The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030935161 8 c- K G» 4 A o x^ It, Xi -'5 ^ Ay t ^f m _ &o^ *^» £y~ Ay**, «. *e X pl>*sfcr^Z- . 7 so JL. f ^^%, - »m^ / /7V»vv*«^c*i^ a^L^j^r 'V r 7'C- t-sC&u-*^ National Intelligence > Nov. 30, 1867. Letter of General Thomas Ewing, Jr. We find in the Leavenworth (Kansas) Commercial a terse and pointed letter of Gen. Thomas Ewing, Jr., upon the political situation, which we transfer with pleasure to our columns. It is a addressed to Col. 0. A. Basse tt, of Lawrence, Kansas, and is as follows : Washington, November 10,186?J Dear Colonel : I have your letter of the 10th inst. advising me of the formation of Grant Clubs by many of our comrades in Kansas, and asking my opinion of the movement. I earnestly wish to be in accord with the great part of my Kansas and army friends, and still hope to unite with them in support- ing General Grant for President. But I want first to know whether he approves the recon- struction measures - for if he does I cannot support him. I regard them as mischievous - begot of revenge, misdirected philanthrophy, and lust of pov/er. I would as soon expect a house to stand on the crater of a living volcano as a State, where whites and blacks being nearly equal in numbers, the whites are proscribed and the blacks made rulers. Such a government cannot long have the heartfelt sympathy of any large body of white men any- where. Elood is thicker than water, and Northern whites will sympathize with Southern whites in their struggle to shake off the incubus of negpo rule. If there were no prej- udice of race to affect their action, the Northern people would still refuse to repro- due in ten States of the Union Hayti or San Domingo, or any other Government and civiliza- tion the negro race has established since the flood. To punish the Southern whites for their treason, the Northern people might possibly for a time be willing to afflict them with such governments; but self interest forbids it. It . were like the fabled war of the belly and the members? The North already groans under the punishment inflicted on the South, and, must be- sides pay for the whip. The negro governments when formed, must be propped by Northern bayo- nets, and the North must pay for the bayonets; and, however costly, they can never safely be withdrawn. When reconstructed each one of those States will be like a magazine - all secure while carefully guarded outside, but when left unguarded a chance spark will blow it and all about it to the devil. Entertaining these views, I would not support any candidate for the Presidency who endorses the reconstruction measures, even if it were lawful, still less, as I consider them wholly unconstitutional and full of danger as precedents . I write you explicitly because I value your good opinion, and you want to know how I think and feel and mean to act on the stupen- dous questions which lie around and before us', Yours faithfully, Thomas Ewing, Jr. The letter is endorsed on the back, as follows : "Copy of letter to Col. G.A. Bassett, Lawrence , Kans . Nov. 10, 1867 from Gen. Thos . Ewlng Reasons for severing his connection with Grant and the Republican Party." SPEECH Iaj. Gen. Thomas Ewim, Jr. O F KAN S AS, MADE BEFORE THE NATIONAL DELEGATE CONVENTION Union Soldiers and Sailors, COOPER INSTITUTE, NEW YORK, July 4, 1868. REPORTED AND PUBLISHED BY ORDER OF THE CONVENTION. SPEECH Maj. Gee THOMAS EWM, Jr, OF KANSAS, MADE BEFORE THE NATIONAL DELEGATE CONVENTION OF UNION SOLDIERS AND SAILORS, AT COOPER INSTITUTE, NEW YORK, July 4, 1868. REPORTED AND PUBLISHED BY ORDER OF THE CONVENTION. SPEECH OF MAJ. GEN. THOMAS EWING, Jr., OF KANSAS, • AT THE SOLDIERS' AND SAILORS'*NATIONAL CONVENTION, J AT COOPER INSTITUTE, JtTi.Y 4, 1868. BEPOUTED AND PUBLISHED BY ORDJilt OF THE CONVENTION'. Mr. President and Gentlemen of the Convention : I heartily thank you for the honor of being called upon to address this vast assemblage of soldiers and sailors — the largest ever gathered on the continent since the grand re- view in Washington, at the close of the war, of the victorious armies of the Potomac, of the Tennessee, and of Georgia. Of the comrades who separated then, and went each to his home and civic occupation, almost every regiment has here its representative. Why have we, soldiers and sailors, who are proud of our service for the Union, assembled here in delegate convention to plan the overthrow of that political party which administered the Government through the war, and the defeat for the Presidency of him who was erst the leader of the Union armies? (Applause.) With your indulgence, I will endeavor briefly to give the reasons for our meeting, and our intended action. (Cries of " Go on.") On the 4th of July, three years ago, the war for the sup- pression of the rebellion had wholly ended. General Lee had surrendered to General Grant the Army of Northern Virginia, and its officers and men were plowing the fields of the Old Dominion, drenched with the blood and scorched by the fires of four years of devastating war. Joe Johnston had surrendered to Sherman (applause) the daring and stub- born troops which our Western army had driven inch by inch from Belmont to Raleigh ; and Shelby's frontier com- mand was scattered over the hemisphere from Montana to Brazil. (Laughter.) There was not in arms a Confederate soldier, mounted or on foot ; not a dockyard, fort, or arsenal, in which there was a rebel ship, cannon) or musket; not a rood of land on earth, or a foot of deck on sea, over which a Confederate banner waved. The last rebel privateers were being dragged for condemnation from the Indian Ocean and the North Pacific ; and the haughtiest leaders of the rebel- lion were wandering outcast over the earth, or seeking par- don of a President who was a noble type at once of the loyal Southerner they had hated, and the laboring white man they had despised. (Applause.) Never was there a rebellion more utterly overthrown, or a cause more hopelessly lost. The people of the Southern States, with wonderful promptness, quiet, and unanimity, submitted to the result. You all know it was commonly predicted and believed, North and South, that when the great armies of the Confederacy were conquered, dispersing, they would fill the land with guerrillas, and wage a Vendean warfare more destructive and irrepressible than the regular war out of which it grew. But this prediction was not in the smallest degree verified. Within sixty days after the last great battle of the war, the Federal marshals and tax-gatherers executed their processes unarmed and unattended throughout the Southern States, in the jungles lately swarming with guerrillas, and over fields lately shaken with the roar of rebel artillery. The whole people of the South bowed to the authority of the nation, with hearts in which, as they were human, there were yet doubt- less revenges and sorrows, humiliations and bereavements, and undying attachments to the cause they had dearly loved and bravely maintained, but which yielded implicitly all that the people, the President, or the war party had ever told them were the purposes of the war. And by the Constitu- tional Conventions and Legislatures, chosen by the electors of the Southern States the year^the rebellion ended, their seve- ral constitutions and their State laws were amended, abolishing slavery and the harsh codes founded on it, abandoning the doctrine of secession, repudiating the rebel debt, recognizing the national debt, and, in short, giving every guaranty which men could give, that in a spirit of concord they recognized and accepted, as accomplished, every avowed object of the war. Now, the Republican party was bound, injoyalty, honor, and good conscience, to accept this submission, and at once restore the Union by admitting the Southern States to repre- sentation, so far as they presented senators and representa- tives personally qualified. (Applause.) It was bound to do it, out of obedience to the Constitution, in thesacred name of which the war was waged, and which, while allowing each House to judge of the qualifications of its own members, prohibits the exclusion from representation of any State as a State. And it was bound to do it, because the war was avowedly waged for the sole purpose of effecting the uncon- ditional restoration of the Union, immediately upon the un- conditional submission of the Southern people, through amendments of their constitutions and laws, to the national authority. Said Sherman to the South, in his Atlanta letter : " We don't want your negroes or your horses, your houses or your lands, or any thing you have ; mm only want, and will have, a just obedience to the Constitution and laws of the United States." (Applause.) And in that declaration he expressed the sole purpose of the war as declared by the Government, and understood by the army and navy and people of the Union. The Republican party, in its National Convention in 1864 — -just after Horace Greeley had tried to effect a dis- honorable peace through George N. Sanders and Beverly Tucker (hisses and laughter) — declared that the war was, and should be waged only, to force " an unconditional surren- der of hostility by the rebels, and a return to their just alle- giance to the Constitution and laws of the United States." And from the beginning to the close of the war, there stood, and still stands, on our statute books, a law declaring that the war should be waged "in no spirit of oppression, but solely to restore the Union with all the -dignity, equality, and rights of the several States unimpaired." (Applause.) That law was the pledge of the Republican party made in 1861 — and reiterated in National Convention in 1S64, that the tre- mendous powers confided to it by the people, without re- gard to party, for the vindication of the national authority, should never be used for party or sectional dominion. And on the faith of that pledge were given every dollar of money and every drop of blood spent in the war. (Applause.) But the Republican party had not the wisdom or patriot- ism to accept this submission of ,the Southern people, and promptly restore the Union. It recollected that before the war it was a minority party, and came into power, in 1861, through a division of the Democratic party, by much less than half the popular vote. Yet, with the prestige and moral power resulting from a successful prosecution of the war, »jid a prompt and cordial restoration of the Union, it could have retained power until this generation of voters had passed away or had forgotten the anti-war follies of the Democratic party. But it took counsel of its fears, doubted its own destiny, forgot the inextinguishable love in the hearts of the Northern people for the Constitution and the Union, and therefore refused to take what the war was alone waged to get — a prompt and cordial pacification and reunion under the Constitution. It did this in the vain hope of controlling the Southern States by making voters of the negroes, and proscribing all the intelligent white men whom Congress and the Freedman's Bureau could not bribe, or coax, or kick, or cuff into Republicanism. But while destroying the ten Southern States, and building in their stead ten rotten bor- oughs, to be represented in Congress in the interests of the Northern radicals by white adventurers and plantation negroes, the party is losing its strong hold on the Northern States, and, like the dog in the fable, drops the substance to snatch at the shadow. (Laughter and applause.) The first step toward postponing reunion until the Southern States could be subjugated by the radical party, ^was, the offer, in 1S66, of the Constitutional amendment. It contained declarations of the results of the war, which the Southern States had already inserted in their constitutions and codes under the advice of President Johnson, and to which they freely assented ; and an alternative of negro suffrage or reduction of representation, and also important additions to the power of the Federal Government, to which they would have assented reluctantly for the sake of reunion. But, inseparably coupled with these, and making with them one proposition, which had to be accepted or rejected as a whole, was the clause of disfranchisement, which they could not accept without dishonor. It disqualified from holding any office, petty or exalted, State or Federal, in effect, every man who was of age when the war broke out and was fit to hold any office. So sweeping was the proposed proscription; that, after it was adopted into the reconstruction acts, Generals Meade, Schofield, and Canby successively reported that it was impossible to administer the governments of the Southern States while enforcing it, because, in many communities, there was really not a man fit to hold any office who was not dis- qualified by it. The Southern people did as the radical leaders wished and knew they would— rejected the amend- ment. They acted like menin doing so. (Applause.) Let us ask ourselves, gentlemen, whether, if the North had rebelled and been conquered, and the South had offered us reunion on condition that we should ourselves rote to disfranchise and degrade every Northern man who could read and write and cipher to the rule of three, as punishment for the rebellion in which all had participated, and to commit the government and destinies of our States to the hands of only the most ignorant of our people, or to the camp-followers of the con- quering army, we would have voted for our own disgrace and .disfranchisement ? (Voices, " No, no.") No people who are fit to be free would thus with their own hands put on their ■own necks the yoke of political slavery. (Great applause.) And so far from the rejection of that clause and the proposed amendment of the Constitution with which it was inseparably connected, being a just cause of complaint against the Southern people, they would have merited the scorn and ■contempt of a/11 high-minded men had they accepted it. But the amendment served its purpose in the campaign of 1866. It was, to the careless or superficial observer; an effort in good faith by the radical party to effect reunion. The Southern legislatures, unanimously and promptly, but respectfully, declared that they could not accept it; and were therefore violently denounced by the radical press and orators, as still defiant and rebellious. Just then, the most mischievous men of both parties in New Orleans contrived to bring on a bloody riot ; and the radicals rode the tempesl it created, and swept the North. Since then, with three-fourths of both Houses of Congress on their side, and animated by a thorough contempt of the Constitution, the radi cal party has been omnipotent. Ii has protracted disunion nearly as long as the rebels did — and done more to destroy our form of Government than all tht parties that ever controlled its destines. On the 8th of July, 1863, in a debate in the House o Representatives, Old Thad Stevens (hisses) bluntly and boldlj announced the doctrine that the Southern States were no States of the Union, and that Congress could legislate ove them as over conquered territory. If this doctrine be true it is because the acts of secession were constitutional, am .in legal effect took the States out of the Union — that is, tha under the Constitution, the States had a right to secede, and therefore the United States had no right to make war on then for seceding. This rebel doctrine, when thus announced bj Stevens, was violently assailed by Owen Lovejoy, and othe fierce radicals of the House, and repudiated in the name o the war party. In the year following, in the National Union Conventio: at Baltimore, Stevens again proclaimed this doctrine, declar ing that Tennessee was but a subject province, and Andrev Johnson an alien enemy. But the Convention contemptu ously repudiated his theory, and gave emphasis to its dec laration by nominating Mr. Johnson for Vice-President, an indorsing Mr. Lincoln's reconstruction policy. All this however, was while the war was going on, and while soldier were being called for co fight in the holy cause of the Con stitution and the Union, and not for conquest. (Applause. But when the rebellion ended, and the elections of 1866 gav the radicals a new lease of power, this infamous dogma which, if true, makes the war for secession Constitutiona and just, and the war for the Union a wicked and unprovokec 10 conquest — a doctrine, which three years bjforj had been, like the hateful Richard — " Sent before its time, Into this breathing world, scarce half made up, And that so lamely and unfashionable, That dogs barked at it as it halted by them," was now adopted by the Republican party as the funda- mental theory of reconstruction and the shibboleth of loy- alty. Having fully adopted this rebel theory that the Southern States were out of the Union, and unsheltered by the broad | I i j 3fcgis of the Constitution, Congress declared invalid the govern- ^*" "^"ments chosen by the electors of thoseStates under the advice of Presidents Lincoln and Johnson, in conformity with State con- • stitutions and laws, and established over them military dicta- torships, through which to inaugurate the rule of the negroes and their Northern allies. J3ut here a new rent in their pro- gramme was discovered, requiring to be patched by a newly- invented dogma. The Calhoun-Stevens theory of the validity of secession was good as far as it stretched ; but, like a shelter tent, was neither broad nor long enough'. It took the States out, and made them conquered provinces, but did not increase the power of Congress, nor deprive the inhabi- tants of the conquered territory of those guaranties of life, lib- erty, and property which the Constitution extends to citizens and aliens alike on every foot of ground within the jurisdiction of the United States — the right of exemption from punishment by ex post/ado laws ; the liberty of speech and of the press ; the right to keep and bear arms ; the right to be free from unreasonable searches and seizures, and from deprivation of life, liberty, or property without due process of law ; the right of trial by jury; and, above all, the privilege of the writ of habeas corpus — that shield of liberty, in possession of 11 which the people of a monarchy are free, and without which a Republic is a despotism. (Q-reat applause.) These consti- tional guaranties were in the way of coercive reconstruction ; and Congress was forbidden, in peace, to touch any one of them. Unless these ancient and sacred liberties could be destroyed, vigorous military despotisms could not be estab- lished — and without, such despotisms, radical reconstruction was impossible. While these guaranties remained in the Constitution, and were obeyed, the whole governing talent of the South could not be disfranchised by a sweeping ex post facto law : Governors of States duly chosen by the' electors in accordance with' State constitutions and laws could not be removed by district commanders as impediments to re- construction .; State legislatures could not be prorogued at the point of the bayonet ; State treasuries could not be robbed, and widow and orphan creditors defrauded of their dividends to pay plantation negroes eight dollars a day for making constitutions (Applause.) New codes of laws, ■framed by Solons and moralists like Dan Sickles (hisses), could not be proclaimed and enforced over the Carolinas ; a Judge conducting a murder trial could not be pushed from the bench, and the trial carried on to conviction, sentence, and execution, by a colonel in uniform ; American citizens — citizens of one of the original thirteen States, charged with no crime, could not be arrested by scores, on Icltres de cachet signed by a post-adjutant, immured in loathsome dun- geons, and tortured to the point of death with the boot and sweat box, to make them swear to what a military com- mander suspected they knew touching the murder of some wretch like Ashburn (applause) ; and military commissions, those courts, organized to convict, at whose doors no man can lay a charge of uncertainty as to the law, or doubt or delay or undei clemency in its execution, which adopt the IS efficient rule that it is better that ninety-nine innocent men should be punished, than one guilty man escape, could not inspire respect for the radical party and its measures by being prepared at a moment's warning to try any citizen for any act, which in the opinion of the officer convening the court, was a " crime against reconstruction," and to sentence him for months, or years, or life, to the dungeon or the Dry Tortugas, beyond the reach of Executive pardon or reprieve. It was indispensable, therefore to get rid of these constitu- tional provisions, which are at once guaranties of the liberties of the people, and prohibitions of power to Congress. To avoid an avowal of a purpose to trample oh the Constitution, the party, with decent hypocrisy, claimed a new derivation of Congressional power. They said that a formidable rebel- lion was never contemplated by the framers of the Constitu- tion, and no powers were conferred^in anticipation of such an emergency. Congress, therefore, was compelled, in the matter of reconstruction, to act outside of the Constitution. The framers of the Constitution were the sons and grand- sons of the Puritans and the Cavaliers who kept England smoking with civil wars for half a century (applause) : and who knew by personal experience how despotic was power when inflamed by the passions of domestic war — whether that power were the legitimate Sovereign, the Pretender, or Parliament. And with recollections of this recent English history, and traditions of family persecutions, fresh in their minds — anticipating that the bold spirit of their sc%! would be transmitted to their children, and break out in occasional revolts against the national authority — the framers of the Constitution not only withheld from Congress the power ot inflicting, in peace punishments at will for political offenses, but also inserted those guaranties of personal liberty ex industria, as express prohibitions, in order to prevent a Congress driving the people to renewed war, or to flight by 13 measures of revenge such as sent their forefathers from England to our shores. (Great applause.) As to Congress deriving power in any contingency outside of the Constitution, it is enough to say that Congress gets all its powers from the Constitution, and outside of it has no powere, and is no Congress (applause) : and that all its acts not authorized by the Constitution, are mere usurpa- tions, whether against express prohibitions or not. If you present this argument to radicals, they will reply that the Constitution in not giving Congress such authority, is therein defective, and Congress needs, and must exercise it. A French philosopher once propounded to Professor Faraday, a new theory of the transmission of light : which the English philosopher heard patiently and then objected to it, that the theory was inconsistent with certain established facts of natural science. " So much ze worse for ze /acts, 1 " was the ready answer of the confident Frenchman. So, if you prove the reconstruction plan unconstitutional, the radicals, in effect, answer, " So much the worse for the Constitution." (Great, applause.) Thus, to secure a reconstruction giving the radicals of the North absolute control of the ten States of the South, not only were the State governments abolished and military des- potisms built on their ruins, but every revered guaranty of life, liberty, and property, which the Southern people and ourselves inherited from a free ancestry, and which our fore- fathers and their forefathers placed in the Constitution to be beyond the reach of the rude hand of faction, was boldly destroyed. No civilized people on this earth are as wholly without legal protection from the capricious oppression of their rulers as the Southern people under these military des- potisms. It is amazing how passively the people, North and South, have borne this gross, dangerous, insolent usurpation. But it has been quietly submitted to because of the belief— 14 now, thank God ! almost certainty — that the Northern people will, in November, seize this radical party and its half-exe- cuted usurpations, and dash them to pieces (prolonged cheer- ing; ; and because many of the military commanders have tempered the harsh rule they were sent to inflict out of that love for our ancient liberties which is born in every tru'e American, and which so shone through the administration of at least one of those commanders as to cover with new and fadeless glory the twice-illustrious name of Hancock. (Tumultuous cheering and waving of hats.) Gentlemen, I do not understand how any white Ameri- can, proud of our race and of our free systems of govern- ment, can behold, without mingled disgust and indignation, the methods and results of Congressional reconstruction, and the pretenses by which it is sustained. It is claimed to be in the interests of -peace — while fomenting deadly strife and rancor between the two races, arraying them into conflicting parties, subjecting the superior to the inferior, and then leaving them to struggle for dominion ! In the interest of liberty and progress — while tearing down ten free, enlightened States, four of the old thirteen that founded the Republic, and establishing in their stead ten despotisms, in which the intelligent and cultivated white man is made subject to the ignorant and brutal negro — despotisms mitigated only by the fact that the negroes are but the ostensible rulers of the ! f\ JU^JyBouthern whitesJ the Northern radicals are the real ones — that the negro acts only the part of the automaton chess- player, while the Northern radical party is the unseen intel- lect which directs the senseless hand that fingers the pawns. It is claimed to bain the interests of national prosperity — while wasting the wealth and paralyzing the industries of the South on the one hand, and doubling the burdens of the Northerns- taxpayers and destroying the eager markets for their manu- factures and breadstuffs on the other. What a spectacle for 15 gods and men does not this reconstruction present ! See the black laborers of the South, fed in idleness out of moneys wrung from the toil of Northern white men (applause), filled with ambition to rule the whites, and to grow rich by con- fiscations, and becoming each year more utterly and irre- claimably idle and thriftless. The splendid sugar, cotton, and rice plantations, at once the evidence and the product of a century of civilization, overgrown with weeds ; idle ma- chinery rusting in the sugar-houses; the floods of the Missis- sippi sweeping over neglected levees and abandoned planta- tions, and the boorish negro field-hands sitting in conven- tions ! Behold Virginia/the Niobe of States, the mother of Presidents and illustrious statesmen — her at whose call our great free Republic was formed — her by whose free gift the Republic acquired the territory of the six great States of the Northwest ! See the civil government founded by her Washington (applause), Madison (applause), Jefferson (ap- plause), Lee (applause), the foremost statesmen of their day on the earth, destroyed, supplanted by a military despotism, and that, in turn, about to be supplanted by a civil government framed by infamous whites like Hunnicutt, and a rabble of half-civilized negroes (hisses). If this be prosperity, progress, and liberty, God send us misfortune, reaction, and despotism forever! (Prolonged applause.) The radicals endeavor to smooth the hideous visage of this reconstruction by asserting that it is indispensable to prevent the Democracy getting power and repudiating the National debt. In other words, to prevent repudiation, some device must be arranged by which a majority of the legal electors of ten states shall not be permitted to rule them. If that necessity really exists, the dire event can not be long postponed by devising in the interest of the national creditors, a scheme cf reconstruction which violates the Con- stitution and the fundamental theory of our government ; 16 breaks pledges of infinitely more sacred obligation than the money debt ; cripples every industry of the land, and while reducing one-half every man's ability to pay taxes, doubles his share of thepublicburden — the essential condition of which scheme is to the perpetuation of the rule of a party which now represents not one-third of the white people of the nation.- But, thank God, that necessity does not exist ! The credit of the Republic as the union of the States, rests secure in the hearts of the people. (Applause.) A vast majority of all parties will preserve and defend it, as they did the Union. But if the national credit could be shaken, it would be by 7 the pub- lic creditors flocking into one party, and, under the panoply of the national honor, scheming to perpetuate the power of that party at the cost of the established Constitutions and liberties of the States and the nation. (Great applause — cries of "That's so.") To accomplish this scheme of reconstruction, the Consti- tution is not only abrogated so far as the Southern States are concerned, but the form of our government is being de- stroyed by the absorption by Congress of the chief powers of the National Executive : Congress has assumed to take from the President the con- trol of the army which the Constitution gives him, arid to com- mit that part of it employed in the South to General Grant and five district commanders (hisses), independent of the orders of the President. By this bold assumption of power, it has con- verted many high officers of the regular army to radicalism, and made them zealous instruments of its usurpations. It has usurped the pardoning power, which the Consti- tution gives solely to the President, and by sweeping bills of pains and penalties, proscribed the intelligent white men of the South, notwithstanding the pardons of the President. And it now shamelessly avows that itj will give congressional pardon only to those who eat the leekoi radicalism. (Hisses.) 17 All such are loyal, though, like Governor Brown, of Georgia, they drove and dragged their people into rebellion, and, cow- ard-like, seized our arsenals and navy yards while yet wear- ing the mask, of loyalty ; while men like George W. Jones, of Tennessee, who stood by the Union from the first, but who opposed negro suffrage and white disfranchisement, are stigmatized as "heart malignants," deserving only proscription at the hands of the Sumners, and Kellys, and Butlers of Con- gress — (Great hisses. Cries, " Who stole the spoons?" " Dutch Gap.") " Those pseudo privy-councilors of God, Who writedown judgments with a pen hard-nibbed." It took, too, from the President, the power of removal, thus fomenting insubordination in the civil service as it had done in the military — prohibiting even the removal of his own cabinet officers, the adjutants through whom he gives orders and receives reports. And it crowned its usurpations by an impeachment founded on a statute it had passed, enacting the glaring and flagitious lie that it is a high crime for the President to dis- charge the duties of removal imposed on him by the Consti- tution, as interpreted by the uniform usage of government from the administration of Washington down (applause) ; or even to so far attempt to exercise it, as to bring the question* of his Constitutional power of removal to decision by the Su- preme Court — that high arbiter fixed by the Constitution to settle every conflict over boundaries of power between the States and the United States, or between departments of the general government. And, after having impeached him, and while giving him a lynch-law trial, the party, with a ferocity unparalleled even in the violent controversies of the day, brought its almost irresistible power to bear through its leading men, its press, and its conventions, to force Kepub- 18 lican Senators to commit moral perjury by an insincere ver- dict. So foul an act was never before attempted by a party in this nation. Had Andrew Johnson consulted his own interests, and become the instrument of a lawless faction, these essential executive powers would not have been disturbed, nor he ar- raigned as a criminal at the bar of the Senate. But, to his eternal renown (applause), he stood by the Constitution when it was assailed by his party, as boldly and grandly as he had stood by the Union when the storm of war burst over and around it : " Unshaken, unseduced, unterrified, His loyalty be kept, his love, his zeal ; Nor number nor example with him wrought, To swerve from truth or change his constant mind." [Three cheers for Andrew Johnson. Three cheers for President Johnson. Tumultuous cheering.] Gentlemen, in any government but ours, usurpations so flagrant and fundamental would result in revolution ; in ours they can be overthrown by the people at the ballot box. The appeal to the people this fall will decide whether the radicals shall retain or surrender the power they have thus used, and are using, for the destruction of the Union and of our form of National Government. . If we could so take our appeal as to present to the people' the living issues between the parties free from the rubbish of past issues, who could doubt the result ? If the Democracy could give us a candidate who would unite as thoroughly the opponents of radical rule as General Grant unites its sup- porters, that candidate would carry nine-tenths of the elec- toral college. (Applause.) The strength of the radicals is not in their cause, but in the divisions of their adversaries. The war was a success— not a failure. It settled the theretofore disputed and doubtful question of secession 19 against the right to secede. It settled, too, the .subject of slavery. (Applause.) These, however, were unsettled^questions in 1864, and were thought to be involved in the political contest of that year. Now, the passions of the war and of that political controversy are not as dead as these issues in which they played their part. From them came all the hopes of the radicals, and all the fears of the friends of the Constitution and the Union. Bousing these slumbering pas- sions of the war, and led on by one of its foremost generals, the radicals hope to fight over again the political battle of 1864. Shall they do it ? (" No, no.") Ah, gentlemen, I wish this convention could decide that question — but it is for the Democratic Convention to answer. By its choice of leader it will determine the battle-ground, and decide whether the Democracy shall triumph on living issues or be routed on dead ones (Applause) ; whether the radicals shall be arraigned and tried for what they are doing, or the Democracy, for what they ■did or failed to do four years ago ? Of a million and a half of present voters who served in the Union army or navy, this Convention represents at least a half. (Voices, " More than on e-half," " Two-thirds," "Three, fourths,") Of the se so represented, a half or more (among whom I wish to be reckoned as one) will support any of the Democrats whose names have been mentioned for the Presi- dency ; but the remainder, numbering several hundred thou- sand voters, will be won or lost to the cause, as the nomina- tion proves wise or otherwise. (Laughter and applause.) This Convention has assembled in no spirit of dictation, but animated by de votion to the Constitution and the Union, and kindness to all who would preserve them, to aid in securing an harmonious nomination, and organizing a certain victory. I can not suffer myself to doubt that the Democratic party has assembled this day in the same patriotic spirit, and will pre- sent a candidate who, whether he fought for the Union or not, thoroughly sustained the war (great applause), and 20 whom all the soldiers and sailors of the Union can support without even seeming inconsistency. The Republican party represents no principle for which we fought. We thought not of negro suffrage (applause and cries of " No, no"), or of white disfranchisement ; of forcing on the Southern States unequal fellowship in the Union (" Never, never"), of changing our beneficent form of govern- ment (" No, never"), or of perpetuating the Republican party (" Never, never"). Out of the five hundred thousand of Union soldiers, Democrats and Republicans, who sleep on fields washed by the waters of the Atlantic and the Gulf, not one laid down his life for any such end. Of the fifteen hun- dred thousand of their surviving comrades, not one will say he would have risked his life for either of these objects. And these measures of the Republican party are not only not the objects of the war, but are so prosecuted as to defeat those objects, and to inflict on the nation evils as great as those the war was waged to prevent. (Shouts, " That's so.") The Democratic party is now the only .party true to the Constitution'and the Union. (Applause.) If we would accom- plish the purposes of our service and sacrifice, if we would save the Union, the States, their liberties, and laws, we must unite with the Democracy. (Long continued applause.) We must not ask what men have been, but what they are ; not who lately defended the Constitution, but who now defend it. (Great applause.) In the path which the Democratic party treads, we see the footprints of Washington, Jefferson, Madi- son, Adams, and all the heroes of the revolution ; of Webster, Jackson, Clay, Wright, and all the giants of the generation just gone before us ; and while it keeps that line of march, and bears the flag of the Constitution and the Union, we can follow it with pride and with unfaltering trust. (Immense applause, cheers, and waving of hats, followed by the band playing " Rally round the flag.") SPEECH GEN. THOMAS EWING, JR, AT CAPITOL SQUARE, COLUMBUS, OHIO, AUGUST 11, 1871. Fellow-citizens :— I shall ask you to ■■ consider this evening national questions |only, there being no differences between the ; parties in matters of State or iocal policy sufficiently developed as yet to attract gen- *eral attention. .There is, however, one matter growing .out of State politics on which I wish to say |a word. Some Republicans have asserted Ithat the Democratic State Convention, the fearty press, and the -people, were all mis- iftaken aa to who was nominated as the Dem- jsratic candidate for Governor — that it was not Colonel MeCook. The Democracy Seated this discovery as a harmless illusion. j|But, recently, a prominent Democrat of Lan- Kcaster has seen tit to revive the assertion in [ a modified form, in a letter attacking the •nominee and the platform. That gentleman is so connected with me by ties of friend- ship and family that I feel it is proper for feme, not only to disavow all knowledge of Ithat letter before its publication, but to say Ethat I regard its statements as to the nom- ination (though doubtless not unkindly -meant) as an unkindness and an injustice to me. I need say no more, for the letter |srill harm no man but, the writer and my- gelf. j|' It is important to all who care for good Kpvernment to sift the past from the pres- Hut party issues, so that judgment may be given intelligently by the people on the ^ery questions to be decided. ft First, then,. the war issues are settled for- f§;er. Secession invoked the war — slavery ■%came necessarily involved in it— and both Went down together in the battle. No one, North or South, representing any body of citizens, has ever questioned the finality of that terrible and potent arbitrament. All the alleged war issues are settled also. The fourteenth and fifteenth anaeiidments embody (in addition to some matters which were never disputed) all that the Republi- cans have asserted, and tie Democrats der nied, to be proper or necessary results of the war. These amendments are .recognized by the Democracy of Ohio and the nation, almost unanimously, as part of the. supreme law; and therefore to be construed, obeyed and executed precisely as the: rest of the Constitution. Hence, unlesaand until some party proposes to agitate for a new .amend*- ment of. the Constitution, striking out all or part of these amendments; they are be- yond the range of profitable discussion. THE NEW, DEPARTURE. ' ; This position, taken by the Democracy throughout the nation, is miscalled the ".New Departure." What departure from Democratic principles is there in saying that, though we opposed making the amend- ments part of the Constitution, we will obey and execute them now they are part of it? Has the Democracy ever willfully violated the Constitution? Never! That theory of our government which led to nul- lification and secession was sincerely be- lieved by most of the Southern Democrats, and many of the Southern Whigs ; it had been taught them by some of the venerated fathers of the Constitution ; and it were a gross error to charge those who were led by that instruction into the act of war with willful disregard of known constitutional obligations. Whenever the Republican par- ty, since the war, has found the grants of power of the Constitution insufficient, or its limitations embarrassing, in the accom- plishment of its schemes, it has deliberately violated its provisions, and, as Thad. Stev- ens said, " legislated outside of the Constitu- tion." But the Democratic party, through- out its long and grand career, has been dis- tinguished, as was the Whig party, for its rigid observance of the fundamental law : and has never wilfully violated one of its provisions, however pressed by party exi- gencies. In thus recognizing the fact that the amendments have been ratified, we do not at all indorse, or admit to have been valid, the reconstruction laws through which their adoption was secured. The fact that those amendments are part of the Constitution results from the fact that the Southern State Governments have been to a large extent formed and wholly accepted and ac- quiesced in by the Southern people, white and black ; have been recognized by every department of the National Government; and all the affairs of society conducted un- der them for three years past. We can not shut our eyes to these controlling facts. Governments, like children, become legiti- mated hy recognition of their putative father — the people. These -State Govern- ments have been so recognized, and it is therefore too late to attack their legitimacy. Only the wildest political visionary would now talk of overthrowing those Govern- ments by force, or of changing them except under their own forms. Hence, $heir acts of ratification of the amendments must be treated precisely as those of the Northern States; and the certificates of the secreta- ries of the requisite number of States, to the fact of ratification by the States re- spectively, having been filed wiih the Sec- retary of State at Washington, no depart- ment of the General Government can im- pugn them, or deny the effect of their ratifications, as declared in the Constitution. Therefore, those amendments are part 6f the Constitution, notwithstanding the law- less inception of the Southern State Govern- ments. And the Democracy, in recognizing the accomplished fact of the adoption of the amendments, no more approve their policy, or the execrable means of procuring their adoption, than the Republicans in 1854, by recognizing the law for the organization of Kansas and Nebraska and making the hest of it, indorsed squatter sovereignty, or took back the accusation that the repeal of the Missouri compromise was a flagrant breach of faith. REPUBLICANS DISSATISFIED WITH THE "NEW DEPARTURE." But this position of the Democracy does not please the Republican leaders. They know if their followers believe it to be in good faith, their battle cries, which have won so often, will win no more — therefore they are distressed with apprehensions that we are trying to deceive the people, and they warn them of their danger with great unc- tion. They catch and parade every tale of outrage or mischief in the South; every escapade of a political knight-errant in the North ; every speech of a dying leader of the dead rebellion in which the flame of se- cession flickers like a remnant candle in its socket ; and ask you to judge from them what the party will do, and not from Thur- man, Groesbeck, Pendleton, Ranhey, Camp- bell, Morgan, McCook, Ward, Hendricks, Doolittle, Cox, Hoffman, Adams, the ac- knowledged leaders of the party, its State Conventions, and its nearly unanimous press. Why, fellow-citizens, take all the bolting leaders and papers in the Demo- cratic party to-day, and, with the- masses, the mere -name of the great, sincere Vallan- digham has more power than they ! Mr. Morton and Mr. Sherman seem espe- cially and even painfully solicitous about the good faith of the Ohio- Democratic plat- form on the constitutional amendments. They misjudge us, but probably not intent tionally. They recollect how their pledges to the people fared — the pledge of the Crittenden resolutions, on which we all won the war — the pledge to redeem the 5-20s in greenbacks, on which they won the Senate — the pledge to let each State regu- late suffrage for itself, on which Grant won the Presidency. Mr. Morton, two years ago, delicately alluded to these violated pledges as " milestones on a deserted road." And Mr. Sherman, in his Columbus speech, says that the policy of his party, built on broken faith, has "become sanctified by success!" Think of it! — sanctified by. sue- , cess .' It seems to me a code not unlike this was taught by the Florentine moralist, Nicholas Machiavelli — the gentleman afttr whom, it is said, the "Old Nick" was named. His "Prince," however, has never been a favorite Democratic text-book : and I think Mr. Morton and Mr. Sherman are needlessly alarmed lest the Democracy shall adopt their political ethics. THE KU-KLUX LAW. I would like very much, fellow-citizens, to discuss the differences between the two parties already develop ad as to the con- struction and execution of the amendments, and especially to show how the Republican party, by a flagrant misconstruction of the Constitution as it is, has assumed to confer on General Grant the power, whenever he thinks the authorities of any State fail to give any person or persons equal protection of the laws, to suspend the privilege of the writ of habeas corpus, stop the functions of the civil government, and declare and wage war on the people. This extraordinary power is vested in General Grant obviously to enable him to re-elect himself and his party next year, by controlling or breaking up the elections in the Southern States with the Federal army and the black militia. He combines all the qualities to make him a lit instrument for such designs. He is both ignorant and careless of the duties and obligations of his high office — has probably never read the Constitution, as it is not published in the Army Regulations or the Stud Book — is bold, unscrupulous, am- bitious, selfish, and as cruel and cold as a bayonet. If he don't use that law next year with that purpose and effect, it will be because the Northern people show in the elections this year a returning 1 sense of the value of constitutional liberty ; «r because the Ku-Klux and carpet-baggers combined can't concoct-sufficiently plausible pretexts ; or because Horace Greeley beats him for the Republican nomination. Let us hope, for the honor of the country, that all these contingencies will happen. But, fellow citizens, the topics of present interest and importance in federal politics are so numerous that I am obliged to select a few for exclusive discussion. I shall, therefore, ask your attention only to the finance and land policies of the Republican party, and their effect on the general wel- fare — to the position of the Democratic party on these subjects, as shown by the votes of the body of the party in Congress and by the Democratic platform in Ohio— and to some of the characteristic traits and tendencies of these two parties in the poli- tics of the country. THE DEBT AND THE CURRENCY — REPUBLI- CAN POLICY, PAST AND PRESENT. Among the most important questions to be considered in this campaign are those affecting the management of the debt and the currency. Before the war, we had no national currency, and comparatively no national debt. The modes of managing them were not topics of immediate interest, and therefore were little studied or discuss- ed by the journalists or statesmen of the country, and were not in the least under- stood by the people. During the war, its exigencies left the Government neither time to elaborate nor freedom to adopt such per- manent policy as would be best for the country; and when it ended, our people were burdened with a debt such as no na- tion but England ever created or carried before. But the business of the country was good, credit expanded, and production large. If the Republican party had been controlled in the interests of the masses, it would have thenceforth so shaped its legis- lation as not to check the geieral business of the country, especially as a million and a quarter of soldiers were just returning from the field, and seeking occupations in civil life ; so as to deal gently with the debtor class, which comprises the mass of the men of business in every community ; and so as to lighten, by every fair expedient and construction, the enormous public debt resting on the masses who had borne the heat and burden of the war. But no such just policy was adopted. The bond-holders, the national bankers, and all the parvenues of the war combined, had control of the Republican party, and through it managed legislation so as to per- petuate the power of the national banks, to increase the value of the 5-20's by declaring them payable in gold, and to enhance the relative value of money and of all bonds, notes, and other investments calling for fixed sums of money. The effect of this system of finance has been to inorease enor- mously the public burdens, cripple the en- terprising debtor class, and paralyze the general business of the people. The measures by which these results have been accomplished are three : NATIONAL BANKS. 1st. The perpetuation of the national bank circulation. The gift to private corporations of the sovereign prerogative of making the money of the people was extorted from the Govern- ment by the State banks early in the war, is founded on no consideration, legal, equit- able or moral, and is revocable at the pleas- ure of the people. Had greenbacks been substituted for national bank notes when the war ended, and 5-20 bonds, then at par in greenbacks, bought with the new issue, our bonded debt would now be $450,- 000,000 less than it is. Or, if $300,000,000 of bonds so bought in 1865 had been set apart as a sinking fund, and interest paid on them and compounded at 6 per cent, semi-annu- ally, that fund would of itself by the year 1896 have paid, in gold, the principal of all our bonded debt outstanding in 1865, or since issued— and have 6aved the people $239,000,000 expended in buying bonds in the past two years. If we would now sub- stitute greenbacks for national bank notes, we would save $17,280,000 in greenbacks annually. That is exactly the sum this circulation privilege given the banks now costs the people yearly, after crediting the one per cent, tax paid on circulation. Mr. Sherman impliedly denies this fact, assert- ing that the banks pay other large taxes, State and national. But the fact is that, with the sole exception of the tax on circu- lation, there is not one tax levied by the general or local Government on banks or their stockholders which does not fall on national and private banks alike, or Which would not be paid if the national bank cir- culation were substituted by greenbacks. I challenge Mr. Sherman, when he shall ad- dress the people at Toledo, on the 24th, to show what these other taxes have to do with a discussion of the question of substi- tuting greenbacks for graybacks, except to darken counsel — or to show that such sub- stitution would necessarily cause any jar to the business of the country, inconvenience to the Government, or injustice to the banks; or, in short, to render any good reason why his party, instead Of lifting this enormous burden from the shoulders of the people in 1865, have held it PH> voted down, every resolution in Congress off«red by the Democracy to remove it, and are now adding to it by increase of the bank circulation. IIVE-TWENTY BONDS!", 2d. The law requiring the 5-20's to be paid in gold. - The expressed opinion of nearly all Re- publican statesmen was that the people had the right to pay them in greenbacks. , The Republicans so declared in their plat- form in 186S in Ohio and throughout the West. Senator Sherman, whose information i and abilities have given him control of the finance measures of his party, said, in his letter of March 25th, 3868, to Hon. A. Mann, Jr., that the holders of the 5-20's who de- mand gold for their bonds " are repudiators and extortioners." Yet no sooner was the new administration inaugurated than Mr. Sherman, and all the Republicans in Con- gress (with the sole exception of Mr. Beatty, of Ohio,) by the act of March 18, 1869, pro- hibited redemption in greenbacks. On the sixteen hundred millions of these bonds we are paying, in effect, 9 per cent, interest — that is, 6 per cent, gold, equal to 6f green- backs, and about 2£ exemption from State, county and city taxes. The interest and exemption burden of these bonds alone is one hundred and forty-five millions annu- ally — is greater than the whole annual debt burden of Great Britain. The first measure of relief for the people is to fund them in a new. bond at a lower interest, which could be easily done, if the holders were offered the alternative of payment in greenbacks or a lower interest bond. - To cut the people off from that relief this infamous act "to strengthen the public credit" was passed. Mr. Sherman ought to have amended the title to read " An act to increase the public burdens, and legalize repudiation and ex- tortion." Under countenance of that act, Grant's administration has bought 5-20's at premiums aggregating over twenty-six mil- lions. If the whole issuebe bought in this way, even at present low premiums, the ad- ministration will pay the bond-holders two hundred and nine millions of extortion money. CURRENCY CONTRACTIONS. 31. The other, and the controlling, nieas-- ure of finance adopted and still maintained ;by the Republican party, ruinous to the masses, but most profitable to the rich, is the contraction of the currency. Just before the rebellion ended we had a little over one thousand millions of curren- cy, which was forty dollars per capita for the twenty-five millions of people then in the Union lines. Peace at once spread it over all the South, so that it had. to supply about thirty-six millions of people, which was equal to twenty-eight dollars per capita. This was a reduction of the cur- rency of the whole country thirty per cent,, and of itself would have caused a serious check to business, then most flourishing. But the cry was raised by capitalists that business was "unhealthy," and that the credit of the Government and the real interests of the people ' required a prompt return by contraction to specie payment. Nobody of standing in the Republican party interested with or for the masses seemed to know or care much about the subject — nobody else was listened to — the immense contraction which had just occurred as an effect of peace was wholly ignored — and our curren- cy was therefore reduced, in obedience to the demand of capitalists, from one thousand millions to seven hundred millions, where it now stands. Thus we haye now $17.50 per capita of circulation against $40 per capita six yeais ago — a reduction of more than $56 on every hundred. . And the 'con- traction is stiir going on. The Republican party refuses to permit an increase of the currency, which, therefore, is now being in effect reduced 2-J per cent., or seventeen and a half millions of dollars annually, by the growth of business. GENERAL EFFECT OF CONTRACTION ON VALUES. . .,:.. It is demonstratable that, other condi- tions being equal, the reduction of the vol- ume Of currency of a country , reduces the value of labor and all its products, as com- pared with money and all securities or property producing a fixed interest or rent in money. The experience and observation, of every one for six years past have shown this. The creditor class, who are generally non-producers, and own bonds, notes, and other fixed money incomes, therefore, have profited enormously by the contraction of. the currency, because of the increased value of the dollar as compared with labor and its products generally ; and all which that class has gained, and far more, 'the debtor class, the producers, and the masses generally, have lost. . For example : A borrowed of B in 1865 $2,000, and has to pay him out of the pro- duce of his farm, which yields 1,000 bushels of wheat a year. At the price then, say $2 per bushel,, it takes one year's product to pay the debt. In 1870 the debt comes due, and wheat has fallen by the contraction of the currency to say $1 per bushel. It now takes two years' product to pay the debt. The effect on A is precisely the same as though the currency had been let alone and the debt had been doubled. Injuries like in kind but differing in degree have been inflicted on nearly all who have been in debt within the past five years — especially in the past two years — for though the greatest reduction of the currency was be- fore 1868, yet the consequent reduction in prices and cramp of business have been slowly felt, and the severest effects are , probably yet to come. Still, thus far, as a; result of contraction, nearly everything has fallen very greatly in value but money and securities calling for rent, interest or prin- cipal in money— ^all debts have been largely increased — and all business, whether of production or,, ex change, lias suffered, be- cause done on a falling market. "... AGGREGATE, OF LOSSES TO DUHJSTBIAL CLASSES BY IT. The aggregate losses thus needlessly occa- sioned already is enormous^ I can give you an approximate estimate of it. The aver- age amount of individual debts constantly outstanding since 1865, has been! at least three billions — not counting sums payable on demand. The average depreciation of labor, products, and property generally, by reason of contraction, is at least one quarter. Therefore, it takes one-third, more of proper- ty, products, or labor, to pay that ' three billions of aggregate debt,' than if the cur- rency had not been contracted. Hence the loss to the debtor class by increase 1 of the principal of their debts, through currency contraction, is one billion "of dollars. But this is not all the hardship the debtor class has suffered "by contraction. The in- terest on the debts has also been increased in equal ratio. Thus the average of inter- est now paid is probably nine per cent., which is equal on the three billions' of debt to two hundred and seventy millions annu- ally. In 1865 it was about the same. Bitt nine per cent, now is as twelve per cent, would have been before the. currency reduc- tion, because every thing' with which the in- terest can be paid has fallen on an average one-quarter. Hence, the industry, of the country now bears an increased annual bur- den of one-third of $270,000,000, equal to $90,000,000, by reason: of currency contrac- tion, in addition to the increase of the prin- cipal of their debts one billion of dollars. These are the weights that have pulled industry down since 1866— combining with extravagance of public expenditures, and subsidies of banks, bondholders and manu- facturers specially fa v6red by the tariff; to arrest enterprise, 'depress . the energies of prodncers, and throw out of work, or on half work, hundreds of thousands of toilers who rely on each week's labor for that week's living. HOW IT' SOBS PKODUCERS OF THEIR EARN- INGS. Let me still further illustrate the injus- tice of this immense rate of interest to la- bor and to other property. All the property in the nation, including gold and silver, in 1869, is stated by Commissioner Wells, in his report for that year (page 10), at less than twenty-four billions. Add all evidences of indebtedness bearing an average of say eight per cent, interest, including all kjuds of notes and bonds, public and private, in- dividual and corporate, say seven billions. Total, thirty-one billions. Now, alljtlie net increase 1 of wealth comes from labpi; oper-; ating with some part of this thirty-one bill- ions of capital and credit; ; and whatever tie laborers of the country get , to. better their condition is out of this net increase. Commissioner Wells statesthe aggregate net increase of wealth for 1869 atabout one bill- ion of dollars, which is admitted to be a large estimate. This is less than three and a third per cent, of the thirty-one billions of combin- ed property andcredits. Deduct from this S per cent, on seven billions of credits equal to five hundred and sixty millions, and the balance, four hundred and forty millions, is all that is left of the net increase for the remaining twenty-four millions of property to divide with all the labor of the country. This is not two per cent, increase for the property alone. The fact that labor gets little or nothing of thisi increase is shown by the evidence adduced by Commissioner Wells, the New York Evening Post, ' and other reliable Republican authorities, that labor- ers generally dress and fare more poorly now than before the war.. Therefore, it is hardly to; be presumed that they lay by a surplus.. I am well aware that much of the twenty-four billions of property yields a larger interest than two per cent. ; but that is counterbalanced by other large proper- ties yielding nothing, or being consumed by interest. To sum up, it is not far wrong to say that the interest yielding investments, held generally by non-producers, gets, un- der our present money system; eight per cent, interest, annually, out of the aggre- gate net increase ; other property about two per cent. ; and labor,which creates all the' increase, nothing. IT CAUSES RAPID CONCENTRATION OF WEALTH. We see, fellow-citizens,' in these finance measures, the Chief cause, not only of the depression of industry generally, but also of the rapid aggregation of wealth in the hands of a few and the general reduction of comfort of the many. For every for- tune of a hundred thousand ten years ago, there are ten of a million now. Girard and Astor wore pigmies to Vanderbilt and Drew. The old National Bank and Nick Biddle were but a child with his " miser box" compared with Tom Scott and the Pennsylvania Cen- tral. The enormous increase of fort unesis due to the.'fact that interest-paying and other subsidised investments increase beyond the average per cent, of increase of wealth, and thus rob the mass of both property and la- bor of their due shares of the wealth they create. Every large fortune is a snow-ball, which fathers fa3ter and laj s bare a larger breadth with every turn. Because of every million added to the wealtli.pf a Stewart, a hundred families fall from comfort to want. The undue, gains of the. rich, at last come chiefly from the poor. The burdens are shifted from ojass to class, ujitilthey finally rest on the masses ";vvbo can escape them only by sinking to pauperism. BELIEF WILL COME,' BtJT NOT FROM THE republican' PAETY. . From the evils these measures are inflict- ing the people must have relief— and by political action — relief from the seventeen million dollars annually squandered as s ibsidy to the National Banks — relief from the greater part of the one hun dred and forty-five millions of interest and exemptions annually borne on the 5-20 bonds — relief from a meagre and ill-regulated currency, which steals for the idlers all the toilers earn, and paralyzes the industry it is created to serve. To what party will you look for this relief? Not to the Republican party? This fi- nance system is theirs, and they are proud of it. Mr. Sherman boasted in. his Columbus speech that " the financial condition of the country is the work of the Republican par- ty." The stockholders of 1,700 National banks ; the bondholders ;. the men whose money and securities have doubled through currency contraction ; the stockholders of giant corporations, enrichedand magnified by tariff bounties and land grants — these are, generally, leaders of the party, and, like Jay Cooke, regard these measures, debt and all, as "national blessings." This is natural. Why should they be discontented and seek a change of finance measures ? They are now holding high festival. "Doth the wild ass bray when he hath grass ? Or loweth the ox over his fodder ?" But how few are these men compared with the great body of patriotic citizens who support the Republican party ? Nine- ty-nine hundredths of the people are inter- ested exactly alike on all these questions — almost all the men in actual business — al- most every man except those who do noth- ing but gather interest on their own money investments, or hang on the favor of their party. And the sense of fair play is so strong with Americans that many of them would be the first to demand reform if the effect of existing measures were fully un- derstood. PROPOSED FINANCE POLICY OF REPUBLI- CANS. In considering the policy to be adopted respecting the finances, we are fortunately not in the dark as to what the Republican party proposes. It is part of their policy, distinctly expressed in the " act to strength- en the public credit," to reduce the cur- rency or hold it at its present volume until, by contraction, it reaches par in gold. This involves continued high interest, and con- tinued appropriation by the non-producers, through usury, of most of the net increase which all the property in the country and all the labor combined produce. They in- tend, too, to fund the whole twenty-four hundred millions of bonds, notes and green- backs into new long bonds, exempt from all taxes, State and National, and give to na- tional banks the whole currency. As they have not yet been able to sell their five per cents at par, it is fair to figure results on as high an interest as that for the whole debt, if funded under their auspices. The result of this policy, if carried out, would be to increase by four hundred millions the pres- ent interest-bearing debt by converting greenbacks into bonds. The people, not withstanding the reduction of the rate of interest, will then have to pay an aggregate of one hundred and twenty millions of gold interest instead of one hundred and fifteen millions as now. There's not much relief in that! Let us see what we will pay if the debt be funded in forty-year five per cent, bonds. I think it will be admitted, after all we have borne of war and taxes, that this generation ought not to do more than pay principal and interest of fourteen hun- dred millions of the bonds, leaving a thou- sand millions to be paid, princpial and interest compounded, by our children If that be done, at the end of the forty years the amount we will have paid, com- pound interest added, will be ten billions, or four times the present debt ; and our children will owe seven billions two hun- dred and ten millions, or more than three times the present debt. DEMOCRATIC FINANCIAL NEW DEPARTURE. From this whole system of finance, past, present, and to come, adopted and proposed by the Republican party, the Democracy of Ohio announce a new departure — one which will relieve the people of much of their burden of taxes; leave no heritage of debt to oppress and enslave our children ; and so establish and regulate the currency as to greatly reduce interest, and thus distribute the net increase of wealth fairly between labor and all forms of capital. They propose that the general Govern- ment shall furnish all the money of the people, in au issue which shall be a legal tender equally with coin for all public and private debts whatsoever, except where the contract expressly calls for specie, and with it redeem the 5-20 bonds ; and, to prevent an undue expansion of the currency, issue a three per cent, bond which shall be ex- changeable at par for legal tenders at any time, and into which legal tenders may, at the option of the holders, at any time be converted. It is not at all likely that the currency would fall so far below par in gold that any bond would be redeemed in a less valuable currency than that the Government got for it. If such instances occur, the hardship will not be great, however. Take the bond- holders of 1864, who, according to Jay Cooke's iable, gave a little less than forty cents in gold for their bonds; they have already received six per cent, on their in- vestment, and got the principal returned to them, and still have the bonds. So if the currency in which the bonds are redeemed were to fall even to sixty cents in gold on the dollar (which is not to be anticipated), these gentlemen will not have suffered much by their self-sacrificing purchases of the bonds at forty. I know -whole families who have suffered more by the war* aud by the legal tender act ! But there is no probability that this pol- icy will depreciate the currency at all for any length of time. Our 5-20's have been below par in Europe; not because of lack of faith in the resources or stability of our Government, but because it is well known that the people regard them as justly pay- able in greenbacks, and that our necks are not yet callous enough to bear whatever yoke our agents put on us. The credit of Great Britain rose when she compelled her creditors to take three per cent, bonds for bonds bearing a higher interest; and if we, in strict accordance with our contract, make our debt easily supportable, and therefore sure to be kindly borne, our bonds will have a value denied to those com- pounded of " repudiation and extortion." CHARACTER AND EFFECT OF THE NEW CURRENCY. The effect of this system, when the out- standing notes and bonds are all converted by purchase or payment into the three per cent, legal tenders, will be — 1st. To give us a currency superior to any we ever had in these important particulars : (1). It will be a legal tender for all pur- poses whatsoever. It will pay every debt, tax and impost, buy every commodity, and rule every money transaction, with the power of gold. (2.) It will be a stable currency. Its constant convertibility into bonds bearin'g a fixed rate of interest will give both it and the bonds a value as stable as that 6f the consols of Great Britain. This quality being obtained, it will be of no more im- portance, so far as the adaptability of the currency to all the uses of the people goes, whether a dollar of it will buy exactly a dollar of gold, than whether it will buy ex- actly a bushel of .wheat. Gold will remain as now, a mere article of commerce ; and of no more influence on commerce than any other article, except as it is the measure of values in about half the countries with which we trade. If the American measure of value, the paper dollar, and the English, the pound, keep about even proportion to each other, as they do now, our foreign trade will not be injuriously affected by the fact that the measures are not the same, any more than our trade with France in silk is affected by the fact that our meas- ures of length are not the same as hers. And if our legal tenders and the English pounds should, vary in proportion to each other, such fluctuations aftect chiefly our foreign trade, which is not one-fiftieth part as great as our home trade. But if we had a currency redeemable in specie, as the Re- publicans propose, it would, be incessantly expanding and contracting, not because of the fluctuations of the business it is used to transact, but because of the export of our gold to settle adverse balances of our for- eign trade. The whole superstructure of domestic business would thus be incessant- ly racked by movements of its foundation. (3.) It will be elastic currency, con- tracting and expanding to fit the fluctuat- ing demands of trade. At seasons when largo amounts are needed, bonds will be converted into currency to meet the de- mand; and as that falls off, the surplus will be re-converted into bonds. It will always be sufficient, never excessive. (4.) It will establish a moderate and nearly xiniform rate of interest. As much will be issued at once as will command in- vestments preferable on the whole to gov- ernment three per cents. It will thus es- tablish 1 the average Tates paid by business men at from four to five per cent., instead of nine, as now. Once established, these rates will be comparatively uniform, be- cause, as they tend to rise, more currency will be issued, and as they tend to fall, more will be exchanged for bonds. 2d. Let us see the effect of this polieyin lessening the burden of the debt. Assum- ing that it will take one billion of currency to reduce interest and meet present de- mands of trade, the people will then pay forty-two millions of dollars interest on the bonded debt, instead of one hundred and thirty millions (in currency) as now. The currency will increase probably in equal ratio with the population — say 2i per cent. — twenty-five millions of dollars the first year. If the people pay the interest of the bonds and apply the yearly growth of cur- rency to extinguish the principal, the whole debt will be paid in about thirty years. Or if they apply the natural growth of the currency to the interest of the bonds, the whole burden of the debt will be less the first year than the burden of the present National. Bank subsidy alone, and this in- crease of the currency to keep pace with increasing population will in a few years pay all the interest and gradually extin- guish the principal. But we will be told the legal tenders will be a debt outstanding when all the bonds are paid. They will be no debt, in any proper sense of the word. The Govern- ment will be bound then to do, what it al- ways has been bound to do, but has never done — furnish the people all their money, the measurer, exchanger and distributer of all their values. It will be necessary to keep up the pel' capita circulation, and maintain its stability and elasticity by some suitable means. The people will have got a good money; stable, elastic, establishing low and uniform interest, and thus promoting hap- piness and industry because distributing equitably the increase of the land between capital and labor. The curse of the debt will thus turn to a blessing by teaching us how to escape the usury which has robbed and degraded the masses of all nations from Israel to Great Britain. My remarks, fellow-citizens, are already 8 so protracted that I have time only to glance at.two topics on which I would. be glad to speak; at large— the tariff and the. land-grant; policies of the Republican, and the Democratic parties. THE TARIFF. The immense burden of taxes to pay bank subsidies, andt nine per cent, interest on the bonded debt, and especially the enor- mous interest on money which the currency policy of the Republican party has estab- lished, have weighed ; down ali productive industries since the war, and crushed, nearly all except those beyond the reach of foreign competition, or which have got a bonus for their work from the rest of the burdened people through the tariff. . Thus, A establishes an iron furnace at Straitsville, or Ferrara* Ohio, whi^e B estab- lishes one in Wales — both to make pig-iron for the Ohio market. Each does it on one hundred thousand dollars borrowed capital. The American has cheaper ore and fuel — his coal makes iron without coking, which the Welsh coal does not ; and he makes his product at the place of consumption, while the Englishman. transports his 3,500 miles. But the Englishman has cheaper labor ; he and his fellow-laborers are less heavily taxed, and he pays but $4,000 a year inter r est, while the American pays $10,000. This puts them nearly even — the Englishman perhaps a little ahead. If the American had to pay only $4,000 a year interest, in- stead of $10,000, he could control the market — for that difference would, of itself, be a fair profit. As it is, however, he does the only thing left — makes up the difference of interest by tariff — and, while he is about it, gets it high enough to drive the Englishman clear out of nearly all American markets. Hence, our Straitsville or Ferrara friend has his home market to himself, and exacts from consumers say $5 per ton more than formerly for his iron, except where he meets American competition. Thus the general i Government gets only about a million dol- ;' lars duties on pig-iron, while the whole American product is enhanced to consumers " about fifteen millions. Each manufacturer of the next grade of iron from pig metal has to pay the extra price of probably $5 , per ton, and is borne down also by high ;. taxes and high interest." Therefore he must i. must get protection, or quit manufacturing. , And so it goes, through the ten thousand ,, American manufactures, composed in whole !. or in part of iron, or steel, from the pig to ... the cambric needle, nearly every article is ;| absolutely cut, off from foreign markets by 1' taxes, high interest, and high tariff on its raw material, and can Only live at home if " itself supported by the tariff. What is true of iron- is true of cotton, ! wool, leather, and nearly all manufactures. ■! The New York Evening, Post, a high Repub- lican authority, alleges as .the result of care- <; ful computation, that all the tariffduties on articles which are made in the United States yield 'a revenue of 'less -than seventy- five millions, while adding to the prices paid by consumers in this country three hundred millions. That is, rather than re- duce the debt burden, and interest, so that;' all industries may thrive, the Republican party gives two hundred '■ and twenty-five millions each year of the people's money to a few favored producers and manufacturers — some of them needing help and others not. This is a great injustice to the masses of the people already overburdened, and it combines with high interest to destroy oth- er industries quite as numerous and import taut as' those it helps. By these causes, for Jl ex'ample, ship-building has been destroyed, and our commerce driven from the seas. Why not lessen the tax and interest bur- den, which oppresses all of our industries ? Why should some suffer or die that others no greater than they may flourish more 1 Indeed, why should not all industries, little and big, like all men, be equal before the law? The Republican party has thus, by high interest leading to high tariff, laid heavy burdens on the whole people, and by the' ' same act cut off the products of our shops' from foreign markets — destroyed ship-build- ing and commerce — saved half of our man- ufactures only by destroying the other half — and degraded the industry of the nation . by making its success depend on party and lobby schemes iustead of on the laws of nature and the movements of trade. Mr. Sherman, the finance leader of the Republi- can party, claims credit for this tariff policy in his Columbus speech. He promises no reform ; his party promises nope in their State platform. It has stood, substantially as it now is, since the close of the war; and : it will so stand substantially until the Re- publican party is cast from power." On the other hand, the Democracy of' Ohio propose to abolish all duties On the necessaries of life 1 ,' as tea, coffee and sugar ; to lay all the duties for revenue only anct ; not protection, putting as much of the bur- den as possible on the luxuries of the rich, and as little as possible on industries ; and then, with ■ seduced Government' expenses, light debt burden, and above all, light in- terest, our prostrate industries will revive and flourish, in competition with the com- , merce and manufactures of the world. LAND GKANTS. A few words now on the land grant ques- tion, and I am done. Among the greatest errors committed in national politics in the past ten years has been the bestowal of public lands on pri- vate corporations^' ! The first grant "was to the Pacific Railway in 1863. Bef6re that year there had been but two land grants ever made by the General Government for works of internal improvement, and both these were made to States, not to private corporations. Tilt) need ot' a Pacific Sail- road was manifest aft the outbreak of the war. The .grandeur of, the idea, and the absence of all- reliable estimates' of its cost, magnified ithei supposed difflquiti'es of the undertaking. Both parties united to give it a munificent land grant. But the hole made for the cat was big enough for all the kittens — and hundreds of smaller grants followed, until over two hundred millions of acres were given away up to the end of last session — an area eight times as large as Ohio. In all this century, the general Gov- ernment has sold and given away about six hundred and fifty millions of acres ; and it has left, excluding Alaska, but nine hun- dred millions. Leave out the worthless lands of the mountains and plains, and it would be an extravagant estimate to put the rest at six hundred and fifty millions of acres, or as much as the Government has already disposed of. This remainder is but sixteen acres to each inhabitant of the United States. It should be kept as a sacred trust for the people, to be disposed of only by gift in moderate quantities and values to those who need and will occupy it. Then, while any of it is left, the rob- bery of the masses by usury, now going on, cannot reduce any larger number of them outside of the cities to absolute pauperism. Though both parties united in the first Pacific grant, the later subsidies have been opposed by the Democracy and carried through by the Republicans. Thus, the last Northern Pacific grant received but seventeen Democratic votes in the House, out of one hundred and seven, and not one in the Senate. CONCLUSION. I know well what answer the constella- tion of Republican orators, who will blaze in our skies on the 24th, will make to all we say of the depression of industry and the decay of prosperity among the masses. They will point to the two railroads push- ing to* the Pacific, to the unexampled ex- tension of our railroad system in every State, to the rows of palaces rising in our cities, and the displays of wealth shining on every hand. But these are evidences only of the growth and concentration of capital, not of the prosperity of the masses. To show their condition, ascertain how steady is the employment of mechanics and laboring men, and what is left of their wages after tariffs and excises on ail the necessaries and common comforts of life are taken out. Hear Commissioner Wells' statements, based on official statistics, that the masses live more poorly now than be- fore the war ; that, notwithstanding the in- crease of population, fewer shoes and hats are worn, and less tea, coffee and sugar con- sumed now than then. Behold in every city, east and west, tenement houses stand- ing vacant to tell how two families are •rowded by hard times into the place lately filled by cine. See the million- Of only half- employed men, in New York and a circuit of fifty miles, of: Whom Horace Greeley tells. Rememberi, the wail that went up out of Boston last year from the eight thou- sand sewing women in that small city who starve in sight of her? gorgeous palaces on but one poor meal a day ; and thus learn " How wide the span Between a splendid, and a happy, land." Fellow-citizens, it is vain to look to the Republican organization to arrest and rem- edy the evils I have discussed; or to banks, or railroad companies, or any of the great repositories of the wealth and power which the policies of that party have filched from the people. Yon cannot divide those forces. With few patriotic exceptions, they all act together. It has been and is the fixed pol- icy of the Republican party to build up great money powers by tariff, bank, bond, and land subsidies. • These corporations are now immensely powerful in American poli- tics, and grow stronger yearly. Already in many States, through money and patron- age, they corrupt legislatures, ttiake the laws governing them, and thus to the ex- tent of their interests rise superior to the people and become sovereign in the State. With them, and the wealthy men generally who have been enriched by their party, to control the North, and the army and the black militia to control the South, the Re- publican party expects to renew and per- petuate its power. To look to that party, therefore, to abolish, these tariff, bank and bond subsidies, or to reform a money sys- tem which robs the masses to enrich its supporters, or to restore civil order and free government in the South, were about as un- reasonable as to expect Jim Fisk to surren- der Erie, or General Grant abolish nepotism. In this contest the Democratic party is the sword and buckler of the people. It has fought every existing abuse, and tried to apply every appropri ate remedy. Though sometime controlled by slavery, and racked by discord and by war, it has kept the faith in the people and free government which Jefferson, its glorious apostle, taught. It represents no faction, but the whole people ; no section, but the whole country. It is not a white man's party, or a black man's party; a poor man's, or a rich man's, a Christian's, or an infidel's party. It is the people's party. It will trample on no man, and give no man preference before the law. It stands for the reserved rights of the people and the States, because liber- ty dwells with them. It is jealous of every extension of Federal power, because the path to consolidation leads ou to despotism. It fights for equality against privilege — de- mocracy against aristocracy — government by the ballot against government by the dollar and the bayonet. It looks to the people, and seeks direction and strength from them, whence comes the inspiration of every great reform. And it now especially 10 btSitm the' Mtf » 1867 2,3BH 1868 MM 1869 MU 1870 3,160 It will be seen that the failures in the one year, 1870, were not only muoh greater in num- ber than in any other year, but also far ex- ceeded in amount the aggregate failures during the whole four years of ourrenoy expansion. This computation does not inolude any losses not resulting In absolute failures; but it indi- cates beyond oavil that there were sixfold more of losses and disasters during eaoh year of our- renoy contraotion than during eaoh year of full ourrenoy. But as the debtors are generally produoers or distributors— largely manufacturers and mer- chants who employ labor— the burden which orushes or oppresses them bears down labor also. Thus we find that the policy of ourrenoy contraction has diminished the demand for labor, resulting generally in - reduotlon both of wages and employment. Another evil effeot of oontraotlon on the masses, beretofore overlooked in dlscnsslng this subjeot, but obvious when suggested, is the lnorease of all the annual burdens of Govern- ment. For example, the farmers pay over one- half of all the national taxes. They have paid, therefore, one-half of. the $645,000,000 of yearly Federal burden slnoe 1865, or $322,000,000 eaoh year. They paid It in farm produots. Suppose It all to have been paid In wheat. In 1866 wheat was worth over two dollars per bushel, and 161,000,000 of bushels paid their share. But by reason of ourrenoy oontraotlon wheat fell In 1870 to a dollar a busbel, and it took twioe that number of bushels to pay their share. That Is, by ourrenoy oontraotlon, their National tax burden was doubled. It Is so to a greater or less extent with all classes who contribute by property, labor or product to Government expenses, national, State, county, township, city or town. The taxes In dollars re- main as high as In 1865, while it oosts on an av- erage one-fourth to one-third more of labor or its produots to pay them. Bondholders and omoe-holders are enrlohed, while laborers and tax-payers are Impoverished, by this lnorease of Interest and expenses of Government. Compared with these losses and disasters to the people through ourrenoy oontraotlon, how small is the argument of Mr. Sherman that, by oontraotlon his party has lnoreased the pur- chasing power of greenbacks sixty or seventy millions of dollars; that is, by foroing down the value of labor and Its products. I don't dispute the estimate, and am willing to see the party credited with this small set-off in the enormous aooount for whioh the people are entitled to judgment against it. The evil effeot on the masses by ourrenoy oon- traotlon, oombinlng with the tariff and other finance measures ot the Republican party, is illustrated by some faots stated by Mr. Wells, late Speolal Commissioner of the Revenue, and exoellent Republican authority, la the July number of the North Amerloan Review. He makes the statement, based on offlolal statistics, that the mass of the people in the United States use fewer boots, shoes and hats, and oonsume greatly less tea, coffee and sugar per capita now than before the war; and that the total Consumption of ootton goods in the United States has fallen off one-quarter slnoe 1860, notwithstanding our population has Increased one-quarter slnoe then. As measures of the relative prosperity of the masses, what better evidence oonld we have than this, the aggre- gate consumption ot the heoessarles and com- forts of life! It Is ne answer to eay that the wages of some olasses of meohanios and laborers have not fall- en off. Wages of workingmen generally have been reduced — more thau rents, less than farm produots— on the whole, perhaps not more as yet than the average prices of olotbing, rent and subsistence. The loss to the workingmen who are not debtors has so far resulted chiefly from orippling production, and thus making em- ployment unoertaiu. Thus I am advised that here in Cincinnati the workers in your great iron founderies and factories have been out of employment generally for several months this summer— that meohanios generally have had during a large part of the summer but half work, and In many instanoes at reduoed wages; and that all business had been duller than at any time since the waT. WRHHS S™S S ° a S US i ne3a oltlea *na towns ol The OT f sent Jlf„flm a ^oughout the country! tbeUnS %t^ a i"? u of ln aastrlal classes la alLwillmg to work, yet wehudeuforoed ill«new, sliM unemployed, commerce departing from its old ana legitimate channels, producers of great staple articles complaining that they are working to no profit, im- ports Increasing, exports of domestic manufactures relatively decreasing, trade dull and collections diffl- m.T?? *H? 0D8erve b r tho table I have just read tnat for three years past both the number and the aggregate sum ol failures have steadily looreased, showing that the rapid oontraotion ol the ourrenoy from 1866 to 1868, and the slower contraction slnoe, have not yet produoed their full combined efleot. This is shown, too, by the fact chat the deorease ol the ourrenoy Irom 1865 to 1870 has been two-thirds, while the average fall of labor and its products is only about a quarter. Making due allowanoe lor the faot that real estate d]fl not rise as high nominally as other prices during ourrenoy expansion, and therefore, has not so far to tail, it is sate to say that by the time, or soon alter, the present oon- traotion ol the ourrenoy shall end in sDnnia i>»ir- 1 ments, all prioes will reoede on an average one- quarter more. Thus another billion of dollars ol undeserved loss will fall on the producers, still further oppressing oar already crippled and prostrate industries, and all the labor with > whioh they are allied. We are, therefore, only half way through the mlsohlefs inflicted or to be inflicted directly by currency oontraotion — not half way. for we have ' as yet paid bat little of the extra burden added to the Five-twenty bonds by It. Shall we brlog back the property of five years ago by restoring to the channels of business a volu me of ourrenoy sufficient to set them flowing again, or go on to specie payment with oontraotion of the our- renoy, aooompanied and followed by increasing burden and disaster to labor and Us handmaid, oredit? This is a question whioh the masses are interested In; having answered in the affirmative, and capitalists gen- erally in the negative. Bat the masses are inert — not well informed on finance measures and their efleot, and even when fully deter- mined on a measure, as in 1868 on the payment of the bonds in greenbacks, are easily deceived by trusted leaders. To deoeive them is " as easy as lying." While the capitalists— the cred- itor class— who diotate the oontraotion polioy and have profited enormously by it, are vigi- lant in guarding their interests, Snow their men in all parties, spend money freely to carry elec- tions, and fill the publics ear and confuse the publlo mind with false and subtle arguments for their finance measures. IHB REQUISITE OP A CURRENCY. Mr. Groesbeek, In his late magnlfloent speech at Steubenville, Insists strongly on the neces- sity for a stable ourrenoy. The quality of sta- bility In the measure of value IS the great, uni- versally acknowledged desideratum— in faot, it is the only requisite of the legal dollar. It is, therefore, of no Importance whether it have intrinsio value, as the gold dollar, or no intrin- sic value, as our greenback, if it is a tender by law for all debts, and Is of a value as stablel as practicable, oompared with the arti- cles it exchanges for. Now this quality of stability Is dependent ohiefly on the supply and demand for business and exohanges. As the demand inoreases, the quantity of ourrenoy ought to luorease, and, as the demand diminishes, it ought to diminish otherwise, the supply Is relatively smaller at one time than at another, and the ourrency thus beoomes unstable in value, as oompared with the artloles for whioh it exohanges — for too small a supply Of ourrenoy reduoes the nominal values of labor and its produots, and too large a supply inoreases them. The fluctuation seems to be in the artloles measured, but really Is in the measure Itself. THREE KINDS OF CURBENCY PROPOSED. There are but three kinds of ourrenoy worth considering, as possible for our people: 1. The purely metallic ourrenoy. Mr. Groes- beck calls it the "true dollar." It never was the only or chief ourrenoy of the United States, nor the only or ohief ourrenoy of any enlight- ened nation at any time within the last six oen- turies. It is, I believe, the only onrrenoy of China and Japan, and of that middle spaoe in history from about the Mood to the Dark Ages. Paper money is now the ourrenoy of the civil- ized world, there being probably three dollars of it for every dollar of coin. In the United States, espeoially, speoie is wholly unfit as a ourrency, because we never had, at most, half enough, and because it is the least stable of all possible mediums, by reason of Immense and frequent fluctuations of quantity by export to settle unfavorable balanoes of our foreign trade. SPECIE-BA.SE PAPER CURRENCY. 2. A paper ourrenoy, redeemable in i00ln. Suoh was our ourrenoy before the war. It was is- sued by State banks, and though not legal- tender, was, in effect, the sole ourrenoy iff do- mestic commerce. It was put out largely in exoess ol the ooin held to redeem It. Walker, lu bis Science of Wealth, says the amount of paper money issued, oompared with the coin held or required to be held to redeem it, averaged in the United States, before the war, four to one, and even in Massachusetts in 1860, when and where banks were soundest, six to one. This ourrenoy was all redeemable in gold on de- mand. While everybody thought it was all right, business wont on swimmingly, and deposits and loans Inoreased. The deposits were payable by the banks generally on de- mand and in gold. Thus their gold obligations were from three to four times their demand notes; and from six to eight times their actual or required gold reserve. But, suddenly, when all sails are filled and business is prosperous , something happens to shake confidence — the failure of a large house like the Ohio Life and Trust Company, whioh oaused the panio of 1857; an unexpectedly large export ol gold, which oaused the panio of 1836; a political oonvulslon; or even some mood of the publlo mind. In- stantly the banks become alarmed and refuse to lend or renew; depositors oall for their deposits, which are loaned out; holders ol notes demand redemption in gold; the banks, ol oourse, sus- pend; their ourrenoy falls twenty -five or fifty per oent. In a week; and the whole struoture of business throughout the oouotry, built on the insane theory that one dollar in gold will re- deem at the same Instant six of ourrenoy, falls, and buries In its ruins all the industries and energies of the people. This exoess of speoie demands over speoie reserves is an Ineradicable vloe of any specie- base system. The oonstant Insufficiency in quantity of ooln is the cause of paper ourren- oy ; and therefore the exoess of the paper our- renoy over the ooin redemption fund Is the law of its exlstenoe. Just in proportion as ooln di- minishes in auantlty, the legitimate demand for more paper to fill its plaoe inoreases, lu order to keep up the volume of ourrenoy. In other words, it is as the redemption fund decreases, the paper held to redeem inoreases. Henoe this system of ourrenoy is not only unsafe, but any tendency to greater insecurity by unexpected withdrawal of the redemption fund oan not be oheoked without oheckiag the healthy growth and demands Of business. The system neoes- sarily has the monstrous shape of a pyramid with Its apex on the ground and Its base In the air. A mere touoh tamblea It over. The tronble with this ourrency, therefore, is not that it is redundant, but that it Is unsound, beoauae neoessarily based on an insufficient and inseoure foundation. In 1860 business was oau- tlously managed and fairly prosperous. No- body then or alnoo thought there was undue ex- pansion of the ourrenoy. Yet Professor Walker shows that the banks then held but eighty- three millions of speoie to redeem four hundred and sixty millions of notes and demand depos- its payable in speoie — the base being less than a fifth of the superficial area of the top. There was-, then, but two hundred and twenty- five million dollars of speoie in the oountry — less than one-half the amount of the demand speoie obligations of the banks alone. The in- stant the rebellion broke out, early in 1861, the banks suspended, oomblning with other causes, to bring Immense disaster on business men. The failures that year, aooording to Hunt's Mer- chants' Year Book for 1870, were one hundred and eighty-nine million dollars, being thirteen times greater than the average failures of the next four years, when we had a full currency, a legal tender* but not redeemable. If this system was impracticable and disas - trous before the war it is greatly worse now. Then, money revulsions were the result of acci- dent; now, they would be readily contrived and exeouted by the Wall street sharpers, who have reduced panlo-making to a fine art. Then, our exports generally exoeeded our imports, and speoie was yearly Imported; now, the tables are turned; we pay at present seventy-two million dollars of gold interest annually on Amerioan bonds of all kinds held abroad; and Amerioans expend probably twenty million dollars more of gold yearly than before the war, traveling in Europe. These items keep the stream of speoie flowing from us, so that we have less ooin now than prior to 1861, notwithstanding our laree gold product. The ninety-one millions exported In 1861 was probably half the gold and silver ooin in the oountry. I have no data showiDg the specie exported since then, but it has been , large and almost constant. Imagine us back at specie payments with bank Issues and deposits neoessarily from three to six times greater than the redemption fund, and these Immense and frequent but unoertain asportations of gold, and with Jim Flsk and his cohorts to look up gold when it is most demanded for export and bank reserves. The fluctuations of ourrency supply would be incessant; all business would be racked by every change and beoome as fit- ful and feverish as gambling. Could any polioy be more irrational I This is the system of ourrenoy to which our rulers propose to return. They will give us National banks instead of State banks; but they dan't invent a sounder speole-base system than that of Massachusetts before the war, where six dollars of currency was based on one of ooin. 8uch a system oan only be stable while the publio don't think of the impossibility of re- demption. The moment the people do think of it, stringency follows; If they grow uneasy, a oramp; if they become alarmed, a disastrous panic. To revive that system would be to send the business of the country toaea in a tub. LEGAL-TENDER PAPE8 ODKKBNOr. Third— There is no other ourrenoy to be considered but one furnished by the Gov- ernment, not redeemable in coin, a inn legal-tender for all debts, publio and pri- vate, exoept those expressly payable In coin. We have had nearly suoh a ourrenoy since 185A and, notwithstanding its great and obvious lm- perfeotions, no one denies it is the best we ever had. But it has never yet been fairly testea, The years of Its use have been subject to the most violent political, and consequently busi- ness vicissitudes; and the quantity of ourrenoy has been first expanded and then contracted enormously, thus throwing up and casting down all values. Yet business has suffered less from these oauses affootlns the onrreuoy than in any equal period before the war from the more.constant vioisBitudes in the de- mand and Bupply of specie and the stringen- cies and panios they neoessarily occasioned. It | is because this ourrenoy is not redeemable in I ooin, and Is a legal tender that It has proved serviceable. Walker, In his Soieoce of Wealth, | says that in 1816 the export ■ of $60,000,000 of speoie and in 1836 the export of $64,000,000 oaused terrible panios and disasters to busi- ness; while in 1864 the export of $91,000,000 oaused no trouble. Why this difference? It is because, in the first two instances,- the base of the ourrenoy was removed by exports of gold, and ourrenoy and credits therefore oollapsed; while in the last, speoie was not currency, was a mere commodity, and Its export oaused no more trouble than an export of Its worth in surplus wheat. Our present ourrenoy, though better than any we had before the war. Is deteotlve in two par- ticulars. First, it Is not sufficient in quantity. Mr. Henderson showed in a speeoh delivered in the United States Senate, Maroh 4, 1868, that the value of ourrency of England and Franoe is $26 per capita. He thought that double that per capita oiroulatlon was neoessary for our people. But if we had a ourrenoy even equal to the cur- rencies of those countries, ours would be in- creased from $700,000,000 to $1,040,000,000. The oth- er diffloulty Is that our currency has no elasticity. It should oontraot and expand in value to meet the fluctuating demands of trade — without which It oan not remain of stable value. The ourrenoy proposed by the Ohio Demo- oratlo party and the Labor Reform par- ty is the greenback we have tried, and found bo serviceable, made, however, a oomplete legal-tender. It is proposed to pay the Five-twenty bonds as they become pay- able, In this ourrenoy. To prevent excess, a three per oent. bond is proposed, into whioh the greenbacks may be oonverted, and whioh may be exohanged again for greenbacks at the option of the holders. The two defeots of the existing ourrenoy will thus be remedied. We shall have a volume - of circulation exaotly adapted to the business It is created to serve. As business expands and oalls for more our- renoy, bonds will be oonverted Into greenbacks. As It oontraots and oalls for less, greenbacks will be oonverted into bonds. The volume of ourrenoy will always, therefore, bear a steady proportion to the business it is called on to do. It will be a stable measure of value. OBJECTIONS TO THE GOVERNMENT CUBBENCY f 1 ri w ^ t ti p r t? xy But, Mr. Garfield says that bankers and bro- kers will be delighted with this plan; for Gov- ernment will thus pay them interest on their idle ourrenoy. That objeotion illustrates the true philosophy of the proposition. We say, let the people pay interest on all d6bt except what is needed for a ourrenoy. Whenever more legal- tenders are afloat than are needed, the volume ought to be oontraoted, and Mr. Garfield states the effeot ot this plan truly when he says that in that oase it will be oontraoted. But we are told that this ourrenoy will have no intrinsic value. Why need it have? It ' has a legal value, whioh gives it all the uses a gold dollar (as money) oan be put to. It pays all debts and dues, publio and private, and ex- changes for all property, produots and labor. That is all that money oan do, whether It be gold or paper. "/■ r 4 4^ . i, L J..UJ- eL*^> K<-%* Cw aU *U( H .Vlvvf H~ ?th Bat Mr. Garfield says "it is not the money of the world." There is no money of the world. Eaoh nation has its own yardstiok of value, whether gold, silver or paper, and all of differ- ent lengths. Ho ooinage of one nation is an established onrrenoy In another. Gold and sti- ver are, however, by common consent of man- kind, the commodities whioh are reoeivable In settling International balanoes of trade. But they are reoeived, not as coin by denomination, but as metal by weight. Though our foreign exchanges are but one-fiftieth as great as our domestic exohanges, yet, they often oall in a year for the export of from one-fourth to one- half of all the ooln of our country. The faot that gold and silver are needed thus as metals for adjusting foreign balances, is con- clusive against adopting them as the base of a ourrenoy and of the vast domestic business It transaets. To do so were as foolish as to build a great edifice on foundation stones, which you are compelled to be incessantly renewing and replacing. Mr. Sherman says we oontraoted with the bondholders that the issue of legal tenders should never exoeed $450,000,000. No, we did not. That limit was not inserted until the law of June 30, 1864, after the larger part of the Five- twenty bonds were issued, and it was evident- ly not Intended as a oontraot with the bond- holders, but merely as an expression of the judgment of Qongress as to the probable futnre necessities of the Government. Besides, one' Congress oan not limit the exeroise by futnre Congresses of powers essential to Government. If it might thus oontraot away the power of fu- ture Congresses, it could, to that extent, depose the people and make the bondholder sovereign. The only oolor of olalm which the bondhold- ers have is that when the Govern- ment pays the bonds fn greenbacks, the volume of the ourrenoy shall not be in the aggregate beyond its per capita volume when the Government sold the bonds. That ourrenoy for 1864 and 1865 excluding the Southern people, was over forty dollars per capita: including them it was over thirty dol- lars. A like per capita olroulatlon now would give us, at forty dollars per capita, sixteen hun- dred millions, and at thirty dollars per capita, twelve hundred millions; the smaller of whioh snms would doubtless, be more than enough for all purposes. BJr. Sherman says that the five judges "who sustained our present legal-tender aot, rested It upon the war power of the Government, and not one of them would uphold as constitutional new legal-tenders In a time of peace." Now the faot is that no opinion has yet been delivered by the Court in the legal-tender oases argued last term. A deolsion was ren- dered sustaining the validity of greenbacks as legal-tender for all private debts, whether con- tracted before or after the passage of the law. But the oourt announced that the opinion would |uot be read until the adjourned term this fall. Mr. Sherman oan only judge of the grounds of that decision from the minority opinion in Hepburn vs. Griswold, 8th Wallace, 606, In which opinion there is not one word to justify his statement that the oourt rested its assertion of the power of the Govern- ment to deolare notes a legal-tender on the war power only. On the contrary, that dissenting opinion declares, in effect, that wherever it is a means adapted (whether absolutely necessary or not) to exeoutlng any powers granted by the Constitution to it, Congress may authorize the issue of legal-tenders. It being the duty of Con- gress to provide for the expenses and debts of the Government, and the issue of legal-tenders being means adapted to that end, the exeroise of the power of issue oomes within the reason- ing of that dissenting opinion. Mr. Sherman and Mr. Garfleld assert that an irredeemable legal tender will necessarily be- come excessive and worthless, thus bringing disaster on the people. They oite the Frenoh Assignats, the Continental money and the Con- federate currency. These instances sho.w that a revolutionary government, struggling for life, may be foroed, by stress of war, into bank- ruptcy bv an overissue of enrrflnnw Tn nw* Revolutionary struggle the ourrenoy reaohed over a hundred dollars per capita, and was indistinguishable from a counter- feit issue of about equal amount. During the Ee volution in France in 1793 the issue exoeeded three hundred dollars per capita, being consid- erably more than the whole wealth of the King- dom. But these instanoes have no relevanoy here. Our people are not driven to desperate measures, and all Wisdom and prudence will not die with the present managers of our finances. In Bussia irredeemable legal-tenders were long above par in gold. So with the Irredeemable legal-ten- der notes of the Bank of England during much of a quarter of a oentury of suspension. So with the legal-tenders of the Bank of Venioe for five oentunes. It is not true, either, that the periods of suspension of specie payments are periods of wild inflation and disaster. Our greenback period up to contraction in 1866 was one of great and general prosperity. And it was during the twenty-nve years of suspension in Great Britain that her spindles subsidized the world. In England, as here, the greatest mischiefs finance suffered during the period of legal-tender paper ourrenoy not redeemable, arose from the foolish attempts and disastrous failures of the Government to legislate baok to specie payments. These Bepublloan statesmen seem to think that the people have no oapaoity for govern- ment, and, therefore, tell them, in effect, that if they are suffered to manage their flnanoes they will aot with the desperation of a Parisian mob, or the reokless corruption of a Louisiana or South Carolina reconstructed Bepublioan Government. They say, in effeot, to the people: "You must not touch these finance questions. We and the bondholders and Jay Cooke know how to manage them— you don't. We expanded the ourreDcy to make the debt so that th.e peo- ple should get as little as possible from the bondholders; now we contract the ourrenoy to pay the debt, so that the bondholders shall get as much as possible from the people. You may I work and pay taxes, and you may govern your local publio policy, but you must leave the man- 1 agement of the national currency and bonds to ua, lor we are philosophers, unci have studied I these subjects, and know exactly how tlie moneyed aristocracy of other nations have manipulated national debts and ourrenoy so as to get all the wealth the people earn." WHY LABOR REQUIRES BOW RATES OP INTER- EST. The establishment of steady and low rates of interest is of the utmost importance to all pro- ductive industry. LaOor can not rise in a ooun- trv where high interest is the rule. All loorease of wealth Is made by labor operating with oap- ital. The rate of interest determines what share of the net increase whioh both combined - produoe shall go to capital and what shall bo lert for labor. For example: A borrows of B, . who is a gentleman of leisure, one hundred thousand dollars and establishes a manufac- tory, employing fifty men. A and his employes toll the year through, and make a profit, less subsistence, of $12,000. This profit is to be di- vided between the workmen aud toe capitalist, and the rate of interest determines how inaoh shall go to eaoh. If the interest Is twelve per oent., the money-lender gets all the profit, and the workers are praotloally his slaves. If it is ten per cent., the one Idler gets five-sixths of the net earnings of the fifty-one workers. If three per oent., the idler gets but a quarter and the workers three-quarters of what their labor and his capital combined produce. But Mr. Medill says: If the supply of money Is full, interest will be higher than if It is small. I admit that if wild expansion occur, unlimited by the wants of business, wild speculation will follow and possibly high Interest. But if the volume of ourrenoy be adjusted to the volume of exohanges— be full, but not excessive— the av- erage interest will be lower than where business Is cramped by a meager ourrenoy. The con- traction of the ourrenoy has depressed business and made Its .results uncertain, and, therefore, lessened its credit and kept Interest high. The uncertainty of business through the oouncry ™«norallv nas led capitalists, who live ohlefly in the great cities, to draw in their money and"keep' It there idle, rather than lend It even at high in- terest to embarrassed* men of business. Mr. lle- dill sees these pools of idle oapital in the cities, whioh oan be borrowed on oall at a merely nom- inal interest (if something better than money is given as seourlty), and says: "There is now a plethora of money and low rates of Interest at all the money oenters. Contraot the ourrenoy a little more, and it will rise to par value of gold. Interest will fall still lower, and money be still more abundant." Contract the ourrenoy still more, and it will be still more abundant! That Is, the greater the drought the higher the creeks! There is just that sort of plethora in the money market that there is of water in a creek in the drought of the dog days, when the most of the bed is dry and the water stands in pools covered with soum. This sort of plethora at the money oen- ters Indioates merely a diminished flow of our- renoy In the smaller veins and arteries of busi- ness. The currency and bonds proposed will make rates of interest both steady and low— steady, beoanse the bonds will be ohanged into currenoy when the business demand for money inoreasee; and the currency will be ohanged back to bonds when the demand decreases; and low, because there will be as muoh ourrenoy kept afloat as can find Investments preferable on the whole to Government bonds — say investments averaging five per cent., instead of eight or nine, as under our present system. HOW THE PRESENT USURY ROBS BOTH LABOK AND PROPERTY. The net Increase of all the values of the land at present is shown by Mr. Wells in his report of '69 to be about one billion dollars, which is about three per cent, of all property and oredlts oombined, whioh amount in the aggregate to about thirty-one billions. That is, after all the people, laborers and idlers get their living out of the inorease, there is left enough to pay each owner of property or oredlts three per cent, on his investment, without allowing anything to per- manently better the oondition of the laborer. Certainly the holders of the sat eat forms of prop • erty or oredlts, therefore, ought not to expect or reoeive more than three per oent. Now, the bondholder gets two and a half times that, not oountlng tax exemptions. Other money-lenders get about three times that, on an average. There are about seven billions of notes, bonds and other credits, drawing on an average, an interest of at least eight per cent.— more than two and a half times the average In- orease of wealth. This seven billions of oredlts get, therefore, five hundred and sixty millions as interest out of the thousand millions of net annual Inorease, leaving but four hundred and forty millions to be divided between labor and twenty-one billions of property. If the prop- erty get all the rest of the inorease it would be an average of a little over two per cent., leav- ing labor nothing. Thus usury is piling up enormous fortunes in the hands of the rich men and corporations who hold money securities, and is robbing the holders of other forms of productive property and the laborers of the oountry of their" fair share of the wealth they create. This system will be kept np just so long as Jay Cooke, with his Syndicates in Europe and his olaquers in America, can dictate the money polioy of our Government. THE DEMOCRACY OF GREENBACKS. Muoh breath has been idly expended in en- deavoring to show that the policy of a paper currency, and above all, a national legal-tender ourrenoy, is contrary to the traditions of the Demooraoy, and therefore the Ohio Democrats are departing from the faith in advocating it. If the ourrenoy is authorized by the Constitu- tion, and Is necessary for the welfare of the people, that is enough. What may have been said by Democratic statesmen against paper money, when the nation was free from debt, and they were fighting a national bank, is hard- ly pertinent to this discussion. All the cir- cumstances have changed, the people are now groaning under a mountain of debt. Experience has demonstrated the servloeable- ness of legal-tenders as money. It is, there- fore, but ordinary prudenoe to reduoe the bur- den by-oonvertlng a portion of the debt into currenoy bearing no interest. .But these stick- lers for the traditions of the Democratic party have overlooked an Important ohapter in its history. In 1813 our country was largely in debt, and there was no national currency, and State banks were furnishing all the oiroulating medium. Thomas Jefferson, the Apostle Paul of Demooraoy, and the most sagaoious leader and steadfast lover of the people, in his letters to Eppes, to be found in Volume VI of his works, advocates a polioy strikingly similar to that deolared In the Ohio Demooratlo platform of to-day. He says: "In the Revolutionary War the old Congress and the StateB issued bills without interest and without tax. They occupied the channels of circulation very freely V till those ohannela were overflowed by au uxci-ss be- vood all oallB of circulation. But tbough^we have so improvidemly suffered the field of circulating medium to be filched from U8 by private individuals, yet I think we may regnin it." Sic. (P. 140.) Again he says: "Bank paper mnst be suppressed, and the circulating medium restored to the nation to whom it belonge. * * Treasury bills, bottomed on taxes, bearing or not bearing interest as may be found necessary, thrown into circulation will take the place of so muoh gold and silver, which last, when crowded, will find an efflux in other countries, and thus keep the quantum of medium at its salutary level. (P. 199.) "If their credit falter, open public loans on which these bills alone shall be received as specie.' Let banks con- tinue if they please, but let them discount for cash alone or for Treasury notes. They discount for cash alone in every other country on earth except Great Britain and her too often unfortunate copyist, the United States." Here we find, advooated by Jefferson under similar conditions, every feature of the bond and currenoy polioy now proposed by the Ohio Demooraoy and the" National Labor party— the suppression of bank ourrenoy, the issue of Treasury notes to the full extent of the our- renoy wants of the people, and the prevention of an undue expansion by the issue of bonds Into whioh the notes may be oonverted at the option of the holders. conclusion: Fellow-oltizens, history is largely made up of the devioes and struggles of the few to seize the fruits of the labor of the many. Sometimes the end is accomplished by enslaving laborers— oftener by manipulating the taxes, debts and currencies of nations, so that the cost of Gov- ernment shall fall on labor, while by high in- terest and bounties all the net inorease of the land may be gathered by favored forms of wealth. By financial measures contrived to this end, England has been oonverted from a feudal aristooraoy to a money oligarohy; and by similar means vast corporate and individual wealth has in a few years been created here and become a controlling power in the land. It already lords It over States and parties, and is fast bringing us to the oondition where oapital, not labor, is sovereign. We are in danger of going the way of all republics: "First freedom, then glory: when that is past, ** Wealth, vice, corruption." This finance polioy, present and proposed, will never be abandoned nor its evil influenoe cured by the rloh men, the corporations or the polltioal organization who inaugurated it and profit by it. If done at all, it will be by the masses— by oombined effort of labor and those forms of oapital whioh are robbed by it— by the farmers, merchants, meohanlos, day laborers, and . generally the unfavored mass of pro- ducers and distributers of values. The world is now agitated with efforts to emancipate labor In other lands. Abroad, however, oppression of labor is inseparable from their systems of sooiety and government. Here it is wholly foreign to our system. There, labor has been always subject; here, always sovereign. There labor is bound with the tra- ditions and sanotions of centuries, aud it oan only be emancipated by upturning the founda- tions of sooiety and government. Here it is, for the first time, being tied down while sleep- ing, as Gulliver was by the Lilliputians. It need only awake and arise to scatter Its petty foes, and walk abroad again In Its sovereign majesty. SPEECH GEf. THOMAS EWIKG, DELIVERED AT Ironton, Ohio, July 34, 1875. COLUMBUS: [PUBLISHED BY ORDER OF DEM. STATE EX. COM.] 1875. SPEECH GENERAL THOMAS EWING, DELIVERED AT Ironton, Ohio, July 24, 1875. Fellow-Citizens : I shall address yon to-day only on tHe money question. It is not a question of ordinary polities affecting indirectly and remotely the welfare of the peo- ple. £, It is of present and paramount importance, and concerns every one who is person- ally engaged in industrial pursuits, or whose fortune is embarked. in them. I know the subject is one almost every body dislikes to study or discuss. But I do not offer you an abstract disquisition on the nature and offices of money, on which po- litical philosophers differ and confute, as did the schoolmen of the Middle Ages on entities and quiddities. I ask you only to take the lamp of our own recent experience as a people, and by it direct your steps. All eyes are on Ohio. The wonder seems to be that the Democraoy have dared £o take issue with the finance policy of the .Republican party — a policy of ruin to the many and aggrandizement to the few. The money power which dictates that policy assumes to control both the great parties. It is a mighty power — the dread legacy of the war — which gathers from all parties to the support of its^schemes men of largest control in business, politics and literature — the Sir Oraofes of public opinion. It has heretofore ruled our National finances almost without dispute through its instrument, the Repub- lican party. Its measures are exactly those through which its prototype, the money class of England, fastened on the masses of her people a burden of perpetual debt which they can barely carry and live ; and which have been grafted here to bear precisely the same fruit. It is a power which brooks no determined opposition from kin^ or people. The howl of rage and torrent of denunciation from its organs which now greet our ears bring ns the welcome intelligence that the arrow from our Ohio Convention hit the. •lout. THE ISSUE ON THE MONET QUESTION STATED. The issue between the Ohio Democracy and the Republican party on this question may be succinctly stated thus : The Republicans say the moneyed class shall determine the proper volume of the cur- rency ; the Democraey say the people shall determine it. They say the business of the people shall conform to such quantity of currency as the "banks can keep afloat redeemable in gold ; we say the volume of currenoy shall conform to the wants of business. They say the people's money shall be issued by pet. corporations ; we say it shall he issued only by the Republic. They say the people shall pay interest on the whole eurrenoy to the banks ; we say the whole currency shall be pavt of the debt bearing no interest. They say the interest-bearing debt.shall be increased oyer four hundred millions to fcuy up and destroy the greenbacks and fractional currency ; we say it shall be reduced ' over three hundred millions by substituting greenbacks for National Bank notes. The verdict of the people of Ohio on these issues, rendered after full discussion, will, I believe, be ratified by the judgment of the American people. I have no fear of there- suit. If it b« shown that the policy of the Democracy involves repudiation or a wild scheme of imposture, the intelligent and conservative masses of our State will condemn it without instructions from Wall street. But if it shall appear to be consistent with National honor, and demanded by the interests of the people, the truculent billingsgate ■with which it has been assailed will ouly emphasize the popular verdict in its favor. THE RESUMPTION LAW PRESENTS THE ISSUE. The whole issue on this question is involved in the act of January 14, 1875, entitled M An act to provide for the 'resumption of specie payments." It provides in Bukstanoe as follows: 1. That the forty-eight millions of dollars of fractional currency them outstanding «hal!, " as rapidly as practicable," be redeemed with silver and destroyed. 2. That the National Banks now or hereafter established may increase their Currency without limit of aggregate amount by deposit of United States bonds as seourity under •existing laws. 3. As each $100 of new bank money is issued, $80 of greenbacks shall be redeemed and withheld from circulation, until the three hundred and eighty-two millions of dollars ■of greenbacks then outstanding be reduced to three hundred millions. 4. On and after the 1st of January, 1879, all the remaining greenbacks shall be re- deemable on demand in coin ; and, once redeemed, shall not be re-issued 5. The Secretary of the Treasury is required to provide the coin for these redemp- tions, and authorized to sell rive per cent, gold bonds to buy the coin. THE RESUMPTION LAW A PARTY MEASURE. This act is the climax of the finance policy of the Republican party since the war. That party must stand or fall by it. It was reported by Senator Sherman from a Ke- pnblican Congressional caucus and passed under the gag of the previous question by a party vote — the Democracy to a man opposing it. It was promptly approved by the President, and was in effect indorsed by the Republicans of Ohio in State Convention. Here, thea, is the issue. Shall that law be carried out or repealed ? Let: the people ■of Ohio and the Republic consider the effect of its provisions and answer. ORTY FOUR MILLIONS FRACTIONAL CURRENCY TO BTS DESTROYED — MORE CpNTRACTION— MORE TAXES. On the 8th of this month the Secretary of the Treasury announoed that, by authority and command of that law, he had sold five per cent, bonds, and with the proceeds pur' the act — a contraction in three years of forty per cent. — the price of labor and all its pro- ducts, with scarcely an exception, had fallen in a still greater proportion. The commit- tee further say : " In the midst of this fall of prices, what operation in business could proceed without loss or ruin t There has been no form in which the capital of the merchant, none in which the capital of the manufacturer, could be invested without the half of it being sacrificed during this calamit- ous period. We have been thrown back upon a condition of society in which all industry and enterprise have been rendered pernicious or ruinous, and where no property is safe unless hoarded in the shape of money or lent to others on a double security." The result was that the theorists and usurers of Great Britain were compelled, a year before their act of resumption was to go into effect, to amend one of its most distressing features providing for the extinction of the small notes — a provision copied into our re- sumption law — by extending the time of their retirement to 1833. Fellow-citizens ! If there be value to us in the experience of other nations, does not this page of British history warn us against attempting resumption by contracting the currency after the plan of her usurers and theorists ? She attempted it when gold was but three per cent, premium, and her circulation but two hundred and thirty-two mil- lions. Ricardo, the oracle of the bullionists, said' it would do no great injury to any one, as it merely involved the raising of the value of bank paper three per cent., while the event proved that it involved a contraction of the currency forty-five per cent., and 12 of business credits eighty-seven per cent , bringing in its train the ruin ot manufacturers, tradesmen, merchants, farmers, and the degradation of the laboring masses to pauperism. M. Leon Say, the French Minister of Finance, cites the disasters to the industries of Great Britain, resulting from the act of resumption, as a -warning to France not to fix at present a time for specie payment, though her currency is at par -with gold, and her people hold more of the precious metals than any other nation. Our theorists and usurers are leading us to even greater misfortunes than befell Great Britain — as our currenoy is over three times that of hers when her resumption act was passed — the pre- mium on gold five times greater — and the reduction of the currency, instead of being ninety millions, will be over five hundred millions. The holders of the public funds forced resumption there as here. The eecond Peel, whom the Irish Catholics called " Orange P«el," was the mouth-piece of the bullionists, who advocated the bill in the name of " the public honor." His patriot father said to him when it was passed, "Robert, you have made the fortunes of your family, but ruined your conntry." Shall this resumption act be executed f Will the people suffer the money-lords here, by the same false cry of public honor, to make the fortunes of their families and ruin their country ¥ Never ! Let Ohio, standing in the center, cry out Bepeal ! Pennsyl- vania and Virginia will answer back Bepeal ! And from every State where the Missis- sippi gathers its waters will come the cry, Bepeal ! Bepeal ! ! Repeal ! ! ! The Ohio Democracy demand that this whole plan of resumption be abandoned; that the contraction of the currency cease ; that the National Bank Notes be canceled and greenbacks issued in their place, thus saving the people eighteen millions annually ; that legal- tenders be given increased value by making them receivable for half the customs ; that the volume of currency be, by some prudent and intelligent method, ad- justed to and kept equal with the growing demands of trade, and that the restoration of legal tenders to par with gold be brought about by promoting the Industries of the people, and not by destroying them. , FAI.SK CRY OF REPUDIATION. The usurers and theorists declare that this means repudiation. Does it, and why f Beoause, they say, the customs are pledged for the interost on the public debt, and must therefore be wholly paid in gold. But, as Judge Thurman has shown, the customs amount regularly to full twice the interest on the debt (which we do not propose to in- crease), and, therefore, half the customs will yield gold enough to pay the interest. They say it would be a violation of contract to take the circulation from the National Banks. But the last section of the law under which they were organized reserves to Congress the right to amend or repeal it at pleasure. They say the Government is bound to redeem and pay the greenback in gold, as it was taken on the faith of that promise. I answer it was never taken as a public debt, but only as a legal tender. It goes from hand to hand — is mine to-day and yours to-morrow. I doubt if there be a man in America who ever took a greenback on the promise of payment in coin, livery one takes it solely because it is receivable for all debts and exchangeable for all values. > But if the holder of the greenback be regarded as an investor in public funds — whiph he is not — still to redeem this money in gold, to the detriment of the business of theoonn- try, were a monstrous wrong. The greenback was issued because the Government oonld not pay its current debts in coin. The formal promise on the face of the bill fixes no day 13 of redemption ; and all takers and holders know they are to be redeemed only when the Interests of the public shall permit. The people's interest must be consulted ; and doubly so because they chiefly hold the greenbacks from day to day, and also chiefly owe the debts, own the property, and do the business to be affected injuriously by forced resump- tion. There is a faith due to the people as well as to the holders of public securities. In the language of Edmund Burke, " It is to the property of the citizen, and not to the de- mands of the creditor of the State, that the original faith of society is pledged. The claim of the citizen is prior in time, paramount in title, superior in equity." WHO SHOULD DETERMINE THE AMOUNT OF CIRCULATION ? Bnt who shall determine what quantity of currency the business of the country re- quires t The Democraoy of Ohio say the people, who do the business, and are the sov- ereigns. The institution of money is conventional, and its establishment and regulation a sovereign prerogative. Why should the people surrender this sovereign power which determines the distribution of their wealth to the mere chance of gold production, or the vioissitudes of European crops or politics, or the interests of incorporated money-lenders? The money power does not distinctly deny the fitness of the people to make war or peace ; to determine all questions of person or property ; to regulate all the rights and duties of man within the scope of civil government. But they demand that the people shall abdi- cate in their favor the sovereign power of controlling the money of domestic commerce on the insolent assumption that they are, and the people are not, capable of regulating it. The chatter about Confederate and Continental money, French assignats, "rags," etc., does not deserve serious answer. The Confederate and Continental currency were issued by Rebel Governments, when thair cause was desperate, th"eir people poor, and publio loans impracticable at home or abroad, and when excessive issues of notes were resorted to as a last resource of despair. The French assignats were based on the con- fiscated property of the church and nobility, and lost all value when the Revolution itself was overturned, and the confiscated property restored to its original owners. Our Republic is the firmest Government on earth, regardful of public honor, with credit at home and abroad, and nine-tenths of the people are property-holders, with the conserva- tive tendency which follows the possession of property. Such a people, under such cir- cumstances, will not run into wild extravagance in this any more than in any other pol- icy of government. They are used to power — have used it wisely and honestly — and will use it on this money question in spite of the contemptuous jeers of the minions of the money power. WHAT SHOULD BE THE LIMIT OIT CIRCULATION ? It is said the Ohio Democracy demand an issue of greenbacks unlimited and illimita- ble ; and that an excessive issue will sink their value, and be in effect repudiation. But our platform prescribes a limit — the requirements of bnsiness. .Recently, in New York, a member of Congress — not our Buckeye abroad, Sam Cox — denounced our plat- form as one of wild inflation, and in the same breath declared that we already have more greenbacks than the wants of trade demand. I answered that if it be true we have more currency than bnsiness requires, our platform demands contraction, and there- fore he should favor it. The elements of our material growth are thirty billions of property, and the labor which by use of property prodices seven billions of wealth annually — about seven-eighths of which product is consumed in living expenses. The business of production and ex- change is now done with seven hundred and forty millions of currency — which is its life- 14 Wood, keeping afloat and iiBcharging fifty times its sum of commercial transactions. We say this body of business shall have all the blood it needs for healthy action and growth. Either the 'wants of trade must determine the limits of currency, or the arbi- trary limit of currency will determine the volume of trade. Which shall be subordinate ? If our position be wrong, the converse must be true, and the business be cut down to the dimensions of the foreordained currency. It were as sensible to cut down the business of our railway system to meet the oapacity of an arbitrarily fixed quantity of rolling stock ; or to reduce the acreage of crops in the country by fixing an arbitrary number of mowers and threshers ; or, after the custom of Chinese women, to limit the growth of the foot to a prescribed size of shoe. HOW SHALL IT BE DETERMINED? Sow shall the volume of currency be adapted to the wants of the trade? That is a practical question not in issue in this canvass. If the people declare it shall be done, the \ow can be left to their representatives, or to future popular discussion. I think, and for five years past have publicly advocated, that the Government should issue a bond bearing an interest about equal to the average net increase of wealth in the United States — say 3.65 per cent, per annum — which would be one cent a day on each one hun- dred dollars, into which bond legal tenders may at any time be converted, and which shall be itself convertible into legal tenders at the option of the holder. When currency becomes scarce these bonds would be converted into money ; and, when money grows too plenty, the bonds would absorb the surplus. The business of the country would thus determine and obtain for itself the amount of currency necessary for its use, with- out arbitrary interference, and it would never be either glutted or starved ; while the low rate of interest on the interchangeable bond would abate the usury which is the bane of our social system. This is one proposed method of adjusting the quantity of currency to the demands of business. It has not the sanction of either of the great par- ties, but has been indorsed by the late Treasurer of the United States, and by many of • the most eminent financiers, statesmen and business men of the country, and is strongly recommended by our experience with our interest-bearing notes about the close of the war, before our home currency debt was made a foreign gold debt, and the policy was inaugurated of giving to the banks control of the people's money. LEGAL TENDERS CONSTITUTIONAL. But it ip claimed that the proposed issue of legal tenders is unconstitutional. I will not eonsider the objection here further than to say that the Supreme Court of the United States, in the legal tender cases at the December term, 1870, decided the acls authoriz- ing their issue constitutional. The Court did not hold the issue valid because it was a means of executing the grant of war powers, but because it was an act not prohibited by the Constitution, and " calculated to effect one of the objects intrusted to the Govern- ment." If a new issue of legal tenders, to take the place of bank notes, or supply a deficiency in (he currency, be found an appropriate means of enabling the Government to oarry and pay its debt and expenses, it would be fully sustained by the reasoning of the Court in pronouncing that decision. DEMOCRATIC TRADITIONS. Some Democrats think our platform a departure from the traditions of the party. The statesman who did more than all others to fix Democratio principles in our Constitution, the father of Democracy — Thomas Jefferson — has spoken on an issue almost identical with this. About the close of the war of 1812 the people were heavily burdened with two 15 •war debts ; the Continental money had been dishonored, and eight hundred banks fnr- nished the entire currency of the country. He then declared, as a proper measure of relief for the people, that " Bank paper should be suppressed, and the circulation restored to the nation, to whom it belongs." He said, " Congress may now brwow of the public, without interest, all the money they want, to the extent of a competent circulation;" and he farther proposed that suoh National currency should be a legal tender for all public dues, and conTertible at the option of the holder into Government bonds. Later, when the Government was free from debt, and the people had no burdens to be lightened by an issue of Govern- ment notes — such as they had in Jefferson's day and now have — Jackson and Benton fought against the Banks, and demanded " hard money " rather than the " rag money." But Democrats who now quote them are, in effect, fighting/or the Banks, with the same eatch- words. " The letter killeth ; but the spirit giveib life ! " VICES OF PROPOSED BANK CURRENCY. We can not have a currency composed largely or exclusively of gold — that is admitted. on all sides. We have only a choice between two systems of paper money : bank money nominally redeemable in gold after January 1, 1879, and legal tenders redeemable at the pleasure of the Government. The chief considerations respecting the bank money system are : 1. It is a device to supplement the acknowledged deficiency of coin with a credit currency, at the risk and cost of the people, and for the aggrandizement of monopolies. 2. It is founded on the false pretense that one dollar in gold will redeem three dollars in paper and five dollars in deposits. Whenever a panic, accidental or contrived, occ*s, the juggle fails, and brings confusion and loss to the business built on it. Mr. Page, of the Bank of England, characterizes this mixed currency as " a grand system of insidious swindling." 3. It will reduce our currency to about a quarter of its already reduced volume, be- cause of the Bmall and steadily diminishing supply of gold in the United States. 4. The struggle of the banks to hoard gold will successfully keep it out of circula- tion, and leave us only such meager supply of currency as the banks dare keep afloat. 5. The system is, by constitution, panicky. It is a currency of three parts paper and five parts deposits, built on one part gold. The gold foundation is as unstable as water ; as fickle and volatile as mercury. It is here this month, in England next, in France next, wherever the winds of war, or craft, or traffic blow it. Our banks could no more control its export than they could control the crops, or finances or politics of Europe, which cause its export. The shipment of gold would come directly from the banks, for there it would be stored, subject to demand of depositors and note-holders. Mr. Patterson, in his " Science of Finance," says : " When the stock of gold in the Bank of England is at its ordinary level, the export of ten or fifteen millions suffices to produce a derth of money and a serious commercial crisis." We exported this year, to the 15th of July, fifty-five millions of gold. Under this proposed bank system, and with our frequent large shipments of gold, cramps, panics, suspensions, and consequent disaster to business, would be the rule, and an even course of business the exception. THE CURRENCY NEEDED FOR OUR FOREIGN COMMERCE, This convulsive currency is demanded in the interests of our foreign commerce. Our home exchanges are over thirty billions «f dollars annually ; our foreign exchanges less than a billion. Our commerce on the Ohio doubtless surpasses that on the seas. Shall 16 the wants of our home or of our foreign trade determine the character of the National currency ? Shall the dog wag the tail, or the tail wag the dog ? But I deny that our foreign commerce would be promoted by a currency so unfit for domestic business. There is no " money of the world." There is a product — gold — in which balances of trade between nations are generally settled. Our National currency should bear as steady a relation to a given weight and fineness of that produot as the unstable value of gold, arising from the fitful changes of demand, will permit. It is the stability of relation of the currency to gold, and not the equality of our paper dollar with our gold dollar, that the wants of foreign trade require. The best assurance of National solvency, honor, and commercial power, is in a home currency which will fill, without paroxysms of drouth or overflow, the channels of domestic industry. CONCLUSION. Fellow -citizen, the Ohio Democracy has called a halt in^the march of the Republican administration to the equalization of the ourrency with gold, and demands that another and better route shall be taken. The two roads are widely divergent. One leads through years of individual bankruptcy, prostration of business, riot of usurers, impoverishment and degradation of the masses ; to the establishment of a currency meager in quantity, inferior in character, and controlled by monopolies in a few money centers, whose power will make them lords and the people serfs. The other leads through industrial activity, abatement of usury, employment of labor and diffusion of wealth, to the establish- ment of an exclasively National currency, controlled by the people with a due regard'to all Obligations of honor and to the equal interest of all sections and classes. Which road shall we take ?■ Shall we plunge on for four years through the Serbonian bog in which the industries of the country are now struggling and sinking, or march by the pleasant and solid paths of prosperity and thrift f SPEECH OF GENERAL THOMAS EWING DELIVERED AT Finaiay, Ohio, August 14, 1875. [PUBLISHED BY ORDER OF DEM. STATE EX. COM.] Fellow-Citizens : The law for specie resumption on the 1st of January, 1879, is the most important finance measure ever enacted in our Republic. Its enforcement or repeal is the issue in this canvass. It is strictly a party measure — framed in a Congres- sional Republican caucus ; supported by almost every Republican Senator and Repre- sentative ; approved by the Administration, and opposed by every Democrat in both Houses of Congress. Mr. Sherman says the execution of this law is "the fixed policy of the Republican party, and no step backward." Mr. Morton said at Akron that the party is irrevocably committed to it. Yet neither they nor any of the Republican speakers or newspapers have dared to fully discuss its several provisions before the people. They know it involves an immense increase of the debt, contraction of the currency, destruc- tion of business and impoverishment of the mass of the people. They therefore touch it lightly, while they expatiate with great warmth and amplitude on the Papacy, the rebellion, and the horrible repudiation and communism of the Democratic platform. These gentlemen affect to believe that the Ohio Democracy intend to deluge the country with paper money, and inaugurate 1 an era of wild speculation and extravagance. No such purpose was expressed in the resolutions or intimated in the State Convention. That Convention reflected on this question the sentiment of a vast majority of the people of Ohio, irrespective of political parties. It as well represented the intelligence, manhood and property of the State as any that ever assembled in its borders. It saw that business had been prostrated throughout Ohio by the contraction of the currency already accomplished, and was threatened with destruction by the still greater con- traction involved in the execution of the resumption law. It looked on the restoration of business prosperity as paramount to the restoration of specie payment, and therefore resolved that contraction should cease, and that whenever the business of the country should need more money it should be issued by the General Government in legal tenders to the amount of such recognized need. It left the determination of the question, how much currency the business of the country may now or hereafter require, to the law- making power of tje Government, whioh will doubtless be able to determine it wisely, even after the present masters of our finance shall have retired from Congress. It pro- nounced against both an insufnc.ent and an excessive issue of money — against destroying business — until only such an amount will be left as a meager currency compatible with specie payment can supply ; and, on the other hand, against unsettling all values by a flood of currency beyond the needs of business. It, in effect, said : " Stop contraction ; let business revive; adopt meaus for regulating the currency with a view solely to the wants of trade ; and then the natural growth of business and increase of wealth will, in due time, and without irrjury to the people, lift the currency to par with gold." The question, therefore, between the parties as to the volume of the currency is exactly this : Shall contraction cease, and the business of the country have the currency it may now or hereafter need 7 or, shall contraction go on, and business be forced to adjust itself to such reduced volume of currency as is compatible with resumption in 1879? It is a cheat to talk of the possibility of resumption three years hence without an enormous contraction of the currency. Our National, State, municipal and railway bonds are now held largely abroad, calling for about one hundred and fifty millions of gold interest annually. This foreign drain is being increased each year by new sales of bonds abroad. If these bonds were held at home, gold and Bilver would accumulate here from the product of our mines, and specie resumption in a few years would become possible with our present volume of currency. But we must take things as they are, not as they should be. While this vast drain of gold lasts, specie payment, if restored, can not be maintained with a quarter of our present paper currency. Russia, Austria and Italj are advancing more rapidly than ever before in wealth and civilization, yet they have, like ourselves and like France, an irredeemable currency. Why don't they seek the blessings of specie payment? Because their bonds, like ours, are owned in England and Germany, and the drain of specie from them makes resumption impossible without ruin to their industries. England and Germany can maintain specie payment, because they hold at home their own public debts and those of all other nations but France, making them largely the owners of the gold of the world. Our stock of the precious metals is less than the yearly demand for the customs — barely enough to make the circuit from Wall street through the custom-houses to theTreasury, and back again to Wall street. We annually send abroad more gold and silver than all that goes into coin from our mines added to all shipped here. or brought by immi- grants. So that each returning year reduces the small stock remaining in the country. Suppose we shonld return to specie payment now, how much currency could we keep afloat ? In ] 860, when we had two hundred and eighty-five millions of specie in the country, the banks could only control eighty-three millions as a redemption fund for two hundred and seven millions of paper money. Ini 1875, with only one hundred and sixty millions of the precious metals in the whole United States, we could not keep afloat, redeemable in gold, more than one-sixth of our present volume of paper money. Such is our ability to maintain specie payment now. What may we reasonably expect it to be three and a half years hence ? With the present drain of gold, certain to con- tinue until then, it can not, in the ordinary course of things, accumulate in the country. The Secretary can not hoard gold received for customs, for the annual receipts from all sources are less than our annual expenses, notwithstanding the imposition of thirty-five millions of additional taxes by the last Congress. Hence, to obtain the gold with which to redeem the greenbacks and fractional currency, the resumption law authorizes the Secretary of the Treasury to buy four hundred and sixteen millions of specie. To ac- complish this he must add four hundred and sixteen millions to our already enormous bondedjdebt, and sell the bonds in Europe, thus adding over twenty millions in gold to the annual taxes of the people and to the annual drain of gold from the eountry. A wilder scheme of wickedness and folly was never enacted in America. Its only palliating feature is its utter impracticability. The Secretary of the Treasury can not buy and bring here that vast sum of gold. With all our sales of bonds of all sorts abroad we have never heretofore got a million of gold in return . When Mr. Boutwell sold our 5-20s in Europe he was compelled, first, to agree with the Bank of England?* that the proceeds should not be brought to the United States in gold, but taken in ex- change for securities. The Geneva award of fifteen millions was, by special negotiation f with England, paid in like manner, so as to prevent even that comparatively small ship- ment of gold to the United States. Our recent sales of 10-40s abroad were all made with the stipulation that they should be paid only in 5-20 bonds held in Europe. The withdrawal of fifteen or twenty millions of gold from the Bank of England always pro- duces a panic — the withdrawal of one hundred millions a year for four years from Eng- iand and Germany would convulse their money systems. It will not, and can not be accomplished. But the Secretary is bound to do it if possible — has succeeded so far in buying about twelve millions of Germany's demonetized silver, and will push the pro- ject far enough to ruin the industries of our country and make a disgraceful failure in his boasted efforts at resumption. But suppose he shall succeed in locking up four hundred millions of gold in the Treasury by 1879, we will then owe still more abroad, our shipments of gold will still more exceed our imports and products . of that metal, and the specie hoarded in the Treasury will be drawn out when the day of resumption comes, and flow abroad, leav- ing us in a year or two more barren of gold than now. We might as effectually legis- late to stop the Gulf-stream from laving the coast of Great Britain, as to arrest the flow of gold from our shores to hers. It is, therefore, certain that we will be in not much better condition for resumption in 1879 than we are to-day, and that we can only maintain resumption then by an im- mense preliminary contraction of the currency. The law furnisheB all the machinery for that contraction. It is perfectly adapted to the purpose. It compels the Secretary to withdraw all our fractional currency as " rapidly as practicable " by redemption with silver bought with our new bonds. He has bought twelve millions, and appears to have redeemed twenty-six hundred thousand dollars of the fractional currency with it be- tween the 1st of April and the 1st of July. Where is this silver? The people have not ihad a dollar of it, and will not get a dollar. The brokers have the twenty-six hundred ithousand dollars, and will get the balance and sell it for the premium of from five to eight iper cent., to go to the Pacific States, and China, and Japan. Under this provision of the law, onr bonded debt will, " as rapidly as possible," be increased forty-four millions, «our fractional currency destroyed, and forty-four millions of contraction accomplished. Meantime the banks have already begun to take in sail. They are permitted to in- crease or decrease their circulation at pleasure. If they increase, it is with the condi- tion that if they fail to pay specie on demand on and after January 1st, 1879, they forfeit •and lose their ootids. If they elect to withdraw their circulation, they merely send green- backs to the Treasury in place of their outstanding notes, get their bonds back, aell them at twenty to twenty-five per cent, premium, and business goes on undisturbed, with that much added capital to lend at ten to twenty per cent, to the people. Between the two alternatives, the latter is being chosen. Under this law, to April 1st three and a half millions of new National Bank notes were issued (to balance which three mil- lions of greenbacks were destroyed), and over seventeen millions of existing bank cir- culation Surrendered. So much for the promised increase of currency through free bank- ing under this law. What contraction of hank circulation will occur before the day of resumption will depend on the willingness of the banks to take the risk of losing their bonds as a penalty for failing to redeem. I think the surrender of circulation will still go on until all the banks, except "the strongest, in the great money centers, will have "sent greenbacks to the Treasury for retirement and got back their bonds, leaving the ^Government to redeem their circulation. However that may turn out on the day of * resumption, the fifty millions of bank notes under five dollars are required to.be de- stroyed. So far, then, .there is Ua be a certain contraction of fractional currency and small bank notes of ninety-four millions, and a further probable contraction of bank notes to a very large amount. Now, what about contraction of the greenbacks ? The Secretary must redeem theru on demand on and after January 1, 1879. He must be ready with near four hundred mil- lions of gold on that day ; and when a legal-tender note is once redeemed the law does not permit it to be again put in circulation. Does any sane man suppose that with our immense debts abroad, with the struggle of all nations, and banks, and incorporated companies throughout tlie world, to get and keep gold, aided by the cunning and power of our gold gamblers, that that vast sum of gold would lie in the Treasury uncalled for while four hundred millions of greenbacks are outstanding, each greenback being payable on demand in gold ? Greenbacks would be presented in million-dollar packages for redemption and withdrawn from circulation, and the gold would be shipped off, or put in bank vaults, to try to keep bank money afloat. Our currency wonld thus suddenly be reduced near four millions, and we would have left only a shaky National Bank currency of probably not more than two hundred millions. Fellow citizens, this law is a scheme full of terrible consequences to the people, un- less I have wholly misapprehended its purpose and effect. Get the law ; examine it yourselves in connection with the bank acts, and you will see I have not distorted or exaggerated a single feature. I would suppose myself mistaken if the law were not plain, and the facts which control its operation unquestionable, and if I was not aware that the great money powers of this country are resolved on early resumption of specie payment at any cost, knowing that all the vast losses of the people by contraction' will be a clear gain to them. Mr. Sherman intimates that the present premium on gold measures the extent of con- traction necessary for specie payment — that is, that not over twelve per cent, contrac- tion is necessary, or, in round numbers, ninety millions. So his predecessor and patron saint, Ricardo, talked when he forced the adoption of the British law in 1819, providing tor partial resumption in 1821, and complete resumption in 1823. Gold was then only about three and a half per cent.' premium ; yet in two years after the passage of that act the British banks were compelled to contract their paper currency from two hundred and thirty-two to one hundred and forty-two millions— forty-five per cent, of contrac- tion, to close a gap of three and a half per cent. Mr. Sherman now says that with a gap of fourteen per cent, between our paper and gold, with ov^r three times the amount of paper afloat which Great Britain had when resumption was forced there, and with all the conditions for resumption far less favorable to us than to her, we can accomplish the feat " not only without sacrificing any business interests, but. so as to promote them." I will answer him in the language of a speech he made in the Senate iu the flush times of 1868, when he was opposing a. bill for the resumption of specie payments. He then said, re- ferring to the history of the British resumption law : " It is only necessary to appeal to the histories of the times to show Us disastrous effects. The productive value of capital was increased fifty per cent. Small traders, debtors and laborers were reduced to the sorest distress. All confidence and trust were lost." Again, in 1he same, speech, he said : " The appreciation of the currency (i e , return toioard specie payment) is a fur more distressing operation than Senators may suppose. Our own and otlier nations have gone through the process before, and always with the sorest distress." Mr, Sherman has the temerity to assert that at the date of the panic we had more cur- rency than we ever bad before, Iu the President's message in December following the panic 70 were S« formed fh&t there had been " great actual contraction-; and a oompara- tive contraction still going on, due to the increase »f manufactures and all the industries." The interest-bearing notes which, added to other currency, swelled the volume to near nineteen hundred millions in 1866, and one thousand and twenty-two millions in 1867,- were all held at home, and did duty as bank reserves and often as currency. They are characterized by Spalding in his "Financial History of the War" along with green- backs as " inflating paper." They were so treated throughout the discussion in the Sen- ate immediately after the panic, in which Mr. Sherman took part. The last of them hav- ing been withdrawn by the contraotionists and funded in gold bonds as the first step toward specie payment, it is now denied that they were ever part of the " inflating paper " which they characterized them when they were doing duty as currency. That Mr. Sherman himself so regards tl»em is evident from the fact that, in the debate in the Senate immediately after the panic, he said, "We are in a different condition now from what we were in 1868 ; then we had a greater volume of currency." Now he denies that there was any contraction before the panic. There was not only " great actual contraction " before the panic, but also great rela- tive contraction. In addition to the opening of the South, and the enfranchisement of the slaves creating an increased demand for .money, the general growth of business for the past ten years operated as a steady contraction of the currency, which can not be put at less than four per cent, per annum. Mr. Sherman says in his Marion speech that the panic was not caused by contraction, but by wild speculation growing out of an inflated currency, and consequent excessive credits. Here, again, he has changed his mind since January 16, 1874, when he said in the Senate, " The condition of the currency has no relation whatever to the panic which has passed over the country " The excessive credits of which he speaks were largely a mere substitute for the interest-bearing Treasury notes taken from the people and funded in bonds sold abroad. They were credits of legitimate business. The failure of a faw over- sangnine railroad enterprises caused the panic, which destroyed the credits and the busi- ness of the country resting on them. Had the business men of the country been gen- erally out of debt, as they were during the period of a full currency, the failure of Jay Cook & Co would have been but a ripple on the waters. These gentlemen talk as though our currency were a terrible cancer, which must be cut out at all hazards. What nonsense! General Grant expressed the opinion of ninety- nine hundredths of the people when he said that our currency is " the best that has ever been devised " The business men of the country are thoroughly satisfied with the greenback — they have never asked redemptfon in coin. It is a perfect and efficieut instrument of domestic commerce — unaffected by the causes which constantly disturb a paper currency redeemable in gold, and equally disturb all business dependent on it. With this currency we have prospered beyond all precedent, and prospered most when it was relatively most abundant. It is not laborers, farmers, or producing capitalists who cry out for contraction and specie payment. It is the holdors of the State, county, city and railway bonds and other money securities — not the^workers, but the drones of the hive. If all business can be crushed by contraction, and all values (depreciated, their money securities will be proportionally increased in value by increasing the pur- chasing power of the dollar. It is for them, and them only, that this general massacre of business is ordered. Mr. Sherman talks tenderly of debtors, and says that they alone will suffer by the contraction nepessary fov resumption, but the extent of their losses will be only about J welvo per cent, of their debts. Let us examine this statement. Who JW $« 4£btev8 f Largely active men, who combine their energies and Jale nt 6 with the capital of non-producers to carry on the work of production and exchange. They are a class whom the policy of the law should protect, not crush. Who else will suffer as debtors ? I answer, every tax-payer, for the burden of his tax will be largely increased. The vast aggregate of public currency debt, including railway mortgages, and the enormous burdens of our expensive governments, local and national, rest on the whole people, and the load is increased by contraction on all. Nothing could be further from the fact than Mr. Sherman's statement that the extent of the losses by contraction on those who bear burdens of taxes and debts are measured by the present premium on gold. The losses will depend rather on the per cent, of cur- rency contraction necessary to reach specie payment, though that will not accurately measure them, for they are so manifold and far-reaching as to be incalculable. The committee of the HouBe of Commons in England appointed in 1822 to inquire into the effect of the passage of her resumption law, reported that all values of land, labor and every product had fallen forty-five per cent, as the direct result of the contraction of currency necessary to resumption, yet bank paper was at but three and a half per cent. discount on the day when the date of resumption was fixed. Did debtors only feel that loss ? Debtors were ruined, wages reduced .nearly half, laborers thrown out of employ- ment by hundi eds of thousands, manufactories closed, business crushed, and want and despair filled the land. Instead of resumption costing debtors only three and a half per cent., it cost them at least forty-five per cent., which was the extent of depreciation of property and labor, with yhich alone debts are paid, and cost the whole people three tim.es the value of their entire currency in loss of production, besides an incalculable sum of human misery. Mr. Sherman, in 1868, wisely quoted the British example as a warning to us. The instances are parallel ; but the morass in which we are plunging is deeper, and the suffering and loss will be far greater here than there. If the people of Ohio determine that this law shall stand, all men who are now at all embarrassed may as well go into bankruptcy at once. The pools of stagnant, money in the cities plainly tell that no large holders will trust a dollar in ordinary business on ordinary security while the country is running the gauntlet to resumption. The chief holders of money securities, iu whose interest this law was smuggled through Congress, thoroughly understand its effect. Morton, Logan & Co. did not understand it when they caught at the bait of free banking and swallowed hook and line. The mass of business men in the coun'ry scarcely knew of its passage, and are only now studying its provisions and probable effects. What it has done is plain. It has contracted the currency more rapidly than McCulloch did in 1868, when the country rose in arms and stopped him. It has, to a large extent, already stopped the usual and necessary credits of business, and has set men to hoarding money, both from dread of its loss and desire to realize the fourteen per cent, advance in its value, thus producing the effect of a large contraction. " If they do these things in the green tree, what will be done in the dry i'J What farmer, manufacturer, merchant, tradesman, mechanic or laborer — all mem- . bers of the same body, each dependent for prosperity on the prosperity of the other — can hope for success while all property, all stocks on hand, are growing each day less valuable, all business dependent on credit dying, markets glutted, demand falling off, and doubt, failure and distress settling down like ught upon the land ? We have com- plained in the last few years of hard times ; but if this law be carried into execution, " with no step backward," the hardships we have endured, compared with tho»e which are to come, will seem like the playful touch of a Florida frost to the iron grip of au arctic winter. While the Republicans propose to increase the bonded debt over four hundred millions by destroying the greenbacks and fractional currency, the Democracy propose to reduce it over three hundred millions by substituting greenbacks for National Bank notes. Messrs Sherman, Hayes and Morton cry out lustily against this measure of relief. They say it will result in the instant termination of all bank loans. The fact is, it will not affect them at all. The loans exceed the hank circulation three-fold. The withdrawal could be effected in six moDths without the slightest disturbance of bank business. The banks are now exchanging at the Treasury Department all their old bills for new ones. Has any cne been distressed by it ? And would there be any more distress if they ex- changed them for greenbacks? They say that to issue greenbacks for National Bank uotes would violate a pledge in the act of June 30, 1864, renewed in that of March 18, 1869, that the legal tenders shall never exceed four hundred millions. The first named act also provided for the issue of Jive twenty bonds, which were redeemable in greenbacks, as Messrs. Sherman and Mor- ton often and truthfully asseverated ; and the pledge that the legal tenders should never exceed four hundred millions was solely a guarantee to those who bought the bonds at par in greenbacks that the bonds should be redeemed in greenbacks of^ equal value. The whole consideration for that pledge was surrendered to the bondholders by Mr. Sherman's act and influence, as soon as it became of value to the people, by the passage of the act of 1669 making the bonds redeemable in gold. The limitation is now no longer a pledge to any body. It stands on our statute books only as a monu- ment of the act of ''repudiation aDd extortion" which paid greenback bonds in gold, and thus increased the National debt five hundred millions of dollars. Mr. Morton warns ns that if we issue three hundred and fifty millions of greenbacks as a substitute for National bank notes, without, an increase of the aggregate volume of the currency, legal tenders will be immensely depreciated. There may lie a Bceutia in Amer- ica where that argument would make a favorable impression. But just: here it is so trans- parently absurd as to baffle criticism. Mr. Sherman tells us that the people would save nothing by the substitution, because the National banks already pay twenty millions of taxes, l«rcal and national, and all this would be lost if the circulation were withdrawn. The fact is, if their circulation were withdrawn, leaving them to go on under the National bank laws, with the business of discount, deposit and exchange, the banks would pay precisely the same taxes, local and national, which they now pay, with the single exception of the tax of one per cent, on circulation, or three and a half millions of dollars in currency. The saving, therefore, to the people would be the gold interest on the bonds which the three hundred and fifty millions of greenbacks substituted for National bank notes would buy, less three and a half millions of taxes now paid on circulation — leaving a net saving to the peo- ple of about eighteen millions in currency annually If the substitution had been made at the close of the war, the saving to this date, including interest, would have been more than two hundred millions of dollars. If the substitution be made now, this saving Alone will pay the principal of the honied debt in twenty-five years A large majority of men who vote this fall would live to see this monstrous burden of debt discharged by that one costless act. of justice to the people. But, instead of proposing to lighten the bonded debt, th-se party leaders evidently intend that the great body of it shall be perpetual, a.ud that the currency shall be concentrated in the hands of two thousand National banks, in order that they may control and manipulate the business of the couutry in the interest of the Republican party. The proposition to pay half the duties in greenbacks is denounced by Senator Sher- man as a monstrous breach of faith with the bondholders, beoause the customs are all 8 ' pledged to pay the interest and sinking fund of tha debt. But the customs now furnish nearly twice the interest, and in ordinarily good times will furnish more than twice that interest and the sinking fund,. Why should the G-overamenlji idemand gold heyond its necessities, and become a broker of the balance ? A large>psrt of the fluc- tuations and gambling in gold arise from this factitious and unnecessary requirement. To abate that speculation, and give increased use and value to the greenback, is ob- viously for the interest of the people, and wrongs no one. Besides, I wholly deny thtt power of any Congress to contract with purchasers of bonds for a payment of duties in coin. If they could de that they could contract that the duties should never be lessened, and thus make a particular tariff perpetual. The taxing power is a prime attribute of sovereignty, and the manner of its exercise rests, only for the time being, in the discre- tion of those who are temporarily entrusted with the powers of government. It can not be fixed for the indefinite future by contract with any body or for any consid- eration. Mr. Morton says the Ohio Democracy are enemies of the greenback ; and after abol- ishing the National bank circulation will abolish it also, and restore Sta.te and wild-cat currency, such a.* we had before the war. What says our platform? "No paper money, except such as may be issued by and on the faith of the General Government." The people who adopted and support that platform are quite as honest and candid, on an average, as Mr. Morton. They mean what they say, and mean it in grim earnest. Not one in a thousand of them would consent to return to the motley currency we were cursed with before the war. Messrs. Morton and Sherman both say the Supreme Court decided the legal tenders unconstitutional, and afterwards decided that they were only justified as war measures. They are both lawyers — have doubtless read both decisions — and they flagrantly mis- represent them. In Hepburn v. Grisworld (8th Wallace, p. 603), the Court held that greenbacks could not be made legal tenders for debts contracted before the passage of the law authorizing their issue, aB by the contract such debts were payable in gold. This was the entire scope mnd effect of the decision. In the legal tender cases (12th Wallace, p. 457), this decision was overruled. It was not even intimated by the Court in either case that the war gave the Government a power to issue legal tenders which it would not have in peace. There is not a syllable in the opinion justifying such asser- tion, as any man of oommon intelligence will see on reading it. The power to issue legal tenders is bettled by that decision to be within the competency of Congress, at any time, in war or peace, when its exercise is an appropriate means in execution " of any of the known powers of government ;" Congress being, by express decision of the Court, the sole judge of the degree of appropriateness of its exercise. So far, therefore, this is a closed question; as completely closed as any judicial interpretation wf the Constitution can be. That interpretation has been accepted for thirteen years past in the myriad transactions of the Republic and the States, and is interwoven with the life and business of the people. There it stands, and there it will stand forever. The "enemies of the greenback" are those who deny its character as money, and talk of it as though it were a dishoDorod bend for the payment of money ; who ignore the fact that no human being ever took it as a promise to pay, but that every body takes it solely because it is, equally with gold, the money of our Constitution and laws; because it pays all debts, exchanges for all values ; does every thing which gold can do in all the varied business of life, escept only paying duties oni imports. To wrest this acceptable constitutional currency from the people, as the Eepublicau leaders now propose to do by their resumption law — to pile up four hundred millions more of bonded debt — to shrink the present volume of currency to the little measure of bank currency which can, under present conditions, be kept redeemable in gold, and th«s immolate the business of the country on the altar of specie payment — w||rea crime against civilization, for which the party attempting it will go down amid the "execrations of an impoverished people. THERE IS A FAITH DUE TO THE PEOPLE, AS WELL AS TO THE HOLDERS OF PUBLIC SECURITIES. SPEECH OF HON. THOMAS EWING BILL TO REPEAL THE THIRD SECTION OF THE RESUMPTION LAW, NOVEMBER 22, 1877. The Bouse having under consideration Mr. JSWING'8 bill (H. E. No. 805,) to repeal the third section of an act entitled "An act for the resumption of specie payments " — Mr.EWINGsaid: Mr. Speaker: It is characteristic of republican governments that the people confine their attention and interest to one great question until it is thoroughly settled. For six years preceding the war, noth- ing of public interest was generally considered but the slavery ques- tion. During the war, the means of its successful prosecution absorbed all attention. Since its close, the status of the negro race as com- ponents of our political life, and the terms of rehabilitation of the revolted States, have been the controlling questions in every cam- paign. Now that the last of the southern questions is happily settled by the triumph of the democratic principle of local self-government, there loom up, as paramount in importance and interest, the questions of the debt and the currency. Happy would it have been for the people had they considered these questions twelve years ago. They would have been saved the inflic- tion of five gigantic wrongs in their finance policy. They would have had a paper currency composed solely of greenbacks, and have avoided $350,000,000 of unnecessary bonded debt caused by dividing the cir- culation with national banks — a saving which would by this dato have equaled one-third of our national burden. They would not have suffered the maladroit and mischievous funding in long bonds of the $1,200,000,000 of interest notes, the chief part of which were legal-tenders and performed the double office of investment and cur- rency ; which were dispersed throughout the country, and little felt as a burden because of the ebb and flow of payments from the . Treasury to the people as interest, and from the people back to the Treasury as taxes. The funding of those notes largely contracted the effective currency just as our business wants were immensely in- creased by the return of the South to our industrial life; and sub- stituted for them a credit system which occasioned the panic of 1873. So, too, if the people had been awake to these questions, the act of repudiation and extortion in 1869 would never have become a law, by which $500,000,000 were in effect taken from them and given to the bondholders without consideration ; nor the silver swindle of 1873 and 1874 by which we were deprived of the power to pay our public debts in the coin of the contract, the metal of which America is the great producer ; nor the crowning villainy of the act of 1875, by whii h about ten thousand millions of currency debts were made payable in gold, by which the great wealth-producing classes are be- ing robbed of their accumulations for the benefit of usurers, and our land in the midst of the abundance of God's bounties filled with the cries of hunger and despair. Mr. Speaker, in closing the debate on this bill I wish it to be un- derstood as having no connection with the question whether the system of free banking established by the resumption law shall stand or fall. The third section of that law repealed all the provisions of the national-currency act which limited the aggregate bank circula- tion to $354,000,000, and which provided for the withdrawal and redistribution of bank currency. The repeal of that third section now, will not revive those provisions of limitation, withdrawal, and redis- tribution; but will leave the bank system just where it now is, open to all in any locality who. may choose to establish banks of issue. This measure will merely stop the redemption and destruction of greenbacks, and the purchase and accumulation of coin for that pur- pose. When it shall have been disposed of, it will be for Congress to determine whether the sovereign prerogative of furnishing the money of the people shall be exercised by the Government alone, or divided with private corporations. I do not wish to confound two wholly separate questions, one of which is before us and the other not; and therefore snail not attempt in the discussion of this bill to present the reasons which ten years ago led me to the conviction that bank issues should be suppressed and the whole paper circulation restored to the nation, to whom its advantages belong. That issue will undoubtedly be presented by an appropriate bill at an early day. EFFECTS OF CONTRACTION AND EXPANSION CONTEASTED. Mr. Speaker, no greater wrong can be inflicted on a people by government than a contraction of the volume of currency to which their values are adjusted. The prices of commodities, whether land, product, or labor, are determined absolutely by the effective vol- ume of the currency. An increase of the volume, raises the price of all commodities ; but, if not carried beyond the wants of business, does injury to only a comparatively small class, whose wealth or de- pendence is chiefly in money securities, fixed rents, annuities, or sala- ries. Yet, while it injures them in one way it helps them in another : it lightens the burden of taxation, promotes industry, stimulates exchanges, multiplies opportunities for safe and profitable invest- ments, and thus indirectly compensates them for the diminution of the relative value of their money. Thus, during the war of the rebellion, so great were the general benefits from the increased volume of the currency, and so many the new opportunities for suc- cessful investment, that «ven the small creditor class suffered little by the decrease of the purchasing power of money. On the other hand, a contraction of the cwrency, by diminishing the price of land, labor, and commodities, spreads ruin among the masses, j It oppresses debtors, by reducing the price of those commodities by < the sale of which money is raised to pay debts. It in like manner i lays increased burdens on taxpayers. It checks business, because j neither the maker nor the exchanger of values can work profitably j on a falling market; and, by diminishing business, forces wage-people ! into idleness and starvation. | Hume, in his Essay on Money, says : The policy of the good magistrate consists in keeping the money of the nation if possible still increasing; because by that means he keeps alive a spirit of indus- try and increases the stock of labor, in which consist all real power and riches. Accordingly we find that in every kingdom into which money begins to flow in greater abundance tuan formerly, everything takes a new face : labor and industry gain life, the merchant becomes more enterprising, the manufacturer more dili- gent and skillful, and even the farmer follows his plow with greater alacrity and attention. On the other hand, a nation whose money decreases is actually at that time weaker and more miserable than another nation which possesses no more money but is on the increasing hand. The workman has not the same employment from the man- ufacturer and merchant; the farmer cannot dispose of his corn and cattle, though he must pay the same rent to his landlord. The poverty and beggary which must ensue are easily foreseen. OUE CURRENCY NOT EXCESSIVE WHEN RESUMPTION LAW WAS ENACTED. Mr. Speaker, this resumption law found the prices" if land, labor, and products in the United States adjusted to a volume of $733,000,000 of money, exclusive of fractional currency. I do not include silver or gold, for they were not then, and are not now, any part of the actual currency. This volume was not excessive. It was but $17.50 per capita, including the fractional currency. Compare it with the money of other nations. As my colleague [Mr. Garfikxd] objects to a comparison with France, take England which has by various esti- mates from $27 to $34 per capita, or Germany which has $23 per capita. These are small nations comparable only in area with our States ; they are covered with net-works of railways and their exchanges are swiftly made ; while we are spread over a vast continent, imperfectly developed, and our exchanges are comparatively slow. It was the deliberate judgment of General Grant's administration in December, 1873, as expressed in his message — an opinion concurred in by the public generally — that our currency was then too small for our bus- iness in the dullest seasons of the year. THE GENERAL PURPOSE AND EFFECT OF THE LAW. Now the immediate evil of this resumption law is that it necessa- rily involves a destruction of from one-half to three-fourths of our paper money ; that the gold with which the paper will be redeemed will not go into general circulation, and that therefore the execution of the law will result in a reduction of all values in substantially the proportion of the contraction of the currency, carrying with it an enormous increase of the burdens of debt and taxation, the wide- spread ruin of industry, and the pauperization of millions of our people. This law was in fact devised by the money power to double their wealth through contraction and the consequent shrinkage of values, and at the same time to take from the people all control of the cur- rency ; to drive in the circulation of the country banks, and establish a dominion of the money power, through a few banks in the large cities, over the business and fortunes of the great wealth-producing classes and sections. THE GREENBACKS REDEEMED MUST BE DESTROYED. Under this law every greenback redeemed must be destroyed. My colleague [Mr. Garfield] says that Mr. Sherman now thinks they may be reissued. If so, he has changed front. He intimated most distinctly in the Senate, when the resumption bill passed, that re- demption meant cancellation. But, whatever may be his opinion, the law stands, and whoever may be Secretary must execute its evi- dent purpose. Section 3579 of the Revised Statutes, which Mr. Sher- man is now reported to interpret as authorizing a reissue, was in force in 1875, when he expressed the opposite opinion. It provides that "when any United States notes are returned to the Treasury they may be reissued." Certainly notes returned — that is, received in payment of public dues— may be reissued. The act of receiving such notes is not redemption — which ispayment of a> ublic debt, andinvolves extinction of the evidence of the debt unless otherwise expressly pro- vided by law. Mr. Sherman's latest phase of opinion on this question is not only unsustained by the law, but actually multiplies the difficulties and dangers of resumption. It compels redemption in gold, not only once but over and over again, and requires the Treasury to be the perpetual supplier of gold to all who need it ; while it puts in the hands of the Secretary the power to expand or contract the currency by reissuing or hoarding greenbacks at his discretion. Mr. Bristow when Secretary of the Treasury declared the purpose and effect «f the law in his report for December, 1875, saying, " the faith of the Government now stands pledged to the final redemption and removal from the currency of the country of the legal-tender notes as fast as they shall be presented for redemption." Mr. Morrill, his successor, reiterated it in his report in 1876, sayiDg that the law "de- clared in effect a monetary system composed of coin and national-bank notes redeemable in coin." The Treasury Department has declared it every month by the destruction of fractional currency redeemed under the same language of the same law. The act itself declares it by providing for the "redemption" of fractional currency "until the whole amount outstanding shall be redeemed;" and by providing that legal-tenders shall be redeemed before January 1, 1879, " until there shall be outstanding $300,000,000 of such legal-tender notes and no more" — both these provisions plainly showing that " redemp- tion" means final extinction and removal from the currency of the country. VOLUME OF REDEEMABLE FATES DEPENDENT ON AMOUNT OP COW IN THE COUNTRY. Mr. Speaker, no nation ever maintained a redeemable paper cur- rency equal to the volume of coin in the country. France with $1,200,000,000 in coin according to the estimate of Victor Bonnett, and $1,600,000,000 according to Mr. Carey, has not yet felt able to resume specie payments on $491,000,000 of paper. England with $700,000,000 of coin can only maintain a redeemable paper currency of about two hundred and sixty millions. Before the war, we had two hundred and eighty-five millions of corn in the United States, and our banks never had a paper circulation in excess of two hun- dred and fifteen millions. The reason is obvious : when coin becomes actually current, two-thirds of its volume, at least, is absorbed by the people or hoarded as reserves by banks of deposit only: and it is not possible for banks of issue or the Government to get control of over one-third or a fourth of the coin in the country as a redemption fund. Thus, before the war, the banks never held to exceed eighty-three millions of the two hundred and eighty-five millions of coin in the country. The British banks hold about one hundred and thirty mill- ions of the seven hundred millions in Great Britain, and the Bank of France holds four hundred and forty-three millions of the twelve hundred to sixteen hundred millions of coin in France. Hence, if our own experience and that of other nations are to guide us to permanent resumption, we must increase onr coin, or cut down our paper, or both, until the amount of coin in the cotmtry shall far exceed the amount of paper money. It should exceed it about three- fold to make resumption as safe as in England or France ; and should exceed it one-third to 'get back to the merely spasmodic resumption we had before the war. OUR COIN SUPPLY. Now, what is our present supply of coin and bullion ? I have had a number of estimates made for me, by persons who have the means of information attainable, the average of which places the amount of coin and bullion at one hundred and fifty millions of gold and ten millions of silver, exclusive of subsidiary coin. That is, we have one hundred and sixty-millions of gold and silver coin and bullion in the Treasury, the banks, and among the people. But we had two hundred and eighty-five millions of gold and silver coin and bullion in 1860, and iu the seventeen years since we have produced from our mines one thousand and seven millions of gold and two hundred and fifty-five millions of silver; about half of which, or six hundred and thirty-one millions, have gone into coinage. What has become of this vast sum of coin ¥ OUE FOREIGN DEBT AND EXPENSE8— THEIR RELATION TO RESUMPTION. It has flowed abroad to pay our debts. Much more than half of our national debt is owned in Europe. The interest on our national bonds held abroad is exceeded by the coin interest on State, city, railway, and other American securities held there ; so that the aggre- gate coin interest annually due from the people of the United States to Europe is estimated at from one hundred to one hundred and fifty millions of dollars. Add to this from forty to fifty millions per year paid for foreign shipping, and a sum equally great for expenses of foreign travel, and we have an aggregate annual drain of from one hundred and eighty to two hundred and fifty millions of dollars in payment of debts and expenditures abroad. How have we paid this enormous annual foreign demand? First, by the shipment of coin and bullion. From 1860 to 1876, both inclusive, we shipped abroad one thousand and fourteen millions of gold and silver more than we imported, being an average of over fifty- six millions a year. The balance of the foreign demand upon us we have paid in part by an occasional balance of trade in our favor ; but always, in whole or in part, by selling more bonds abroad, thus each year increasing the annual drain of the precious metals and making it more impossible for us to get or keep any large sum of coin in our country. I do not ignore the consideration that our disnse of gold and silver as money would of itself have caused them to low abroad. But I claim that our foreign debts and expenditures make the drain im- perative, whether we do or do not use the coin as a foundation for a home currency. Our great specie product of the past seventeen years has become the property of creditor nations who have built their business on it. We can neither bring it back, nor hold future accu- mulations here, by creating a demand for it at home, be it ever so imperative ; for with nations, as with individuals, " the borrower is servant to the lender." No nation greatly in debt abroad ever did, or can, have a redeemable paper currency for domestic business. Kussia, Austria, and Italy, who are like us greatly in debt abroad, are also like us compelled to forego specie payments. OUR FOREIGN TRADE — ITS RELATION TO RESUMPTION. But my colleague [Mr. Garfield] says in effect that this bad con- dition is all changed now, and resumption made easy by our favorable balance of trade. So far from the balance of trade helping us to coin, the report of the Bureau of Statistics of August 21, 1877, shows that we shipped abroad for the year ending June 30, 1875, seventy- two millions of coin and bullion more than we received; in 1876 forty- one millions, and in 1877 sixteen millions. So that, notwithstanding the unexampled balance of trade in our favor, and our great effort 6 to accumulate gold for resumption, we have in the past three years exported one hundred and twenty-nine millions more of coin and bullion than we have received from abroad. How, then, has the bal- ance of trade helped resumption ? Mr. Speaker, this vast and increasing drain of the precious metals makes a maintenance of specie payments absolutely impossible on one-third of our present volume of paper currency. Until the finan- cial policy which has taken our debt from our own people to send it abroad shall be wholly reversed, and the debt is hold at home ; until the usury which forbids vessels built here, where money costs 10 per cent., from competing with those built on the Clyde, where money costs but 3, shall have been abated by a money policy which shall give money and moneyed securities a less exorbitant interest ; we can no more arrest this outgoing drain of the precious metals than we can stop the waters warmed by an American sun in the Gulf from flowing to lave and enrich the British Isles. FBEPAKATION FOB RESUMPTION. The administration has had in its hands for three years past the whole credit resources of our nation for the purchase of coin where- with to prepare for resumption. It has been authorized to sell bonds bearing 4, 4-J, and 5 per cent, interest. Three-fourths of the time allotted for preparation has already elapsed. The Secretaries of the Treasury nave exerted themselves to the utmost to accumulate gold. The national banks have no doubt been fairly diligent in getting and hoarding it. The problem before the Treasury and the- banks has been to get gold enough to keep seven hundred and thirty- three millions of paper afloat, or to take up the paper with gold and destroy it. How successful have they been ? We find from a report of the Secretary of the Treasury made to this House last Thursday that the United States had succeeded in obtaining to October 31, 1877, but $57,436,071 of gold, from which is to be deducted, however, accruing interest, amounting at that date to $24,840,093— leaving but $32,595,978 of gold applicable to resump- tion. Whether any of that small sum is what Jim Fisk would have called " phantom gold" — say subscriptions by the national banks for bonds payable in gold, but not yet paid — does not distinctly appear. In addition to the thirty-two and a half millions in the Treasury, the national banks hold $19,948,407 of silver and gold combined. How much of this is silver and how much gold does not appear from the bank statement. No doubt the chief part is subsidiary silver coin, which is of no use for resumption. Mr. SPRINGER. If the gentleman will allow me, I would say that, according to the last statement of the Comptroller of the Cur- rency—that for November — there are but five millions of gold coin in the national banks, the other specie in the banks being in silver and United States gold certificates. Mr. EWING. After nearly three years of preparation, what hare we accomplished? We have effected a net destruction of over seventy- five millions of greenbacks and bank notes combined; but have ac- cumulated in the banks and the Treasury less than fifty millions of gold and ten millions of silver applicable to resumption. Here we are, then, with resumption day not fourteen months distant, with not one-fifteenth of the amount of gold and silver indispensable to float six hundred and fifty-eight millions of paper money now out- standing — with no stock of the precious metals in the United States to draw from — with the outgoing drain still kept up — with our foreign creditors and the great banks of Europe determined to prevent the shipment of gold to America ; holding in effect a mortgage on every dollar of the coined product of our mines ; and able to drain the petty accumulations in our Treasury or the banks at will by simply demand- ing coin payment of the interest on our public and private securities, or by sending them home for sale. Under these conditions, how ut- terly futile it is to hope that we can maintain resumption without the swift destruction of much the greater part of the present currency of the country ! If we were wholly out of debt to Europe, if our foreign commerce floated under our own flag, if there were no system of absenteeism among our wealthy classes, expending their wealth abroad, resump- tion in gold, or even in gold and silver, would be impossible on our present volume of paper currency for many years to come. In the proportion of coin in England to redeemable paper money, it would require about eighteen hundred millions in our country to maintain resumption on the six hundred and fifty-eight millions of paper money outstanding. In the proportion of France's paper money to her coin, we would require an accumulation of sixteen hundred millions. Take even the proportion of coin in our country in 1860 to the highest volume of paper money then in circulation and nominally redeema- ble, and it would require nearly nine hundred millions of coin to float our present paper money. How can we accumulate such a vast sum of gold f The coined product of our mines, if it were all retained here, would not yield it in forty years. If we were free from debt to-day and were to offer 6 per cent, bonds in the markets of Europe in exchange for gold, we could not get a hundred millions. Recollect, sir, that England, France, and Germany, never suffer a shipment of gold from their shores, if by any artifice or power they can prevent it. All the vast sales of bonds abroad for fifteen years past have brought us nothing but our own securities or merchandise. England refused to pay the Geneva award of fifteen and a half millions in gold, but paid it in securities. An export of ten to fifteen millions of gold will always produce a panic there. It is the base of the pyramid of currency and credits in every specie-paying country, and- the withdrawal of any part of the base shakes the industrial fabric resting on it. Hence every monarch of Europe guards his country's gold as he does his crown or scepter. RESUMPTION NECESSARILY INVOLVES IMMENSE CONTRACTION OP THE CURRENCY. Hence resumption can only be maintained by the destruction of the greater part of the present paper currency. To accomplish that pur- pose the means provided in the law are probably adequate. Mr. Sher- man says they are. He ought to know. His plan probably will be to limit the amount of redemption per day to, say, two millions ; to require all the greenbacks to be presented through a chosen syndicate which can pay him two millions of gold per day for 5 per cent, bonds, and present two millions of greenbacks per day and receive the gold back. It could probably be managed so that most of the gold thus used would be merely diverted from European and American money- markets long enough to flow through the Treasury and back to the same markets, causing comparatively little disturbance, and accom- plishing in effect merely a funding of most of the greenbacks into gold-bearing bonds. My colleague [Mr. Garfield] says the people will not want the gold when greenbacks are at par. True, the masses will not. They never have wanted it in preference to greenbacks, which they always have regarded as being, in the language of President Grant's message in 1873, " the best paper money they ever had." But the people generally will have no more to do or say as to the redemption 8 and cancellation of their currency than they have, had with the finance policy of the Government for the past twelve years ; than they had ■with the establishment of the national-bank System; or the funding of the^aOO^OOjOOO of interest-bearing Treasury notes ; or the pass- age of the infamous aot of 1869 ; or the rascally sleight of hand by ■Which silvet was demonetized ; or the enactment of that sum of finan- cial villainies — the resumption law* The national banks, the im- porters, the gold rings in New X 01 ^, the desperadoes of Wall street, the money kings of Europe to whom we are financially enslaved, they will present the greenbacks for redemption and destruction as fast as the gold oan be paid over the counters of the Treasury. But we are assured there will be little more contraction, because gold ■tfill take the place of the redeemed greenbacks ift the business of the country. That is a most fallacious conjecture. The dearth of gold here, the present large demand for it, the immeasurably in- creased demand arising from the fact that considerably more than two thousand millions of national, savings, and other bank deposits will then be payable in gold; that seven or eight billions of othe* debts, corporate and private, and seven hundred and fifty millions of annual taxes, now payable in currency, will then be payable only in gold ; that every banking institution in the land will be at the mercy of the millionaire gamblers who may hoard it to burst the banks and place the business of the country at their feet, will create a general scramble for coin which will keep every dollar of it out of general circulation. BESUMPTION INVOLVES EETIEEMENT OF A LAEGE PABT OF THE BANK CUEBENCY. After our currency shall have been contracted over a half by destruction of the greenbacks, the bank circulation must, also be largely reduced to maintain resumption. The national banks, since the resumption law was enacted, have made a net reduction of forty- eight millions of their circulation. Whatever other causes may have led to it, the obvious impracticability of maintaining even the pres- ent volume of bank currrency redeemable in gold was the main cause. Over three hundred national banks have already surrendered their circulation in whole or in part. They are chiefly the banks of the country districts, that know perfectly well that it will be impos- sible for any banks to maintain their circulation except those situated in the great importing centers, where whatever of gold may remain in the country will accumulate, and where alone redemption will be practicable. OUE BUSINESS DISTEESS Is THE RESULT OF CONTRACTION. The destruction of over seventy-five millions of greenbacks and national-bank notes under the operation of the resumption law has of itself caused much of the business distress we have witnessed ; but the obviously impending destruction of more than half that is left is the storm-cloud which covers our heavens and fills all communities With alarm. Sir, the assertion that the distresses that our country is now under- going are due to the large volume of currency, and to the wastes of the war, is contradicted by our experience, and by the parallel expe- rience of England's twenty years of continental war and irredeema- ble paper money. British industry was greatly wasted by that pro- tracted war, but the loss was more than made up by the industrial prosperity which attended her full, stable, but irredeemable paper currency. It was in that season that she established her manufact- uring aiid commercial supremacy over the world. Every sea was whitened with her commerce ; everv market filled with her wares. Napoleon said in liis exile at St. Helena, " Great Britain conquered me 9 with her spindles " — with spindles kept in motion by a prosperity due to the fact that she had during that period of suspension a fuller, better, and more stable currency than any which can be built on the quicksands of gold and silver. So we had, during the rebellion and for some time afterward, a full and satisfactory currency which stimulated industry, and compen- sated to a large extent for the ravages of war. If the distress which now afflicts our country were due to the increased volume of paper money, how is it that during the period of the fullest currency bank- ruptcies were almost unknown ? How is' it that that period, though marked by extremely heavy taxation, was one of comparatively little accumulation of municipal or private debt? Mr. Speaker, therecords of commercial failures in the United States indisputably show that business distress was least when the currency was fullest, and that the contraction of the currency, by funding legal- tender interest notes, arrested prosperity and caused an enormous in- crease of bankruptcies throughout the nation. In place of this currency withdrawn, was substituted a mountain of debt which toppled over in the panic of 1873. But in the year following the panic those records show, and our recollections attest, that the business of the country revived. The return of prosperity was stopped by this resumption law, which was an emphatic warning to moneyed men to withdraw or withhold their money from all industrial pursuits, and to hoard it in anticipation of a contraction and shrinkage of values unparalleled in our history. Had our home debt and our currency been let alone, the prosperity that accompanied and followed the war would no doubt have continued, prices would have gradually settled to a salutary level through a relative shrinkago of the currency resulting from the extension of business, and we would have been to-day richer, freer from debt, and far, far nearer a practicable resumption than now. My colleague [Mr. Garfield] attempts to prove that our present disasters are the result of the increase of the currency during the war, by citing the hard times from 1837 to 1842 and from 1857 to 1859 as instances of the evils of redundant currency. Sir, the volume of cur- rency was no larger at those periods than it was in 1860, which has been Cited by the gentleman as the most solidly prosperous year in our history. Those panics were caused by the fact that the specie reserves of the banks were necessarily small, and that to accommo- date the business of the country they issued more paper than they could get coin to redeem with, and therefore specie payments col- lapsed. To get back to redemption, the banks were compelled by their charters to do, just what the resumption law now compels the Treasury and the national banks to do, that is, contract their paper to the little measure compatible with coin redemption. That con- traction, and that alone, caused the business distress which charac- terized the years following those panics. EQUALIZATION IS SOT RESUMPTION. But my colleagues [.Messrs. Garfield and Monroe] tell us that greenbacks are within 2J per cent, of gold, and by the 1st of January, 1879, we will glide into resumption as a ship is launched from the stocks. Sir, that is the same jack-o'-lantern which beguiled the British people into the bog of resumption in 1819. Eicardo and other oracles assured the people that, as gold was at but 4 per cent, premium, resumption Was an easy step, and that the fall of values . caused by resumption would not exceed the 4 per cent, premium then existing on gold. Their assurances were credited, the law was passed, and the shrinkage of the currency and the fall of values which fol- lowed exceeded ten-fold the predictions of these oracles of finance. 10 This theory, which Ricardo himself subsequently admitted to be fal- lacious, is referred to now by the resumptionists with as much assur- ance as if it were a demonstrated maxim of finance. The fact is, the premium on gold is no measure whatever of the extent of con- traction necessary to resumption. Equalization is not resumption. Equalization can occur without dis- turbance of the volume of the currency or of domestic business, for Jt leaves all who want gold to exchange greenbacks for it in the mar- ket. Resumption involves redemption and destruction of the home currency to the extent of the demand for gold, regardless of the disas- ters to business attending such destruction. The reduction of the premium on gold is due to causes which may cease or be counteracted at any time. The depression of industries in Germany through contraction by silver demonetization ; and in England through a falling off of exports to the United States, and through the cheapening or silver, which has enabled the residents of British India to manufacture goods there at less cost than they can be manufactured in England, (thus cutting off her greatest market,) has tended to lessen the demand for gold in Europe, while the de- crease of our own imports has lessened demand for it at home. Hence its fall in price in our markets. A revival of commercial prosperity in those nations, increasing the export demand for our gold ; a money panic abroad ; a large crop in England next year ; a short crop here ; or even the termination of the European war, opening the Dardanelles for export of Russian wheat, may turn the balance of trade against us and send gold up to 10 or 20 per cent, premium before resumption day. Any one of these incidents, after resumption, would probably drain the little accumu- lations from the Treasury and the banks, and throw them into in- solvency. WITH SILVER REMONETIZED RESUMPTION STILL IMPBACnCABLlI. But we are told that silver will be remonetized, and then resump- tion will be practicable without further contraction. That, in my judgment, is an egregious error. The total supply of silver coin and bullion in the United States, exclusive of subsidiary coin, is stated on excellent authority not to exceed from five to ten millions of dollars. There is no great stock, of silver in the world on which we may draw for the enormous sum needed as an auxiliary to resump- tion ; the only large accumulation being the demonetized coin of Ger- many, which does not exceed If 80,000,000. Remonetization by us will strengthen the already strong tendency in Germany to Testore its sil- ver, and will go far to remove the restrictions on that coinage in France, Italy, Spain, and the other states of the Latin Union. Mints have been established to coin it in Japan and India, and are about to be established in China with a view to the substitution of silver for copper in the domestic business of those countries, which is vast enough to absorb all the silver of the world. If our paper currency should be contracted no further, and if every contingency were to result in our favor, we could not possibly accumulate in the next twenty years enough of the precious metals to maintain even the sham redemption we had before the war. The only alternatives therefore are an indefi- nite postponement of resumption, or contraction of the volume of paper money to less than the attainable supply of coin, say f 200,000,000. TALL OF VALUES CAUSED BY CONTRACTION. ■ Mr. Speaker, there is no law of political economy more universally recognized than that the reduction of the effective volume of a cur- rency by which the values of a country are measured, causes a ratable reduction of all values of land, labor, and product. It was strikingly 11 illustrated in the hi story of the British resumption law. When that act had been in force three years, and resumption day was but a year dis- tant, Mr. Atkins showed on the floor of the House of Commons— and Tooke's Tables of Prices confirms his statement — that the reduction of the bank paper 1 45 per cent, as a necessary preparation for resump- tion caused an equally great reduction of all values on the island. I think it safe to say that the combined effect of withdrawal of over seventy-five millions of the paper currency under the resump- tion law, and the hoarding caused by the threat of resumption, have together reduced its effective volume at least one-third, resulting in an average fall of values in like proportion. EFFECT OS DEBTOES, TAX-PAYEKS, AND WAGE-PEOPLE. Now, Mr. Speaker, what is the extent of injury thus inflicted? How have tax-payers suffered ? "We pay more taxes each year than the aggregate volume of our currency — seven hundred and fifty millions — for the support of national, State, and local governments. That is, a tax of $17.50 per head for every man, woman, and child in the United States — an enormous burden, far surpassing any borne by any people on earth. The British pay $11.09 per head ; the French, $11.41 ; the Germans, $9.24; the Austrians, $7.22. This burden is insup- portable, unless industries prosper. The resumption law has broken down industries and reduced one-third the average values of land, labor, and products, by the sale of which alone taxes are paid, and in effect has thus increased the tax burden 50 per cent. The burden has thus been made, in heavily taxed communities, absolutely insup- portable. Several great States, and many counties and cities, have already sought relief in repudiation. Continue that process of reduc- tion of values, bring them down much more, as will inevitably be done if this law be not repealed, and one-half of the corporate and munici- pal debts in the United States will be repudiated. The greed of the money power, in thus seeking to enhance so enormously the value of the dollar, is only equaled by its arrogant and dogged stupidity. Consider, Mr. Speaker, the wrong done to individual debtors by this contrived shrinkage of values. The aggregate of private debts in the United States, including railway mortgages, is probably not less than seven and one-half billions of dollars, or three and one-half times the sum of our national debt. They are owed generally by the young, energetic, driving business men of the country, who are seek- ing to rise from poverty to competence, or from competence to wealth. They comprise two-thirds of the merchants, manufacturers, and ex- changers of values, and give employment to two-thirds of the wage- men of the country. This' law breaks down their business, strips them of their property, and casts out of employment millions of laborers dependent on them. Above all, Mr, Speaker, consider the effect of the shrinkage of val- ues on wage-laborers and their families ; on the millions who are compelled to eat up in idleness the little accumulations of thrifty industry ; on the millions who have no accumulations, but rely only on daily labor for daily bread, and who are now unemployed, or half employed, or living on pauper wages. The president of the Spring- field and Pomeroy Eailway Company, Mr. Emmett, who is struggling to construct a railway across Southern Ohio, told me recently that he had plenty of laborers offering to build his road without other com- pensation than enough bread and meat to keep the poor machines of their bodies in working order — asking nothing for clothes, nothing for wives or children, nothirig to lay up in store for winter— and this too 12 in the midst of bounteous harvests, in a rogiononoof the fairest ever fashioned by the Almighty for the abode of man — Oh, G»d ! that bread should be so dear, And fleah and blood so olioap I [Applause.] The SPEAKER. The hour of the gentleman has expirecf, Mr. PRIDEMORE. I withdraw the objection I made a while ag» to the extension of the time of the gentleman from Ohio. Mr. GARFIELD. I now renew my request for unanimous eonseht that the time of my colleague be extended indefinitely. The SPEAKER. The gentleman from Ohio asks unanimous con- sent that the time of his colleague be extended indefinitely. Is there objection t [After a pause.] The Chair hears none. Mr. CHITTENDEN. I must object to that peremptorily, unless the same time is given to the other side. The SPEAKER. The Chair thinks the gentleman from New York rose too late to object. Mr. EWINGr. I thank my colleague [Mr. Garfield] for his courtesy. ESTIMATE OP INJURIES THUS FAK INFLICTED. Suppose, Mr. Speaker, that resumption were attainable without further fall of values and depression of industries, and that after Jan- uary 1, 1879, prosperity should promptly return. Let us make a rough estimate of the cost of resumption. It will have cost the people at large, through the enforced idleness of factories, an enormous sum, probably surpassing several times the aggregate of our national debt. The debtor class, instead of paying seven billions, which they owe, would have to pay one-half more by the shrinkage of former values ; that is, the enormous sum of about three and three-quarters billions of dollars would be wrongfully taken from them, so far as they have power to pay it, and given to the creditor class, without consid- eration and in violation of the spirit of the contracts. The census of 1870 indicates that there are not less than ten mill- ions of wage-people in the United States, men, women, aDd children. If there be no increase of demand for labor by resumption day, we may safely put the loss of labor, unemployed, or only partly employed, at a daily average of three millions of days' labor ; and, putting wages at an average of a dollar a day, the loss, from want of employment alone, will have been nine hundred millions a year for about three years— an aggregate of $2,700,000,000 wrung from the poorest class of our people. The loss to taxpayers in depreciation of property with which taxes are paid, while the sum of taxes remains the same, w.mld be three hundred and fifty millions a year, or over a thousand millions in the three years ; and the increase of bonded debt in purchase of gold and silver to pay and cancel the greenback and fractional currency, will be four hundred and sixteen millions more. Thus, under the specious pretext that national honor requires us to add 10 per cent, to the value of three hundred and fifty-four millions of greenbacks, the contrivers of this scheme will have wrested from the people many times the sum of our vast national debt. FURTHER AND GREATER DISASTERS TO FOLLOW. But the shrinkage of the currency and of all values cannot stop here, if the resumption scheme be not arrested. The entire indus- trial system of this country has been pushed to the verge of de- struction. Savings banks and insurance companies are now failing everywhere through depreciation of real estate mortgaged to them. Yet my colleague [Mr. Ga.rpield] appeals to us, iu the name of tho 13 workingmen whose means are in these failing companies, to adhere to the policy of contraction, which involves the loss of their savings in addition to loss of employment. There is not a savings or other bank in the United States which can possibly prepare for resumption by January 1, 1879. AH the banks owe, by the estimate of the Comp- troller of the C urrency, abo ut nineteen hundred and seventy-four mill- ions to depositors, which will be payable in effect in gold on that day, in addition to three hundred and seventeen millions of bank-notes. Those institutions have not to-day one million of gold for each two hun- dred millions payable fourteen months hence. When they shall have drifted on a few months longer, their helpless condition will become generally understood, and a panic will ensue which will involve the whole banking system and with it the entire industries of the country, to be followed by an enormous increase of suffering among wage- peosple and by civil commotions, riots, and disasters which will shake the firm foundations of order and property. Mr. Speaker, this is no phantom of the imagination, but a predic- tion of fact founded on the necessary effects of the law in the situ- ation in which we are, as illustrated by the experience of England, in her fatal scheme of forced resumption. Our legislators slavishly borrowed this scheme from British statute- books, while shutting their eyes to every lesson its history taught the world. They are blind to the fact that, while resumption was possible in England, it is wholly impossible here. When ehe at- tempted resumption the paper money to which her values were ad- justed was about $232,000,000 ; ours, seven hundred and thirty-three millions. She had far more gold in the country than we have. All the world owed her; we owe all the world. The precious metals flowed to her from every land ; they flow out from us at every port. "With her small volume of paper money, her comparatively large accumulation of coin, her supreme command as the creditor, the mer- chant, and manufacturer of the world, resumption might well have seemed practicable to her statesmen. With our large volume of paper money, our petty and diminishing supply of coin, in our helpless situ- ation as the financial slave of the world, unable either to get or keep coin as the foundation of a redeemable paper currency, the attempt at forced resumption is theory or craft run mad. England carried through the scheme of her theorists and usurers, stripped her laboring class of their homes and little accumulations, robbed debtors of their property, and suppressed with slaughter the cries of her starving wage-men. Our theorists and usurers have a far more gigantic job on hand. Its monstrous immorality and injustice are understood by the people, who will not submit to be robbed and en- slaved by it. The alliances of workingmen everywhere — their action in the late elections — the civil commotions of last spring — are but por- tents of a coming storm. Look at the multitudes in the streets of our cities fast being driven by hunger to despair 1 I saw hundreds last summer clubbed by policemen out of the parks in New York at night — homeless, starving workingmen, who had gone there to find a resting place on the grass under a pitying sky. I warn you, this scheme has been pushed just as far as it can go. Stop I or the spoliation of the masses, accomplished and still threatened, may arouse an avenging spirit which will not be content with merely righting wrongs. WHAT WILL BE GAINED BY EESUMPTIONl Mr. Speaker, what are we to gain by this resumption scheme to compensate for the enormous calamities it has inflicted and will yet inflict? The answer is, "We will get a better and more stable cur- rency redeemable in gold and silver, and shall then have a sound and 14 lasting prosperity." Sir, I deny it, and confidently assert that we will get no currency at all comparable to that we have had for ten years past. The most that can be said of it is 'that it will be in some respects a better and in others a worse currency than we had before the war. It will be better than then, because the State-bank money had not uniform security or value. It will be a worse currency in this, that before the war we were comparatively out of debt abroad, and had more coin in the country and greater power to hold it than we can have for many years to come ; and because the enormous aggregation of money and of money securities since then has created money kings and wreckers, who own and control the great banks and can contract and expand bank issues, make hatd times and good times at pleasure, and rob the people at every change of values. Imagine us back to an exclusive bank paper redeemable in coin. Let us view the inverted pyramid 1 We see $3 of bank paper built on each dollar of coin in the vaults and $3 of deposits ou top of each dollar of paper, making $12 of paper and deposits, largely payable on demand, resting only on $1 of coin. Then suppose any year an abundant crop of cereals in Europe, and a consequent diminished ex- port of grain from the United States, necessarily followed by in- creased coin shipments. The withdrawal of twenty-five millions of coin from the banks would involve a contraction of seventy-five mill- ions of paper, taking the foundation from under two hundred and twenty-five millions of deposits — bringing on inevitably a general panic, just as the withdrawal from our banks in 1857 of seven mill- ions of coin for shipment abroad caused the crash of that year. A war between any two great nations ; a commercial crisis in any one of them ; a combination of a half dozen of our largest creditors in Lon- don or the Netherlands; a combination of two or three great specu- lators at home; anyone of a dozen incidents may occur in any month after resumption, causing the withdrawal from the banks for ship- ment abroad, or for making a corner at home, of coin enough to cause a disastrous panic. The British have something approaching honest coin redemption, for thare can only be $45,000,000 of bank paper in excess of coin in the vaults of the Bank of England ; yet, there, with near seven hun- dred millions of coin in the country, " the export of ten to fifteen mil- lions of coin," says Mr. Patterson in his Science of Finance, " will pro- duce a serious commercial crisis." In the United States we have never had, and for many years cannot have, sufficient coin attainable by the banks to establish an honest redemption of one-third of the paper money which the necessities of business imperatively demand. Before the war the deposits but little exceeded the bank paper, while now they are three times the sum of our whole volume of paper currency, being near two thousand mill- ions; yet then we had redemption only when coin was not generally wanted, but when the banks were called on for it the fact that $1 of coin will not redeem $3 of paper and $9 of deposits always threw them into insolvency. The system wouldhave been ajuggle if it were not a transparent lie. It is to get back to something even worse than this old system of insidious swindling that the American people are now undergoing the tortures of the damned. NATIONAL HONOE. But the gentleman from New York [Mr. Chittenden] declares with great vehemence that the greenback was originally merely a debt payable on a day not named ; that the resumption law made it 15 payable January 1, 1879 ; and that to repeal that law, and change the day of payment so fixed, is downright repudiation. Mr. Speaker, if the gentleman's statement be true that the greenbacks were pay- able on a day not named, then they were payable on demand. Then the resumption act postponing payment four years was an act of re- pudiation, and to now repeal that act is to restore as far as possible the original contract. Hence, by his own logic, he was a patriot ■when he voted against the resumption law in 1875, and is now a re- pudiator in sustaining it. My colleague [Mr. Gakfield] says the greenback was a forced loan. I deny it. It was issued as money ; and solely because the people had not enough coin or other safe currency with which to prosecute the business of the war. I care not for the form of the contract, but for its meaning ; not for the letter, but the spirit. It was and is only a pledge by the whole people to each successive holder that it shall be money ; the money of the Constitution and law ; the money of taxes, judgments, and contracts, in the transactions of domestic business ; and that the function of money shall inhere in it until considera- tions of public interest alone require its redemption in coin. A favorite scheme of the bullionists — those guardians of national honor — recommended repeatedly by Grant's administration and the leading resumptionists of this House, has been and is to break this pledge of national faith by destroying the legal-tender character of the greenbacks in the hands of the people. They and they only are the repudiators; while those advocating the retention of the money, with all its faculties unimpaired, respect alike the obligations of national honor incurred in its issue and the considerations of national interest which demand its retention as the safest and best possible currency. Sir, the resumption law was a trick and a fraud ; hatched in the dark; its real purpose and effect concealed from all but the initiated in the mystery of money ; and put through Congress without expla- nation or debate, because its authors well knew that the people would never consent to increase the bonded debt or destroy the green- back, and that if the effect of the bill had been known it would have been instantly strangled on this floor. That la w is itself a repudiation of the compact by which the green- back became the measure of all contracts in the myriad transactions of domestic business. It sought to destroy the greenback and to in- crease by stealth the values of $10,000,000,000 of contracts, public and private, measured by it. To repeal that law, and thus restore as far as possible the just measure of those contracts, is demanded alike by the people to whom the greenbacks belong and by every consideration of interest and honor. If a repeal of this law be repudiation, as the gentleman from New York [Mr. Chittenden] so loudly asserts, who are the hapless suf- ferers ? Not the people at large, for they hold the money to-day and pay it out to-morrow, and a change in its purchasing power is not so instantaneous as to affect hand to hand transactions. Is it the few men who have hoarded greenbacks on the pledge of the law ? They diverted the money from the uses for which it was issued and have already made exorbitant profit by it. Is it not enough for them that $6 in greenbacks will now buy ten dollars' worth of labor or property f Does justice or honor demand that we give the hoarders of one or two hundred millions of greenbacks the power to double or treble their wealth by purchasing the people's labor and property at mere nominal prices, and that to accomplish this the industries, the property, the happiness of the masses shall be sacrificed ? 16 No, sir! no public debt, however clear or obligatory, would justify a sacrifice so stupendous. In the language of Edmund Burke — IT 18 TO THE PBOFEKTY OP THE CITIZEN, AND NOT TO THE DEMAND OF THE CKEDrrOB OF THE STATE, THAT THE ORIGINAL FAITH OF BOCIETY 18 PLEDGED. THE CLAIM OF THE CITIZEN IB PRIOR IN TIME, PARAMOUNT IN TITLE, SUPERIOR IN EQUITY. I have not attempted, Mr. Speaker, to reply to all the arguments on the other side, or to sound a tenth part of the depths and shoals of this subject, which is as boundless as the sea. No greater question was ever presented to an American Congress for its action. It touches the prosperity, the happiness, the future, of three-fourths of the men, women, and children of this land. Countless homes have already been desolated by this robber law. Thousands of men have been {Liven by it to unBanity-oiy.Bciciflfl- ■JHnptTrefls of. thOTre*a,nda-Jbava- been cast down from competence to poverty. Millionshave been de- prived of that employment for their labor on which rest the hope and dependence of their families. It is now too late to right these wrongs, but greater evils may be averted from the most of these vic- tims, and from millions more, by the prompt action of Congress and the President. I do not appeal to that money power which intrigues for its own ag- grandizement o\ er the wrecked fortunes of the unwary multitude — a power to whicn our unhappy civil war gave birth, which has grown so enormous through unjust finance legislation, and now "bestrides this narrow world like a colossus;" which subsidizes the press, the great organs of public opinion ; which captures statesmen and parties, and makes them its subservient tools; which villifies and seeks to crush every public man who dare raise hisvoice against it. That power, in the flush and arrogance of its enormous and ill-gotten gains, has a heart of stone, not to be touched by human sympathy or compassion. I appeal to the masses; to their faithful Representatives of both parties on this floor; to all who think that the true aim of govern- ment is the greatest good of the greatest number ; who believe there is a faith due to the people as well as to the holders of public securi- ties; and that whoever by covert legislation changes the value of contracts, is as accursed as he who moves his neighbor's land-marks. For twelve years past the finance policy of this country has been dictated in Lombard street or Wall street, and the people have been plundered by every fresh enactment. They have suffered the fate of the giant Gulliver tied down by the Liliputians. Thank God! they are now about to arise, to burst the bonds their, petty >ipes have fast- j^nedouthernileopiug, and to walk abroad again intbeiTOwnTnajesty. [Great applause.] [For sale by "Capitol News Stand," Washington, D. C, at SI five cent* per copy, postage free.] per hundred, or 2 15 The aggregate of such notes shall he increased each 16 year at a rate equal to the average annual percentage of 17 increase of population of the United States, as shown by the 18 last preceding census ; to which shall he added a reasonable 19 amount for loss of outstanding circulation. Of the first issue 20 of such notes as much as may be necessary shall be used 2 1 in retiring all the United States notes not bearing interest now 22 outstanding, and the remainder in reducing the interest-bear- 23 ing debt; and each yearly increase shall be applied to the 24 extinguishment of such debt, or to necessary public works. 25 No notes of the United States not bearing interest shall 26 be issued except as herein provided; and no law of the 27 United States or of any State shall authorize the issue of 28 notes payable to bearer on demand by or for the benefit of 29 any person, association, or corporation. 30 Congress shall provide for withdrawing from circulation 31 all bank-notes now outstanding. 45th CONGRESS, 2d Session. [Printer's No., 4010. H. RES. ISO. IN THE HOUSE OF REPRESENTATIVES. MARCH 11. 1878. Read twice, referred to the Committee on Banking ami Currency, and ordered to .be printed. Mr. Ewixg, on leave, introduced the following joint resolution : JOINT RESOLUTION Proposing an amendment to the Constitution of the United States. 1 Eesolved by the Senate and House of Bepresenta- 2 fives of the United States of America in Congress assembled, 3 (two-thirds of each House concurring therein), That the 4 following article be proposed to the legislatures of the several 5 States as an amendment to the Constitution of the United 6 States, which, when ratified by three-fourths of said legisla- 7 tures, shall be valid as part of the Constitution, namely: 3 Article XVI. 9 To furnish the people of the United States a permanent 10 and stable paper money, Congress shall provide for issuing H millions of dollars of United States notes, not 12 bearing interest, which shall bo a legal tender for all debts 13 and dues, public or private, except for such existing debts as 14 by contract are payable only in coin. H. RJES. ISO. JOINT RESOLUTION Proposing an amendment to the Constitution of the United States. March 11, 1878.— Read twice, referred to the Conn nit- tee on Banking and Currency, and ordered to bo printed. 1 o ractically available fqr resumption 1 Secretary Sherman. The amount to the credit of disbursing-officers and outstanding checks varies but very little, because it rarely, if ever, gets below $5,000,000, and it varies from that up (the amount in process of disbursement), so that you can very fairly anticipate that fact (it is a business fact), just as a merchant can anticipate the coming in of his bills receivable. Mr. Ewing. Is not that banking? Secretary Sherman. Every man does banking in that sense. Mr. Ewing. Would the Treasury be justified in disregarding out- standing existing interest obligations by applying the coin which was set apart to meet those obligations to the redemption of legal-tender notes ? Secretary Sherman. The Treasury will do just what any prudent in- dividual will do ; it will anticipate the demands upon it, and always have money to meet those demands. It is sufficient for me to say that the law authorizes the use in anticipation of coin-certificates. The amount of coin-certificates that may be issued can be 20 per cent, in ex- cess of actual coin. The Secretary of the Treasury, from the known certainty that these coin-certificates will not be and cannot.be presented all at once, and are not likely to be diminished in amount, can issue 20 per cent, in excess of the actual coin on deposit. Mr. Ewing. Yes, the law gives you that authority. What would 20 per cent, of the coin-certificates amount to % Secretary Sherman. Nearly $9,000,000. Mr. Ewing. So that you might at this time issue coin-certificates to the amount of $9,000,000 beyond the amount of coin nowin theTreasury? Secretary Sherman. Yes, sir. The law authorizes that. I will say, however, that it has not been done. As to the next item, " Called bonds and interest"— $6,818,677— that amount is in the Treasury, and is always there. There is interest due and carried on the debt- statement for twenty or thirty years; but we count it as a demand that we must pro- vide for, and it is covered by this deduction. Mr. Ewing. How much of that amount is for called bonds and interest on such bonds ? Secretary Sherman. The whole of it. We have now in the Treasury over $7,000,000 due to "called bonds and interest"— that is, bonds that are due and not bearing interest, but that are not presented for pay- ment. Sometimes bonds come in three or four years after they are due, and they are then paid. Mr. Ewing. Can anything approaching that amount have gone beyond the ninety days when the payment of interest stops'? Secretary Sherman. Every dollar of that has gone beyond the ninety days. Whether that amount will be continuously in the Treasury is only to be told by a comparison of the statements of "called bonds and interest." I have no doubt that some of that amount will never be called lor. You will find by reference to the monthly statements that RESUMPTION OF SPECIE PAYMENTS. 15 the amount varies from mouth to month, but it is an item which can be counted on with almost as much certainty as any other item. Mr. Ewing. I notice from the Treasury report that the whole "slack" from the beginning of the government to August, 1877, is less than $2,000,000 out of the $7,000,000 of aggregate of called bonds and in- terest unpaid to date. I don't think you can very safely assume that the $5,000,000 of bonds under recent calls will not he presented. Secretary Sherman. On the contrary, under the last call — which is charged up and included in this last statement (a call of $10,000,000, made on the 6th of December last and maturing on the 6th of March) — but $7,000,000 of bonds had been presented on the day before yester- day, leaving $3,000,000 not presented. That leaves two or three mil- lions of that particular call. I do not say that you can rely upon it with absolute certainty. Mr. Ewing. This inquiry is to ascertain how much gold and silver can be certainly relied upon to redeem legal-tender notes. Secretary Sherman. Well, I think you can fairly count on at least one-half of this $6,818,677 of " called bonds and. interest." In all human probability there will be three or four millions of that amount that will not be called for. Mr. Ewing-. Within what time! Secretary Shekman. There will be that balance on that account all the time, because we are going ou to make calls all the time. Mr. Ewing. But if you are pushed to get coin enough to redeem legal- tender notes you are certainly not going to continue the call of bonds ; so that probably that item will disappear from your resources. Secretary Sherman. In my judgment, we will go on and make those calls. Last year we accumulated $60,000,000 of actual gold in the Treasury, while at the same time we were making calls at the rate of $1,000,000 a day ; and therefore your conclusion does not follow. If we had this question of resumption fixed beyond doubt, and if the people understood that it was to come, the bonds would be taken promptly and the calls would be repaid; because accumulation for resumption accom- panies and is increased by refunding. The actual experiment shows it. Whenever we have made calls we have accumulated coin, until last De- cember, when, by the agitation created here in Congress, it ceased. My calls were outstanding, but the bonds did not sell. Mr. Ewing. We are trying to ascertain the amount of coin which you can certainly use in redeeming legal-tender notes ; and you say that in an exigency you can use that item of $6,818,677 of "called bonds and interest," or a poitiou of it. It seems to me that if the exigency arises you will be in such a condition that you will not be calling bonds and increasing your coin demand ; and, therefore, that that fund is not avail- able, and that you cannot safely draw upon it to redeem legal-tender notes; or if you do so in an extremity, you may not only fail of re- sumption, but also fail of paying the interest and principal of the debt. Secretary Sherman. I say that having $62,000,000 of coin in our possession subject to demand liabilities (an aggregate sum), which by the experience of nine years is rarely diminished to the amount often or fifteen per cent, (never falling below $50,000,000, and sometimes going up as high as $80,000,000), we can fairly count that, in any probable state of circumstances at least $18,000,000 of that amount will be in the Treasury — not to be used (because I do not anticipate that our reserve will ever be drawn down to that), but that we may fairly count upon it as in the Treasury. Mr. Ewing. This accumulation has been during the period when legal- 16 RESUMPTION OF SPECIE PAYMENTS. tender notes were not redeemable, but you certainly cannot assume that, because you have had that accumulation of coin in the Treasury hereto- fore when there was* no redemption of legal-tender notes, you will con- tinue to have it after redemption begins 1 Secretary Sherman. I think we can assume if, when gold was not in circulation, there was a gold balance in the Treasury subject to demand without much variation, that, when all transactions are based on coin,, or paper redeemable in coin, this coin will remain in the Treasury. I believe that one of the first effects of resumption will be to increase the deposit of coin in the Treasury, because paper will be so much more . convenient in all the transactions of life that paper will be used and the coiu will be deposited with us. The subtreasury in New York will be, like the Bank of England, the place of deposit for all the coin of the country ; and coin certificates or greenbacks will be used for all current transactions, leaving the coin only to be drawn to meet the demands of foreign trade or the mutations and changes of supply and demand. The Chairman. That would depend entirely upon the balance of trade ! Secretary Sherman. Very much. The Chairman. That would be the key of the situation 1 Secretary Sherman. Yes, sir. Mr. Ewing. You say, then, that at least $3,000,000 of this $6,818,677 for "called bonds and interest" might be used, if necessary, in the re- demption of legal-tender notes'? Secretary Sherman. Practically. I would say that at least one-tbird of the amount, $2,000,000, might be so used. The next item of $4,909,705, "interest due and unpaid," stands in about the same position; in fact, it is more stable than the other. Mr. Ewing. You think that $2,000,000 of that could be used ? Secretary Sherman. Yes, and perhaps more. Here (showing a debt statement) are the items of this "interest due and unpaid;" much of it is on old loans. Very often people do not collect their coupons, but leave the interest to accumulate, so that this interest item is even more stable than the other item. This is the "interest due and unpaid "on out- standing bonds ; the other is " the interest and principal of called bonds." Mr. Ewing. I see that this " interest due and unpaid "is made up chiefly on bonds not yet due. It therefore cannot run along. Secretary Sherman. That always follows. " Suppose a man who owns $10,000 of bonds neglects to cut off the coupons when they are due and lets them run for two or three months without collecting the interest, he is likely to do the same thing the next time. Mr. Ewing. But suppose it were understood that the Treasury was short of gold, would it not be likely that these overdue coupons would be run in for collection ? In other words, could you safely use that fund to redeem legal-tender notes if you are pushed to that point ? Secretary Sherman. I do not think I would have occasion to use that fund, but I simply say (as I have said to the Senate committee) that while we can only surely count upon the actual coin on hand over and above our coin liabilities, we can yet, as business men, fairly understand that all of these demands, of which I have given the items, will not be presented at the same time, and that there will always be a balance of at least eighteen millions of them. Mr. Ewing. Do you count any of the coin-certificates in that category ? Secretary Sherman. Yes ; I count 20 per cent, on coin certificates. Mr. Ewing. You propose to issue 20 per cent, of new certificates beyond the amount of gold on hand ? RESUMPTION OF SPECIE PAYMENTS. 17 Secretary Sherman. Tes, we could. Mr. Ewing. Which you may use for the redemption of legal-tender notes'? Secretary Sherman. I do not think I ever would, except in case of necessity, but the law authorizes.it. Mr. Phillips. Have not our revenues, both from internal revenue and imports, been decreasing of late? Secretary Sherman. Yes, but we have more gold revenue than we have gold expenditures. • Mr. Phillips. But have not the revenues been decreasing this year as compared with the past year i Secretary Sherman. Very largely this winter — especially in the whisky tax. Mr. Phillips. And will not the recent law in regard to whisky still further decrease the revenue? Secretary Sherman. That gets me into legislative grounds, and I think you had better settle that question among yourselves. There is no doubt but that we will have a surplus revenue to the extent of a. portion of the sinking-fund. I do not think that a deficiency can equal the sinking-fund. Mr. Phillips. The sale of bonds has been stopped I Secretary Sherman. Yes, but we can renew their sale if we pay a higher rate of interest — if we issue 4£ per cent, bonds. The time was (ever since I have been in public life) that it would have been looked upon as very remarkable to sell bonds at less than 4J per cent., and we are getting very strong when we refuse to sell bonds at 4| per cent. Never before in the history of the government have bonds been issued and sold at par at so low a rate of interest as four per cent. Mr. Phillips. You state that we have coin interest to pay to the amount of ninety millions a year. Do you think it would be safe to un- dertake resumption with that burden resting upon us I Secretary Sherman. Clearly. If we have the power to. reissue legal- tender notes at par, and the power to sell bonds, if necessary, we can undoubtedly keep the notes at par. Redemption would not go far be- fore legal-tender notes would become scarce. I have stated that there were $70,000, 000 of those legal-tender notes in our vaults, and there are also $70,000,000 of them in the custody of the national banks, whose interest it would be to keep them in their vaults. Mr. Phillips. Would it not be more to their interest to have the coiu? Secretary Sherman. These legal-tender notes are scattered all over the country. Mr. Phillips. The interest of the banks to get the gold might prompt them to send in these greenbacks for redemption. Secretary Sherman. If you ask me whether 347 millions of legal- tender notes can be all paid with a hundred millions of coin, if they are all presented on the same day, I will say no; but, with 600 millions of currency, you cannot purchase all the wheat and corn in the country in the same day. Mr. Phillips. Will not the mere act of resumption create a demand for gold which does not now exist 1 Secretary Sherman. On the contrary, I think it will diminish the demand for gold. What would they want gold for ? Mr. Phillips. These banks may wish to resume. Secretary Sherman. They would rather resume in greenbacks. They deposit their gold with us for safe-keeping. H. Mis. 62 2 18 RESUMPTION OF SPECIE PAYMENTS. Mr. Fort. Would there not be a temptation for the banks to exchange their greenbacks for gold ? Secretary Shecman. I do not see what object they would have in doing it. Mr. Fort. They would do it merely for the premium. Secretary Sherman. But there would not be any premium. Mr. Ewing. How much of this item of "interest due and unpaid," $4,909,705, do you say may be counted as applicable to resumption.? Secretary Sherman. I would say about one-third of it. Mr. Ewing. That will be one million three hundred thousand. Secretary Sherman. I never went into the division of this thing. Mr. Ewing. Then the item of " amount to credit of disbursing officers and outstanding checks," $6,189,626. How much of that can be used for resumption ? Secretary Sherman. You may count on the whole of it if you choose; because it is really only money in the course of disbursement. We always have in the hands of disbursing officers large sums of money, and every disbursing officer has a balance on hand, and we can reduce those balances to a large extent, or cut them off entirely. Mr. Ewing. You include "outstanding checks"; do you think yon could count the whole sum they represent as a part of the funds that could be used ! Secretary Sherman. No, sir. Mr. Ewing. How much of it? Secretary Sherman. I cannot tell ; because I cannot tell how much of this item is for " outstanding checks " and how much to the credit of disbursing officers. Mr. Ewing. Exclusive of those items you would only have ou your theory $12,300,000 which you could add to the $62,000,000. Secretary Sherman. It is totally immaterial whether you count that in or count it out. As I said before, my reliance would be on the actual coin reserve — to be increased as I have stated. I do not propose to re- sume on seventy-one millions of coin. Mr. Ewing. It strikes me that the addition of seventeen or eighteen millions, drawn from these four items, is not safe in calculating the re- sources for resumption. Secretary Sherman. I think that if you ask any banker in New York how much of that fund is available for resumption purposes, he will put it higher than I do. Mr. Ewing. As a banker ? Secretary Sherman. As long as we are issuing United States notes, redeemable on demand, we are in the banking business. Mr. Ewing. And take the bankers' chances ? Secretary Sherman. We do it as a matter of course. We save the interest and have to do as bankers do. Mr. Ewing. You have got here under the item of "called bonds and interest" only $6,818,677. Has there not been a call of $10,000,000 since ? Secretary Sherman. No; there has been no call since. The last statement which you get to-day will include these " called bonds." The last call was made on the 6th of December, 1877, and matured ou the 6th of March, 1878. It has been covered — about half of the amount- by the sale of bonds since the call issued. Mr. Ewing. Does this statement include all of the called bonds un- paid on the first of February, 1878? RESUMPTION OF SPECIE PAYMENTS. 19 Secretary Sherman. Yes, sir ; all the called bonds that matured at that date. Mr. Port. What is the cost of selling bonds, including the expenses of the syndicate ? Secretary Sherman. One-half of one per cent, is the limit under the law and our contract with the syndicate. The syndicate pays all the cost, including engraving, &c, out of the half of one per cent. Under the popular loan we pay one-fourth of one per cent, commission and pay the expenses out of the other fourth. Mr. Ewing. Going back to your statement before the Finance Com- mittee, you add to the sixty-two millions of gold five millions nine hun- dred and seventy-two thousand dollars of fractional silver tjoin ; do you regard that as available for resumption ? Secretary Sherman. Undoubtedly. We can issue that silver coin in exchange for United States notes to the full exteut of the outstanding fractional currency ; but, in my judgment, Congress ought to pass a law enlarging the limit of subsidiary silver to fifty million dollars. Mr. Ewing. Such an exchange would be a voluntary exchange on the part of the holder of legal-tender notes. I am not speaking of what you can buy with the subsidiary silver coin, but as to whether it is avail- able for the redemption of legal-tender notes when presented. Secretary Sherman. Tes; in my judgment that five millions of dollars will be all absorbed before the first of January. Mr. Ewing. But we are speaking of this as a redemption fund for the legal-tender notes after the first of January. Secretary Sherman. If the five millions of subsidiary silver coin be paid out in exchange for United States notes or in current expenses, there will be left in the Treasury just so much the more current revenue which will be in gold. Mr. Ewing. But after resumption day you do not regard fractional silver as available for the purposes of redemption 1 ? Secretary Sherman. Only to a small amount. We will still exchange silver coin for United States notes. But I think the whole amount now on hand will be paid out and gold will take its place. Mr. Ewing. The resumption law provides that the redemption of legal-tender notes shall be in sums of $50 and upward, and fractional silver currency is not a legal tender above $5. How, then, can it be counted upon as part of the redemption fund ! Secretary Sherman. Simply because it can be, and will be, probably, exchanged, as needed, for United States notes. Mr. Ewing. But after the first of January can it be used as part of the redemption fund? Secretary Sherman. Tes, I think so ; if it is used for the redemption of United States notes. Mr. Ewing. It is not a legal tender ? Secretary Sherman. That makes no difference. People come to us every day with United States notes for silver currency. Mr. Ewing. But I am speaking of using this fractional silver currency for the redemption contemplated by the law. Secretary Sherman. I regard redemption as simply meaning paying, according to law, the United States notes in the coin which the holder has a right to demand. Any holder of a United States note may now come to the Treasury and ask to be paid in subsidiary silver coin. After the first of January we will pay him in silver dollars or in gold coin just as he prefers. If we should redeem United States notes between now and the first of January to the extent of five millions of 20 RESUMPTION OF SPECIE PAYMENTS. dollars, we have in place of it the revenue which comes into Treasury — probably in gold. Mr. Ewing. My point is this : that fractional silver coin cannot be counted as a fund with which to redeem, after the first of January, United States notes, because it is not a legal tender for as much as $50, and because, under the law, the presentation of legal-tender notes must be in sums of $50 and upward. Secretary Sherman. I do not think it material for us to discuss that question, because that five millions of subsidiary silver coin will be used in exchange for United States notes precisely as the silver dollars will be. The Chairman. Tou regard it as an asset in the Treasury for all the purposes of the resumption bill ? Secretary Sherman. Certainly. If you really want to drive me into the position, I can simply say that we can convert subsidiary silver coin into silver dollars and then we can pay it out. It is money there in the Treasury available for the payment of United States notes. Mr. Ewing. Might you not as well put in United States notes as money available for redemption 1 Secretary Sherman. No ; I think not. This subsidiary currency would, in the ordinary course of business, be paid out in lien of otuer revenue, and would be replaced by gold or silver. Mr. Ewing. In the statement made on the 26th of February to this committee by the Treasurer, he says : "I am iuformed by the Director of the Mint that the amount of unpaid deposits belonging to private in- dividuals and held by the mints and assay-offices on January 1, 1878, amounted to $2,114,000." Is that a proper deduction from the coin on hand! Secretary Sherman. No, sir ; that is a mint account. Mr. Ewing. But the amount in the mints is credited in your table. Secretary Sherman. Only the amounts belonging to the United States. There are privnte deposits of bullion under the law. That is a private deposit for trade-dollars. It is not a liability. Mr. Ewing. That is, the gold and silver are not counted in the state- ment of the amount in the mints f Secretary Sherman. No, sir ; that debit is for gold and silver de- posited by private individuals for their own use. Mr. Ewing. In this statement you have got the available sum on Land at $71,000,000, without any deduction for accruing interest? Secretary Sherman. Yes, sir. Mr. Ewing. Now, the interest which is accruing on bonds is to be paid by gold which has been accruing from customs, pari passu f Secretary Sherman. Yes, sir. Mr. Ewing. You count all the gold thus coming in from customs as applicable to resumption, and yet here is a charge upon it of $17,277,000, up to the last of .February, for accruing interest 1 Secretary Sherman. The answer to that is that the interest is not due. If the interest is accruing, we have also revenue accruing. We have goods deposited with us and bonds issued for customs duties, but we do not count this as revenue, although the revenue is accruing with absolute certainty of payment, aud will be paid within a year. Mr. Ewing. It is not fixed in amount ? Secretary Sherman. O, yes. The entries are liquidated and ascer- tained, and we hold the goods in bond ; but we do not call that revenue, because it is not paid ; and so it is with accruing interest. Interest, as it accrues, we count as such, but interest accruing will be met before it becomes due by revenue accruing. RESUMPTION OF SPECIE PAYMENTS. 21 Mr. Ewing. But you have already credited your whole accruing reve- nue to your resumption fund 1 Secretary Sherman. No; we have credited our accrued revenue. We do not iu either case credit the accruing or prospective revenue or the accruing or prospective interest. Mr. Ewing. That is retrospective interest. It has accumulated to the exteut of over seventeen millions to the date of your statement. Secretary Sherman. It is no more fixed than the revenue which is accruing. This question of whether, iu our liabilities, interest not yet due shall be counted has been variously discussed, and many take a dif- ferent view of it; but I take it that the point is this: Dan that interest be demanded on the 1st of March or on the 1st of April 2 Certainly not. There is accruing interest from the 1st of January to the 1st of July; but it is not due until the 1st of July, and canuot be counted, therefore, as a demand liability until the 1st of July; and in the mean time our ample coin revenues come iu, and a great deal more than cover the accruing interest. Mr. Ewing. But, as a matter of fact, if you take out that seventeen millions of accruing interest and say that you put that apart as a resump- tion fund, you will be short of revenue to pay your interest and to create the sinking-fund, as the law requires. Secretary Sherman. If we are bound not only to get gold enough to pay what is due, but bound to get gold enough also to pay what may be due in six months, as a matter of course we can never resume. Mr. Ewing. 1 think it fair enough to say that whatever you have on hand now which has no ascertainable charge against it may be counted as a redemption fund for the greenbacks, trusting to future revenue to meet the future accruing interest and liabilities. But the difficulty about this statement is, that you have taken all the gold in hand dow, and have not counted the accruing interest, which amounts to the very large sum of $17,227,000 up to the date of your statement, while the law expressly sets apart the gold that has been accruing from the cus- toms to meet the interest which has been accruing during the same time. Secretary Sherman. No; but to meet the interest which has accrued. Mr. Ewing. The statement, I think, makes an incorrect impression on the public mind as to the amount of gold actually ou hand for resump- tion purposes. Secretary Sherman. But, according to your idea, you would have us accumulate seventeen millions of gold more to-day to meet an obligation that is not to fall due until July. Mr. Ewing. No; but my idea is that in your statement you should have deducted the $17,227,000 of interest accruing up to date from the amount of gold on hand, because that gold is pledged and set apart by the law as a special fund to pay this interest, and is not applicable to resumption. Secretary Sherman. But we have other gold as sure to come iu as the 1st of July will come, to meet that interest. Mr. Ewing. Yes ; and you have other obligations to meet to the amount of all the gold hereafter coining in. Secretary Sherman. We cannot be expected to pay a debt before it is due. Mr. Ewing. The receipts from customs for the fiscal year 1877 were $130,956,000. The receipts this year will be less, as the imports have fallen off. The interest on the public debt last year was $97,124,000. That interest this year will be a little less. The sinking-fund this year, according to the statement of the Treasurer, is $35,424,000, and the law "22 RESUMPTION OF SPECIE PAYMENTS. sets apart customs as expressly to the sinking-fund as it does to the interest on the public debt. Section 3694 of the Revised Statutes pro- Tides that " the coin paid for duties on imported goods shall be set apart as a special fund, and shall be applied as follows : 1st. To the payment in coin of the interest on the bonds and notes of the United States. 2d. To the purchase or payment of one per centum of the entire debt of the United States, to be made within each fiscal year, which is to be set apart as a sinking-fund, and the interest of which shall be in like man- ner applied to the purchase or payment of the public debt. 3d. The residue to be paid into the Treasury." !Now, here is a special appropriation by law of the receipts from cus- toms to the extent of the sinking-fund and of the interest on the debt, and these two items will this year, evidently, amount to the whole re- ceipts from customs. Secretary Shermak. I have already explained the operation of the sinking-fund. If we should undertake to do what you say we ought to do — set aside that $35,000,000 and apply it for sinking-fund purposes — as a matter of course, there would be at once a deficiency in the pay- ment of your own salaries, and of all the other expenses of the govern- ment. Now, this sinking-fund is a well-known technical fund, and has been known from the foundation of the government. It is really noth- ing but a pledge by Congress that it will provide revenues enough, not only to pay the expenses of the government, but to pay, in addition, the sinking-fund of one per cent, upon the debt. Therefore the sinking- fund has been always used simply as a representative of the balance of revenues over expenditures. The current expenditures are always taken from the amount of revenues, and the balance is applied to the sinking. fund. If there is a deficiency in the revenue, so that there is no balance to be applied to the sinking-fund, of course that is the fault of (Jongress in failing to provide revenues sufficient to cover the appropriations and the amount to be applied to the sinking-fund. That has beeu the estab- lished custom of this and other countries. Mr. EwiNG. I am not speaking about the custom, bnt the law. The law says that the coin paid for duties shall be set apart as a special fund, first* for the payment of coin-interest on the public debt; and, second, for the purchase of one per cent, of the debt each year, and for payment of interest upon the accumulated sinking-fund. Now, I do not see how any custom or usage of the department, or usage of other coun- tries, can change the obligation of the statute. Secretary Sherman. Let me look at the resumption act, if you have it there, and I will show you that not only does it do that in express terms, but it has been held to do it by every administration. (Referring to the law.) This clause has always been held to apply to the sinking- fund in the form of surplus revenue: "And to enable the Secretary of the Treasury to prepare and provide for the redemption by this act authorized and required, he is authorized to use any surplus revenue from time to time in the Treasury not otherwise appropriated, and to sell, issue, and dispose of, at not less than par in coin, either of the description of bonds," &c. This passed January 14, 1875. It has been held, under this appropriation, made in 1875, of the surplus revenue, that the excess of revenue over expenditures could be applied under it with- out regard to the sinking-fund; and that has been the construction put upon these words. Mr. Ewing. That is, by yourself, and Mr. Morrill, and Mr. Bristow, the only three Secretaries of the Treasury who administered that law. RESUMPTION OP SPECIE PAYMENTS. 23 Secretary Sherman. Yes, sir. That appropriation of surplus revenue Las been held -pro tanto to be an amendment of the act of 1870. Mr. Ewing. The words are " any surplus revenue from time to time in the Treasury not otherwise appropriated." Now, in addition to section 3694 of the Revised Statutes which I have cited, there are in sections 3688 and 3689, under the head of permanent annual appropriations, appropriations of the sums required for the sinking-fund. These pro- visions of law, setting apart the customs as a special fund and perma- nently appropriating them to the sinking fund, certainly are not affected by this provision of the resumption law, appropriating " auy money in the Treasury not otherwise appropriated." Secretary Shbeman. I think it is ; the words " surplus revenue " are not in it. That has always been construed to mean that sum of money which has been left after paying current expenses. Mr. Ewing. Tou mean always since the passage of the resumption law ? Secretary Sherman. I never saw that questioned. At all events, it was so held aud acted upon, when Mr. Bristow failed to make good the $16,305,421 of the sinking-fund. Mr. Ewing. It was so held by the Secretary ? Secretary Sherman. Yes, sir ; and was never questioned by Con- gress. Mr. Ewing. The subject may not have been looked into. Secretary Sherman. That may be. As a matter of course, if Cou- gress was to say that we should invest the sinking-fund prior to and as against all appropriations made by Congress, it would leave a defi- ciency at once. Mr. Ewing. Congress has said it. Secretary Sherman. I do not think that the fair construction. Still, that is a question for Congress and not for the Secretary. Mr. Ewing. The section from the Revised Statutes which I have read sets apart the duties on imported goods as a special fund for those two objects. A certain and permanent appropriation of the customs as a special fund cannot reasonably be held to have been repealed or modified by this clause, which is usual to all laws — " out of any money in the Treasury not otherwise appropriated ; " that is a common phrase in all statutes making appropriations. Secretary Sherman. Look at the practical question. Would you have had Secretary Bristow, who met this difficulty in the first instance, refuse to pay the ordinary drafts for the expenses of the government to the extent of $16,000,000. Mr. Ewing. 1 would have had him execute the law, and most cer- tainly and most especially I would not consent to the proposition that the resumption act overrides all the laws that preceded it, nor that the importance of resumption is so exigent and overwhelming, as that the permanent appropriations may be disregarded by the Executive in order to carry it into effect. Secretary Sherman. All this you speak of occurred before the re- sumption law was passed. This very question about the application of the sinking-fund occurred June 30, 1874, and the resumption act was passed in 1875. Mr. Ewing. You are speaking of Mr. Bristow's interpretation ? Secretary Sherman. And Mr. Morrill's. Mr. Ewing. ISTot Mr. Morrill's. The resumption law passed before Mr. Morrill became Secretary. Secretary Sherman. Yes; but, at all events, that question was de- 24 RESUMPTION OF SPECIE PAYMENTS. termined by the department and was acquiesced in certainly by Con- gress, and rightly acquiesced in. I certainly take my share of the fault, if there is anything wrong in it, for I was then in Congress, of acqui- escing in the construction that the ordinary expenses of the govern- ment must be paid before the sinking-fund is attended to, and that if there is any deficiency, it must fall on the sinking-fund. Mr. Ewing. But what warrant can there be for a ruling that this gen- eral power to provide for resumption by using " any money in the Treas- ury not otherwise appropriated" shall override the permanent appro- priation of receipts from customs as a special fund to pay interest ou the public debt and to keep up the sinking-fund. Secretary Sherman. The answer to that is, that the resumption act expressly authorizes the use of the surplus revenue and the proceeds of bonds to carry the resumption act into effect; and you will see that the resumption act has been carried into effect thus far by the sale of bonds even in the purchase of the silver bullion in the first instance. Mr. Bristow sold $15,000,000 of five per cent, bonds and used the proceeds of those bonds in the purchase of silver bullion, and so all that I did under the resumption act was done by the sale of bonds. Mr. Ewing. There has been this year applied to the sinking-fiiDd $3,000,000 of fractional currency ? Secretary Sherman. Yes; and I do not know how many United States notes. We have redeemed largely United States notes. Last month we redeemed $700,000. All that goes into the sinking-fund. Mr. Ewing. Why ¥ Secretary Sherman. Because it is a part of the debt which is re- deemed under the operation of law. Mr. EwiNOk. The sinking-fund section (3094) which I have cited con- templates the purchase of bonds. Secretary Sherman. Not necessarily. Mr. Ewing. I think it does. Secretary Sherman. United States notes are a portion of the puhlic debt. Mr. Ewing. I think that the sinking-fund act clearly contemplates the purchase of bonds only. The expression "one per cent, of the en- tire debt," simply means the mode of ascertaining the amount to be purchased. It further provides, "and interest ou the debt so pur- chased." Secretary Sherman. That is the computation of interest on the amount of debt as paid. Mr. Ewing. How do yon compute interest on legal-tender notes? Secretary Sherman. Probably at the current rate at which bonds are sold. I would not be able to tell you the exact rate last year, but the rule, I think, has been to compute the interest at the rate at which bonds were sold. Here is the computation. [Eeferring to it.J Page 18, Fi- nance Eeport. I see that it is computed at 6 per cent. Mr. Ewing. Was there no redemption of bonds in 1876 for the sink- ing-fund? Secretary Sherman. Yes, a small amount. Mr. Ewing. This resumption law does not expressly provide that the legal-tender notes redeemed under it (80 per cent, of the issue of bank notes) shall be destroyed. They may be hereafter authorized to be re- issued. Secretary Sherman. These words in the act, "until the amount out- standing shall be $300,000,000 of such legal-tender notes and no more,* were held to mean a permanent retirement of notes in excess of that RESUMPTION OF SPECIE PAYMENTS. 25- amount. If I ever had any doubt about that, it was removed by the passage of the Revised Statutes, which re-enacts the old law about the reissue of United States notes. From that, taken with the resumption act, it seems plain that, after the reduction of greenbacks to $300,000,000 had been reached, they may be reissued. The act provides that the reduction shall go on until the amount is reduced to $300,000,000 and no more. Mr. Ewing. I find, according to the Finance Eeport of 1876, a defi- ciency in the sinking-fund for that year of $9,225,000. Secretary Sherman. That is correct. Mr. Ewing. And for 1876 a deficiency of $1,143,000 ; for 1875 a de- ficiency of $5,596,000 ; and for 1874 a deficiency of $16,305,000 ; making the total deficiency $32,670,000. Secretary Sherman. I suppose that is correct. Mr. Ewing. If the gold received from the revenue had been applied as this permanent appropriation requires, your stock of gold would be pretty largely reduced. Secretary Sherman. Yes; and if the amount of money which had been applied to the sinking-fund before the panic of 1873, in excess of the amount required by law, had been set apart for a resumption-fund, we would have been at specie payments long ago, and that is what ought to have been done, in my judgment; but there is no use in "crying over spilled milk." Mr. Ewing. I understand that you feel at liberty under the usajre to neglect any application to the sinking-fund at all if the purposes of the resumption law require it. Secretary Sherman. No ; I feel bound to do this : to apply the actual surplus revenue to the sinking-fund ; and that has been done. But when there is not sufficient surplus revenue to pay the sinking-fund, I would let the deficit fall on the sinkiug-fuud. That is the way we have done. Mr. Ewing. And it has made a deficit in four years of $32,000,000. Secretary Sherman. That is, the Government of the United States has failed to keep up the sinking-fund to that amount for the last four years. Mr. Ewing. And you do not feel required to apply any gold received from customs to the purchase of bonds for the sinking fund ? Secretary Sherman. Except to the extent of the surplus revenue. Mr. Ewing. Even then you feel justified in paying the sinking-fund in legal-tenders instead of in bonds. Secretary Sherman. Yes ; that is the construction put upon the law. We have a right to count the legal-tenders and fractional currency re- turned under the operations of the law as so much debt paid. We do not retire any legal-tenders under any circumstances except in conse- quence of the issue of the national-bank notes ; but when legal-tender notes are retired in that way, we count them as so much debt paid, and we credit them to the sinking-fund. Mr. Ewing. And your construction of the statute is that the debt can- celed must not necessarily be a bonded debt. Secretary Sherman. That is the construction. Mr. Ewing. But that it may be a debt bearing no interest ? Secretary Sherman. Yes, sir. Mr. Ewing. And the Secretary of the Treasury is at liberty to fix the rate of interest on it? Secretary Sherman. No ; I do not wish to answer that in the affirm- 26 RESUMPTION OP SPECIE PAYMENTS. ative, because my impression was that the interest was counted at the current rate. I have never had occasion yet to fix the interest. Mr. Ewing. In your statement to the Finance Committee of the Sen- ate as to the preparation the national banks have made for resumption^ you have given the banks' statement, showing the amount of gold held by them on December 28, 1877, as $5,506,556. Secretary Sherman. That is the amount held by the New York City; banks alone. Mr. Ewing. No ; that is the amount held by all the national banks. All the national banks of the United States held $5,506,000 ! of gold coin on the 28th of December last. Secretary Sherman. The banks have gold-certificates, however. They •own that gold in the Treasury, and we do not count it as ours at all. Mr. Ewing. Is it counted in the $125,000,000? Secretary Sherman. Yes. The amount of the specie of the banks, including gold-certificates, was, on the 28th of December, 1877, $32,907,750. That was the amount of coin and gold-certificates held by the national banks ; but that amount is largely increased now. (See Appendix No. 6.) Mr. Ewing. Outside of the Treasury there is, it appears, $5,506,556 of gold in the banks. Do you think the actual gold coin in the banks has largely increased since then ? Secretary Sherman. I do not know about that ; I think it has. There is an increase in the commercial cities ; but I do not like to speak posi- tively upon that point, because in a day or two you will have the actual returns from all those banks. Mr. Ewing. Adding the certificates held by the banks, $23,000,000, to the $5,000,000 of gold coin, you get the extent of their preparation for resumption. Secretary Sherman. Yes, sir. Mr. Ewing. Unless you count the fractional silver coin as a redemp- tion-fund, which it seems to me it is not. Secretary Sherman. The amount of gold held by the New York banks alone, including gold-certificates, is $5,000,000 more to-day than the whole gold and silver coin in all the banks of the United States in December last. Mr. Ewing. Including gold-certificates? Secretary Sherman. Yes, including certificates. The amount is $37,432,000, or $5,000,000 more than the whole amount in all the banks iu the United States in December last. Now, as to how much gold has increased in the other banks I cannot say, but we will have the returns in a day or two, and perhaps in time to attach to this statement. Mr. Ewing. Probably $40,000,000 of gold coin and certificates to- gether will represent the preparation of the national banks for resump- tion. Secretary Sherman. It is more than that. The increase in the New York national banks alone from December to March was $13,000,000. All the great body of these coin-certificates is held by banks and bank- ers. Mr. Ewing. Do you think the aggregate of gold coin and certificates in the hands of the national banks would run up to $45,000,000 ? Secretary SHERMAN. I should think so. Mr. Ewing. That $45,000,000, assumed to be held by the national banks and whatever amount you have in the Treasury belonging to the United States applicable to resumption, represents the whole prepara- tion for the redemption of the $647,000,000 of paper money ? RESUMPTION OF SPECIE PAYMENTS. 27 Secretary Sherman. So far as the national banks are concerned, they have enormous resources. They are only bound to redeem their notes in United States notes, of which they have $70,000,000 on hand ; they have also cash resources of various kinds, as shown by this table, and very large ones. They have surplus profits to the amount of $173,000,000 over and above their capital stock. They have resources which will enable them to redeem in United States notes with great facility. Mr. Ewing. Their surplus profits are invested largely in buildings. Secretary Sherman. They have invested largely in United States bonds. They have United States bonds on hand to the amount of nearly four hundred millions of dollars. They have $343,000,000 to secure their currency. Then they have bonds to secure deposits ; aud they have other United States bonds on hand ; and they have very large cash funds. As a matter of course they have also very large loans aud dis- counts, and they are liable to their depositors to a very large sum. But they have ample cash resources. Mr. Ewing. But I am speaking of the amount of gold and silver they have for resumption. Secretary Sherman. The banks do not have to redeem any notes in gold ; they redeem in United States notes. Mr. Ewing. After all, the problem is to float $647,000,003 of paper money redeemable in coin. Secretary Sherman. Yes. Mr. Ewing. Now, is not the drain upon the government practically the same to the extent of the aggregate of the greenback circulation ($348,000,000) as though the entire circulation were money? Secretary Sherman. I say no, emphatically: and all experience in other systems of banks would also say uo. The truth is, the Govern- ment of the United States has nothing to do with the banks any more than it has to do with the other corporations and merchants of the country. The banks are as separate and distinct corporations as they can possibly be made. The United States has got to redeem $348,000,000 of legal tender notes, or to make them at par with coin. You recollect what I said before, that we have seventy millions undisputed money in coin. Mr. Ewing. I beg leave to say that I regard the statement as incor- rect. Secretary Sherman. Let me go on. We have seventy millions of coin, and then we have seventy millions of curreucy in our possession, some of which at least belongs to us, and none of which is likely to be called for, unless it may be a portion of the certificates of deposit, amounting together to $26,000,000. Then we have these obligations on the part of the banks, which are not fictitious persons but strong corpo- rations. They hold at least seventy millions in our notes and forty mil- lions of gold or gold certificates in their vaults as a reserve at all times. Their notes are absolutely secured by United States bonds, so that if you take that into consideration it is very easy for us to resume. And then you must remember that the body of our notes is in circulation all over this broad country, scattered everywhere from one end of the land to the other. Now, is it likely that these notes are going to be rushed in for payment of them in coin ? Mr. Ewing. I think it is. Secretary Sherman. I say no ; you have no confidence. Mr. Ewing. I have met very few who have confidence. Secretary Sherman. I say that if you strengthen this reserve from seventy millions to from one hundred and twenty millions to one huu- "" RESUMPTION OP SPECIE PAYMENTS. tired and fifty millions, with power in the Secretary of the Treasury to sell bonds if necessary, and with power to reissue greenbacks, there is no danger of breaking the government. I do not think that anybody desires that. Everybody will be glad that the contest is over. Let us look out for ourselves and let the banks look out for themselves. The banks are not interested in running in our notes to get coin for them to embarrass us. On the contrary, these legal tender notes are their money, and as long as they have them, they cannot be broken. Their notes are ' pnyable in our notes, and if they keep a strong reserve of our notes (and they will be interested in keeping a strong reserve)-, they give us aid practically by giving employment to our notes. There is no motive for them (unless there be a fear that we are not able to pay) to rush in and demand payment of our notes in coin. Now I can see very well that if we had a reserve of $130,000,000 of coin, with no demand liabilities whatever except for those legal tender notes, we can maintain those notes at par in coin — scattered as they are over this country. It seems to me that there is no difficulty about it. Mr. Ewing. My question was this : Whether the general government, to the extent of its whole paper circulation outstanding, must not re- spond to the demands of the holders of the $647,000,000 of paper cur- rency for conversion into coin ? Secretary Sherman. The government is bound to respond, to the ex- tent of the amount of United States notes outstanding, but not one step farther. Mr. Ewing. Of course not. Secretary Sherman. VerywelL That is only $300,000,000. It is just as if Great Britain was behind that $300,000,000 of bauk-notes — a sepa- rate and distinct power. We are under no obligation to redeem the national-bank notes. On the contrary the banks are under obligation to redeem their own notes in our notes, and we hold ample security for that. Anybody can present a national-bank note at the Treasury, and the Treasury is ready to redeem it, having a deposit of 5 per cent, which the banks must keep good to redeem national- bank notes. The banks are obliged to redeem their own notes, and they are therefore desirous to get our notes. Mr. Ewing-, Suppose that through lack of confidence in your ability to maintain resumption, with the small accumulation of gold that yon can obtain, there should be a demand for fifty millions of coin in any one month in New York. It makes no difference whether the demand is made on the banks for legal-tenders, and then the legal-tenders be sent to the Treasury for redemption, or whether the demand is directly on the Treasury, you have got to respond to the whole of that demand, and the gold has got to come out of the Treasury, because the banks have practically none in their vaults. Secretary Sherman. It is scarcely a supposable proposition that you put to me that they could gather together in one mass an amount of legal- tender notes to break the Treasury if this reserve is anything like what I say. You can see as a matter of course that there are times when the Bank of England could not meet a demand for 25,000,000 pounds sterling in gold for bank notes. Perhaps at times the demand for half that amount would break it. But actual experiment shows that such a thing is prac tically impossible. Theidea of accumulating $75,000,000 or $100,000,000 of United States notes aud carrying them to the Treasury in the course of a month is practically impossible. The commencement of such a scheme as that would make legal-tender notes so scarce that it would be RESUMPTION OF SPECIE PAYMENTS. 29 impossible to get them, aud the very scarcity would increase their value so that they would be equal to coin. Mr. Ewing. They could very readily present at least their coin cer- tificates for redemption. Secretary Sherman. Where are they 1 Scattered all over the coun- try. The whole amount of mouey, including currency certificates in the city of New York, which is the great commercial deposit of the country, is only twenty million dollars, and they never get more than that. That is the amount of the aggregate. If they gathered every note and every certificate in all the national banks of New York, they would amount to twenty millions of dollars ; aud is it to be supposed that they would do that? Unless you maintain that we require to have as much gold on hand as there is paper money outstanding before we can have resumption, I do not see any difficulty about it. Mr. Ewing. Did I understand you to say that a demand for half of twenty-five million pounds sterling on the Bank of England would break the bank ? Secretary Sherman. I do not kuow how much the reserve of the Bank of England is now, but the Bank of England, like all banks, owes vast amounts of demand liabilities besides its notes. It holds the de- posits of England. Every banking house in England, almost, has an account in the Bank of England; aud therefore the danger which threat- ens the Bank of England would be the calling in of the deposits, and if notes to the amount of ten million pounds sterling were presented, in addition to the call of depositors, there would be such a draft upon the resources of the bank that the bank would have to suspend. But the advantage of our government now is that we have no demand liabilities not covered by actual money on hand. These national banks have six hundred million dollars due to depositors on call, but they have facilities to meet that liability. The strength of the United States Government is so much the greater from the fact that it owes nothing but these notes. Mr. Ewing. The gold coin and bullion of the Bank of England was, in December, 1877, one hundred and twenty seven million dollars, and its entire circulation one hundred and thirty-three millions, so that it could pay its notes almost dollar for dollar. Secretary Sherman. Yes ; but add one hundred aud twenty millions more that the bank is liable to be drawn upon for its deposits. How much does the bank owe its depositors ? Mr. Ewing. One hundred and thirty-one million dollars. Secretary Sherman. There is the danger. The call on the deposits might break it down. Mr. Ewing. Yet you do not seem afraid of the call of over six hundred millions of deposits of the national banks. Secretary Sherman. I say that the national banks have ample re- sources in currency and United States bonds. Mr. Ewing. To pay the six hundred millions of deposits and to keep afloat three hundred and twenty millions of currency I Secretary Sherman. They cannot do it in a day, because it is not possible for the depositors to draw out their deposits in a day. Mr. Ewing. But contrast their situation with the situation of the Bank of England. The Bank of England has in circulation and deposits combined two hundred and sixty-six millions of dollars, and it has one hundred and twenty millions of coin against its circulation and deposits. Our national banks would have nine hundred and twenty millions of deposits and circulation, and have probably forty five millions of coin to 30 RESUMPTION OF SPECIE PAYMENTS. meet that; and yet you think that our national banks are in first-rate condition as compared with the Bank of England. Secretary Sherman. You do not draw the distinction between our national banks and the Bank of England. The Bank of England occu- pies somewhat the position of our national government. But compare our situation with the Bank of England, and we are better off today. Mr. Ewing. You mean the Government of the United States? Secretary Sherman. Yes. Let me give you the reason why. We have on band one hundred and thirty-four millions of gold and silver; we have got seventy millions of paper money ; which makes two hundred and four millions cash on hand in our Treasury. Mr. Ewing. You include money belonging to other people f Secretary Sherman. So do you in your statement of the Bank of England. Mr. Ewing. This gold belongs to the bank. Secretary Sherman. Take the full amount of the demand liabilities upon us and add them together, and then take the money which we have on hand, and we are in as good a condition as the Bank of En- gland. • Mr. Ewing. You are counting in the Treasury gold and legal-tenders which do not belong to the Treasury. Secretary Sherman. No; that is a mistake. Mr. Ewing. The law expressly sets apart the gold on which certifi- cates are issued as a special fund to redeem the certificates, so that it is not applicable to the redemption of legal-tender notes. Secretary Sherman. But take the demand liabilities upon the Uuited States and add them all together and then take all the money that we have got in the Treasury, and, I repeat, we are in a better condition than the Bank of England is. Mr. Bell. Then your idea is that the question of sustaining resump- tion would depend, to a greater or less extent, on the amount of prepa- ration on the day of resumption ? Secretary Sherman. Yes, sir ; and after. I think we ought to be so strong that we can meet any reasonable demand made upon us. Mr. Ewing. The Bank of England has on hand in gold coin and hull- ion $120,000,000, and in the banking department $59,000,000 of notes. Secretary Sherman. According to that the Bank of England has got $179,000,000 with which to pay $266,000,000. The total amount of demand liabilities on us is $407,000,000, and the total amount of coin and currency on hand $208,000,000. Add to that such an additional reserve as 1 propose to accumulate of $50,000,000, and it would make it $258,000,000 to meet $407,000,000, which is just about the proportion, according to the figures you give me, of $179,000,000, held by the Bank of England to meet its liabilities of $266,000,000. The disparity is not so great. Mr. Ewing. That is a statement of very little value, because you in- clude gold and currency which do not belong to us, and you lump it all in together; but if you put down your state of coin preparation for the obligations, which would be a coin demand after the 1st of January, 1879, you do not stand as favorably as the Bank of England. Secretary Sherman. Considering that we hav # e no demand liabili- ties except legal-tender notes, which have a pretty general circulation, I think that our condition on these figures is better than that of the Bank of England. Its liabilities are demand liabilities. Mr. Ewing. Will the reissue of legal-tender notes help you to main- tain resumption 1 RESUMPTION OF SPECIE PAYMENTS. 31 Secretary Sherman. Yes; to have the power to reissue thein; for if the greenbacks can be retained at par, and we can reissue them, it will save us from issuing bonds. We would only reissue greenbacks in exchange for coin or its equivalent. We would reissue them in pay- ment of coin interest, but as a matter of course we could not reissue them unless they were equal to coin, just as the Bank of England would not issue a single note unless it was worth gold. We go on the suppo- sition that the legal-tenders are on par with gold. Mr. Ewing. Tou have just now indicated a possibility of their not being at par with gold. Secretary Shbeman. No, sir. Mr. Ewing. You threw in the " if." Secretary Sherman. The very moment you diminish the supply of greenbacks you bring them up to par again. Mr. Ewing. And your idea of reissuing greenbacks would be only to reissue them in exchange for coin ? Secretary Sherman. Or as a substitute for coin — to reissue them when they are at par with coin. Mr. Ewing. And you would reissue them for the purpose of increasing your coin supply? Secretary Sherman. Yes, sir; practically. The public would be very willing to take the greenbacks if they were at par with coin, and as a matter of course they would be substitutes for coin. The Ciiairman. Do you not think we could make them so if. they were made receivable for four per cent, bonds ? Secretary Sherman. That is to be tried. I want to sell four per cent, bonds if I can. Whether, on actual experiment, four per cent, in- terest is enough in this country to induce the sale of bonds, Mr. Low and Mr. Chittenden can judge better than I. Adjourned to Thursday morning, April 4, 1878, at half past ten o'clock. Thursday, April 4, 1878. Present, Mr. Buckner, chairman, Messrs. Ewing, Hardenbergh, Hart- zell, Bell, Eames, Chittenden, Fort, and Phillips ; the Hon. John Sher- manj Secretary of the Treasury. Mr. Ewing. I ask your attention to a comparison of the condition of the Treasury for resumption with the condition of the Bank of England in 1819 and now, with the Bank of Prance this year, and with the banks of the United States in 1857 and 1861. Secretary Sherman. When I said the other day that I thought the condition of the Treasury on the 1st of January next would be as good as the Bank of England, I had not then before me the actual figures or tables, but only spoke from a general knowledge of the facts. Since then I have given the matter a good deal of attention, and I have got some carefully-prepared tables, founded upon late information, giving the exact comparison of the condition of the Bank of England, the Bank of France, the Bank of Germany, the Bank of Belgium, the national banks, and the Treasury. These tables will show that pretty accurately. [Secretary Sherman handed the tables to the committee, and they are printed in the appendix. The latest statement of the condition of these banks is found in the London Economist of February 23, 1878, and the older statements are found in McCulloch's Dictionary, a standard authority on the subject, on page 117.] .32 RESUMPTION OF SPECIE PAYMENTS. Mr. Ewing. I see you have given the figures of the Bank of France m pounds sterling. Secretary Sheeman. Yes; they are reduced to pounds sterling. I ought to say, explanatory of the statement which I have submitted, -that there are two modes of making up the accounts of the Bank of England ; one by dividing them into the bank department and the issue -department, while the other is the consolidated statement. Mr. Ewing. How does this statement give it 1 Secretary Sherman. It gives the consolidated statement — what is called the old form. The consolidated statement is but a combination of the two departments. Mr. Ewing. Still the consolidated statement charges to the bank the reserve on hand, does it not? Secretary Sherman. If there is any material difference; perhaps I had better put it in both forms, because the Economist gives it in both ways. 1 will give here the table from the Economist : ISSUE DEPARTMENT. .Notes issued £38,693,020 38, 698, 020 Government debt £ 1 1 , 015, 100 Other securities 3, 984, 900 Gold coin and bullion 23, 698, 020 38,698,020 BANKING DEPARTMENT. Proprietors' capital £ 14, 553, 000 Rest 3,414,161 Public deposits, including ex- chequer, savings banks, commissioners of national debt, and dividend ac- counts 6,524,776 "Other deposits 21,529,721 Seven-day and other bills. . . 255, 619 Dated February 21, 1878. 46,277,277 Government securities £15,203,201 Other securities 17,672,338 Notes 12, 368, 96ft Gold and silver coin 1, 032, 773 46,277,277 F. MAY, Chief Cashier. THE OLD FORM. Securities £33,322,539 Gold and bullion 24,730,793 The above bank-accounts would, if made out in the old form, present the following results : Liabilities. Circulation (including bank post- bills) £26,584,674 -Public deposits 6,524,776 Private deposits 21,529,721 54, 639, 171 The balance of assets above liabilities being £3,414,161, as stated in the above ac- count under the head " Rest." 58,053,332 Now, in regard to the United States, I have a statement here showing the apparent and probable condition of the United States Treasury on April 1, 1878, and on the 1st of January next. The only difference in these statement is that I add to the present condition of the Treasury the proposed accumulation of fifty millions of coin and a substantial payment before that of the fractional currency. I think it will be prac- tically redeemed before that time. The actual results show the amount of demand liabilities on April 1, 1878, against the United States as RESUMPTION OF SPECIE PAYMENTS. 33 $460,527,374, and they show the demand resources including coin and currency, at $174,324,459, making the percentage of resources to liabili- ties 37. To show the probable condition of the Treasury on the first of January, 1879, I add the fifty millions of coin and I take off the frac- tional currency, and deduct estimated United States notes lost and destroyed, leaving the other items about the same. That would show an aggregate of probable liabilities of $435,098,400 and probable cash, resources of $224,324,459, making 51 per cent, of the demand liabili- ties. The ratio of the Bank of England, at this time, is 45 per cent. ; the ratio of the Bank of France is 65 per cent. ; the ratio of the Bank of Germany is 58 per cent. ; and the ratio of the Bank of Belgium is 25 per cent., all based upon the same figures. (See Appendices 7 and 8.) Mr. Ewing. Does not this statement charge to the Bank of England the unissued notes ? Secretary Sherman. No, sir; not at all. The notes on hand in the banking department are deducted from the notes issued, so that the cir- culation in the consolidated statement shows an aggregate of £26,584,674. Mr. Ewing. Does that include the amount of notes issued ? Secretary Sherman. No, sir; the total amount of circulation as shown by the issue department, is £38,698,020 ; but there is in the banking de- partment some twelve millions of pounds. This statement deducts the notes on hand from the notes issued (which is proper), and gives the actual notes to be provided for at £26,584,674. Mr. Ewing. Is there not some error about that? Secretary Sherman. Neither you nor I want to fall into any error about this ; but my understanding is, that the whole amount of notes of the Bank of England issued by the issue department is £38,698,020; but the banking department has on hand £12,368,965, and in stating the amount of notes outstanding, they deduct that twelve millions from the thirty-eight millions, which ought to be done, because the twelve millions really belong to the Bank of England. Now, in stating ours we have done it differently. We have given the full aggregate without deducting the notes on hand, so that the account is more favorable to the Bank of England as thus stated than it is to us. If I am mistaken about this, I shall be very glad indeed to have you point it out, but I think I am not, because I have looked very carefully into it. In regard to the national banks, here are some statements which are interesting to me and which were prepared in consequence of our interview the other day. I think they will be interesting to the committee. The first paper contains the circulation and deposits and - specie of the State banks in 1857 and 1860, as compiled from state- ments in the Finance Report of 1876, pages 204 and 205. The next paper contains the circulation, deposits, and cash reserve of the national banks on the 28th day of December, 1877. The latest statement of the banks I cannot give you, because it is not yet made up. It was made in March last, and the returns are not fully in. This statement shows a general demand liability of $960,816,052, and it shows a total cash reserve of $145,019,338. The ratio of legal-tender funds to the amount of circula- tion is 48.4 per cent. The ratio of legal-tender funds to circulation and deposits is 15.1 per cent. The next paper exhibits the circulation, de- posits, and cash resources of the national banks on December 28, 1877, on a different basis, counting the amount of national bonds owned by the banks and deposited with the Treasurer as money. This other table excludes them entirely. This gives the same figures, but counting the bonds at their nominal par as money, it shows this result : Total amount of liabilities $960,816,052, and total amount of cash resources H. Mis. 62 3 34 RESUMPTION OF SPECIE PAYMENTS. (including four hundred and five millions of bonds) at $550,201,055, The ratio of cash resources to circulation is 183 per cent, and the ratio of cash resources to circulation and deposits is 57 per cent. (See Ap- pendix No. 6.) Mr. Ewing. Do you think that the bonds can be counted as cash ? Secretary Sherman. Yes; the bonds are all worth par. or above in gold. The Chairman. The other cash held by the banks is legal-tender notes ? Secretary Sherman. Yes, and coin. Mr. Ewing. Do you think it safe to count these bonds as gold? Is it possible to convert them into gold ! Secretary Sherman. O, yes. Mr. EwiNG. That is, the banks can sell over four hundred millions of bonds and get gold for them 1 Secretary Sherman. Probably not to-day or in a moment. Mr. Ewing. At any time can the national banks accumulate four hundred millions of gold by sale of their bonds ? Secretary Sherman. Not in a day. Mr. Ewing. Or in a year ? Secretary Sherman. O, yes. I sold last year (within the year) of 4J per cent, and i per cent, bonds two hundred and seventy-five million dollars. Mr. Ewing. How much gold did you get for them ? Secretary Sherman. Sixty or seventy millions of gold and the bal- ance I paid for six per cent, bonds. Mr. Ewing. They were practically funded in other bonds. But I want to know now if you make up that table on the theory that these four hundred millions of bonds can be turned into gold for the purpose of resumption ? Secretary Sherman. I make up my statement on the theory that four hundred millions of bonds will more than pay four hundred millions of bank-notes at any time, such bonds as the banks hold, and that, if that is not so, we are bankrupt. I just give you this statement. Here, also, is an abstract of reports made to the Comptroller of the Currency, be- cause these tables are taken from it. (See Appendix No. 6.) Mr. Ewing. Here is a consolidated statement which 1 have prepared, and to which I wish to call your attention. RESUMPTION OF SPECIE PAYMENTS. 35 10 S ID'S £H O H « jj. t ^3 . CC ■5j«m a -S " n39' a ^ a .S o ^ =vS'S9Srt a «4 m ft o a H H a O c o E-i cq H -^ H llltsijtt | %>u S-b 2*5^ S n 0)=. M-g g-g "lea's «> .5 g°S s=b3 Sg"3 SIS § &1« aK s a "2 °ffl2S.2 S Stfi'Ss a g O P ^2 ,_, rrt ®^J-S P ^H ^O* E-. *S to r- *= ,5° ■dsgx^hfM^o Sswa °>r we? *-^> g-p J gigllsl'as^s &£ 83 as 3 H __M_ g ea 2 « 2 -S-SS.3 a 3 a - ® o g cd a to a 5- b P O O^' i » o &£ a o a o o> «.« a o «T3 p-fe a o:< o M Hi ills £g|s hIO H o o o o o o CO '■» © o o o o o o o Offi o tH CN CO o o o o o o © CJ o o o © CO '"! 3 . o o o lO O © © © irt © © © C( lO O © CJ CO 00 CO io'co" o © o o © o CO o o © © o CIO t-4 © © lO ©i * 3 £.2 lag --l^C»^ oo a oo a >- . c3" « a &->a >i d is ^-3 'bca'fejta a a a a [^ Cfiq o ih ran-i ja atttf GO w in '-^ dj GO rtrn p p a 2 ^ aa ^^ p d as o" a 1 5 * 5 •I a •S 'g S a r ■a* CD «T3 ^«a "*"* »'S co a •3 I 2 —I •* J T3 pi ^ p g'aS- © t- "2; CD *g ,-/ a (71 CD't-i wg o «w p £ d ®' a 36 EESUMPTION OP SPECIE PAYMENTS. Secretary Sherman [examining the paper]. Your currency outstand- ing of the Bank of England is about what I have got it, about twenty- six million pounds ; but yours is made up only to December, 1877, and mine is made up to February. I have no doubt that you have got this correct. There is no trouble about these figures, although we may some- times look at them a little differently. Mr. Ewing. I cannot get the deposits in the English country banks. Secretary Sherman. The great liability of the Bank of England is the deposits. I have no doubt that this table is substantially taken from the same authority, and I should like to have it go into the report of the conference as yours. Mr. Ewing. I wish you to state the probable amount of gold and silver, not including subsidiary coin, in the United States, outside of national banks and of the Treasury, and where it is or supposed to be. Secretary Sherman. I am like you and like everybody else as to my knowledge on that subject. I have to depend upon the information from the Director of the Mint for it, and I can only give it to you as he gives it. This table here [handing it to the committee] gives that in- formation from the best lights I can get, and I am inclined to think on the whole that it is about right, but I give it as the statement of the Director of the Mint, for I have no knowledge outside of that which I get from him and from the official documents. [The paper, being an estimate of the amount of gold and silver bullion and coin in the United States on April 1, 1878, is published in the ap- pendix No. 9, giving the total at $199,490,753 of gold and $65,500,000 of silver, making an aggregate in gold and silver of $264,000,000.] Secretary Sherman. That statement is not only concurred in by Dr. Linderman, who has mainly prepared it, but it has been carefully exam- ined by other officers of the Treasury Department who are familiar with the matter. Mr. Ewing. Have you with you the report of the sinking fund? Secretary Sherman. In my report I refer to the sinkiug fund. I say: "In the last annual report my predecessor stated that had there- sources of the Treasury during each fiscal year, commencing with 1862, been sufficient to make a literal compliance with the conditions of the sinking-fund law practicable, a total of $433,848,215 would have been applied to that fund July 1, 1876 ; whereas the actual reduction of the debt, including accrued interest, less cash in the Treasury at that date, amounted to $658,992,226," or $220,954,459 in excess of the amount re- quired by law to be provided for that fund. The details of the fund are given on pages 19-20 of my report. ■ 'Here is a table showing the excess or deficiency placed each year in the sinking fund since 1869 : Excess or deficiency placed each year in sinking fund since 1869. Excess. Deficiency. Difference. 1869 $672, 020 23 1870 $744, 711 80 257, 474 32 1871 1872 2,823,891 46 1, 451, 588 95 1873 1874 16,305,421 96 5, 996, 039 62 1, 143, 769 82 9, 225, 146 63 1875 1876 1877 4, 947, 500 64 33, 672, 564 15 $28, 725, 063 51 RESUMPTION OF SPECIE PAYMENTS. 37 Here is also a table showing the Monthly redemptions of legal tenders and fractional currency during the current fiscal year, to be applied to the sinking fund. July, 1877 August, 1877 September, 1877 October, 1877 November, 1877 December, 1877 JaDuary, 1878 February, 1878 '.. March, 1878 Total for 1878 Amount applied to the sinking fund during the fiscal year 1876 Amount applied to the sinking fund during the fiscal year 1877 Total Legal tenders. $670, 112 1,118,056 1,061,232 2, 424, 040 3, 150, 604 1, 396, 512 833, 352 492, 400 769, 312 11, 915, 620 5, 999, 296 10, 007, 952 27, 922, 868 Fractional cur- rency. $618, 801 45 612,221 50 385, 472 12 434, 067 61 309, 554 14" 278, 911 62 292, 189 18 281, 221 58 240, 582 52 3, 453, 021 72 7, 062, 142 09 14, 043, 458 05 24, 558, 621 86 Now I want to show you also that the surplus revenue has not been equal to the sinking fund- since 1874 ; but actually there has been more applied to the sinking fund than the surplus revenue during those years. My report of December 3, 1877, will show the exact application of the amount. The amount of the surplus revenue is stated there at $30,340,577, which was applied as follows: To the redemption of United States notes, &c $10,071,617 To the redemption of fractional currency 14, 043,458 To the redemption of 6 per cent, bonds for the sinking fund 447, 500 To increase of cash balance in the Treasury 5,778,002 30, 340, 577 That $5,77S,002 has never been applied. Mr. EwiNG. Is tbat thirty millions the sum of the sinking fund % Secretary Sherman. It is the sum of the surplus revenue, the total revenue over expenditures. So that that five millions has not been ap- plied. Mr. EwiNG. Where do you expect to get the additional fifty millions of gold by January 1, 1879 1 Secretary Sheeman. You must see that for me to state too closely what I propose to do might prevent me from doing what I expect to do, and therefore I will answer your question just as far as I think you will say I ought to go. I answer, mainly from the sale of bonds. Indeed, in the present condition of the revenue, we cannot expect much help from surplus revenue, except so far as that surplus revenue may be applied to the payment of greenbacks and to the redemption of fractional cur- rency in aid of the sinking fund. To that extent I think we can rely upon revenue enough to retire the United States notes redeemed under the resumption act ; so that I would say that we can get the $50,000,000 of gold additional by the sale of bonds. As to the kind of bonds that I would sell, and as to how I would sell them, &c, I ought not to say anything on that subject at present, because you ought to allow me as an executive officer, in the exercise of a very delicate discretion, free power to act as I think right at the moment, holding me responsible for my action afterward. As to what bonds I will sell, or where I will sell them, or how I will sell them, as that is a discretionary power left with the Secretary, I ought not to decide that now, but to decide it as the case arises. 38 RESUMPTION OF SPECIE PAYMENTS. Mr. Ewing. I understood you to say iu your interview with the Sen- ate committee that you would have to rely upon the natural currents of trade to bring gold from abroad ; that is, that there cannot be a large sale of bonds for coin abroad. Is it on a foreign sale that you are rely- ing? Secretary SnERMAN. Not at all, but ou a sale at home. Perhaps I might as well say that if I can get two-thirds of this year's supply of gold and silver, it will amount to a good deal more than $50,000,000, so that I do not have to go abroad for gold. If we can keep our own gold and silver from going abroad, it is more than I want. The Chairman. For this $50,000,000 additional I suppose you rely to some extent on the coinage of silver % Secretary Sherman. To some extent; silver and gold we consider the same under the law. Mr. Ewing. Do you expect to pay out the silver dollar coined by you for current expenses, or only for coin liabilities, or to hoard it for re- sumption % Secretary Sherman. I expect to pay it out now only in exchange for gold coin or for silver bullion. 1 am perfectly free to answer the ques- tion fully, because on that point, after consulting with many members of both houses, I have made up my mind what the law requires me to do. I propose to issue all the silver dollars that are demanded in ex- change for gold coin. That has been going ou to some extent ; how far I cannot tell. Then I propose to use the silver in payment for silver bullion, which I can do at par in gold. I then propose to buy all the rest of the silver bullion which I need under the law with silver coin. As a matter of course, in the current course of business, some of that silver coin will go into circulation ; how much, I do not know. The more, the better for us. But most of it, I take it, will be transferred to the Treasury for silver-certificates (that seems to be the idea of the bill), and those silver certificates will come into the Treasury in payment of duties, and in that way, practically, the silver will belong to the govern- ment again. Until silver is so abundant that it becomes the acknowledged basis of coin transactions, we cannot pay out that silver for the ordinary ex- penses of the government, because we have not enough to pay all the expenditures in silver ; and if the silver is maintained at par with gold, and if the United States notes are below par with gold^we cannot dis- criminate in favor of any class of creditors ; we would, therefore, have to hold silver at par with gold until we either have enough to pay every- thing with it or until the legal-tender notes are practically at par with gold and silver. That is a matter over which I have no more control than any other citizen. The silver dollars being receivable for duties— the law allowing them to be converted into certificates which are receiv- able for customs — I must receive them ; and I could not prevent, if I tried, the silver from coming into the Treasury, either for silver certifl- . . . cates or payment of duties. As to when I shall commence paying them out for the current expenditures of the government or in payment of the interest or principal of the debt I cannot tell ; because that would depend upon the equality of the three kinds of currency — gold, silver, and paper. I do not know whether I make myself understood, but that is the general idea I have in my mind. As a matter of course, it beinga great discretionary power which you have invested in the office of Sec- t retary of the Treasury, while I hold the office I will be very careful to exercise that power so as to carry out in good faith the law as Congress RESUMPTION OP SPECIE PAYMENTS. 39 has passed it, and that law, I think, contemplates that gold, silver, and paper shall be all brought on an equivalency. Mr. Ewing. Please state in detail the fund in the Treasury, other than gold and silver, applicable to resuinxition, and not covered by appropriations. Secretary Sherman. It is very small. In round numbers, the $70,- , 000,000 of currency in the Treasury, which is less than the average amount so held for the last five years, is subject to the following, viz : Special fund for redemption of fractional currency .' $10,000,000 Redemption of notes of national banks "failed," iu "liquidation," and "reducing circulation" 12,000,000 Five per cent, redemption fund j 9, 000, 000 Disbursing officers' balances 13,000,000 Certificates of deposit issued under act June 8, 1872 26, 000, 000 So that, you may say, some of those items are ours. First, the item of $10,000,000 for the redemption of fractional currency is ours ; then the item of $13,000,000, held by disbursing officers, is ours. The two redemption funds, one of national banks (hat have failed, and the other in present redemption of national-bank notes (together $21,000,000), belong to the banks. We have to hold it, but the amount does not vary much. The certificates of deposit are less now than usual; they are only $26,000,000. I think that answers your question fully. (See Appendix No. 11 as to distribution of currency iu the Treasury.) Mr. Ewing. No; what I desire to know is the funds in the Treasury other than gold and silver applicable to resumption, and not covered by appropriations. Secretary Sherman. I do not count any of these as applicable to re- sumption. Mr. Ewing. You spoke the other day about $70,000,000 in the Treas- ury with which to maintain resumption. Mr. Sherman. Not to redeem notes. That $70,000,000 is so much money that is almost constantly in our hands, and which cannot be pre- sented for redemption. Iu that view only I spoke of it. Mr. -Ewing. You did not speak of it, then, as a fund available for use in maintaining resumption 1 Secretary Sherman. O, not at all ; but as so much money which cannot be presented for redemption. Mr. Ewing. Cannot the $26,000,000 of certificates of deposit be pre- sented for redemption 1 ? Secretary Sherman. Yes ; that much can be ; but it is not likely to be. We have got the money to pay for it if it is presented, but it is not likely to be. Mr. Ewing. That depends upon the preferences of the holders of the certificates. Secretary Sherman. Still, I can tell you that it is a great comfort to have $70,000,000 where it is not likely to be disturbed. The Chairman. You are not liable to be called for it at any day ? Secretary Sherman. No, sir. Mr. Ewing. Then I understand that you have no right to use the special fund for the redemption of fractional currency ! Secretary Sherman. I do not think that we have any right to use any of that to redeem notes with, because we must redeem notes with coin ; but, having this $10,000,000 on hand, it is ours. Mr. Ewing. Is it subject to use ? Secretary Sherman. It is pledged in law to redeem the fractional currency which is really lost or destroyed. If I have $1,000 belonging 40 KESUMPTION OF SPECIE PAYMENTS. to a man who died without heirs I am pretty likely to fall heir to it; and that is the case with this special fund for the redemption of frac- tional currency. Mr. Ewing. What I desire to know is, not what the Treasury might be authorized by additional legislation to do for the purpose of resump- tion, but the resources of the Treasury under existing laws in legal- tender notes or bank-notes that may be used in facilitating resumption. What are the items ? Secretary Sherman. I- think that practically none of this fractional- currency money and none of this money on hand is available for resump- tion in the sense in which you use the term. It only lessens the burden of resumption to have the notes where they are not likely to be pre- sented. Mr. Ewing. You certainly spoke the other day of this $70,000,000 as being a resource. Secretary Sherman. I think it is, in this way : It is a resource, because it is like the notes of the Bank of England that are in the issue depart- ment. They do not have to be redeemed, or they are not likely to be redeemed, although they may have been issued. They diminish — to the extent that we hold these greenbacks in the Treasury — the amount of greenbacks outstanding among the people. Mr. Ewing. What has been the amount of sales of bonds per month since the last sales to the syndicate 1 Secretary Sherman. Here it is : Subscriptions received for four per cent, bonds per month since the last sales to syndicate. January, 1878 $2,846,550 February, lb78 744,200 March, 1878 ' ], 445, 450 5,036,200 Mr. Ewing. Then it would take four or five months of sales of bonds to meet outstanding called bonds'? Secretary Sherman. We will probably sell enough this month to meet the outstanding- called bonds. I think we will be able to sell enough to cover the deficiency in the last call. I hope within this month to make an arrangement to sell, unless Congress should repeal the resump- tion act. 1 would like Congress to determine that. If it is not repealed I would undoubtedly sell, during the present month, a good deal more bonds. I would sell all the bonds that I wanted to sell. Mr. Ewing. Four per cent, bonds f Secretary Sherman. That I cannot say. I will do the best I can. I would rather sell four per cent, bonds, and hope to do so ; but if I sell any other bonds they will be sold at a premium. I can sell them in the market at above par. Mr. Ewing. Do you think that under existing law the legal-tender notes redeemed will be subject to be paid out as other funds, returned to the Treasury. Secretary Sherman. I think that the law is very clear that the amount of legal-tender notes redeemed in excess of $300,000,000 cannot be paid out. That is my construction of the law. Mr. Ewing. I am speaking of the others, and not those redeemed by the increase of bank currency. Secretary Sherman. I do not think they can be issued. I think that those which are redeemed after the 1st of January, in excess of $300,000,000, cannot be reissued under existing laws. 1 am not certain RESUMPTION OP SPECIE PAYMENTS. 41 about it. It is a mooted question; I would rather have your opinion on that than my own. It is a question which I would like very well to have Congress settle. The law proposes and provides for no mode of redeeming United States notes, except as bank-notes are issued (when eighty per cent, of United States notes must be redeemed). As the law provides for no other mode of canceling and destroying United States notes, it would seem to follow that all notes redeemed in any other way than under that law can be reissued, because the section of the Eevised Statutes I mentioned provides that all notes which come into the Treasury may be reissued. But, then, on the other hand, there is a provision in the resumption law which seems to contemplate that the amount outstanding on the 1st of January shall not exceed $300,000,000. Mr. EwiNG. Provided the increase of bank currency is such as to bring down the legal-tender notes to $300,000,000. Secretary Sherman. There is the question. That question I have never determined in my own mind. It may be that all the notes now outstanding, and which are not redeemed under the provisions of the resumption act, can be reissued. Mr. Ewing. If any can be they all can be, I think. Secretary Sherman. That is a question I have not determined in my own mind. I havenodoubtof my power to reissue all below $300,000,000. The law expressly provides for that ; there is no provision of law which authorizes the reducing of them below $300,000,000. But the resump- tion act does contemplate the reduction of United States notes to $300,000,000. Mr. Ewing. Provided the bank currency is increased to such an ex- tent as, under the provisions of that law, will reduce the greenback currency to $300,000,000. Secretary Sherman. I frankly say that I wish and hope that that is the proper construction; for I do not want to retire greenbacks except as they are retired by the issue of bank-notes, because I believe that that process will reduce them in time. I do not desire to hasten the process. But, as a matter of course, I would be very glad indeed if Congress would solve that question for me, just as I would like to have Congress solve the doubt which rests on the reissue of the $300,000,000. Mr. Phillips. Tou cancel legal-tender notes to the extent of eighty per cent, of the amount of national-bank notes issued, but when these national-bank notes are retired (as they have been to a far greater extent than they have been reissued) there is no means in law of reissuing legal- tender notes to that extent. Secretary Sherman. The authority to reissue extends to every dollar of United States notes outstanding. Any of the United States notes that come, into the Treasury in the ordinary course of business, either for redeption or in payment of taxes, I have the right to reissue. Mr. Phillips. That I understand. Secretary Sherman. Then the question is whether that provision of the resumption act which contemplates the reduction of the volume of United States notes to $300,000,000 is a mandate to the executive offi- cer not to reissue them until they fall below that amount. That is a question which I ought not to answer, because I have not made up my mind upon it. Mr. Ewing. But as to the legal-tender notes under $300,000,000, re- deemed under the resumption law, you hold that you have the right to pay them out the same as any other fund in the Treasury. Secretary Sherman. I do. 42 RESUMPTION OF SPECIE PAYMENTS. Mr. Ewing. You have no more discretion respecting their reissue than you have respecting the reissue of notes received from taxes ? Secretary Sherman. No, sir ; I issue them according to the exigencies of the public service. Still, you know that that is a disputed proposi- tion. I know a very able Senator, for whose opinion I have great re- spect, who thinks differently. I think, therefore, that that is a question which Congress ought to settle. Mr. Ewing-. Did any law-officer of the government, or any Secretary of the Treasury, give a written opinion to the effect that the authority given to the Secretary of the Treasury by the resumption law to use any surplus revenue from time to time in the Treasury, not otherwise appro- priated, to prepare and provide for the resumption of legal-tenders, affects in any way the obligation imposed by that section of the Revised Statutes which declares that the coin paid for customs shall be set apart, as a special fund, and applied, first, to the interest on the public debt, and, second, to the sinking fund? Secretary Sherman. No ; I think that no law-officer of the govern- ment, or no Secretary of the Treasury, has yet authoritatively decided that question, as you put it now. The question which the Secretary of the Treasury did decide was, that United States notes and fractional notes, being a part of the public debt, may be included in the sinking fund; and practically we have paid the full amount of the surplus revenue in that way and applied it to the sinking fund until last year. In one year, in Mr. Bristow's time, there was a deficiency of $5,000,000 ; and this last year I did not buy bonds to the extent of $5,000,000 of the surplus fund, so that the question which you now present, although it is presented to my mind very often, has not been decided, either by myself or by any Secretary of the Treasury or by any law, for the question has really never been presented in a way which made it necessary to decide it. My annual report will show the exact application of the amount of the surplus revenue. As, under the provisions of existing law, I was actually selling bonds under the resumption act, I did not see my way clear to go into the market and buy these bonds for the sinking fund, just as, during the whole of the war, the sinking-fund provision was held to be inoperative. While we were actually selling bonds, it was absurd for us to go into the market and buy bonds. The money lies in the Treasury, subject to the order of Congress. If Congress directs that that $5,000,000 be applied to the sinking fund, it can do so, but it will only involve us in the same absurdity that the English were involved in when they undertook to carry out Sir William Pitt's sinking-fund law during their war. j?, Mr. Ewing. But you can buy 6 per cent, bonds with it, and you can sell 4 per cent, bonds. Secretary Sherman. I know that. We can sell 4 per cent, bonds, but what is the use of doing so? Mr. Ewing. What is the balance for the sinking fund? Secretary Sherman. Five million seven hundred and seventy-eight thousand dollars. Mr. Ewing. Where is that — in the Treasury ? Secretary Sherman. It is in the general cash balance. It is in the coin accumulated. Mr. Bristow, in his report in 1875, mentions this very matter, and says that, in his opinion, the law requires him to call in bonds, and to invest this money; but Congress took no action upon it, and the result was that that year, or the preceding year, the balance over the surplus revenue, some $16,000,000, was not applied at all; and so, ever since the panic of 1873, there has been a balance not applied. RESUMPTION OF SPECIE PAYMENTS. 43 Mr. Ewino. 1 don't thiuk the surplus reveuue has anything to do with it ; what I wanted to know was whether any law-officer of the . government, or any Secretary of the Treasury, had given a written opinion that the sinking fund was to be composed merely of surplus revenue under that section of the Eevised Statutes which says that the income from customs shall be applied, first to the interest on the public debt, and second to the sinking fund. Secretary Sherman. I can only say to .you that established custom, as well as the theory of our government, would seem to require that auy sinking fund provided for the extinguishment of the debt cannot be applied until alter all current demands upon the Treasury are paid. Otherwise the Treasury would be bankrupt whenever there was a tem- porary falling off in the revenue. For instance, the law which you read to me and which I helped to frame (the law of 1862), providing for the sinking fund, sets aside the receipts from customs to pay 1 per cent, of the debt. Now, although that was the law, just as mandatory as you have read it (requiring the sinking fund to be maintained at 1 per cent.), the sinking fund was never opened, nor could it be, during the war. The pledge was never carried out until the old floating debt was mainly refunded. Mr. EwiNCr. That was covered by the blanket of war necessity. Secretary Sherman. Not at all. That matter was presented to Con- gress frequently on the ground that it was impossible to maintain a sinking fund until there was an excess of revenue over expenditure, and so it continued until I myself complained of it, after the war was over, ' insisting that while that was right during the war, it should not apply after peace, and we therefore carried through Congress a provision for the sinking fund, so that the money might be applied, so much every year, in pursuance of the old act of February, 1862, and so it continued to be carried out until the revenues fell below the expenditures, so as to make it impossible to pay the current expenses of the government, and to pay the sinking fund at the same time. Thus, from the necessity of the case, any Secretary of the Treasury was compelled to pay the cur- rent demands on the revenue before he paid the sinking fund, just as the manager of a railroad would be bound to pay his hands and furnish the fuel to run his locomotives before he would pay the interest on the first bonded debt. Mr. Ewing. Was not the public debt being reduced all that time % Secretary Sherman. Up to the panic of 1873 it was being reduced all the time, and we paid more during all those years than the law required on what we call the sinking fund — that is, the redemption of the debt. Mr. Phillips. From what source did the payments come? Secretary Sherman. From surplus revenues. And so it continued until 1873. Then, all at once, there was a deficiency of $16,000,000. "Well, the Secretary of the Treasury, as a matter of course, would go on and pay the ordinary expenses first; and if there was any deficiency he would report that deficiency to Congress, and if there was any fault about it, it was with Congress, for Congress should either provide addi- tional revenues to keep up thesiuking fund or else should reduce appro- priations. Mr. Eichardson was Secretary of the Treasury when the first trouble took pla.ce. The exact condition of the Treasury was given two months after the panic, and so on by every Secretary, and as Congress did not feel disposed (and I think rightfully — I was in Congress myself at the time, and take my share of the responsibility) to levy new taxes upon the people in a time of great distress, this deficiency in the sink- ing fund was allowed to continue from year to year until now, and I 44 RESUMPTION OF SPECIE PAYMENTS. presume that it will be allowed to continue, although if Congress can see its way clear to levy a tax upon tea and coffee, to make good the sinking fund, I would like it very much. But I do not think Congress will do so. . Mr. Ewing. I guess not. Secretary Sherman. Because I do not think that the people would sustain Congress in it. So I do not think there can be any just criti- cism in throwing on the sinking fund the actual deficiency in revenue, because any Secretary of the Treasury who would undertake to refuse to pay the current expenses of the government, and who would at the same time pay the whole amount of this technical sinking fund in the purchase and payment of the debt, would be overhauled very quickly, Mr. EwiNG. I understood you to say on Monday that this appropria- tion in the resumption law, of any surplus revenue, authorized you to use any of the funds which would otherwise go to the sinking fund. Secretary Sherman. Yes, for the redemption of United States notes and fractional currency, but not beyond that ; I never claimed that. Mr. Ewing-. For the redemption of the United States notes after the 1st of January. Secretary Sherman. No, sir ; we did not discuss that. The point you were putting to me was that we ought not to have used this money (which should go into the sinking fund) for the purpose of redeeming the United States notes and fractional currency, but that we ought to have applied it to the redemption of bonds ; and I said in reply that the plain mandate of the resumption act requiring us to pay and cancel and retire the greenback notes was just as mandatory as the appropriations for your salary and mine. Mr. Ewing. Do I understand you now that the appropriation of " any surplus funds in the Treasury not otherwise appropriated," contained in the resumption law, will authorize you, after the 1st of January, 1879, to use funds which would otherwise go to the sinking fund in redemp- tion of United States notes? Secretary Sherman. My impression is that, under the resumption act, after the 1st of January I can tise all surplus revenue to pay any lawful demands on the Treasury of the United States. Mr. Ewing. That is, it gives you the command of the sinking fund for that purpose ! Secretary Sherman. Yes. If Congress fails to make enough appro- priation for paying the current expenses, including any demand that may grow out of resumption, I would have aright, to the extent of the surplus revenue, to command those moneys, in order to carry out the resumption act, just as I would have a right to use it under any other act of Congress. Mr. Ewing. So that the sinking fund is not only subordinated to any subsequent appropriations by Congress, but is subordinated to this appropriation in the resumption law of the surplus fund, and is really the last thing which is to be looked after or provided for? Secretary Sherman. Yes ; for this reason : if I should fail to have money enough to meet the demands upon me for resumption purposes I am invested with the power to sell bonds ; I would have the authority to go iuto the market and sell bonds. It would be idle for me to go into the market to sell bonds while I was actually buying bonds for the sipking fund. I would regard a demand made upon the Treasury for United States notes after the 1st of January next just like any other demand for a liability which I was bound to pay, and I can use all the means at my command, including the proceeds of the sale of bonds. RESUMPTION OF SPECIE PAYMENTS. 45 Mr. Ewing. And the sinking fund ! Secretary Sherman. O, yes. The sinking fund, in my view, is noth- ing but the surplus of revenue over the expenditures. The nature of the sinking fund has been debated to an extent in folios greater than the folios you have got in tbis room. It was debated in the English Parlia- ment in the famous Dr. Price controversy, which extended for thirty years, and that was the generally recognized idea of a sinking fund — that it was nothing but an agreement on the part of the law-making power to apply surplus revenues to a certain amount to the reduction of the public debt. Mr. Ewing. Has any law-officer of the government, or the Secretary of the Treasury, given a written opinion to the effect either that the sinking lund is subordinated to the special appropriations or to this general appropriation of surplus funds made in the resumption act? Secretary Sherman. No ; I do not think so. I know of none. Mr. Ewing. Has any law-officer of the government, or any Secretary of the Treasury, given a written opinion to the effect that the United States notes or fractional currency redeemed may be charged to the sinking fund? Secretary Sherman. No ; because I think that that is so clear thatT would not ask for such an opinion. The United States notes and frac- tional currency have been regarded as a part of the public debt ever since, their first issue, and in every statement of the public debt it has been always classified as a part of the public debt. In making up the state- ment of the sinking fund, you will find that we always included the whole aggregate of United States notes and fractional currency. Mr. Ewing. The law unquestionably requires that ; but the law also requires that a sum equal to the interest of the sinking fund shall be ap- plied annually. Secretary Sherman. Yes ; that has been done. • Mr. Ewing. And if you put into the sinking fund notes that bear no interest, it is impossible to execute that provision for paying interest on the sinking fund ? Secretary Sherman. What is the sinking fund ? The sinking fund is not the identical bonds that are canceled, destroyed, and burned. The sinking fund is neither the bonds paid and destroyed, nor the notes paid and destroyed. The sinking fund is like many other book accounts that are kept upon our books. It is a certain amount of money, and it is ac- cumulated at the rate of 6 per cent, interest. It does not make any dif- ference from what source the sinking fund comes. Mr. Ewing. If there were 5 per cent, bonds in the sinking fund, would you count interest on them at 6 per cent. ? Secretary Sherman. But there are no 5 per cent, bonds in the sinking fund. I fell into the same error the other day. I told you the other day that I thought that the interest was computed as at the rate of the bonds purchased ; but, on inquiry, I find that I was mistaken, and that the habit has always been to redeem only the 6 per cent, bonds and to com- pute uniformly 6 per cent, interest on the whole amount of the sinking fund. The sinking fund heretofore has been always composed either of 6 per cent.' bonds, United States notes, or fractional currency re- deemed. Mr. Ewing. If you had 7.30 bonds in the sinking fund would you not compute the interest at 7.30, and if you had 4 per cent, bonds would you not compute the interest only at 4 per cent. ? Secretary Shebman. No, sir. The identity of the particular security is lost the moment that it is redeemed ; and the sinking fund is com- 46 RESUMPTION OF SPECIE PAYMENTS, ' puted at the rate of 6 per cent., because the 6 per cent, bonds are now available and can be paid off. Mr. Phillips. In case of the falling off of revenue, do you think that you would probably have to sell gold in hand to meet the current ex- penses of the government? Secretary Sherman. If so, Congress would be in a very sorry predic- ament. Mr. Phillips. I am speaking of your power to resume. Secretary Sheeman. If Congress fails to give us money enough to meet its appropriations, we are broke. That is all that there is about it. Mr. Phillips. You would avail yourself then of the coin in your hands to meet the current expenditures of the government? Secretary Sherman. Undoubtedly ; but I cannot presume that our government is going to do that. Mr. Phillips. I observe that the currency balance on the 1st of April, 1S77, was eight millions; a little over half a million on the 1st of this April. Secretary Sherman. The balance now is greater than it was then. After I came into the office I established this fund of ten millions for the redemption of fractional currency. That fund had not been estab- lished until after I came in. The actual balance is $10,751,S51, includ- ing that fund of $10,000,000. Formerly that fund had not been stated according to law. Mr. Phillips. But that fund had all accrued before this year? Secretary Sherman. No, sir ; it had not. It was never stated until after I came into office. It was required to be done under the act, and I thought that its not being done was a failure to comply with the act. I therefore directed it to be done. Mr. Phillips. That is held in legal-tenders, is it not? Secretary Sherman. Yes, sir. Mr. Phillips. But you stated a little while ago that, of your coin balance in hand, there was five millions that had come from the sink- ing fund. Secretary Sherman. Here is the law under which that ten-million fund is required to be kept. It is the first section of the joint resolu- tion for the issue of silver coin, approved July 22, 1876. It is as follows : That the Secretary of the Treasury, under such limits and regulations as will best secure a just and fair distribution of the same through the country, may issue the sil- ver coin at any time in the Treasury to an amount not exceeding ten million dollars, in exchange for an equal amount of legal-tender notes; and the notes so received in exchange shall be kept as a special fund, separate and apart from all other money in the Treasury, and be reissued only upon the retirement and destruction of a like sum of fractional currency received at the Treasury in payment of dues to the United States ; and said fractional currency, when so substituted, shall be destroyed and held as part of the sinking fund, as provided in the act approved April seventeen, eighteen hundred and seventy-six. Now there is the answer, " Shall be held as a part of the sinking fund." Mr. Ewing. The answer makes against your construction, because there is a special provision of law that this non-interest-bearing security, when redeemed, shall go into the sinking fund. Why should that be put in the law if it was the law already ? Secretary Sherman. It had been done before that and afterward. This simply carries out the same thought and the same idea. Mr. Ewing. That is put in to accomplish a purpose. Secretary Sherman. It is a negative pregnant. RESUMPTION OP SPECIE PAYMENTS. 47 Mr. Ewing. It was an entirely unnecessary provision, if those notes so destroyed would necessarily go into the sinking fund. Now, let me ask your attention again to the table you have given us of the items composing the seventy millions of currency in the Treasury. That ten millions of a special fund for redemption of fractional cur- rency cannot be used by the Secretary, nor the twelve millions for the redemption of the national-bank notes in liquidation, nor the 5 per cent, redemption fund of nine million dollars, nor the funds for which cer- tificates of deposit are issued to the amount of twenty-six millions. None of those items are in the control of the Secretary for use. Secretary Sherman. The ten millions and the thirteen millions are practically as absolutely paid off as if the amount of the United States notes outstanding were reduced to the amount of twenty-three millions. . Mr. Ewing. But that fund of ten millions is not under your control under existing law. Secretary Sherman. It is practically redeemed ; it is in the Treasury; it is ours. Mr. Ewing. I am speaking of it as a resource. That cannot be used. Secretary Sherman. I explained that before. It cannot be used to pay notes or anything of that kind, but it is none the less currency, which we do not need to provide for ; that is all. Mr. Ewing. And the $12,000,000 held for redemption of national- bank notes in liquidation, that can't be used? Secretary Sherman. No; but that is dead while the bank-notes do not come in. As they come in, they are redeemed. Mr. Ewing. Still, it cannot be used by the Secretary ! Secretary Sherman. No, sir ; nor need it be redeemed. Mr. Ewing. Nor the 5 per cent, redemption fund nor the certificates of deposit? Secretary Sherman. No, sir. Mr. Ewing. Then, of this 170,000,000,' there would be only the $13,000,000 to the credit of disbursing officers, which the Secretary is at liberty to use ? Secretary Sherman. I would have to make the same explanation which I made in the beginning — that I do not regard the $70,000,000 as a fund on hand with which to redeem anything; but that it is $70,000,000 in hand which is not likely to be called for in coin, and that it lessens, to that extent precisely, the burden of resumption. Mr. Ewing. I understand that perfectly; but I want to bring out this fact definitely— that of that $70,000,000 there is but $13,000,000 that may be used (the balance in the hands ot disbursing officers), and that the $57,000,000 cannot be used by the Secretary. Secretary Sherman. No ; but it is so much money that is locked up in the Treasury not to be redeemed. Therefore, instead of counting $340,000,000 of legal-tender notes liable to redemption, you may deduct the great body of this $70,000,000, just as in the statement of the Bank of England, which deducts from the total amount of notes issued all the notes held in the banking department. Mr. EwiNG. I understand that; and with that explanation you admit my statement— that of the $70,000,000 only $13,000,000 can be issued and used by the Secretary of the Treasury under existing law. Secretary Sherman. For the purposes of resumption. Mr. Ewing. For any purpose. Secretary Sherman. We use it for the redemption of outstanding certificates and for the redemption of bank-notes. We pay it out every 48 RESUMPTION OF SPECIE PAYMENTS. day. This rfioney is the most active money that we have in the Treasury. We pay it out aud receive it every day. Mr. Ewing. But not for any other purpose than that for which it is specially appropriated? Secretary Sherman. It can only be paid for these particular purposes, but it is being paid out every day, and other money coming in its place. Mr. Ewing. Kow, you make the amount of bank-notes of banks in liquidation by your statement to the Senate committee $21,000,000 or $22,000,000. Secretary Sherman. I think that that includes not only notes of banks in voluntary liquidation, but of broken banks. Mr. Ewing. I read from your statement before the Senate committee: Ou December 31, 1875, the amount was $346,479,756.; on December 31, 1877, $321,672,505, -and ou February 28, 1.878, the amount of bank-notes outstanding was $321,989,991 ; but the amount of bank-notes of banks in existence, not in process of liquidation, was $299,240,475 ; and the difference between these two sums being the notes of banks in process of liquidation, although the notes are in circulation, yet an equal amount of greenbacks are in the Treasury as a special deposit to redeem thenj. That makes the difference between $321,672,505 and $299,240,475— about $22,000,000. Secretary Sherman. I can tell you the explanation of that. I was correct in my statement before the Finance Committee. There are $21,000,000 or $22,000,000 of notes of outstanding banks in process. of liquidation, of which $13,000,000 in United States notes is held in the Treasury, aud for the balance we hold the bonds of banks that failed as security. The discrepancy, no doubt, is represented by the fact that we have not sold those bonds. I am surprised that we hold as much as $13,000,000 of notes, for we do not usually sell bonds until the proceeds are needed to redeem the outstanding notes of those bonds. Mr. Ewing. When a bank goes into liquidation it deposits greenbacks to redeem its notes. Secretary Sherman. Yes; but failed banks do not. When banks fail we take possession of their bonds aud we sell them only as we need the proceeds to meet their notes. I have no doubt that the great body of this $13,000,000 on hand is money deposited by banks which have voluntarily retired. They have to deposit greenbacks before they get their bonds. But in the case of banks that fail, we sell the bonds as we need the proceeds from time to time. That will doubtless explain the discrepancy. Mr. Ewing. That explains why the item is not $22,000,000 instead of $12,000,000. Secretary Sherman. Yes; we can, if we desire, sell all the bonds that we hold as security for those broken banks, but the usual course is not to do so, but to give the stockholders the benefit of their circulation, and only to sell the bonds as money is needed to redeem the bank- circulation. Mr. Ewing. There is a fraction under $300,000,000 of national-bank notes outstanding, but the five per cent, redemption fund is only put down at nine millions ; it should be fifteen millions. Secretary Sherman. No; the explanation of that is this: As the notes of banks iu operation come in we redeem them, and at the end of ten days, or oftener if the Treasury sees proper, these notes are returned to the banks issuing them, and are replaced by the banks with green- backs. This redemption of bank-notes for the time diminishes the $15,000,000 or five per cent, fund to some extent, but, at the end of ten days the redeemed bank-notes are sent back to the banks and replaced RESUMPTION OP SPECIE PAYMENTS. 49 by other United States notes. In other words, there is a little leeway given there in the ordinary course of business. Mr. Swing. That is only $500 to every bank. That would scarcely make the difference between $9,000,000 and $15,000,000. Secretary Sherman. It will make it. Ten days' redemption makes about $5,000,000. Mr. Ewing. That explains the discrepancy, therefore. Secretary Sherman. Yes ; it is always so. Mr. Gilfillan has been of late very strict with the banks. Mr. Ewing. In case of a drain of gold from the Treasury, what meas- ure would you resort to to check it — I mean after resumption I Secretary Sherman. The Treasury ought to be so strong that the thing would cheek itself. You can scarcely imagine, in the probabilities of business, that, with no outstanding liabilities that are not covered by actual cash on hand except the $300,000,000 of legal-tender notes, the drain upon the government would be so great as to exhaust the reserve of $120,000,000. That proposition is all based, not upon the fact that $120,000,000 would pay $300,000,000— we all know that is not so— but upon the fact that it is impossible to gather together United States notes and to present them in such a mass and in such a continuous stream, and that the very effort to do so would raise the value of United States notes. Their convenience is so great, and the necessity for them so ap- parent, that such an effort would at once bring them up to par in gold. I think that a drain of five, ten, fifteen, or twenty millions would at once tend. to bring up the value of greenbacks until they were at par in gold, and then there would be no object at all in drawing them out. Mr. Ewing. After resumption the greenback must remain at par in gold as long as the Treasury maintains resumption f Secretary Sherman. Certainly; and while they are at par in gold they will not be presented to any considerable extent. Mr. Ewing. Of course, if there was an established difference of 1 per cent., or one-half of 1 per cent., between gold and greenbacks, the Treas- ury would be broken pretty quick? Secretary Sherman. Yes, sir, or a quarter of 1 per cent. ; there is no doubt, about that. Mr. Ewing. Therefore, after resumption, greenbacks must necessarily be at par with gold so long as the Secretary is able to maintain resump- tion ? Now, I am supposing a case of a draiu of gold from the action of foreign creditors, or from any other cause, and want to know what means you would resort to to check it ? Secretary Sherman. I do not think that it would be necessary to resort to any means; but if it were necessary to devise some means, I would resort to such as have been adopted in other countries — the tem- porary suspension of specie payment. That is a question for Congress. The British bank act, which is so often quoted as the standard, makes no provision for suspension ; there is no legal suspension of payment in England, nor does our law make any provision for it. If the govern- ment should meet such an adverse state of circumstances as to make suspension absolutely necessary, the government would necessarily have to take the responsibility of it, leaving Congress to determine whether the circumstances justified it.' That has always been so. Mr. Phillips. Then do you think that the Secretary of the Treasury has the power to suspend specie payment f Secretary Sherman. No, sir; but if demands were made upon the Treasury, which the Secretary could not pay unless he was to pay them H. Mis. 62 4 50 EESUMPTION OF SPECIE PAYMENTS. out of his own pocket, he would have to stop paying. That is all there is about it. Mr. Ewing. When, short of the point of your actual inability to go further, would you feel at liberty to stop ? Secretary Sherman. That I cannot state. That will not occur in my time if you give me now such a reserve as I mention, and it will not occur at all, iu your time or in my time, in my judgment. But we can- not anticipate what the future will bring forth. We do not know but that we may be involved in war, which would compel a suspension of payment, and we do not know what might be the effect of war in Europe. Mr. Phillips. I was going to ask you* on that very point. Would not a general war in Europe result in raising the price of gold ? Secretary Sherman. Wise men differ very much upon that. I think that a general war in Europe would give such a demand for our agricul- tural products and for everything that we produce and sell, that it would probably inspire confidence, and there would be less danger. Mr. Phillips. Might it not raise the price of gold as compared with currency 1 The Chairman. Or might it not have the effect of sending our bonds here I Secretary Sherman. We are not bound to pay for our bonds unless they are due. Mr. Eaving. But banks and others that hold gold would be tempted to buy bonds, and the gold would go out. Secretary Sherman. I do not think so. I have shown you now in these figures that, with such a reserve as I have mentioned, the Govern- ment of the United States is stronger for resumption than the Bank of England. Mr. Ewing-. Is now ! ' Secretary Sherman. No ; I say will be, if you give us the reserve I mention. It will then be stronger than the Bank of England. Mr. EwiNG. You said on Monday that it is now stronger. Secretary Sherman. I do not think that it is now, but I say that be- fore the 1st of January, with an additional reserve of $50,000,000, and if you will provide enough means to carry on the current expenses of the government, with or without regard to the sinking fund, we will be stronger than the Bank of England. If you make good the sinking fund, we would be better off; but if you do not make it good, it does not affect the question of resumption. With that $50,000,000 additional (making our reserve $130,000,000 or $140,000,000), with the fact that our notes are of universal credit and are distributed throughout this great extent of country and among 40,000,000 of people, with the fact that $70,000,000 of our notes are now in the Treasury not likely to be called upon, and with the fact that the banks have to take care of $70,000,000 more, which they cannot run in upon us_ without subjecting themselves to the violation of the law of their creation, with their notes absolutely secured by United States notes — if we cannot maintain specie payment, then it is impossible to maintain specie payment on a paper circulation. The Chairman. That is on the theory all the time that paper and gold are equivalent f Secretary Sherman. Certainly. Specie payment means the equiv- alency of gold and paper. It is on the theory that the 1 per cent, dif- ference between gold and silver will disappear before the 1st of Janu- ary that I propose to commence specie payments ; but suppose that I am mistaken ; suppose that your fears are well grounded and that I am RESUMPTION OP SPECIE PAYMENTS. 51 over-sanguine, as some people say I am, still, Congress will meet in December, and then the question will be so apparent to every man that, if the resumption act cannot be carried out, I shall come to CoDgress and say that I have been unable to accumulate this reserve, or that an adverse state of circumstances has arisen, and that I am unable to do what the resumption act requires of me. Mr. Ewing. But in the mean time the country is on the rack and tor- ture of preparation for impracticable resumption. Secretary Sherman. There you are mistaken. The process toward resumption is not a harsh process. What is harsh, and what has been of great weight upon the people, has been the effect of extreme paper inflation, resulting in the panic of 1873, sixteen or eighteen months be- fore the passage of the resumption act. Last summer, when I accumu- lated $60,000,000 of gold, and was going on refunding the debt, every sign of prosperity was increasing, and business was getting better. Mr. Ewing. In your conference with the Senate committee, you spoke of " this long, weary agony and struggle toward resumption," and I think that the country will agree with you that there is enough of agony in it. Secretary Sherman. Wherever there is an evil caused by inflated money, the instincts of human nature lead men back to specie payment, and the whole process from 1873 down to the present time is a process toward resumption. Mr. Ewing. If the resumption law had never been passed, the country would have revived from the panic of 1873 during the year 1875. Secretary Sherman. You and I, no doubt, differ very honestly on that point. Mr. Hartzell. What would be the effect of this resumption act upon the national banks and their depositors'? Secretary Sherman. I cannot see that it will have any injurious effect. Wherein ? Mr. Hartzell. I understand frem your statement here last Monday, that the national banks hold $600,000,000 of deposits. Lack of confi- dence might iaduce the depositors to go to these national banks and demand on the 1st of January, or soon after the resumption act takes effect, a large amount of gold. Secretary Sherman. No ; United States notes. Mr. Phillips. Which would command gold. Mr. Hartzell. And if the banks did not have them, and the sup- position is that they could not Secretary Sherman. All the national banks in the country have but $70,000,000 of greenbacks. Mr. Hartzell. The banks would have to furnish to the^depositors either gold or greenbacks, but they could not furnish either to half the amount of their deposits ? Secretary Sherman. No, sir. Mr. Ewing. The aggregate of deposits in all the banks, national, State, private, and savings banks, as shown by the report of the Comptroller, is $2,120,000,000. Secretary Sherman (to Mr. Hartzell). Tour question is a very proper one. I can only give you my idea. All banking is based upon the idea that a larger amount of paper money can be maintained in circulation than the money in which it is to be redeemed. Otherwise there would be no object in banking. The Bank of England and the small banks of England maintain a cash reserve varying from 9 per cent, up to about 33 or 40 per cent. The Bank of France and the Bank of Germany, which 52 RESUMPTION OF SPECIE PAYMENTS. are real! y government depositories, maintain a large reserve. A reserve of 40 per cent, would be considered a very large reserve. The only answer to your question is that experience bas shown, to the satisfactiou of the banks, that their deposits will not be all demanded. If they are demanded they will be paid by credits. Most of these depositors are debtors to the banks, as well as creditors of the banks. . They are cus- tomers. The balance of credits would pay off a good deal of the deposits of the banks, and experience shows that a certain amount of money on hand and available, with a good line of discounts to support it, is suffi- cient. As to the notes of national Wanks, every dollar of them is secured by United States bonds to an amount of at least 10 per cent, greater than the amount of notes outstanding; and these bonds are of such universal credit and ready sale that in the ordinary course of business they can be readily converted into any kind of money. Mr. Ewing. What about the $1,500,000,000 of deposits in other banks than national banks ? Secretary Sherman. They are private individual debts ; the govern- ment has nothing to do with them. Mr. Ewing. The government has certainly to consider them in the plan of resumption ! Secretary Sherman. It has to consider them just as it has to consider any other public fact. Mr. Ewing. More than that ; they have a direct bearing on the prac- ticability of government redemption, for the legal-tender note is the only paper money redeemable in coin, and, on the $3i8,000,000 of legal-tender notes rest $300,000,000 of national-bank notes and $2,120,000,000 of cash demand deposits. That is all to be considered. Secretary Sherman. It is all to be considered, but $10 will pay $100 of deposits in the ordinary course of business. Mr. Hartzell. Does the mere fact that the government will, on the 1st of January, be able to redeem all its legal-tender notes, bring us of itself to specie resumption ? Is that what we mean by specie resumption? Secretary Sherman. I mean by specie resumption not the payment of all these debts in coin, but I mean the equivalency of these United States notes with coin, so that the people will take paper at par with coin, and if they want the coin they can get it. I do not suppose that $1 out of $100 of greenbacks will be presented for redemption. Mr. Hartzell. The national banks are close corporations, as I un- derstand, and there is a general understanding between them on all questions affecting their interests, as we find by their uuanimity in ap- plying for a repeal of the bank-tax. Secretary Sherman. Mr. Ohittenden here can tell you that there are no people who have such diverse views as the national banks. Mr. Hartzell. If it should appear that the safety and security of these national banks demanded it, could they not unite and get together such securities and present them to the Treasury as would drain the Treasury of all the gold that it has, and thus absolutely prevent, by their combination, the Secretary from carrying out the provisions of the re- sumption law 1 Secretary Sherman. I do not think, in the first place, that they would attempt to make such a combination against the government, and, in the secor.d place, I think that if they did it would be very easily met. It is not possible, with the amount of legal-tender notes which they hold— admitted to be about $70,000,000— that they could take the whole of them and present them to the Treasury. Such a thing is not possible, because the banks could not be brought into anything like a co-opera- RESUMPTION OF SPECIE PAYMENTS. 53 tion of that kind, nor could they keep up a continuous stream of demand on the Treasury ; and then, besides, the. Treasury has ample power to make the banks redeem their notes. Mr. Ewing. In legal-tender notes? Secretary Sherman. Yes, in legal-tender notes. Mr. Ewing. Or in silver and gold ? Secretary Sheeman. Yes ; that would throw the gold back on the Treasury. Some of the papers thought that in my remarks the other day I threatened the banks. I did not threaten them, but there is no doubt about it that the Treasury would be stronger than the banks in such a contest. There is no danger that the national banks are going to combine to present their legal-tender notes to the Treasury. The Chairman. It would be much more reasonable to suppose that the banks would agree among themselves that their obligations and operations would be in currency, and that their checks would be paid in currency rather than in gold. Mr. Hartzell. Suppose that the depositors in the national banks should run in and demand payment of their deposits, would not the national banks be bound to go under ? Secretary Sherman. The banks can pay their depositors in green- backs, because greenbacks are legal tender. Mr. Hartzell. Ho w could they when there are only about $220,000,000 of them in circulation f • Secretary Sherman. Then, if they cannot get them, how can they present them to us for redemption f Mr. Ewing. They have $70,000,000 which tbey can present in a week. Secretary Sherman. How can they bring $70,000,000 % The national banks in New York, where the largest accumulation of greenbacks is, have only got $11,000,000. I think it is sufficient to say that Mr. Hart- zell's supposition is an impracticable one ; first, because the banks could have no desire to do such a'thing; and, secondly, because it could not be done. It would have to be a very slow operation, and with a reserve of $130,000,000 or $140,000,000 even that extreme danger could be met. Mr. Ewing. In case of an apprehension that the Treasury would have to suspend specie payments, and, consequently, that gold would rise, would not the banks want to convert their reserves, and would they not certainly convert their coin-certificates into gold ? Secretary Sherman. It might be ; but a suspension of specie pay- ment, or a sudden panic, never comes at a time when people are expect- ing it or protecting themselves. It always comes like an earthquake, when it is wholly unexpected. Mr. Ewing. You intimated a probability of a suspension by the gov- ernment, from the running down of the coin in the Treasury. Secretary Sherman. I say that such a thing might be possible. Mr. Ewing. The state of the Treasury is known all the time to the banks and to the public, and certainly the fact that the Treasury was running short of gold would create alarm, and would naturally cause the banks and other holders to precipitate their seventy millions of legal-tender reserves and their fifty-eight millions of gold-certificates on the Treasury. Secretary Sherman. I can only say that the Bank of England has frequently run its gold down — at one time to a million of pounds. Mr. Ewing. Yes, sir ; and the bank ran short once and then found a lot of one-pound notes, and they saved it from bankruptcy when gold could not. Secretary Sherman. If you would ever run the Treasury down, so as 54 RESUMPTION OF SPECIE PAYMENTS. to redeem the $140,000,000 of the present outstanding legal-tender notes, greenbacks would be so scarce that they would be taken readily by everybody, just as in England, when the bank balance ran down under the panic to one million pounds sterling, every one was anxious to get Bank of England notes. Everybody was eager to get them and to hoard them ; so that I do not think this is a danger to be regarded. Mr. Ewing. I want to ask further about your means of stopping a drain. Would you not naturally withhold the greenbacks as they come into the Treasury, in case you became apprehensive at all of a drain of gold ? Secretary Sherman. I think I would. If it should so happen that there was a run upon the Treasury for greenbacks, I would not issue them until the run was over. Mr. Ewing. And until the Treasury felt as strong as usual ? Secretary Sherman. Yes, sir ; and in that event I do not like to say what I would do. I would sell 5 per cent, bonds, if necessary, in an extreme case. Mr. Ewing. In such a contingency the banks would naturally con- tract their currency also ? Secretary Sherman. In case of a panic which would threaten to break the government, or to break the banks, as a matter of course the instinct is one of self-preservation; but that is so whether you have coin payments or currency payments. . Mr. Ewing. I am not speaking of a panic, but of the state of the Treasury from time to time. If you find your gold running out, would you not hoard the greenbacks f Secretary Sherman. Naturally ; if I found the greenbacks coining in, I would hold on to them until they are called out again in the natural course of business. Mr. Ewing. For the purpose of diminishing the drain on the Treas- ury of gold I Secretary Sherman. I might temporarily, until that drain passed ; but ordinarily I would use them to redeem 6 per cent, bonds. Mr. Ewing. After the drain passed, what would you do ? Secretary Sherman. I would pay them t)ut again. Mr. Ewing. That is, you would do very much as the Bank of England does — you would stop the movement of the currency out of the Treas- ury, as far as practicable % Secretary Sherman. Yes, sir ; and, as a matter of course, Congress would be in session from time to time and could be applied to. It may be that Congress may, by future legislation, provide for that contin- gency. Mr. Ewing. Have you any apprehension that the banks, before re- sumption day, will present their gold-certificates. Secretary Sherman. I wish they would. Mr. Ewing. That would put a stop to your power to issue certificates to the amount of 20 per cent, beyond the gold on hand 1 Secretary Sherman. It might, but there is no prospect of that. The power to issue certificates to the extent of 20 per cent, is a power which, up to this time, has not been exercised, and which would not be exer- cised except in an entreme case. But what motive would the banks have to withdraw the money deposited with us? It is deposited with us for safe keeping, and they would only withdraw it from a fear that it was not safe. Mr. Ewing. Might not the fact that there is a contingency in which RESUMPTION OF SPECIE PAYMENTS. 55 you might issue coin-certificates in excess of the 'coin in the Treasury lead the banks to feel that they had better get their gold 1 Secretary Sherman. I do not think so; but at any rate it is safe to say that that thing has not been done, and probably would not be done, except in an extreme emergency, such as would justify the Bank of Eng- land in issuing notes when it would not pay gold. Mr. Ewing. Is there not a further reason why the banks would take possession of their gold, when you reach specie payments, which is that they must pay gold when the gold is asked for? Secretary Sherman. No. Mr. Ewing. Otherwise they will receive no deposits in gold. Secretary Sherman. The banks under the law can always redeem in legal-tender notes. Mr. Ewing. I know that, but if they are to receive deposits in gold they certainly must pay their depositors in gold where the depositors want it. They must treat gold and paper as equivalent exactly, and, therefore, they must have gold on hand to pay those who want gold, otherwise they will not receive a dollar in gold deposits except as special deposits. Secretary Sherman. The fact is that but little gold is paid even on «oin payments. Mr. Ewing. But as a matter of fact, must not the banks have the gold to pay whenever it is demanded? Secretary Sherman. Yes, sir ; on deposits they agree to pay in gold. As a matter of fact, they have some gold to pay now. They have gold in all the city banks, and the reserve of gold in the New York banks is very large ; but there is no gold needed in Lancaster or Mansfield, Ohio, where you and I live ; what do they need it for ? Mr. Ewing. When you get to specie payments plenty of people will want to hoard it. Secretary Sherman. No; they will hoard silver dollars. The class of people who hoard money are those to whom small sums are great ones. Mr. Ewing. The amount of gold in the banks now is very small, be- cause there is a very small amount of obligations payable in gold ; but after resumption day, when you establish that paper and gold and silver are equivalents, a large body of the bank depositors may want gold, and the banks must give gold to their customers who want it. Do you think it necessary to get the amount of legal-tender notes down to $300,000,000 before the 1st of January, 1870. in order to resume with safety f Secretary Sherman. I would like to have it so, but even if I do not succeed, I would not postpone resumption on that account. Mr. Ewing. In the three and a quarter years since the resumption law was enacted, $35,000,000 of legal-tenders have been drawn in and canceled ; is there any probability that, in the time left between now and resumption day, the remaining $47,000,000 can be retired 1 Secretary Sherman. No ; I think not. Mr. Ewing. Do you anticipate any considerable reduction of legal- tender notes by the increase of bank currency by next January ! Secretary Sherman. Yes, sir; last month there was a reduction of $1,000,000." I think that the amount will depend very much on the de- cree of confidence in the future which, prevails in banking circles. Mr. Ewing. That is as to maintaining resumption 1 Secretary Sherman. Yes, sir; that estimate of the amount will be reduced, probably, $1,000,000 a month. 56 RESUMPTION OF SPECIE PAYMENTS. Mr. Ewing. That would leave you with $340,000,000 of legal-tender notes outstanding. Secretary Sherman. Then I think we can fairly state that this money in the Treasury (that is, the balances held by disbursing-officers, the $10,000,000 fund for the redemption of fractional currency, and the money held for the redemption of bank-notes on failed banks) will prob- ably reduce it to the neighborhood of $300,000,000, nominally. Mr. Ewing. Still that $16,000,000 to disbursing-officers goes out. Secretary Sherman. But there is always about that much on hand. Mr. Ewing. But I understand that you want to reduce the total vol- ume of legal- tender currency to $300,000,000. Secretary Sherman. I do. Mr. Ewing. It is obvious that it cannot be reduced to $300,000,000 on the 1st of January, 1879. Secretary Sherman. I say it would be better if it could be done ; bnt if it cannot, I would not postpone resumption for that reason, because I think that with this large reserve which 1 mention we can maintain re- sumption on the full amount — with the advantage we have of having thirty or forty millions locked up in the Treasury not likely to be used. Mr. Ewing. Do you think that the balance of trade can be kept in our favor for the next few years ? Secretary Sherman. That is an uncertain problem. Mr. Ewing. You say, in your Senate interview, that the balance of trade brings us gold and silver and bonds 1 Has it brought us, in the past few years, gold and silver in excess of the gold and silver exported? Secretary Sherman. No ; you see heretofore silver has been largely exported as bullion, but we received gold, last season, in pretty large sums in this country — precisely how much I am not prepared to say. Mr. Ewing. I have here, from the Bureau of Statistics, a statement of the imports and exports of coin and bullion, from 1865 to 1877, which shows a total, for the thirteen years, of exports over imports of $692,000,000. (See appendix No. 10.) Secretary Sherman. Yes, sir ; that is so. Mr. Ewing. That is an average of exports over imports of gold and silver of $53,264,000 a year. Secretary Sherman. That was at a time when paper money was in universal use, and there was no demand here for silver or gold ; but now that we are to have specie payments, that course of things will be nat- urally expected to cease. You will find it easier to send off the products of our soil than the products of our mines, if we give the same use to the precious metals that is given in other countries. Mr. Ewing. For the past three years the average excess of the ex- ports of gold and silver over the imports (the balance of trade being in our favor) has been $42,396,000 a year; and that average is still con- tinuing? Secretary Sherman. Yes, sir. At this season of the year gold is shipped abroad, and at other seasons of the year it comes back. Some- times the same gold will flow backward and forward two or three times in the year. After the cotton crop is marketed, and before June, when the canals are open, and products can be moved on the canals, is the time when gold naturally flows abroad, and it comes back in the fall. Mr. Ewing. Have you any reason to expect that the average exports of bullion, over imports, will not be in excess for the next two or three years, as it has been for seventeen years past f Secretary Sherman. I would expect more exports, because of our home products of gold and silver, which may be stated, in round num- RESUMPTION OF SPECIE PAYMENTS. 57 bers, at $85,000^000. If we can hold two-thirds of it in this country, it is as much as we can expect. That would leave a balance of thirty or forty millions to go abroad. And suppose it does go abroad 1 We can stand the drain of thirty or forty millions a year, and still have a large amount of gold and silver in this country. (See Appendix No. 12.) Mr. Ewing. Do you not anticipate that drain ? ^11-1 Secretary Sherman. I would expect it. Our production of gold and silver is greater than is necessary to maintain resumption in this coun- try, and it will go to help other countries. Mr. Ewing. Will it not go abroad irrespective of our demand for it here ! Secretary Sherman. It depends upon whichever demand is the great- est. ' Mr. Ewing. And upon whoever has the most ability to keep it? Secretary Sherman. Yes, sir. Mr. Ewing. We being the debtor nation, and the people of Europe holding our debts, can they not attract gold from us at present? Secretary Sherman. If we are a debtor nation we are also a nation which the European nations like to have for a debtor. Our nation has been a productive, active nation, and foreign capital seeks a favorite in- vestment here. Mr. Ewing. Still, in case of a want of gold abroad they have it in their power to get it at any time by the sale of our securities. Secretary Sherman. Yes ; they can recall it if they want to do so, but the chances are that they will be more likely to invest in our securi- ties in the future than they have been in the past, because this country is a stable country. It has gone through a great civil war, aud it has elements of strength and stability which no European country pos- sesses. Mr. Ewing. Our ability to keep gold practically depends upon this, whether our creditors abroad prefer to hold our bonds or to take our gold ? Secretary Sherman. Certainly. Mr. Ewing. If they prefer to take our gold they can get it by send- ing their bonds here and selling them. Secretary Sherman. Yes. Mr. Ewing. And in the past three years, with the balance of trade largely in our favor, the excess of exports of specie over imports has been forty-two millions a year. Secretary Sherman. That is because until last year we have never shown a determination to accumulate coin. Mr. Ewing. Our determination to accumulate coin was as strong in the month of January last as it ever has been, and yet the balance against us in that month was over two million dollars. Secretary Sherman. The cause of the bonds flowing back -was the fear of unfriendly legislation. The truth is, that (whether the fear was well or ill founded) a very large amount of our bonds came back which had to be paid in gold or silver because of pending legislation, but that movement has ceased. I got a letter yesterday from the highest au- thority, stating that that movement of bonds had gradually diminished. Mr. Ewing. Still the export of gold last Saturday was a million and a half of dollars. Secretary Sherman. It always is large at this season of the year. This same gentleman tells me that he does not think that the export of gold this year will be greater than in former years, but that it com- menced earlier, caused by the exportation of these bonds from abroad. 58 RES0MPTION OF SPECIE PAYMENTS. Mr. Ewing. But the indications are that the excess of shipment of coin will be kept up as compared with the last three years. Secretary Sherman. I hope not at anything like the same rate. Mr. Phillips. You have stated that you have not been able to accu- mulate gold at all this year. Secretary Sherman. Yes : because I would not come into competition with the bonds which came back from abroad — caused by the agitation of the silver question. Mr. Phillips. Can you get coin from 4 per cent, bonds'? Secretary Sherman. Not just now to auy great extent, but I hope that it will be better, and that 1 will be able to sell 4 per cent, bonds. Mr. Chittenden. Will not the mixed condition of the national bank currency be an element of strength in facilitating resumption 1 For ex- ample, if you were to present national bank currency to a bank for re- demption, you must separate the notes. If you take any given amount of national bank currency which you find on deposit anywhere, you will be surprised to find how it represents banks from all sections of the country. I take it that no bank can be called upon to redeem any but its own issue. Secretary Sherman. That is so ; it is almost impossible to sort national bank bills. Mr. Chittenden. Will that be for you an element of strength or of weakness f Secretary Sherman. It will be an element of strength. The difficulty of sorting national bank bills is very great. When they come to ,sort them in the Treasury the bills have to pass through four or five skilled hands. First they are sorted into States, then into denominations, and then into banks. If you were to try and make a run on any particular bank in this country, as they used to do twenty or thirty years ago, it would be impossible to do so from the difficulty of assorting notes of different banks. Mr. Bwing. The balance of trade in our favor in the past three years has been due not so much to our largely increased exports as to our diminished imports, resulting from diminishing purchasing power. Tlie total exports for the three years ending June 30, 1874, were $1,550,939,000 The total exports for the three years ending June 30, 1877, were 1, 656, 201, 000 Excess of latter over former period 105,362,000 The total imports for three years ending June 30, 1874, were $1, 836, 137,000 The total imports for three years ending June 30, 1877, were 1,445,069,000 Excess of former over latter period 391, 068, 000 Now I wish to #sk you whether with the removal of the pressure from the country of the threat and preparation for resumption on the 1st of January, 1879, we may not expect thatthe imports willincrease, and that we will go back to the old condition of importing more than we export, and in that way increase this drain of gold and silver? Secretary Sherman. I think that the excessive imports for several years before the panic were evidence of the greatest extravagance and disregard of expenditure. People went into debt recklessly. That state of mind is always induced by a superabundance of paper money; I think that one of the best results of the panic (which was bad enough in depress- ing industry) was in stopping this extravagant and reckless importation of foreign goods. That is an element of real good which has come out of the evil which we have suffered from the past. Mr. Ewing. But you expect to maintain the same volume of paper RESUMPTION OF SPECIE PAYMENTS. 59 money, and you expect to add to that volume a considerable amount of specie. That is, you expect to increase the currency as a result of re- sumption. Certainly, if this condition of extravagance arises from a superabundance of money, that extravagance will be increased very largely alter resumption, if your theory be correct. Secretary Sherman. There is a great deal of difference between irre- deemable paper money, which fluctuates in value day by day, and re- deemable money which always has a coin standard, and is measured by the values of the world. It is not a- question of abundance of money so much as it is a question of fluctuations of value. A paper which is irredeemable and fluctuating always induces speculation. For instance, if a man sees that his neighbor has bought a piece of land on which he has made a large profit, he goes into speculation himself; and one man embarks in a hazardous enterprise because another man has done so and has succeeded. Now a redeemable paper money which is always at a fixed standard is less likely to produce that kind of speculative feverish adventure, even although it may be larger in volume. Mr. Ewing. So you understand that with inflation of currency after the 1st of January, 1879, there will not be inflation of values ? Secretary Sherman. No ; values will be more stable. Mr. EwiNG. As a matter of fact, did the greenback currency vary so greatly in purchasing power for the three years before the passage of the act of 1873 « Secretary Sherman. O, yes. The purchasing power of the greenback to-day is at least 60 per cent, more than it was before the panic. Mr. Ewing. Undoubtedly, because of the threatened contraction un- der the operation of the resumption law. Secretary Sherman. No; but because of our getting back to a coin standard. Mr. Ewing. It is because the opinion of the country is that we must submit to an enormous contraction of our paper money, which is the currency with which business is done, in order to reach and maintain resumption. Secretary Sherman. You and I differ about that. I have given you my view. I tell you that I think the falling off of importations is not an unfavorable sign. Every man knows now that money. is money, and that he has to earn it. It is an evidence of more stable and economical management of affairs. Mr. Ewing. Do you expect the business of the country to revive after resumption? Secretary Sherman. I think so. Mr. Ewing. Will not the imports increase largely as a necessary re- sult of that revival, and will not, therefore, the balance of trade more likely turn against us by the increase of imports, the present favorable balance being due chiefly to the falling off of imports? Secretary Sherman. I doubt very much whether the importations to this country for many years will equal what they were for the three or four years before the panic. The whole course of our industry has changed within the last three or four years. We are manufacturing now a great many things which we did not manufacture then. We are embarking in a great many industries which did not exist here before the panic. Prices have been reduced so that we can almost compete with any nation, and we export now many articles which we did not think of making until the last few years. When we manufacture upon the basis of a coin standard, like Great Britain and France, we can compete with those nations, because we have over them the great ad- 60 RESUMPTION OF SPECIE PAYMENTS. vantage of raw products. To be sure we have the disadvantage of higher priced labor. Our labor is more intelligent and higher-priced. The Chairman. And the disadvantage of higher-priced money. Secretary Sherman. Yes; but when we get down to compete with them on the same money, our natural advantages would countervalue the difference in wages and the difference in interest of money. We are now manufacturing a great variety of articles which were never manufactured in this country before. Values now — even gold values — are lower than they were before the panic all over the country. The same amount of money represents now a greater amount of either im- ports or exports than it did then, because nothing is tru'er than the fact than that that general revulsion which overcame us like a cloud extends all over the civilized world. Mr. Ewin&. My belief is that on any revival, any letting up of the pressure caused by the resumption law, the imports will increase rela- tively to exports, and the old balance of trade will be re- established against us, and the drain of gold will return in its full force. (See Ap- . pendix ISTo. 13.) Mr. Phillips. Will not the coin-certificates become a part of the cur- rency, when specie payment comes, and so fill up the void made by the retirement of the legal-tenders, and probably neutralize the effect of the retirement of the legal-tenders ? Secretary Sherman. I think they will ; but these coin-certificates are now represented by actual money on hand. Mr. Phillips. They increase the responsibility of the Treasury just in proportion. They will go into circulation, will they not? Secretary Sherman. Yes. It does not make any difference whether currency is represented by coin-certificates or by actual coin. If they draw out coin, that coin goes into a general circulation, and if they leave it with us, then the certificates go into circulation. Mr. Phillips. But these coin-certificates will then ; go into general circulation as they do not go now. Secretary Sherman. Coin-certificates do go into the general circula- tion for coin purposes now. They are largely used. Mr. Phillips. But will they not go in for general purposes as circu- lation? Secretary Sherman. Perhaps they will. Mr. Phillips. There has been $35,000,000 of legal- tender notes re- tired under the resumption act ? Secretary Sherman. Yes. Mr. Phillips. Of that amount I have been informed that $15,000,000 has been in small notes ; what rule have you to govern the Treasury in that respect ? Secretary Sherman. I am glad you mentioned that, because I would like to correct a misapprehension on that point. We always give to every man who makes a demand upon the Treasury any kind of bills he wants. We do not seek to force one-dollar, two-dollar, five-dollar, twenty-dollar, or one-hundred-dollar bills. Every person who presents a draft at the Treasury gets the paper money he wants. Mr. Phillips. But the practical result is that some $15,000,000 of small bills have been retired, to the detriment of small change. Secretary Sherman. Our impression is that that is a mistake. Mr. Phillips. It has been so stated to me. Secretary Sherman. I can give you the fact exactly. I suppose it js because the banks, to whom the great body of the paper money is paid out, do not wish to handle small bills, and require large ones ; but any- RESUMPTION OF SPECIE PAYMENTS. 61 body who wants the small bills can have them. I will give the exact amount at different dates, so that you will see how much the circulation of small bills has fallen off.* Mr. Phillips. Do you think that the proportion of small bills retired has not been much greater than the proportion of large bills retired? Secretary Sheeman. I do not know. I would rather give you the «xact figures. General Butler talked to me yesterday about it, and I told him what I say to you. We never have attempted to withdraw the ones and twos from circulation. Mr. Phillips. But have they not gone out of circulation under the resumption act"? Secretary Sheeman. Not to any very great extent. They do not go out simply because the banks and others who draw large amounts do not take them as freely as the people wish to have them. The banks do not wish to handle them. The Chaieman. It seems to me that upon your theory on resumption it would be very important that greenbacks should be used for our four per cent, bonds. Secretary Sheeman. Yes, sir. The Chaieman. And that, if they can be also received for duties at the custom-house it would help you in resumption. Secretary Sheeman. Yes. As soon as we resume, or are ready to resume, we ought to receive greenbacks for customs-duties. The Chaieman. And bring them on a par with gold also by making them exchangeable for bonds. Secretary Sheeman. Yes ; or redeem such as are presented in coin. The Chaieman. On that theory of resumption you would resume already, in order to have practical resumption. Secretary Sheeman. Yes; that is resumption, and we would not know about it. Within a year we have seen a decline of 9 per cent. between greenbacks and gold. In December, 1876, gold was 110 per cent., and we have since had that decline and nobody has been hurt by it. Mr. Bell. Suppose the greenbacks were to obtain an equality in value with gold, how would the repeal of the resumption act then affect resumption ? Secretary Sheeman. The repeal of the resumption act would prevent me from maintaining resumption by the sale of bonds. That would be the first thing. Then the resumption act is the only provision of law which requires me to redeem United States notes in coin? Mr. EwiNa. But you are at liberty to do so. If the resumption act were repealed, you might maintain an equivalency of paper and coin ? Secretary Sheeman. No. It is perfectly clear that I have no right to exchange one form of money for another. Mr. Ewing. But you could pay out gold and silver. Secretary Sheeman. Yes. Mr. EwiNGr. And you could thus maintain an equality of coin and paper upon your theory, which is, that as soon as paper and coin are equal nothing will be likely to occur to disturb the equilibrium ? * Statement of one and two dollar United States notes outstanding at the dates mentioned. Date. Ones. Twos. Totals. June 30,1873 28,911,309 34,210,856 63,122,165 June 30, 1874 26,571,512 28,117,438 54,688,950 June 30, 1875 27,416,863 26,345,326 53,762,189 June 30, 1876 28,007,504 27,480,479 55,487,983 June 30,1877 25,160,297 25,369,825 50,530,122 April 1, 1878 22,744,288 22,707,443 45,451,731 62 RESUMPTION OF SPECIE PAYMENTS. Secretary Sherman. There will be more or less fluctuation, and we must be prepared to meet those fluctuations, so that, if greenbacks be- .come superabundant, we can get gold for them ; or if, on the other hand, gold becomes a drug, as it may, it will be deposited for greenbacks. Mr. Ewing. But if greenbacks become superabundant, and are pre- sented to the Treasury for redemption, you will have to pay them out again f Secretary Sherman. Yes, as soon as the equivalency is restored. Mr. Ewing. That is, you will hold whatever greenbacks come in until there is an equivalency ? Secretary Sherman. Yes ; that is the effect of it. Mr. Phillips. Would it not be safer, by legislation and by taking greenbacks for customs-duties, to secure and maintain an equalization of values in that way rather than by resumption to authorize the com- bination of bankers to • drain away the only credit resources in the Treasury ? Secretary Sherman. I think not ; unless you maintain this equiva- lency you have no right, under your law, without violating your prom- ise, to receive anything but coiu in payment of customs-duties. Mr. Phillips. There may be various means of bringing up greenbacks by equalizing values. Would it not be safer for us to legislate so as to preserve an equality in values rather than to have forced resumption"? Secretary Sherman. No ; because legislation is not powerful enough • to do what can only be done by the actual redemption of the notes on presentation. No law can make two things equal to each other in values. Mr. Phillips. Can the law force you to resume if you have not the coin to do it ? Secretary Sherman. No; but we have the coin. As a matter of course, if we had not the coin we could not resume, but if we have the coin we can resume. Mr. Ewing. I understand that your idea is to exercise about the same power which is exercised by the Bank of England in regard to these legal-tender notes. Secretary Sherman. No ; because the Bank of England loans out its notes for profit. That is its business. Mr. Ewing. The Bank of England, when a drain sets in, interrupts the movement of circulation by taking in its notes and not paying them out until the drain is checked. In that respect your idea of maintaining resumption is the same. Secretary Sherman. Yes. When the notes are presented, the Secre- tary of the Treasury pays them in coin, silver or gold, at his discretion. When, in his judgment, it is wise to pay out these notes, either on the public debt or on the iuterestof the public debt, to those who are willing to take them, or any current expenses, he does it. . Mr. Ewing. But he would not pay them out Secretary Sherman. Unless they were equivalent to coin. Mr. Ewing. And he would judge of their equivalency by the drain, upon the Treasury 1 Secretary Sherman. He would never be likely to pay out these green- backs if they were to come back again on him for coiu; and he would not be wise if he did it. Mr. Ewing. In that respect, he maintains resumption by exercising the same power and control over the paper currency as the Bank of England does? Secretary Sherman. Yes, sir. Practically, that is done by the assist- RESUMPTION OF SPECIE PAYMENTS. 63 ant treasurer in Few York. I know every day how much coin-certifi- cates are outstanding and how much coin there is in the subtreasury. Every day these certificates are presented for redemption and somebody else deposits coin for other certificates, and thus the thing goes on, in ebb and flow, sometimes to the amount of a million or two a day. I see nothing of it, but 1 see the subtreasury reports every day. One man brings gold to the subtreasury and gets certificates, and another man brings the certificates and draws out the gold. Mr. Ewing. I think I have your idea pretty clearly that your control in putting out legal-tenders or withholding them is the lever by which their convertibility is to be maintained "? Secretary Sherman. Yes; and then there is, too, the fact that the Secretary is under the constant eye of Congress if he abuses his powers, because a great power is less liable to be abused than a small one. The eye of the public is on the Secretary in the exercise of power of this kind, and it is not likely to be abused. If there is any sign of his abusing it, Congress is always present to prevent it. The Secretary . would not dare to sell bonds to raise gold for resumption while he has any notes on hand unless there is a drain for the gold. All these^pow- ers will be exercised under the eye of Congress. Mr. Ewing. If there is a drain of gold you would sell bonds? Secretary Sherman. The Secretary might sell bonds, and again, when greenbacks were abundant in the Treasury, he might make a call for six per cent, bonds, as I have done. I exercised my discretion in the matter last December, and I made a mistake in making a call for $10,000,000 of bonds which had better not have been made. I under- estimated the effect of pending legislation. I did it under my discre- tion ; but I did not sell enough bonds to redeem that call. So the Sec- retary of the Treasury, administering under this law, if he found coin or greenbacks accumulating in his hands, would make a call of six per cent, bonds and would pay them off and sell four per cent, or four and a half per cent, bonds — whichever was the current bond in the market — and thus make good his money. That operation would go on without difficulty. That is the way, at least, that I would conduct it if I were in charge. Mr. Hartzell. I understood you to say that, in order to complete your preparations for resumption, additional bonds to the amount of, perhaps, fifty millions would have to be sold between now and the 1st of January. Secretary Sherman. Yes; I think so. Mr. HArtzell. Is it your expectation that, after resumption day, you will have to continue the sale of bonds at different periods for the purpose of maintaining the specie reserve? Secretary Sherman. Not at all. If I would sell any bonds at all after that, I would sell them merely for the purpose of refunding. It might be that, to meet a sudden drain, 1 would sell bonds in order to accumu- late coin ; but the very moment the drain ceased I would use the coin or the greenbacks which I had received in calling in six per cent, bonds. Under that the whole of the public debt might be reduced to 4 per cents., if that should prove to be the ultimate rate of interest in this country. Mr. Hartzell. But the interest-bearing debt of the country has to be increased in order to bring about this result. Secretary Sherman. Yes ; in the absence of surplus revenue. There is no other way except by the increase of the public debt temporarily. We would have the coin to represent the bonds. That is all. The conference here ended. 64 KESUMPTION OF SPECIE PAYMENTS. APPENDIX. Appendix No. 1. Statement of gold and silver in the Treasury on the 1st of February, 187? Gold coin $71,944,129 47 Gold bullion 8,720,150 25 $80, 664, 279 72 LesB amount to credit of disbursing-officers and outstand- ing checks v .„ 3,074,445 45 Less gold-certificates actually outstanding 50, 791, 240 00 Less called bonds and interest 10,117,672 63 Less interest due and unpaid 9,993,750 26 , 73,977,108 34 Available gold coin and bullion $6,687,171 38 Silver coin $2,228,898 02 Silver bullion 3,211,796 21 $5, 440, 694 23 Less outstanding checks 191,194 52 Available silver coin and bullion 5,249,599 71 Available gold and silver coin and bullion 11,936,771 09 Appendix No. 2. Statement of coin and bullion in the Treasury February 1, 1878.* Held by- Treasurer United States, Washington Assistant treasurer United States, New York Assistant treasurer United States, Boston Assistant treasurer United States, Phila- delphia Assistant treasurer United States, Saint Louis Assistant treasurer United States, San Francisco Assistant treasurer United States, New Orleans Assistant treasurer United States, Balti- more Assistant treasurer United States, Cin- cinnati ., Assistant treasurer United States, Chi- cago Mint, Philadelphia Mint, San Francisco Mint, Carson City . Mint, Den ver United States assay-office, New York United States assay-office, Boise City United States assay -office, Charlotte United States assay-ofl&ce, Helena First National Bank, Milwaukee, Wis First National Bank, Portland, Oreg Totals 104,414,33134 11,198,15137 Gold coin. $397, 628 39 92, 024, 659, 454, 274, 1, 854, 1, 120, 509, 280, 528, 1, 403, 978, 224, 3, 3, 672, 604 20 618 47 884 35 722 04 963 38 121 66 154 30 064 83 326 04 416 24 757 74 154 54 000 00 671 37 28, 078 19 165 00 Gold bullion. $3, 367, 713 26 637, 557 34 5, 039, 352 92 73, 693 61 2, 079, 834 24 Silver coin. $201, 679 74 1, 171, 392, 273, 146, 224, 166, 2L7, 253, 748, 41, 427, 368 14 540 55 674 75 045 33 608 35 170 16 450 22 877 33 549 38 546 67 327 65 894 76 100 00 148 22 500 00 200 00 500 00 5, 097, 181 25 Silver bullion, $671, 116 55 893, 651 51 214, 462 31 1, 048, 137 70 2, 827, 368 07 * The items to be deducted are the following, taken from page 4 of Senate interview : Amount to credit of disbursing-officers and outstanding checks $6, 189, 626 60 Gold-certificates actually outstanding 44, 498,500 00 Called bonds and interest 6,818,677 29 Interest due and unpaid 4,909,705 21 "627416, 509 10 EESUMPTION OF SPECIE PAYMENTS. Appendix No. 3. [In reply to inquiry No. 1. Letter of March 28, from Hon. A. H. Buckner.) Statement of coin and bullion in Treasury at close of business February 28, 1878. 65 Held by— Gold coin. Gold bullion. Silver coin. Silver bullion. $675, 899 51 99, 699, 528 09 663, 577 50 467, 415 70 276, 031 00 2, 458, 100 00 1, 168, 719 00 519, 391 50 251, 636 00 665, 527 50 2, 829, 834 32 4, 045, 079 73 655, 147 80 3,000 00 3, 672, 671 37 $179, 377 97 1, 407, 992 53 379, 903 05 797, 294 75 263, 694 98 149, 260 81 217, 575 95 157, 218 52 211, 828 16 248, 319 12 887, 057 86 72, 920 54 225,145 33 100 00 21, 148 22 500 00 200 00 500 00 456 45 455, 000 00 Assistant treasurer United States, New York $3, 367, 713 26 Assistant treasurer United States, Phila- Aasistant treasurer United States, Saint Assistant treasurer United States, San Assistant treasurer United States, New Assistant treasurer United States, Balti- Assistant treasurer United States, Cin- Aasistant treasurer United States, Chi- 556, 035 45 1, 887, 305 36 46, 412 00 175, 974 88 United States assay-office, Now York 2, 079, 834 24 630, 741 02 300, 150 03 Total 118, 351, 709 05 7, 937, 300 31 5, 675, 494 24 2, 955, 577 65 Treasury United States, Washington, D. O., March 30, 1878. Appendix No. 4. Statement of coin and bullion in the Treasury March 28, 1878. Date. Offices, &c. G-old coin and standard sil- ver dollars. Fractional sil- ver coin. Gold and silver bullion. 1878. Treasury of United States, "Washington . . $676, 282 68 ill, 688 00 100, 128, 068 09 271, 109 97 975, 607 50 233, 659 50 623, 807 00 279, 373 00 1, 139, 747 00 2, 803, 900 00 2, 938, 910 93 1, 245, 220 75 1, 903, 552 50 933, 032 05 3, 000 00 $958, 165 65 149, 093 52 1, 374, 628 52 791, 004 75 370, 333 46 207,141 33 247, 819 89 251,208 84 213, 706 76 150, 648 66 $3, 367, 713 26 25 23 16 642,114 97 79, 260 86 279,260 09 100 00 20, 951 89 1, 200 00 4, 927, 353 92 65, 387 97 3 670, 849 85 114, 666, 958 97 5, 736, 639 19 13, 664, 914 46 Note.— Standard silver dollars included above, 454,711. H. Mis. 62 5 66 RESUMPTION OP SPECIE PAYMENTS. Appendix No. 5. Comparison of condition of the Treasury April 1, 1877, and April 1, 1878. Balances. 1877. 1878. Cnrrencv $8, 184, 863 58 $751, 851 35 10, 000, 000 00 25, 215, 000 00 138, 357, 608 14 57, 883, 400 00 80, 474, 208 14 7, 305, 200 00 Special fund for the redemption of fractional currency fepecial deposit of legal-tenders for redemption of certificates of 35, 155, 000 00 86, 818, 285 26 48.279,400 00 38, 538, 885 20 5, 262, 900 00 6, 786, 028 00 362, 656, 204 00 23, 440, 512 08 29, 937, 001 43 2, 074, 674, 126 63 *14, 107, 016 41 *24, 765, 218 36 105 00 420, 199, 831 00 603, 631, 538 00 Coin-certificates Coin, less ooin-certincates Outstanding called bonds Other outstanding coin liabilities , Outstanding legal-tenders 347, 848, 712 00 16, 950, 115 62 38, 662, 487 02 2, 039, 723, 514 31 2, 313, 614 77 20, 434, 708 95 101 25 Outstanding silver coin Reduction of debt for March Reduction of debt since July 1 Market value of gold 475, 638, 634 00 637, 757, 892 00 Exports (12 months ending February 28) *This reduction includes $9,553,800 Geneva award bonds canceled. Treasury Department, Warrant Division. Appendix No. 6. Circulation and deposits and specie of the State hanks, 1857 and 1860. Circulation. Deposits and bank bal- ances. Total. Specie. Ratios of specie to— Tears. Circulation. Circulation and deposits. 1857 $214, 778, 822 207. 102, 477 $230, 351, 352 253, 802, 129 $445,130,174 460, 904, 606 $58, 349, 838 83, 594, 537 Per cent 27.2 40.4 Per cent 13.1 1860 18.1 Compiled from statement in Finance Report, 1876, pages 204, 205. Circulation, deposits, and cash reserve of the national banks, December 28, 1877. LIABILITIES. Circulation $299,240,475 Deposits 661,575,577 Total ; 960,816,052 CASH RESERVE HELD. Gold coin $5,506,556 Silver coin 4,300,274 United States gold-certificates 23,100,920 Total specie 32,907,750 Legal-tender notes $70,568,248 United States certificates for legal-tenders 26, 515, 000 Total legal-tenders 97, 083, 348 Five per cent, redemption fund 15,028,340 Total cash reserve 145, 019, 338 Ratio of legal-tender funds to circulation 48. 4 per cent Ratio of legal-tender funds to circulation anddeposits 15. 1 per cent. RESUMPTION OF SPECIE PAYMENTS. 67 Circulation, deposits, and cash resources of the national banks December 28, 1877. LIABILITIES. Circulation $599,240,475 Deposits 661,575,577 Total 960,816,052 CASH RESOURCES. Gold coin ?5, 506, 556 Silver coin 4,300,274 United States gold-certificates 23,100,920 Total specie '32,907,750 Legal-tender notes •. $70, 568, 248 "United States certificates for legal tenders 26, 515, 000 Total legal tenders 97,083,248 Five per cent, redemption fund 15, 028, 340 United States bonds, par value, 5285,687,350; currency value, $405,181,717 405,181,717 Total cash resources 550,201,055 Ratio of cash resources to circulation 183+per cent. Hatio of cash resources to circulation and deposits 57. 3 per cent. Abstract of reports made to the Comptroller of the Currency, showing the condition of the na- tional banks in the United States, including national gold banks, at the close of business on Friday, the 28 u 2 Bank of England Do 1818 1820 1822 1824 1826 1823 1830 1832 1834 1836 1838 1840 1842 1844 1846 1878. Feb. 20 Feb. 14 Feb. 7 Feb. 7 $26, 202, 000 24, 299, 000 17, 465, 000 20, 132, 000 21, 564, 000 21, 358, 000 21, 465, 000 18, 320, 000 19, 195, 000 18, 018, 000 19, 488, 000 17, 170, 000 20, 332, 000 21,485,000 21, 390, 000 26, 584, 674 99, 350, 000 30, 987, 000 13, V. 0,000 $7, 928, 000 4, 421, 000 6, 399, 000 9, 680, 000 7, 200, 000 10, 201, 000 11, 621, 000 10, 278, 000 13, 300, 000 12, 040, 000 8, 922, 000 6, 254, 000 8, 690, 000 12, 138, 000 16, 322, 000 28, 054, 497 21, 193, 000 10, 311, 000 2, 330, 000 $34, 130, 000 28, 7S0, 000 23, 864, 000 29, 812, 000 28, 764, 000 31, 559, 000 33, 086, 000 28, 598, 000 32, 495, 000 30, 058, 000 28, 410, 000 23, 424, 000 29, 022, 000 33, 623, 000 37, 712, 000 54, 639, 171 120, 543, 000 41,298,000 15, 500, 000 $6, 363, 000 8, 211, 000 10, 098, 000 11, 787, 000 6, 754, 000 10, 469, 000 11, 150. 000 7, 514, 000 7, 303, 000 5, 250, 000 9, 540, 000 4, 299, 000 9, 729, 000 15, 315, 000 16, 388, 000 24, 730, 793 78, 896, 000 24, 759, 000 3, 991, 010 .18+ .28+ .42+ .39+ .23+ .33+ .33+ .26+ .22+ • 17+ .33+ .18+ .33+ .45+ .43+ .45+ .65+ .58+ .25 + 2. 13. 2. 2. 12. 0. Nil. Nil. Nil. Nil. Nil. Nil. Nil. Nil. Nil. Nil. Nil. Do Do Do A Do Do Do Do Do Do Do Do Do Do Nil. Nil. Do Bank of Germany National Bank of Belgium . Appendix No. 9. An estimate of the amount of gold and silver bullion and coiii in the United States April 1, 1878. Gold. In United States Treasury (including bullion fund of mints and assay office) October 31, 1877 In national banks (exclusive of coin-certificates) Octo- ber 1, 1877 In California banks Private banks (Pacific coast) State and county treasuries (Pacific coast) 125, 122, 843 94 4, 867, 909 18 18,000,000 00 2, 000, 000 00 4, 000, 000 00 RESUMPTION OF SPECIE PAYMENTS. 69 Merchants and individuals (Pacific coast) $4, 000, 000 00 Unpaid deposits, United States mints 500, 000 00 Smelters and private refiners (exclusive of the Pacific coast) 500, 000 00 Gold bullion in California 1, 500, 000 00 In private hands, including bullion dealers, savings- banks, and private bankers east of the Eocky Mount- ains 15, 000, 000 00 In State banks 2,000,000 00 177,490,753 12 Production from October 31 to April 1 20, 000, 000 00 Approximate excess of imports over exports 2, 000, 000 00 199, 490, 753 12 Silver. Fractional coin in States east of the Rocky Mountains, in- cluding trade-dollars and Mexican coin, October 31, 1877 . $42, 000, 000 California banks , 2, 000, 000 Private banks (Pacific coast) 500, 000 State and county treasuries (Pacific coast) 500, 000 Merchants and individuals (Pacific coast) 500, 000 Silver bullion (Pacific coast) , 2, 000, 000 Silver bullion in hands of smelters and refiners east of the Eocky Mountains 1, 000, 000 4S, 500, 000 Silver bullion in mints 2, 000, 000 Production from mines to April 1 15, 000, 000 f 65, 500, 000 I have not the data necessary to ascertain to which of the foregoing items should be credited the gain of gold and silver since October 31, 1877. It may be stated, however, that the Treasury stock has been in- creased, and the amount of trade and Mexican dollars which have gone into circulation may be set down at not less than 4,000,000, exclusive of about 1,200,000 trade-dollars in the mints. According to the above estimate the amount of gold coin and bullion now in the country is $199, 490, 753 12 And silver coin and bullion 65,500,000 00 Total 264, 990, 753 12 Allowing for gold and silver used in the arts and for manufacturing purposes and possible overestimation, say $15,000,000, the total amount of gold and silver in the country may be set down at about two hun- dred and fifty millions of dollars, of which about fifty millions are in the form of fractional silver, trade-dollars, and Mexican coin, and $1,200,000 in standard silver dollars. THE PRESENT AVERAGE PRODUCTION OF GOLD AND SILVER FROM THE MINES OF THE UNITED STATES. I have availed myself of every facility to procure full information in relation to the product of the gold and silver mines of the United States, 70 RESUMPTION OF SPECIE PAYMENTS for the purpose of estimating approximately the present annual yield, with the following results, based upon the production for the first six months of the year and the average monthly out turn since, so far as it was possible to ascertain the same: State or Territory. California Nevada Montana Idaho Utah Colorado Arizona New Mexico Oregon Washington Dakota Lake Superior. - Virginia North Carolina . Georgia Other sources . - Total. Gold. 115,000,000 18, 000, 000 3, 200, 000 1, 500, 000 350, 000 3, 000, 000 300, 000 175, 000 1, 000, 000 300, 000 8, 000, 000 50, 000 100, 000 100, 000 85, 000 Silver. $1,000,000 26, 000, 000 750, 000 250, 000 , 5,075,000 4, 500, 000 500, 000 500, 000 100, 000 50, 000 200, 000 Total. $16, 44, 3, 1, 5, 7, 000, 000 000, 000 950, 000 750, 000 425, 000 500, 000 800, 000 675, 000 100, 000 350, 000 000, 000 200, 000 50, 000 100, 000 100, 000 50, 000 84, 050, 000 It is impossible to state with any degree of accuracy how long this large rate of production will be maintained. A gradual increase may be expected in Montana and Arizona, aud there is nothing to indicate a decrease in any bullion-producing State or Territory, except in the State of Nevada, and that depends upon contingencies which to a great extent must be a matter of conjecture only. Several mines in different localities in that State have within the last year or two been opened and are producing considerable bullion, but whether they, and others which in the mean time may be discovered, will yield sufficient to make up the decrease, which, unless other ore-bodies on the Comstock shall be found,, must sooner or later take place, is somewhat doubtful. The superintendent of the mint at San Francisco has furnished, at my request, a statement, embraced in the appendix, of the yield of about thirty different mines, the bullion from which finds a market in San Francisco. The yield of bullion from the two mines which embrace the great ore- chimney discovered in 1874 in the Comstock lode has, according to the official statement of the managers, amounted, up to October 31, 1877, to $78,852,918.48, of which $36,736,347.91 was gold. These mines are now producing at the rate of nearly three million dollars per month. H. E. LINDEEMAN, Director of the Mint. Treasury Department, April 3, 1878. RESUMPTION OF SPECIE PAYMENTS. 71 Appendix No. 10. Statement of imports and exports of specie (coin and bullion) during the fiscal years ended Jane 30, 1865, to 1877, inclusive, and the seven months ended January 31, 1878. ■Fiscal years ended June 30- 1865. 1866. 1867. 1868. 1869. 1870. 1871. 1872. 1873. 1874. 1875. 1876. 1877. July Angust September . October November . December . January . Coin and bullion. Exports. $64, 618, 124 82, 643, 374 54, 976, 196 83, 745, 975 42, 915, 966 43, 883, 802 84, 403, 359 72, 798, 240 73, 905, 546 59, 699, 686 83, 857, 129 50, 038, 691 43, 134,738 4, 197,923 1, 665, 357 2, 239, 416 1, 693, 583 1, 197, 733 1, 539, 446 3, 230, 996 Foreign. Total. 13, 025, 102 3, 400, 697 5, 892, 176 10, 038, 127 14, 222, 414 14, 271, 864 14, 038, 629 7, 079, 294 10, 703, 028 6, 930, 719 8, 275, 013 6, 467, 611 13, 027, 499 285, 641 388, 526 844, 195 317, 379 367, 121 380, 451 $67, 643, 226 86, 044, 071 60, 868, 372 93, 784, 102 57, 138, 380 55, 155, 666 98, 441, 988 79, 877, 534 84, 608, 574 66, 630, 405 92, 132, 142 56, 506, 302 56, 162, 237 4, 483, 564 2, 053, 883 3, 083, 611 it, 010, 962 1, 564, 654 1, 919, 897 Imports. $9, 810, 072 10, 700, 092 22, 070, 470 14, 188, 368 19, 807, 876 26, 419, 179 21, 270, 024 13, 743, 689 21, 480, 937 28, 454, 906 20, 900, 717 15, 936, 681 40, 774, 414 1, 107, 814 1, 642, 143 3, 840, 382 1, 717, 793 2, 266, 083 1, 670, 265 Excess of— Imports. $756, 771 701, 229 Exports. $57, 833, 154 75, 343, 979 38, 797, 897 79, 595, 734 37, 330, 504 31, 736, 487 77, 171, 964 66, 133, 845 63, 127, 637 38, 175, 499 71, 231, 425 40, 569, 621 15, 387, 823 3, 375, 750 411, 740 293, 169 ""249," 632 1, 962, 790 Total for years 1865 to 1877, inclusive $692,435,569 Average 53,264,000 Average for last three years 42, 396, 000 Average gold and silver product of the United States, 1870 to 1876, inclusive 71, 000, 000 Average excess of prodaction over net export, 1874, 1875. and 1876, $29,000,000 ; deduct $7,000,000 used in arts; leaving , 22,000,000 EDWAKD YOUNG, Chief of Bureau. Bureau of Statistics, March 29, 1878. Hon. Thomas Ewixs, M. C. Appendix No. 11. Distribution of currency in the Treasury of the United States, March 28,1878. Date. Office, &c, United States notes. National- bank notes. Currency. 1878. March 27 27 $6, 432, 588 20 32, 107, 136 84 3, 481, 053 00 4, 730, 620 00 3, 608, 000 00 1, 322, 089 00 3, 629, 500 00 2, 270, 094 00 1, 560, 000 00 1, 127, 300 00 370, 610 00 $122,261 50 488, 066 92 44, 478 00 38, 800 00 206, 836 00 356, 000 00 356, 785 00 A ssistant treasurer United States, New York Assistant treasurer United States, Baltimore Assistant treasurer United States, Philadelphia . Assistant treasurer United States, Boston Assistant treasurer United States, Cincinnati . . . Assistant treasurer United States, Chicago ...... Assistant treasurer United States, Saint Louis. . . Assistant treasurer United States, New Orleans . Assistant treasurer United States, San Francisco 163, 000 00 470, 000 00 9 $6, 065, 059 69 90, 538 00 60, 729, 529 04 2,246,227 42 6, 065, 059 69 72 RESUMPTION OF SPECIE PAYMENTS. Appendix No. 12. [From Dr. Lindennan's official report.] Annual product of gold, and silver from the American mines. Tear. Gold. Silver. Total. $50, 000, 000 43, 500, 000 36, 000, 000 36, 000, 000 40, 000, 000 40, 000, 000 44, 300, 000 $16, 000, 000 23, 000, 000 28, 750, 000 35, 750, 000 32, 000, 000 32, 000, 000 41, 500, 000 $66, 000, 000 66, 500, 000 64, 750, 000 71, 750, 000 72, 000, 000 72, 000, 000 85, 700, 000 100, 000, 000 Exports of Bpecie in the fiscal years 1872, 1873, and 1874, in excess of imports for same years. Average for each year Excess of exports for the years 1875, 1676, and 1877 Average for each year....' Excess since July 1, 1877, to January 31, 1879, inclusive $167, 436, 981 55, 812, 000 127, 188, 797 42, 396, 000 4, 835, 081 Vieics of Mr. James B. Colgate, of the firm of J. B. Colgate & Co., 47 Wall street, New York. [Washington, D. O., April 16, 1878. Mr. Hardenbergh. Are you a stockholder in a national bank? Mr. Colgate. I am. Mr. Hardenbergh. Do you regard the national banks as creatures of the government '! Mr. Colgate. Yes, sir. Mr. Hardenbergh. And that any action on the part of the govern- ment toward resumption should include the national banks — that is, that there can be no resumption except attended with a full resumption on the part of the national banking institutions of the country created by the government? Mr. Colgate. I look upon the two as being so interlaced that it is impossible that one can resume without the other; the two must go together. Mr. Hardenbergh. Do you understand that resumption can be prac- tically accomplished while we have a floating debt of $347,000,000 of legal-tenders f Mr. Colgate. I am of the opinion that on the 1st day of next Jan- uary, or possibly before that, gold and greenbacks may be interchange- able, but the prospect of resuming permanently with $140,000,000 of coin is to my own mind a doubtful experiment. There are so many causes at present to favor resumption that it may possibly be accom- plished. Mr. Hardenbergh. The difficulty in my own mind in regard to re- sumption has been that there can be no practical resumption while we have a floating debt of $347,000,000 of legal-tender notes. If the Sec- retary of the Treasury had in his vaults to-day $347,000,000 of gold, and if the $347,000,000 of legal-tenders were to be presented and paid, how is that gold to be again recovered by the Treasury unless there be that confidence in the financial affairs of the government which will lead the mind of the people away from financial problems to matters of business, leaving the finances to take care of themselves? In other RESUMPTION OP SPECIE PAYMENTS. 73 words, can we have resumption while we have out so large a floating debt as $347,000,000 of legal-tenders ? Mr. Colgate. I conceive that greenbacks and coin may be inter- changeable, yet I cannot see that resumption can be permanent until the greenbacks are retired. Mr. Haedenbeegh. Will not the receipt of greenbacks for customs- duties drive gold from the country ? Mr. Colgate. Not necessarily. Mr. Haedenbeegh. Does not the baser metal always usurp the place of the better 1 Mr. Colgate. As a rule, it does. Mr. Haedenbergh. "Will not the receipt at the Treasury of silver coin at 41 2 J grains to the dollar, and the receipt of greenbacks for duties, prevent the government from receiving, through, its customs, gold enough to pay the interest on its bonds ; and will it not thereby (through speculation and corners in the money market) be difficult for the government to obtain gold for the payment of interest on its bonds ! Mr. Colgate. It is evident that if the government does not receive gold for its customs it will have to purchase gold in the market for the payment of interest on its bonds. Mr. Haedenbergh. The government will not refuse gold. . Mr. Colgate. I mean if the government does not receive gold through voluntary payments by the public. Mr. Hardenbeegh. The baser money always comes in first, and people will hoard their gold if they can pay duties in greenbacks. Then where is the government to find gold to pay the interest on its obliga- tions 1 Mr. Colgate. At present, the balance of trade in favor of this country is $150,000,000, in addition to the amount of gold and silver which we are producing, and all this is favorable to the Secretary's scheme of re- sumption. Mr. Hardenbergh. Are not the exports liable to fall off so greatly between the first of June and the first of October as possibly to defeat the Secretary, unless by the sale of bonds in Europe ! Mr. Colgate. I should say not this year, from all present appear- ances. Mr. Hardenbergh. And this year being tided over you think we will bridge next year ? Mr. Colgate. That will depend upon the crops and other circum- stances. Mr. Hardenbergh. Then resumption depends upon the crops ! Mr. Colgate. As I said before, gold and greenbacks may be inter- changeable without any Congressional legislation ; but I cannot see how there can be any permanent resumption with $650,000,000 of paper money in circulation. Mr. Hardenbeegh. Will not the fact of the withdrawal of the national-bank notes, founded as they are on United States bonds, and convertible, and the substitution in their place of greenbacks (thus add- ing to the national debt, as the national-bank notes are not a part of the national debt), will not, I say, that fact be an objection in the way of permanent and positive resumption by increasing the amount of the government obligations convertible or non-convertible? Mr. Colgate. In my opinion, the increase of legal-tender notes, or the wiping out of national-bank notes by the substitution of greenbacks would be attended with great injury to the interests of the country. I cannot but look upon both issues as fraught with evil. 74 RESUMPTION OF SPECIE PAYMENTS. Mr. Haedenbeegh. Can the ordinary banks of this country exist as banks of deposit only, without being also banks of issue I Mr. Colgate. In my opinion, there should be no banks of issue what- ever. A bank of issue is an evil to the country. Mr. Haedenbeegh. Then what would be your circulating medium ? Mr. Colgate. Coin and bullion notes entirely, and nothing else. Mr. Haedenbeegh. Is there bullion enough in the country to give the percapita circulation necessary for business ? Mr. Colgate. I think that the interests of the country would be greatly subserved if there should be a gradual withdrawal of all the bank and governmental issues, and if issues based alone on gold and silver be substituted, as the country is producing from eighty to one hundred millions of the precious metals every year, which, in a few years, would furnish us with all the money we want. Mr. Haedenbeegh. But if a failure of crops for two years should cause that bullion to be sent to Eugland, where will we find metals to base the circulating medium on % Mr. Colgate. That is a hypothetical statement which I cannot un- dertake to answer. Mr. Haedenbeegh. Gold may flow out in consequence of the ex- travagance of the people by our imports exceeding our exports. Mr. Colgate. Then, the best check to that extravagance is the ex- port of our gold and silver. Mr. Haedenbeegh. If we were free from debt I would jump at your theory ; but as we are so heavily in debt, I do not see how you can extricate us without an addition to our circulating medium. Mr. Colgate. You have asked my opiuion, and I have merely given it to you. Mr. Bell. Suppose greenbacks on an equality with gold, what would be the effect of repealing the resumption act? Do you think that its effect would be to depreciate greenbacks; or do you think that the equality of gold-and greenbacks would still be maintained ? Mr. Colgate. For the time being, the repeal of the resumption act would have no effect whatever. Mr. Bell. What, in your judgment, is the proportion which coin should bear to paper, in order to float a redeemable currency ? Mr. Colgate. Dollar for dollar. Mr. Bell. Then, in your opinion, resumption cannot be successfully maintained with a less amouut of coin than the amount of currency to be redeemed ? Mr. Colgate. It may be maintained for a short period with less, or even for a long period, but it cannot be permanently. Mr. Bell. We never can feel sure of it % Mr. Colgate. No, sir. Mr. Phillips. We have to-day in the country, as estimated by Dr. Linderman, $250,000,000 of coin. We have also, in round numbers, $650,000,000 of paper currency — greenbacks and bank-notes — making some $900,000,000. Do you think that that is too much circulation for the present business of the country? Mr. Colgate. It is my opinion that we have too much paper for the present business of the country. I think that the business of the country does not require the same volume of currency which it did a few years since. Mr. Phillips. Does not the business of the country regulate the amount of currency? RESUMPTION OF SPECIE PAYMENTS. 75 Mr. Colgate. How can it do so when the issues are fixed by the government "J Mr. Phillips. We had two or three times the amount of circulating medium some ten years ago that we have now — 7.30 notes, compound- interest notes, and a large volume of other notes. There has been a constant reduction of the circulating medium. Would the reduction of the present volume injure any of the business interests of the coun- try or cramp them ! Mr. Colgate. I do not think that the gradual reduction of our pres- ent issues of paper (either national or bank) would be at all detrimental to the interests of the country, because the vacuum would be supplied by the precious metals. Mr. Phillips. Then your answer would be, that we ought not to do away with the paper currency faster than we can accumulate coin. For instance, we produce eighty millions of bullion a year: it would take seven years to make the coin equal to the volume of national-bank notes and legal-tender notes, if we were to keep all the coin. Do you think that there should be no reduction of the paper currency save in proportion as we increase the volume of bullion and coin 1 Mr. Colgate. I should think that any reduction of the volume of paper would be beneficial to the true interests of the country. Mr. Phillips. Would it make it more difficult for business men to get discount from banks? Mr. Colgate. Perhaps that would add very much to the prosperity of the country. Mr. Phillips. But if business men required discounts to carry on their business, and if they cannot get them, would that not cripple the manufactures and business of the country ? Mr. Colgate. There will always be capital where it is wanted, on good security. Good security will always bring capital. Mr. Phillips. If these banks are compelled to conduct their business on a gold basis, will they loan money as readily 1 Mr. Colgate. I do not think that there can be any general rule in regard to discounts. Every case must stand by its own merits. Mr. Phillips. But would not the natural tendency of the banks be to hold their funds in hand in case of a resumption in gold ? Would they not lock up their capital ? Mr. Colgate. I do not know that they would. Mr. Phillips. If we were to maintain the equalization of values be- tween gold and paper, would it not be safer to do so than to allow banks to demand gold on resumption ! In other words, if we repeal the re- sumption act and still maintain an equality between gold and paper, would that not be safer for the business interests of the country ? Mr. Colgate. If you could maintain that equalization, it might be safer. Mr. Phillips. France, for years, while paper was equal in value to gold, refused to resume specie payments; and that is the point I wish to get at: whether it would not be safer for the country to equalize val- ues and to repeal the resumption act. Mr. Colgate. I do not fully comprehend the import of your question. Mr. Phillips. In case exchange is against us, gold may be drained from the Treasury; but, if the business of the country maintains green- backs and gold at an equal price, would it not be safer to repeal the resumption act, and not allow the Treasury to be drained of gold, if exchange should set in against us? Mr. Colgate. That is a question which I cannot answer, but I fully 76 RESUMPTION OF SPECIE PAYMENTS. believe that the finances of the country will never be on a solid and per- manent foundation until the issues of the government areentirely funded or paid. Mr. Ewing. And also the national-bank issues 1 Mr. Colgate. I think that the interests of the country would not be injured if there was a gradual extinction of the national-bank system. Mr. Phillips. The banks of the country hold twenty-two hundred millions of deposits, for which the banks are liable, in addition to the three hundred millions of national-bank notes. Now, would it be safe for the depositors in national banks to have resumption occur and to make every demand payable in gold I Mr. Colgate. Yes; if we go to resumption, it is safe to make every demand payable in gold. Mr. Phillips. Would the banks not be liable to break ? Mr. Colgate. They are all liable to break. Mr. Phillips. Would they not be likely to break ? Mr. Colgate. Not necessarily. Mr. Phillips. Could the national banks meet, with their present supplv of gold, the demand for the payment of their circulation in gold f Mr. Colgate. That is a question for them to answer, not for me. The question for me to answer is whether, in my opinion, it is expedient to resume specie payments. I have answered that several times before, that in my opinion it is of very doubtful expediency. But at the same time there may be a great many favorable causes which may allow the maintenance of resumption, not only for months but for years. Mr. Hardenbergh. Is resumption practicable with a floating redeem- able currency in the United States 1 In other words, as long as we have three hundred and forty-seven millions of legal- tender notes afloat, can we properly resume without their being funded. Mr. Colgate. As I said before, these bills may be interchangeable with gold, and we may have practical resumption, not only for months, but for years, owing to favorable circumstances; but we cannot be al- ways sure of it. Mr. Fort. Do you think it better for the government to fix, by law, the time for resumption than it would be to allow the government to resume at pleasure on prosperity ? Mr. Colgate. That is a very difficult question to answer. Mr. Hardenbergh. In other words, would we not reach resumption better by natural than by forced means ! Mr. Colgate. Of course, resumption reached by natural means would be the most permanent. Mr. Fort. It is the most expedient for the government in the present financial condition of the country. Mr. Colgate. According to the present outlook (out exports exceed- ing our imports and with the great amount of precious metals that we are digging from the earth) it may be very safe for the government to resume at the time appointed, but whether the resumption can be main- tained for any length of time is something exceedingly problematical. Mr. Fort. Then, would it not be better for the government to be allowed to resume or not, just as the circumstances might suggest, at any time in the future ? Mr. Colgate. The best way of resumption would be for the govern- ment to retire its issues. Mr. Fort. State whether, in your opinion, the remonetization of ail- RESUMPTION OF SPECIE PAYMENTS. 77 ver has had anything to do with the present low premium on gold and with the value of bonds. Mr. Colgate. My opinion is that the reinonetization of silver has had a tendency to reduce the premium on gold, and that the two things together will have a beneficial influeuce on the price of our bonds. Mr. Fort. That is to say, will stiffen the price of bonds? Mr. Colgate. Will have a beneficial influeuce on them. But the future price of our bonds will depend upon the rapidity of funding. Mr. Fort. If the remonetization of silver has reduced the premium on gold and stiffened the value of bonds Mr. Colgate. I do not think it has stiffened the value of bonds. I said that it may have a happy influence. Mr. Fort. Would not that, all taken together, be for the general wel- fare of the country ? Mr. Colgate. I think we all understand that. Mr. Fort. In other words, has not the influence been good 1 Mr. Colgate. I think that remonetizatiou of silver (take the question by itself) has had a beneficial effect upon our commercial and material interests. Mr. Fames. State whether or not the existing amount of legal-tender notes is requisite for the business purposes of the country, the amount being, say, $350,000,000. Mr. Colgate, I think that the material interests of the country would be very much subserved by the gradual reduction of the volume of legal- tender notes. Mr. Bames. Is not the amount of legal- tender notes now outstanding actually used and required lor the business purposes of the country ? Mr. Colgate. No ; I do not think so. I think the volume is too large. Mr. Eames. Is, or is not, the legal tender note more convenient for business purposes than coin, either gold or silver? . Mr. Colgate. As far as personal convenience is concerned, I think that the advantage lies with paper. Mr. Eames. Suppose the government should resume on the 1st of January next, what amount of these legal-tender notes, iu your judg- ment, will be presented to the Treasury for payment in coin ? Mr. Colgate. It would be very difficult to answer that question ; but if there was a possibility of a very large export of gold, the amount of greenbacks that would be presented would soon exhaust the Treasury. Mr. Eames. What do you mean by the possibility of a large export of gold; do you mean by the balance of trade being against this country 1 ? Mr. Colgate. It often happens in the history of the country that the balance of trade is against us ; and, besides, our securities might be sent home for causes which we cannot now foresee ; and then the gold would be very speedily drawn from the Treasury. But, from the present out- look (with our' exports much larger than our imports, and with the amount of precious metals which we are digging from the earth), I should say that resumption may be maintained for quite a period after the 1st of January, and may perhaps run for years. Mr. Eames. On the assumption that the balance of trade is in favor of this country, and will continue to be so, and that these legal-tender notes are in use for business purposes, how large an amount of coin do you think it necessary to be kept in the Treasury of the United States in order to redeem any legal-tender notes that may be presented for payment % Mr. Golgate. Dollar for dollar. That is the only safe way there is. Then let the bills be for convenience. 78 RESUMPTION OF SPECIE PAYMENTS. Mr. Eames. You thiuk, then, that in case of resumption, all of these legal-tender notes would be presented to the Treasury for coin ? Mr. Colgate. I do not say that; but I say there may be circnkt- stances occurring under which they would be presented. Mr. Eames. I only ask what, in the ordinary course of thing.", would be the result in case resumption takes place? Mr. Colgate. I say that, with the present outlook, I think we will have sufficient coin ; but if things should change before the 1st of next January, on account of the failure of crops, our securities might be rapidly returned to us, and then things would assume a very different aspect. If a man owes $1,000, he can only be perfectly safe by having a thousand dollars to meet it. Mr. Eames. The point to which I want to call your attention is simply this : The legal-tender notes now are in use for the business purposes of the country, and are as convenient for business purposes as coin is, and more so. If that is so, what, in your opinion, will be the amount of legal-tender notes that will be presented for redemption in coin ! Mr. Colgate. The nearest approach that we can come to on that point is by reference to the case of our fractional currency, nearly the whole of which (that is in existence) has been presented. You can judge by that how it will be with legal-tender notes. And the fractional cur- rency has been redeemed in subsidiary coin, depreciated money. Mr. Eames. Let me ask you as a banker Mr. Colgate. I beg your pardon, sir, I am not a banker. Mr. Eames. If the 1st of January should come round, and if the gov- ernment were in a position to pay a gold dollar for every legal-tender dollar you had, would you present your legal-tender notes to the Treas- ury for redemption f Mr. Colgate. That would depend upon my interest. I have no doubt that 500 national banks in the United States would send to me their greenbacks to draw gold for them, and would pay me for doing it. That is in my business. In my opinion, national banks would prefer to keep their reserves in gold, rather than in greenbacks. They might not openly withdraw them, but there are other ways of doing so. Mr. Hardenbergh. If Congress were to adjourn to-day without tak- ing further action, the understanding being that the 1st of January was to be the day for practical resumption, would not the banks continue to do as they are doing now — accumulate gold in their vaults for the day of resumption? Mr. Colgate. jSTo, sir ; because the Secretary of the Treasury, by selling his four and a half per cent, bonds, is going to put the price of gold up on himself, thereby drawing all the gold out of the community and depositing it in the Treasury. Mr. Hardenbergh. I am the cashier of a national bank that has no gold as yet in its vaults. If this Congress adjourns with the under- standing that the 1st day of January next is to be the day of resump- tion, must I not proceed to hoard gold in order to protect my deposit- ors as well as my circulation ! Mr. Colgate. If you exercise prudence you will buy your gold early. The government is never safe while it has its notes out, just as a man is- never safe whose notes are out on demand. Mr. Fort. You say that the government is not safe while it has its notes out payable on demand. That will be after resumption. But why not allow the notes to remain out as they are now, without fixing a day for resumption ? Mr. Colgate. That is a question for Congress to settle. RESUMPTION OF SPECIE PAYMENTS. 79 Mr. Port. As I understand, oar legal-tender notes are not now pay- able on demand. Mr. Colgate. O, yes, they are, but they are false on their face. There is a promise to pay on every one of them. Mr. Fort. The government does not owe a bill to day which is pay- able on demand. Mr. Colgate. Excuse me, sir ; it promised to pay the legal-tender notes on demand. Mr. Fort. We have not fixed the time yet for their payment, but merely say we will pay them. Now, according to your views, is it per- fectly safe for us to fix the day until we are ready beyond all question to make good our promise J ? Mr, Colgate. If we go back to the first issue of the greenbacks, we find that every one of them was issued under the sacred promise of Congress that they should be convertible into a twenty-year 6 per cent, bond, and Congress broke faith with the people. Mr. Fort. They are not so now, are they ? Mr. Colgate. That is because you broke faith to the people. Mr. Fort. As a matter of fact, they are not now payable upon any fixed day ? Mr. Colgate. No; there is no specified day named, but they are payable on demand. Mr. Fort. Then might we not present them at the Treasury now and demand payment for them ? Mr. Colgate. Yes, sir ; but it would be like Glendower calling " spirits from the vasty deep." You would not get coin for them if you did. Mr. Phillips. You have intimated that if we resume on the 1st of January next we are not likely to maintain resumption for any length of time. Would future suspension, after having attempted resumption, be disastrous to the business of the country "? Mr. Colgate. It would be certainly a very great misfortune to attempt to resume and to fail; but, from the present outlook, it does appear to me as if the Treasury could resume on the 1st of January next with success for a long period ; but what intermediate causes may occur to change my opinion I cannot foretell; for instance, a general war in Europe might affect us. Mr. Phillips. .But a suspension, after attempting resumption, would be disastrous ? Mr. Colgate. It would be very sad. Mr. Ewing. In the past three years the balance of trade has been, on an average, very largely in our favor ; and yet we have exported more than we have imported of gold and silver coin and bullion by some $42,000,000 a year. It does not therefore follow that because the bal- ance of trade is in our favor we will be able to command the whole pro- duct of our mines. Mr. Colgate. We would not of late have exported more gold and silver than we imported, if it had not been for the great amount of our securities which have been sent here and absorbed here. Mr. Ewing. Have you any means of estimating the probable amount of our aggregate indebtedness abroad 1 Mr. Colgate. The government indebtedness abroad is estimated at between three and four hundred millions of dollars. I think that that is a very large estimate. The indebtedness of corporations I have no means of knowing. Mr. Phillips. Is it much larger? Mr. Colgate. I should say not. Our railroad bonds have been returned to us of late in very large amounts, and very many of our rail- 80 EESUMPTION OF SPECIE PAYMENTS. road bonds that were held abroad have gone out of existence by failure. The companies have ceased to pay interest on them. Mr. Bell. "When these bonds are returned, what is done with them ? Are they paid off, or are they put on the market and sold 1 Mr. Colgate. They are sold on the market. Our government bonds have been absorbed by our own people. Mr. Ewing. The question of our being able to retain gold in the country depends upon this : whether our foreigu creditors send our bonds here for sale, and whether the balance of trade continues in our favor ? Mr. Colgate. Yes, sir ; something depends upon both. Mr. Ewing. Tou think that a foreign war would probably cause a large part of our corporate securities to come back 1 Mr. Colgate. Its first effect, I think, would be to send back our government and corporate securities. Mr. Ewing. And that would drain a large amount of our precious metals I Mr. Colgate. It might, unless the balance of trade was sufficiently in our favor to pay for the bonds — as it has been during the last year. Mr. Ewing. Would you not anticipate a very large home demand for gold, the country being practically bare of it and the whole supply accu- mulated in the Treasury 1 I mean for home circulation % Mr. Colgate. Of course. A very large circulation of gold among the people would naturally grow up in place of greenbacks. Mr. Ewing. And that, of course, would create a heavy drain upon the Treasury for the gold which it has been accumulating ? Mr. Colgate. Yes, sir. Mr. Bell. I understood you to state this morning that you thought it wise policy for our debt to be held by our own people as far as practi- cable ? Mr. Colgate. I do. I think it better for us. Mr. Phillips. Do you think that if the Secretary of the Treasury had not sold his 4£ per cent, bonds he could have sold 4 per cent, bonds to the same amount 1 Mr. Colgate. I think in that respect, that if the Secretary of the Treasury had thrown himself on the people after the first of May, when money becomes easy and floats toward the centers, there would have been a very large absorption of 4 per cent, bonds by the people, which will now be greatly diminished in consequence of the sale of the 4| per cent, bonds. Mr. Eames. If the government bonds that are now held in foreign countries should be returned here and taken by the people here, would not that withdraw the capital which is now used in the manufactures and industries of the country, just to the extent that the bonds are ab- sorbed ? Mr. Colgate. No, sir. In my opinion, it would greatly add to the industries of the country to have the interest on the government bonds paid and spent here and and not abroad. Mr. Eames. If I hold $10,000 of government bonds at 6 per cent, do I not hold them for their interest, and do I not in that way lock up the capital which might otherwise be engaged in the industries of the country? Mr. Colgate. I see the sophistry of the question. My answer to it is that a country is always impoverished by having its money spent abroad, because in the end, it has to meet both principal and interest of its debt and that spent abroad ; but if it holds its own securities, then the interest is spent in favor of the industries of the country. RESUMPTION OF SPECIE PAYMENTS. 81 Views of Mr. William R. Winder, of Kew Yorlc. Washington, D. C, April 16, 1878. Mr. Ewing. We are charged with the duty of obtaining information as to whether it will probably be practicable and consistent with the public welfare to resume specie payment on the 1st January next, and the committee would be glad to have your views on the subject. Mr. Winder. With the kind permission of the committee I will ex- press my views by the statement of a series of propositions, which, I believe, will include the whole circumference of the question. In order to stimulate a merciless criticism, but in candor and with an eye single to the elucidation of truth and not for the purpose of fence, in which I have no skill, I will make the probably presumptuous assertion that the propositions I am about to enunciate will, within ten years, be estab- lished truths and the accepted text-book of all nations. 1. It is the sovereign power alone which creates money. 2. In a country with exclusive domestic transactions a fixed volume of currency (legal tender), whether of gold, paper, silver, copper or of any other material would be of identical value. 3. The only reason why gold is the highest legal-tender standard is because creditor countries have chosen that material. 4. If creditor countries were to make their legal tenders exclusively of paper they would be at a premium over gold, as was that of Venice for centuries, and which sometimes was as high as 30 per cent, premium over gold. The premium was restrained from going higher by a law for- bidding a premium higher than 20 per cent. The paper or credit of the Bank of Amsterdam was at a premium over gold. Should the creditor countries of the world now make their treasury notes the sole legal tenders, gold and silver would be at a very large discount. 5. A " convertible" paper currency, i. e. not legal tender, but by exac- tion of law "convertible" on demand into metal legal tender, is a mon- strous device, wholly in the interest of the foreigner creditor and fatal to domestic productive industries of a debtor country. The foreigner alone avails himself of the " convertibility" to the exceeding damage of productive industry, derangement of currency, and general shrinkage of values, when, having crushed manufacturing competition and de- pressed the prices of raw material, he comes into this cheapened market to reap a second harvest. 6. A "convertible" currency, as a cause, cannot by any possibility bring about resumption in a largely debtor country, or maiutain it in a country plunging into debt. A law exacting " convertibility' is an un- mitigated evil, with no redeeming trait. 7. It is the condition of a country as creditor or debtor which alone determines its ability to maintain the par between gold and paper legal tenders. As creditor, it will inevitably be par, and as largely debtor it cannot meet all legitimate demands which may be made for gold and maintain par. All the laws in Christendom cannot give ability ; condi tion only can establish the par. Any law in violation of this law of nature will surely bring signal retribution upon the legislators. 8. In a country with a fixed volume of paper legal tenders, not con- vertible, any recklessness on the part of importers, which shall run the country into debt to the foreigner, will cure itself in the only possible way it can be done, by a rise in the price of gold, which, acting as a bounty on exports and a duty on imports, will speedily cause a return to par by excess of exports extinguishing the debt, when, of itself, without exac- tion of law and of necessity, paper will rise to the par with gold. The im- H. Mis. 62 6 82 RESUMPTION OF SPECIE PAYMENTS. porter will thus himself be made to pay for his folly of excessive importa- tions, whereas by "convertible" currency he throws the whole burden upon productive industries, which have had no participation in the wrong-doing. 9. All customs duties should imperatively be made payable in gold. This mode of restoring the par between paper and gold makes the foreigner, the reckless importer, pay the penalty of his recklessness, while domestic productions profit to same extent. But a " convertible " currency works by a double back action, relieves the foreign reckless importers of all loss, covers him with immunity, and throws the whole loss upon domestic productive industry. It is an evil of so accursed a nature that the ingenuity of Belial him- self could not invent a policy which so surely and so sorely enslaves the debtor to the creditor country. No despot that ever lived, ever imposed upon a subjected country any measure comparable for its cruel robbery to that of a "convertible" currency. No human being can conceive of any good it can possibly be to domestic productive industries. 30. We owe the foreigner some two thousand millions of dollars, the whole of which, admittedly, he can convert into demand claims. 11. This establishes the fact that a resumption would depend alto- gether upon his forbearance to do so, to any considerable extent. A resumption then, if possible, would be only by and during the con- tinuance ot sufferance by the foreign creditor. What assurance can be given that this sufferance will be extended or how long it will last 1 As a genuine resumption means an ability to meet all legitimate de- mands which may be made, and without convulsing the currency, dis- organizing industry, and shrinking all values, any resumption by the sufferance of the foreigner, is only a bastard resumption, as the for- eigner would in fact be the owner of all our coin, permitting it to remain on interest at call, to be withdrawn by him at any moment when his needs or his policy may dictate that course. The following British offi- cial circular shows that England considers her greater capital her only superiority over other countries, and is her " weapon of warfare with which to overwhelm and destroy foreign competition with her manufac- tures." With this bold and brazened declaration of purpose always fronting us in the face, it requires no little credulity, no little hardihood of assertion, to say that the foreign creditor will not make an embarrass- ing demand for coin. The laboring classes generally in tbe manufacturing districts of the kingdom, and especially in the iron and coal districts, are very little aware of the extent to wtaioh they are often indebted for their being employed at all to the immense losses which their employers voluntarily incur in bad times, in order to destroy foreign competition, and to gain and take possession of foreign markets. Authentic instances are well, known of employers having in such times carried on their works at a loss amounting in the aggregateto £300,000 or £400,000 in the course of three or four years. If the efforts of those who encourage the combinations to re- strict the amount of labor and to produce strikes were to be successful for any length of time, the great accumulations of capital could no longer be made which enable a few wealthy capitalists to overwhelm all foreign competition in times of great depres- sion and thus to clear the way for the whole trade to step in when prices revive, and to carry a great business before foreign capital can again accumulate to such an extent as to be able to establish a competition in prices with any chance of success. The large capitals of this country (England) are the great instruments of warfare, against the competing capital of foreign countries, and are the most essential instrument now remaining by which our supremacy can be maintained, the other elements — cheap labor, abundance of raw materials, means of communication, and skilled labor — being rapidly in the process of being equaled. Here is a table of our imports and exports from 1828 to 1877 : RESUMPTION OP SPECIE PAYMENTS. 83 United States exports and imports {merchandise only) for fifty years — 1828 to 1877. Years. Exports, mil- lions dollars gold. Imports, mil- lions dollars gold. 284.4 451.9 504.2 528 730. 3 1, 141. 9 l,2i0. 5 1, 081. 6 1,778. 1 2, 738. 3 401.7 1837 653.4 1842 569.6 1847 498. 5 1852 881,5 1857 1, 477. 7 1862 1, 426. 9 1867 1, 629. 1 2, 357. 6 2, 654. 5 1872 , .. 1877 10,469.2 2, 081. 3 12, 550. 5 12, 550. 5 12, 550. 5 The imports in " panicky '73" were 642 millions, or 300 millions more than in 1868, or six times those of '33 (101 millions). For five years prior to 1873 the imports were 579 millions more than the exports, and for ten years they were 1,127 millions, facts not before noted, but which " fix" the main cause of said panic, from the ruin of which we have not yet recovered. The imports it appears were — Doubled in 10 years 1826 to 1836 Tripled in 25'years 1826 to 1851 Quadrupled in 30 years 1826 to 1856 Quintupled in 41 years 1826 to 1867 Six times more in 50 years 1826 to 1876 In 1803 the imports were 64 millions, and in 1873, 042 millions, or an increase of 1,000 per cent. Mr. Ewing-. You state the amount of our foreign indebtedness at two thousand millions. On what do you base that estimate! Mr. Winder. On the statements of manypublicmen who have placedit at two to three thousand millions, and by this table of exports and imports which I now submit for examination by the committee, which shows an excess of imports over exports since 1859 of over sixteen hundred mil- lions of dollars. A large proportion of this enormous excess was met by securities at from forty to fifty cents on the dollar, thus largely swelling the amount ; and the calculation has been frequently published of fifty millions per annum being spent abroad in gold by our absentees ; then the foreign vessels carrying greatly the larger portion of freights and passengers swelled this amount still further, to the extent of some hun- dreds of millions ; then there was accumulated interest reinvested here, and large commissions paid the foreigner ; all of these, together with many other items, would appear to approach nearer three than two thou- sand millions. Not one cent of all this immense debt was for money received in this country ; the whole of it was for the surplus rattletraps of the foreigner, money spent by our traveling people, freights, commis- sions, &c, but not a dollar in money was received by us. On the con- trary, at the very period in which the foreigner insolently and falsely claimed to be loaning us money for the two thousand millions of interest- bearing securities which we were sending to him, he was drawing, receiv- ing from this country eight hundred millions of gold, which alone saved Mm from an overwhelming disaster. If, in 1866, when we sent to En- S4 RESUMPTION OF SPECIE PAYMENTS. gland in her critical need forty millions of gold in the space of three months, we had retained it, she would have suffered a deadly blow. In order more fully to comprehend the enormity of the financial blundering of our Treasury, let us take this view of the case. The Banks of England and France together have about five hundred and fifty millions of gold. Suppose, as we could have done, that we had retained those eight hundred millions of gold in this country, where now would be these five hundred and fifty millions of the Banks of Eng- land and of France % Which would now be the creditor country of the world % I now make the assertion, and I feel quite capable of maintain- ing the position, that the crime of reducing this country to the condition of a desperate debtor overburdened with annual taxation, paralyzed in- dustry, armies of the willingly industrious idle, the impoverishment of millions, and a general damage to all except strictly moneyed men and people of fixed incomes, is due to the policy of the Treasury Department and the banks. The loan of money, so called, by the foreiguer is simply a transaction ©f this kind : A, of America, contracts with B in London to lend him a certain amount on securities to be deposited with B. A then returns to America, without a cent of money, but with the right to draw a bill of exchange against his deposited securities. A does make such a bill of exchange and sells it to C, who remits to London to pay his debt there; the bill of exchange is charged to A and credited to C, but no money lias come from England on the transaction ; the bill of exchange has been paid for with our own money ; and so with every transaction called a loan, and the same process in all sales of our securities ; in all cases the payments are made from our own pool. I may, therefore, say with- out exaggeration that no successful contradiction can be made to the assertion, that with a wise fiscal policy during the past seventeen years we would this day be a largely creditor country, with employment at good wages for all the industrious, and a general prosperity. What I mean by a wise financial policy is one in full accord with the proposi- tions I have submitted for your consideration. Mr. Bell. Do you mean to say that while our government was sell- ing bonds abroad, through the syndicate, it received no gold for them? Mr. Winder. Not a dollar of gold, I apprehend, for the sale of all the bonds ever sold or hypothecated abroad, has ever been received in this country ; or if, in any particular case, a few dollars may have come aver, they were quickly reclaimed and went straight back again. Mr. Ewing. The exports of precious metals from 1860 to 1877 aver- aged fifty-six millions a year in excess of imports, making about nine hundred and fifty millions in the seventeen years. Mr. Winder. There seems to be a most unaccountable infatuation in the wide-spread belief that, in a largely debtor country, such as is ours, it is advantageous to it to have the premium, as it is called, on gold decline, aud that if it could be brought to par it would be consum- mate wisdom to get it down to par; whereas it is the most wretched policy that could be devised. Its evil is so patent and so monstrous that it is a marvel how intelligent men could for a moment be so misled. In order that every one may cure himself of this most pernicious fallacy, let him present to himself this problem : What possible disadvantage to any American productive industry can there be in a rise in the price of gold, however high ; or what possible benefit can any American pro- ductive industry derive from gold declining to par? Auy one who will correctly solve that problem will be effectually and forever cured of the par fever in a largely debtor country. RESUMPTION OF SPECIE PAYMENTS. 85 Mr. Fort. Do I understand you to say that it is better for us to have gold at a premium ? Mr. Winder. A premium of 100 per cent, would be of incalculable advantage to every American productive industry, and if it could be kept at that, in less than five years we would not owe the foreigner one dollar. Mr. Fort. You mean because the paper money is inexportable ? Mr. Winder. I mean that a premium on gold of 500 per cent, would cause our exports to multiply five-fold, and proportionally for any lesser or higher premium. Mr. Fort. And is a domestic currency which we can use and cannot be sent abroad. Is that what you mean ! Mr. Winder. I mean that every per cent, rise of premium ou gold acts precisely as a similar bounty on exports and a duty on imports. Mr. Bell. If the government had (as it has) a large amount of gold- interest-bearing securities, would not the appreciation in the price of gold be a misfortune to the government ? Mr. Winder. In what way ? Mr. Bell. In increasing the value of the debt to be paid. Mr. Winder. The appreciation of gold, by which I suppose you mean an advance in the premium ou gold, would, by causing a great excess of exports, bring home all of our securities abroad, when, of itself, the par between gold and paper would be established; there could be no premium on gold when the foreign debt would thus be extinguished; greenbacks and gold being at par, it would be immaterial alike to the holders of the bonds and to the government whether the bonds were paid in greenbacks or in gold. Mr. Bell. Suppose I had a plantation that was worth $10,000, with gold at par; if gold went up 100 per cent., would not the natural result be that my plantation would be worth $5,000? Would not its value go down in a corresponding ratio 1 Mr. Winder. If the premium on gold was caused by an increase of 100 per cent, in the volume of legal- tenders, yes; but it would be of equal value to you, it would bring $20,000 in greenbacks, and with $20,000 greenbacks you could buy $10,000 gold at 100 per cent, pre- mium ; but throughout all the observations I have made, or may make, it is upon the assumption of a stationary or fixed volume of greenbacks or paper currency. Now, under your question, your plantation is worth $10,000 in gold or in greenbacks indifferently, they being at par; with an unchanged volume of paper a rise takes place in gold; a premium is offered for it; how in the name of common sense is the greenback responsible for this rise ? How and why has it become " depreciated"? The premium is caused by some parties who wish to make foreign payments. This cannot be done by " greenbacks," but must be done by gold. This necessity for foreign payments creates an unusual demand for gold. This demand causes gold to rise in price as everything else rises from an increased demand. This gold thus purchased at a pre- mium and sent out of the country, diminishes the volume of money in the country, and of course appreciates or increases the value of what re- mains. Is not that a demonstration as clear and complete as any of the problems of Euclid ? Is it not perfectly clear that (the volume of paper being unchanged) the rise in the price of gold by its export, and diminishing the volume, does not work the depreciation of the remain- ing volume "? in a creditor country where its paper is not " convertible " by exaction £6 RESUMPTION OP SPECIE PAYMENTS. of law, but where gold and paper are necessarily on a par, should every dollar of gold be retired from the public, the paper would be still at par, because in a creditor country gold has no preference over paper in any transaction, there being no foreign creditor wanting gold. Further to show this delusion of the depreciation of a fixed volume of paper legal-tenders in a largely debtor country being established by a rise in the premium on gold, suppose as in the case of your plantation being worth $10,000 gold and greenbacks being at par, and the volume of money consists of 600 millions of greenbacks and 100 millions of gold, and a demand for gold should abstract the 100 millions of gold, gradu- ally raising the premium from one per cent., rising to fifty per cent, as the volume of gold diminishes ; according to your supposition, while the volume of money was 700 millions as above stated, it was on a par with gold, and of course worth $700,000, equal to gold ; now reducing, curtailing, contracting this volume of currency 100 millions reduces its value, according to your theory, to 300 millions. Is that not the reductio ad absurdum ? The bullionists, the " convertibles," argue that it is inflation of the volume alone which depreciates paper ; but, in this supposition or ex- ample, it would seem that a contraction of 100 millions of 700 millions' reduces the value of the remaining 600 millions fifty per cent. As in creditor countries where paper or credit is exclusive legal tender gold has always been at a discount, sometimes, as in Venice, the premium of paper over gold has been as high as thirty per cent, and was restrained from rising higher by a law which prohibited the charging more than twenty per cent, premium ; the same way with the Dutch banks — their paper was always at a premium over gold. Every fact which can possi- bly be adduced all concur to demonstrate the truth of the proposition that " it is the condition of a country as debtor or creditor which alone determines the par or discount of its paper legal-tenders." Mr. Bell. Leaving its foreign value out of the question and accept- ing gold as the standard of value, if gold rises, does not property fall in a corresponding ratio 1 Mr. Winder. If you mean by "leaving out of the question the for- eign value" of gold that the foreigner has no claim with which to with- draw the gold, then paper legal-tenders and gold will continue at par; gold cannot in that case rise above par, because nothing whatever ex- cept its use abroad can make gold rise above paper legal-tenders. Of course, if by augmenting a paper currency so that the foreigner will be tempted by high prices to deluge a country with his commodities greatly exceeding its exports, he will become a creditor and will draw the gold; that result is the inevitable consequence of a large paper volume with a convertible "currency in which he can get gold at par" ; in an incon- vertible currency he would have to pay a premium for gold, which would in so far lessen his profits and cheapen his goods for the country. Mr. Fort. Then it is because that paper is a domestic currency, and therefore hiexportable, that this advantage you speak of comes? Mr. Windee. The advantages of a paper legal-tender for domestic purposes are that it is susceptible of being made an unvarying volume, one which the foreigner can neither curtail, abstract, nor augment. For steadiness its advantage is superlative. A gold volume is of all things on earth the most unsteady, the most fluctuating, the most treacherous; no human power can control its volume, and of course cannot render it stable or steady. Every country has its suction-pipe in the great gold pool of the world ; that country whose suction-pipe is strongest gets the larger share. The creditor countries have supreme suction power, RESUMPTION OF SPECIE PAYMENTS. 87 and could draiu to themselves the whole gold, leaving other nations entirely to paper, if such should be their interest. Creditor countries, like all others, have practically a domestic paper currency, gold being- used chiefly for foreign purposes. Mr. Phillips. It seems that we have steadily exported gold for six- teen years. Is not the reason of our bonds coming back to us within the last few years that we prefer paying our debts to buying goods? Mr. Winder. It is not so much a matter of preference as it is of ne- cessity. By that murderous and insane contraction of our currency* and the criminal sales of gold by the Treasury and the banks, our produc- tive industries were crippled, millions of industrious people thrown out of employment. A fearful shrinkage of values so incapacitated our people for consuming large amounts of foreign commodities, crippling corporations so that they could not pay interest on their bonds, that the foreigner refused to take any more bonds because we would not take com- modities in payment, and because the interest on some of the securities was not paid. Our imports therefore fell off, and our people, being too poor to buy all of our own productions, forced larger shipments abroad, turning the balance in our favor. That balance the foreigner has not paid in gold, but in bonds at a large premium, which he had purchased at forty to fifty cents, and had been receiving for more than ten years 12 per cent, per annum on their cost. But the great, the transcendent wrong, and a most absurd violation of every principle of justice and political economy, was the change of payment of the bonds from greenbacks to coin. But it was of a piece with all the rest of the financial policy of our government, which seems to have been (as most assuredly it really was) as wholly in favor of for- eign interests and against American as though our administration had been conducted exclusively by foreign cabinets. Lunatics from an asylum could not have worked greater mischief. Mr. Phillips. We might have preferred to buy their merchandise rather than pay our debtsi We might have been more extravagant and have bought goods. Mr. Winder. The contraction too effectually disabled us to permit any further extravagance or to keep up the consumption of foreign com- modities. It was a matter of necessity, not of will. Mr. EwiNGr. Please state a little more fully the view you entertain that if paper be the currency of the country, a rise in the price of gold is an advantage to our home industries and a disadvantage to those with whom we deal. Mr. Winder. To illustrate: Our shipping interest has been under the harrow ever since we pretended to pay specie, and is now in great dis- tress. Suppose gold were at 200. An English and an American ship, each of 1,000 tons, are lying in port ; both obtain freight lists of £5,000 ($25,000), and proceed to England. The owner of the English vessel receives his £5,000. The American owner draws a bill of exchange for his £5,000, and gets for it $50,000 in greenbacks. These same ships return to this country with a freight list each of $50,000. The American owner pockets $50,000. The English owner purchases a bill for remit- tance and gets £5,000. How long do you suppose the English vessel could compete at this rate with the American ? Again, suppose the price of coal in England be $3 per ton ; in the United States, $4. One thousand tons of coal are shipped to England for sale, costing here $4,000. It sells in England for $3 per ton. The shipper sells his bill of exchange for $3,000 at 200 per cent., equal to $6,000. Again, for illustration, say flour is worth $6 per barrel in England, $5 here. One thousand barrels 88 RESUMPTION OF SPECIE PAYMENTS. sent to England would bring $G,000. A bill of exchange would give $12,000 to the shipper. So it is with everything, and relatively in pro- portion to the rate of premium on gold. It is a fact that if shipments abroad will lose 1 per cent, people will not ship one dollar's worth. If they can realize 5, or even 1, per cent., they will ship all they can lay their hands upon. Now, the premium on gold makes just this turning-point. Without a premium on gold they cannot ship unless the market-price here is much lower than abroad, but with a premium ou gold they can ship, although the prices here may be greatly higher than abroad. It is the fellow who remits who has to pay the premium, and this fellow with us is the foreigner and his agent who howl so lustily for par, while no American productive indus- try has ever asked for a convertible currency or for a par, except when it shall come of itself in the only possible way to endure by extinction of the foreign debt. In regard to the volume of currency which a country ought to have, there is no rule by which a specific amount can be named ; but so long as a country continues to be creditor by exports exceeding in value im- ports, it is entirely immaterial what is the volume of its currency. If with a billion of currency its exports exceed its imports the foreigner cannot endanger the par between its paper and its gold legal-tenders; that is a position which cannot be controverted, although it is not probable that a country with a billion of currency could export largely; its prices would be above those of all others. Mr. Ewing. But if it be a debtor country ! Mr. Winder. Then of course gold will beat the mercy of theforeignerj with a "convertible" currency it will be withdrawn; suspension of spe- cie payments will follow with premium on gold. The power of a creditor country over the currency, interests, and welfare of a largely debtor country with a "convertible" currency, is more searching, absolute, and despotic than that of any tyrant that has ever plundered his people. Mr. EwiNG-. The resumption of specie payments is, at present, im- practicable. Mr. Winder. The sun at noon-day is not a more indisputable fact. Mr. Sherman, the ablest exponent of the resumption fallacy, with the coun- sel of the ablest of those who would profit by resumption, in his exami- nation before this committee was utterly unable to solve the problem in the only way it could be solved, by showing conclusively that demands would not or could not be made exceeding an amount specified, and then as clearly showing that that amount could readily be met with funds which he could show we would have without derangement of currency, convulsion of domestic productive industries, or further shrinkage of values. Mr. Sherman's whole exposition was not how to resume, but how not to do it; it was an agglomeration of ifs, and ands, and buts, and contingencies, and expectations that nobody would want specie. If nobody will want it, nobody will suffer if there be no resumption. An assumed ability to pay all demands which may legitimately be presented is the only foundation upon which resumption should be based. An assured ability to pay knows no panic. Mr. Sherman's pre- scription for resumption is, first to run up a further debt of fifty millions with which to buy gold, paying interest on the bonds thus sold, forget- ting that on the very next day these very same bonds may be sold, and the very same men demand of him the return of the gold. It is useless to urge that this would not be done ; the purchase of these bonds is part of the policy of the crafty foreign creditor to lure back this couutry to the unspeakable folly of a "convertible" currency, which renders the RESUMPTION OF SPECIE PAYMENTS. 89 country simply a milch cow for the foreigner. He is not to be trusted ; he has openly avowed his capital to be his weapon of warfare, to crush and overwhelm our competing manufactures. Who are the parties who have snared the Secretary with a promise of fifty millions, and have ca- joled him into a blind confidence that this foreigner, who, when we owed him only from 30 to 200 millions, never failed every few years to con- vulse us by a drain of gold, now that we owe him 2,000 millions will no more demand our gold? Mr. Sherman professes to believe this in the face of the fact that while we were gorging him with 2,000 millions of securities, even in that moment he drained us of 800 millions of gold. Now, if he don't intend to draw why does he want specie payment! He "wants par. Well, if he will guarantee that no gold shall be drawn, par will come of itself. Mr. Ewing. But where there is acknowledged inability ? Mr. Winder. To illustrate: Look at the cases of Overend, Gurney & Co. and Duncan, Sherman & Co. Up to the moment of their failure they were apparently solvent, and would have continued so to this day if inconvenient demands had not been made upon them. Had people known of their condition, of their inability to meet the demands which might be made, they certainly would not have made deposits with them, would not have trusted them. And yet the United States in regard to resumption is in the condition these firms would have been had their affairs and their inability to pay been laid open to view. The inability of the United States, under a "convertible" currency, to meet all the demands which may be made is not only similar to that of these firms, but this inability is laid bare to the public gaze. All the world plainly sees that the demands which may be made exceed, ten times over, the amount of gold which the banks and the Treasury can possibly have. One-tenth of the demands which the rival foreigner may make would gulp down all the gold that could be accumulated. And yet, without the shadow of assurance that one-tenth, one-fifth, or one-half even may not be called for, Mr. Sherman, with intrepid faith in the harm- lessness of the Trojan horse, proposes to the country that it shall accept him. The foreign influence has with rare periods been most potential in shaping our fiscal policy. England herself owes her prosperity mainly to an inconvertible currency. By holding her gold, forcing up its price, she compelled the foreign creditor to purchase her commodities; the high price of gold gave immense stimulus to her industries so that every one was profitably employed; her exports increased, her manu- facturing system became organized, the markets of the world were made familiar with her manufactures, so that by the time she emerged from foreign debt she was in a condition for free trade and specie pay- ment, which she has persistently sought to impose on debtor nations. It was the withholding of gold upon which Pitt so confidently relied to rescue England from debt to the foreigner; and right well did that policy serve her. Yet with a serpent-tongue at the ears of our Secre- tary of the Treasury, she has taught him that a "convertible" currency is the one thing needful for a debtor country, and that honor and hon- esty require that we should let the foreigner absorb the fruits of our labors. I assert without qualification that an inconvertible currency does no injustice to the foreigner; he gets gold whenever he is entitled to it; if he sells us anything for gold of course he gets it. If he pre- fers to sell it for greenbacks he has no claim for gold, but like our own people can get it in the market. No one has injustice done him by an inconvertible currency; no one has ever shown injustice; no one can do so. It has been stated that an English gentleman came over to this coun- 90 RESUMPTION OF SPECIE PAYMENTS try with $500,000 to obtaiu the demonetization of silver. The commit- tee which reported the bill for that purpose stated — I have read io the report itself the name of this party — that it was mainly upon his representations that they were induced to bring in the bill. Mr. Fort. Then you are going upon the hypothesis that somebody was bought and sold? Mr. Winder. That this party came over prepared to use this money iu any way by which he could secure the passage of the bill. But it would seem from the facts that he had no occasion to spend a dollar of it. In regard to the committee itself, I hold that the facts reveal this state of affairs. This agent came over with the highest recommenda- tions from men in high position in England to men of equal position in New York, and, in turn, they gave him letters to Washington, com- mending him to consideration as one of the highest financial authorities. Indeed, it is very clear he was with the committee magister ipse; for they evidently were so impressed with his financial theories that they accepted him as their Gamaliel, and as such introduced him, in their report, to the House, believing, as sincerely they did, they were offering conclusive authority for the House accepting their bill. It is very likely, is it not, that England would send over a man with $500,000 to spend to induce us to pass a law for our own benefit and to her disadvan- tage! England is so famous for her disinterestedness that no one can doubt the motive which prompted the sending of this missionary. Mr. Port. Do you agree with Mr. Colgate that it will take three hundred and fifty millions in gold to redeem the three hundred and fifty millions of Treasury notes? Mr. Winder. Certainly it will. Mr. Fort. Can the Secretary of the Treasury resume without having as much gold as there is paper outstanding? Mr. Winder. Even should he have as much gold as there is paper outstanding, there is no certainty that he can maintain specie payment. If he had twice as much gold it could all be abstracted by the foreigner. Mr. Fort. Then how can we resume? Mr. Winder. We cannot resume and maintain specie payment with any certainty until we get out of debt, or so nearly so that the debt if drawn iu gold would not endanger suspension. This system of " con- vertible" currency must and will be abolished. If any one can show any advantage from it to any of our industries, let him do so. Mr. Eames. Do I understand you to say that there can be no resump- tion of specie payment so long as the country owes a dollar? Mr. Winder. I would not say so long as it owes a dollar; but so long as it owes enough to enable the foreigner to sweep away the basis, or a ruinous portion of it. Mr. Eames. What has this government got to do in order to resume specie payments except to meet interest on its public debt, and to pay the legal-tender notes now outstanding ? Mr. Winder. It must break the power of the foreign creditor for draining us of gold by stimulating an excess of exports over imports ; he now has the power to present more than can be redeemed. Mr. Eames. But when the government once redeems the Treasury notes, what becomes of them ? Mr. Winder. The government is obliged to pay them out again for current expenses. Mr. Hardenbergh. Would you fund greenbacks ? Mr. Winder. No; I would on the contrary substitute greenbacks for national-bank notes ; by that simple act, the 20 millions gold a year RESUMPTION OF SPECIE PAYMENTS. 91 which you would save as a sinking-fund, would in thirty years have paid off the entire national funded debt; that is one essential difference between greenbacks and national-bank notes. Mr. F ORT. What do you mean by convertible currency? Mr. Winder. I understand it to mean that the paper currency is re- deemable in coin on demand. Mr. Port. Is gold or silver a convertible currency ? Mr. Winder. Gold and silver currency alone, of themselves, are not a convertible currency ; that means that paper is convertible into coin on demand, redeemable in coin. Coin is irredeemable. Mr. Fort. How can you stop it, unless you destroy the paper cur- rency? Mr. Winder. All that is necessary to stop a convertible currency is to have no law exacting convertibility. Paper and coin legal-tenders in creditor countries will pass at par, with or without law. In largely debtor countries it will be below par in spite of all the laws which can be framed. Mr. Eames. I understand from you that the more you can get of this • (greenback) kind of paper currency, the better it is? Mr. Winder. No, I do not say so. I have not said anything of the kind. I should say, myself, let the volume of currency remain fixed, where it is. Mr. Eames. Do you think there is any more currency outstanding, including legal-tender and national bank notes, than is necessary for the legitimate business of the country f Mr. Winder. Whenever the currency is increased or decreased, the change always entails injury on somebody. If you increase it, the creditors lose; if you decrease, the debtors suffer and all property shrinks; therefore there should be neither increase nor decrease with- out conclusive justification. Mr. Eames. You do not think it safe to leave a question of that kind to the discretion of Congress ? Mr. Winder. Somebody must be trusted, and if we cannot trust Congress who can we trust? Mr. Fort. Do you hold that the resumption act should be repealed, even though gold should go to par? Mr. Winder. I do. The resumption act is a snare set by the for- eigner to get his hand upon the throat of all our interests, especially our manufacturing interests. The brokers tell Mr. Sherman resumption is practicable, if the price of exchange can be kept down ; with all of its advocates, resumption is invariably linked with an impossible if. An assured ability to meet all demands has no ifs or buts, and is the only condition which assures resumption. Mr. Port. What benefit is to come from resumption? Mr. Winder. That is an insoluble problem to all but the foreigner; he alone will profit by it. Mr. Ewtno. Explain a little more and connectedly your idea that the rise in the price of gold is a stimulus to industry. Mr. Winder. Suppose cotton is selling at 10 cents a pound and the premium on gold is 1 per cent., you get for your bill of exchange only 1 per cent, premium ; if gold should shoot up 20 per cent., you would get 20 per cent, on your exchange ; the price of cotton would go up two cents in greenbacks, the price in Europe for it being unchanged. Mr. Ewing. But the difficulty about that is, that the cost of produc- ing the cotton or the flour would probably be 20 per cent, more than if gold is at par. 92 RESUMPTION OF SPECIE PAYMENTS. Mr. Winder. The advance in gold would cause an advance in all ex- portable commodities and might increase the number of kinds of export; if the premium be very high, commodities would go abroad which have never heretofore been exported. If the rise in the price of gold were caused by an augmentation of paper then your objection would be good, but with the same volume of currency the expense of production would not be increased anything like the advance in gold ; foreign and export- able commodities would be higher. Gold is no part, now, of the currency; it is held as a commodity for which we ought to get the highest price we can, just as we do for other commodities. Gold is high only because the foreigner wants it If he can realize more gold in Europe from $1,000 worth of flour or oil or any commodity, than he can buy of gold here with $1,000 green- backs, he will, of course, remit commodities. Does not this statement make it perfectly clear that a rise in gold, a high premium, insures in- creased sale of commodities at augmented prices and causes commodi- ties to go abroad, which, but for the premium in gold, could not be ex- ported. Mr. BwiNGr. Explain why you think the silver bill will drive gold out. of the country. Mr. Winder. All of the creditor countries want gold. Silver being re- ceived for duties will tend to lessen demand for gold, and consequently lower the premium so that the foreigner will the more readily take it ; indeed silver, on speculation, maybe sent here and sold and gold bought and remitted for it. Mr. Hardenbergh. Why will they do so any more than before we issued this large amount of silver ? Mr. Winder. Because silver has gone up by being monetized. Mr. Fort. What special harm is that 1 Mr. Winder. It gives inducement to take gold instead of commodi- ties. Mr. Fort. You say they will take gold and send their silver ; what harm will that do? Mr. Winder. You have much gold to pay, and to buy gold back will cost you much more than you sold it for, besides the gold having taken the place in export of so much commodities. Mr. Phillips. As I understand you, by making our paper and gold convertible we endanger the maintenance of the equalization of values"? Mr. Winder. I do not know that I understand you. Mr. Phillips. We have now an equalization of values ; gold and greenbacks are nearly at par. Mr. Winder. Yes, at par, just as Duncan, Sherman & Co. were solvent until somebody asked payment. Mr. Phillips. Do I understand you that when we make this paper convertible into gold after the first of January, we endanger this equal- ization 1 Mr. Winder. Certainly. This equalization, as it is called, is only temporary, beyond all manner of doubt, greatly due to foreign manipu- lation, who, by this showing, expect to ensnare this country into re- sumption. I suppose that no intelligent, well-informed man in the country has a shadow of doubt that the syndicate and their European connections could, in a month, raise the premium on gold to twenty or thirty per cent. Who is able to answer for it that they or some other of equal ability will not, after resumption, make a ruinous demand for gold? The whole question is this: the foreign creditor can break down resumption at any moment — what sufficient assurance have we that he RESUMPTION OF SPECIE PAYMENTS. 93 will not do it ? Until that assurance can be had, resumption has to a prudent mind an insuperable barrier. Mr. Phillips. Then resumption, instead of maintaining the values, will destroy them 1 Mr. Winder. Eesumption places us absolutely and helplessly at the mercy of the foreign creditor — the moment for a crash depends entirely on his will ; it may be sooner or later, but is inevitable; it is literally the sword of Damocles hanging over the head of our currency. Since Asia has ceased to drain Europe so largely there is less need for the foreigner drawing gold, but his avowed policy of a money warfare to crush out our manufactures ought to be a sufficient caveat to our states- men not to place these great interests of our country at the mercy of a rival who professes a purpose of extinction toward them. The result of a "convertible" currency giving power to the foreigner has caused ninety-five of every one hundred persons who have embarked in busi- ness in this country to fail ; that has been the fruit which it has pro- duced. Is it so grateful that we must go crazy to get back again into the same fatal rut ? The foreigner and his satellites in tbis country charge all our disas- ters to overproduction of domestic commodities. As we imported some two thousand millions of foreign products more than we exported, it would seem that our fault was too little production, for had we produced enough for ourselves we would not have needed this immense supply from the foreigner. But suppose we had produced five times as much as we did, will these logicians show how these excessive productions could have brought us into debt; how they could have caused a dollar of gold to go abroad 1 Mr. Bell. If that were true, and if overproduction could account for the depressed condition of the country, would not ceasing to produce correct the evil ? Mr. Winder. I should like to hear Mr. Eesumption answer that question. William Pitt said it was idiotic to suppose a country largely in debt to the foreigner could resume specie payment ; the debt is in effect a loan on call, which the foreigner can make at any moment. Mr. Phillips. Then you hold that the only safe resumption would be in paying off our foreign debt and funding it at home ? Mr. Winder. I do not consider resumption or a convertible currency wholesome anywhere ; but certainly the foreign debt should be so re- duced that a demand for its payment should not overwhelm us with dis- asters ; if owned at home, the debt would not comparatively hurt. Mr. Bell. What is the reason that the debt would not hurt if owned at home? Mr. Winder. Because it would not cause a drain of gold to derange all interests ; the whole amount would continue to circulate. Mr. Ewing. What have you to say about the probability of the Sec- retary of the Treasury maintaining resumption after the 1st of Janu- ary, 1879 ? Mr. Winder. The syndicate, with its foreign affiliations, is very pow- erful, and they may stave off for a time embarrassing demands, but if their interests should dictate a different course they could in a month put an end to resumption. The foreigner would have Mr. Sherman in his power as much as a cat a mouse it has caught. She may allow it to seem to be at liberty for a while, but, sooner or later, with a slap of her paw she puts an end to her victim. So the foreigner with Mr. Sher- man ; no one knows the moment his paw will slap over the Secretary ; but come the catastrophe certainly will. 94 RESUMPTION OF SPECIE PAYMENTS. 1. Besumption of specie payments means an ability to meet all legiti- mate demands for specie which may be made without causing derange- ment of the currency, convulsions among productive industries, and shrinkage of values. 2. The only legitimate actual need for any considerable amount of coin is for the foreigner — is to pay foreign claims. A domestic combi- nation or conspiracy ou a large scale might call for a large amount, but in the absence of claim by the foreigner a domestic combination can never be very formidable. In a " convertible " currency exacted by law the ratio between coin and paper currency, including deposits, is never less than three to six for one. Consequently, on the withdrawal of coin, a corresponding cur- tailment of the currency must be three to six dollars for every dollar of coin withdrawn. In case of a drain in a largely debtor country by the foreigner, as the extent to which he may drain is unknown, the banks, in order to prepare for the worst, do not stop at a curtailment of their loans at the ratio of three or six to one for coin actually drawn, but, in anticipation that there may be further demands, remorselessly continue the curtailment of loans to save their coin until such a general crash takes place that their debtors can no longer pay up, and the prices of commodities fall so far below foreign markets that the foreigner can re- alize more gold by shipping commodities than he can by shipping gold. But this process has brought down the commercial community and debtors generally by battalions, has deranged the currency, has crushed manufactures, has thrown hundreds of thousands of the willingly-indus- trious into idleness, has broken the hearts of thousands, reduced the affluent and the moderate to poverty, and has demoralized the whole community — all of these evils flowing clearly, directly, and solely from the foreigner demanding gold instead of taking our commodities in ox- change for his commodities sold to us. The foreigner has availed himself of our large volume of paper cur- rency in which to sell his own goods at high prices, but instead of buy- ing our goods with the currency he received in payment for his com- modities, he insists on taking all of the coin, upon which the whole currency is based, with the one-fourth of it which he received for his commodities ; by this process, which is possible only under the idiotic " convertibility " process, he leaves the other three-fourths of the cur- rency without any basis, and, of course, the community without a dollar of currency, unless by a violation and utter disregard of the "con- vertible" law, by a "suspension" of specie payments by the banks, and the adoption of temporary inconvertible currency. Thus it appears that in every emergency the "convertible" currency has to seek shelter and recuperation under the wing of the " incon- vertible." Now, we ask in all soberness and candor, which is. the pref- erable, the " convertible," which ever proves itself helpless in emer- gencies, or the inconvertible, which ever rescues a community from the depths of misery into which a "convertible" currency has never failed to hurl it, and which always fails to afford relief to a community at the only times when its service can be of any use whatever, and instantly flees to the shelter of that despised " inconvertibility " which is ever courted in adversity, and which alone has ever rescued a community from the evils incurred by a " convertible" currency. The moment the inconvertible brings a community into the region of prosperity, the " convertible" again usurps the throne only again to betray the com- munity into the power of the foreigner. It is the foreigner, and those who with bim profit at the expense of RESUMPTION OF SPECIE PAYMENTS. 95 the community, alone, who howl for " convertibility." No American productive industry profits by "convertibility." Every American pro- ductive industry has been, is, and ever will be, the victim, while the foreigner always profits by it. An "inconvertible" currency of a fixed volume is a self-sustaining, self-adjusting, self- renovating power, upon which alone any community can safely rely. When foreigners and their agencies in this country " overwhelm " us with imports, refuse to take full pay in commodities, but require gold, let them pay for it ; they have got pay for their com- modities in currency, just as the holders of domestic commodities have ; let both stand on an equality ; let him who wants gold buy it iu the market. The foreigner has the right to sell his goods for gold ; he can always do so, but then he must take the gold price, whatever that may be ; but no, the foreigner wants to sell in currency at high price, and then to get gold at par. This is a damnable insolence as well as a robbery, and yet it is only such persons and their abettors who squall and bellow for " honest" money, when they refused to sell for what they call " honest " money, and preferred to sell in currency. Now, when the price of gold advances, say 10 per cent, for an ex- ample, the effect is just this : The shipper of American commodities will get just 10 per cent, more for his bill of exchange, and this bill of exchange is bought by the foreigner for remittances he pays the premium. The shipper of American commodities profits by it. This premium enables millions of our commodities to go abroad which would be obliged to re- main at home without the aid of this premium. Everybody can under- stand that if there be a loss of 1 per cent, no one wishes to ship a ton ; but if there be a profit of 5 or even 1 per cent, people will ship a hun- dred millions of tons, or so long as they can realize profit of 1 per cent. The consequence is, exports have a bounty of the premium on gold, while imports have a quasi duty of the same amount. This process en- courages exports and discourages imports. There is one proposition which is a pure truth if not an axiom, and should be the motto of every statesman : Take care to encourage exports ; imports will take care of themselves. Views of Mr. J. D. Vermilye, president of the Merchants' 'National Bank, New York. Washington, D. C, April 19, 1878. Mr. Ewing (to Mr. Vermilye). The Committee on Banking and Cur- rency is engaged in an inquiry as to whether it is practicable and con- sistent with the public welfare to resume specie payments on the first of January, 1879, and we have invited you here for the purpose of obtaining your view's on the subject. Mr. Vermilye. You ask me the question whether, in my judgment, it is practicable for the government to resume specie payment on the 1st of January next. Mr. Ewing. To resume and maintain resumption. Mr. Vermilye. I do not, for myself, see the slightest difficulty in it. Mr. Ewing. Do you think the present volume of paper currency can be kept afloat redeemable iu coin ? Mr. Vermilye. I do not see that there is any difficulty in that at this time. I have always wished, and wish now, that the amount of currency was reduced ; but, in the present state of business, with ex- change in our favor, we are not losing coin to any amount, and I do not 96 RESUMPTION OF SPECIE PAYMENTS. see why we should. I do not see anything ahead, at any rate, for eight or ten months, to draw away our coin. I should not think there was any difficulty at all in maintaining resumption, particularly as the legal-tender notes are to be reissued and used. That, I understand, is part of the plan. The Secretary of the Treasury, as I understand, has the right to reissue legal-tender notes. Mr. Ewing. He so interprets the law now, but I have not understood that such has been his interpretation heretofore. Mr. Vermilye. I only understood it so from reading the conference of the Secretary of the Treasury with this committee. I had supposed that the law provided for an absolute redemption of legal-tender notes. Mr. Ewing. What is regarded as a safe reserve for the maintenance of specie payments — what proportion of coin to paper outstanding? Mr. Vermilye. Under the old system we used to think that, with a reserve of from 25 to 28 per cent, of coin against deposits, we were pretty strong. Mr. Ewing. Against deposits aud circulation ? Mr. Vermilye. Circulation, so far as the New York banks were con- cerned, did not amount to a great deal. The New York banks were never able to keep out their circulation. I do not suppose that there ever was a time that the city banks of New York could not maintain specie payments on their own notes. Take, for instance, our own bank. It was difficult for us, under the old system, to maintain a. circulation of $200,000 ; and under the new system we took out $900,000 of circula- tion, aud hardly ever saw a note of it at that. Mr. Ewing. When specie payments are resumed, the coin reserve for redemption (whether in the Treasury or in the banks) must of course be in some considerable proportion to the circulation and deposits com- bined — you would say 25 to 28 per cent, f Mr. Vermilye. That question would not operate, so far as the gov- ernment is concerned. As I understand it, the maintaining of specie payment by the government is the payment of its demand debt. It is not a question of bank deposits. Mr. Ewing. I am treating the government and the banks as in effect one, so far as the maintenance of specie payments is concerned. All of the deposits and all of the bank circulation are at last solvable in legal- tender notes which are solvable in coin, so that the government is prac- tically at the bottom of the structure. In old times you thought that from 25 to 28 per cent, of the amounts of the deposits should be held as coin reserve. Mr. Vermilye. Yes ; I spoke of the financial centers, New York, Boston, &c. Of course the country banks never carried anything like that. They relied upon the city banks, and they do now, and would still in case of resumption. I think that the country banks would do as they do now, consider their reserve in New York banks as their reserve; as in case of resumption it would be immediately converted into specie. Mr. Ewing. What was the old rule of proportion of the coin reserve to the currency outstanding ! Mr. Vermilye. I cannot answer that. I never paid much attention to it. Mr. Hardenbergh. It was not over 10 per cent., was it f Mr. Vermilye. I should say from 10 to 12 or 13 per cent., but I can- not give you anything like an exact answer. Mr. Ewing. What is the rule in England 1 Mr. Vermilye. That I do not know. So far as the Bank of England RESUMPTION OF SPECIE PAYMENTS. 97 goes, I believe that the rale is to have coin against its issues, dollar for dollar. Mr. EwiNG. We have now, according to the report of the Comp- troller of the Currency, something over twenty-two hundred millions of deposits, largely demand deposits, in the various banks. There are then six hundred and fifty millions of paper money in circulation, making in the neighborhood of three thousand millions of paper money and depos- its. About what proportion of coin will the government have on the 1st of January, 1879, to turn all these deposits and circulation, practi- cally, into a redeemable demand? Mr. Yeemilte. I do not think it necessary to carry the 25 or 30 per cent, reserve on twenty-two hundred millions of deposits and sixty-five millions of paper currency, because, in the first place, if the government is allowed to reissue legal-tender notes, it will go on reissuing them over and over again. After all, it is a matter of confidence. That is all that there is in it. If people are alarmed about the government not being able to pay its legal-tender notes with a fund of one hundred and twenty-five or one hundred and thirty millions of gold (three hundred millions of greenbacks being out), the government would be just as easily broken as it would be if there should be an attempt to break the banks and the government together by a demand for the payment of deposits and circulation to the amount of twenty-eight hundred millions (inscribed credit and issues). After all, as I say, the whole thing resolves itself into a matter of credit and of faith. If the people have faith in the government that when they need to draw one hundred dollars or a million of dollars, they can go with their greenbacks to the subtreasury and get it in coin, that is all that there is of it; and unless there is that faith and confidence in the government, specie payment cannot be re- sumed under any circumstances. If the government anticipated that it would be called upon to pay its tbree hundred millions of legal-tender notes in gold, anybody can see that it could not be done. But that is not the case, and is not likely to be the case. I think that for a time after the commencement of specie payments there will be a pretty heavy demand for gold, and that demand may arise from this cause: People have been so long without coin that they rather like to see whether they cau get it, and for a time they may draw heavily upon the govern- ment supply of coin, because that is the only source of coin that there is. Whatever coin is in the banks is on special deposit. But I think that that demand will very soon subside. I do not think that there is any danger whatever in the government attempting to resume specie payment on the first of January, 1879. I do not see that there can ever occur a period when the government cau better do it. The whole trade of the country and the state of exchange at present (and as it is likely to be) all tend to that one result. Mr. Ewing. At the base of this twenty-eight or twenty-nine hundred millions of deposits and currency outstanding there is, or will be on the 1st of January, 1879, $140,000,000 of coin. That is the amount which the Secretary anticipates. Tou say that there will be a pretty large drain to begin with ; but that so long as confidence lasts the govern- ment is safe. May not that drain be large enough to shake confidence ? Mr. Vermilye. I should say not. You must bear in mind that the very fact of the resumption is an inflation of the currency. You are not withdrawing a dollar of legal-tender notes which you cannot reis- sue. You are therefore adding to the money of the country, money which is now demonetized, to the extent not only of the $140,000,000 of gold which the government may hold on that day, but to the extent of H. Mis. 62 7 98 RESUMPTION OF SPECIE PAYMENTS. the $35,000,000 or $36,000,000 of gold in the New York banks which now stand as special deposits. Of course we are not going to take special deposits after the 1st of January next. We are not going to allow depositors to draw their currency in greenbacks, then go to the subtreasury and convert them into gold, and bring the gold to us and deposit it as a special deposit. If we allowed that we would be squeezed to death ; and the only thing we can do is to notify our dealers that after the 1st of January, and perhaps earlier, gold will not be received on special deposit. If taken, it must be taken as a general deposit, the same as bank or United States notes. So that you see that you not only add to the circulation the $140,000,000 of gold that is in the Treas- ury, but also the special deposits of gold in the New York banks. I take it that if specie payment is resumed on the 1st of January next the premium on gold is wiped out; then there is no object for dealers to have special deposits. If you have a deposit of $150,000 of gold in a bank, you do not want to go to the bank to borrow $150,000 on that gold and pay interest for it. Gold is then worth no more than the paper itself. Mr. Ewing. What is the amount of these special deposits that you speak of? Mr. Veemilye. My recollection about the special deposits of gold in the New York banks is that they are something like $30,000,000. Our own bank, for instance, has $2,000,000 of special deposits in gold. Mr. Ewing. That would make $160,000,000 at the base of this $2,850,000,000 of circulation and deposits ? Mr. Vermilye. Yes, sir. Mr. Ewing. If you do not take gold on special deposit after the 1st of January, 1879, and if you expect to get it on geueral deposit, you must expect then to pay gold to any of your depositors that want it? Mr. Veemilye. Certainly. Mr. Ewing. That practically turns the bank deposits into a gold de- mand after the 1st of January, 1879. Mr. Veemilye. That is so. Mr. Ewing. You speak of its being impossible to resume specie pay- ment without confidence, that is, confidence that this $160,000,000 of gold will answer all the actual demands that will come from the holders of twenty-eight or twenty-nine hundred millions of outstanding gold demands. Mr. Veemilye. In answer to that I would say, that if a man has a credit in a bank he is not, of course, going to load himself down with gold — to take the gold home and lock it up — when he is satisfied that to-morrow he can get all he wants. In other words, he does not want any more gold than he is obliged to use — say for duties or something of that kind. And even, after the 1st of January, the legal-tender notes are really receivable for duties. Mr. Ewing. The country is practically barren of gold now, and you say that there will be a pretty large demand by persous who prefer to have gold to hold or hoard it ; may not even that demand from our own people run up to the amount of this reserve"? Mr. Veemilye. We have never found in New York, during specie payments, that the demand for coin came from interior towns or cities, outside of the large cities of the country, except in certain cases like this. We have found, in old times, during specie payments, that during the cotton season a considerable amount of gold went to the South. But the trouble has always been, in the suspension of specie payments, that the exchange was against this country, and that the specie was leaving RESUMPTION OF SPECIE PAYMENTS. 99 the country, not that it was going into the interior, for it never did go there to any great extent. Take a country bank with a capital of, say, half a million of dollars, and I do not suppose that you would ever find over $50,000 of coin in its vaults. The country banks would rely on their New York, Boston, or Philadelphia credits as coin. Mr. Ewing. But before the war, when we had, according to Mr. Amasa Walker's estimate, $285,000,000 of coin in the country, the banks never held in their reserves over $83,00;>,000 of coin, leaving more than two-thirds of all the gold in the country outside of the banks. In that situation the people held over two-thirds of the coin in the country, but in the present situation the banks and the Treasury hold practi- cally the whole of the coin and the people none. Mr. Vermilye. I hardly think that you can say that the people have none. There must be a very large amount of coin among the peo- ple. How much, of course, I cannot get at, but I only judge from a little circumstance within my own knowledge. I know one case where a lady, in 1864, put in my hands $6,000 in gold coin. I have tried to induce her, time and again, to sell that coin and invest the amount. 1 have at this day the identical coin which she placed in my hands. It has been locked up in my chest in the bank, and there it is. That is, I should judge, one of a great many cases. It is a small amouut, to be sure, but it only goes to show that there is a certain hoarding which you and I know nothing about. In that way there may be a good deal of coin in the country. It is very easy to hold United States gold-cer- tificates. I have known cases where certificates have been taken out of the bank to a large amount and locked up in safe deposit compa- nies. That gold does not show. There is a good deal of gold in New York which is loaned upon, and the coin is taken out and held as collat- eral. That does not show. There is hardly a day, I think, that there is not more or less coin, and sometimes a very large amouut, loaued upon ; and most of the banks, I know, take the coin-certificates out, put in an envelope, and hold as collateral. They do not count it in place of the currency given for it. Some banks do, but as a rule they do uot. Mr. Ewing. But the amount so held in private bauds, hoarded since the beginning of the war, must necessarily be exceedingly small. Mr. Vermilye. It has diminished. Row small it is I cannot say. Mr. Ewing. Professor Linderman estimates all the gold so held at fifteen millions of dollars, outside of the banks and the government, and east of the Rocky Mountains ; but before the war there were $285,000,000 of coin in the country and some $83,000,000 in the banks. Therefore,. over two-thirds of the whole coin of the country was held outside of the banks ; and that is so now in England and in France. Mr. Vermilye. What was the amount of paper circulation at that time? Mr. Ewing. Two hundred and fourteen million dollars. Mr. Vermilye. That is my recollection of it. lou must notice that the paper circulation now is three times, or three and a half times greater than it was then. There is no necessity for the proportion of coin now that there was at that time. Coin at the South was a great deal more freely used as a currency than it ever was at the North ; and you have three times the amount of paper now out, and which it is pro- posed to leave out as a currency. It is a well-known fact that a poorer currency displaces a better one, and therefore you do not now get so much coin. If you can assure the public that if a man wants $1,000 in coin he can go to the bank, or subtreasury, and can convert his bank- note, or his legal-tender note into coin, that is all that is needed ; and 100 RESUMPTION OF SPECIE PAYMENTS. so long as there is no foreign demand and no outflow of coin, you are perfectly safe in assuming that with $140,0110,000 of coin in the Treas- ury, and with the amount of coin that is in the hands of the public, and also in the banks, there is no difficulty in resuming specie payments. Mr. Ewing. You say that the poorer currency always drives out the better ; and you are going on the assumption that gold is the better currency. On that assumption resumption is impossible. Mr. Veemilye. What I mean is this : that if a bank-note or a legal- tender note of $1,000 will answer a man's purpose, he is not going to change it into silver and gold and lug the specie with him. Mr. Ewing. Then you think that bank-notes are better than gold and silver % Mr. Veemilye. No ; I think exactly the opposite of that. I am just as far from thinking that as you can possibly dream of. I do not be- lieve in it. I would consent to withdraw bank-notes and leave the out- standing currency to the government. If we are to have an excessive paper issue, I would give it to the government. Mr. Ewing. The meaning of the poorer currency driving out the bet- ter is, that when there is an established difference between one kind of currency and another, the people hoard that currency which seems to them to be best. That is the condition of things which I apprehend after the 1st of January, 1879 ; that the people will entertain your idea that gold is the better currency, and that therefore gold will go practi- cally out of circulation ; that is, it will be hoarded by the people. Mr. Veemilye. I do not suppose (as I stated in the beginning) that, if the people have faith that they can get the coin when they want it, there will be any great demand for coin. In the case of the silver dol- lar there was a desire at first to handle the new silver dollar, but I think the people are now entirely satisfied, and do not want any more. I carried a couple of silver dollars in my pocket for three or four weeks, and I was very glad to get rid of them. People are not going to be loaded down with coin if they are satisfied that when they want it they can go and get it. Mr. Ewing. Now, on this point of the amount of gold in the country. In England they have $772,000,000 in gold and silver, according to the estimate of the deputy master of the British mint, of which $120,000,000, or one-sixth, is in the banks. In France they have, according to the estimate of Victor Bonnet and the London Economist, $1,400,000,000 in coin, with $417,000,000, or about one-fourth, in the banks. In this coun- try we had before the war, when we had specie payments, $285,000,000 coin, of which the banks succeeded in coutrolling$83,000,000. All of which facts indicate, it seems to me, that, in order to maintain specie pay- ments, you cannot rely on being able to control in the redemption-fund over a third of the aggregate volume of coin in the country. That is, the home demand for currency will absorb two-thirds of the coin that is in the country. Now, if that rule, which applies in England and France, and which applied here before the war, be applied to us now, it is perfectly evident that as almost all the coin in the country has got into the Treasury and the banks, when redemption comes two-thirds of it will be got out and will be absorbed by the people. Mr. Veemilye. What is to make the demand for coin under resump- tion % What is there now to make a demand for coin? I do not know, and you do not know what is going to make a demand for coin in the future, but what is there now in the state of the business of the country, or in the state of the exchanges, to make a demand for coin % RESUMPTION OF SPECIE PAYMENTS. 101 Mr. Ewing-. Every man who has $25 to carry in his pocket will find it just as convenient to carry it in gold as in paper. Mr. Vermilye. There you are mistaken. Mr. Ewing. Every man who wants to hoard money will hold it in gold rather thau paper ; because paper is an unsafe thing to hoard ; it may be burned, or it may be eaten up by rats or mice. Confidence in the banks has been a substitute for coin, because the people could not tell the condition of the banks, and would assume from the character of the men controlling them that they were all right. Here was redemp- tion maintained on confidence. But you cannot rely on that confidence when the public see, day by day, exactly what the drain from the Treas- ury is. And if this drain should amount to one-half of the amount in the Treasury in the first month after resumption, whatever confidence there was would probably be lost. There is no concealment of the con- dition of the Treasury. It is known to everybody. And therefore con- fidence eannot be a substitute for coin. That is the way it looks to me. Mr. Vermilye. It does not seem to me that there is going to be any drain of gold after a short time, when the people see that they can get it. You say that in the first thirty days after resumption they may de- plete the Treasury to the extent of one half— $70,000,000. I think that in ten or fifteen days after resumption there may be some pretty large demands for coin ; but what is to become of the coin ! It is not taken away. It is put in banks. It is not lost to the public. It is not lost to the business community. It is just adding so much more circulation. It is a means of inflation. If a man gets $25, or $50, or $100 in coin, it is in place of so much paper. He is no richer, and the banks are no poorer for having gold instead of paper. You are bringing in one hundred and sixty or one hundred and seventy millions of dollars, and as you go on to coin silver there is no end to it so long as you use the paper. You are just adding so much to the circulation of the country, and if the country were in a prosperous condition you would see a state of things somewhat such as we had at the commencement of the issue of legal-tender notes. Now, I would like to see the greenbacks redeemed, as was certainly the meaning of the resumption act. The meaning of that act was not that the Secretary of the Treasury should pay $100 or $500 of gold to-day for greenbacks, and then should reissue the green- backs to-morrow; I should like to see their absolute redemption. Mr. Bell. And the destruction of the greenbacks ? Mr. Vermilye. And the destruction of the greenbacks. I should like to see their destruction at once to the extent of $140,000,000, to bring down the paper currency. I think that then we should bring prices more to their real values, and everything would be on a firm, solid basis. You will have an enormous volume of currency when you add to the amount outstanding $180,000,000 of gold and silver coin, and when there is no end to the amount of coinage of silver which you are con- stantly pouring in and issuing bonds to pay for. You are not paying for the silver in greenbacks, but you are paying for the silver in bonds on which yon have to pay 4 and 4J per cent, interest, and it looks to me like a very dear bargain. Mr. Ewing. But let us see how that works. The Treasury issues five millions of bonds to buy five millions worth of silver bullion ; it coins that bullion, and with the coin buys another five million of silver bullion, and so on ; so that you have only five millions of bonds out. It seems to me that the interest-bearing debt is not increased except by five million dollars; and the last five millions of silver coined will pay for these bonds. 102 RESUMPl'ION OF SPECIE PAYMENTS Mr. Veemilye. What does the Secretary pay for the bullion ; does he pay silver, paper, or with gold % Mr. Ewing. He can pay for it in silver dollars. Mr. Veemilye. I do not know whether that can be done or not. I should doubt it. Mr. Ewing. It may not have been so, but it can undoubtedly be done. Now, you think that after the 1st of January, 1S79, there is to be considerable inflation ? Mr. Veemilye. I do. Mr. Ewing. That is, inflation of the currency, and also inflation of prices, is it not ? Mr. Veemilye. I should think that that would be natural. Mr. Ewing. When wages go up, and the price of raw materials go up, that increases the cost of manufactures and will diminish our exports. Mr. Veemilye. We are going over the same thing that we have been since 1861. Mr. Ewing. Will it not have that effect 1 ? Mr. Veemilye. It will in a measure. Mr. Ewing. Will it not then change this favorable balance of trade and restore the old balance of trade against us "? Mr. Veemilye. No; I do not think that that necessarily follows. This country has gone through a state of things which it never went through before; and that has started the ingenuity of the people, so that we are not so dependent upon outside goods as to create a large demand for coin abroad. My apprehension of coin going abroad is from the amount of bonds that may come back and from excessive importations. Our bonds we know have been coming back for some time, but I do not think that that is going on now. Mr. Ewing. Will not the tendency of this inflation of prices, which you anticipate following resumption, be to diminish our present favor- able balance of trade ? Mr. Veemilye. I do not think that that is necessary. If you sup- pose by that question (as I presume you do) that we are to get all our goods from abroad, of course that would follow. But take our iron interest. That is dead now. Inflation may start that, and it may start the industries of this country. But what is the consequence? It starts it on the old system of high prices, and then this whole thing is to be gone over again. Mr. Ewing. Thatis, it will end in a collapse 1 ? Mr. Veemilye. It will end in a collapse. Mr. Ewing. If it must end in a collapse, that means in the Treasury Department not being able to maintain specie payment. Mr. Veemilye. I do not think that that follows, because it is in the power of the government to retire its notes at any time. Congress can to-day pass an act to fund the greenbacks, and I believe that the inten- tion of the resumption act was to fund them. In that way it is in the power of the government to check this inflation. Mr. Ewing. That is your mode of maintaining resumption, is it f Mr. Veemilye. That is one mode. Mr. Ewing. Do you see any other safe mode of maintaining resump- tion ? Mr. Veemilye. I do not think that I can point our how long the gov- ernment and people can go on and pay specie, if such a state of things were to come as I have indicated — a foreign demand, and a fear in the public mind that the government could not pay its debts. The moment RESUMPTION OP SPECIE PAYMENTS. 103 confidence is lost, people want the coin, and of course there is a suspen- sion. I do not see any reason why the government should come to that at all, if it will fund a portion of its notes. I do not mean that it should do so necessarily now, although I should like to see it done now or within one or two or three years. If it should do so, what is there to make a demand upon the government? The receipts for customs are paid in coin, and the government has no coin to pay out except the interest on the public debt. 1 do not see, therefore, why the govern- ment cannot maintain specie payments, simply by reducing its legal- tender notes, or by withdrawing them altogether. Mr. Ewing. I believe with you that the purpose of the resumption law was to destroy the legal-tender notes as fast as redeemed. And I understood from the tenor of Mr. Sherman's remarks in the Senate, when the bill was pending there, that that was his construction. That mode of resumption might be entirely practicable; I do not question that. But the Secretary of the Treasury now says that it is his purpose to reissue legal-tender notes, and that he understands the law to contem- plate the reissue and the keeping outstanding of three hundred mill- ions of legal-tender notes. That is the plan of resumption respecting which we wished to inquire of you whether you thought it practicable to maintain it. Mr. Veemilye. I do not see any difficulty in it as things now are. Mr. Ewing. But you see no assurance that things are going to remain as they are ? Mr. Veemilye. ISo, sir; none of us can tell what is ahead. Mr. Ewing. Things may change in eight months so as to make that mode of resumption impracticable. Mr. Veemilye. It is possible ; but, at the same time, it is wholly in the power of the government to maintain specie payments by retiring United States notes. , Mr. Ewing. But if the government were to maintain resumption on the basis of keeping out the whole of the three hundred millions of legal- tender notes, you think it probable that there would be a failure f Mr. Veemilte. I think it is possible. Mr. Ewing. Do you not think it probable I Mr. Veemilye. I do not think it is ; because I do not think that the government would put itself in the position. Mr. Ewing. You think it would retire legal-tender notes rather than fail in resumption? Mr. Vermilye. I think it ought to. Mr. Ewing. And, therefore, you think that a failure will not occur, because you think that the government will first retire its legal-tender notes ? Mr. Vermilye. Either retire them altogether or reduce them to a point where they will be perfectly controllable. Mr. Ewing. What would be the effect on the business of the country and on the credit of the government of a resumption and then a failure ? Mr. Veemilye. It would be disastrous. Mr. Ewing. Disastrous to business and to the credit of the govern- ment ? Mr. Veemilye. Yes. Mr. Ewing. Do you not think that the favorable balance of trade for the past three years has been due, in a large part, to the decrease of the purchasing power of the people ? Mr. Veemilye. It does not strike me in that way. There is just as much money now in circulation as there was before 1873. 104 RESUMPTION OF SPECIE PAYMENTS. Mr. Ewing. Not quite. Mr. Vermilye. Not far from it. Mr. EwiNG. There is as much money in existence, but not in circula- tion. Mr. Vermilye. Well, in existence. Mr. Ewing. The tables show that the favorable balance of trade in the past three years has resulted from a very small increase of exports and a very large decrease of imports, indicating to my mind that it is the hard times among our people, the diminution of purchasing- power, that has caused this result. Now, do you not think that when the press- ure of the past two or three years is relieved, and when things begin to come up, or when there is this inflation of values which you speak of, the increase of purchasing-power among the people will lead to the usual amount of imports, and in that way turn the balance of trade against us ? Mr. Vermilye. I do not know that I understand your question. What do you mean by the increase of purchasing-power f Mr. Ewing. There are probably five millions of people in this coun- try who ordinarily buy tea and coffee, but who do not now buy tea and coffee. Mr. Vermilye. Then you do not refer to the increasa of the purchas- ing-power of paper money as compared with gold ? Mr. Ewing. No, J am not speaking of the purchasing-power of money, but of the falling off in the resources of the masses of the people and of their means to live as well as they would like to live, and as they have been in the habit of living. Mr. Vermilye. I think that the cause of that is that we have been — I was going to say, " on a drunk," and are getting sober ; and, of course, we have got to feel the effect, the headache, for a while. Everything has been overdone. We ha,ve built, or attempted to build, too many railroads. Some of them are not built yet. The building of houses has gone on beyond the wants of the people. We have lived extravagantly ; and it seems to me that, for the last three or four years, we have been coming to our normal state. I should think it a very disastrous state of things to get back to the old way, or to the way of the last ten or fifteen years, and to the great inflation of real estate and other property of five or six years ago. I think that that of itself would be a calamity. I believe that what we want is a stable growth, a sound growth, and I do not believe that it is inflation of the currency that we need at all. I be- lieve that it is stability and confidence that we want. We want to know that we are not going to be legislated for one way to-day and another way to-morrow. In other words, with all due respect to you, gentlemen, if Congress did not meet again for three years I think it would be one of the happiest things we could imagine for this country. Mr. Ewing. Now that the resumption law is on the statute-book. Mr. Vermilye. I would let things take their course. Mr. Ewing. If the resumption law is repealed and things are allowed to take their natural course, I think that you will get a large number of members of Congress to concur with you. Mr. Vermilye. Why do you think it necessary to repeal the resump- tion law ? Mr. Ewing. Because it disturbs the natural order. Mr. Vermilye. Is not the normal condition of this country a specie- payment country ? Mr. Ewing. The normal condition of this country is, not to be sub- jected to that sort of pressure to which this resumption law subjects it RESUMPTION OP SPECIE PAYMENTS. 105 The normal condition of the country is the condition to which the coun- try will grow. Mr. Vermilye. Well, we have gone ahead of our growth and now we have to take breath, and we will, in a measure, come back again to that normal condition. But if we are going over this thing again, we will only have to retrace our steps five, ten, or fifteen years hence. Mr. Ewing. According to your theory, the resumption law puts us in the way of going over this path of inflation; whereas, if the resumption law is repealed, this large volume of coin which you speak of is not added to our currency and we would not have iuflation ? Mr. Vermilye. That is a very pretty theory ; but when you come to practice the thing I do not think it would work very well. I see that what I have stated may be so construed ; but I am just as far from it as possible. The real thing, in my judgment, is, that the law which contemplated the paying of greenbacks, Congress is now trying to evade, and while I think that Congress can evade it, and cau go on and pay specie, I do not think it desirable to do so. I think that the end is bad. This country certainly does not want nine hundred or a thousand mil- lions of circulation in gold, silver, and paper. Mr. Ewing. We would still have a less circulation thau Great Britain has. Mr. Vermilye. How is it as to population 1 Mr. Ewing. I see no reason why we do not need a larger paper circu- lation in proportion to population than Great Britain does. Mr. Bell. We have a larger population than England, Ireland, and Scotland. Mr. Vermilye. In Great Britain they do not issue paper notes below $25 — five-pound notes. Mr. Ewing. And still they have a larger coin and paper circulation than we would have if we had a thousand u^illious. Mr. Vermilye. They do not use them both together. When the pa- per is out the gold is in, aud when the paper is in the gold is out. Mr. Ewing. That is going to be our plan under this resumption act. Mr. Vermilye. Not if you do not pay it out without reserve ; and not only that, but issue certificates for gold beyond the absolute amount of gold in the Treasury. That is inflation, too. Mr. Ewing. I have no doubt of it. That is the most flagrant kind of inflation. Mr. Vermilye. That, I believe, is part of the law, is it not? The Sec- retary of the Treasury has that right. Mr. Ewing. Yes; he has the power. You were speaking about the New York banks not taking special deposits in gold after the 1st of January, 1879. They will receive general deposits, and will pay out gold or paper to their customers as the customers prefer. Must they not have a larger gold reserve ? Mr. Vermilye. I do not think necessarily beyond the amount of re- serve which they would hold in greenbacks. We are now required by law to carry a reserve of 25 per ceut. If we had the gold and did not have the greenbacks, we would be just as well off as we are to-day with the greenbacks and not the gold. Mr. Ewing. Will not the banks seek to make that reserve a gold re- serve instead of a greenback one ! Mr. Vermilye. I think they will, in a measure ; to what extent I cannot say. Mr. Ewing. They would be likely to convert their gold -certificates so far as they have them. 106 RESUMPTION OF SPECIE PAYMENTS. Mr. Vermilye. I do not see any reason why that should be done to any great extent, because these certificates are to be counted as reserve, the same as gold. It is rather a convenience for the banks to use the certificates rather than gold. Mr. Ewing. How would it be in the power of the Secretary or of the banks to check a drain of gold if a want of confidence should begin to show itself 1 ? Mr. Vermilye. If there is a demand made upon the banks or upon the Treasury for gold, and if they have not the gold to pay, that is the end of it. Mr. Ewing. Without actually refusing to pay, what measures would the Secretary of the Treasury or the banks take to check the drain? Mr. Vermilye. I really do not know that I can answer that question, so far as the Secretary of the Treasury is concerned. It seems to me that he has got to pay, or not to pay ; I do not see any plan that he can adopt to check the demand for gold if people will have it. If they have got demands against the government, the Secretary has to pay them until he has no more gold. But I do not think that it is going to come to that, and certainly it does not look to me as if there was anything ahead now which would make that necessary. And my hope is, that, long before that time comes, Congress will see the desirability of fund- ing the greenbacks and getting them out of the way. Mr. Hardenbergh. There can never be any possible settlement until that is done. Mr. Vermilye. No ; I think not. Mr. Phillips. Do you think that there is any safety in resumption, as long as we have paper circulation f Mr. Vermilye. As long as the government continues paper circula- tion — I will not say "no safety." Mr. Phillips. I speak of absolute safety. Mr. Vermilye. No, sir. Mr. Hardenbergh. Do you not think that the government would be better off if the $347,000,000 of legal-tender notes were funded in the 3.65 bonds? Mr. Vermilye. I do. Mr. Phillips. Could the national banks safely exist if the legal-tend- ers were withdrawn ? Mr. Vermilye. I do not see why not, if gold was substituted in their place. Mr. Phillips. The bank-notes are redeemable in legal-tenders? Mr. Vermilye. Ves ; but gold is a legal tender. Mr. Phillips. But would not the withdrawal of legal-tender notes necessarily force the withdrawal of bank-notes in the same way and from the same cause? Mr. Vermilye. No. I think that as a necessary precautionary meas- ure the banks might withdraw part of their circulation. I do not think that they would necessarily be obliged to do it. A very large number of our banks have withdrawn their circulation. In our own case we had a circulation of $900,000, but we have not issued a note for three years, and we have got our circulation down to $110,000 or $120,000 ; we do not pretend to issue notes. Mr. Bell. I understand you to concede that, in the event of resump- tion taking place, all deposits in banks will be, after the 1st of January next, specie demands. Mr. Vermilye. Virtually. Mr. Bell. Suppose the depositors proposed to withdraw their de- RESUMPTION 0F SPECIE PAYMENTS. 107 posits from the national banks, and the savings-banks, and the trust companies ; what would become of those institutions ? Mr. Vermilye. If there was anything like a panic, or combination to withdraw specie, there is only one result possible. But that can only happen in a time of panic — in a time of want of confidence. There is no object to be gained by it. Mr. Bell. Does not this whole scheme of resumption depend upon the question as to whether the holders of these securities and these deposits want the specie ? Mr. Vermilye. Not altogether. To answer your question in another way : if the community were alarmed, there is not coin enough in this country to maintain specie payments against a panic or alarm at any time. Mr. Bell. Then this scheme can only succeed upon the theory of public confidence 1 ? Mr. Vermilye. On the general run of business in the country — that it requires so much coin, and that people would rather take the credit than carry their pockets full of coin. Mr. Bell. In the event of the Secretary of the Treasury reissuing greenbacks, and paying them out for current expenses, if the greenbacks were presented for redemption, would that not necessarily involve either the bankruptcy of the Treasury or the continued sale of the bonds to keep up a fund with which to redeem ? Mr. Vermilye. Of course the Secretary must have some method to regain the coin which he loses. Mr. Bell. Do you give it as your opinion, siuce the experience of the last ten years, on the subject of the fluctuations in the value of paper currency, that people throughout the country who occasionally hoard money, would not present United States notes for redemption at the very earliest opportunity ? Mr. Vermilye. 1 think that that might be so at the start, to some considerable amount, but I do not think it would continue for twenty days. Mr. Bell. Do you not think that that being done at the start, by a portion of the people, it would excite all the holders of these securities? Mr. Vermilye. I think not. Mr. Hardenbergh. Is not our position illustrated by this fact: Two years ago, in 1876, Congress passed an act substituting $40,000,000 of silver currency for the redemption of fractional paper currency. Now, there is a bill in Congress to-day for the issuing of fractional paper cur- rency, because the people know that they can get silver if they want it. If there was a new issue of fractional paper currency, people would use it more than they do silver currency. Mr. Vermilye. I think that that is so ; and we have that evidence daily. Aman will come to the bankand will waut$25or$50in small coin. We will pay him in silver, and he will say, "Can you not give us frac- tional paper currency ?" Although I am as hard money a man as can be, yet I never carry silver when I can get fractional paper currency, simply because I do not want to be loaded down with the silver. I know I can get it when I want it. Mr. Ewing. It has cost us some $40,000,000 or $50,000,000 increase of our bonded debt to demonstrate the fact that fractional paper currency is better than silver. Mr. Phillips. The legal-tender note is not taxable, and the gold is ; would that fact, in your opinion, bring legal-tenders to a premium over gold? 108 RESUMPTION OF SPECIE PAYMENTS. Mr. Vermilye. No, sir. Mr. Phillips. It would make a difference in some States of four per cent, in taxation. Mr. Vermilye. United States bonds are not taxed, and they draw- interest, and are better security than legal-tender notes; so that if a man wants to hoard money, and to escape taxation, he can invest in these bonds. I do not think that there is enough in that point to make any material demand for legal-tender notes. Mr. Chittenden. What course by Congress, at this time, do you, as a representative of great fiduciary interests at the financial center, ad- vise as best calculated to inspire confidence and revive industry and enterprise, so as to secure, as soon as possible, employment for the masses of unemployed labor and idle capital in this country? Mr. Vermilye. My answer to that would be to do nothing, and let us alone. Mr. EwiNGr. After we repeal the resumption law, we will be glad to do that. Mr. Vermilye. I hope you will do it before you repeal the resump- tion law. Mr. Phillips. You have intimated that we have built too many rail- roads and houses ; in other words, that we have developed the country too fast, and that in order to come to a sound business basis we must cease to employ labor. Mr. Vermilye. No, sir. Mr. Phillips. That was the inference I drew* from what you said. Mr. Vermilye. I do not mean to be reported as saying such a thing as that. I think this : I think it is evident to you all that we are ahead of the times twenty or twenty-five years, so far as railroading goes. We see that in the immense amount of railroad security that does not pay a dollar, and in the immense amount of foreclosures of railroad property. Mr. Phillips. Do you think that the country would be more pros- perous if we went back that twenty-five years f Mr. Vermilye. No • I would catch up with it. That is what I would do. Mr. Ewing. Would you stand still until you catch up I Mr. Vermilye. No ; I would not stand still either, but I would not start a railroad from here to New York, for instance, while there are two railroads in operation already. This, I think, illustrates my point exactly, that where a thing is not needed it will not pay to put it. Mr. Phillips. Would not the logical inference from that be to carry us back to the wigwam period'? Mr. Vermilye. No ; I think we are a progressive people. The trouble is that we are too progressive. Mr. Hardenbergh. Has not one great trouble been the withdrawal of so many people from agricultural pursuits and getting them into the cities f Mr. Vermilye. I think that that is a large cause of the trouble. Everybody seems to think that in the cities they have a mine. The cities have been filled in that way, and the consequence is that we have crowds of idlers in the cities, with nothing to do, and the state of the times is making it worse and worse. Mr. Eames. In your judgment, is the amount of legal-tender notes now outstanding required for the purposes of business i Mr. Vermilye. No • I think not. RESUMPTION OF SPECIE PAYMENTS. 109 Mr. Eames. You mean to say that three hundred millions of green- backs is in excess of what is required for business purposes ? Mr. Vermilye. I qualify that in one way. I say that with the amount of coin which is to come into circulation on resumption, we do not need the greenbacks. I do not believe that we need the whole of the legal-tender notes now. Mr. Eames. The question that I put is simply this : whether the vol- ume of legal-tender notes now in existence is more than is requisite for the transaction of business ? Mr. Vermilye. You must, of course, also include the $300,000,000 of national-bank notes; and I say that I think it is too great. Mr. Eames. You think that, with the two together, the paper cur- rency, which is quite as convenient as coin, if not more so, is more than is requisite now for the transaction of the business of the country 1 Mr. Vermilye. That is my idea. Mr. Eames. You think it ought to be reduced? Mr. Vermilye. I think it ought to be reduced. Mr. Eames. Why do you think it ought to be reduced i Mr. Vermilye. I do not think that the wants of the country demand $650,000,000 of paper, and the addition which is to come in by coin pay- ments, and by the further addition of silver coin every month. Mr. Eames. Do you not think that there will be a certain amount of paper currency required and used in the transaction of the business of the country in preference to coin 1 Mr. Vermilye. I do think that there will be. Mr. Eames. To what extent? Mr. Vermilye. That I cannot tell ; I have no idea. That is gov- erned altogether by the amount of business. Mr. Eames. To the extent that paper money (either legal-tender notes or bank-notes) is required for business purposes, will it not reduce the amount of coin necessary to be held, either by the Treasury or by the national banks, to resume specie payment on the 1st of January ? Mr. Vermilye. Undoubtedly it will have that effect. Mr. Eames. I understood you to say that paper currency was more convenient than coin, either silver or gold f Mr. Vermilye. Yes, sir. Mr. Eames. And only the legal-tender notes that are not required and used for business purposes would be ever presented, either to the Treasury or banks, for redemption. Is that so 1 Mr. Vermilye. Yes, sir. Mr. Phillips. Do you think that a circulation of State bank paper would be as safe or as good as legal-tender notes or national-bank notes ? Mr. Vermilye. I would not like to go back to the old issue of State banks. Mr. Phillips. You think that our present paper system is better? Mr. Vermilye. I think it is ; I think that the community has a right to demand that the paper which circulates as money shall be, beyond all cavil, safe. Mr. Phillips. Do you think the national-bank notes safer aud better than the legal-tender notes ? Mr. Vermilye. No; I do not say that. I do not know that I would make any distinction between them. I would be willing, so far as the paper money of the country goes, to let it be confined entirely to green- backs, and let the national-bank notes go out of circulation. Mr. Eames. Is not the national-bank note secured by the United 110 RESUMPTION OP SPECIE PAYMENTS. States bonds, and in addition to that, is not every stockholder in a national bank liable to the extent of his stock ? Mr. Vermilye. I think you are in error there. I do not think that a stockholder in a national bank is held liable for the circulation at all. There is no necessity for it, because national -bank notes are absolutely secured by government bonds. I think that the stockholder is only liable for deposits. Mr. Eames. Then, if the national-bank note is secured in that way, by the bonds of the United States, its security is fully equal to legal- tender notes ? Mr. Vermilye. It is just as good. Mr. Phillips. Is it not better J ? Mr. Vermilye. No; one is the faith of the government, and the other is the faith of the government. One has it on bonds, and the other has it by act of Congress. Mr. Eames. Is it not true that the national-bank notes have this ad- ditional security: that the shareholder is personally responsible to the amount of his stock ? Mr. Vermilye. No, that is not so. That liability is for deposits ; not for circulation. Mr. Stewart. The liability exists for the notes as well as for the de- posits 1 Mr. Vermilye. Not under the act. You are mistaken. Mr. Stewart. But it is never a practical question, because not only are the bonds hypothecated as security for the circulation, but if there is any deficiency of responsibility the government itself is responsible on every national-bank note issued. Mr. Ewing (to Mr. Vermilye). Do you not regard it as the test of the proper quantity of paper currency that it can be kept afloat redeem- able in coin! Mr. Vermilye. Yes, sir ; as a rule, that is so. Mr. Ewing. That determines whether the country has got too much or too little paper currency. Mr. Vermilye. Yes, sir. Mr. Ewing. If you start with the propositiou that we have already too much paper currency, then it will be certain that it cannot be kept afloat redeemable in coin, and that resumption can only be maintained by reducing the volume of paper currency. Mr. Vermilye. It does not follow that the Secretary of the Treasury, after redeeming these notes, will be able to get the whole of them out again. And, as I said in the beginning, I think the whole thing comes back to a question of confidence. If the Secretary does not pay out his legal-tenders every day, then he is getting stronger daily ; because his coin balance is increasing. I do not believe, as a rule, that with $650,000,000 of paper money out, coin payments can be maintained under a panic, or under a demand that would take the coin out of the country in amounts to which it might go out. There is not only our imports to pay for, but whatever bonds may be returned to us must be absolutely paid in coin. But there is no such state of things now. Mr. Ewing. In the present situation, I understood you to say that the present volume of paper currency, added to the coin which will come into circulation after the 1st of January, 1879, makes too large a cur- rency. I asked you whether the test of a sufficiency of paper currency was not that it could be maintained redeemable in coin ? Mr. Vermilye. As a general rule, I think it is. Mr. Ewing. If you start out with the proposition that our paper RESUMPTION OF SPECIE PAYMENTS. Ill currency is too large, it must follow that it cannot be maintained in circulation redeemable in gold coin. Mr. Vermilye. If you are going to present $650,000,000 of paper against $170,000,000 of coin, I answer you at once, that it cannot be done. But no state of things ever existed in this country where a certain amount of paper currency could not be floated, and has not been floated, even with specie payments. Mr. Ewing. But you think that $650,000,000 of paper money cannot be floated 1 Mr. Vermilye. I think that that is too much paper cnrrency. Views of Mr. John A. Stewart, president of the United States Trust Com- pany, New York. Washington, D. 0., April 19, 1878. Mr. Ewing. What amount of paper currency do you think we can maintain in circulation in this country, redeemable in coin, after the 1st of January next 1 Mr. Stewart. That depends entirely upon the business of the coun- try. Of course, if there is activity in trade we can maintain a much larger paper circulation than we can with the state of things that has existed for the last three years. When I last had the honor of an inter- view with you, I put this question in the way of answering one which you put to me, " What do we mean by resumption V If by resumption we mean what the community for some time past supposed resumption meant, — redemption of the legal-tender notes, — then I say that we are not prepared for that kind of resumption. But if by resumption we mean what appears to be now understood by the Secretary of the Treasury and by the people, that we are simply to pay coiu and reissue these notes, that kind of resumption, I think, is practicable. I do not see where any great demand for coin can arise as long as the balance of trade is in our favor. It certainly is in our favor now ; and if we have another crop equal to that of last year (and there is no reason to sup- pose from the indications thus far this spring that we will not), I do not think that the balance of trade is likely to turn against us during the coming twelve months. If that be so, I do not think there is any trouble about that kind of resumption at all. There may be some demand for coin. As has been just remarked by Mr. Vermilye, many people have seen little or no gold coin for the last fifteen years, and they want to handle it — to keep it as a matter of curi- osity. But that curiosity will be soon satisfied — and when the legal- tender notes for every other purpose in this country are just as good as coin (and they are now), after a little while people will find it very much more convenient to use legal-tender notes than to use coin. So that there cannot be much demand from that source. I do not think that that can exceed fifty millions of dollars. I think that the people will become perfectly satisfied after fifty millions of gold coin is distributed among them. We never have had any trouble on this question, except when the balance of trade has been against us, and when we have been compelled to export gold. This year we shall probably receive fioiu the mines in gold and silver more than fifty millions of dollars. I think it is fair to presume that if we do, we will pretty nearly supply the home demand that is likely to arise for coin. 11-2 RESUMPTION OP SPECIE PAYMENTS. Mr. Ewing. The balance of trade has been very largely in our favor for the past three years ? Mr. Stewart. Yes, sir. During the war there were a great many mills erected in the New England States, and they have been compelled to enforce economy of every kind, and have got down to so fine a point that they can manufacture many of the goods which we previously imported. That is going to lessen the demand for coin. Mr. Ewing. But, during this favorable balance of trade for the past three years, we have exported, on an average, forty-two millions a year of gold and silver more than we have imported. Mr. Stewart. We always will. We produce gold and silver in this country. It is one of our productions, and therefore we should expect to export it. Mr. Ewing. This forty-two millions average annual export of gold and silver approaches pretty near the aggregate coinage product of our mines; and that has occurred during the three years when the balance of trade has been uniformly in our favor, and when the government has been on the qui vive to prepare in every practicable way for resumption. Mr. Stewart. I have not seen any very definite steps with regard to resumption until recently. Mr. Ewing. Have you any means of establishing the amount of our debt held abroad 1 Mr. Stewart. I have only means which I derive from conversing with the representatives of foreign houses in New York who deal in bonds. The best information that I have is that the amount of our gov- ernment bonds held abroad is somewhere between five and six hundred millions dollars — probably not over five hundred millions. Mr. Ewing. What do you think would be the amount of our other State, municipal, and corporate debts held abroad f Mr. Stewart. It is less, I think. Those securities have been coming home very fast. Mr. Ewing. You would say, then, probably, that our foreign debt is altogether about one thousand millions f Mr. Stewart. Possibly. Mr. Ewing. That gives the foreign holders of these debts the means of draining our gold out at any time they choose to do so f Mr. Stewart. Yes. If they return our bonds rapidly, that would interfere very much with resumption. But why should they return them? Mr. Ewing. They may want gold more than they want bonds. Mr. Stewart. That is a possibility. We have got to treat this as a practical question, and we must take some things for granted. We can judge of the future simply from the past. There have been very few of our government bonds returned in the last year until the passage of the silver bill. Since then, I suppose, we have had seventy-five millions of government bonds returned, and the country has taken them all. Mr. Ewing. Then the practicability of maintaining resumption de- pends on two things: first, on the continuance of a favorable balance of trade; and, second, on the fact that the holders of our foreign indebt- edness will retain rather than return it. Mr. Stewart. These are the two principal factors in that problem. Mr. Ewing. Would not an unfavorable balance of trade lead to a drain of gold 1 Mr. Stewart. Undoubtedly. I think we can fairly presume, how- ever, and that it is safe for us to take it for granted, that for the next twelve months the balance of trade will not be against us. We have planted a larger acreage this year than probably ever before. The sea- RESUMPTION OF SPECIE PAYMENTS. 113 son, up to the present time, has been very much in our favor, and if we have another such crop as we had last year, I do not think that the bal- ance of trade is likely to turn against us to such an extent as to lead to a large foreign demand for coin. It must be borne in mind that if for- eign dealers in exchange can get a better rate of interest for their money in New York than they can get in London, they are very apt to leave it in New York. The rate of interest enters into the question a little. Mr. Ewing. I would like to have your view on this point : Whether with the removal of the pressure exerted by the resumption law on the country for the past three or four years, and with a rise in prices, such as Mr. Vermilye anticipates after the 1st of January, 1879, the disposi- tion of our people to buy goods abroad will not turn or tend to turn the favorable state of exchange against us ? In other words, has not our favorable balance of trade resulted chiefly from the depression of busi- ness here and from the forcing down of prices of labor and of material so low that we are at once able to manufacture lower than we did before, and are unable to buy as much as we have heretofore bought 1 Mr. Stewart. To some extent that is true. But take one industry, the iron-trade, of this country. I have no idea that in the next five years to come you are going to see any importation of steel rails. We have got it so now in this country that we can manufacture these things cheaper here than they can be manufactured abroad and imported here. There has been a large drain of bonds from this country to pay simply for iron and steel rails. Hereafter that is not going to exist. The foreigners have lost this market and are not likely to recover it again. Mr. Ewing. But, with a rise of prices such as Mr. Vermilye antici- pates, wages will go up, and the price of ore and of coal and of every- thing that enters into the manufacture of iron will go up, so that we cannot make our iron as cheap as we can now when our industries are greatly depressed. Mr. Stewart. I am not quite prepared to go the length that Mr. Ver- milye did as to the inflation of values. We are going, under this plan of resumption, to have an expansion, of course, of the currency, but it is a healthy expansion. It is not inflation. You are infusing into what we now have as currency one hundred and fifty or one hundred and eighty millions of that which is real currency, coin, and you are bene- fiting it to that extent. Mr. Ewing. Still, you must recognize the fact that the increase of the currency increases prices, whether it is a sound currency or an un- sound currency. Mr. Stewart. Undoubtedly it will increase values to some extent, but not to lead to such a period of speculation as we have had. Mr. Ewing. An increase of the currency one-fourth, whether it be redeemable or irredeemable, coin or paper, will have its effect on values just the same, will it not? Mr. Stewart. No, I do not think it will. I think that an increase of coin will have a far more salutary effect than an increase of so much paper which has no value, except that by the law greenbacks are made receivable for duties. I draw a distinction between the real article, coin, and the paper. Paper inflates ; coin expands. One is very much better than the other. Mr. EwiNG. But they both mean a rise of prices ? Mr. Stewart. Undoubtedly, to some extent. Mr. Ewing. It seems to me to an equal extent. Mr. Stewart. I do not think it is to an equal extent. H. Mis. 62 8 114 RESUMPTION OF SPECIE PAYMENTS. Mr. Phillips. Unless they are both maintained at equal values, and are equally desirable, can you keep them both in circulation together? Mr. Stewaet. No, sir; you cannot keep them both in circulation together unless they are both equally desirable. They will be here. You can use the legal-tender notes in this country for any and every purpose that the gold can be used for or the silver. The only great de- mand that can arise for gold over and above legal-tender notes is for the payment of our balances abroad. If we are going to have a drain upon us from the other side for $150,000,000 of gold, of course we cannot maintain resumption. That is out of the question. But I do not look for that. I do rot see anything in the immediate future to create any such demand, and, therefore, I believe that the Secretary can maintain specie payment. Mr. Ewing. The failure of crops would do it? Mr. Stewart. Yes; a failure of two successive crops would probably do it; but we must look at the bright side of things. Mr. Ewing. Unusually fine crops in Europe would have a large effect in doing it? Mr. Stewart. It would have some effect. Mr. Ewing. A foreign war might do it. Mr. Stewart. It might and it might not. A foreign war might create an increase of confidence in our securities, and might lead foreigners to send money here instead of retaining it there. . Mr. Ewing. On the other hand, it might cause such a requirement for gold in England as to lead to a return of our securities f Mr. Stewart. I admit that, but we must try in this matter to take the brightest view of things that we can. Of course, there are possi- bilities that may arise to interfere with it, but the probabilities now are in our favor. Mr. Ewing. You think that, because we had a good crop the year before last, and a good crop last year, and there is promise of a good crop this year, the probabilities are that we are going to keep on having good crops. Does not that seem to be illogical 1 Mr. Stewart. I cannot look ahead more than six months, and I do not think that any of us can ; but I say that, with present indications, with the favorable spring that we have had, and with the large acreage that has been planted in this country this year, we have reason to hope that Providence will favor us with another good crop. Mr. Ewing. And with another good crop, we can start specie pay- ments ? Mr. Stewart. Yes, sir. Mr. Ewing. And two years' failure of crops thereafter would break us down again 1 Mr. Stewart. I do not say how long we can maintain specie pay- ments ; and he would be a pretty bold man who would venture to pre- dict that. Mr. Ewing. I rather think that he is a pretty bold man who under- takes specie payment when he has no assurance that he is able to maintain it. Mr. Stewart. He has as much assurance of his ability to maintain specie payment as any one has assurance of his inability to do so. We can only act upon general principles. Mr. Ewing. Then it is assurance on both sides ? Mr. Stewart. A good deal of that. Mr. Ewing. Do you not recognize the fact that the maintenance of RESUMPTION OF SPECIE PAYMENTS. 115 specie payment depends upon the redeeming agency having a certain proportion of coin to the amount of its paper outstanding 1 Mr. Stewart. Undoubtedly, to the amount of paper for which the government is responsible. I do not think that it is the province of the government to look so much to the condition of the banks. The banks should take care of themselves. It is the duty of the government to see that it can redeem its legal-tender notes when coin is demanded. And it does seem to me that if the Secretary of the Treasury succeeds in securing $140,000,000 or $150,000,000 of coin, he can take care of his $300,000,000 of legal-tender notes. The amount is $348,000,000 now ; but under the existing law he has a right to reduce the amount to $300,000,000. Mr. Bwing. Tes ; if the banks increase their currency in proportion. Mr. Phillips. There are $300,000,000 of national-bank notes con- vertible into legal-tender notes, and then there are all the deposits in the national banks. Do you think it is safe to force the national banks to specie payment, if it would entail the danger of their becoming bankrupt? Mr. Stewart. So, sir : but I have not the slighest idea that it would. Mr. Phillips. You think it would not be likely to do that? Mr. Stewart. You must bear in mind that these deposits in the banks can only be drawn upon to a certain extent. The deposits con- sist of balances, and the banks have loaned these depositors largely on their business paper. If a man calls for his deposits, the bank will be likely to call upon him to redeem his obligations to it: so that the de- mand from depositors is not to be measured entirely by the amount of deposits. Mr. Phillips. But would not that universal calling on one another produce bankruptcy in the country generally 1 Mr. Stewart. If there should be that universal calling, it might; but we have no right to presume that that will be the case. So long as the people know that they can get what coin they want, they are not likely to call for it. It is only when they think that they cannot get it, that they go for it. Mr. Phillips. Is not the possibility of a foreign demand for gold an additional element in the problem of resumption °1 Mr. Stewart. Yes, sir. That is the principal difficulty in the whole question. Mr. Phillips. While we are a debtor nation ? Mr. Stewart. Yes. That is the principal difficulty that we have to encounter. Without that demand, I do not think that there is any dif- ficulty whatever. Mr. Phillips. Is it safe for us to attempt resumption with one thou- sand millions of foreign debt, with its interest, and with a possible de- mand for its payment ? Mr. Stewart. I think it is safe for us to attempt it. Mr. Phillips. Can we maintain it ? Mr. Stewart. We can maintain it until that foreign drain comes. When that is coming I cannot tell. Mr. Ewing. Or until our crops fail. Mr. Stewart. The foreign demand is not likely to come until after the failure of our crops. Mr. Hardenbergh. What would be the effect on the price of gold of a repeal of the resumption act 1 Mr. Stewart. I think it would tend to advance the price of gold. 116 RESUMPTION OF SPECIE PAYMENTS. Mr. Chittenden. As a matter of fact, in the suspension of specie payment in 1857 the withdrawal of specie deposits was unknown. I was in New York at the time, and I have no recollection of ever hearing of a depositor drawing specie out of a bank. Mr. Stewart. Yes, it was done; I know one gentleman who did it. But the very day after the banks in New York suspended, in 1857, you could get, for one per cent, premium, all the specie that you wanted. It was not worth over one per cent, premium the day after the banks sus- pended. Mr. Chittenden. Do you mean to say that the depositors generally participated in the fright of 1857 which broke the banks 1 Mr. Stewart. No, sir. Mr. Chittenden. I was at the time a director of the Continental Bank, and my recollection is that there was no demand made upon that bank, except to redeem bills. There may have been an individual case of a depositor withdrawing his deposit. Mr. Stewart. It was rather a stigma on a man to do it. Mr. Vermilye. It was done, nevertheless. Mr. Stewart. It was done. Mr. Bwing. I recollect that, in Cincinnati, a man was in danger of being run over who should venture into Third street during the two weeks that they were running on the banks. Mr. Bell. Suppose greenbacks were to attain an equality in value with gold, would not that accomplish, practically, all the desirable results of resumption I Mr. Stewart. It would, for all purposes in this country ; but it would not abroad. Greenbacks never will pay your debt abroad. Mr. Bell. But, if all the practical good of resumption can be secured to this country, without the hazard of bankrupting the government, would not that be, in your judgment, the wiser policy to pursue? Mr. Stewart. I do not believe that, even for this country, it is safe to be entirely on a paper basis ; I believe that you want something real. I think that there is a difference between a real value and that value which paper requires, simply because the government says that it shall be receivable in payment of duties.' Mr. Bell. Do you think that the appreciation of the greenbacks, as compared with gold, has resulted from the resumption act or from other causes 1 Mr. Stewart. I think it has resulted more from the balance of trade being in our favor than from anything else. Mr. Bell. Our inclination to a normal condition of business ? Mr. Stewart. Yes, sir ; the greenbacks, at present, answer nearly every purpose that coin does in this country. There may be some demand for coin for the purpose of hoarding, and from curiosity ; and there will be a demand for it, of course, for customs duties. The prin- cipal reason why, for so long a time, there was a great difference in the market value of legal-tenders and of coin was for fear that the balance of trade would be against us and that coin would leave the country. Mr. EwiNG. I understand you to think that the danger of resumption arises from two causes : First, a failure of the crops ; and, secondly, that the balance of trade may turn against us; or (even with the bal- ance of trade in our favor) a return, to a large extent, of our securities held abroad ? Mr. Stewart. Yes, sir. Mr. Ewing. Otherwise you think that we can maintain specie pay- ment? RESUMPTION OF SPECIE PAYMENTS. 117 Mr. Stewart. 1 do. Mr. Ewing. Independent of those circumstances, are we in as favor- able a condition to maintain specie payment as we were before the war, or as the Bank of England is, or as the Bank of France is, or the banks of any country which now maintains specie payment 1 Mr. Stewart. That is a pretty comprehensive question. I answer, first, with regard to our own country, of course we have got a very large volume of paper money, and it may be found necessary to reduce that somewhat, in order to maintain specie payment. I think it desirable that that should be done after a while. Mr. Ewing. I am speaking now of resumption on the plan as ex- plained by the Secretary of the Treasury, to retain in circulation the three hundred millions of legal-tender notes, with the bank currency, as he says, likely to increase. Is there any instance in this country, or in Europe, of the banks or a government maintaining specie payment under conditions so unfavorable as now exist in the United States, leav- ing out of sight our large debt abroad I Mr. Stewart. That would depend upon whether we can maintain in the country the gold and silver which we expect to continue to mine here for years to come. Mr. Ewing. Take our condition as it will be after the 1st of January, 1879. Is there an instance in the history of banking of specie payment being maintained with so large a volume of paper and of deposits, and so small a supply of coin ? Mr. Stewart. I do not know that there is, but you must not lose sight of the fact that these legal-tender notes are not to be treated as ordinary paper obligations. For all the purposes of this country they answer nearly as well as the coin itself. Mr. Eames. Were you familiar with banking in this country under the State laws f Mr. Stewart. I was somewhat familiar with it. Mr. Eames. State to the committee what amount of specie was held in the vaults of those banks as compared with their circulation and de- posits. Mr. Stewart. I do not think (as Mr. Yermilye remarked) that they had ordinarily over 12 or 15 per cent. ; and that was confined pretty much to the banks in the great commercial centers. Mr. Ewing. The amount of circulation and deposits in 1858 in Amer- ican banks was three hundred and forty-one millions, and the amount of coin held by the banks was seventy-four millions. In 1861 the amount of circulation and deposits was four hundred and fifty-nine millions, and the amount of coin in the banks eighty-seven millions. Now, take the American banks and the Treasury circulation and deposits, twelve hun- dred and fifty-seven millions; coin, one hundred and forty-seven millions. Mr. Stewart. Why is it that the coin is so small now ? It is simply because the banks have no use for coin. The coin has not become money yet. Mr. Ewing. It is more than that ; because, according to the best estimate that can be made (for I assume that the estimate by the Di- rector of the Mint is the best), four-fifths of the whole coin in the coun- try has been aggregated in these few banks and in the Treasury, leaving little or none at all among the people. Mr. Stewart. The banks own very little coin. I do not suppose that the New York banks to-day own absolutely six millions of coin. Mr. Ewing. Dr. Linderman's estimate is that out of one hundred and seventy-seven millions of gold in the country but fifteen millions is held 118 RESUMPTION OF SPECIE PAYMENTS. outside of the national banks and the Federal Treasury, east of the Eocky Mountains, showing that the national banks and the Treasury (however little they may have) have got substantially all that there is ; and the fact that they have got so little is not due to the fact that they have not sought to get it, but is because it is not in the country. Mr. Stewart. As long as legal-tender notes answer the same pur- pose in this country, there is not sufficient inducement for the banks to accumulate gold. Mr. Ewing. And the national banks and the Treasury have got all the gold there is in the country, according to the estimate of the Direct- or of the Mint, less by fifteen millions, east of the Eocky Mountains. Mr. Stewart. When coin becomes monetized again in this country; in other words, when legal-tender notes and coin are of the same mar- ket value, the coin will of course materially increase in the banks. Mr. Ewing. From what source? Mr. Stewart. In the first place, from their special deposits. There must be, in the shape of special deposits, now in New York banks some thirty millions of gold. Mr. Ewing. It seems to me that our experience before the war, and the experience of other nations, in maintaining specie payments, afford no parallel which would at all justify an attempt to establish specie pay- ment with our present volume of paper currency and the present enor- mous aggregate of bank deposits. Before the war (in 1861), we had $459,000,000 of circulation and deposits. Now we have $1,257,000,000. In 1861, we had $285,000,000 of coin in the country, and now we have only $250,000,000. Mr. Stewart. But then you had not $348,000,000 of legal-tender notes, which, for nearly every purpose in this country, are just as good as coin. Mr. Ewing. As long as specie payment was maintained — in 1861 and before — the paper was the same as coin and performed every purpose, during the time that specie payment was maintained. Mr. Stewart. It never performed the office that legal-tender notes perform now. Mr. Ewing. Practically the same. It was received for every private debt, and it was convertible into coin to pay public duties. Mr. Stewart. That was only by sufferance. Mr. Ewing. But still it was done. Mr. Stewart. But here you can use legal-tender notes without con- sent. The creditor is bound to take them. He has no option. Mr. Ewing. Does not the national-bank note perform among the peo- ple the same office that the legal-tender note does ? Mr. Stewart. It does; simply because the people believe that they can get legal tender for it, but if they found that they could not get legal tender for the bank-note the bank-notes would not perform that func- tion. Mr. EwiNG. Just as, before the war, bank paper performed the same office as coin as long as the people believed they could get coin for it. So that it seems to me the situations are parallel. Mr. Stewart. I cannot agree with you in that. Mr. Ewing. If we. could maintain before the war a paper circula- tion of only $214,000,000 of coin in the country, how is it possible to maintain now a circulation of $650,000,000 of paper money with only $250,000,000 of coin in the country 1 Mr. Stewart. I contend that you do not require so large a propor- tion of coin now as you did then, because now you keep out $300,000,000 RESUMPTION OF SPECIE PAYMENTS. 119 of legal-tender notes which, for nearly every purpose in this country, are just as good as gold. Mr. Ewing. Suppose there came either one of those contingencies, the failure of crops here or the sending back our bonds from abroad, shaking the public confidence, and making a drain on the Treasury so as to make people feel that the government would probably have to sus- pend specie payment, would not the fact that we have such an enormous demand (an aggregate of $1,200,000,000) that might be turned into a gold demand at any day put us in a far worse situation than we were in before the war, when we had only one-third the amount of our present obliga- tions outstanding 1 Mr. Stewart. It would be unfortunate for us to have that state of things. Mr. Ewing. Does it not, therefore, make the maintenance of confi- dence more difficult, and the shaking of that confidence more disastrous? Mr. Stewart. I should answer that by saying it would be very un- fortunate for us to fail in maintaining specie payment; but we have got to take some risks, and it seems to me that the risk is comparatively small now and is likely to continue so for a year to come. Mr. Ewing. Our favorable balance of trade, and the prospect of favor- able crops make you feel easy about starting specie payment; but would you you not consider a failure a year or two hence a great national calamity ? Mr. Stewart. I should consider it a calamity. Mr. Ewing. And what is your idea of the mode of maintaining specie payment as against those chances which you are speaking of. Is there any other method than retiring legal-tender notes I Mr. Stewart. I think it is desirable to retire them. Mr. Ewing. Can there be any assured and safe resumption without retiring them ? Mr. Stewart. I think it better that they should be retired. I do not think that we are prepared to have them retired at once. It is a sort of transition which must be gone through for the time being in keeping out legal-tender notes, but it will really be better for the country ere long to have them withdrawn entirely. Mr. Ewing. Have you any confidence in the maintenance of re- sumption through several years without such retirement f Mr. Stewart. I think that without it there will be great risk. Mr. Phillips. Do you think the business of the country can be maintained without a paper circulation of some kind 1 Mr. Stewart. No, sir ; I think that we require some paper circulation for convenience in transacting business. Mr. Phillips. Do you think that there is any safer or better kind than the legal-tender notes % Mr. Stewart. I do not think there is any better. Mr. Ewing. When resumption is reached, your theory is that the banks must take care of themselves ? Mr. Stewart. Yes, sir. Mr. Ewing. And the Treasury of itself f Mr. Stewart. Tes. And if the Treasury takes care of itself, I think that the banks can take care of themselves. Mr. Ewing. Will not the depositors in the banks be practically entitled to gold on their deposits ? Mr. Stewart. They will if they want it. Mr. Ewing. Should not the banks, therefore, have a large gold reserve ? 120 RESUMPTION OF SPECIE PAYMENTS. Mr. Stewart. They should either have a large gold reserve, or a re- serve of that which they cau convert into a gold reserve by application at the Treasury doors. Mr. Ewing. And they will convert it into a gold reserve to the extent that the depositors want gold ? Mr. Stewart. They may be compelled to, not from choice bat from necessity. The house of A. T. Stewart & Co., in New York, has for some weeks past been paying gold in change to the ladies who go there to buy goods. At first they were all anxious to get the gold, but now they say they do not want to be bothered with it, and they say they had rather have paper. That thing has practically occurred in New York within the last three weeks. Mr. Ewing. What is true of the banks generally will be true also of the savings-banks and all the banks of deposit 1 Mr. Stewart. Yes, sir. Mr. Ewing. They must practically pay gold where the depositors de- mand it ? Mr. Stewart. Certainly. Mr. Ewing. So that the $2,200,000,000 of deposits in the banks of the United States become gold demands if the parties choose to ask gold I Mr. Stewart. The banks have a perfect right to give them legal- tender notes. Mr. Hartzell. Will the banks have the right to pay legal-tender notes after the 1st of January, or will they cease to be legal-tender notes ? Mr. Stewart. That is the construction given to the law by the Sec- retary. They are legal-tender notes as long as they are out ; nothing can take that quality from the note except a decision of the Supreme Court. Mr. Ewing. But practically, as a business matter, the depositors hold- ing these twenty-two hundred millions of deposits may demand gold from the banks ? Mr. Stewart. It is hardly fair to put it in that shape. They can de- mand gold or legal-tender notes. Mr. Ewing. If they want gold, the obtaining of legal-tender notes gives them gold? Mr. Stewart. Unquestionably, by their going to the Treasury and demanding it. Mr. Ewing. So that, practically, these twenty-two hundred millions of deposits, as well as the six hundred and fifty millions of circulation, become, in effect, gold demands from the day of resumption ? Mr. Stewart. Of course they could not demand that amount of de- posits, for the reason which I have stated before. In the case of the banks, these deposits simply represent balances that are loaned largely by the banks to their customers ; and, when a customer withdraws his deposit, the bank at once looks around and says, " we cannot discount for this man ; he is withdrawing his deposit" ; and the banks refuse their discounts. In that way the deposits will be materially reduced. There will not be that claim upon the banks which there would appear to be from the volume of deposits. Mr. Ewing. That is not so, though, with the savings-banks' deposits. Mr. Stewart. It is not. Mr. Ewing. Will not the banks, in case of any apprehension that the government may not be able to maintain resumption at once, protect themselves, as far as they can by presenting their legal-tender reserves and their coin certificates for redemption, and by lessening their dis- counts ? RESUMPTION OF SPECIE PAYMENTS. 121 Mr. Stewart. I think they would. Mr. Ewing. And does it occur to you that the Secretary of the Treas- ury will have to maintain resumption probably by acting on the gold market, and by withdrawing greenbacks from circulation by the sale of bonds, for greenbacks ? In other words, if there is a tendency to convert greenbacks into gold, will not the Secretary have to check that either by large purchases of gold or by large purchases of greenbacks ? Mr. Stewart. By the sale of bonds for gold or greenbacks. That, of course, would be his mode of doing it. Mr. Ewing. And, having got the greenbacks, he would have to retain them during the continuance of any considerable drain ? Mr. Stewart. He would have to pay them out, or pay out coin, as long as the drain continued. Mr Ewing. But would he not check a demand for gold by taking, as far as possible, greenbacks out of circulation on which gold could be demanded f Mr. Stewart. Tes. Mr. Ewing. And hoarding them in the Treasury until the drain ceased % Mr. Stewart. Unquestionably it would be for his interest not to pay out greenbacks in very large amounts if he could avoid it. If he had the coin, it would be better for him to pay out the coin, and in that way meet that demand. Mr. Ewing. And lessen the amount of greenbacks'? Mr. Stewart. And lessen the amount of greenbacks. Mr. Ewing. But if he had not the coin 1 Mr. Stewart. Then he would have to sell bonds. Mr. Ewing. He might sell bonds to the amount of, say fifty millions of dollars, and get that amount of greenbacks into the Treasury. That would be a contraction of the currency to the extent of fifty millions. He could hold them in the Treasury. He is not obliged to pay them out again. That would be your idea of maintaining resumption. Mr. Stewart. Either by retaining the legal-tender notes in the Treas- ury or by a sale of bonds for coin. Mr. Ewing. Have you any idea that he could sell bonds for coin, and could get the actual coin from abroad in any very large amount 1 Mr. Stewart. I think he could do that, for a 5 per cent, bond, to a very considerable extent unless the people abroad get the idea in their head that there is going to be a large difference in value between sil- ver and gold. If they get the notion that they are going to be paid their interest or their principal in silver, and that silver is to be at a depreciation from gold, I think that their desire to take our bonds will be very much lessened, Mr. Ewing. "What do you think yourself as to the probability of sil- ver so appreciating in value that the silver dollar will be and remain at par with gold ? Mr. Stewart. So long as Germany continues to sell the silver at the present market price in the London market, I do not see how it is pos- sible for the price of silver to advance. After Germany has disposed of its forty-five millions (I believe that is the amount of its silver) I cannot say what the course will be, but it is probable that silver will then advance. That is one of the possibilities. If it does, it is going to help us very much in this matter of resumption. Mr. Ewing. But if it does not, the tendency will be to make gold a commodity of export ? 122 RESUMPTION OF SPECIE PAYMENTS. Mr. Stewart. It will, and I think somewhat regardless, too, of the exchanges. Mr. Ewing. In other words, you think that the passing of the silver bill makes a new cause of draiu of gold from the country I Mr. Stewart. It may, and it will, unless the price of silver advances. Mr. EwiNG. There is no indication, so far, of such an advance ? Mr. Stewart. I do not see any. It has not thus far advanced. Mr. Ewing. Do you think it expedient that the Secretary of the Treasury shall act on the markets and the values of the country by con- tracting the circulation in order to maintain resumption by withholding legal-tender notes ? He may sell one or two hundred millions of bonds for legal-tender notes, and may retire legal-tenders even to that great amount and keep them temporarily out of circulation. It is all within his own breast, and he is to be governed by his own notions of expe- diency. Mr. Stewart. I think that those are very great powers to intrust to any one man. Mr. Ewing. Are they not too great powers to intrust to any one man ? Mr. Stewart. Yes; I think so. Mr. Ewing. Does it not practically subordinate the banks and busi- ness men and industries of this country to the discretion of one man, which may be exercised wisely or unwisely, and of the exercise of which they can have no knowledge except as he chooses to impart it ? Mr. Stewart. That is so ; but that discretionary power, I believe, is limited to the extent to which the Secretary can sell five per cent, bonds. He has no right to sell any bond beyond five per cents, so that you know how far he can go. Mr. Ewing. He can sell four per cents, or four and a half per cents, or five per cents; and he has the power to take out of circulation the whole of the greenbacks, or any part of them, at his pleasure, and no hu- man being can tell when he may choose to exercise the power. Does it not practicallyput all the business of the country in the hands of one man, to be manipulated according to his judgment as to the necessity of diminishing the currency? Mr. Stewart. He has a very great discretion given him there, and it is questionable in my mind whether it is not too wide a discretion. Mr. Phillips. The banks, you say, ought to take care of themselves. Would they, in case of resumption, not have an inducement to organize and to draw from the Treasury all the coin that is in it, so as either (in case they were threatened) to compel the Secretary to suspend resump- tion or to have the power to meet it themselves? Would there not be danger of a combination of that kind ? Mr. Stewart. The banks would undoubtedly have to get their coin from the Treasury. Whether they would combine to do it, or whether they would do it severally on their own account, is immaterial. They would have to do it. Mr. Phillips. In other words, would it not be their interest, if they could not meet specie payments themselves, to compel the government to suspend specie payment? Mr. Stewart. Yes, sir. Mr. Phillips. Would they have the power to do so as the matter stands ? Mr. Stewart. That I am not clear upon, because the Treasury, on the other hand, can present to the banks their bank-notes for redemp- tion in legal-tender notes. The Treasury, of course, would say to these RESUMPTION OF SPECIE PAYMENTS. 123 banks, " You are drawing on us for coin. Now, here are those notes of yours, which we have received in payment, and you must redeem them in legal-tender notes or coin." It would react on the banks. Therefore it is desirable for the banks and the government, if possible, to act understandingly. Mr. Ewing. Still, if it comes to the point where there is an apprehen- sion that specie payment cannot be maintained, every bank, acting on the instinct of self-preservation, will try to get all the gold it can ; and even without combination would produce this very drain on the Treas- ury ; and they might do it before the Secretary could take any defen- sive measures. Mr. Stewart. The legal-tender notes which the banks now hold are just as good to them as gold in paying their obligations. Mr. Ewing. Not quite, because depositors might prefer gold. Mr. Stewart. It is not a question what depositors may prefer, but what the banks prefer to pay them. Mr. Ewing. If the banks receive gold deposits they certainly must pay out in gold if demanded. Mr. Stewart. They might as well do it, because they have the right to take their legal-tender notes and go the Treasury and demand gold for them, so that it practically amounts to the same thing. Mr. Phillips. The Secretary told us that the banks hold about $80,000,000 of legal-tender notes. They might suddenly present that volume of notes and take all the gold that the government itself owns. Mr. Stewart. Banks are not likely to do that. The withdrawal of gold would be a gradual thing, and if the Secretary finds that his coin is being reduced he will undoubtedly offer a five per cent, bond, if nec- essary, for coin, to get more ; and he might get coin from abroad for them. Mr. Phillips. Is it not your experience, for the last twenty years, that this country has exported more bullion than it has imported? Mr. Stewart. Yes, sir ; for the reason that that is one of the pro- ducts of the country. Mr. Phillips. Still it has always exported, and never imported? Mr. Stewart. Yes ; and that is the reason ; because we produce it. Mr. Phillips. What likelihood is there, if, in the last three years of prosperity, we have exported some $42,000,000 a year of gold more than we have imported, that we can improve on that in the next three years? And is it not possible that we may fall short of it ? Mr. Stewart. We might ; but, taking the doctrine of chances, I think we are not likely to. Mr. Phillips. The Secretary says that he must have $50,000,000 more gold. He has accumulated none on government account since the 1st of January, 1878. Do you think it possible for the government, between now and the first of January, 1879, to drain $50,000,000 of coin from Europe ? Mr. Stewart. That would be pretty severe. I think that that would be a doubtful experiment. Mr. Phillips. Is there such a business possibility I Mr. Stewart. I should doubt it; but you must recollect that the Treasury has the production of gold in this country to draw upon be- tween now and the 1st of January. Mr. Hartzell. The papers say that he has sold $50,000,000 of four and a half per cent, bonds. Mr. Stewart. He sold $10,000,000 with the option on the part of the syndicate to call for $40,000,000 more. I was told yesterday, by a mem 124 RESUMPTION OP SPECIE PAYMENTS. ber of the syndicate, that they had already sold $4,000,000 out of the $10,000,000. Mr. Phillips. In this country ? Mr. Stewart. Yes, sir. Mr. Phillips. The money must have come out of the stock on hand already? Mr. Stewart. They may not have bought the coin for it yet. I do not know whether they have or not. I do not know whether they ac- tually buy the coin as fast as they sell the bonds. I should think, how- ever, that they would do that. Mr. Hartzell. Is not this effort at specie resumption, by the increase of the interest-bearing indebtedness of the country, a very injurious ex- periment, so far as the people of the country are concerned 1 Mr. Stewart. It is hardly an increase of the burdens of the people, provided at the same time the Secretary of the Treasury can retire a large amount of government debt payable in six per cent., and refund it at four per cent. That is not increasing our burdens. Mr. Hartzell. But that is not the result of specie resumption at all. That is the result of legislation. Mr. Stewart. I think that specie resumption will facilitate that very materially. Mr. Phillips. The Secretary's purpose is, not to fund our high inter- est bearing bonds, but to raise the gold to meet resumption. Mr. Stewart. He will do both. Mr. Phillips. When we received the amount from the Geneva award, there was an express stipulation with the English Government that the amount of $15,000,000 should be partially in our bonds — England being unwilling to risk the exportation of $15,000,000 of gold f Mr. Stewart. That was so at that time. Mr. Phillips. Is there a likelihood of our getting the $50,000,000 in gold which the Secretary says he needs before the 1st of January next? Mr. Stewart. I think he can do it, and without drawing much coin from the other side. Mr. Phillips. Where can he get it ? Mr. Stewart. He can get it from the mines of this country. Mr. Phillips. In other words, he would stop the exportation of gold? Mr. Stewart. Yes, sir. Mr. Phillips. We exported last year forty -two and a half millions of gold more than we imported. He would have to stop that exportation of coin. Mr. Stewart. Yes. However, we are now coining the silver too. Mr. EwiNG. Mr. Vermilye speaks of $20,000,000 of special deposits of gold in the New York banks which ought to be added to the $140,000,000 in the Treasury. Are not these special deposits largely in. Treasury certificates ? Mr. Stewart. They are, very largely. Mr. EwiNO. So that they have been counted already, and are not to be considered as so much addition to the stock of metal in the country? Mr. Stewart. Yes; they have been counted in the gold in the Treasury. Mr. Vermilye. Of course the certificates are not counted twice. We count them, and the Secretary puts the gold down against so much gold-certificates. Mr. Stewart. The Secretary has not $140,000,000 of gold, exclusive of what is held against these coin certificates. You have to take that amount from the $140,000,000. RESUMPTION OF SPECIE PAYMENTS. 125 Mr. Hartzell. In your opinion, will not the ability of the govern- ment to maintain specie resumption after the 1st of January next depend very largely on the co-operation of the national banks f Mr. Stewart. I think it will to a very considerable extent ; but I believe that the government can maintain specie resumption on $300,000,000 of legal-tender notes whether the banks do it or not, pro- vided the balance of trade continues in our favor, and provided that our bonds are not sent home from Europe. Mr. Phillips. The Secretary has not been selling his four per cent, bonds during the first three months of this year. He has now put on the market four and a half per cent, bonds. We usually export gold at this season of the year. Mr. Stewart. Or a little later. Mr. Phillips. The current turns about the beginning of May. Mr. Stewart. We generally begin to export along in May, and the exports increase in June and July. Mr. Phillips. Could not the Secretary have sold the four per cent bonds f Mr. Stewart. No, sir ; he could not. He could not have sold four per cent, bonds at par in sufficient amounts. Views of Richard B. Pullan, of Cincinnati, Ohio. Washington, D. C, April 20, 1878. Mr. EwiNG. Please state your occupation ? Mr. Pullan. I was formerly a merchant and manufacturer. My last occupation was collector of the Cincinnati internal revenue district. Mr. EwiNG. We wish to inquire of you (as you have given a good deal of thought and attention to the subject) whether, in your opinion, it is practicable to maintain specie payment after the first of January, 1879? Mr. Pullan. To make the answer as brief as possible, I would say that it is not ; but, in order to state the reasons why I think it is not, I would like to read to the committee some ideas which I committed to paper last evening, so as to facilitate and expedite the inquiry. Mr. EwiNG. You may read the paper. Mr. Pullan proceeded to read the paper, as follows : " Specie payments cannot be long maintained after the resumption law takes effect ; how long depends upon circumstances over which the government will have lost all control. Sooner or later suspension will come. It' will be more disastrous than ever known in this country, for it will involve the national credit. " The paper circulation now is apparently equivalent to specie. It is at par with coin, or said to be. The national banks even advertise their ability to pay out gold for their notes. This apparent equivalency is the result of a combination of favorable circumstances, chief of which is the effort of the Secretary of the Treasury and the banks to bring green- backs to par at this moment in order to quiet the apprehension of dan- ger about the effect of the resumption law after January 1, so that Congress may be beguiled into inaction and allow the law to stand. If all the influences that now prevail to make an equivalency continue, and Congress should pass no law that would disturb it, it could be main- 126 RESUMPTION OF SPECIE PAYMENTS. tained after January 1, 1879, as well as before, and continuously thence- forward. " Equivalency is all that is necessary, and all that the Secretary of the Treasury thinks resumption means; for in his answer to this committee he said, 'Eesumption of specie payments means only the equivalency of gold and paper'; 'the equality of three kinds of currency — gold, silver, and paper,' and that 'the silver law just passed contemplates that gold, silver, and paper shall be all brought on an equivalency.' With this idea, he is seeking to create a condition of affairs that will preserve that equivalency. I think he makes as great a mistake in the means employed to accomplish that end as he does in supposing that gold and silver can be brought to an equivalency by an act of Congress, or until the ratio between the monetary value of the two metals shall be the same with all the great powers, and be universally accepted; for gold and silver have a value determined by the laws of other countries than the state that coins it, while paper derives its whole value from the impress upon it. Hence the coin of a country will consist of the cheaper metal, and the paper money will be the equivalent of that cheaper metal only. " If the Secretary of the Treasury's sole object has. been to establish the equivalency he speaks of, he has it now, and will most likely continue to have it so long as the condition of the greenback currency remains as it is. That condition is money, absolute money, the same as coin, and dependent for its value upon no other power than the government which created it. If Congress passes a law stripping the greenback of its money power by making its use as money depend upon the power and caprice of those interested in destroying it, it would undoubtedly disturb, if not destroy, the equivalency that had previously existed. It is not possible to believe that the conversion of $340,000,000 of money, whose quantity is at all times absolutely under the control of the gov- ernment, into $340,000,000 of mere paper notes, clothing the holder thereof with the absolute power to control the quantity, will not work a financial revolution, such as will place it out of the power of the gov- ernment to preserve the equivalency that had previously existed. If this would be the result of the passage of such a law when it should take effect, will not the taking effect of a law already passed be ex- actly the same? This, I think, is precisely the situation at present. A House of Representatives, more than half of whose members had been defeated at the polls only a few months before and were at the close of their official existence, rushed through the resumption law, with- out debate, to take effect five years afterward, so as to tie the hands of their successors. That law, in so far as decreeing what rights should accrue on January 1, 1879, has had no practical existence nor will have until by its terms it begins to operate. Its taking effect then will be just the same as if the law had been passed a few days before in Decem- ber. The only way, therefore, by which we may hope for a coutinuance- of the equivalency between paper and coin that now exists is to repeal the law passsd in 1875. "As the supreme object of financial legislation is to maintain the equiva- lency between paper and coin under all circumstances and be so benefi- cent in operation as to forbid the idea of change, I cannot conceive how one whose object is to preserve that equivalency will seek to termi- nate the condition of things which has permitted equivalency to be had now, and pursue a course which he himself in his conference with the Senate committee admitted was perilous, but perilous as it was the risk had to be taken some time. The only explanation is that the resump- RESUMPTION OF SPECIE PAYMENTS. 127' tion law was passed to enable the banks to force the withdrawal and cancellation of the government currency and secure to themselves the monopoly of the circulation and all the advantages, political, social, and commercial, incident to such a monopoly ; and that the new interpretation placed upon the law, by which the Secretary can reissue the greenbacks,, is for the protection of the banks during the time they are strengthen- ing themselves. Any other explanation would.be doing injustice to the superior intelligence and great ability of the Secretary. This policy will secure to the banks the monopoly of the circulation and protect them as far as anything can, until the crash comes, as it did in England in October, 1825, when eighty solid bankswent down, sixty of which were ruined. "While it is extremely doubtful that equivalency can be maintained after the resumption law takes effect, even if possible, I think it can be conclusively demonstrated that with a repeal of the resumption law, which would wisely provide for the establishment of an exclusive gov- ernment currency, that equivalency cau be preserved as well after the 1st of January, 1879, as before, and thenceforward, as long as the gov- ernment endures, without the possibility of interruption or disturbance. I say preserved as well after the 1st of January as before, and not at the point which bank power causes it to appear now. There might be a slight difference between the two forms of government currency, the metal and the paper, after the passage of such a law. If there was, it would be because of the withdrawal of the assistance and power of the Secretary and the banks, which they are now exerting so success- fully, and which would then be equally effective. " The power of the alliance between the government and the banks is illustrated not only by what we now see, in the bringing a paper circu- lation of between six and seven hundred millions to an apparent equiva- lency with coin, but by its work in the past, when it has been exerted to extirpate the greenback. The financial trouble and distress began at the close of the war ; not as a consequence of a state of war, as has been always alleged, for the history of France disproves that, but by the inauguration of a new war against the government currency by a class whose interests demanded a monopoly of the paper circulation. Assured of final triumph, if the law passed for their benefit three years ago is permitted to go into effect, they have made and are making the extraordinary effort the country is now witnessing to influence Congress, as already stated, expecting that the exhibition of specie payments and the proposition to reissue will quiet all agitation and alarm. "Eeissue of greenbacks that would be no longer greenbacks — eniascur lated legal-tender notes — will prove a delusion and a snare; for with the right of redemption in coin it will be impossible to keep these notes in circulation. They will all be in the vaults of the Treasury or the banks,. and the whole circulation would be bank-notes. They would be to the banks coin, for they would answer all the purposes of coin until the circumstances arose, described by Mr. Vermilye and Mr. Stewart, when they said the law of self-preservation would require them to be pre- sented for coin. That such an exigency would arise appears highly probable from the fact that the right of redemption will make an entire change in the character of the circulation, for its character partakes of that of the basis on which it rests. Now, bank-notes rest on a solid basis the credit of the government — in a form which no combination of circumstances can effect. After resumption the greenback, instead of being a rock, would be only a quicksand of the same nature as the bank- note itself. 128 RESUMPTION OP SPECIE PAYMENTS. "Bankers would recognize this fact, and very soon keep their reserves in coin, and let the Treasury take care of itself. The circulation being filled to the point of equivalency, by the free-banking provision of the resumption law, the hybrid greenbacks would be driven into the vaults of the Treasury and of those inexperienced bankers who might pay less regard to the voice of prudence than to that of the Secretary. The dis- astrous consequences of such a state of things is plain to be seen. The number of banks increased; a circulation enlarged to the very verge of the wants of business and nearly every dollar bank-notes ; the money- less legal-tenders mostly in the vaults of the Treasury and the balance in the vaults of the most imprudent and incautious of the bankers, with no more coin in the vaults of the Treasury than equaled the legal-tenders in the hands of these weak bankers and what might be outstanding in importing cities to circulate in the payment of customs and what was necessary to meet its current demands, what would be the situation of the country if the national banks should slip up, as they did in Sep- tember, 1873, on a basis of coin in the country equally as large, if not larger, than it is now or can be for years to come ; for to the banks green- backs were coin, absolute money, the only money the law required or that any one asked them to pay. They could not pay then and they will not pay again, when a similar exigency, possible at any time and certain to come at some time. " It is to meet just such exigencies as this that the bankers have found a new interpretation to the law of redemption that will give the Secre- tary the power to reissue the moneyless legal-tenders any time in the fature. It would place in his hands $300,000,000 of these notes, with the power to throw them into circulation by the tens or hundred mil- lions, at any moment, without a dollar comparatively in the Treasury. It would be giving him the same despotic power which the English privy council has exercised, without any authority of law, on several occa- sions, to save the Bank of England from destruction. The English Parliament has not dared to give such despotic powers, to place such vast discretion in the hands even of the council of its most exalted statesmen. Is it prudent or wise for this republic to give even greater powers and a wider discretion to the Secretary of the Treasury ? Such a course will make the government essentially what it is now partly, a monster bank, managed by the Secretary of the Treasury, as president, and a syndicate. Then the business of the country will be in the keep- ing of one man, under circumstances that will enable him and his friends to gather in millions through legitimate channels. For it should be always remembered that it is not the right to issue the basis of a cir- culation but to issue the circulation resting upon such basis, that gives the issuer the control over the quantity of the circulation. Any person or class having such control has in his hands the power to regulate prices, and hence the business of the country. It is the vast, unlimited control of the business of the country that will be the fruit, if it is not the object of the war that has been and is now being carried on by a class, against the vast property of the people. " I have just said that the character of the circulation is governed by that of the basis on which it rests. Hence, the requirement to redeem the greenback on presentation works a revolution which will be terrible in its consequences, for the condition will be instantly changed from a purely credit currency to one in which there is no element of credit. It was the overlooking this fact that misled Eicardo and Peel in the legislature of 1819." (Here Mr. Pullan read extracts from the speech of Eicardo, when EESUMPT10N OP SPECIE PAYMENTS. 129 closing the debate in the passage of the resumption bill in 1819, and which closed with the words, " He would venture to state that in a few weeks all alarm would be forgotten, and at the end of the year we should all be surprised that any alarm at all had ever prevailed at the prospect of the variation of three per cent, in the value of the circulating medium." And his dying declaration four years afterwards, addressed to his friend Sir W. Heygate, a fellow member of that Parliament: "Aye, Heygate, you and a few others who opposed us in the cash payments have proved right ; I said the difference, at most, would be only four per cent, and you said at the least it would be twenty-five per cent.'''' And also an extract from apian for the extinction of all bank-notes, and the establishment of a goy- ernment currency exactly like our greenbacks, which was found among Ricardo's papers after his death, closing thus : " In a free country with an enlightened legislature the power of issuing convertible paper money might be safely loged in the hands of commissioners whose fidelity there could be no more reason to doubt than commissioners appointed for the sinking fund or other purposes.") " These words of the author of the resumption law of 1819, not more terrible in its effect than will be that of 1875, are read to warn us of the extreme peril the country is in from the conspiracy of the Treasury and the banks to bring down the premium on gold to the lowest point to bulldoze Congress ; a peril far greater than when the premium was 10 or 15 per cent., for the people are that much nearer the edge of the pre- cipice, and it is that much easier for designing men to push them over. To illustrate the danger : An admixture of certain proportions of air and gas changes its condition ; until that point is reached a light can be taken into the room with impunity. If the continued escape of gas while one is looking for the leak is unheeded, the danger increases as the quantity approaches the explosive point. It may be either one or half or quarter of one per cent., yet no harm comes. But the moment the other quarter is added and a change of condition occurs, every thing is blown up. So it is with a forced unnatural resumption, it is the change of the condition from a purely credit currency to one in which there is no element of credit. Thenearer youget to that point the greater the peril. I have said that the national banking system was the main cause of the distress that exists, and that it had received immense subsidies, and was now exerting all its power to finish the war it had been waging for twelve years upon the government currency. While the system has operated thus to the advantage of those who availed themselves of its privileges, they have done no more to secure all the legislatiou'possible for their benefit than have those engaged in manufacturing, in making iron, in raising sheep or tobacco, or other products. They got all they could and are trying to keep it, at the expense and ruin of their neigh- bors. Notwithstanding all this, it would be a wise policy that any legislation had should not only put an end to the war, but invite their co-operation. With their aid a substantial equivalency can be secured, and a degree of confidence established that will restore prosperity to the country. Legislation that will not be unfriendly to the present national banks, that will provide for the gradual retirement of bank-notes as fast as they are run out, and the final establishment of an exclusive government currency, and that will afford no opportunity for any enlargement or contraction of the circulating notes, would accomplish that end. The repeal of the resumption law is the all-important thing at this moment, to prevent a wild inflation or most disastrous contraction. If the bill should also provide for the removal of the bank-tax, as some compensa- tion for the gradual curtailment of their privilege of issue, and the as grad- H. Mis. 62 9 130 RESUMPTION OF SPECIE PAYMENTS. ual enlargement of the government currency, with a dollar of coin de- posited for each dollar of currency so increased, it would give universal assurance that the end had been reached. And if there was a further provision making all the circulating notes receivable for customs the same as coin, and requiring the Treasury, through commissioners ap- pointed for that purpose, to buy in the open market what was necessary for interest on the public debt, either of coin or coupons with the inter- est off, assurance would be given that a uniform equivalency with coin would be practically preserved, and a substantial, enduring, and univer- sal confidence established, that within a very brief period would make an equivalency between its two currencies, paper and metallic, which nothing could ever disturb. The supreme confidence that would be in- spired by even the passage of such a law would stand in place of much gold in preserving the nominal equivalency that now appears, and with the passage of each month and year would cause it to become more and more perfect. Mr. Ewing. You spoke of the cost to the people of the national bank issues, and you stated the cost at several hundred millions. How do you make it up ? Mr. Pull an. It is a matter of figures. Mr. Ewing. Have you got the figures ? Mr. Pullan. I have. Here is the statement in this book.* (The tables referred to show that the temporary loan continually increases from year to year, and that the currency in the reserve being kept at one-third of the temporary loan each year, by that much the volume of notes (the aggregate of greenback and bank notes) existing August 31, 1865, is reduced. This reduction is such as to reduce the circulation to a point where the whole amount would have been required for the wants of business, after which the accumulation consists of coin and notes. In 1872 the amount of coin and notes in the reserve would have established an equivalency between the reduced quantity of notes in actual circulation and coin which continued without interruption afterward. The operation of the temporary loan law permitted the banks and people to supply themselves with any additional currency the wants of business demanded by the presentation of their certificates, and again any excess of circulation would be reduced by again deposit- ing and taking out new certificates. The summary of the detailed calcu- lations for each year, from August 31, 1865, to July 1, 1876, shows that the system cost the public Treasury during that time $771,258,844, and that the amount of the interest-bearing public debt would have been, on July 1, 1876, $1,311,450,000, bearing an average interest of less than 4£ per cent. ; also that on July 1, 1876, the balance in the Treasury would have beeu $28,950,000 ; amount in the reserve, $350,000,000, and the amount of outstanding circulation $550,000,000, against $763,000,000 actual circulation on that day.) Mr. Ewing. You think that the banks have cost the people that much ! Mr. Pullan. Yes ; the system of bank-notes. The same evil existed, of course, in the former State banks. These calculations are not made as an afterthought. They were made in 1867, and were published in the Cincinnati Gazette of February 13, 1868, covering a large portion of one side of the paper. In that publication I detailed the whole of these calculations year by year. That paper was a review of Mr. McOulloch's annual report for 1867, and of the report made by Mr. Sherman from the Senate Finance Committee. I analyzed those reports and showed what would be the condition of the country if their policy * Theory of Money and Currency, by E. R. Pullan, recently published by Solomons & Chapman, of Washington, D. C. RESUMPTION OP SPECIE PAYMENTS. 131 was carried out. It has since become history. I also showed what wonld be the condition of the country under what was known as the greenback policy of Ohio. I made another calculation, which I did not publish. This I corrected in 1874, when I was editing one of the eity daily papers for Mr. Stevenson's political campaign, and I brought the calculations down to 1874. I make this explanation to show that the calculations were not made after Mr. Sherman had completed his dis- astrous work, but when he was just entering upon it ten years, and that they were part of a paper prepared for Senator Morton, but pub- lished in Mr. Sherman's organ by request. The calculations for each year were made upon estimates of receipts and expenditures for the next succeeding eight years. The difference between the estimates and the actual figures for the whole period were: for receipts, about $200,000,000; and for expenditures, estimate, $1,225,000,000; actual, $1,211,841,000. Mr. Bell. You made a calculation in 1867 of the expenditures for nine years, and then, in 1874, you took the actual expenditures for those years ? Mr. Pullan. In 1874 I took the calculation which I had made ten years before, and which I hail not published, and I corrected the figures by the facts as they occurred during the nine years. On its publication in the work referred to, influential friends said that it was unsatisfactory, because the figures were so concentrated that they were hard to under- stand, and Dr. Spence requested me to state the figures in full, so that any one could understand it. I did it, in consequence, some two months ago. Mr. Ewing. Have you that paper here, that the committee might have it ? Mr. Pullan. Yes, sir ; I brought it with me, and it is at the disposal of the committee.* "Nature and effect of a Savings Bank of the People, the name given in the annual re- ports of Secretary Chase to the temporary loan feature, section 4 of the legal- tender act of February 25, 1862. Statement showing how soon the United States notes would have been the equivalent of coin if the law in successful operation in 1865 had continued to be honestly executed, as it had been previously by Secretary Chase (who called it the Savings Bank of the People), and amended only so far as to require the State notes to be substituted for bank notes within two years, and to remove all limit to the amount the banks and the people could deposit, and that would have specifically bound the government to do what Secretary Chase had done in the wise exercise of the discre- tion given him, viz, that the proportion of one to three between the amount of cur- rency in the Treasury and the amount of the deposits should be preserved ; that the government's option to pay the deposit or terminate the interest at any moment should first attach to the class of deposits bearing the highest rate of interest, and to the certificates bearing the highest number, &c, to the last deposits of each class. The amount of public debt on August 31, 1865, and the amount of expenditures and of coin, or customs, receipts for each year, are copied from the reports of the Secretary of the Treasury ; and the amount of currency revenue each year is the amount found after deducting from the receipts from all other sources than customs. Of the balances reported in the Treasury in the preceding table, a portion has been placed in the reserve, and only a part remained in the Treasury for ordinary uses. One hundred and seventy million dollars coin had been thus transferred from time to time, and $30,000 lawful 'money in the last year was added to the reserve instead of to the circulation, all of which appears in the table describing the condition of the re- serve and circulation. The balance, therefore, in the Treasurv was, coin, $9,530,000 ; lawful money, $19,420,000; total, $28,950,000. The difference between computing the interest on a part of the certificates at 4|, 4, and 3 Ah per cent., and all at 5 per cent., is $45,680,000. Adding this amount to the principal, $1,050,000,000, the total debt would be $1,357,130,000, instead of $1,311,450,000 as stated. Whatever doubt might suggest itself about the government being able to dispose of the amounts named from time to time at the reduced rates, none could possibly arise 132 RESUMPTION OP SPECIE PAYMENTS. Mr. EwiNG. You say that if the present law remains on the statute- book the whole of the legal-tender notes would be practically retired, and their place in our paper circulation supplied entirely by national- bank notes ? about its ability to place even greater sums at 5 per cent., especially as the payments would continually approximate to coin. Table No. 1 shows the condition of the deposit and reserve funds, the amounts being stated in millions for each fiscal year ending June 30. The numbers designate the character of each column. No. 1. Amount of deposit at the beginning of year. No. 2. Increase during the year. No. 3. Amount at the end of the year. No. 4. Amount in the reserve at the beginning of year. No. 5. Amount of coin added to reserve daring the year. No. 6. Amount of lawful money added and withdrawn from circulation. No. 7. Amount in the reserve at close of year. "Years. Deposit. Reserve. 1. 2. 3. 4. 5. 6. r. 1866 107 130 220 310 400 490 610 810 950 1,050 1,155 23 90 90 90 90 120 200 140 100 95 —95 130 220 310 400 490 610 810 950 1,050 1,145 1,050 50 50 734 103* 1334 1634 203i 270 316* 350 381J 50 1867 23* 3p 30 30 40 56| 73t 1034 1334 163* 203i 1 868 1869 1870 1871 1872 10 469 534 60 1873 315f 350 1874 —20 — 28i -314 1875 3815 1876 350 Table No. 2 shows the condition of the circulation and the situation under the " sav- ings-bank " system and that which has existed ; the figures for the last are from official reports, stated in millions. . No. 1. Total amount of circulation at the beginning of the year. 2. Amount of reduction or addition during the year. 3. Amount at the end of the year under savings-bank system. 4. Amount United States notes actually outstanding at the end of each year. 5. Amount national-bank notes in actual circulation. 6. Total amount of United States notes and bank-notes in circulation. Tears. Under savings-bank system. Actual jer official report. 1. a. 3. 4. \ 5. 6. 1866 710 710 687 657 627 597 557 500 500 520 558 710 687 657 627 597 557 500 500 520 548 550 460 421 400 388 388 395 396 398 400 427 418 250 290 299 300 300 300 323 341 343 333 345 710 1867 -23 —30 —30 —30 —40 —57 711 1868 699 1869 688 1870 688 1871 695 1872 719 1873 739 1874 +20 +38 +02 743 1875 760 1876 763 The condition of the "Savings Bank of the People " on July 1, 1876, as shown by the two tables above : Immediate liability : United States notes outstanding $550,000,000 Resources immediately available : Cash in the reserve— Coin $170,000,000 United States notes 180,000,000 350, 000, 000 Balance secured by the property of the whole people 200,000,000 These two tables also show the gradual reduction of the circulation, and the increase RESUMPTION OF SPECIE PAYMENTS. 133 Mr. Pttllan. Entirely. They will not be retired immediately, because that would not be to the interest of the banks. Mr. Eames. Under existing law, can the limit of legal-tender notes be reduced below $300,000,000 ? Mr. Pullan. The avarice and cupidity of the banks will cause such of the coin reserve under one system, and the increase of the circulation, with com- paratively no such reserve, in the other ; that while in one the circulation would have been $550,000,000 on July 1,1876, the other was actually $763,000,000. As a result the gold premium Would have gradually fallen to par, as shown in table 3, while under the bank-note system it has fluctuated, as shown by the following table compiled from the Bankers' Magazine and the Financial Chronicle, giving the lowest and highest gold premium, and the average for each six months from 1862 to July, 1876 : For the first six months. For the last six months. Average for the year. Lowest. Highest. Average. Lowest. Highest. Avorage. 1862 Par 34 51* 25 32 334. 30J 10* 10* 81 US 10* Hi HJ 9* 72J 151 134$ 67| 41* 44 44J 25* m 14J 19* 14g 171 15 3.21 52.15 75.80 71.28 37.23 37.68 39.78 35.40 16.00 11.34 11.39 15.96 12.44 15.00 13.24 9 22* 85 38 31i 33 321 19J 10 8* 11* 6* 9 HI 7 37 56J 185 49 55* 45* 50 62| 22J 15* 15} 16* 12* 17* 13* 23.63 40.33 131. 87 44.69 46.19 39.83 30.89 30.58 14.19 12.18 13.51 12.20 10.52 14.20 10.25 13.42 1863 1864 1865 1866 1867 1868 1869 1870 1871 11.76 1872 12.48 1873 14.04 1874 11.30 1875 14.36 1876 11.74 Condition of two thousand and eighty-nine national banks, as per report (pages 278-9) of the Comptroller of the Currency, December 2, 1876 : Capital stock, $499,502,232 ; surplus, $178,647,487. Immediate liability : Bank-notes in circulation $292,166,039 Individual deposits 651,385,210 United States deposits 11,003,583 $954, 554, 832 Resources immediately available : United States bonds 385,010,550 Lawful money due from United States Treasurer 131,580,749 Cash items 12,043,139 Specie 21,360,767 549,995,202 Balance secured by the property of the banks only 404, 559, 630 EFFECT ON THE PUBLIC DEBT. Under the system of government currency the lawful money outstanding on June 30, 1876, per table No. 5, forms no part of the public debt ; for its equality with coin would be preserved by the reserve set apart for that purpose, because the necessities of com- merce would forever prevent its quantity being materially reduced. The pnblic debt would, therefore, have been (page 46) $1,357,130,000, less cash in the" Treasury, $28,950,000, leaving the net debt $1,328,180,000. The result of similar calculations, published in the Gazette ten years ago (page 28), shows, after transferring $350,000,000 of the coin to a reserve, that the public debt on June 30, 1875, would have been $1,435,363,640, less cash in the Treasury (coin, 139,189,460 ; lawful money, $44,629,751), $83,819,311, leaving the net debt $1,351,444,329. Under the bank-note system, which necessarily contemplates the redemption and annihilation of the government currency, for it cannot exist long without such extinc- tion, the lawful money must be added to the existing interest-bearing debt to find the total amount. The net public debt on June 30, 1876, was, therefore, by Secretary Morrill's report, $2,099,498,848 ; and on June 30, 1875, per Secretary Bristow's report, it was $2,088,852,114 (see pages 28 and 40). The saving to the people, as shown by one calculation, would have been $737,137,785 ; by the other, $771,258,844. 134 EESUMPTION OF SPECIE PAYMENTS. an increase of bank-notes that they will crowd out the superior paper currency and force it into the vaults of the Treasury or of the banks. Mr. Eames. Would the national banks retire the legal-tender notes to any extent beyond what the industries of the country require ? Mr. Pullan. The national banks are not necessarily hostile to the interests of the country. They are just as much bound up in the inter- ests of the country as any other corporation. In fact, they ought to be more so, because their assets are really in the faith, stability, character, and prosperity of the people. But the resumption law provides for free banking. There is no limit to bank issues. That is the objection. If the drain of gold after resumption be not sufficient to cause a collapse, it will be followed by confidence and prosperity. With prosperity will come increased business and a greater need of money and higher in- terest; and that higher interest will be a strong inducement to men who have the government bonds to establish banks in localities where the tax- ation is very low ; and their notes will crowd out the legal-tender notes. Prudent bankers, like Mr. Vermilye, will retire their notes ; but these financial adventurers will come in and fill up the place, not caring for the consequences. The law may say that the legal-tender notes shall be kept in circulation, but there is a law, higher than any act of Con- gress, which will drive them in sooner or later. And if they do not drive them in, we will have such an expansion that a trip-up will burst it all. Mr. Ewing. Kb matter what amendment may be made to the resump- tion law, requiring the reissue of legal-tender notes as redeemed, you think that that amendment will be, in effect, inoperative ? Mr. Pullan. Yes, sir. Mr. Ewing. You think it will be impracticable for the Secretary of the Treasury to keep the legal-tenders in circulation, because the bank issues will be so largely increased as to usurp the channels of circula- tion? Mr. Pullan. Certainly; and I have too much respect for the intelli- gence of the Secretary of the Treasury not to believe that he has reached this conclusion. Mr. Ewing. Unless the Secretary of the Treasury felt bound, for the purpose of arresting some great convulsion, to reissue the legal-tender notes thus forced in upon him for redemption, he would of course hold them in the Treasury, particularly if the channels of circulation were already filled by bank paper? Mr. Pullan. Certainly. Mr. Ewing. He would certainly hold them in the Treasury ; and, es- pecially if he should run short of gold, he would be compelled, by the necessity of maintaining resumption and preserving the honor of the country, to retain the greenbacks thus retired ; and that would practi- cally result, in your opinion, in the permanent retirement of the green- back circulation! . Mr. Pullan. When I say permanent retirement of the greenback circulation, I mean its retirement so far as circulating in business in the country. The legal-tenders would not be retired from the vaults of the Treasury, but would be the reserve, either in the vaults of the Treasury or in the vaults of the banks. They would not be the active circulating medium of the people. The people would not see any greenbacks, no matter what might be the provision of law in regard to their reissue. Every sensible banker would keep himself in the condition of being able to draw gold from the Treasury. He would keep his reserve either in gold or in legal-tenders. If all the banks had their reserve in gold, then the legal-tenders would be in the Treasury. The policy of the RESUMPTION OF SPECIE PAYMEKTS. 135 banks would be to let the gold go out ; but, as both Mr. Vermilye and Mr. Stewart said yesterday, the people, for ordinary purposes, prefer paper to either gold or silver. Mr. Ewing. Would not that substitution of bank-notes for legal-tend- ers take place soon after the resumption of specie payment, irrespec- tive of the question of the increase of bank issues f Mr. Pullan. Causes would have to operate. If it did take place, it would not be long after resumption, because I have no doubt that, with the return of prosperity, it would be the disposition of the present national banks to co-operate with the government, and to bridge every- thing over, and make resumption a success. They would not send their greenbacks to the Treasury, but would keep them in reserve. At no time is it the interest of the banks to have greenbacks sent to the Treasury for redemption, because greenbacks are the same to the banks as gold. In fact, it is better for them to keep the greenbacks in their vaults than to keep gold. Mr. Bwing. Yes; as long as they are assured they can get the gold. Mr. Pullan. If they begin to have a doubt about that, some timid banker will very prudently push out and work all his reserves into gold. The thoughtless bankers will not be so careful, and may not be alarmed so quickly ; but, as it has been said, a million of dollars is a very timid thing, and smells danger from afar. Mr. Ewing. Tou did not quite apprehend my question as to whether the greenbacks would be, in effect, all retired from the circulation of the country soon after the 1st of January, 1879? Mr. Ptjllan. I say that they will be, soon after the 1st of January, 1879, in the vaults of the Treasury or in the vaults of the banks. They will constitute the reserves of the banks. How fast that will take place I cannot say. It may be done in anticipation of a return of prosperity or wait the assurance of it. No ODe could say in such a time what might happen, for financial convulsions are only the work of a few months. Mr. Bames. Suppose that the government resumes specie payments on the 1st of January, 1879 ; do I understand you to say that the effect of that resumption will be to retire the legal-tender notes gradually, and then ultimately to have them all withdrawn from circulation ? Mr. Pullan. Certainly. The effect will be to retire them entirely from the circulation of the country, and to let their place be supplied by national-bank notes. Mr. Eames. Suppose that that would be the effect of a resumption of specie payments on the 1st of January; would, or would not, the national- bank notes be equivalent in safety and convenience, as a means of circulation for the business of the country, to the legal tender notes? Mr. Pullan. I do not regard the legal-tender notes as possessing, after the 1st of January, 1879, any of the attributes of money that attached to them before the 1st of January, 1879. Mr. Eames. But I understand you to say that if the legal-tender notes are retired, their places will be taken by the national-bank notes. Mr. Ptjllan. Yes, sir. Mr. Eames. Now, will not the national-banknotes that are substituted for the retired legal-tender notes be equally' safe and convenient for all purposes of business as the legal-tender notes themselves ? Mr. Pullan. They will be just as convenient for the purposes of busi- ness so long as confidence continues. Both would then be but the rep- resentatives of coin ; and the government is bound alike to redeem the bank-notes as it is to redeem the legal-tender notes. Besides, the bank- notes are first protected by the bonds (which is an abundant security), and then, if the bonds fail, the government is liable for the deficiency. 136 RESUMPTION OF SPECIE PAYMENTS. Mr. Eames. And, in addition to that, the stockholders in the national banks are also liable; Mr. Pullan. That would not amount to anything. The liability of the stockholders would be really nothing, unless they were prosecuted by the government itself. If I hold a bank-note, its strength is not in- creased to me by the liability of the stockholders, because the govern- ment itself (which is superior to any individual) is liable to me. The stockholder can only suffer when the government, which is the guar- antor of the note, proceeds against him. Mr. Eames. Do I understand, from what you state, that your appre- hension is that in case of resumption on the 1st of January, 1879, the legal-tender notes will be practically retired from circulation, and that there will be an excess of national-bank notes for the business purposes of the country ? Is that your idea ? Mr. Pullan. Yes, sir ; that will be, sooner or later, the operation of the resumption law. There will be either a crash or (in case of prosper- ity) inflation will be invited under the free-banking feature of the re- sumption law. Mr. Bell. In view of the extent of this country, of the number of its population, of the demands of its business, and of the progress of civili- zation, is it your opinion that the present paper circulation of, say, $650,000,000, is adequate or inadequate to the demand? Mr. Pullan. The answer to that question can only be conjectural. My own opinion is that if the government had an issue of $650,000,000 of paper currency, the whole of that currency would be required to be in circulation for the wants of the people. But, if there was any feel- ing of insecurity (no matter how latent that feeling was), the quantity that would be absorbed by the government would be reduced, and the thing would adjust itself. Confidence is the substitute for gold, and on confidence the whole of our modern financial structure is based ; and the whole object of legislation is to do that which will inspire the great- est confidence. Mr. Bell. That is, it is based on confidence, in the absence of a suf- ficient amount of coin to float the currency. Mr. Pullan. The value of any paper currency does not depend upon its relations to gold and silver, but upon its quantity. We make it de- pend upon its relations to gold and silver in order simply to put a check upon the quantity, and to have no more in circulation than is requisite for a stable, uniform value, so that it will be kept upon a par with some- thing like gold and silver. Mr. Bell. Something of intrinsic value ! Mr. Pullan. Something of value recognized by other nations. I do not regard gold and silver as having any higher intrinsic value than what the laws of this and other countries have established. Views of A. J. Warner, of Marietta, Ohio. Washington, D. C, April 22, 1878. Mr. Ewing. As you are understood to have given a good deal of attention and study to the question of resumption of specie payment, we have invited you here for the purpose of obtaining your opinion as to whether it is practicable and consistent with the public welfare to re- sume specie payment on the 1st of January, 1879. Do you think that it is practicable? Mr. Warner. I do not think it at once practicable and consistent with the general welfare of the country] nor, indeed, do I think it at RESUMPTION OF SPECIE PAYMENTS. 137 all practicable to accomplish and maintain resumption, except by re- ducing the paper circulation down to such a limit as would be indi- cated by the exercise of the choice of the people between coin and paper. That is, an equilibrium in the circulation itself must be first restored if resumption is to be maintained, and by equilibrium I mean such a state of the circulation as would be indicated by as many people on the average taking coin to the Treasury or the banks for paper as would take paper for coin. That is a state not reached, of course, at once. That is a choice not expressed finally on any given day, nor once for all, but it is a choice exercised from day to day, from time to time, in all the busi- ness operations and transactions of the country — to go on from month to month for one or two years at least. To make myself better understood, I will illustrate my view of the question in this way : When a currency is made convertible into metallic money, or the money of the world, then the quantity of circulation which any country will possess or can maintain is governed solely by the laws determining the distribution of metallic money over the world. No direct act of legislation, I take it, can make it more or make it less. The first question, then, that arises is, how large a volume of convertible currency would be maintained in the United States now; and, secondly, how much or such a volume {when left to the free operation of the choice of the whole people, to be exercised as I have indicated) will be coin and how much paper. I conceive resumption, then, to consist in nothing short of providing coin to the full extent that the people may prefer coin to paper, and in pay- ing it out in substitution for the paper and retiring the paper down to that limit. I think resumption can be maintained in no other way. To illustrate further, suppose that the volume of currency which would nat- urally fall to us in the maintenance of the general level of prices to be seven hundred and fifty million dollars, and suppose further (for the sake of illustration) that we had that amount in circulation now, and that it was all coin, seven hundred million dollars of full coin and fifty millions of subsidiary coin ; and suppose that Congress should decide that the country needed more currency, and should direct the Secretary of the Treasury to purchase, with bonds, one hundred million dollars of the precious metals from other countries, and pay it out in the course of payments from the Treasury, it is a very plain proposition, I think, that the coin so paid out in excess of the volume that would naturally fall to us would leave the country after being paid out — not immediately as paid out, but certainly soon after. The first effect of making our cir- culation redundant, as compared with the currency of the world, would be to raise prices, when exports would be checked, imports increased, and the exchanges turned against us. Then the excess of coin would go away. I conceive that that law holds good and would be just as true with our channels of circulation filled with paper money. If, on the top of legal-tender paper, the Secretary pays out coin, one of two things must necessarily take place; either the coin will displace the paper, and remain as a part of the circulation of the country, in lieu of paper, under the operation of the choice of the people (as I have designated), or, if the paper is kept in circulation per force of its legal-tender quality, then the coin will as surely leave the country again as it would if we had already coin in circulation, and the Secretary should pay out more coin on top of that. That is, the coin will not stay in the country as an addition to a full paper circulation. The Chairman. You mean irrespective of the question of what is termed the balance of trade f Mr. Warner. I conceive that that in itself would determine the bal- 138 RESUMPTION OP SPECIE PAYMENTS. ance of trade agaiust us. That is the way that the gold would be sent abroad. The first effect of an increased volume of money is to raise prices, and thus to operate to determine an adverse balance of trade when the exportable part of the currency goes away. I will say further in that connection, that if it should turn out, as the Secretary of the Treasury seems to assume (and, apparently, very many people in the country), that on the announcement of resumption the people will not take the coin, but will choose to retain the whole six hundred and fifty millions, or all the paper now outstanding, rather thau have any part of the circulation coin, then, also, would the coin, when paid out, leave the country for the same reason; and resumption, therefore, on that supposition might just as well be begun to-day, with the coin which the Treasury now possesses, as next January; provided always, of course, that our distributive share of the money of the world would not be greater than our present volume of paper, together with the fractional currency and the coin already in circulation on the Pacific slope, and the reserve that the Treasury now has. Or, to state the proposition generally, coin paid out from the Treasury, whether on top of paper or coin already in circulation, in excess of What would be our distributive share of the currency of the world, as determined by the laws of trade, unless allowed to displace a part of that already in circulation, will not long stay in the country, but now to other countries. This I understand to be the law of currency, the law as given by writers on monetary science, and as attested by the experience of this and all other coun- tries. As to what our distributive share of the money of 'the world would be now or at any given time cannot, of course, be set down before- hand. The quantity of such a currency is determined by trade, not trade by the quantity of the money. Still I think there are data from which we can arrive at an approximate idea of the volume. Mr. Ewing. Give your views as to what you think the volume would be. Mr. Warner. I made some time ago some figures on that question, taking as a starting point our currency at different periods before the war, as in 1854, 1858, 1860, and 1861. I wish to premise, however, with reference to all estimates made as to the quantity of coin in the country at any given time, either in 1861 or before that time or now, that we must take all these estimates with a good deal of allowance ; but I have followed the estimates given in the Mint and Treasury reports as probably nearer correct than any others. In 1854 the total circulation of the United States, as compiled from the Treasury reports, was, in round numbers, four hundred and fifty-four millions. Of that, two hundred and four millions was in bank-notes, and the balance in coin and bullion. The coin was divided into coin in circulation, one hundred and ninety- one millions, and coin-reserve in banks, fifty-nine millions. In 1857 the total circulation Mr. Hardenbergh. Before or after the panic ? Mr. Warner. Before suspension. Suspension took place on this state of the currency. In 1857 the total currency of the country was •four hundred and sixty-two millions. Of that, two hundred and four- teen millions consisted of bank-notes; the balance of coin. The coin was divided into specie-reserve in banks, fifty -eight millions (there was, as will be seen, an increase in bank-notes and a decline in bank reserves before suspension in 1857), and coin in the circulation of the coun- try, one hundred and ninety millions, a decline of only one million from 1854. In 1861 the total circulation of the country (which in- cludes actual circulation, reserves, hoards, and everything) was four RESUMPTION OF SPECIE PAYMENTS. 139 hundred and eighty-seven millions, two hundred and two millions of which consisted of banknotes, and the balance of coin, divided into specie reserves in banks, eighty-seven millions, and the coin in circulation, one hundred and ninety-eight millions. In that year, or before the end of the year, there was a general suspension. In other words, there was in the country in 1861 when the suspension of specie payments took place, $1.41 in coin to $1 paper. But, compar- ing the Secretary's estimate of the coin there will be in the country on January 1, 1879, 1 find that, if there is accumulated by the Secretary and the banks all the coin which the Secretary calculates will be accu- mulated, we will have 40 cents of coin in the country to $1 of paper. That is, the banks suspended in 1861 with $1.41 of coin in the country to $1 of paper money, and we will have in 1879, 40 cents in coin to $1 in paper, upon which state of facts Mr. Sherman proposes to resume. Mr. EwiNG. What was the percentage between coin and paper when we suspended in 1857 1 Mr. Warner. We had in the country in 1857, when we suspended, $1.16 in coin to $1 in paper. On that point the Secretary's comparison of the strength of the United States Treasury and of the banks with other countries — foreign moneyed institutions; — is, it seems to me, liable to lead to error (and I believe a serious error), in this : that it does not take into consideration the condition of the circulation in the different countries. For instance, to restore even the equilibrium of the cur- rency which existed in 1861 will require considerably more coin than it is expected the Treasury and banks altogether will have by January, 1879. Mr. EwiNG. How much more? Mr. Warner. I will figure out the percentages and give them to the committee again. As to the proportion of coia and paper in circula- tion in different countries (taking the estimates made by Mr. Ernest Seyd), there is in Great Britain about $3.33 of coin to $1 of paper; in France (according to the last report I have seen — that of January, 1878), $3.10 in coin to $1 in paper (taking the total circulation), and in Ger- many, a little over $4 in coin to $1 in paper. Beyond those countries I have not carried the investigation in that respect, but I will review these figures and give the correct percentages to the committee. Mr. Hardenbergh. How then do you account for the depressed con- dition of affairs in Germany rather than in France, if the reserve is so much greater in Germany than it is in France 1 Mr. Warner. It is not the reserve which is so much greater ; if is the proportion of coin to paper in the entire country. But that is not among the causes of the depressed state of trade in Germany. There are other causes for that. It is mainly due, I think, to the demonetization of sil- ver. Germany's own economists, I believe, now almost universally agree on that. Mr. EwiNG. That is, to the contraction of the currency by the demone- tization of silver ? Mr. Warner. Yes; and the changing from a cheaper to a dearer cur- rency — from silver to gold, by a process that enhanced the value of gold — the contraction involved in the change from a cheaper to a dearer cur- rency. Mr. Ewing. Just the process which we have been going through for the past four years. The Chairman. Have you given any thought to the question as to the ability of this country to maintain resumption, growing out of the dif- ference in the character of the paper currency that exists ? 140 RESUMPTION OF SPECIE PAYMENTS. Mr. Warner. Yes ; I have considered that, and I think this is true : When a paper currency is, in fact, convertible, readily and easily con- vertible, then there is the least difference in the world between a paper that is legal tender and one that is not. The force of legal tender is not exerted, does not come into play, when the currency is readily and easily convertible into metallic money, which is a legal tender. The legal-tender quality comes into force at the point and at the instant that convertibility either fails or is made difficult or uncertain, and not be- fore. The difference will depend, in my judgment, not so much on the fact that the currency is legal tender as on the fact that convertibility will be made easy, and that there will be no fear of failure of converti- bility to-morrow. As long as bank-notes are actually and easily con- vertible, then the difference between them and legal tender is but little, because the legal-tender quality does not come into play, except at the point where convertibility fails or becomes uncertain. Mr. Bwing. That is, it is your opinion that it will require as large a reserve to maintain resumption as if the whole paper currency was bank currency 1 Mr. Warner. I think a somewhat larger proportion of paper, green- backs and national bank-notes, will be maintained than there would be of the old bank currency ; resulting, not so much from any legal-tender quality, as from its uniformity and the sustained confidence of the country that the paper will be as good to-morrow or next week as it is today, and that if convertibility fails its use as money will not be less- ened ; but I should not expect to see the proportion very much more than it would be with readily convertible bank currency under the old system. Tou will observe, from the data I have given, that the paper part of the circulation seldom exceeded 45 per cent, of the whole circu- lation of the country. If it exceeded 45 per cent., we find (I think, too, invariably, so far as I have examined different periods), that suspension took place before it reached 50 per cent, of the whole. Generally from 40 to 45 per cent, of the whole seems to have been the safe limit of bank currency before 1861. But I will add this further : that, if it should prove that a very much larger percentage of the whole circulation would be pa- per, then there can be no possible gain now in accumulating a large stock of coin for the purpose of resumption. To illustrate that better, let me give these figures. It has been proposed, I see, to retain six hundred and fifty millions of paper after resumption. There is also in circulation fifty millions of fractional currency and subsidiary coin ; and, if we suppose that there are fifty millions of coin on the Pacific slope in circulation (which is an overestimate), and if we assume that eight hundred mill- ions of the currency of the world would be our distributive share, and no more, then you will see that there is only room tor fifty millions more ; and if you put out one hundred millions, the result, as I have stated, must be, first, a rise in prices, which will affect exports and turn the exchanges sufficiently against us to send the excess of currency away, just as when a vessel is already filled, if more fluid be added, it will overflow ; and, therefore, I can come to no other conclusion (and so far as I have been able to study the question I do not see how any other conclusion can be reached) than that coin, put out in excess of what will be our distributive share of the money of the world, will dis- place paper or, on the other haud, if paper is maintained in circulation by force of the legal-tender quality, or because it is preferred to coin, then the excess of coin will flow away, and resumption might as well begin to-day as next January ; and to accumulate coin would be a detriment to the world. I do not believe, however, that paper, to RESUMPTION OF SPECIE PAYMENTS. 141 any such extent as now claimed, would be preferred to coin if left to the free operation of choice. I gave the committee the cir- culation in 1854, 1857, and 1861. I did not consider in that con- nection the conditions, or the change of conditions, of our commerce, or of the currency of the world, that would tend to affect, one way or the other, the quantity of circulation which we would now prob- ably have. There are four things, I think, which chiefly influeuce, or are controlling in that matter: First, the increase of population since 1861 ; second, the increase in trade, commerce, and national wealth since 1861 ; third (and a very important element), the additions to the stock of the precious metals in the world from the mines; and fourth, the effect of the issue of inconvertible paper in this and other countries. For I think it is a principle which can hardly be questioned, that when any country issues an inconvertible paper, and thereby displaces the coin which was in circulation, which coin goes to swell the volume of coin in other countries, to the extent that coin is displaced by such issues, to that extent the effect on the total circulation of the world is precisely the same as if so much coin was suddenly created and added to that already in circulation ; and, therefore, in considering the distrib- utive share of the world's money any country would possess, we cannot ignore the effect of the inconvertible issues of such countries as Russia, Austria, Italy, Spain, and other States, as well as our own. Then a fifth consideration (and one which may be very controlling) is whether more States of Europe will or will not demonetize silver, because it will be very readily granted, I think, that our distributive share of the money of the world, with gold alone as that money, would be a very different sum from that which would fall to us with both gold and silver as money for all countries. Probably the sum would be double in the one case what it would be in the other. All the estimates I make, there- fore, will be on the basis of bi-metallism. The increase in population in the United States since 1861 has been, say, fifteen millions, or 45 or 46 per cent. The increase in national wealth, trade, and commerce is a little more difficult to get at; but, divided into its different parts, we find the increase in incomes from 1860 to 1869 was about 75 per cent. According to our census returns our manufactures increased from a little more than one thousand million dollars in 1850, and not quite two thousand millions in 1860, to four thousand two hundred and thirty-three millions in 1870, or an increase in ten years of nearly 125 per cent. The estimate of 1870, however, was in currency, and therefore there should be the proper deduction made. The increase in the value of real and personal estate, between 1860 and 1870 (we have no data to go beyond that), was nearly 150 per cent. Mr. Bell. That is on a currency basis, too? Mr. Warner. On a currency basis, too. Taking railroads, there were but about thirty-one thousand miles of railroad in 1861 against seventy-six thousand miles now, or an increase of nearly 150 per cent. The increase in the precious metals for the world since 1861 (according to the table given in the parliamentary report on silver), and adding $350,000,000 as the production of 1876 and 1877, was about twenty-six hundred million dollars. The coin equivalent of the inconvertible paper issued in Europe and the United States can hardly be taken at less than fifteen hundred millions ; the total quantity given by Ernest Seyd is somewhere from two thousand million to twenty-two hundred and fifty million dollars in 1876. I put the coin equivalent of that, I think, rather under than over, by giving it at fifteen hundred million dollars. In 1876, the population of England, France, Germany, Switzerland, 142 RESUMPTION OF SPECIE PAYMENTS. i Belgium, Holland, Denmark, and Sweden (generally put down as the creditor nations of Europe) was one hundred and twenty-seven millions. These states are all coin states, and, according to Mr. Seyd, possessed a circulation of $3,400,000,000 of metallic money. The rest of the states of Europe, usually designated as the indebted states, have, according to the same authority, but five hundred and fifty millions of metallic money, but have a population of one hundred and eighty-seven millions. The difference in the circulation is made up by inconvertible currency. It is much less per capita, it will be seen, than in the other countries ; and, except the $550,000,000, the currency of this large population is made up of inconvertible paper, and all are indebted states. Now, put- ting together these different influences which would affect the volume of money that would circulate now in the United States (and I grant that there are other influences), and counting all at 50 per cent. — that is, as having the effect of increasing our currency 50 per cent. — that would give us about seven hundred and thirty millions of dollars as an equivalent currency in 1878, when compared with the currency of 1861. Mr. Ewing. Do you not think that an underestimate ! Mr. Warner. I think it may be an underestimate. I have made it under rather than over. It may happen that a larger volume of incon- vertible paper will circulate in a country without raising prices above the metallic level than of a convertible paper. The movement of the precious metals is determined principally by movable commodities, and a country where the larger part of the wealth is fixed will have pro- portionally less metallic money than one the larger part of whose wealth consists in movable commodities, and commodities that will bear distant transportation. This, as well as the habits of the people, I think, has much to do in determining so large a currency to France. Hence, a country with most of its wealth in fixed forms, or so situated as to be without facilities for the easy movement of its exportable wealth, might have a certain amount of currency comparable with its fixed wealth unaffected by international trade. Such was the situation of the first colonies on this continent. They had nothing to export, but were in constant need of imports, and consequently they had little money. A resort, under such circumstances, to some well-regulated inconvertible currency would be a great gain, and in fact all the col- onies — some of them in a cumbersome way — adopted such a currency. Franklin's idea of paper money doubtless grew out of this experience. But of a convertible currency we should not expect to see more than seven hundred and fifty, or at most eight hundred millions, both coin and paper, in the present state of our trade, and that for other reasons. Taking another line of iuvestigation, I arrive at very nearly the same result (a line of investigation perhaps more reliable in some respects). Taking our paper currency at six hundred and fifty million dollars now, with fifty millions of subsidiary coin and fractional currency, there is at this time almost no premium on gold, but silver bullion is at a dis- count as compared with paper of, say, 6 to 8 per cent. The fact of silver bullion being at a discount is in itself positive, direct, and certain proof that our currency is today deficient, rather than redundant, as compared with bi-metallism for the world. If it was not deficient, then, with the restriction on coinage removed, silver would as certainly flow into this country now as that water will flow to a lower level unless it is prevented, as silver is now, through the restriction on coinage. Now, taking the average of premium and discount on gold and silver, and the two metals combined, as compared with our circulation, are at a discount rather than at a premium. With unrestricted coinage a state RESUMPTION OF SPECIE PAYMENTS. 143 of equilibrium would be established by an inflow of coin, which would, undoubtedly, in the present ratio, be silver. Mr. Ewing. But the restriction on coinage does not impair the force of the argument. Mr. Warner. Not at all ; the argument is the same ; but I call your attention to this one point which I think has great force, and is very direct evidence, namely, that at the point at which the average of premium and discount of the two metals (gold and silver) touched the zero line of our currency (somewhere a year back) when perhaps the volume was fifty millions greater than it is now, that marked exactly, for that time, the equivalency of our currency with the currency of the world in the condition of trade existing then ; any variation in our trade would, of course, vary the quantity of currency. Mr. Ewing. We had then about sixty millions of paper more than we have now. That would make seven hundred and ten millions in paper and fifty millions in fractional currency — seven hundred and sixty mill- ions. Mr. Warner. Then include in the calculation whatever coin there is in circulation in the Pacific States that would remain. Mr. Ewing. Say forty millions. That would make the aggregate of our currency to meet the equivalent currency of the world a year ago eight hundred million dollars. Mr. Warner. Yes ; but in that connection I think this fact should be considered : Since 1873-'74, our total volume of paper has not been in actual circulation — has not been effective in determining prices. Paper that is for the time being withdrawn, hoarded in bank vaults, has no more effect on prices and no more influence on trade than a currency not in existence at all. But, on the other hand, the moment there was a revival in trade and business, this currency would be called out. Its effect, however, would be mainly taken up, I think, in the increased de- mand for money ; that is, an increase in the business of the country. Mr. Ewing. What, in your opinion, is the amount of coin which the people will take, if left to their free choice, under easy and certain con- vertibility 1 Mr. Warner. My own judgment is that it would not be safe to rely on any less than 50 per cent, of the whole circulation being coin. It would be more likely to be more than less. In that I include the re- serves of banks, the hoardings in the country, and the uses generally for which coin will be preferred to paper. And I base that on our ex- perience in this country and on the experience of other countries, not relying, as many do, on the faith that when the people find they can have coin they will not want it. I do not wish to be understood, how- ever, as giving the opinion that this 50 per cent, of coin would be re- quired at once, but in the course of one or two years. The demand for coin would continue from month to month until that state of equilibrium in our circulation was reached, indicated by as many people taking coin to the banks or the Treasury for paper as would take paper to the banks or the Treasury for coin. That I would call the state of equilib- rium of the currency. Mr. Hardenbergh. How do you reach that ? Mr. Warner. In my judgment it can only be gained by the displace- ment of a part of our present volume of paper by coin. Mr. Hardenbergh. Then you are opposed to any further issue of paper by the government 1 ? Mr. Warner. That involves other considerations ; but if I were asked 144 RESUMPTION OF SPECIE PAYMENTS. my judgment upon that, I should say I do not think more paper now was the remedy we needed. Mr. Hardenbergh. Are you in favor of early resumption on the part of the government f Mr. Warner. I am not. I am in favor, however, of maintaining the equivalency of coin and paper ; maintaining the paper at a level with metallic money by limiting the volume of paper to the present amount, or to an amount not greater than would be our distributive share of the currency of the world ; on this principle, that an inconvertible paper currency actually in use, performing all the functions of money, if less, or not greater, in amount than would be the distributive share of the currency of the world for that country will always be on a level with metallic money, aud if it does not fill the channels of circulation full, coin will flow in and fill the vacuum. The vacuum, however, must first be made. Coin will go to a country only when it will buy there more movable commodities than elsewhere. Mr. Hardenbergh. Do you find any positive equalization of this distributive share which you speak of? Is it not affected more or less by wars ? Mr. Warner. Certainly; it cannot be fixed beforehand; it is impossi- ble to do that. That would require omniscience. It fixes itself, or, rather, is determined by the laws of trade. Wars, good or bad crops, active or stagnant production and trade, all operate to affect the flow of the precious metals. But it is quite possible to fix the limit of paper within what would always be our distributive share of the world's money. Taking the condition of the country now into consideration, it seems to me that the part of wisdom would be to maintain our paper at a level with metallic money, on the principle of limitation of volume. That would involve no further contraction, and no further alteration in the value of money. Mr. Hardenbergh. That is resumption. Mr. Warner. There is a very great difference, I think, between that and resumption. I would maintain the value of paper at the coin level by limitation of volume instead of by convertibility or resumption. Mr. Hardenbergh. Equalization is resumption. Mr. Warner. In my judgment, resumption has only begun when you have reached the point of equalization. Then the work of resumption really begins, and consists in providing coin and actually paying it out in substitution for paper — not in addition to it — to the extent that peo- ple may choose coin to paper, and retiring the paper. Mr. Bwing. What is the practical difference between equalization and resumption ? Mr. Warner. The practical difference is this : assuming that eight hundred millions of dollars, or any other sum you may take, would con- stitute our distributive share of the money of the world (as I have before explained), then, if the currency is convertible, it will conform to that volume. Now, if an inconvertible paper circulation be limited in amount to a sum no greater than the eight hundred million dollars, then it will not Ml below the level of metallic money. But that is a very different thing from resumption. For, having assumed our quota at eight hundred million dollars, if you make it convertible then you at once lay it open to the choice of all the people of the country (a choice to be exercised, as I have said, in all their business transactions from day to day and from month to month), as to what part of the eight hun- dred million dollars they will have in coin and what part they will retain in paper. Then, providing the coin and paying it out in substitution for RESUMPTION OP SPECIE PAYMENTS. 145 the paper, and retiring the paper to the extent that the people may pre- fer coin to paper, is the accomplishment of resumption, and, in my judgment, nothing short of that is; and when that is done I think it will be found that at least half— more rather than less — of the entire volume will be coin, or in an assumed volume of $800,000,000, $400,000,000 of it, at least, would be coin, and not more than $400,000,000 paper. Eesumption would be accomplished on that sup- position, then, when the $400,000,000 of coin had been provided and all paper in excess of $400,000,000 destroyed. The part destroyed, of course, would be the greenbacks. The substitution of coin for paper necessitates, in the very operation, prolonged contraction, and, in my judgment, one to two years more of depressed business and trade would follow such a course. The very process of gathering up paper and presenting it for coin, and getting coin back, involves, practically, more or less temporary contraction. Again, if in the course of business as large a part of the whole circu- lation should be required to be coin, as existed in 1861, or $1.41 coin to $1 of paper, then resumption will have been fully accomplished only when that proportion of coin has been provided and the paper in excess of $1 to $1.40 of coin retired. And in this connection it is pertinent to consider that before 1861 we seldom had a truly convertible currency, even when called convertible. Mr. Eames. If the amount of paper currency in circulation is equal to coin in its purchasing value, is there any probability that any con- siderable portion of it will be presented for redemption after resumption? Mr. Warner. In my judgment it will. But I will repeat that if it should turn out that in the exercise of their choice the people do not wish coin, but prefer paper, then you can as well resume to-day as next January, because you have more coin now in the Treasury of the United States and in the banks, if added to the present paper circulation and the subsidiary silver coin, than will make up our share of the coin of the world, and all in excess of that will leave us after it is liberated. Mr. Eames. State whether or not, in the transaction of business, paper currency is not more convenient than coin ; and for that reason, if it is equal to coin, will it not be preferred and kept for the purposes of business to the extent that it is required ? Mr. Warner. It will to the extent that it is required ; but in my judgment that extent will not exceed (when the state of equilibrium has been restored) more than 50 per cent, of the entire circulation — less rather than more. As this same question was prominently up before the secret committee of the English Parliament in 1819, 1 should be glad to read the opinions of two or three witnesses as then expressed, in regard to it — opinions which, if interpreted by the experience in England which followed, will, I think, throw light on the question now before this country. Mr. Alexander Baring expressed , his decided belief that it would not be safe for the bank to resume until a very considera- ble part of the circulation in England had become coin. Mr. Harmon in his evidence stated "that at that period (1817) he was induced to flatter himself that if the doors of the banks were opened, the public would hardly know whether they were open or shut— that was in a moment of tranquillity— that people seemed indifferent about gold ; and that instead of coming to the bank for gold, they brought their gold to the bank; that remained until the financial operations in France began, and as soon as they were talked of the tide turned." Mr. Stuokey [says the report], a gentleman very extensively connected with banks in the county of Somerset, gave evidence to the following effect : " In the latter end H. Mis. 02 10 146 RESUMPTION OF SPECIE PAYMENTS. of the year 1816 and beginning of 1817, we had a circulation of coin for some months '. it cost us at that period nearly one hundred pounds to transmit a surplus quantity of coin to London, of which four-fifths in value, at least, consisted of gold. We could not get rid of it in the country, our customers preferring our notes. In the spring of 1817, 1 brought with me to town near 1,000 guineas from one of our hanks ; on taking them to our London banker, he requested as a favor I would not leave them there. They had lately sent so many to the Bank of England that they did not like to trouble them any more; besides, the bank only took those which were of full weight." Now, as to what followed. In 1817, the Bank of England gave notice that it would pay all its one pound and two pound notes dated prior to 1813 and 1816. It began payment. The testimony of Mr. Harmon and of Mr. Stuckey related to the beginning of that payment. The bank paid out, during the first part of 1817, but little ; but before the middle of 1818 the bank had paid out nearly £7,000,000, and stopped. Three- fourths of the amount paid out, Mr. Jopliu says, was traced directly to the French mints. The committee, in 1819, reporting on this evidence, say : Notwithstanding this evidence, it must be admitted that no satisfactory conclusion ean be drawn from the experience of so short an interval as that which is referred to by Mr. Harmon and Mr. Stuckey. Great uncertainty must prevail with respect to the amount of gold which may be required for the purposes of internal circulation. Also, Your committee are satisfied that the bank, iu undertaking to pay their notes in cash, under the circumstances above mentioned, acted from the best motives, and from a belief that the measure would tend to facilitate the complete resumption of pay- ments in specie. Unfortunately, it has had a contrary effect. In 1819 the resumption act was passed, requiring the bank, on the 1st of February, 1820, to commence paying its notes in bullion at the mar- ket-price, instead of at the mint-price — the term which they use there. From February, 1820, when the bank began paying bullion for bank- notes, until 1823, according to Mr. Jopliu, the bank imported into En- gland from 20,000,000 to 30,000,000 pounds sterling. During that period the mint issued £19,000,000 in gold coin, and there was retired over £21,000,000 of the paper currency. The total bank currency in 1818 was £18,000,000, and in 1823 it was about £27,000,000, £21,000,000 and over having been retired. It was well known that guineas, when first paid out in 1820, were largely hoarded. The state of equilibrium of the currency was not reached until 1823, and at that time the paper part of the currency was reduced, as shown, from £48,000,000 to £27,000,000, the metallic part having increased till there was much more of it than of paper. It is hardly necessary to add that the period of the greatest distress in England came after the commencement of resumption in 1820, the period known as the great agricultural distress. Mr. Bell. Eesulting from the depression in the prices of property and wheat? Mr. Warner. Tes, sir. According to Mr. Atwood, Sir James Gra- ham, Mushet, and others, prices fell all the way from 35 to 50 per cent., and some things even more. Mr. Swing. Mr. Tooke's tables showed the fall f Mr. Warner. Yes ; it showed the general fall in prices that took place. Mr. EwiNG. What was the extent of the diminution of credits during that time? Mr. Warner. That point I deem a very important one in the consid- eration of this subject. Credit was almost entirely overthrown ; and it is duetto that fact, very largely, that prices fell so much in England, andjtbat prices have fallen so much in this country. To give a summary RESUMPTION OP SPECIE PAYMENTS. 147 view, as I understand it, of that period between 1797 and 1816 : England had forced out of circulation and out of the country about £30,000,000 of gold, by the issue of inconvertible paper money. The gold had gone into France, and other countries in Europe which maintained a metallic circulation. Austria displaced about $100,000,000; Russia, $75,000,000 ; Prussia, from $40,000,000 to $50,000,000; and other states more or less, during the Napoleonic wars. All the coin displaced in these countries went into the few countries still maintaining coin; and, in consequence, the value of metallic money itself was greatly depreciated ; or, in other words, prices generally rose. The failure to take that into considera- tion was, I think, where Ricardo made his great mistake in giving the opinion that resumption in England involved only a difference of 3 or 4 per cent. After 1816, when all these countries together commenced the withdrawal of their paper money, and when a redistribution of metallic money took place in Europe, gold itself was greatly changed in value, as compared with commodities generally. At the same time that money was undergoing diminution in quantity, and a consequent in- crease in value, credit was being undermined. Credit, which with currency in a state of rest would be secure, always suffers when changes of that kind are going on. To illustrate that further, where there is a given amount of currency in a country, and things are in a state of rest, credit assumes a certain relation to the currency. Authors have variously estimated the effect of credit. McLeod says credit is ten times the amount of all the money, and Webster said it was more to us than all our mines of gold and silver. But the moment that money is contracted in quantity, credit is contracted in a far greater ratio ; and if the con- traction of the currency is sudden, and takes place to any considerable extent, it very often results, as we have many times seen, in an almost entire overthrow of credit. I think one of the principal reasons of the low prices of real estate, and property generally, now in this country, at least in many parts of the country, is due to the fact that while the contraction of the money volume is going on, credit is almost entirely neutralized, and has little or no effect in maintaining business or prices. Mr. Ewing. And the contraction of the currency causes a shrinkage in values ! Mr. Warner. Undoubtedly ; and the effect of contraction is multi- plied by the overthrow of credit which it causes. Mr. Ewing. And the overthrow of credit reacts on prices ? Mr. Warner. Yes ; and often suddenly and powerfully. Mr. Ewing. The primary cause is the contraction of the currency, and the consequent shrinking of values, making the position of every man who uses credit uncertaiu and unstable ; and that uncertainty aud instability are magnified, and thus credit is contracted three or four fold 1 Mr. Warner. I think that is true. Mr. Eames. You mean the contraction of the currency below that point required for business purposes, do you not? Mr. Warner. It is very seldom that a country has more currency in that sense than business absorbs. I take it that if we should double the volume of inconvertible paper money the country would very soon absorb it. Prices would rise, undoubtedly, aud the money volume would be absorbed. Mr. Eames. Do you mean to say indefinitely and to any amount? Mr. Warner. Yes. Suppose $800,000,000 to constitute at a given time our currency. Then if that volume should be doubled or made $1,600,000,000, the whole would have no greater value than the $800,- 148 RESUMPTION OF SPECIE PAYMENTS. 000,000 had, and would not until the increase of business had changed, the relations between the quantity of commodities and transactions and the quantity of money. The effect otherwise would be consumed in rais- ing prices. If at the same time that you doubled the money the busi- ness of the country (the quantity of commodities and transactions) were doubled, there would be no change in prices, except what was incident to the act of changing. There can be no general rise of prices in any coun- try, and no general fall of prices, except it comes from a change in the quantity of money. Prices of commodities vary, as compared with one another, continually ; but a general fall or a general rise means, in effect, a diminution or an increase in the quantity of money, and consequently a change in its value. The diminution of the quantity of our money has not been at all in proportion to the decline in values, and the difference is made up, I think, in two ways : first, the change in the value of metallic money itself, by the demonetization of silver in certain countries, and by a partial redistribution of metallic money, caused both by the de- monetization and by a withdrawal of paper money in this and other coun- tries, and the demand made for metallic money to take its place; but also largely from the breaking down of credit which so sustains prices when based upon a stable currency. If we were to issue $100,000,000 of inconvertible money and afterward to reduce it suddenly by $50,000,000, the same consequences would follow as would result from a sudden re- duction of $50,000,000 in the volume of coin. And I may state gener- ally what I understand to be a law of currency — a law which bears di- rectly upon this question of resumption. It is this: Having, say, $650,000,000 of paper now in the country, to destroy any part of that and buy coin from other countries to take its place must necessarily produce the same consequences and have the same effect on business and prices as would be the case if, having a full volume of coin now in circulation, we should propose to annihilate, step by step, as much of the coin as we propose to retire of paper, and to buy other coin from other countries to take its place. To illustrate my meaning better: If England now should determine upon the annihilation of $250,000,000 of her gold, with a view of buying other gold to take its place, the ef- fect on prices and business of such a step in England could not be dif- ferent from the effect in this country of destroying that amount of our circulation, and buying coin from other countries to take its place. Mr. Ewing. You think, then, that if the people are left to their free choice under the operation of resumption they will require as much coin as paper f Mr. Warner. I think that when the state of equilibrium has been reached, we will have at least 50 per cent, of the whole circulation (re- serves, hoards, and for other uses) in coin, and not more than 50 per cent, in paper. Mr. Ewing. The proportion of coin to circulation in 1861 and 1857 was about 63 or 64 per cent. Mr. Warner. In 1860 we had just about 60 per cent, coin to 40 per cent, paper. In 1857 it got down as low as 53J or 54 per cent, coin to 46 J paper, and then suspension took place. Mr. Ewing. And you think that suspension took place from the dim- inution of coin ? Mr. Warner. Yes, sir. Just before that there was an increase of paper — an increase in the quantity of the currency of the country — and exchange was turned against us, coin went away, and then the suspen- sion took place. That is an important point, I think, in the considera- tion of the currency. It operates in this way : when banks issue the cur- RESUMPTION OF SPECIE PAYMENTS. 149 rency, if there is at the one period an increase in the bank's reserves of, say, 120,000,000 of coin (and the first increase of the metallic currency always goes into the banks, and its first outflow is from the banks and not from the circulation), there will almost certainly be an issue of $60,000,000 to $80,000,000 of paper based on the $20,000,000 increase in the coin. That increases the volume, lessens the value of the entire currency (including the metallic part), raises price, and turns the ex- changes against us. Then the banks have to pay out coin, and if $20,000,000 of gold goes away, in order to preserve the same relation be- tween paper and coin, they must contract the paper currency sixty or «ighty millions. It is the extreme fluctuation iu the volume of currency issued in this way (first by increasing and then by decreasing it) that leads to the wide fluctuations in prices which we had under that sys- tem. Mr. Ewing. Assuming $800,000,000 to be the distributive share for this country on a metallic basis, you think we must at least have $400,000,000 of that in coin 1 Mr. Warner. I think if left to the operation of the choice of the people to determine what part of the $800,000,000 should be coin and what part paper, that within a period of twelve or eighteen or twenty- four months, at farthest, after resumption began, half, at least, of it would be coin* Mr. Ewino. There will be no resumption of specie payment unless the people be left to that free choice ? Mr. Warner. Manifestly not. You may, of course, initiate resump- tion at any time, but the maintenance of it will consist in supplying coin to answer all future demands. The Chairman. You observe that the Secretary of the Treasury intimates that Congress ought to pass some law to provide against what he says is a necessary evil of metallic money (that there is no provision by which banks or the government can pay in coin). Has it ever occurred to you that that can be obviated by authorizing the Sec- retary of the Treasury, in case he resumes, to pay his obligations at the market rate of money, instead of at the mint rate ? Have you ever given that subject any attention? Mr. Warner. That question was discussed in England during their period of suspension. It was carefully considered by Kicardo, Sir Eobert Peel, and others. In fact, resumption in England begau on that theory ; but, as a means of regulating the quantity of money, which alone determines its value, I have never been able to see how that principle is going to work so as to regulate the volume in such manner as would preserve steadiness of value. As I have already stated, this, undoubt- edly, would be true; we can maintain our currency on a level with metallic money by simply limiting it to its present volume ; I think there is no question about that; that is a principle which has been always admitted by writers on monetary science, and if that does not ■constitute as much money as would naturally fall to us in the course of trade, coin would come in to fill up the vacuum — the vacuum being first formed. Such a currency, $650,000,000, say, in paper, and fifty millions in small coinage, and this supplemented by full coins, would vary precisely as a purely metallic currency would vary — precisely as though, the whole of it was coin ; and its fluctuations would be far less than a ■convertible currency issued by 2,000 independent banks, which, on the inflow of $20,000,000 of coin into their vaults, would issue, perhaps, $60,000,000 or more of currency, and on the outflow of coin would draw that much of their paper in. But that a purely metallic currency pos- 150 RESUMPTION OF SPECIE PAYMENTS. sesses the flexibility which is desirable in a currency I do not admit. There is where that principle seems to have failed in England. It possesses, nevertheless, greater flexibility than the national-banking system as at present constituted ; that is, a purely metallic currency has greater flexibility than our present national-bank currency has. And a currency of $800,000,000, of which $650,000,000 is paper and the rest subsidiary coin and full coin, will all vary precisely as a purely metallic currency would. So an inconvertible currency fluctuates as you increase or decrease the quantity, and by that means only ; and to say that all variations in the market price of gold, as on Black Friday, marks fluctuations in our currency, is the absurdest nonsense. If that were true, then prices generally would have varied in the same pro- portion. The Chairman. You might then have a paper currency that fluctuates no more than gold or silver, and, iu fact, fluctuates less? Mr. Warner. Certainly. Adjourned until to-morrow. Washington, D. C, April 23, 1878. Statement of Mr. A. J. Warner continued. Mr. Warner. I have made out the percentages of coin and paper, in reply to the question put by the chairman yesterday, as to what addi- tional amount of coin would be required, and what amount of paper must be retired, in order to place the circulation of this country now on the same basis of equilibrium that existed in 1861 and 1857, and the change necessary to make to place us on as good a footing relatively as exists in countries with which the Secretary makes comparison. Taking our present volume of currency as a normal one, or as a full volume, made up of paper, $650,000,000, and subsidiary coin and fractional currency, $50,000,000, and allowing to the Pacific slope $50,000,000 coin (which is something more than Dr. Lindermau's estimate), making a total of $750,000,000; to restore, then, the state of equilibrium existing in 1861, when we had $1.41 in coin out of a total volume of $487,000,000, to $1 in paper, our circulation should stand today $439,000,000 coin and $311,000,000 paper. That would place us on the basis of 1861. Mr. Hardenbergh. That was at the time of the suspension of 1861 ? Mr. Warner. Yes. That would put us where we were when sus- pension took place in 1861. To do that would take, besides the $50,000,000 of subsidiary coin, and besides the $50,000,000 coin set down for the Pacific slope — presuming that amount to be in cir- culation there now — and the $150,000,000 more which it is proposed to have in the Treasury and the banks by January 1, 1879, making $250,000,000 in all. That is, in addition to this $250,000,000 of coin which it is proposed to have January, 1879, it would require $189,000,000 more coin, and the retirement in all of $349,000,000 of paper, leav- ing the circulation of $750,000,000 to stand, coin $439,000,000, paper $311,000,000. That would be the state of equilibrium that existed in 1861, when specie payments were suspended. Comparing in the same way with 1857 (auother period of suspension), when there was $1.16 of coin in the country to $1 of paper, our volume of $750,000,000, to give us the state of equilibrium existing then, should stand $403,000,000 of coin and $347,000,000 of paper, which would require, in addition to the subsidiary silver, the coin on the Pacific slope and the $150,000,000 of reserve which it is proposed to have January, 1879, $153,000,000 RESUMPTION OP SPECIE PAYMENTS. 151 more coin still, and the retirement of $303,000,000 of the paper money now outstanding. Mr. Bell. Your estimate as to 1861, 1 understand to be based on the condition of the currency unaffected by the war and by inflation 1 Mr. Warner. Yes, it is based on the currency of 1861 before the sus- pension of the banks, and before the issue of any legal-tender paper. Mr. Hardenbergh. Isuot the estimate of 1857 a safer one than that of 1861, because from 1857 to 1861 the country was in a disturbed state awaiting the secession movement, and therefore gold occupied a differ- ent relation to the circulation than it had done previously? Mr. Warner. I have taken 1857 and 1861 both. If I should take 1859 or 1860, then the amount of coin that would be required now, ac- cording to that ratio, would be still greater. Mr. Hardenbergh. Do you not think that 1857 is a fairer test of the true condition of the country, aside from the civil war, there having been great financial disturbance from 1857 down to 1861 1 Mr. Warner. Perhaps so. These periods, especially that of 1857, are what may be called periods of depression in the proportion of coin to the whole circulation. But if the political state of the country prior to 1861 had any effect it probably was to increase the proportion of coin to paper in the country. Mr. Hardenbergh. But the panic of 1857 affected the financial health of the nation, and the period of the secession movement in 1861 affected its life. So there was no financial peace in the country from 1857 to 1861. During that time capital was beginning to fly away, and people were beginning to contract and withdraw their money in anticipation of the trouble connected with secession. Therefore the period previous to 1857 was a much healthier time, I take it, as to the amount of gold re- quired in the country than the period from 1857 to 1861. Mr. Warner. Well, I have given both periods. Mr. Ewing. But really a better comparison would be with the years preceding the panic, because the panic occurred probably in part on account of the fact that there was an excess of paper money as com- pared with the volume of coin. Mr. Hardenbergh. The panic itself grew out of one fact, the failure of the Ohio Life and Trust Company. Mr. Warner. Taking the years 1857 and 1861 (years of suspension), we have years of the lowest amount of coin in circulation to compare with now. However, in July, 1861, there was an issue of 50 millions of demand notes for war purposes, before the issue of legal-tender notes. Mr. Ewing. Does that go into the aggregate of paper currency which you have calculated in your total t Mr. Warner. No, sir ; I have calculated only the bank currency. As an offset for that 50 millions of demand notes, I may say that that amount would be no more than sufficient to provide for the additional use for currency caused by the war. Comparing in the same way our whole circulation with that of other countries, having reference to the Secretary's comparison on pages 32 and 33 of his examination before this committee, where he compares only the reserves, Without taking any account at all of the state of the circulation in the different coun- tries, I find this to be the fact : In order to establish the same rela- tions between paper and coin that exists in England, ours should stand (taking the 750 millions as a full circulation), 579 millions coin, 171 mil- lions paper. To establish this relation it would require the procurement of 375 millions more coin than now exists in the country, or than it is proposed there will be in January, 1879, and the retirement of 479 mil- 152 RESUMPTION OF SPECIE PAYMENTS. lions of the 650 millions of paper. Comparing with Prance, to establish here the same state of equilibrium (with a total circulation of 750 mil- lions), our currency should stand, coin 562 millions, paper 185 millions, which would require us to procure 312 millions more coin than we have, or expect to have January next, and the retirement of 465 millions of our paper. Making a comparison in the same manner with Germany, our circulation should stand 600 millions coin to 150 millions paper. To establish this state of the circulation would require us to procure 350 millions more coin than the country possesses, or is expected to have next January, and the retirement of 500 millions of our present paper circulation. That is, to establish the state of equilibrium in this country that now exists in other countries, and that, at former periods', existed iu this country, we should have the following proportions of coin and paper in a total volume of $750,000,000: Proportion of coin to paper in the whole circulation, as it should be, to estab- lish the relation — Existing in England Existing in France Existing in Germany , Existing in the United States in 1854 Existing in the United States in 1857 Existing in the United States in 1861 Proposed to have in 18/9, when resumption takes place Coin. Paper. $3 33 u 3 10 1 4 00 1 1 24 1 1 16 1 1 41 1 40 1 Table showing how a circulation of $750,000,000 would stand roiih the same proportion of coin to paper that existed at different periods before the change in the system of currency in the United Slates, and also hoio the circulation would stand if on an equal footing with other countries as to the proportions of coin and paper ; also the amount of additional coin yet required to establish such relations, and the paper to be retired. Coin. Paper. Coin required more than is in the coun- try , or it is ex- pected there ■will be Janu- ary, 1879. Paper to be retired. To have the same proportion as in England $579, 000, 000 562, 000, 000 500, 000, 000 439, 000, 000 403, 000, 000 415,000,000 8171, 000, 000 185, 000, 000 150, 000, 000 311, 000, 000 347, 000, 000 335, 000, 000 $329, 000, 000 312, 000, 000 350, 000, 000 189, 000, 000 153, 000, 000 165, 000, 000 8479, 000, 000 185, 000, 000 T" stand on the same footing as Trance we To stand on the same footing as Germany 500, 000, 000 To re-establish the condition existing in 1861 349, 000, 000 303, 000, 000 To establish the condition existing in 1854 . . . 315, 000, 000 On the other hand, on the supposition that the 050 millions of paper is to be maintained, either by the force of its legal-tender quality, or be- cause of the preference of the people to have the whole 650 millions in paper rather than in coin, which is hot at all likely, then with the 50 millions of subsidiary coin, and the 50 millions for the Pacific States, we have already, in these amounts, the full volume of 750 million dol- lars; and on the supposition that this volume, with bi-metallism for the world, would be our full proportion, then there is no room in our circu- lation for coin, and if added to the paper it would not remaiD in the RESUMPTION OF SPECIE PAYMENTS. 153 country, and its accumulation in the Treasury for the purpose of resump- tion, by the sale of bonds or otherwise, is only a disturbance of the money market of the world, and one that affects injuriously not only the United States, but, more or less, other countries also. The Chairman. Why does it not leave the country now! Mr. Warner. It is under lock and key. The Chairman. Not all of it. Mr. Warner. That which is iu the banks is not ; and one reason why that does not leave the country now is that banks are holding it in view of resumption. Again, if 750 millions does not make up our full circu- lation, and some small amount additional is required, it would exist iu the form of bank reserves. Besides, a given amount of coin, under any circumstances, and with gold at any premium, would stay in the coun- try, being required for international commerce, and that sum is aug- mented by a given amount required to pay duties on imports. I believe, even when the premium on gold was highest, there was never less than eighteen or twenty millions of gold in the country; but this does not go into circulation. The Chairman. That is the idea ; that while we have apparently a certain sum of money in circulation, yet it is not in fact in circulation, but is in the banks and the Treasury, and that it is really as if it were dead and not in existence. Mr. Warner. Yes ; the same as though it were still in the mines, so far as pertains to our circulation ; and so when gold and silver is taken from the mines, all but a small part of it (say our natural share) leaves the country. Just so, and under the same laws, and for the same rea- son precisely, when the door of the Treasury is open the coin that is there will leave us if paid out in excess of our natural circulation and paper is not retired. There will be no difference then whatever between gold and silver dug from the mines and gold and silver let out of the Treasury. The Chairman. You do not estimate at all the probable favorable condition of our trade abroad. You do not take that into your estimate. Mr. Warner. Yes, I take that into account in estimating our proba- able volume of money. It is that favorable balance which allows us so large a volume. If the balance of trade turns against us, then some part of our volume of money, if convertible into coin, will, flow away until the state of equilibrium is established. Kemarking further on the balance of trade and on its influence, I will say, first, as has been frequently said, nothing is more misleading than figures showing the extent of a balance of trade. As an illustra- tion : a silk merchant of Lyons ships to this country $20,000 worth of silks. They are entered as worth $20,000 in the New York custom- house. He sells the silks in New York for $25,000, and invests the whole sum in flour, with which he loads his vessel back to Lyons. The custom-house books would show $20,000 of imports and $25,000 of ex- ports, but when you ask France for the difference, she will, of course, say she does not owe you anything. If you find the merchant who made the importation aud the exportation, he will tell you that he paid for the flour and owes nothing, and that the difference is his profit. Therefore, just what amount of money comes to us iu the balance of trade is very difficult to calculate, but certainly no such sum as 160 millions. Besides, there is the large amount paid out iu the carrying trade and for insurance every year and by travelers going abroad, which never enters the custom-house returns. Again, a balance of trade never sets constantly toward one country. If it did, such coun- 154 RESUMPTION OF SPECIE PAYMENTS. try would eventually have all the money, and some other country the goods. The longer, therefore, that the balance of trade sets in favor of any given country, the more certain it is that it will grow less, and the more probable is it that it will change, for the reason that the exporta- tion of the precious metals from the countries importing goods lessens the quantity of the precious metals in such countries and, of course, depresses prices there and prevents further exportation of the metals. Mr. Ewing. An increase of prices in the country to which the coin goes 1 Mr. Warner. Yes; lowering prices on the one side and raising them on the other. Mr. Hardenbergh: Under this examination that you have made con- nected with the amount of coin now and in 1861, when can you ever look forward, by your theory, to resumption of specie payments in this country, without an immense and terrible contraction of the currency which would shake everything from center to circumference ? Mr. Warner. I do not think it possible without doing that. I give it as the result of my own examination that the only possible way to maintain specie payment is to supply coin and retire paper till the quantity is reduced to a sum not exceeding 50 per cent, of the entire circulation. What that yet involves can be better imagined than described. Mr. Bell. I understand you to mean by resumption a redemption of the paper circulation and its withdrawal from circulation, as was done in Great Britain. Mr. Warner. That is the only way, in my judgment, that resump- tion can possibly be maintained ; that is, to make it properly resump- tion. Let paper be reduced down as far as it will reduce itself, and substitute coin for it, and my own judgment, I repeat, is, that the paper will not stand, after a year or two, at more than 50 per cent, of the whole circulation. It is opposed to all previous experience in this country, and the experience of other countries, to calculate otherwise ; and I cannot see that anything has arisen to change greatly the laws of currency or the preferences of the people. Monetary science is the same now that it was fifteen years ago. Hence I think the country is being drawn into a vortex by this resumption process that ought to be avoided, and the country spared the loss and agony it must entail. Mr. Ewing-. Comparing the situation now with 1857, what reason is there to suppose that it is possible to maintain resumption without even a larger proportion of coin than we bad in 1856"? The banks broke down in 1857 for want of coin. What reason is there to suppose that we can now maintain specie payments"? Mr. Warner. The only reason I can assign is this : the character of the currency now existing being uniform, and the greenback part being legal-tender, the confidence of the public in the currency will be better sustained ; alth&ugh, as I said yesterday, when a currency is actually and conveniently convertible, there is no force (or almost none) to the legal-tender quality. But the very moment that confidence fails, or begins to fail, in the convertibility of the currency, then the legal-tender quality comes in just at that point to sustain it. It would sustain con- fidence when any person having bauk-uotes, which, although converti- ble to-day, might be open to suspicion that they would not be converti- ble to-morrow, but if that person is sure that, even if convertibility fails, the money power at the same nominal value will continue, he will be less likely to present his notes at the bank, and I think, therefore, we may reasonably count on a somewhat larger propor- RESUMPTION OF SPECIE PAYMENTS. 155 tion of paper than existed under the old system. On the other hand, however, there is this to be considered : in the years with which comparison has been made (1857 and 1861 ; or, for that matter, generally under the old system of a specie basis) it is hardly cor- rect to say that we had a convertible currency in the United States. In large parts of the country the currency was not really convertible, but to a large extent in many States even when nominally convertible, was practically an enforced circulation. Public sentiment was against those who demanded coin. I remember that was the case in 1857 ; and in some places that spirit was carried to extremes. Mr. Theophilus Fisk, for instance, of Charleston, describing the condition of the currency existing there before the panic of 1837, says they determined not to suspend specie payment, but at a public meeting, at which the mayor presided, it was proposed that it should be made death (!) for any man to demand coin ! A paper that is convertible with difficulty, or against public senti- ment, is in some degree to be treated rather as an enforced currency. Then, again, Bank of England notes are legal tender, and we have shown what proportion of the whole circulation of England is coin. Ou the other hand, it is to be considered (and it is important) that no notes are issued by the Bank of England under five pounds. If small notes were issued, undoubtedly there would be a larger proportion of the whole cir- culation in paper than there is now. Mr. EwiNG. If you take the situation in 1857, when there was an excess of the volume of paper as compared with coin (so large a volume that in many parts of the country there was no actual resumption), and when you had the whole power of the banks exerted to keep out the paper, every bank dealing to a large extent with its own paper, and in its own community, to keep it in circulation, is there good reason to think that we can get along now with a less proportion of coin supply than we had then? Mr. Warner. After resumption banks will have.no interest in keeping any but their own paper in circulation. They will have the same inter- est, I think, in keeping out their own paper that they had then in keep- ing their paper out. But, on the other hand, the banks are manifestly, under the present resumption act, largely relieved from the obligation of providing themselves with coin, except through the instrumentality of legal-tender notes. Mr. Hardenbbrgh. In 1857, the circulation of the banks throughout the country was not all secured, aud there was a great difference of feeling as to the different notes. Is it not probable that the gold which we had then would have sustained the demand that would have been made by the people if, instead of State bank issues which we then had and of which the people were afraid, we had had greenback circu- lation and national-bank notes? Mr. Warner. That is, as I understand you, the same as if you ask me this question : " Suppose the same equilibrium in currency should exist now that existed then, could it not be maintained 1 " Well, in my judgment it could be, and yet in New York circulation was well secured at that time ; and it should be remembered that more than half of the whole volume then was coin. Mr. Hardenbergh. I have been the cashier of a bank for twenty years. In 1857, every one wanted specie, and did not want bank notes. But in 1861, aud in 1867, and in 1873, when they wanted money, they did not care about the gold, but what they wanted was either green- backs or national-bank notes, and the volume of gold required was not 156 RESUMPTION OF SPECIE PAYMENTS. one-tenth of the part necessary to meet the demand. People did not «are for it so long as they had confidence in the government. What they wanted was either national-bank notes or greenbacks. Mr. Warner. As you say, with a greenback currency, I do not think there would be a run for gold coin even in a panic. In making allow- ance for the difference in the quality of the paper, I have already given it as my opinion that with the same proportion of coin to paper existing in 1857, specie payment, under favorable circumstances of trade, could very well be maintained ; indeed, very probably with a less amount ; probably with 1 to 1 in the whole country. But we must not lose sight, however, of a foreign demand for our coin that may at any time spring up. The Chairman. Eecollect that there is a marked difference in the condition of the country then and now. We had no public debt of any consequence in 1857. A small debt that we had at the beginning of the war accumulated subsequent to that period. We have now a very heavy public debt. In addition to that, we have now a large private indebted- ness abroad, as well as indebtedness of States and railroads. It Seems to me that that is an element which you have not regarded at all. Mr. Warner. Not as yet, although I have had it in view and have made some figures on the subject. I regard it as a very potent element, and one that is likely to exert a powerful influence, and very possibly at times when otherwise we would be in a state of equilibrium. The dif- ference between a debt at home and a debt held abroad in its influence on the currency of a country is very great. I often think of the remark of Disraeli, that " a debt at home is like an irritating flea-bite, but a debt abroad is an open, bleeding wound." The influence of a debt abroad on the currency of a country owing the debt is very great. It may be illustrated in this way : Suppose our exports to be six huu- dred millions, and suppose, also, that we owe one hundred millions in gold as interest, which is drawn away annually, then our distributive share of the world's money would be no more, with the six hundred million exports and one hundred millions of debt to pay abroad, than it would be if, without the debt, we exported but five hun- dred millions. The difference, moreover, between paying a debt abroad out of the circulation or the currency of a country and paying it with commodities has not, I think, been generally taken sufficiently into account. Indeed, most writers on economical science seem to as- sume that it is the same thing whether a debt abroad is paid in coin or whether it is paid in commodities, and that when coin is exported it is really as a commodity. But I conceive the difference to be very great. Bullion, or the product of mines that has never formed part of the cur- rency, if exported, would be the same, of course, as any other commod- ity, and would have no effect ou the circulation of the country different from the exportation of the same amount of other commodities. But when a country exports a part of its currency it is taking away that which is the measure of the value of other things. Suppose, for instance, the total wealth (taking convenient figures) of the United States now to be thirty thousand millions, and suppose the currency circulating that amount of wealth to be six hundred millions; now, this thirty thousand millions of wealth stands as thirty thousand millions because it is measured by six hundred millions of currency. That is the relation that exists between the money and the commodities — so much currency, so much wealth, the thing measured and the measure. Now, if you export a hundred millions out of the thirty thousand millions of com- modities there would be still left in the country twenty-nine thousand RESUMPTION OF SPECIE PAYMENTS, 157 nine hundred millions of wealth, of commodities. The change is less than four-tenths of one per cent. Moreover, the one hundred millions of commodities sold could be replaced in a few weeks, or months, at most, by the production of new commodities. But if you take away one hundred millions of the currency of the country, then you have taken away nearly 17 per cent, of it. The total wealth which was thirty thousand millions becomes 17 per cent, less, or only twenty-five thou- sand millions. Besides, you cannot restore the one hundred millions of currency at will by new production. You must acquire it in your trade with the rest of the world. You, therefore, change the relations of money to debt and commodities. You change the value of all commod- ities when you export a part of your currency. You change the rela- tion between money, debt, and property ; that is, between money and the other wealth of the country. And not only that, but if you take one hundred millions from your currency you affect the whole structure of credit based upon it. That is shaken to its foundation, perhaps overthrown, and the disturbance is increased tenfold, which is enough to ruin half the producers in the country or bankrupt half the ordinary dealers in any market. Hence I conceive the question of debt abroad as having an important bearing on the whole problem of resumption. Specie payment that would be safe and reasonably certain without a debt abroad may become very unsafe and uncertaiu with such a debt — with the power in the hands of creditors abroad to draw away the very coin needed for the maintenance of resumption. Mr. Hardenbergh. Coin is the nation's wealth, while currency is its debt, and therefore they differ very greatly. Mr. Warner. In reply to that I beg to say this : whether the six hundred millions of currency be derived from the precious metals, or consists of paper, if it be reduced from $600,000,000 to $500,000,000 the effect on the value of the commodities which constituted the wealth of the country would be the same, and the effect on production and busi- ness the same. And, if permitted, I would say further on that point, because as a principle of currency it is important in its bearing on questions now at issue, that the value (call it a debt, if you please, but the value, nevertheless) of our paper currency rests upon precisely the same principle as that on which the value of metallic money rests. From 70 to 80 per cent., it is estimated, of the value of gold is due solely to its use as money, and but from 20 to 30 per cent, to its use in the arts and as ornaments. Seventy per cent, likewise of the value of silver is due solely to its use as money and about 30 per cent, of it to its use in the arts. Now, when a government issues an inconvertible paper, and it goes into use as money, having the same power and per- forming the same functions as other money, then its value rests upon the same principle, namely, its use as money ; but not merely 80 per cent, of its value, but its entire value, we may say, is due to its use as money. This principle was stated by John Locke two hundred years ago. It is not new, although it does not seem to be commonly under- stood. The value of inconvertible paper money, like the value of any other money, depends wholly upon quantity as compared to use. On this theory only is it" safe to treat the currency of a country. I was going to remark, however, before this divergence, in reference to our debt held abroad, that estimates which I find differ very widely and are very unsatisfactory. The estimates which have already been given before this committee, derived from information on this side of the Atlantic, differ very widely, I find, from estimates on the other side. Mr. Ewing. One estimate made up from this side and given to the 158 RESUMPTION OF SPECIE PAYMENTS. committee was that our debt held abroad amounted to two thousand million dollars. That is Mr. Pullan's estimate. Mr. Warner. The data and information on which all these estimates are made, so far as I am able to get them, are very meager, but I have myself given more credence to those made from the other side as being made from more certain data than those made on this side. Ernest Seyd has given in different forms an estimate of the debts of this coun- try held in Europe in 1876. He gives national and State indebteduess of the United States, held in Europe, as $1,200,000,000; railroad and other corporate indebtedness, $750,000,000; other loans, $300,000,000; making a total of $2,250,000,000, calculated at $5 to the pound sterling. Mr. Ewing. Where do you find that? Mr. Warner. In Seyd's Fall in the Price of Silver. He divides it in another place as follows : Taking the full sum of £250,000,000, or $2,250,000,000. Foreign holding in loans and mortgages, £20,000,000 = $100,000,000 ; railways and public debentures, shares, &c, £150,000,000 = $750,000,000 ; national, State, and municipal, £200,000,000 = $1,050,- 000,000; miscellaneous (or what he calls international capital, such as current balances, temporary, loans, &c), £40,000,000 = $200,000,000. Then he includes in the indebtedness here (what probably is also em- braced in his first estimate) what he assumes as the amount of coin we must buy yet from Europe in order to be able to resume specie payment. He designates certain states in Europe that own debts of other states, besides holding their own debts, as creditor nations and assigns them sums as follows: England, from £800,000,000 to £1,000,000,000 of the debts of countries other than her own ; Germany holds from £450,000,000 to £500,000,000 ; France, from £400,000,000 to £500,000,000 ; Holland, Belgium, and Switzerland hold from £100,000,000 to £125,000,000. This would give in dollars to England from $4,000,000,000 to $4,800,- 000,000; Germany, from $2,000,000,000 to $2,500,000,000; France, from $2,000,000,000 to $2,250,000,000 ; Holland, Belgium, and Switzerland, from $500,000,000 to $600,000,000. Mr. E. Dudley Baxter, an eminent authority on public debts, accepts Mr. David A. Wells's estimate of the amount of interest due on the bonds held abroad in 1870, which does not include, I suppose, other debts, namely, $85,000,000. This does not differ very widely from the estimate of Seyd, and is below rather than over. Dr. Edward Young, chief of the Bureau of Statistics, makes the total of our indebtedness held abroad at thirteen hundred and fifty millions. I doubt not that some part of the indebtedness held abroad a few years ago has been returned, and some part of the corporate indebtedness lessened through the insolvency of the corporations. I presume it is a hundred millions less now than it was in 1876. Mr. Ewing. Have you any other estimate! Mr. Warner. Nothing that is sufficiently definite. Mr. Leone Levi and others give some estimates, but in round numbers not differing widely from the others, and probably drawn from the same sources. Mr. Ewing. Is there an instance of a debtor nation maintaining specie payments! Mr. Warner. I know of none. All those countries in Europe that have large debts, which are held by four or five principal creditor na- tions, are using inconvertible currency for the larger part of their circu- lation. The precious metals seem to stay with the holders of these debts. The Chairman. I believe it is true also that in Italy, as well as KESUMPTION OF SPECIE PAYMENTS. 159 Austria, what is called the balance of trade is very largely in favor of both of those states, and that they use inconvertible paper. Mr. Warner. Yes, sir ; and if we owe a hundred million dollars abroad as interest, we must, in order to maintain stability in a currency derived from the precious metals, have an actual balance of trade in our favor of a hundred millions every year, and if we fail iu that, then some part of the currency will be drawn away. The Chairman. Is not this a debt on demand practically of both principal and interest f That is, they may send into the market here those bonds and sell them for whatever they are worth, to be paid in gold or products ? Mr. Warner. That, of course, may be done. But if they send them very rapidly, the bonds would doubtless fall in price and in that way the sale be checked. It is a demand debt, so far as interest is concerned, and of course the creditor will demand coin unless we have something else to offer him which he prefers to coin, or, in other words, keep a bal- ance of trade in our favor. Mr. Bames. What proportion of the two thousand millions of indebt- edness held abroad — national, State, and municipal — is matured ? Mr. Warner. I think very little of it is matured. Mr. Eames. Then all that the government at present has to do is to provide the interest ? Mr. Warner. The interest is all that is required of the government now, I think. Mr. Ewing. Why should not more be considered f Suppose we had positive assurance that the balance of trade would be in our favor equal to the amount of interest on our debt held abroad, could we, with any safety, resume specie payment f Is it not a fact that our whole supply of gold is practically held then at the will of our foreign creditors, who may send our bonds here and sell them if they please for gold, and drain ■our gold from us ? Mr. Warner. They certainly have a very strong lever. They have a strong hold upon any part of the precious metals we may have. Not only their interest must be paid, but, of course, they can send their bonds here to be sold, and can allow them to be sold down until they would drain very largely our coin. Mr. Ewing. If there should be an exigency in Europe, arising from war or from any other cause, requiring a drain of one hundred millions -of gold from this country, and making it desirable for them to get the .gold from this country, is it not perfectly certain that they could get it irrespective of the question of the maturity of those bonds, and irrespect- ive of our demand, however exigent it may be, for the use of the coin here as our currency ? Mr. Warner. 1 think it would be a question of bargain between the holders of coin here and the holders of the bonds. If the holders of the bonds offered them at a price low enough to induce those having the coin here to part with the coin, it could be certainly drained away. It is a question of business, the same as it would be if they should send anything else here. Mr. Ewing. Is not this the fact which makes it impossible for a •debtor nation to maintain specie payment irrespective of the balance of trade ? Mr. Warner. The annual deraaud for interest, together with that, makes it so. The annual demand for interest is in itself very exhaust- ing, and then comes the fact that debts may be sent home, and the fact >that those having gold are always ready to part with it for bonds if the 160 RESUMPTION OF SPECIE PAYMENTS. bonds are offered a little down. That would undoubtedly have a very powerful influence in determining the movement of gold. Mr. Bell. Are you advised as to the rate of interest which this debt abroad carries — I mean the average rate of interest of our entire indebt- edness 1 ? Mr. Waenek. I have no figures on that point with me. But until the funding operation began the rate of interest was generally 6 per cent, for national, and 6 to 7 on municipal indebtedness. For corporate indebtedness, mortgages on lands, and public works, &c, the rate would run somewhat higher. I think that 6 per cent, would be as low as the whole would now average- Mr. Hardenbergh. You mean taking national, State, municipal, and every other debt held abroad ? Mr. Warner. Yes, sir; I think the interest on the whole would not run less than 6 per cent. On loans made on landed security, they are often at higher rates — from 8 to 10 per cent. Bail way bonds usually bear interest at 7 per cent., oftener over that than below it, and municipal indebtmeut seldom bears interest below 6 per cent. A part of the na- tional debt comes below 6 per cent., but the average, I should say, would be rather above 6 per cent, than below it. Mr. Ewing. Do you think it practicable to get this sum in gold or coin which you regard as necessary in order to maintain specie pay- ments "? Mr. Warner. If it is possible to obtain it at all it will be at a very high price as compared with what we have to buy it with. We can buy easily enough one hundred millions of commodities from England or France or Germany. We could buy, probably, several hundred millions of commodities from either country, with bonds, at the market rate of such commodities as they stand now. But for the reason that I have given, that when you attack the currency of a country, drawing away a part of its circulation, you are changing the relations between that which measures value and other things, I do not suppose we could ac- tually buy one hundred millions of England's coin and get the gold to bring away for five times one hundred millions in bonds. Indeed, to abstract from the circulation of England one hundred millions of her gold, would overturn all the established relations between money, debt, and property, and would involve the country in general bankruptcy. You may draw from a country a given part of its hoards or of its re- serves, but the moment you go beyond and touch its circulation, then you begin immediately to affect prices, and immediately the pressure is put upon it, and, if the outflow of coin is not stopped, panics will be sure to follow. It is easy enough for a country to sell its coin, that is, to change its currency into capital. That is easy enough, I say; but when you come to convert capital back into currency, that is a very dif- ferent thing. Mr. Hardenbergh. Have we not this advantage over England, that she cannot do without our food, but we can do without her reserves f »Mr. Warner. That is an advantage which we have undoubtedly in the maintenance of the balance of trade, but one that scarcely balances England's advantage as the holder of millions of our debt. But I was goiugon to illustrate thedifference between con verting a metallic currency into other capital, that is, selling it forcommodities and drawing currency • from other countries by selling commodities. On that point I hardly think that any one would be risking much by advancing the opinion, that if we had on hand to-day in this country, now, all the material, all the commodities that we bought with the two hundred and eighty-five RESUMPTION OF SPECIE PAYMENTS. 161 millions of gold which was displaced and sent abroad in 1862-'63, I doubt very much whether we could buy back with it all $85,000,000 of the money of Europe, or even $50,000,000, and actually get the coin to bring away. Hence, a country that first turns currency into capital or material, and then capital back into currency, makes bad bargains. Mr. Ewing. Have we ever in any year added to our stock of precious metals by importation ? Mr. Warner. No, sir; I think not — not very lately; not since we became producers of the precious metals. Mr. Ewing. Our bonds aud securities of all kinds that have been sold abroad have not brought us gold or silver? Mr. Warner. No, sir; they brought us commodities. Mr. Ewing. And the balance of trade in the precious metals has been against us every year, has it not? Mr. Warner. Yes, sir, steadily so, I believe ; that is, we export more of the precious metals than we import. Mr. Bell. Am I to understand, that in the sale of this vast amount of United States securities abroad we have actually realized no coin ? Mr. Warner. Not any coin at all. The sale of our bonds abroad brought us commodities, but not coin. Mr. Eames. If the Government of the United States should meet promptly and at maturity all of its legal obligations for the public debt, will any considerable amount of those bonds now unmatured be returned here for sale? Mr. Warner. I do not think they would be in ordinary conditions of trade; but in such an exigency as a great foreign war, or the balance of trade turning heavily against a country holding our debt, as, for in- stance, in the years 1818, 1838, and 1847, the year of the Irish famine, then I should say the bonds would come here rapidly. But in ordinary states of trade they would not. Mr. Phillips. Have not our bonds to the amount of a hundred mill- ions and more come back here since last September? Mr. Warner. It is reported, I believe, that over seventy-five millions of them have come back, and that, I think, was largely due to the expect- ancy of war and to the troubled state of Europe, but partly, perhaps, to the silver agitation. Mr. Eames. Do you think that the return of our bonds from abroad was affected by action of the House in repealiug the time named for resuming specie payment by this government ? Mr. Warner. I do not think that any action about resumption affected the question at all. Holders of bonds can have no direct inter- est in the resumption of specie payments. That cannot add to our abil- ity to pay the bonds, or make them more secure. But it is very proba- ble that the passage of the silver bill affected the movement somewhat at first. However, I am inclined to think that even the effect of that has been much overrated ; aud in this connection permit me to say I discredit entirely the assumption that it was by funding our public debt into gold bonds that we have been able to reduce the rate of inter- est. Bate of interest does not depend upon the kind of money. Bate of interest is always as low in silver to be repaid in silver as in gold to be repaid in gold. The Secretary at any time could have sold "coin" bonds, taking pay in silver or gold, at the option of the purchaser, and with the coin so obtained taken up 6 per cent, coin bonds and saved as much interest as has been saved. Mr. Ewing. There were two quite notable instances in our dealings with England illustrating the reluctance of the Bank of England to H. Mis. 62 11 162 RESUMPTION OF SPECIE PAYMENTS. part with any of its gold. Mr. Boutwell stated in the SeDate that during his administration of the Treasury Department he sold twenty- one millions of bonds for gold, and that he was notified by the Bank of England, or by the British Government, that the gold could not be withdrawn and that he must take other American securities, and he did so. Again, in the case of the Geueva award of fifteen millions five hundred thousand dollars, which was payable to us in gold, the British Government in effect declined to pay it in gold and paid it in other securities. Mr. Warner. That illustrates the difficulty of abstracting a part of the currency of a country. Mr. Hardenbergh. Where is the Secretary to get his fifty millions additional of gold ? Mr. Ewing. If he gets it at all he will get it from this country. [To Mr. Warner.] You have stated that, in your opinion, when the people are left to their free choice of taking paper or coin, we will certainly be compelled to have as much coin in the country as paper? Mr. Warner. Yes, sir. Mr. EwiNOr. And that we cannot expect to keep out more than one- half of the aggregate of the currency in paper money ? Mr. Warner. Yes, sir ; that is my opinion. Mr. EwiNOr. Now, what proportion of the aggregate amount of coin in the country (judging from past experience here and from the experi- ence of other nations) would it be practicable for the redeeming agency (whether Treasury or banks) to retain as a redemption fund? Mr. Warner. The proportion of the whole coin of the country which may be held as reserve by banks and the Treasury will, undoubtedly, vary very greatly, not only from year to year, but will vary with the seasons. It will be more at certain seasons than at others. I do not know of any data that would enable any one to form an intelligent opin- ion as to what it will be in any given mouth. Mr. Ewing. In 1861 we had two hundred and eighty-five millions of coin in the country, and eighty-seven millions of it was in the banks; how much had we in 1857 ? Mr. Warner. In 1857 we had one hundred and niuety millions in circulation and fifty -eight millions in reserves. Mr. Ewing. That is, between one-third and one-fourth of the coin of the country has been held at those periods by the redeeming agencies? Mr. Warner. Yes, sir; the amount has oscillated between those figures, but many banks, under the old system, would not have half that. Mr. Ewing. Would that not seem to indicate that it is not practicable for a redeeming agency (whether the government or the banks) to com- mand more than one-third or one-fourth of the coin in the country? Mr. Warner. I do not think that they will command more than that percentage, and I think the rest of the coin will remain out. It will go into private hoards, aud to the various uses for which coin is preferred to paper. Mr. Eames. What was the paper circulation in 1857? Mr. Warner. Two hundred and fourteen millions. Mr. Eames. What was it in 1861 ? Mr. Warner. Two hundred and two millions. Mr. Ewing. Is not about that same proportion maintained in France, in England, and in Germany by the redeeming agencies ? Mr. Warner. A larger proportion is geuerally maintained there than we have maintained, Mr. Ewing. Speaking of the effect of the withdrawal of one hundred RESUMPTION OF SPECIE PAYMENTS. 163 millions of our coin — when it becomes actually paid out in the current money of the people, will not that withdrawal (whenever it occurs) come from the redeeming agency? Mr. Warner. Yes ; that would undoubtedly be first taken from the reserves. Mr. Ewing. Heretofore, and doubtless hereafter, the reserve of coin has borne, and will bear, a proportion of only one-third or one-fourth of the amount of paper outstanding to be redeemed. Mr. Warner. Yes, sir ; probably not more. Mr. Ewing. If you withdraw say twenty-five millions of coin from the redeeming agency for shipment abroad, does not that necessitate a con- traction of seventy five millions of paper? Mr. Warner. In order to maintain safe proportions, it involves that contraction always. Mr. Ewing. So that the effect of the shipment of twenty-five millions of coin when we get back to resumption, will be a contraction of seven- ty-five millions of paper money ? Mr. Warner. Yes, sir ; and an inflow of twenty-five millions of coin, which would go first into the vaults of banks, would probably result in the extension of the paper circulation by seventy-five millions. There will be these fluctuations. And to withdraw fifty millions even of cur- rency from a volume of seven hundred millions, would undoubtedly be sufficient, at any time, to involve the country in very serious trouble, overthrow credit, and bankrupt a very large percentage of the ordinary dealers in any market. Mr. Ewing. Speaking of the hoards of currency. When we get back to specie payment, will not these hoards naturally and almost certainly be hoards of gold — of the metal which, by common consent, is the cur- rency that is the best ? Mr. Warner. I should say that there can be very little room to doubt that, as long as gold can be had for paper. Mr. Hardenbergh. Would it continue for any length of time 1 Mr. Warner. It would continue just as long as hoards continue. Hoards are about so much ; they vary, of course. One man may not keep a hoard for a long time, but about so much will be kept in that state. Mr. Hardenbergh. Contingent on the prosperity of the country? Mr. Warner. Contingent both on the prosperity of the country and on the prosperity of the individual. But usually times of adversity are times of the greatest hoarding. Mr. Ewing. On whom will the burden of making this large coin prep- aration for resumption fall ? Mr. Warner. It will fall almost wholly on the Treasury. While the national banks will undoubtedly take care of themselves, yet nothing is plainer than that they will do so through the instrumentality of green- backs, and if greenbacks are reissued, that instrumentality is made continuous to them. In other words, if the national banks now have what would be deemed safe reserves in greenbacks, I do not see that they need concern themselves at all about gold ; and after resumption, if the banks wish to convert their reserves into coin, they can do so, and to the extent that their customers will want coin they undoubtedly will do so. Mr. Eames. The reserves and legal-tenders now held by national banks in the cities amount to 25 per cent., and in the country banks to 15 per cent. Do I understand you to say that, in your judgment, that reserve which may be converted immediately through the government 164 RESUMPTION OF SPECIE PAYMENTS. into coin, is sufficient to enable the national banks to meet the presenta- tion of any national-bank notes that may be presented for redemption after the 1st of January next? Mr. Warner. That reserve would be sufficient, I should say, for any probable presentation of notes; but the reserve would have to be kept up by constant additions, or by new supplies of coin, as the people draw it away for their own purposes ; and as there are more greenbacks in the country than national-bank notes, of course the greenback currency furnishes an ample fund to float the national-bank notes. I cannot see, therefore, that there is any obligation imposed upon the banks which the greenback does not at once afford them the instrumentality of ac- complishing. Mr. Phillips. Would not the natural tendency of resumption be this: that the government would concentrate in New York all the gold needed to meet the legal-tender notes, and that the national banks would hoard all the legal-tender notes to offset the gold, being two reserves, and thus causing contraction of the currency. Mr. Warner. I think the result would be a contraction and a con- tinuous contraction. Besides, you cannot substitute a dearer currency for a cheaper one even without involving, during the whole course of such a change, contraction to a greater or less extent, because there is always a considerable time intervening between the collection of the paper and its presentation, and the return of the coin to the same lo- cality. That, in itself, must involve a prolonged contraction, which will not be over until the state of equilibrium between the two parts of the currency is fully established. Mr. Phillips. Our conditions would change on resumption from what they are now, and all the gold would be held by the Treasury to meet the presentation of legal-tender notes, and the legal-tender notes would be held in the banks to meet the presentation of national-bank notes; would not that be the tendency I Mr. Warner. That probably will be the tendency. I should hardly apprehend, however, any very sudden demand for legal-tender notes in exchange for national-bank notes by the people. The demand for green- backs will be mostly for the purpose of using greenbacks to get coin, and that is a demand that will continue; but I should hardly expect it to be very sudden. Mr. Phillips. If the national banks intend to maintain a safe basis, would they not accumulate legal-tender notes ! Mr. Warner. I think so. That will be their policy. They will in- crease the accumulation of legal-tender notes for the purpose of procur- ing coin, and that, of course, will work temporary contraction. Mr. Hardenbergh. After the 1st of January, 1879, when the first resumption of specie payment occurs, would not the banks suffer imme- diately by the demand made upon them for gold by their depositors, and also by the demand for gold on their bank-notes % Mr. Warner. If their deposits were really payable in gold, I should say that that would be the case. Mr. Hardenbergh. Are they not all so payable? Mr. Warner. They are payable in legal-tender notes, and so will the banks' own notes be. I have not supposed that the deposits would lead to such an immediate drain of coin from the banks as some have antici- pated. If the deposits in banks do not bear an unsafe relation to circu- lation — that is, when the circulation is ample for the deposits, and when the convertibility of that circulation is provided for, then I take it that the deposits are taken care of. It turns upon the question whether RESUMPTION OP SPECIE PAYMENTS. 165 your circulation is sufficient to meet the demands from deposits — that is, whether it bears a proper proportion to the deposits or not. Mr. Hartzell. Secretary Sherman, when he was before this commit- tee, told us that he was making provision to secure sufficient coin to enable him to redeem the outstanding government notes that would be presented after the first of January, and that then, in his opinion, re- sumption would be consummated. Now, if resumption of specie pay- ment iu January, 1879, should prove disastrous to the national banks, have they not got the power to combine and soon to abstract all the coin in the Treasury, and force an abandonment of resumption ! Mr. Warner. There is no doubt but that the banks have the power by combining to draw the coin from the Treasury. Mr. Hartzell. If it should become a question of self-preservation with the banks, would they not be very likely to do so? Mr. Warner. They can always be relied upon to protect themselves first. Mr. Hartzell. Then, would not the ability of the government to maintain specie payment after the 1st of January, 1879, depend en- tirely upon the co-operation of the national banks ? Mr. Warner. Without the co-operation of the banks, resumption would fail quicker, but I do not think myself that the banks and the government together have the power, by any co-operation, to maintain specie payment without retiring part of the paper. No country can have all its currency in convertible paper, because when the choice is extended to all the people of the United States iu the course of their trade (a choice to be exercised continually in all transactions) to deter- mine what currency they prefer, some part of the whole certainly would be coin, and most probably the larger part. In that connection I would add this : If there is a hundred millions of coin now in the country, over and above the fifty millions of subsidiary coin and the coin in circula- tion on the Pacific slope, then, for the Secretary to gather up fifty mil- lions of that and put it in the vaults of the Treasury, no more helps re- sumption than a man enriches himself by taking money from one pocket and putting it into another. You are increasing the bonded debt, but how in any possible way the maintenance of resumption, or its final accomplishment, is aided by that process I am unable to see. It makes no difference whatever whether there are one hundred millions in the Treasury and fifty millions in the vaults of the banks to start with, or whether the whole hundred and fifty millions of coin is in the Treasury and nothing in the vaults of the banks. The banks furnishing the coin to the Treasury to lie there through the summer months drawing interest, will keep larger reserves in greenbacks, and, after January next, present greenbacks and draw their coin. But how such a loan can possibly aid resumption I am unable to see. If the coin comes from abroad of course that is another thing. Mr. Hartzell. Without the aid of the national banks, the Secretary's attempt at resumption would be utterly futile, would it not ? Mr. Warner. Yes. If the banks should operate against him, his efforts would fail quicker than with their cooperation. But I take the position that it is absolutely impossible to maintain six hundred and fifty millions of convertible paper iu circulation in the United States by any co-operation of the banks and the Treasury. Mr. Hartzell. The Secretary says that he has nothing to do with the banks, and that they must take care of themselves. Mr. Warner. They will undoubtedly take care of themselves ; but he furnishes the instrumentality. The Chairman. The Secretary will have twenty-five millions of silver 166 RESUMPTION OF SPECIE PAYMENTS. in the Treasury at that time. If he offers it to the banks, they will not want to take it for their legal-tender notes. Will he not be able to keep up this balance by the use of silver, and will it not be his duty to do so as being a cheaper metal ? Mr. Warner. Only for a short time, I take it. If there are twenty- five millions of silver, and if back of that is the gold, it would be very easy for the banks to combine and distribute that amount of silver, and then reach the gold that is behind it. Moreover, twenty-five millions of silver would be taken up by the country in pocket pieces. Mr. EwiNG. It would be taken up because silver certificates can be used to pay customs. Mr. Warner. Yes, sir ; for that reason also. Mr..EwiNGr. The Comptroller of the Currency states the amount of de- posits in the national, State, savings, and other bauks, at twenty-two hun- dred and twenty millions. Add to that amount the currency, six hundred and fifty millions, making twenty-two hundred and seventy millions of coin demand. Must not the Treasury Department respond iu the end to the whole of that demand for gold and silver, if the holders prefer gold and silver to paper ! Mr. Warner. Yes, to the extent that they do so; but I think that is all covered in this. Our circulation, when made convertible, will be just so much coin and so much paper as will be determined by the laws of trade. The people, through their deposits, will take so much of it in coin and so much in paper; and the whole problem, it seems to me, is involved right in that. If the whole circulation is sufficient to take care of deposits, that is of discounts, which are the principal source of deposits, and not excessive, then, when the circulation is made convertible, it will still be adequate for deposits. The whole question is one of pro- portion of coin to paper in the circulation. Mr. Bwing. And the coin must come from the Treasury f Mr. Warner. The whole of it except what the banks may chance to have at the time. Mr. Eames. Under what obligation is the government to pay other than its own debt ! Mr. Warner. It has no other obligation. But if it reissues its paper, the power to repeat the demand on the Treasury for coin is renewed just as often as it is reissued. Mr. Eames. As far as the legal-tender notes are concerned, the extent of the obligation of the United States is about three hundred and fifty million dollars, is it not? I mean to say that the United States govern- ment is under no obligation whatever in regard to national-bank notes, deposits, or anything else. Mr. Warner. No, sir ; but this will be the result : If, out of a total currency of seven hundred and fifty millions, three hundred and fifty millions of it is coin and the balance is retained as paper, then what paper is retained as currency will certainly be national- bank paper, and the paper retired will be the greenbacks, and the government must pro- vide the coin for taking up the greenbacks, and in doing so will provide the coin for circulation and for the bank reserves. The committee took a recess for an hour. Washington, D. O, April 23, 1878. A. J. Warner recalled. Mr. Ewing. What do you think has been the effect of the resumption law upon the industries and productions of the country ! RESUMPTION OF SPECIE PAYMENTS. 167 Mr. Warner. I think the effect has been to greatly lessen the total production of the country, and greatly to lessen, if not to stop altogether, the increase of national wealth. It may not be easy to determine the amount of the loss with any close approximation to correctness, and yet there are data which afford, I think, some fair grounds upon which an estimate may be based. But first I will state what 1 have found in my experience to be the effect of the diminution of the volume of money under the resumption act, and the consequent increase in value, upon the industries of the country, and upon business generally. A thousand, ten thousand, or a million dollars, or any other sum of mouey, locked up in the vaults of a bank, or for that matter buried in the earth, four years ago, when con- traction of the money volume began, and now dug up and invested (tak- ing the average of the value of property in the country, at least in the State of Ohio), will buy more than twice as much as it would have bought wheu it was buried; that is, money has grown, as it were, not by use or by the accumulation of interest, but through increased pur- chasing power given to it by legislation, contracting the volume and in- creasing thereby the value of the money remaining. Mr. Ewtng. You speak of this as an effect of the resumption law. Mr. Waener. Yes. I speak of the operation of the resumption law and other monetary legislation. If the same sum of money, instead of being buried in the ground or kept from use in any other way, had been invested in property at the time it was buried, or had been employed any time since in sustaining industries, the consequence would have been that half of it would have been lost. It is plain enough, therefore, to see that that road leads directly to bankruptcy for those who con- tinue to employ money in sustaining industries. The operation may be more particularly explained in this way : Manufacturing establishments, such as mills, factories, furnaces, &c, where capital is gathered in large amounts for the erection of such establishments and for machinery, tools, &c, designed for reproduction, necessarily produce from month to month beyOnd the orders they receive. If they did not, they would find themselves, part of the time, out of work, and would not be ready to answer immediate demands. The cost of producing the goods any establishment turns out is estimated from the cost of the raw material at a given time, the cost of labor, &c, and manufacturers calculate upon a given market price for their commodities and upon given profits. But they find that as money increases in value other things decline. The meaning of increase in the value of money is that it will buy more, or that goods have fallen. They find, therefore, at the end of the month, or of two or three months, that their productions in excess of immedi- ate consumption — using the word consumption in the economic sense — are worth less than they cost them. They then make a new calculation ; they find that raw material has fallen, and they cut down the wages of labor and try again, thinking that, having cut down to the new level, they may safely go on again ; and they go on for a time producing as before. The same thing occurs over again. The product of their in- vested capital and the wage-fund they had to provide have yielded only loss. The commodities they produced have fallen again as money has continued to rise, and they find further loss as the result of their opera- tions. They either go over the same ground, perhaps making half-time, or they suspend entirely. And the suspension of operations by fac- tories, mills, furnaces, &c, where tools and machinery become necessary supplements to the hands of man, involves, of course, the idleness of labor. Only the most favored establishments in the various industries live at all, and none escape loss. 168 RESUMPTION OF SPECIE PAYMENTS. Now, the relation that labor, in point of value, bears to productive capital has been variously estimated. According to the Census Report of 1870, the total capital invested in manufacturing, mining, and fish- eries is only twenty-one hundred and eighteen millions of dollars — leav- ing off the thousands — or about $1,000 capital to a laborer; but the superintendent of the census, remarking upon the difficulty of obtaining correct reports of capital invested in the various industries, observes : " This sum is probably not one-fourth the amount actually contributing to the gross product." Pursuing another line of inquiry, and taking such industries as I have had some acquaintance with, I have found that the different kinds of industries vary very considerably as to the amounts of capital invested to a laboreremployed. Certain classes of manufacturing industries have less capital in the form of real estate, machiuery, &c, or as a wage-fund, than others. The proportionate amount of capital, in the form of real estate, machinery, tools, wage-fund, &c, to a laborer will vary from $1,000 to $4,000. Wood-working establishments have less capital in proportion to labor than the iron industries ; but from two to three thousand dollars, in the various forms, to a laborer, will probably be within safe limits. The number of hands employed in manufacturing in 1870 was 2,053,996; wages paid, $775,584,343. The gross product of all the capital and labor employed in manufacturing, mining, and fisheries, for that year, as given in the Census Eeport, was $4,232,325,442. Suppos- ing the total capital invested in manufacturing and mining to be three times that given in the Census .Report, it will approximate the estimate before given of $2,000 to $3,000 of capital to a man. The value of farm products, including betterments of stock, &c, was $2,447,538,656, or a gross total of products for that year, as measured in the currency as it then stood, of $6,679,864,098. The average production per man for capital invested in manufacturing was $2,115. Tbe average wages paid, according to the figures of the census, was but a little over $400 per individual for all classes employed. Now, we may reason either way — that is, take a given amount of capital as idle and determine from that the number of laborers idle and the loss of production in consequence ; or assuming a given number of laborers to be idle, we have a given amount of idle capital, and from that we may derive the loss. It is proper to say, in this connection, that in this estimate of capital employed in reproduction, there is no account taken of the productions which are the result of workmen who employ their own capital or such as work at their respective trades as day-laborers or in their own shops, &c. Mr. Swing. The larger establishments only are taken into account 1 ? Mr. Warner. The larger establishments only ; and if we assume that $3,000 of capital are invested for every laborer employed in manu- facturing establishmeuts, and assume that one-third of the capital so employed is idle, which I do not think is an overestimate, then we have about three-quarters of a million of men, on the average, forced into idleness because of the enforced idleness of capital. Allowing $2,000 as the value of the gross annual product of one laborer and the capital employed with him, which is less than the average in 1870, and we have a direct loss, resulting from forced suspension of capital and the enforced idleness of labor of $1,500,000,000, in the manufacturing and mining industries alone. But even here there is a further permanent loss in the rapid decay of this kind of capital. Moreover, such establishments, when forced into liquidation, are often in a large degree a final loss. RESUMPTION OF SPECIE PAYMENTS. 169 It is generally estimated that a larger number of laborers than I have given are idle, and if we take into account the large number that work independently as day-laborers or on repair-work and in their own shops, and take into the estimate those who work but part time, I doubt not the number of those who are idle, or the average number of idle days, will be largely increased, and that the loss to the nation is actually greater than the foregoing figures make it. This does not include any loss in agriculture. I have not supposed there was any enforced idle- ness there. That department woul J be the last t ) feel the pressure, and for the past two years good crops and foreign demand growing out of war has kept up this industry. The reason why labor is forced into idleness when capital is idle is very apparent. Labor and capital, as modern industries are carried on, are so combined, that capital cannot be employed without labor nor labor without capital ; a machine cannot be used without a man to run it, and vice versa. When the machine is idle the man cannot be em- ployed, partly because he has learned nothing else and partly because almost nothing is done without a machine. If his occupation is to weave cloth with a loom he can weave only with his loom, by the power of steam or water; he cannot go out by himself and set up a loom of his own. He cannot live by making cloth by hand. A boy who has learned to tend a nail-machine must stop work when the machine stops ; he cannot make nails without it ; he cannot go out and make nails in the old way; he has never learned such work, and could not live by it if he had; making nails with a machine is his trade. The capitalist owns the machine, he owns his hands; and, so far as his work goes, the machine is as much a necessary part in the production of nails as his hands are, and even if he should undertake to learn something else, he will find that the same cause that operated to throw him out of that particular employment has turned others out of other employments, and there is no room for him. All trades are alike overfull when prices are falling. If he turns to the country, hoping for relief on some farm, he finds that im- proved machinery has kept pace with agricultural wants, and although there is less enforced idleness in agriculture than elsewhere, neverthe- less there is not room on farms for the many forced out of other depart- ments of labor, and owning no land himself, and having nothing with which to buy any, he finds little relief. Therefore, when capital is forced into idleness, labor is necessarily idle with it, and that without any fault of the laborer ; while his own wants, and, albeit, that of his family too, continue all the same. And this, I charge, is the direct and natural consequence of the ap- preciation of money under the resumption act and the act demonetizing silver and other legislation which, diminishing the volume of money, has increased its value. That increase going on from year to year in the value of money, and decrease in the value of everything but money and investments that share the enhancement of money, has made it certain that, if employed in production, some part of the capital so employed would be lost. Money put in with capital in other forms as a wage-fund, is almost cer- tain, under such a monetary policy, to be lost. It therefore follows, as a consequence of this legislation, that it is profitable to bury money in the earth, and hazardous to employ it in producing wealth. It is the buried talent that, under such a policy, secures the reward. The same cause is operative in other countries, though to a less ex- tent, and produces like results. The appreciation of money, effected by 170 RESUMPTION OF SPECIE PAYMENTS. legislation, is cause sufficient to account for the depressed state of trade in other countries as well as our own. The false and mischievous the- ory of " overproduction " was long since exploded, and " want of confi- dence" explains nothing. The difference between an increasing and decreasing volume of money for a country growing in population and wants is incalculable. Hume was right, and Alexander Baring right in quoting him to the parliamentary commission of 1819. In no other question has mankind a greater interest. As to the extent of the loss to the country through non-production, if we take the figures before given, of $3,000 capital, on the average, to a laborer, and take $2,000 as the value of the products of this capital and labor combined for a year, theu with 750,000 laborers idle we have the enormous sum of $1,500,000,000 as the loss of wealth to the nation from non-production in a single year. Or if we count that a million men are idle, which is much less than the usual estimate, then the loss would be $2,000,000,000 (a million of men, in 1870, produced more than $2,000,000,000), which is more than double the net savings of the nation in the most prosperous years. At $1,500,000,000 we have for four years a loss of $0,000,000,000, or with $2,000,000,000 a year a loss of $8,000,000,000, since the passage of the resumption act. If our produc- tions had been two thousand millions more each year, probably one-half of that would have beeu consumed in better living by laborers and others whose living has been reduced to the barest necessities, and the rest would have remained as so much permanent addition to the wealth of the nation ; and the country is less able, by the amount of this les- sened production, whatever it may be, to pay its debts than it would be with it as an addition to its present wealth. On the other hand, the burden of debts has been increased by the whole amount of the appre- ciation money has undergone. That is, the debt burden has increased by the appreciation of money, while the ability to pay has been lessened by diminished wealth. Mr. Ewing. Have you taken into account the loss from idleness of laborers not connected with the large establishments ? Mr. Warner. Not in these estimates. The loss by only partial em- ployment of that class of mechanics and laborers not connected with established industries, such as carpenters who work about, maintaining, keeping in repair, and producing on their own account, has been cer- tainly considerable, probably as much as one-fourth, of the whole amount of such labor; but as to the value of their products, I know of no relia- ble statistics covering the subject. If you extend the investigation from manufacturing and mining to agriculture, the loss there, I take it, has been very slight, if anything. This industry, at least for the last two years, partly in consequence of foreign demand for breadstuff's, occasioned by the war in Europe, has kept employed the usual number of laborers. Besides, a given amount of labor in the field of agriculture will produce a grsat deal more one season than it will in another. On the whole, therefore, I think a loss of $1,500,000,000 to $2,000,000,000 per annum, since 1873, through non- production, as a consequence of a continued increase in the value of money, would not be an overestimate. This sum, as I have said, is considerably more than has been the average annual savings of the nation. By that I mean to say this : If, in 1870, the gross production of the United States was $6,200,000,000, the cost of keeping up the pre-existing wealth of the country, the cost of maintaining the population being deducted, then the residue would be national profit or net gain. RESUMPTION OF SPECIE PAYMENTS. 171 Mr. Ewing. Mr. Wells put it at between seven and eight hundred millions per annum. Mr. Warner. I believe those are his figures. Probably in no one year has the nation reached a net saving of the lowest estimate of loss, or $1,500,000,000, and on an average not much beyond half of that amount. If this reasoning be correct, then we have not only had no net savings since 1873, but have been actually consuming some part of previously accumulated wealth. Mr. Ewing. Living on our own capital ? Mr. Warner. Tes, sir; living on our pre-existing capital. And that involves another consideration, which is worthy to be noticed. That is, that the large increase in the value of money, or, as we may call it, the gain to holders of money and public securities that share the enhance- ment of money (which gain has been very large for that class), there being no net national gain from which to derive this increase, must necessarily measure a corresponding loss to another class. Therefore the net result of legislation increasing the value of money may be summed up thus: A contraction of the currency volume of $85,000,000 Las cost us in loss of production from six to eight thousand millions of dollars, and in loss of national wealth say one-half to two-thirds of that amount; because if the million or more of idle laborers could have pro- duced more, they would have consumed more, and the whole difference would not have been net savings. There is a further loss, not measured in money — loss from demoralization of labor, the increase of crime, and the deterioration which idleness engenders — but it is by no means with- out its significance. Mr. Ewing. You commence with 1873, but attribute this loss wholly to finance legislation. Mr. Warner. Yes, sir. Mr. Ewing. I wish you would explain your reason for that. Mr. Warner. I commence with 1873 because, notwithstanding there was heavy contraction in various ways, rather of an indirect than a direct nature, prices and the value of money previous to that year were pretty generally sustained by credit, and especially by a very large in- flow into this country of floating capital in various forms, which came here in exchange for bonds and other forms of indebtedness that we sent abroad. I think this inflow of foreign capital was one of the prin- cipal causes of the maintenance of prices up to the period of the panic;, and this is a consideration which I think has been rather lost sight of. This capital supplied the place of other forms of credit that had been made use of as money, as that was withdrawn, and sustained prices and business. Mr. Ewing. When you speak of other forms of credit used in lieu of money you refer, I suppose, to the interest-bearing legal-tender notes of the government ? Mr. Warner. Yes, sir ; such as the demand notes, certificates, tem- porary interest- bearing bonds, compound-interest notes, &c. Mr. Ewing. All of which performed to some extent the office of cur- rency ? Mr. Warner. Undoubtedly ; and helped to sustain prices, though not to the full extent that the same volume of actual money would have sustained them. Nor do I wish to be understood as advancing the opinion that foreign floating capital made up entirely for the government currency retired ; but, I think, it was the chief reason why prices did not fall before. 172 RESUMPTION OF SPECIE PAYMENTS. Mr. EwiNGr. Because they were in use sometimes as investment and sometimes as currency ? Mr. Warner. Yes, sir. I would draw a distinction between the effect of money and the effect of credit on prices. I would admit as coming within tbe true definition of money, metallic money and paper, whether bank-notes or government issues ; anything that has general acceptance in the final discharge of obligations; and I make this dis- tinction between money which has general acceptance in the payment of all obligations, and mere instruments of credit, and substitutes for money, which, while they may discharge obligations, have no such gen- eral acceptance, and which, while in some degree they take the place of money, nevertheless pass as such only within a limited sphere, or be- tween few individuals, or in restricted channels, and are not generally accepted as final payment. In other words, money proper may be said to exert a constant pressure in maintaining prices, a pressure that is unintermitting, and acting in all directions. While substitutes for money — forms of credit that may largely supplement and take the place of money, are intermittent in their effect upon prices, and exercise, I conceive, a much less force than money proper. These substitutes for money, these forms of credit, and credit itself, while they may and do largely at times supplement the volume of money, at the same time owe their stability and efficacy to the quantity and stability of the volume of money upon which they depend. Mr. EwiNGr. To what extent do you attribute to the resumption law this loss, so far as it has occurred since the passage of that law ? Mr. Warner. I regard the resumption policy, coupled with silver demonetization in this and other countries, as the sole cause of the loss in production and the depressed condition of trade since 1874. In my view, this condition is the direct and necessary consequence of these acts. It is what would be expected to follow a priori from settled prin- ciples of monetary science. From like legislation in future like results must flow, whether such legislation be enacted ten, fifty, or a hundred years hence. Always, legislation that causes money to appreciate in value, causes other things to decline, and makes it profitable to hoard money for the growth it makes, and correspondingly unprofitable to use it, and this must always be so. Money is the life-blood of industry, and when it increases without use, then it leaves the veins and arteries of trade, and gathers in money centers, while industries are left to die out of syncope. Mr. Ewing. Supposing that silver had not been demonetized, and the resumption law had not been passed, how much of this loss would have occurred since 1875, from causes other than those of which you have spoken ? Mr. Warner. With the cessation of the iuflow of foreign capital, and with the other causes culminating in the panic there would have been a temporary check ; but if there had been no subsequent adverse legis- lation, that is, if the resumption act had not been passed nor silver de- monetized, I do not think we would have sustained altogether more than a half year's loss, instead of the four years of loss which we have now sustained. Indeed I believe that the effect due to the panic had been mainly dissipated before the middle of 1874, and that the subsequent decline of business has come from the reduction in the quantity of money and increase in its value that has followed the resumption and silver-demonetization acts. Mr. Ewing. Mr. Sherman, in his statement to thecommittee, attributed the mischiefs which we have suffered since 1873 to the fluctuations of RESUMPTION OP SPECIE PAYMENTS. 173 the currency, arising from its not being redeemable in coin — he called it inflatiou — but at the same time said that we would have a larger volume af currency as soon as we reached resumption, and that that would be healthy inflation. Mr. Warner. The assumption that our currency has fluctuated in value since 1873 is one which I cannot accept as being a correct de- duction from known facts, or as in accordance with known principles of monetary science. Mr. EwiNG. On the contrary, it has steadily increased in value. Mr. Warner. It has not " fluctuated," it has steadily increased in value as its quantity has been lessened. Not only has our paper cur- rency increased in value toward the level of gold, but the value of gold itself, in consequence of silver demonetization and in consequence, too, of the withdrawal of paper from use, not only in this but in other countries, has risen very considerably as compared with commodities generally. When there has been a general fall in prices as compared with gold, it would be more correct to say gold had risen, as John Locke two hundred years ago said (I may not give his exact words, but nearly) : " When the same quantity of money is passing up and down the kingdom in trade, then any variation in price between commodities, one with another, is truly a variation in the commodities themselves, but when you change the quantity of money that measures the value of the commodities then the alteration is in the money and not in the commodities." I re- gard that as a true statement of the fact, and one entirely consistent with the principles of economic science. Hence, I do not think it can be properly said that there has been a " fluctuation " in currency when there has been a steady rise ; and that rise will go on as long as the quantity of money as compared with the quantity of commodities, and transactions is lessened. An inconvertible money can be made to fluc- tuate only by increasing and decreasing its quantity in a ratio different from the increase and decrease of commodities and transactions. Mr. EwiNG. Eeferring now to your data as to unemployed laborers, it seems to me that they indicate a much smaller number of the unem- ployed than is shown in fact. Mr. Warner. I know it is below that generally made, and T think it under rather than over ; but results multiply so fast that I have felt con- strained not to risk much outside of authenticated data. So great would be the loss upon the general estimate of three mill- ions of laborers idle, with a proportionate amount of capital in suspen- sion, that it almost staggers one, and yet I should be quite ready to expect, if all the facts could be known, that the total loss was in excess of, rather than within, the limit I have given. That is to say, taking $6,200,000,000 as the value of the gross products of the country in 1870, and allowing that in a healthy condition of trade the rate of increase would have been as great on the average as in the decade preceding 1870, we ought to have a gross production of nearly $8,000,000,000 for 1877, measured in the money of 1870. If it does not reach $6,000,000,000 measured by that scale, or say $4,800,000,000 measured by the money of to-day, then the loss has been greater than I have given. If the surplus in agricultural products, due largely to the season, be deducted, then it could be shown, I think, that we have not produced commodities worth, in our present currency, $4,800,000,000, and if not, then the loss from idleness of labor and depressed business was more than $2,000,000,000 in 1877. Indeed I am ready to admit that, so far as I have seen statis- tics, data are wanting to establish a gross production for 1877 of even $4,000,000,000. This sum, and more than this, would be required to 174 RESUMPTION OF SPECIE PAYMENTS. maintain pre-existing accumulations and support the population, some part of which would find then but meager support. Mr. Ewing. What estimate have you of the amount of debts in the United States of all kinds, public and private ? Mr. Warner. The public indebtedness, national, State, and munici- pal, is somewhere between four and five thousand millions. As to cor- porate indebtedness, there has been a good deal of that practically wiped out in the last three or four years through insolvency, but in 1875 it was probably not much less than the whole public debt. The indebtedness of railroads in 1875 was about $2,500,000,000. Perhaps $1,000,000,000 will cover other corporate indebtedness, not including banks. Mr. Ewing. Now as to private indebtedness. Mr. Warner. Private indebtedness secured by mortgages was over $2,000,000,000 in 1876. It has increased since, and if to this be added loans made on personal securities, the total would hardly fall below the public or corporate indebtedness. Mr. Ewing. You would make the aggregate, then, about what ? Mr. Warner. The aggregate would range from ten to twelve thou- sand millions; that is, more or less permanent. Mr. Ewing. State what has been the effect of this resumption law upon the debtors. Mr. Warnek. The effect upon the debtors of the country, especially those debts created on the basis of a full volume of money consisting of gold, silver, and paper, as it existed in 1874, has been, of course, to double, and, as compared with many kinds of property, to more than double, the value of money and the burden of debts as compared with the means of paying them. So that practically, taking the State of Ohio by way of illustration, more than twice as much property, on the aver- age, is required to pay a debt now as would have been required at the time the debt was created ; that is, there has been, in effect, a change in the measure since many of these debts were created amounting to 50 per cent, or more. The debt was created according to one scale, and the effect of legislation has been to apply to property taken in payment another and enlarged scale. Mr. Ewing. So much for individual debtors. Now, what is the effect as to these corporate debts ? Mr. Warner. The effect, practically, is the same, except, perhaps, in the case of railroads. The effect on railroads has been not only to in- crease the burden of the debts, but the continued increase in the value of money has operated to cut down their business very largely, and to lessen their earning power; and hence a very large number of the rail- roads of the country are bankrupt, and more must become bankrupt if the present monetary policy is continued one or two years more. Mr. Ewing. State the effect upon the tax-payers. Mr. Warner. The effect upon the tax-payers is the same. The num- ber of dollars required for taxes remains about the same, both for pub- lic expenditures and interest on public debt ; for expenditures have not been cut down ; but it takes twice as much property, twice as much labor, or the products of labor, to pay the same number of dollars of taxes. Then, again, the amount of taxable property becomes less each year as the shrinkage goes on. In my own town there has been a reduc- tion in the personal property of about 40 per cent, since 1873, and if a reappraisement were to be made of real estate, that would be reduced in about the same proportion. The result is, the legal limit placed on taxes RESUMPTION OF SPECIE PAYMENTS. 175 will not permit a sufficient sum to be raised to pay necessary expenses and interest ou the muuicipal debt. The same increase of debt burden is felt in the payment of the public debt. It is not merely a change in the value of paper money, but gold prices have changed nearly as much. For instance, if we suppose the interest on our debt held abroad in 1873 to have been a hundred millions, and to have been paid entirely by the exportation of cotton, it would have taken in that year (taking the Liverpool price at 10J pence for the best grade, or, say, 21 cents at New York) about one mill- ion and sixty-six bales to have paid that entire interest ; but in 1877 (last year), it would have taken to pay the same interest, at the prices then ruling for cotton, about eight hundred thousand more bales, or one million eight hundred and sixty-six thousand bales. Again, it is estimated by Mr. David A. Wells that the total taxes paid in 1870 in the United States amounted to $750,000,000. If the taxes for that year had all been paid by the sale of cotton, it would have taken about eight millions of bales, but at the price now ruling, or ruling in 1877, it would take fourteen millions of bales. Taking pig- iron and comparing in the same way, it would have taken in 1873, at the prices then ruling, about twenty-eight millions of tons; it would take now over fifty millions of tons, or nearly one hundred per cent. more. Mr. EwrNG. That is, taking the New York price. Mr. Warner. Yes ; I take the New York price. Mr. Ewing. What do you anticipate is to be the injury to our indus- tries in the future from the execution of this resumption law? Mr. Warner. If the resumption law is to be executed, and resump- tion is to be actually accomplished, and coin is to be substituted for the paper currency now in use, as I have explained, to the extent the peo- ple may prefer coin, I can foresee no other result than that of a contin- uance of the present state of affairs — that is, a continued increase in the value of money and decline in prices until the end is reached by establishing a state of equilibrium between coin and paper, with the possibility, moreover, of convulsions. For I repeat that to destroy two or three hundred millions of the paper money now in use aud buy coin from other countries to take its place can have no different effect on prices aud business from that produced by sinking in the ocean so much coin, if that were now our currency, and buying more coin from other countries to take its place. To appreciate better the necessary effect here, consider what would be the effect in England of annihilating three hundred millions of her gold and buying with commodities, or with bonds, as much more from other countries to take its place. The two operations would be perfectly analogous. The state of the public mind must be considered, too. I think that any one who mingles much with the people of the country, and especially in the West, finds that a deep sense of wrong pervades the country, and. is increasing in intensity ; a feeling that the interests of a large class have been disastrously affected by monetary legislation, enabling another class, whose wealth is in money aud such securities as share the en- hancement of money, to derive enormous increase — an increase which necessarily (there being no- net national gains from which to derive it) measures a corresponding loss to another class. I think it is very evi- dent that that feeling is not only increasing in intensity, but is becom- ing more widespread. Mr. Ewing. Through how long a period would you expect that these low prices would continue if the resumption scheme is attempted ! 176 RESUMPTION OP SPECIE PAYMENTS. Mr. Warner. Well, judgiDg from the experience of England, I should expect it would take from eighteen months to two years after resump- tion has begun to reach a state of equilibrium in the currency, and if an adverse balance of trade, arising from failure of crops or any other cause, or if the interest on bonds held abroad, or a special demand for the precious metals from any other cause, should drain away a part of our coin, then the time would not only be prolonged but the effort itself must fail. It is very unsafe to rely ou such harvests every year as we had last year. We are as likely to have 75,000,000 bushels of wheat below an average as above, and such a year is as likely to come next year as any time. We do not, on the average, have five years in a century like 1877. I should look, however, for a temporary reaction upon the initiation of resumption. When it begins aud coin is first paid out, the tendency will be to relieve currency that has been kept from circulation. The belief that now seems to possess the country, that the equalization of paper and coin is the accomplishment of resumption, may also lead, for the time being, to the investment of money on the suppo- sition that the end has been reached. But when it is found that the accomplishment of resumption involves a change in a part of the cur- rency from coiu % to paper, leading, probably, to an early adverse balance of trade, then I should look for a more rapid reaction in the other direc- tion, with, very probably, convulsions. Mr. Ewing. You state that you do not believe resumption to be prac- ticable ; that is, you think the Secretary will break down. Mr. Warner. I recur to my general proposition that neither the Sec- retary nor the Secretary and the banks together, by any cooperation between them, can possibly maintain the present volume of paper in circulation aud make it readily aud easily convertible. It is absurd to propose to have all the currency paper and still make it convertible, and that is about what seems to be expected. If the Secretary and the banks have only to look to their reserves, and if with $150,000,000 of coin re- serves they can float $650,000,000 of paper, then on the same principle with $350,000,000 of reserves they could float $1,300,000,000 of paper. It is absurd. They must look beyond the reserves to the state of the whole circulation and know that when paper is made convertible that there is a limit to the total volume of currency that will stay in the country. I have no hesitancy in saying that such an undertaking will sooner or later break down, and the fear is that it may break the country down too. I believe, at the same time, it is possible for the Secretary to accom- plish resumption', and for a time, perhaps a number of years, maintain it, but only by retiring the paper; and what that involves to the country I have stated. Mr. Ewing. What do you call resumption? Mr. Warner. By resumption, as I think the Secretary will have to practice it, I mean redeeming the paper as presented. The Secretary may also buy greenbacks with bonds and burn them up. If he destroys all the greenbacks presented the coin paid out will. doubtless remain in circulation, and coin will also come in from abroad if there is any vacuum, unless national-bank issues are extended. You can accomplish resumption in that way and maintain it until the balance of trade, or our debt abroad, or convulsion, panic, bad harvests, or other adverse conditions turn things against us. The maintenance of convertibility of paper will always depend more on the quantity of paper than on the coin reserves. But if, as suggested in the question of Mr. Eames, the paper be kept out, by bringing its legal-tender power into operation, or by otherwise preventing free convertibility, then, I repeat, the coin will RESUMPTION OF SPECIE PAYMENTS. 177 be driven away ; because if the channels of circulation are already full, no more currency, if convertible, will remain here. Mr. Ewing. How is it possible to prevent free convertibility under a system of resumption? Mr. Warner. Resumption, of course, fails when paper is not readily convertible. Nevertheless, in 1862, when greenbacks were paid out, they were paid out as promises to pay, and kept in circulation per force of being legal tender, and being made money ; and the same thing may be done over again. The banks, by combining, may undoubtedly make use of a certain influence against a demand for coin, as under the old system the banks always exerted more or less influence in that way. Mr. Hardenbergh. Cannot the government resume of itself without the uational banks? Mr. Warner. The government can take up greenbacks with bonds, or buy bullion and coin it and redeem and cancel them ; but the gov- ernment cannot make greenbacks convertible into coin at the will of the holder, and then keep in circulation $350,000,000 or $300,000,000 as a system of currency independent of bank curreucy. While the national banking system exists, the government cauuot separate its own issues from the issues of the banks, and separately maintain resumption. I think it is very plain that, first, banks will not, as they need not, look elsewhere but to the government for their specie, which the instru- mentality of the greenback affords them ample facilities for doing; and, second, that the paper retired, in order to maintain the convertibility of the whole, will be the greenbacks. Mr. Ewing. You said at the meeting on Monday that the repeal of the resumption law, or some modification equivalent to a repeal, was necessary. What modification do vou suggest ? Mr. Warner. The absolute repeal is best. Mr. Hardenbergh. What action do you propose Congress should take whereby confidence may be so far restored as to invite capital into such ventures as will give employment to labor ? Mr. Warner. First, repeal the resumption act and stop the further alteration in the value of money. The alteration in the value of money, as it has been going on for years, has been the one source of evil. Con- fidence is a consequence, not a cause; it is a creature of success, and will return only when success in business is the rule and not the excep- tion. If it were known to-day that there was to be no more contraction of the currency, no attempt at substituting coin for paper, and no more hoarding of coin for that purpose, confidence would appear again and industrial life revive immediately. Hence, taking in view the present condition of affairs in the country, and considering the whole question practically, I should say, repeal the resumption act first, and limit the volume of paper money substantially to its present volume, and thereby preserve the equality of value be- tween paper and coin. It is a principle as well settled as is anything in monetary science, that, by limiting the quantity of paper money to a volume less, or not greater, than we would have of metallic money if there were no paper, or than would be our share of the currency of the world, then the paper volume would have the same value so much coin would have, and would stand at a level with metallic money. It is a mistake to suppose that the equality of value between metallic and paper money can be secured in no way but by convertibility. It can be se- cured as well, and more certainly, by arbitrary limitation of quantity thau by the promise of convertibility. Indeed, Peel's act of 1844 was, in effect, an assertion founded upon the experience of England with H. Mis. 62 12 178 RKSUMPTION OF SPECIE PAYMENTS. bauk issues, that the promise of convertibility alone could not be relied upon to secure equality of value of the bank-note with coin, even with but one issuing bauk, and that closely allied to the government, aud the principle of arbitrary limitation was accordingly established by that act to secure convertibility The same principle, with an elastic margin or limitation, has been incorporated into the German system. 1 cannot think, therefore, that an economist or statesman could be found in Eu- rope who would stand by a proposition to maintain the equality of value between paper and coin by the promise of convertibility alone, with two thousand or more independent issuing banks. It has failed m other countries. It has periodically failed here. No other country, except Scotland— if that be an exception — relies upon the principle of convert- ibility, or rather the promise of convertibility, alone to secure equality of value. We have many times passed through Lord Overstone's cycle in this country, relying upon the promise of convertibility of independ- ent banks, and I see no reason to believe the principle will work differ- ently in the future. By limitation of the quantity of the paper to a volume not greater, as 1 have shown, than would be our distributive share of the money of the world, and its value is at once secured. With this principle in force the currency would now stand, say, #650,000,000 of paper, $50,000,000 of subsidiary coin; with, say, $50,000,000 on the Pacific slope, and elsewhere in hoards, and then if the channels were not filled to the level of the currency of the world, coin would come in to fill up the vacuum. If the restriction on the quantity of silver were removed aud paper limited to the present volume, then coin would now flow into the coun- try. The fact that silver bullion is at a discount now as compared with paper affords abundant proof of this proposition ; on the other hand, if the government continues to buy silver bullion, and to coin it after the bullion and coin are at par, then silver coin will leave the country. Or, to state in a seutence my proposition ; limit paper to its present volume, until some safe principle for regulatiug issues of paper can be adopted, remove the restriction on silver coiuage, and with the doors full open to both the. precious metals, if we need more money get it from the precious metals, precisely the same as If all our money were coin now and we wanted more. This will stop contraction and the further alteration in the value of money ; will wrong not a being, while the policy of further contraction involved in the resumption scheme, and the substitution of coin for paper, cannot otherwise than work yet infinite wrong to multi- tudes of people. ' Then the whole currency, paper and coin, would vary precisely as though it all consisted of gold and silver. Now, I do not say that a me- tallic currency, or a currency varying precisely as a metallic currency would vary, best preserves stability of prices, but it certainly much bet- ter preserves stability than does or will a currency issued under our present national banking system. There would be greater flexibility even in a purely metallic system than our present national banking sys- tem affords. Under that system the flexibility of the old State bank issues is taken away. A given amount of currency is issued, and that remains outstanding or issued the same for all seasons of the year. Under the old banking system, or " the Scotch system," banks adapted their cur- rency to the varying needs of their respective localities ; they increased it at one season and decreased it at another, having in view only the probable demand on them for coin. That is the case with the Scotch system now. RESUMPTION OF SPECIE PAYMENTS. 179 Let me illustrate this. In Cincinnati, in December, during the pork season, there is an extra demand (or several millions of currency. With a purely metallic currency, it would have to be gathered up from other p;irts of the country or brought in from abroad. It may be wanted in other places, too, at the same time. The scarcity created by the increased use for money at that particular season, arising from an increased amount of products, embarrasses trade and affects prices. Now, under the Scotch banking system, the banks of Cincinnati, having in view only the probable demand that would be made upon them for coin, issue their notes to dealers in produce, taking in return the notes of the produce- dealers, on the theory that when the notes of the pro- duce dealers are paid to the banks they will be paid in the banks' own notes. If they are not, they are paid in the notes of other banks, which are exchanged for their own notes ; or if paid iu coin, then the bank- note is safe. The effect is that that particular work is performed by credit instruments alone, which are created for that particular use, and are extinguished when it is doue. There is a great gain in such flexi- bility in any money system. A purely metallic currency does not afford it, and that is perhaps its one defect. But much less does the present national banking' system afford it. Under this system, if an increase of currency is wanted in Cincinnati, before the banks can issue it they must purchase bonds in the market, send them to the Treasury in Wash- ington, and have the notes issued; and when the notes are once out, they are out for all seasons — when they are not wanted as well as when they are. Therefore, there is less flexibility, less adaptation to our local wants in the national banking system than there would be in a purely metallic currency. And here, taking into full consideration the present situation of affairs, the different views held in the different sections of the country, and the unsettled state of the public mind, as a practical solution of the immediate question before the country, and one on which different opinions might be harmonized, I recommend and urge for the considera- tion of the committee, and upon Congress, the adoption of the principle of limitation to be applied to the volume of paper, for the preservation of the equality of value between paper and coin. This would, of course, involve the arbitrary limitation of bank issues. The ultimate question of the regulation of paper issues, by which the ratio between the quantity of money and its use, or the quantity of com- modities and transactions, may be kept more stable than under either the metallic or national banking system — while perhaps the most impor- tant question pertaining to economic science, not only for this country but for the world — the country is not prepared to act upon now, and on this point I am not prepared to express any opinion. The constant factor in the equation of currency should be the ratio between quantity of money and quantity of commodities and transac- tions. Then you have stability of prices. Mr. Hardenbkrgh. Would not the national prosperity be promoted by a complete separation of the national government from control of the currency and leaving it to the States'? Why should notthe 10 per cent, tax on State banks be rescinded 1 ? Mr. Warner. I would say, substitute greenbacks, or United States paper in some form, for national-bank notes, both because this system is an expense to the whole people, and a profit to a few, for which they have no right to ask, and which the public are under no obligation to concede; and, second, because that system, as it now stands, is so wanting in flexibility that it does not perform the function of a good 180 RESUMPTION OP SPECIE PAYMENTS. bank-of-issue system. As to a complete separation of the government from the States in the matter of currency, and the removal of the tax on State banks, that is, a returning: to the policy of State control of banks of issue, I do not think public sentiment in the country would now favor that. There is, however, an advantage in State banks that the national system, as I have explained, does not possess; and that is, flexibility and adaptation to local wants; and this is an immense gain to a people ; an advantage, the loss of which, I am ready to admit, is not compensated by the uniformity of the currency gained through the national banking system. Flexibility and adaptation to local wants have been sacrificed in the national currency system to security and uniformity. Mr. Ewing. Would you, then, fix the volume of the government paper money at a little below what you consider to be our distributive share of the money of the world, and let the coin flow in to bring it up to the level? Mr. Warner. Yes, sir; I think that the best practicable solution now attainable; but I would not lose sight of the ulterior question con- nected with the regulation of paper money hereafter. I deem that the great question ; but it is in the future, and upon that I am not prepared now to express an opinion. Mr. Ewing. What would be the effect if other states of Europe were to demonetize silver 1 Mr. Warner. The effect would undoubtedly be, with our silver law as it now stands, to lessen the quantity of metallic money that would fall to us. But with the restriction on the coinage of silver removed, it would probably operate to turn the flow of silver somewhat in this direction. Mr. Ewing. Would that be to us a beneficial effect f Mr. Warner. I should not think it would have any adverse effect. The best condition, however, would be one of bimetallism, in a ratio to be agreed upon between the different countries — either fifteen and a half or sixteen. Without silver, or with gold alone as money for the world, I believe all attempts at resumption, or the payment of debts generally, with prices at the level of gold as it would then stand, to be utterly impossible. The credit of the government, after private credit had been generally destroyed, would itself fail, and that a long ways short of monometallism for the world, or for Europe and the United States even. All estimates of volume of money I have given are based upon the continued use of both metals as money throughout the world. The share of metallic money that would fall to us with gold alone as the money of the world, would be little, if any, more than half the volume we would have with both metals to draw from ; that is, 350 or 400 mill- ions instead of 750 or 800 millions. Mr. Ewing. If other states of Europe demonetize silver and we had free coinage at sixteen to one, the probabilities are that our metallic cur- rency would be purely silver! Mr. Warner. Almost certainly so. Mr. Ewing. What would be the effect upou us if other states of Europe now using an inconvertible paper currency were to return to the coin standard ? Mr. Warner. To the extent they withdraw their paper, and call upon other countries for the precious metals, just to that extent will it tend to lessen the quantity in other countries, and in the same proportion to increase its value. If, for instance, at the same time we are hoarding coin, Italy should RESUMPTION OF SPECIE PAYMENTS. 181 be doing the same, coin would be scarcer and dearer. The hoarding by the governments of France and Germany at the same time two years ago undoubtedly affected very materially the premium on gold in this country. The premium was higher iu this country then than it would have been if there had been no extra demand for hoarding in their treasuries by Germany and France. The rise in the premium here, ac- cording to our Secretary and the Comptroller of the Currency, was due to fluctuation in our paper currency, when there was no increase in quantity, and, in fact, no such fluctuation. There was a rise in the value of gold and a rise iu the value of paper, and a fall in commodities, all the result of contraction. Mr. Ewing. Will we not have a more, stable currency by retaining at least our whole volume of paper money than we would have if we return to specie payments ? Mr. Warner. I think there is no question about that at all. Our volume will be more stable, as I have said, with the paper limited to any sum less than that which would be our distributive share of the world's money if there was no paper, leaving a vacuum to be filled by the inflow of coin — and it would be more stable than is possible under a state of promised convertibility with 2,000 and more independent issu- ing banks. Mr. Ewing. Please state your views as to the bill of the Senate Com- mittee of Finance, amending the resumption law, and also the bill pro- posed by Senator Matthews, if you have examined them. Mr. Warner. The proposition reported by the Senate Finance Com- mittee, in substance to retain the present volume of money, I think is in the right direction, but entirely incousisteut, if at the same time it is proposed to execute the resumption law ; and that for the reason already given, that it is utterly impossible to fill the channels of circu- lation with paper — paper to be kept out by reissue — and then make that paper convertible. Resumption in that way must be on the theory that when left to the choice of the people no part of the circulation would be coin. This, I should say, would be resumption by faith, and might as well be put in operation one time as another. It is plain, however, that if coin is paid out on top of a full circulation of paper, and is not allowed to displace the paper, the coin will soon leave the country and convertibility after a time fail. Hence, a proposition to retain all our paper and still go on with resumption can hardly gain general ac- ceptance. The amendment to the resumpiion act proposed by Senator Mat- thews will, no doubt, I think, operate to preserve equality in value between paper and coin ; and, after all, this is the great thing to be attained by any plan of resumption. This amendmeut proposes also to give full money power to greenbacks by making them receivable for customs and exchangeable for four per cent, bonds. It will, in my judg- ment, be a great gain to permit bonds to be paid for in the currency of the people. Nothing will do so much to bring our debt home and dis- tribute it among our own people. People do not like to buy a thing to get which they must first change the currency they ordinarily deal in into another kind of money. It notes received in the Treasury for bonds were allowed to accumulate, there might be at times heavy contraction ; but if greenbacks received for four per cent, bonds are paid out iu redemption of 5-20 bonds, contraction of the currency will not only be prevented, but a most desirable means of funding will be provided for. I do not see, however, the necessity of always maintaining intact in the 182 RESUMPTION OF SPECIE PAYMENTS. Treasury fifty million dollars. I see no reason why that should not be drawn upon, if need be, for paying interest or other coin obligations. Kesumption, under the proposed Matthews amendment, could, more- over, as well be tried now as uext January. If, as the Secretary seems to think will be the case, the people will not take the coin, then the suspension limit provided for in the proposed amendment will not be reached, and, for that matter, more coin to start with will not help the case, if the paper is to be reissued ; and the difference between a lawful and a forced and unexpected suspension is worthy the gravest consid- eration. Mr. EwiNOr. Would not our currency, with the present volume of paper money inconvertible, be better than a return to specie payments, even though all the paper money we issue be government money? Mr. Warnee. Decidedly so ; and I think it would be better if it were all government money. And at that point I am reminded of the recom- mendation by the eminent writer on money, thinker, and banker at the same time, Mr. Eicardo. On that point his recommendation, I have thought, was a very sound one. His proposition for England, then situated much as we are now, with a large debt — only England owned all her own debt — and with a paper currency, was, instead of taking the capital of the country to procure a gold currency, to make her cur- rency one of paper, and to maintain it at a level with gold bullion by making it exchangeable for gold bullion only in sums of — my recollec- tion is 1,000 ounces. Mr. Ewing. Was it his idea that the whole volume of currency should be paper? Mr. Warner. Yes, sir ; that the circulation should be paper. Mr. Ewing. The whole of it I Mr. Warner. Yes - ; that the whole of it should be paper, but paper maintained at a level with metallic money. And his mode of maintain- ing it was by allowing it to be exchanged in large amounts for gold bullion for international traile. Mr. EwiNG. You allude to his posthumous work ! Mr. Warner. Yes, sir ; to an essay published after his death. The proposition, indeed, was first published, I think, by Mr. Jopliu, but in a different form, but substantially the same proposition, but elaborated by Mr. Kicardo. And 1 think for us uow, in the situation of the coun- try, so overwhelmed with debt — national, State, municipal, and indi- vidual — to take from our capital, which we need for productive purposes^ to produce the things with which alone we can pay our debts, and con- vert it into currency — that is, use the capital to buy a currency with to take the place of our paper currency, would be very much like a mer- chant who, already very much in debt, should take from his capital in trade and buy a gold yard-measure to use, instead of a wooden one of the same length. Wuile he made use of his gold vard-measure he would earn no more, his trade would be no greater than it was when he was using his wooden one. On the other haud, his capital in trade would be lessened by the cost of the gold measure. Of course he could recon- vert his gold yard-measure into capital ; but so long as he used it merely as a measure, he would be no better off than he would have been if he had not possessed it at all. So with a nation situated as we are. If we convert capital into currency to take the place of a currency that we already have, the result will be that, while we use it only as currency, our earning power will not be in the least increased, but diminished by the cost of the new currency. We may convert such a currency again into capital, as we did in 1862; but a country that is constantly con- RESUMP1T0N OF SPECIE PAYMENTS. 183 verting its currency into capital, and then capital back into currency, as I have said, is constantly making bad bargains. Mr. Ewing. Can we, in justice to the people, the tax-payers and debtors, change the measure uuder which the debts were created, by returning now to this gold standard ? Is it fair to them for us to do it? Mr. Warner. No, sir. It can be justified on uo principle of morals or ethics. It is bad economy, and worse in a moral point of view. If Congress should change by a single inch the length of the yard-measure or the standard bushel, the courts would undoubtedly compel adjust- ment of contracts according to the measure in force when contracts were made. But when you change the value of money by legislation, 50 per cent, or more, as has been the case — a change that must still go on, if the resumption law is executed — there seems to be nowhere a remedy, except iu Congress itself; but the injustice and the wrong- remain the same. Mr. Ewing. Your illustration of the gold yard-stick does not express the chief objectiou. There is this additional objection to which we have just referred, that of injustice to debtors and tax payers, and the further objection that when you get to the convertible currency, you will not have as good a currency as you would have had if you let it remain inconvertible. Mr. Warner. I grant that. I only used that illustration to show the bad ecouomy of such a step, to show what would be the direct national loss in the change from paper currency in use to a metallic currency. Views of Mr. Henry Carey Baird, of Philadelphia. Washington, D. C, April 24, 1878. The Chairman. Define what you understand by resumption. Mr. Baird. Resumption is, to be able at all times to pay specie on demand for circulating notes, whether of the government or of the banks, as well as for the deposits of the latter. The Chairman. Will the government and the banks, in your opinion, be iu that condition on the first of January next ? Mr. Baird. They will not be able to sustain it. If permitted, I will go into particulars on this point. The Treasury of the United States occupies a more isolated position toward its people and toward their business than any other treasury in the world. Its whole course has long been one entirely out of harmony with the people aud fieir affairs. The Treasury collects its revenues in money and deposits them in the Treasury, aud pays out its expenditures in money, always keeping a large amount iu the Treasury. There is no other treasury in the world belonging to a civilized people that does this. All others keep bank- accounts at national banks and receive and pay out checks. Take, as an instance, the treasury of France. About seventy years ago the French finances were established upon an entirely different system from that which they had previously had. There is a receiver general of revenues iu every department. These officials receive the revenues and remit them to the treasury by means of che iks and bills of exchange ; the central receiver informs his subordinate receivers as to whether he wants more or less money iu Bordeaux, or iu any other city, than he has there, and what funds he wishes sent to Paris, and transfers are made accordingly. The French treasury department is very much like 184 RESUMPTION OF SPECIE PAYMENTS. a bank, buying and selling bills of exchange and French rentes daily in all the departments of the republic, and the system has worked with, immense success. The Marquis D'Audiffret, who published the Sys- feme Financier de la France, 6 vols., 8vo, 1856, was the principal official who was instrumental in introducing this system. He expresses the opinion that, working in perfect harmony with the people and with the mode in which they do business, it has been largely instrumental in ob- viating the necessity for the institution of banks. In Prance the people operate either through the credit of the govern- ment, or with circulating notes, or money, and very little mere bank credit called deposits. Transactions are almost entirely for cash. The result of this national financial system is, that of the revenues but from thirty to forty millions of francs per annum are transferred from all the departments of France to Paris in money, all else by bills of exchange and checks. The payment of the war fine to Germany was made in exact accordance with this system. In this country, however, where we have isolated the Treasury from the people, we employ express companies to cart money all over the country, taking it away from the people and out of circulation, and the friction between the government, the Treasury, and the people is de- structive to all business. The money is for weeks and even for months withdrawn from the place in which it is collected, being carried princi- pally to New York, there to be distributed by the same barbarous sys- tem. Now, in Mr. Sherman's statement the other day before this com- mittee, he says, on page 28 (I quote it to show what utter selfishness the system begets), "Everybody will be glad that the contest is over [the contest over resumption]. Let us look out for ourselves and let the banks look out for themselves." And in another place he says that he "would consider the banks just as he would consider any other public fact." Now, this isolation, this selfishness, has produced a feeling on the part of government officials that they have nothing whatever to do with the people or their affairs. But wheu they come to resumption, they will find that that isolation has weakened, and must of necessity weaken, the government in the struggle. The banks act in accord with the people, but the government simply takes from the people; so that the very necessities of the people will make the banks stronger than the government in the contest. During the crisis of 1873 the banks suspended payment in legal- tenders, but they established a system of balances through clearing- houses, and the people were more than glad to avail themselves of this system, which was in violation of the bank act, a violation of law which the government had to sanction and overlook. In his examination before this committee the other day, Mr. Sherman said, on page 30 : The Bank of England occupies somewhat the position of our national government) but compare our situation with the Bank of England, and we are better off to-day. Now, I think that the Secretary entirely misapprehended the rela- tions which the Bank of England holds to the financial system of the English people and their effects. The Bank of England, on the 27th of March, 1878, held in the banking department public deposits to the amount of £12,287,000, and private deposits to the amount of £23,338,000. On the other hand, it held of government securities £16,385,000, and of pri- vate bills £25,918,000. Irrespective of circulation, it was responsible to the government and the people for demand liabilities to the amount of £35,600,000, against which it held public and private securities to over £42,000,000. These private securities vary from day to day, and RESUMPTION OF SPECIE PAYMENTS. 185 it is quite optional with the bank whether it will give new discounts or not. So that the bank has daily flowing into its coffers money in the discharge of the debts due to it. But that is not the strongest poiut of its position. While it is liable to drafts every day, at the same time it daily holds drafts upon other bauks and upon individual bankers for, on au average, an equal amount. The clearings at the clearing-house are made without the interposition of any money, but wholly by checks on the Bank of England, and these create but little demand upon the bank for money, as all banks and bankers keep their deposits with it. Thus the strength of the bank consists in having daily demands upon the public about equal to the demands upon it, in being the depository of the funds of all banks and bankers and the government, and in the checks upon it, which are canceled at the clearing-house, being perfectly acceptable means for the discharge of all taxes, expenditures by the gov- ernment, and debts due to banks, and in all great financial operations. In all respects it differs from the Treasury of the United States, and the two are not for one moment to be compared. The resumption of specie payments, so called, on the 1st of January next, is, I think, an absolute necessity to this people. The Treasury Department has been carrying on a contest with the people ever since the close of the war. During the war it cried out to the people, " Save us, or we perish." And the people of all conditions came forward with their $50 and their $100 and their $1,000 to rescue the government from destruction. But, the moment the war was over, the government virtually said to the people, to those in the Army and to those who had furnished means to carry on the war, " We are now saved, and we no longer have need for connection with you. We will go on with our independent treasury operations; 'look out for ourselves,' and you may take care of yourselves/' And this thing has been carried on ever since. In January, 1875, the so-called resumption act was passed. The news- paper press generally throughout the country, and the government, have insisted that that thing shall be tried. Now, I say, let it be tried. We will never have any peace until it is. We will never bring the Government of the United States and the Treasury Department round in accord with the people until the Treasury is broken ; and, if I had had the power, I would have compelled the Treasury to resume specie payments, not in Jauuary, 1879, but in July, 1875; and I would have given it three or four months to maiutaiu specie payments. A bill somewhat like that which has been reported from the Senate Finance Committee should be passed, which would tie the hands of the Secre- tary of the Treasury, and not allow him to contract the currency one dollar more. The people have stood enough of this thing ; now let the Treasury stand it. If the Treasury is put in that position, the contest will be a short and sharp one; and the Treasury will go down before the banks or the people. Without having any particular affection for the banks, my sympathies are with them as between them and the Treasury, because the banks are, to a certain extent, acting with the people, while the department is against them, and has always been so since the war. When the Treasury has once resumed, with, according to Mr. Sher- man, about one hundred and twenty millions of specie, which he says will belong to it, and when this specie is paid out the Secretary will find that all his calculations in reference to the strength of the Treas- ury and the relation of its resources to its liabilities will vanish, for the simple reason that when this specie goes into circulation it will be 186 RESUMPTION OF SPECIE PAYMENTS. beyond recall. This is illustrated by the condition, of things in Gre"at Britain. The estimate of the specie there is seven hundred and seven- ty-two million dollars, of which one hundred and fifteen millions is in both the departments of the Bank of England, leaving six hundred and fifty-seven millions outside of the bauk. There are, besides, in circula- tion two hundred and thirty-four million dollars of bank-notes. When the specie in the Treasury is paid out, it will travel to the extreme ends of the country, and this country being so much larger than Eng- land, it will be, just in proportion, difficult for it to come back into the Treasury ; and in a short time the Treasury will find itself high and dry. When once the Treasury has "resumed" with a circulation of legal tenders which cannot be funded, the burden of resumption which has for thirteen years been carried upon the shoulders of the people, to their ruin, will be placed where it properly belongs — upon the Treasury of the United States. In his statement before the Finance Committee of the Senate, Mr. Sherman said, in speaking of the balance of trade, "In the last three years the balance of trade in our favor is $414,034,666." And on page 11 he says: "The fact that we have paid four hundred and fourteen millions of debt in foreign countries is favorable." You see, therefore, that he assumes that we have actually canceled four hundred and fourteen millions of debt by the balance of trade. Now this statement is merely based upon a subtraction of the value of the imports from that of the exports. By doing this he finds a differ- ence of four huudred and fourteen million dollars. In this estimate, however, he has wholly disregarded the interest upon national, State, municipal, and corporate debts held abroad, which interest may be fairly assumed to be one hundred million dollars; the cost of carrying in foreign ships, which may be placed at fifty million dollars; the expend- itures of travelers and other absentees in Europe, which have been estimated at one hundred million dollars, as well as commissions paid to foreign bankers and others. This two hundred and fifty million dollars per annum is quite overlooked by the Secretary. Thus in three years we have seven hundred and fifty millions as an offset to his liquidation of $414,000,000, that is going to be so effectual in carrying him through with his plans. Now in order to show that there must be some tolerably good founda- tion for the estimate which I have given, take the exports and imports of the precious metals for the last four years. The imports have been one hundred and six millions, and the exports two hundred and seventy- one millions, showing that in spite of the exports of merchandise, we have sustained a net loss of oue hundred and sixty-five milliou dollars. Now we come to the cause of the decreased imports and of the in- creased exports. What is it 1 It is because our people have been almost entirely destroyed. Their inability to consume foreign goods accounts wholly and solely for our decreased imports, and their inability to con- sume American products explains our ability to ship them in competition with other countries. Resumption may be kept up by the same process if it be only carried far enough. In England the same thing was done. We are merely traveling over an old, beaten track. The English people went through this experience between 1816 and 1830. The government there was able to put them down at the point of the bayonet. It remains to be seen whether our people will be put down in the same way or not. In 1818 the Bank of England notes in circulation amounted to twenty-seven million pounds; the notes of pri- vate banks to twenty million pounds; the discounts of the Bank of RESUMPTION OF SPECIE PAYMENTS. 187 England to four million pounds, and the official value of the exports to forty-two million pounds. The bank began to contract its circulation and its discounts very rapidly, and by 1824 its circulation had been re- duced to twenty million pounds, and that of the private banks to thir- teen million pounds, and the discounts of the Bank of England to two million three hundred thousand pounds, while the exports had increased to forty-eight million seven hundred thousand pounds, official value; but their declared actual value had declined to thirty-seven million pounds. The English people had been ruined. They had increased the volume of their exports, but the value of them had declined. If we carry on this same system long enough, we shall be able to maintain specie payments but to the utter and complete destruction of the people, finally to be followed by decreased revenues and repudiation of our debt. Let me illustrate how this may be done by the condition of things in India. The population of British India is to-day 191,000,000, and the productions, according to Torrens '- Empire in Asia" (London, 1872, p. 407), are less than $1,500,000,000 per annum. The city of Philadelphia has a population of 800,000, and its productions for 1875 amounted to $525,000,000. That is to say, that 800,000 people in Philadelphia turned out in 1875 products of one-third the value of those of 191,000,000 in British India. But there is a magnificent balance of trade in favor of India, one that would suit our finance minister and make him crazy with delight. In India the imports of merchandise in 1876 amounted to £38,887,000, while the exports were £58,091,000. Last year it ab- sorbed $100,000,000 in silver. But the people are beggars. They are in such a wretched conditiou that, having falleu into the hands of the . money-lender, not even the clothes on a man's back are exempt from seizure; but yet the country maintains specie payments. And, gentle- men, if you will only continue the prevailing process in this country long enough, and contract the, greenback circulation, as some of the bank officers of New York have suggested, to $150,000,000, my word for it, you can maintain specie payments easily enough. But you will be apt to have a civil war. We have had a war called a civil war, which was not one, but a war between sections of the country. But the war that will be precipitated upon us by these contractionists and bankers will be a real, genuine civil war, such as they had in France in 1789, and such as has been going on there more or less ever since, resulting, however, in giving to France a government which stands nearer to its people than any other government that has ever existed on the face of the earth. There is not a government in the world that feels the people, feels their touch, and fears the people more than the French govern- ment of today ; and it has so resulted from what has been called " ninety years of agony " in France. Now we come to the question of prices. All writers who have writ- ten on prices, up to the time of my kinsman, Mr. Carey, of Philadelphia, have jumbled all prices together; indeed, they had no prices which they could use as standards on which to base an argument except those of raw materials. All such arguments lead to the confusion, anarchy, and discord which exist in political economy to-day, when we have not a single word the definition of which is universally accepted. In countries of a low degree of civilization, without diversified in- dustries, where the people are poor, as they are in India, the prices of the raw materials which they raise are low. The destiny of man is fastened to that of raw materials. Man himself is a raw material as he exists in the world to-day. If we depress raw materials man is de- pressed, and if we elevate raw materials man is elevated. In countries 188 RESUMPTION OF SPECIE PAYMENTS. of a high civilization with diversified industries, raw materials rise, and they must of necessity, because they are more readily utilized, and there man rises too, and is able to consume the raw materials. But political economists generally tell you that that would lead to ruin, that with such high prices the country and all its industries would be ruined by the prices that would be paid for labor. But we have a saving clause here. The power of man, who is born the weakest of all the animals, comes from the development of his intellect. He subdues nature to his use. He takes the raw materials, utilizes them, and makes cheap fin- ished products by the aid of the steam-engine, of the power-loom, of the spinning-jenny, and of all the appliances in the manufacture of iron. He makes rails out of steel now, while twenty years ago steel was a luxury only used in small manufactures. Three tons of coal represent the labor-power of a man for his life time. We have a mill in the city of Philadelphia which manufactures every day of ten hours 40,000 miles of cotton-yarn. Supposing it possible for such a quality of yarn to be made by hand, it would require 85,000 women working for the same number of hours. In 1870 but 137,876 men, women, and children were employed in the productive industries of that city, the value of whose products amounted to $334,852,458, and thus this one cotton-mill represents nearly two-thirds of the mere physi- cal power of those persons who produced this great volume of com- modities. Finished commodities are dearer in India today than they are in England or the United States without reference to wages. It is not nec- essary in order to get cheap things to enslave man. Now, let us trace out the movement of the precious metals, of money. Money goes from the place in which industries are not diversified to the place where they are. Strange to say, money moves from the place where it is scarce and the rate of interest is high to the place where it is plenty and the rate is low. It persistently goes away from the place where the rate of interest is 24 per cent, to that where it is 20 ; thence to where it is 12, and thence to where it is 10, and thence to where it is 6, and thence to where it is 3 or 2£ per cent. And there is the place where the precious metals persistently accumulate. Money goes away from California, Nevada, and Colorado to Missouri, and from Missouri to Chicago, from Chicago to Cincinnati, from Cincinnati to Pittsburgh, from Pittsburgh to Philadelphia, Boston, and New York ; but it does not stay there. It jumps across the ocean and goes to Liverpool, Lon- don, and Paris. Why does it do so? Because there is the place where men are able to combine among themselves and where they have greater control over the forces of nature, where they can make finished com- modities cheaper, where the industries are carried to the highest point of perfection. That brings me on to the great underlying central principle, in my opinion the greatest truth that has ever been given to man by himself, and it is this : " Man, the molecule of society, is the subject of social science. In common with all other animals he needs to eat, drink, and sleep, but his greatest need is that of association with his fellow-men." Born the most helpless of all the animals, he needs to be nurtured and clothed ; he must be taught and fed. He gets all his power by contact with his fellow-men. If he is born deaf he remains dumb; if he lives among ignoraut people he remains ignorant. From being born the most helpless of all the animals, he is able to subdue the fiercest by the de- velopment of his intellect ; and the power comes through association with his fellow-men. And just in here comes the necessity for money. RESUMPTION OF SPECIE PAYMENTS. 189 The need for money arises out of the diversity of the wants of meu, the necessity for exchanges of services and commodities, their endless com- position, decomposition, and recomposition. That may be well illus- trated by reference to a newspaper. You buy a newspaper for two cents, and in it you have two cents' worth of the services of hundreds of thou- sands of men. Now, money is the instrument by which the composition, decomposi- tion, and recomposition of these services is rendered possible. Take away money, and man loses his power to exchange his services, com- modities, and ideas with his fellow-men, and the result is that he wastes his labor-power, the most perishable of all commodities. Now, our government has beeu steadily, ever since the close of the war, ever since it had no need for men to be shot at, or for people to bring their little sums towards enabling it to carry on its finances, divorcing itself from the people. It has taken away the instrument of association ; it has destroyed the power of association, and is destroying our civiliza-' tion. It has, in a word, broken the hearts of nearly a generation of people, and, if it keeps on long enough, the government itself will be destroyed. In illustration of the fallacy of this position, I quote from Colwell's " Ways and Means of Payment," p. 1 : It is further assumed [by the writer] that writers treating of these subjects have paid ioo little attention to the fact that whatever concerns money, currency, banking, and credit must he considered as strictly subordinate to commerce, of which they are merely agents; this cannoi be overlooked in any aspect in which these topics may be considered without hazard of error. The chief inquiry is not what is the power of money, or what is the use of money, or what can be substituted for money ? The inquiry which we prosecute to ascertain the nature and doctrine of money, is what is commerce, and what is the nature of the agency of money in its affairs ? Money, with all its substitutes, is only one of many agents of trade, and, like many others, it is a pure matter of discretion aud convenience how far it may be employed. Ever since the close of the war our government has been legislating on the mere instrument, and has beeu disregarding the country, the misery and happiness of the people, aud the result is, we have a grow- ing amount of bankruptcy, misery, and immorality, and a decreasing love and respect for the government. Now, as to the material losses entailed by this policy upon the people of the country within the last five years: The population of the country to day is forty -eight millions. Assuming the population two or three years ago to have been forty-five millions, I estimate the losses of the country at fifteen million dollars a day ; that is, 33£ cents per capita per day of the population. That this estimate is not excessive I believe, from the fact that in my own city of Philadelphia, with a population of 800,000 (a very small proportion of whom are producers), our iudustries amount to more than $000 per capita of the whole population per annum; that is, $2 a day. In this estimate I do not merely take the industries as they existed at the commence- ment of the year lt>73 as a basis to make a charge against the authori- ties, but I take into consideration the immense latent power in this coun- try at this time undeveloped; the great enterprise of our people, the anxiety of most of them to be at work and doing something (an anxiety surpassing that of any other people on the face of the earth) ; our great coal fields, the unlimited capacity we have for utilizing this coal by manufactures — steam-engines and machinery; and considering that three tons of coal represent the labor-power of a man's life, I think that this estimate of $15,000,000 per day, or $4,500,000,000 a year, or $22,500,000,000 for the last five years, is decidedly within limits. That may be taken as a measure, not solely of wealth which has not been ac- cumulated, but a measure of the misery and deprivations of our people 190 RESUMPTION OF SPECIE PAYMENTS. pat into the form of money of account, bat impossible to be estimated in their moral and mental aspects. The intellect of man is wholly inca- pable of grasping this tremendous problem. Only divine wisdom knows what our people have suffered, and are now suffering, in mind and mor- als from this great wrong. The Chairman. What, in your opinion, will be the effect of unlocking the specie of the country and putting it into circulation ? Mr. Baird. A good part of it will be scattered over the country. If there is no revival of business, if the policy of contraction goes on, and if we go on steadily grinding down our people to see how near we can get them to the condition of those of Ireland and India, or of those who recently revolted in Turkey, most of this money will remain in the coun- try ; and it will circulate to some trifling extent throughout the country. But if it is connected with any sort of revival — if the people are allowed any let-up — then the money will rapidly go into circulation in the coun- try, and will go out of the country. The mere payment of interest on our foreign debt, the expenses of absentees and of the carrying-trade, make us a largely debtor country. If you continue to allow the Secre- tary of the Treasury to have his way, he will be able to get all the gold in the country into the Treasury, and probably after a while to import a little if the people will stand it long enough ; but that policy will destroy the people. As the paralysis of the business of the country has caused the money of the country to collect in the great centres, so its revival will scatter that monoy. Only continued paralysis will enable New York and the United States Treasury to retain this money in their control. The Chairman. You mean by contracting the circulation ? Mr. Baird. Yes ; let the Secretary take the advice of some of those bankers who were here the other day. The Chairman. Suppose that the circulation remains as it is now. Mr. Baird. If it remains as it now is, and if the people are satisfied that there is going to be no contraction, there will be a revival of busi- ness, and the result will be that gold will go into circulation ; and going into the circulation through the country is, for the time being, so far as the Treasury is concerned, almost as disastrous as if it went out of the country, because it cannot be regained, as you will see by the figures of the Bank of England and of the circulation of the national banks. The Chairman. Suppose that the Secretary of the Treasury collects the revenue in specie ; will not that keep gold in the Treasury to some extent? Mr. Baird. But he has to pay it out again for interest. The Chairman. If there be a revival in business, there may be an in- crease of importations. Mr. Baird. Yes. The Chairman. And that will require specie to be paid into the Treasury 1 Mr. Baird. jSTo ; because the revenues can be paid in greenbacks. But it is indifferent whether the revenues be paid in greenbacks or in gold. A large amount of gold will get into circulation. Then these imports will call for the export of gold, unless we are to have a revival of the sale of bonds abroad. Mr. Ewing. After the 1st of January, 1879, the Secretary may receive greenbacks in payment of duties? Mr. Baird. Yes. The circulation of the national-bank notes on the 15th of March last was $300,503,000, and yet the whole of such bank- notes in the possession of the national banks was only $16,228,000. The RESUMPTION 0F SPECIE PAYMENTS. 191 rest of tbe amount was out among the people. And so, when the Sec- retary of the Treasury opens his doors, gold will get into circulation without regard to tbe question whether die people prefer gold or green- backs. They will take them indifferently. In this connection I would like to point out the necessity under which we stand — the peculiarity of our position as regards this matter of money, when compared with compact European countries like England and France. Our population is scattered so widely that we are unable to use bank checks to any large extent. When a farmer is paid money and is given a check for the amount, he goes to the bank and draws the amount and takes it home with him, five, ten, or twenty miles out of the town. It is inconvenient for rural populations to use checks in their daily operations. In England, on the contrary, the system of checks is carried to such an extent that tbe great mass of large operations are carried on by means of them. There were in the city ot Loudon in January, 1875, thirteen joint-stock banks with a capital and reserve of twelve and a half million pounds sterliug. Almost all of them had their capital invested in public securities and in real estate. They had cash funds to the amount of eleven or twelve million pouuds, and their lo.insand deposits each were to theamountof one hundred million pounds. This was simply because the great mass of their operations are by means of checks. The power of association in England is thus centralized. They have not given the people enough of money. Nine-tenths of the people of England are slaves to-day ; about one per cent, of the popu- lation govern the country. Tbe main reason for this is because the people have not a sufficient volume of money to enable men to associate freely among themselves. The consequence is that when a farm laborer, a miner, an iron-worker, a weaver, and a cotton-spinner want to exchange services among themselves that would enable all five of them to live in comfort and ease and without any friction, they find it impossible to do so without the interference of a lord — a cotton lord, a mining lord, an iron lord, a money lord. This lord stands in between them, and takes the lion's share aud deals out to them 10 or 11 or 12 or 15 shillings a week on which they have to starve and bring up their families. The consequence is that, with the great increase of power which has grown up in England within thela-st 100 years, the cotton-spindles alone doing the work of 108,000,000 of women, the misery and degradation of the people and the wealth of the few grow in equal proportion. It is because the people have no power of direct association among them- selves. The same process is being carried on here. Tou are taking away the money from the people, and the power of association declines at the ex- tremities of the country, while the money finds its way into New York, Philadelphia, and Boston. The property of the people in Ohio, Michi- gan, Iudiana, Iowa, aud the other agricultural States is being sold out by tbe sheriffs, and the people made to pay 15, 20, and 25 per cent, interest, while the money is concentrating itself in the large cities. The control over this government is being more and more centralized in New York City. Tbe government is hardly able to breathe without permission of the moneyed men of New York. We are building up a geueral system of centralization in this country just as they have in England. It is not so in Prance. That people has been growing in strength, freedom, and power ever since 1789. Prance has a popula- tion of thirty-six millions, and in July, 1873, according to the best estimates, there were in circulation in France twelve hundred million li)2 RESUMPTION OF SPECIE PAYMENTS dollars of gold aud silver. She bas imported siuce tbeu five hundred million dollars of gold and silver, which makes the specie circulation sev- enteen hundred millions of dollars, and has besides live hundred million dollars of notes of the Bank of France, or twenty-two hundred millions of dollars in all, for a population of thirty-six millions concentrated on a small amount of territory. We have a population of forty-eight millions, scattered over a territory of over three millions of square miles, with a greater necessity for car- rying on our business with money than Prance, and have but about $650,000,000. We grow in weakness, misery, and degradation. Our government disregards us more and more every day, while the French government regards its people more and more every day. The deter- mination to have freedom, and real freedom, in that country is increasing, while it is declining in this country. When the French government, at the close of the war, wanted a loan and applied to the French people for it, the peopleoffered it in one day eight thousand millions of dollars. When our Secretary of the Treasury wants to borrow money he applies to the people almost in vain, aud he has to go to New York for it. Steadily for years the public securities in France have been more and more scattered in the hands of the people, until at present the national debt of France is held by four millions of persons, and the land is divided among five million five hundred thousand proprietors, of whom five million are peasants. In this country public securities and other property become hourly more concentrated — the rich thus becoming richer and the poor poorer ; until such a condition of things is coining to pass that a leading New York paper says of our agriculture: "There seems to be but one remedy. It is a change of ownership of the soil, and a class of laud- owners on one hand, and tenant-farmers on the other, something similar to whaWias long existed in the older countries of Europe." I said in the course of my main testimony that the payment of the war fine by France was made in accordance with the manner in which the finances of that government had been conducted for years. I did uot enlarge on that idea. The first payment was made in specie and bullion, shipped direct by the French government to the German government, and amounted to one hundred millions of dollars, That was found to be a very expensive operation, and it was immediately abandoned. The result was that the French government came into the market to buy every class of bills of exchange. It carried on a general system of fiuaiicial operations, just as banks and bankers do. It bought bills on London, Brussels, Munich, and Amsterdam, &c. It had an agent in London who converted all exchange in London into exchange on Berlin aud Hamburg, and the result was that the French finance minister at one time had the Bank of Hamburg so completely in his control that he could have broken it at any moment, it being unable to respond to his bills on demand. The whole of the balance of the thousand millions of dollars (eleven hundred millions with interest, &c.) was paid through the intervention of bills of exchange, and with the loss of but $140,000,000 in specie and bullion. Mr. Hardenbergh. If we resume specie payment on the 1st of Janu- ary, 1879, and if there should be a subsequent failure, would not that failure carry down every national bank in the country within twenty days? Mr. Baied. No; not any more than the failure of the Treasury in December, 1861, carried down the banks or the business men of the country. Mr. Hardenbergh. It carried the banks down pretty well. RESUMPTION OF SPECIE PAYMENTS. 193 Mr. Baird. I beg your pardon, not at all. Both banks and people began to grow and flourish from that hour, or at least from the passage of the legal-tender act, about sixty days after. Mr. Hardenbergh. Can specie payment ever be resumed with an irredeemable paper circulation of three hundred and forty-seven million dollars? Mr. Baird. Yes; with what you call an irredeemable circulation of six hundred million dollars. Mr. Hardenbergh. In what way 1 Mr. Baird. I cannot too much impress on this committee the fact that resumption and prosperity are not to be brought about by destroy- ing the people. The circulation of the Bank of France ran up to six hundred and fourteen million dollars, and when at that amount, the premium on gold had wholly disappeared. It is a very remarkable fact, that as the circulation of the Bank of France increased, the premium on gold (which was never more than 2J per cent.) decreased. Mr. Hardenbergh. What would you advise Congress to do now? Mr. Baird. To subordinate the instrument of commerce to commerce itself; to get rid of the theories about the instrument, and to concen- trate its mind upon the people — to disregard everything else — enable the people to go to work. Mr. Hardenbergh. Will you not state in a few words the practical remedy ? Mr. Baird. The practical remedy would be an increase of circulation. The circulation of the country is to-day six hundred and fifty millions ; but it should, in my opinion, be no less than two thousand millions, and even then would be below France, a country which is intersected with roads from one end to another, while we are scattered over a territory of three million square miles with hardly a good road in it. Mr. Hardenbergh. Then you would forever abolish specie payment I Mr. Baird. Certainly. It is but a relic of barbarism, which has long outlived its day and its usefulness. Mr. Hardenbergh. How is the government to get gold for its exchanges f Mr. Baird. Let the government look out for itself. The government says, through its finance minister, " Let the banks and people look out for themselves." The government has no concern for the people. It has alienated itself from the people, and let it get out of the scrape which its finance ministers have created as best it can. Mr. Hardenbergh. Would not $2,000,000,000 of currency issued by the government be $2,000,000,000 of debt 1 Mr. Baird. No ; it would not be. Mr. Hardenbergh. It would have to be paid at some time. Mr. Baird. No, never. Mr. Hardenbergh. Tou cannot make the people believe that there is something in nothing. What influence on prices would your $2,000,000,000 of currency have ? Mr. BairD; We have nothing whatever to do with prices. Tou have first to show that the present prices are the right ones. They are fixed by enslaving the people. The people of the world have been enslaved for thousands of years by the metallic system. Mr. Hardenbergh. Under your system it took a bushel of French assignats in revolutionary days to buy a loaf of bread. Mr. Baird. For the simple reason that the English Government and the emigres together were engaged in counterfeiting the assignats, and the counterfeits were so good that they could not be told from the gen- . h. Mis. 62 13 194 RESUMPTION OP SPECIE PAYMENTS. uine ones; but the finances of France were ruined before the revolution, and the assignats saved the revolution, one of the grandest events in history, when it was attacked by the tyrants of Europe. Mr. Haedenbeegh. Can you maintain the income of labor by paying laborers in paper that is not based on redemption 1 Mr. Baied. Production and the power of consumption will do that. What you have got to do with labor is to enable it to get work — to pro- duce and consume. As well might we discuss the material of which plows are made as that of which money is made. We need money which will do its work, and plows too. Of what either is made is not material, if it will do its work. Mr. Haetzell. Labor was pretty well paid during the war. Mr. Baied. Labor was never so well paid and there was never such development in any country before as here during that time. Mr. Haedenbeegh. But the reaction is on us now, and that is the trouble. Mr. Baied. No, not a reaction ; it is destruction of the structure by the American Government. Action and reaction are parts of each other. But there is no reaction here. This is destruction pure and simple. This is the going back of the government to its old selfish practices. McCulloch is the author of all this trouble. Mr. Haedenbeegh. I think that Mr. Boutwell had something to do with it, in paying out 15 per cent, premium for bonds. Mr. Baied. McCulloch's Fort Wayne speech was made in 1865, long before that. McCulloch, Boutwell, Bristow, and Sherman are not only answerable for our present miseries, but they are answerable for our foreign debt. If they had let the currency alone, instead of " bearing" gold all the time, the high price of gold would have enabled us to export immense quantities of produce which we were unable to without it. Mr. Haedenbeegh. They never should have let a bond go out of the country. Mr. Baied. Bonds would not have gone out of the country, because Europe would have taken so much of our produce that it would not have been able to take bonds. The crisis of 1866, in England, was brought on by the purchase of our bonds and large quantities of cotton. If the price of gold had remained high, it would have acted as a pro- tective tariff against the importation of foreign goods, and as a bounty in favor of the exportation of American goods. The London Economist pointed out the fact that the depreciation of silver would result in in- creased exports in India and in decreased imports, and that the so-called depreciation of the currency in Bussia by reason of the war would do the same for Bussia, and the facts in both cases have justified the theory. Mr. Ewing. Please explain how the price of gold, as compared with our currency, operated as a protective tariff. Mr. Baied. By increasing the prices, to American consumers, of all foreign commodities to the extent of the premium on gold. Mr. Ewing. That assumes that the prices of American material and labor, and consequently of American products, are not increased in pro- portion. Mr. Baied. Tes, certainly. Mr. Ewing. Now I concede that it will operate as a protective tariff, provided that all commodities, including labor, do not rise in the same proportion. But if gold be worth 100 per cent, premium, and if all com- modities, including labor, are doubled in price, in consequence of that, in the home currency, then I do not see that the difference between paper and gold operates to affect the tariff at all. RESUMPTION OF SPECIE PAYMENTS. 195 Mr. Baird. But prices are not tied to gold and silver when an incon- vertible currency is in use. Mr. Ewing. How does the action of our government in " bearing " the price of gold operate on the industries of the country 1 — " * Mr. Baird. It exposed them more and more to foreign competition, and increased the facility of importing foreign goods. Every bond that we sent out of this country from the close of the war up to the crisis of 1873 was paid for in foreign merchandise. The indemnity received from Great Britain under the Geneva award was actually paid in mer- chandise, and the evidence of that is to be found in the fact that while we exported the bonds there was no diminution, but an increase, in the export of the precious metals. They followed the bonds. The govern- ment " beared " the gold market and exposed us to foreign competition, prevented us from entering into many foreign markets, as we would have been able to do if gold had been let alone, for prices did not fall with gold, or even with contraction of the currency, while the credit system was being inflated in substitution for money which was retired. Now, I fully believe that, instead of being indebted to the amount of two thousand millions of unrepudiated foreign debt without contraction and with expansion, we should to-day be entirely out of debt. We should be in the position in which France is, in having specie payments without any action of the government whatever, simply because it was a matter of indifference to the people and the government whether they had specie payments or not, because the specie would have been here. If at the close of the war, so far from contracting the currency the gov- ernment had substituted greenbacks for the five-per-cent. and compound- interest notes and seven-thirties, the South would within five years have entirely recovered from the ruin inflicted upon it by the war, and there would to day have been no antagonism between the North and the South. The people of the South would have said to the government and to the people of the North, "We are obliged to you for having whipped us ; we never knew what civilization, happiness, and comfort were before." The whole southern country would have bloomed and blossomed like a rose, and we would have had there a contented, happy people instead of a people that has been utterly cleaned out and whose disloyalty has increased. The people of the North are now being ruined just as those of the South were, for, in my opinion, the whole trouble in the Southern States since the war has come from vicious monetary legislation and more vicious monetary administration. Here was a people, after a herculean struggle, left without any money except a few greenbacks that had percolated through there. Their currency was annihilated, and, in- stead of our finance minister seeing that there was the grandest chance, not only to make a great name for himself, but to impart the greatest blessings ever given by man to man, in enabling this people to get upon their feet, he went to work and contracted the currency, when the real want at the time was an increase of currency. If he had never paid any attention to the premium on gold, the thing would have settled itself, would have come down by force of the import and production of the precious metals. Currency never was depreciated, but gold was simply in demand for duties on imports and interest on the public debt, and scarce. At the close of the war, as Stephen Colwell showed, you could buy more real estate in the United States for an equal amount of money in greenbacks than in gold in 1856. Had the war lasted ten years longer, and the debt been $6,000,000,000 instead of less than $3,000,000,000, we never should have heard of the beauty of the theories through theprac- 196 RESUMPTION OP SPECIE PAYMENTS. tice of which we have been ruined by McCulloch, Boutwell, Eichardson, Bristow, and Sherman. Mr. Ewing. To what extent do you attribute the business disasters of the country since January 1, 1875, to the operation of the resump- tion law ? Mr. Baied. Almo ?t entirely. I thiuk that if it had not been for that law the people would probably have recovered by degrees from the effects of the previous contraction of the currency. Toe people were very much weakened by the 1st of January, 1875, and it was an easy thing to break them down while in that position. In January, 1874, there was a little apparent improvement, and the enterprise of our peo- ple was encouraged ; but since January, 1875, prices have fallen steadily as a necessary result of further contraction, and as men buy on a falling market nothing which they can do without, paralysis and bankruptcy have become the rule, and all confidence in the future is destroyed. I consider that we were in a very unhealthy position in 1874; and we should have had another crisis if we had recovered at that time, and for the very reason that we had not the instrument to do the work with. In England there is a crisis every ten years or less. The one of 1866 did not disappear until we got our inflated credit system in operation and got to building railroads. The whole bankrupt railroad system of the country to-day is the work of Hugh McCulloch and his successors, in taking away our currency, destroying confidence, and thus prevent- ing the people from building cotton and woolen mills and iron works, and other industrial establishments. The enterprising men of the coun- try, seeing that there was but one outlet for their energy, the building of railroads, which could be done by the sale of bonds abroad, went to work, started the roads, and sold the bonds. Foreign merchandise came in, to the detriment of our people, and we contracted a debt abroad, a great part of which will never be paid. The thing went on till the time came that the credits became too large for the volume of money which aided in working them, when an explosion of necessity took place. At the close of the war, when we had a large volume of money, there was a fall in prices generally of 25 per cent, within 60 days, but the country got over it without any crisis. It created hardly a ripple. The reason was that we had not been driveu into the use of the credit ■ system, but were never before so much out of debt, with so large a volume of business. In his report of December, 1865, Hugh McCulloch called attention to the fact that the people of the country were to an extraordinary degree free from debt. Mr. Ewing. Give us your views as to the length of time the Secretary can maintain specie payments, assuming that he gets the one hundred and thirty millions of gold by the 1st of January, 1879. Mr. Baird. And with the power to contract the currency to three hundred million dollars ? Mr. EwiNG. Tes. Mr. Baied. I think that if he contracts the currency to three hun- dred million dollars by the 1st of January he will be able to maintain specie payments for some time — I would not like to fix any definite time, but for months, perhaps a year or more, on account of the utter exhaus- tion of the people. Imports will fall off very largely ; the prices of domestic commodities will fall and will be largely exported, and the probability is that we shall be able to maintain at home at least half of the precious metals that we produce. In that way he will maintain specie payments; but the maintenance of resumption is dependent on EESUMPTION OF SPECIE PAYMENTS. 19T the power that the Secretary of the Treasury has to destroy the people of the country, or their power to consume produce, foreign and domes- tic. If there be any revival, if the hands of the Secretary of the Treas- ury should be tied, then there would be a tendency to increase imports. But the only way in which specie payments can be maintained in this country is by actually bringing our people down to a condition approach- ing that of the people of India or Ireland. This will, however, finally end in repudiation of the national debt or a civil war, or both, followed with a style of government like that of Mexico or those of South America. Mr. Ewing. And your idea is that, as soon as there is any revival of business at all, our importations will increase, and the drain of gold from us be increased, and resumption fail 1 Mr. Baird. Tes ; and not only that, but the domestic circulation of the gold and silver money will increase. In England and Scotland, especially in Scotland, at certain seasons of the year there is an increased demand for money. By their stupid laws — Peel's bank act of 1844 as applying to England, and that of 1845 as applying to Scotland — the Scottish banks are arbitrarily lim- ited to a circulation, unrepresented by specie, which they had at a cer- tain date prior to the act of 1845. When these payments are to be made the banks of Scotland draw on London for specie. That specie comes to Scotlaud, and is held just long enough to enable the banks temporarily to increase their circulation, and then they ship it back to London. They simply get the gold as a foundation for their circulating medium. Now, in our case, our specie will be taken away from the Atlantic seaboard and into circulation in the Western States ; and it will take a long time for us to get that specie back again. Some of it will not find its way back for years, some never. By his present pro- cess of accumulating gold, the Secretary is robbing California, Oregon, Nevada, and Colorado of their circulating medium. He has not merely the exports but this domestic circulation to contend with ; but, if he can destroy our trade and industry on the Pacific as well as on the Atlantic, he will be able to maintain specie payments until he breaks down the government itself. Mr. Hartzell. In the effort of the Secretary of the Treasury to maintain specie resumption, success will depend, very largely, will it not, on the co-operation of the national banks °l Mr. Baird. Most assuredly. The national banks will be stronger than he, because they are a part of the necessary business machinery of the country and work in harmony with the people. They are not isolated like the Treasury. Mr. Hartzell. If the resumption of specie payment, after the 1st of January next, should prove disastrous to the national banks, have they not got it in their power, by combination, to draw from the Federal Treasury all the specie that it has, and to compel a suspension on the part of the government ? Mr. Baird. Most assuredly ; and, what is more, they will be justified in so doing, and will deserve the thanks of the people for it. We never got the greenback until the Treasury of the United States was driven into a corner, and when the condition of the Treasury was such that Mr. Chase was not able to wait a single day. While the Senate was debating on the bill, after it had gone through the House, he wrote to Mr. Pessenden, chairman of the Committee on Finance, saying, " Give me ten millions of demand-notes. I must have them at once." It was so difficult to come to an appreciation of the magnitude of the contest that we had before us, and of the total insufficiency of the old and obso- 198 RESUMPTION OF SPECIE PAYMENTS. lete monetary machinery to carry on the war to enable the people to associate with sufficient force and rapidity to be able to carry the gov- ernment, that he allowed things to drift on until the Treasury was utterly bankrupt. So, now, the Treasury has to be brought to an appreciation of the fact that it and the people are one, and are finally irrevocably joined together " for better or for worse." Whenever we reach that point, the banks will appreciate it and will use their efforts to clean out the Treasury, because nothing else will bring it to a realizing sense of its own inherent weakness, its dependence upon the people, and the enormity of the crimes which it has committed against the latter since the close of the war. If slavery was" the sum of all villainies," the conduct of the Treasury Department from 1865 to the present hour is the sum of all crimes, because it has resulted in the commission of every crime known to the law, and broken the hearts of millions of people besides. The riots of July, 1877, were the pardonable result of this policy, and, as well as the ruin of the South should be laid at the doors of their true authors. Mr. Haetzell. Would not a combination on the part of the banks to draw from the Federal Treasury all its coin and to force a suspen- sion result beneficially to the national banks ? It would, of course, create a premium on gold, and the banks having all the gold, would they not be the gainers f Mr. Baied. Yes ; one of our banks in Philadelphia was in this way enabled to declare one dividend of 100 per cent, during the war. When, too, the Treasury suspends again, it leaves behind forever the policy of 1865-1878, and will not soon again resume. Mr. EwiNG. You stated that you thought the people needed a larger volume of currency. Please state how much larger the people need now, and what the probable early future need will be. Mr. Baird. I think the currency should immediately be brought up to $1,000,000,000, and that there should be means whereby that circula- tion should be steadily increased from month to month. The people of France have a circulating medium to-day of not less than $2,200,000,000, and we, having one-third more population than France, have need, in order to be put in the same position, of $2,900,000,000, and I believe in the necessity for such an amount in the near future, and that it would develop such a power of association among the people as would double our production and consumption within two years; and as that cur- rency increased, and as people were enabled to sell for cash, they would cease to sell on credit. The fact is that this country has never been worked up to one-fifth of its capacity, and if we were not so intent on keeping the mass of the people down, so that we could have cheap service of one kind and another, and if we were just once to conclude to let the people get all the power, and all the development, and all the civilization, and all the comfort and happiness that they could get, "do justice though the heavens fall," we would in five years present to the world s ich a picture as would make this nation at once the wonder and the envy of mankind. All that we need is to place it in the power of our people, with there in- dustry and* intelligence, to go to work in such a manner that there would be a just distribution of the product. If we have to pay more wages, we can take comfort to ourselves in feeling that that is the road to civ- ilization. But we will get cheap, finished commodities by the invention of machinery, man's capacity in that direction being unlimited. Seal cheapness does not come of cheap men, but of intelligent ones. RESUMPTION OF SPECIE PAYMENTS. 199 Mr. Hardenbergh. You say that this country wants to-day $2,900,.- 000,000 of currency. How would you get it into circulation 1 Mr. Baird. That would be the easiest thing in the world. I would release the people from taxation, destroy the entire internal-revenue system at one blow. It should have been done years ago. Improve the navigation of the Mississippi, and give the couutry a navy which, would at least place us on a level with Spain or Turkey as a naval power. Mr. Hardenbergh. And the debts thus contracted you would not provide means for paying? Mr. Baird. Certainly, I would pay them by increasing the legal- tender paper money by the sovereign power of the United States. The losses to the country, by the paralysis of business which we have had here since the crisis of i873, aggregate $22,500,000,000. If we had a circu- lating medium of $2,900,000,000, it would within the next four or five years result in the increase of our productive industries to the amount of $4,500,000,000 per annum, and beggary would disappear entirely from this country, where it would now have no foothold but for empirical monetary laws. Surely if it should do these things it would prove its own justification, and the country need not trouble itself about $2,900,000,000 due to itself alone. That it would do far more than this I have not a doubt, and the financial triumphs and the developed indus- tries of the war and the more recent experiences of France prove that it would beyond a perad venture. Washington, D. C, April 25, 1878. B. B. Pullan recalled : Mr. EwiNG. You expressed the opinion, in your examination on Sat- urday, that the execution of the resumption law would result in further disaster and was in fact impracticable. Have you any suggestion to make as to any modification of the method of resumption that would make the same practicable ? Mr. Pitllan. Upon the definition of resumption made to your com- mittee by the Secretary — which I think is the correct one — that resump- tion is nothing but equivalency between coin and paper, I think that some modification of the resumption law may be had which may be practicable and which will result in a nominal resumption on the 1st of January; I say "nominal," but I might say a "practical" resump- tion. I believe that the only true interpretation of the law as it stands is redemption. I do not believe that an iron resumption on the 1st of January, such as the resumption law contemplates, involves the reissue, though that interpretation is now given to it. In speaking of the resumption law as entirely impracticable, I had reference particularly to the feature of absolute power of convertibility of the whole circula- tion of greenbacks and of all the paper circulation, bank-notes and all j because if one is convertible, all of them are made convertible. I say I regard that as impracticable and as ending in disaster. There would necessarily be a suspension ; it would have to come. And a suspension such as that would be a suspension by the banks and by the govern ment; would be one, the proportions of which we could have no ade- quate conception of in advance from anything that has occurred in the past. 200 RESUMPTION OF SPECIE PAYMENTS. Mr. Hardenbergh. Of what time in the future are you now speak- ing? Mr. Pullan. I speak of a suspension after resumption ; I do not undertake to say when. I was saying that a suspension by the banks was only one that operated upon the individual credit of the country, but that a suspension at the time to which I have alluded would involve the national credit, because the national credit is interwoven with our whole circulation. I think that the real danger would lie in this, that it would be an acknowledgment to the world that the government had failed to accomplish what it had undertaken to accomplish ; in other words, that the government was " broke." Now I would think that a modification such as would provide, as it were, for a legalized suspension under certain circumstances which might arise would not be attended with that disaster. And such a modification might be accompanied with legislative provisions that would secure an equivalency being retained, and tbat would really bring about a practical resumption, and at the same time permit very nearly the present volume of currency to remain. I do not believe that we can ever have a proper currency in this country, that is, a currency equal to coin, until the government has the absolute control over both of the currencies, paper and coin, and issues both under such circumstances and conditions as will make the one equivalent to the other and will preserve that equivalency be- yond all contingencies. Among other practical suggestions that have occurred to me on this subject, I would mention this one, that provision could be made to require the Secretary to accumulate, by the first of January, a certain amount of coin in the Treasury, declaring that on the 1st of January the notes shall be redeemed; and further providing that redemption shall continue just so long as coin shall remain above another fixed point lower down, and that, when that occurs, redemption shall cease until this space is occupied again by coin, or until coin comes up to the point of redemption again. Mr. Hardenbergh. There is such a bill now pending. Mr. Ewing. The bill of Mr. Matthews. Mr. Ptjllan. In that case it would be legalized suspension. It would not operate as a suspension, because it would be a suspension according to law. Mr. Ewing. I understand you to say that it would not be such a sus- pension as would be any injury to the national credit. Mr. Ptjllan. It would not be any injury to the national credit, and it would be operating according to law and by a certain fixed order which would be known to all men. With that, provision should also be made to bring the greenbacks up to an equivalency with coin by having them taken for customs, taken and used by the government for all pur- poses as money, declared to be money. Provision should also be made for providing for the money for the interest on the public debt by pur- chase, in open market, by commissioners appointed for that purpose by the President, practical men, whose purchases should be made at inter- vals (so as to secure at all times a sufficient amount of money for the next installment of interest), and the coupons, with accrued interest off, should be taken the same as coin. Now, the object of that would be to find, in the gold-maturing liabilities of the government, the coin which the government requires for meeting those liabilities; because if that provision is made to take coupons maturing within a year, say, it will go on from installment to installment, and the amount of gold actually to be bought will be reduced just to the extent to which the coupons are anticipated. The advantage and the object in it is to relieve the gold RESUMPTION OF SPECIE PAYMENTS. 201 market from the monopoly of the bullion dealers ; in other words, to increase the quantity of gold. I think that some provision of law such as that would admit of what you might call a practical resumption. It would not be a resumption under the resumption law as fairly inter- preted, but it would give us an equivalency, and would save us from dis- aster. Mr. Hardenbergh. What would save us from disaster ? Mr. Pullan. I say that a modification such as that would not be resumption such. as I have always thought was contemplated by the resumption act ; that is to say, that the unlimited power over the public Treasury, granted to the holders of greenbacks and the holders of bank- notes (which is all the same), would be limited. Then, in addition to that, there should be a provision by which, when the legalized suspen- sion took place, the notes would go down very little, if anything, below par. It would, perhaps, be like it was in France, where, although the actual condition was not resumption, the notes were so little below par that they circulated on a par in the hands of the people and in all com- mercial transactions. This provision would be that during that time the notes should be convertible into a security whose value would be on a level with coin. If the notes, during this period of suspension, are converted into a security that is on a level with coin, they will be just as good as they would be in being converted into coin itself. Mr. Hardenbergh. What would be the effect of resumption by the government and not by the banks, supposing the government were to resume and the law should not require the national banks to resume ? Mr. Pullan. That seems to me to be an impossibility. Mr. Hardenbergh. Why so f Suppose a case such as this : I am the cashier of a national bank, and, for instance, have not accumulated any coin in my bank. If Congress adjourns, leaving things just as they are, then I must go to work and accumulate coin, even though I have to buy it at a half per cent., or whatever the market price may be. Now, here are two thousand millions of deposits on hand. My idea is that the curiosity for gold on the part of people who have never had it nor known what it was will cause a large amount of it to be hoarded, and that such an amount will be hoarded that resumption will not be practicable. Now, I ask what would be the effect of a law requiring the United States to redeem its currency and yet not requiring the national banks to redeem their deposits in gold? Mr. Pullan. I cannot conceive how it is possible for any legislation to relieve the banks from the obligation of paying their depositors in the current funds, that is, in their own notes, or in gold, or in legal- tenders. Mr. Hardenbergh. Or national bank notes ? Mr. Pullan. Or national-bank notes, of course. If they pay them in those notes, the government, by the law now — and I think I am cor- rect in that, you will correct me if I am not — the government, by the terms of the resumption law, is obliged to redeem all the greenbacks. Mr. Hardenbergh. They have the bonds with which to do it. Mr. Pullan. They have the bonds with which to do it. I see the point which you would make, but I cannot see that it is a practicable one, because the deposits are to be paid by these notes, and these notes are to be paid by the greenbacks. They are built on the greenbacks, and the greenbacks are subject to redemption ; so we have to go back to the basis. Now, in the old times, the State banks, as I understand it, were built directly upon the metallic basis ; the credit of the currency was founded upon a metallic base. Their issues now are not upon a 202 RESUMPTION OF SPECIE PAYMENTS. metallic base, but upon the legal tender, which is a credit base ; and as long as that credit base exists and is the only foundation, the national banks cannot be disturbed, because the base cannot be disturbed. The national bank can do a healthy business, can control its own business as long as its base is not disturbed ; but if its base is disturbed, no matter how carefully its individual business may be conducted — if its base is knocked from under it, then it suffers. Mr. Haedenbeegh. What is your idea of the practicability of re- sumption now, in the present disordered financial state of the country ? Mr. Ptjllan. I think it extremely perilous, and that sooner or later it will culminate, as it did in Great Britain, in a disastrous crash, and it will carry down the banks as well as the people. Mr. Haedenbeegh. Where do you draw the line with safety between communism, that is, evil excesses arising from unemployed labor, on the one hand, and national inflation on the other? That is the issue before the nation to-day. The industries are languishing for the want of a proper standard ; men have no work but must have work. How are you to provide a mean between the disorderly element of society that has no work, and, on the other hand, that inflation which frightens capital? Mr. Ptjllan. I would have such legislation as would most effectually inspire the most unbounded confidence. If you inspire that confidence you have the money. Without confidence, you may put out notes but will not have the money needed. Mr. Haedenbeegh. Will you not dissipate that confidence by re- pealing the resumption act ? Mr. Ptjllan. You will increase confidence by repealing it ; that is, by repealing it in a proper and wise manner. Mr. Haedenbeegh. Do you not admit that the currency in the country to-day is sufficient for its wants in prosperous circumstances? Mr. Ptjllan. Entirely so, at present. Mr. Haedenbeegh. Then you would not inflate it 1 Mr. Ptjllan. I would not inflate it. It is for that reason that I want the whole resumption act repealed. It is not the repeal of the time clause only, but the whole, because of the provision of it permitting the whole national debt to be converted into bank-notes by, I will not say irresponsible men — they are responsible in one sense, in a money sense, but not in another sense — by adventurers who, utterly regardless of consequences, when the time comes will convert their 4 per cent, bonds into something that will pay them 8 per cent., and will flood the circu- lation. They will foster enterprises for their own individual gain, and when it suits them they will get out from under and the wreck will come. That is one of the worst features of the resumption law. It is a feature that was put there to satisfy an element that wanted more national-bank notes. Now, what I hold as to that is this, that you do not get more money by making more notes. Whether you make bank or government notes, the business of the country will be done and is done by institutions of established credit. It is done by checks and bills of exchange, and by the credit of man with man. Mr. Haedenbeegh. Do you regard the public sentiment of the country as opposed to the national banks f Mr. Pullan. Yes, sir; I do, decidedly. Mr. Haedenbeegh. On what ground 1 Mr. Ptjllan. The public sentiment of the country — and it is a senti- ment that is growing very rapidly — is disposed to arraign the national banks as the cause of the disasters and trouble that have come upon RESUMPTION OF SPECIE PAYMENTS. 203 the country. In saying that, I do not mean to reflect at all upon the persons who are in the business of the national banks, but I speak of the system. The fact is, and it is a matter of record, that the Secretary of the Treasury was compelled by the influence of those who were directly concerned in the issue of bank-notes to make some provision by which their privileges would be preserved to them. He said so in his reports and statements, and I knew the fact from him personally. Mr. Hardenbergh. Of what Secretary of the Treasury do you speak ? Mr. Pullan. Of Mr. Chase. It was the subject of conversation be- tween us on the last occasion I saw him, which was some two years before his death. In reply to some rallying remarks about the institu- tions being a success, 1 said, "Mr. Chase, the system is no more of a success than was the old State banking system. They will not even be able to pay their deposits in greenbacks whenever a panic or crash strikes them." He said it was impossible that such a thing should happen. I differed with him, when, in speaking of the national banks, he made this remark, " If it does come, the people will give me credit for one thing, anyhow, in having gathered them all into one neck and they will have but one neck to cut." That was a favorite expression of his. It was the same with Sir Eobert Peel in making the bank charter of 1844. He intimated in the debates in Parliament at that time that they had to do it for the purpose of satisfying the old private banks who had the privi- lege of issue. Mr. Gladstone said, only two years ago, in the great de- bate that occurred in March, 1875, that Sir Eobert Peel had declared (and that it was a fact known to him) that he would have wiped out the bank circulation in England entirely bnt for the large sum that the Scotch bankers and the old bankers would charge for the privilege; that it was so much the government had not the money to pay it; but that so far as the Bank of England was concerned it existed by legislative authority and there was no difficulty. He would have abolished it if the government had been able to get rid of the issue of the private banks. Mr. Hardenbergh. Then you do not regard the gold and silver of this country as sufficient for a circulating medium f Mr. Pullan. "So, sir. Mr. Hardenbergh. Then if another circulating medium is required (and that is one of paper), and that medium is founded on the bonds of the government, why is it not the safest that can be procured 1 ? Mr. Pullan. It is not the safest that can be procured, but it is equally as safe as the safest, so far as individuals are concerned. Mr. Hardenbergh. Is it not better to have such a currency as will be flexible and sufficient to meet the demands of trade, either by contrac- tion or extension, than to have a currency issued at the hands of Con- gress 1 Is it not better to relegate the whole matter of circulation to the States rather than to the government 1 ? Mr. Pullan. No, sir. I will here say, inasmuch as the question has been asked, that it is a very desirable thing; and if it is an absolute neces- sity to have a flexible currency for trade, I say that the government can have an entirely flexible currency of government notes and have those notes equal to coin under any circumstances whatever, and that, too, while entirely beyond the control of any officer of the government to increase or diminish their volume. And such a currency would be so beneficent in its operation that it would never invite legislation on the part of Congress, and the people would never countenance or permit such interference. Mr. Hardenbergh. Who is to decide as to its quantity f Mr. Pullan. The people themselves. The people, in that instance 204 RESUMPTION OF SPECIE PAYMENTS. ■would be represented by the money they had in their pockets. Now, the legal-tender act provided, among other things, for a public deposi- tory, which Mr. Chase called " the savings-bank of the people." Now, that "savings-bank" proved one of the most remarkable successes in financial history. They could not keep the money out of it at 4J and 5 j>er cent. Mr. Haedenbeegh. What do you call u the savings-bank"! Mr. Pullan. I speak of the fourth section of the act, which related to temporary deposits. It became so beneficent in its operation that the Secretary, in all his reports, called it " the savings-bank of the people." That was a depository for the surplus funds of the people; anybody could deposit in it, but practically it was a depository for the banks. Mr. Haedenbeegh. That was what was known as " a war measure." We mast now dispense with " war measures." Mr. Pullan. Any measure that was necessary for the interests of the country in time of war is equally proper when the exigencies of peace demand it. The fourth section of the act of February 25, 1862, should be revived. That section will absolutely secure coin payments, that is, equivalency and flexibility at the same time, and this, too, under the en- tire control of those who hold the money. That section, I say, should be revived with this additional provision — a requirement that that shall be done which the Secretary then did in the exercise of his discretion — that there shall be one dollar of the currency in reserve for every three dollars of the deposit, and that the last deposit should be the first to which the option of the government should attach, the interest to range at not exceeding 5 per cent. Now, what would be requisite if the gov- ernment was to repeal the resumption law ? It would be to order that the greenbacks should be taken for customs; to order that as fast as the national-bank notes were returned to the Eedemption Bureau for ex- change the same amount should be deposited in bullion or coin in the Treasury ; to create a reserve that would in time secure an equivalency between coin and paper, and that United States notes be issued for a like amount, and that that return of mutilated notes and issue of United States notes should go on without disturbing the privilege of the banks. Tn other words, the privilege of issue should continue with the banks as long as the notes lasted. As a part of the same legislation, Congress should at the same time repeal the national-bank tax ; because the system has valuable privileges, and, if the national well-being requires that such privileges should be surrendered, the government should, as far as practicable, compensate the' holders of such privileges, no matter how such holders obtained them. I think that a law embodying provisions such as those to which I have just adverted would inspire such confi- dence among the whole people that the result would show just as much money on a par with coin as the business of the country might require and with a volume of notes even less than that which we now have. Mr. Haedenbeegh. In other words, you would wipe out the national banks, lock up coin, and make the government the instrument of issue ? Mr. Pullan. No ; I would not pass any law that would wipe out the national banks. I would simply require that, instead of receiving bank- notes in return for the notes which they send for exchange, they should receive the bond they have deposited against that note in return for the note ; that the government would issue its own notes with a dollar of bullion (for each dollar-note so issued), and placed in a reserve to bring the whole of United States notes to approximate par with coin as soon as practicable. EESUMPTION OF SPECIE PAYMENTS. 205 Mr. Hardenbergh. Where are you going to get all that bullion I Mr. Pullan. By the notes that are issued for it. Mr. Hardenbergh. You could not get it from Europe, and there is not enough gold in this country for the purpose. Mr. Pullan. It would be a slow process because it would be only as the notes came in. Mr. Hardenbergh. Then the people would have no coin 1 Mr. Pullan. The people would have no coin, but the people would have government paper which would be equal to coin. The public con- fidence, which would be an outgrowth of the system, with the fact that the paper is taken for all purposes, would cause that paper to be equal to coin everywhere. I do not say that it would be convertible into coin, but I do say it would be so nearly upon an equality with coin that the whole people would take it. Now, if the system of the depository, of which I spoke, was established, so that as the deposit increased the United States notes would have to go into the reserve, the quantity of notes would be withdrawn, and that of itself, and the accumulation of coin in the Treasury, would bring the notes up entirely to par. It would be the currency of the country, and it would be the currency of the world. The Chairman. You say that for every greenback substituted for bank-notes a dollar of coin should be placed in the Treasury. Do we understand that you think the value of the greenback depends upon its being convertible into coin ; if so, where will $350,000,000 come from when all the bank-notes are retired? Mr. Pullan. I am not to be so understood. I hold that the green- back is essentially money, just the same as coin — both are of the same creation; and further, that neither nor both constitute the only money, but are, besides being money themselves, the measuring units and repre- sentatives of all other descriptions of money. Money is simply power, and the legal-tender (whether of metal or paper) is the representative and symbol of that power, created by the sovereign, thus making it an irresistible power by the silent operation of law. It is this money and not currency that measures the value of property. The currency is only the representative of this money and the measure of its quantity, and the office of gold and silver is to preserve uniformity between the currencies of different countries. The money now existing in commercial nations consists almost entirely of individual and corporate credits. The cur- rency representing it should also consist of credit, of bills of credit (the present legal-tender notes) emitted by the government, and either interconvertible into a public credit bearing such a rate of interest pay- able in the precious metals as would cause the credit and consequently the currency convertible into it to be equal in value to the metal itself in the markets of the world, or convertible directly into gold and silver by the state's use of its own credit, under such an organic law as would secure such convertibility under all circumstances, and where the quan- tity would be regulated by the laws of trade, and not be subject to the caprice of either legislators or bankers, "With this understanding of the nature of the greenback, the balance of the question can be more readily answered. I think that the passage of a law that would advertise the world that the government had re- versed its policy, and initiated measures that would perpetuate the legal- tender currency instead of bank-notes, or any legislation that might clearly look in that direction and prevent the possibility of further contraction at this time, and which would commend itself to the exist- ing national banks, would restore confidence, such enduring confi- dence as would not make it necessary for the maximum of the coin 206 EESUMPTION OF SPECIE PAYMENTS. reserve to be more than $100,000,000, and that this, with the minimum of $50,000,000, would preserve the perfect equivalency of the two forms of government currency without reducing the present volume of circu- lation. My suggestion did not involve convertibility, only equivalency — -just what the Secretary of the Treasury is groping after. I believe (under proper conditions) that can be better preserved without convertibility than with, for unless there be nearly if not quite as much coin as paper, the power to convert impairs confidence, and when the disparity between the quantity of coin and paper is very large, destroys it. After confidence was restored and harmony of action had been secured between the banks and all other interests, and equivalency established, without the state indicating its power and placing it in the hands of those whose latent selfishness, cupidity, avarice, and remorseless greed would be kindled, and whose highest pleasure is in exercising and dis- playing any power with which they are clothed; I say after all this there would be time enough to consider whether it was good policy to attempt to make certainty more certain. The bankers, whose calling has given them a keen appreciation of the value of confidence, after they have relinquished all hope or idea of monopolizing the circulation, will be the last men to consent to try experiments and disturb a state of enduring equivalency by attempting or insisting upon legal convertibility to meet the hypercritical demands of doctrinaires who insist that there can be no perfect equality without the right of redemption, a fact requiring no more proof than that no force, however great, can draw a cord accurately straight. As, however, a cord can be drawn straight enough, so a govern- ment currency can be made convertible enough for all practical purposes. The difference between a convertible currency without legal converti- bility and one with legal convertibility lies in this : that the govern- ment in one case is master of the situation, in the other its slave; that every citizen knows beyond the shadow of a doubt that the government can, under all circumstances, meet every obligation the law imposes in one case, while in the other it is not only doubtful but altogether prob- able that it cannot ; that in one case a condition of equality is created that invites the exchange of coin for paper by every citizen of the repub- lic — as was the situation in France for years before the date the right of redemption was declared, when the holder of the paper had no right to demand such exchange either from the government bank or the citi- zen — while in the other the law gives not only the citizen but every alien the right to insolently demand such exchange, even though the demand was the execution of a criminal purpose to break the Treasury. Any one can see the vast difference that must exist between the confi- dence inspired by one state of facts and the other. The Chairman. How long do you think the bank notes would last, and how could there be any increase of government notes when the wants of business required an increase beyond the present volume of the circulation I Mr. Ptjllan. They would last much longer than they do now, because they would be held in the reserves (which the law should permit). As there would be no longer any antagonism between the United States notes and the bank notes, they should be treated the same in all respects so long as the latter continued, thus making the paper-circulation homo- geneous. The increase of notes could be made by the government buying its own bonds when their purchasing power would be equivalent to that of coin in the purchase ; when it was not there would not exist a necessity RESUMPTION OF SPECIE PAYMENTS. 207 for the increase. That equivalency could be maintained by either of two ways : by having the notes convertible into a bond bearing an interest that causes the bond to be par in the markets of the world ; or by having the Treasurer and assistant treasurers exchange coin for notes on pre- sentation whenever the reserve in the Treasury was not below the mini- mum established by law, and making it imperative upon the Secretary of the Treasury to sell bonds in the open market to restore the reserve. Just here is seen the advantage of the principle of Judge Kelley's inter- convertible bond. It was most successfully applied by Secretary Chase in the operation of the temporary-loan law. To reap all the benefit of an exclusive government currency that law should be re-enacted, with such amendments as would compel all Secretaries to do what Mr. Chase did. If funding was immediately stopped, as it should be, and that law revived, the whole of the unfunded debt would be taken by the banks and the people at an average of not to exceed 4J per cent, currency- interest. A large sum would be taken directly by the people if oppor- tunity was afforded through the agency of assistant treasurers and money-order post-offices, but far the larger portion would be taken by the banks for their reserves, and by savings-banks, insurance compa- nies, &c. After this took place a panic or convulsion would be impossible. The banks and people could get whatever money the wants of business required by presenting their certificates ; and when those wants subsided the United States notes would be returned to the Treasury and new cer- tificates taken. During the operation of the temporary-loan law, of the hundreds of millions deposited, only between 1 and 2 per cent, was by individuals ; the balance was by the banks. The experience of the banks of the city of New York in 1863, when their deposits in the temporary loan pre- vented a panic, would not likely be disregarded by them now if opportu- nity should offer by the revival of such a law for a like investment of a portion of their reserve. The Chairman. Would such a modification of the resumption law as you suggest afford the relief the country needs, and could effect be given to the views advanced without the paper currency being legal tenders to which Constitutional objections might be interposed? Mr. Pullan. It would not give such relief. It would be only a half- way measure at the best, even if the law was administered by a friendly hand. It would be mischievous ; if not, such a law would be rather a suspension than a resumption law. There is only one circumstance that would invite its passage, and that is, its being the only measure of defense against a public enemy. If there be such an irresistible power it would be better to capitulate on such terms than unconditionally sur- render ; better to take half a loaf than no bread. The necessity of Congress to stultify itself at the dictation of the bank power should be sufficient cause to seek its destruction at this time. Full effect could not be given to a government currency without that currency is uniformly legal tender. As the necessity for an exclusive government currency manifests itself, so also will the doubts about the constitutionality of the legal-tender quality of the issue be removed. The advance in this direction may be recognized in the declaration by one of the ablest lawyers in the public councils, and one of the most conservative of men, that the greenback is the Constitutional currency in times of peace as well as in times of war. The true meaning attached to the word money, in 1789, must interpret the grant of power to coin money. That and the prerogative of sovereignty to issue bills of credit 208 RESUMPTION OF SPECIE PAYMENTS. will, when bank influence is gone, be accepted as good grounds for the issue of the currency in two forms — coin and notes — the one to be equivalent to the other. The necessity of the paper money being issued exclusively by the government appears greater than that the coin should be so issued, because, by the laws of other countries, the metal of which the coin is made has already a monetary value, while the paper of which all paper money, greenbacks, and bank-notes, is made is worthless, and the value of the money is governed by the impress made upon it. With how much more care, then, should the paper be issued than the metal? Views of Mr. George 8. Coe, president of Hie American Exchange Bank, New York. Washington, D. 0., April 26, 1878. The Chairman. Are you aware of the provisions of the resumption act of 1875 ? Mr. Cos. Tes, generally. The Chairman. Tou and gentlemen who think with you were gen- erally agreed as to the propriety of that measure at that time ? Mr. Coe. We were, I believe, quite unanimous. The Chairman. What was your construction, and that of those whose views you represent generally, as to the redemption, cancella- tion, and destruction of the greenback issue after the 1st of January, 1879 f Mr. Coe. We supposed that the greenback issue would virtually terminate as an active circulation, and that it would be gradually absorbed — that the government would retire from the particular busi- ness of issuing circulating notes. The Chairman. In other words, your idea of that act and of its in- tention was that after the 1st of January, 1879, what is known as the greenback circulation should be, when brought into the Treasury, re- deemed in specie, canceled and destroyed, and never reissued f Mr. Coe. Our idea was that the business of the currency, as it is called (issuing notes), would return to what we supposed to be the nor- mal condition of commerce — that is, return to the banks, as in other countries, and as in this country before the war. The Chairman. And that, of course, as these notes were brought to the Treasury they would be taken out of circulation, redeemed, and canceled? Mr. Coe. Either funded or paid. That was the general idea. It was based in some respects on this fact, that when Secretary Chase inaugu- rated the national-banking law he limited the circulation to three hundred million dollars, a sum which was then supposed to be about the average requirement of the country. The national-currency law seemed therefore to contemplate, after the war, a return to that condi- tion, and we accepted that as the general idea. The Chairman. So that at the time of the passage of the resumption act in 1875, or soon thereafter, the idea was that we would have a paper circulation issued by the banks alone, and that it would probably not exceed four hundred million dollars'? Mr. Coe. Three or four hundred millions. The Chairman. Your idea was that that would be about all the paper circulation needed for the country, and about as much as we should have gold to float? RESUMPTION OF SPECIE PAYMENTS, 209 Mr. Coe. About that sum. The Chairman. Is that your opinion now? Mr. Goe. That is my opinion now. I justify that opinion from this fact, that in Great Britain, whose commercial affairs are larger than ours, something like sixty million pounds sterling constitute the aggre- gate paper circulation. The Chairman. Now it seems to me that the proposition is very much changed, so far as the views of the Secretary of the Treasury are concerned. Mr. Goe. It seems now to have a new aspect. The Chairman. That is, that instead of having, say, four hundred millions of paper money in the country we will have about six hundred and twenty millions? Mr. Cob. Six hundred and twenty millions and the coin also. The Chairman. The question, therefore, is, is there anything in the present condition of the country, or in the immediate prospective condi- tion of the country, that justifies this change of base? In other words, can we sustain at a convertible rate the six hundred and fifty millions of paper circulation (one-half of which you thought in 1875 would only go in circulation)? If so, what condition of things has arisen to authorize that change of opinion ? Mr. Coe. What views the Secretary of the Treasury has in that re- spect I do not know. I have never conversed with him at length upon that subject. The Chairman. I judge of that from the interview we had with him. Mr. Coe. For my own part, I cannot see how a compulsory circula- tion can coexist with a circulation which is voluntary, in regard to re- demption. If the Treasury opened its doors to-day for resumption and allowed circulation to take its own natural course, my judgment is that six hundred millions of dollars will not be the amount that will naturally stay out. I believe that the demands of the public, and of commerce in its healthy operation, upon a coin basis, would make the currency recede from six hundred and fifty millions to something like that which we had before the war, taking into consideration, of course, the growth of the country as one of the elements of the problem. I should not like to say dogmatically what amount the paper circulation would assume, but I say that it would not be six hundred and fifty million dollars. My judg- ment is, therefore, that if you remove the restraint of the legal-tender act, coin will take the place of a large proportion, if not of nearly the whole, of the legal-tender notes. The Chairman. Do you mean by that that in your opinion the legal- tender notes will be as dead stock, and will not be used at all for circu- lation ? Mr. Coe. Not entirely, but to a great degree; they will naturally return to the Treasury for coin. The Chairman. Would it not be more reasonable to suppose that both gold and legal-tender notes would go into circulation, provided there is interchangeability, and that prices of commodities would be thereby very much increased ? Mr. Coe. No, sir; they would not go into circulation unless one of two things should happen. If you add the two hundred millions of coin to the circulating notes, either prices must rise in that propor- tion to absorb them, or, under the voluntary operations of commerce, the notes would recede until prices remained at the gold standard. In other words, gold prices would naturally create what would be the gold-* redeemable currency. H. Mis. 62 14 210 RESUMPTION OF SPECIE PAYMENTS. The Chairman. Bat, if the legal-tender notes are equally good for all purposes, as Mr. Sherman desires that they shall be made, would not that, of itself, keep them in circulation, to say nothing about their greater convenience in the ordinary transactions of business ? Mr. Coe. No, sir. There is an intrinsic difference between the two things. The government currency, or the legal-tender currency, never could have had existence to any extent except by the force of the legal- tender act. We are cognizant and familiar with the origin of those notes and may learn from that experience. Most of us here were actual participants in the events relating to them originally, and it may illus- trate the subject to tell you what the financial operation was at the start. When we were on a specie basis, as we were in 1861, the banks began to lend to the government, and did lend it one hundred and fifty mill- ions of coin. This was paid into the Treasury by installments of about five million dollars a week. The banks were going on and taking sums of fifty millions each of government bonds, paying for them five million dollars a week. This was in August, 1861, after the battle of Bull Eun. The whole country was then on a specie basis. We had in our banks, in three cities that were organized for the purpose of those negotiations, sixty millions of coin, which was a very large sum for our then expe- rience, and was adequate for all required purposes. There was supposed to be in the country at that time at least as much coin as now, say two hundred and fifty millions. That coin, thus paid by the banks, went into the subtreasury and was there disbursed to the people. The great expenditure for war purchases sent it back immediately to the banks; and, in one week, we were in possession of the same money and ready to pay it out again. These operations with government created an undue activity of coin circulation. Mr. Chase, then Secretary of the Treasury, issued, in 1861, twenty-five million dollars of what he called United States Government demand notes, which were not then a legal tender. When these notes were presented to the banks by parties who received them in payment of supplies to the Army, the question at once arose whether banks could take them on deposit. We asked, "Are they redeemable in coin at the Treasury V The reply was, " No ; the Treasury has no coin except what the banks are furnishing for loans." Consequently we could not take an irredeemable currency and be subject to drafts for coin. The second twenty-five million dollars of that issue produced a decided embarrassment among us. Here was an irredeemable circulation by the side of a redeemable one. It was like Pharaoh's fat and lean kine. Being compelled by force of events to receive these notes, the banks of necessity stopped payment in coin in December, 1861, because they could not take an irredeemable currency and be subject to a coin response for it. Consequently, in order to make the new notes pass as money, it was necessary that they should be made a legal tender; and they were so made; afterward, that currency became permanent. Now the answer to your question, as to the amount of currency that can be kept afloat on a specie basis, is somewhat illustrated by that fact, and the difference between the two currencies is also shown by it. Here was a currency emitted by the government which had no assets to meet it. Let me present that to your mind more clearly. The Treasury of the United States issues an amount of paper promises, but it has no assets in hand to redeem them. If it should make up its account current after it had emitted the first hundred millions, what would the account be 1 Liabilities — one hun- dred millions ; assets — the power of taxation ; but no money. If, how- ever, a bank issues one hundred millions of currency, its assets would RESUMPTION OF SPECIE PAYMENTS. 211 consist of the notes of commerce which are taken for such currency, and which, as they represent commercial products, are exchangeable for the notes themselves or for the coin equivalent, and therefore they con- tain an offset one against the other ; and the revolution in such trans- actions by an exchange is perfect and complete, because there is a lia- bility and an asset at coin prices. Not only the notes themselves, but the merchandise they represent, have the coin value. The Chairman. You think that that is a good deal better than the power which the government has to extract from the people whatever the government requires for the purpose of its operations 1 Mr. Coe. Yes, sir ; because the power thus to extract is a limited and contingent power, and the power of merchandise is a present power. The one is future and indefinite, and the other is at hand. The Chairman. I want to know what reason (unless this which you give be the one) there is for supposing that we can float six hundred and fifty millions of paper money on two hundred and fifty millions of gold? Mr. Coe. I do not believe you can do it. I think that so large an amount can only be kept afloat by force of the legal-tender act; and that is a force which drives things beyond specie prices, and will derange matters again. The Chairman. You think that, with the legal-tender quality of the paper, that might be done ? Mr. Coe. It might be done, but it will compel suspension of coin payments as it did before. The Chairman. Howl Mr.fboE. By forcing prices up to such a degree that we shall again be just as abnormal as we have heretofore been. The Chairman. In other words, if the present bank circulation be continued, and the legal-tender circulation be continued, and if gold and bills are exchangeable, the effect will be a very large increase of the prices of commodities, if all the paper currency and coin remain in circulation 1 Mr. Coe. Either that, or the people, having had experience once of this very effect, which is the legitimate one, will abhor the experiment and will not resume active business. The legitimate effect is just that. The Chairman. What effect would a rise in the prices of commod- ities have upon the stock of gold in the country as to retaining it here or sending it abroad ? Mr. Coe. Of course it would send it away. Whatever excess there is above specie prices will set the specie at liberty. It will be the cream from the top of the milk, and it will go off first. The Chairman. If there be in circulation three hundred millions of greenbacks, three hundred and twenty-five millions of national-bank notes, and two hundred and fifty inillious of gold, can the gold and the paper, in your judgment, be regularly maintained as convertible or exchangeable ? Mr. Coe. No, sir ; I do not believe that it can. My judgment is that it will operate in this way : In the first place, as I read the resumption law, it is not compulsory on the Secretary to pay out the legal-tender notes again. The law is silent in regard to them after redemption. He is required to prepare and provide means for resumption — that is, for the payment of three hundred million dollars of legal-tender notes — but the law does not say that he shall pay them out again. The Chairman. The law, as I understand it, says to the contrary. It says that he shall redeem them ; and I undertake t,o say that when 212 RESUMPTION OF SPECIE PAYMENTS. a man redeems his note he pays it and destroys it. But that is not the Secretary's construction of the law, and his policy, as I understand it, is to keep three hundred millions of greenbacks in circulation. Mr. Coe. I think that the practical operation will be this: That when the doors of the Treasury are opened for resumption, if coin be the me- dium and the measure of value all over the country, such an amount of the Treasury circulation will go in for redemption as experience will then show cannot be kept afloat. That will be the exact test of the question, how much circulation the country can absorb. The question will settle itself, without any violence or extraordinary proceeding. It will natu- rally take care of itself. How far the circulation will recede I do not think any person can tell, but that it will come to the exact adjustment of coin values (whatever that may be) is certain. But if the notes be then forced into circulation by the Treasury, it will occasion a continual contest of the government against specie payments and specie values. The Chairman. That will prevent our getting any additional circu- lation ? It will prevent any additional gold from coming to the country? Mr. Coe. Not at all. The Chairman. Do you think that gold would still come in ? Mr. Coe. Certainly. The Chairman. So that, in your judgment, it is not necessary to cur- tail the amount either of national-bank notes or of the greenbacks in circulation ? Mr. Coe. Neither one nor the other. It will curtail itself, if left free. There is a law inexorable which underlies all this subject. The Chairman. Is there not a law just as inexorable as that^ which is, that the cheaper circulation will, all the time, take the place of the dearer or more expensive circulation 1 Is not that a uniform law 1 Mr. Coe. That is the law of circulation. The Chairman. So that the effect of it will be that the gold will be hid away ? Mr. Coe. No, sir; not at all. If the redemption be perfectly free, and if what you call the poorer circulation be exchangeable for the better — for the gold — of course the poorer will be converted into the better. As between redeemable bank circulation and gold circulation, there is no difference, because they are interchangeable at all times, and also be- cause they are both property, or are based upon property which is con- vertible either into gold or into other property. The Chairman. You think, then, that the Secretary of the Treasury can safely resume on the 1st of January ? Mr. Coe. I do. The Chairman. With the three hundred and fifty millions of green- back circulation outstanding ? Mr. Coe. Yes. The Chairman. Why do you fix on that limit, and why not let it stand as it is, if your law is true that when you get to the point that it will not be absorbed, it will be withdrawn from circulation f Why contract the greenbacks any further? We have got now three hundred and forty-seven millions of greenbacks out; why reduce them to three hun- dred millions, if the law which you spoke of is the rule ? Mr. Coe. So long as the circulation is to be the legal-tender compul- sory circulation, kept out simply by force of law, and not by force of its own intrinsic merits, you might as well fix it at three hundred and forty- seven millions, or at ten hundred and forty-seven millions. It is all arbitrary. There is no logical or commercial point which you can fix as the limit of a compulsory circulation. RESUMPTION OF SPECIE PAYMENTS. 213 The Chairman. So that, as I understand your views, it is not at all necessary that there should have been a contraction of the original amount of greenbacks 1 Mr. Coe. Of course the nearer you approach redemption in coin, th more contraction will go on, until the coin equivalent is reached. My idea, and I think the idea of any person who studies the subject, is this: that this circulation of the government being a compulsory loan with- out interest, something which commerce in its healthy coudition did not originate and would not retain, that it will as naturally flow in as it exists, because it never came out naturally, but by compulsion. It was an obstacle originally to a redeemable currency, and from its nature it always will be. The Chairman. Then it all depends upon the fact that the circulation is compulsory by law ? Mr. Coe. Yes; had it not been, there would have been no necessity for such a law. The Chairman. But suppose it is not compulsory by law, but volun- tary with the people, would that affect your views in any way 1 Mr. Coe. No, sir; you cannot tell what is voluntary with the people until you withdraw all restraint and let the people do as they please on the subject. Then you will find out what is voluntary; but it is now involuntary. The Chairman. That is, the circulation is made involuntary by law ? Mr. Coe. Exactly, and the best way to test the question, how much and what sort of currency is needed, is to try the people after the 1st of Januajy, 1879 ; and then you will find exactly how it will be. The Chairman. That is, you think the people will prefer the gold to the paper? Mr. Coe. They will, if the circulation prove to be in excess at gold prices ; not otherwise. The Chairman. Do you hold that any considerable amount of the gold will be hoarded or hid away? Mr. Coe. No, sir; on the contrary, resumption tends to bring out all hidden coin resources. The Chairman. In the history of this or of any other specie-paying country— Germany, France, or England — do yon know any country where so small a base of coin is used for so large an amount of paper as will be in this country on the 1st of January, 1879. Mr. Coe. Yes. I think our base for resumption is greater, relatively, than that of England was when she resumed in 1821. It appears to me that we overlook one very important factor in this problem ; and that is that gold is not the chief support of resumption, but property and other resources. Now, this country has this great advantage over any other that ever yet existed. We have an area capable of an untold amount of production of articles that are wanted by the Old World, and for which the people of other nations will exchange anything, even their gold. These are our great resources for resumption, and that these resources exist has been shown for the last two or three years in the large balances of trade in our favor. I think that the country, left to itself unobstructed, might have resumed before, in the natural course of things. It would, if there were no law at all but the law of trade, which requires every one to pay what he owes, and if there were no legal restraints in regard to money. The Chairman. And stay resumed? Mr. Coe.. Yes, sir; and stay resumed. 214 RESUMPTION OF SPECIE PAYMENTS. The Chairman. Then it does not depend so much upon the amount of specie basis that we have got as upon our immense resources f Mr. Goe. Yes, upon both ; and upon the relative condition of other countries with ours. The Chairman. Has that condition relatively changed so much within the last twenty years that it can be relied upon as a safe resource? Mr. Coe. I think it has changed very much. The Chairman. Has not the condition between imports and exports been produced principally by the poverty of the people, by their inability to purchase the comforts and luxuries of life? Has not that been the chief cause of the smallness of our importations ? Mr. Coe. I think not. The country, as a whole, never in its his- tory had such wealth of resources of every kind as it has now. It is traversed in every direction by 76,000 miles of railroad, which reach vir- gin soil never before placed under cultivation, and which is daily aug- menting in regard to its productive power. We have stimulated an industry which produces all kinds of utensils, tools, and articles that used to be exclusively imported. We have developed an inventive force which applies to agriculture ; machinery that is producing untold values at a minimum rate of cost. So that the country itself is reached in its vast area as it never has been reached before. It is exposed in every direction to commercial influences, and it has the power of producing all things required by human beings such as no other country ever had. It is unparalleled in that respect. Now, there is no doubt that the economies which you speak of have been enforced ; but that is one of the reasons, and will also be a great means of recuperation. The- infla- tion of paper circulation turned away from production into trade an nu- due proportion of our people, who saw in the consequent advance of prices the way of securing sudden wealth. But so soon as the tide turned, and contraction began, economy again set in, and that has re- stored the people again to their original pursuits, and particularly to agriculture, wherein is our great hope. The Chairman. Is it not true of the American people more than of any other people on the face of the earth, that prosperity ordinarily leads them to look after their comforts and luxuries ? Mr. Coe. Yes, sir. The Chairman. That necessarily begets an increase of importations to a great extent ? Mr. Coe. Yes, sir. The Chairman. And in my judgment it is the poverty of the people, their inability to purchase, that has caused, to a great extent, the de- crease of importations. Mr. Coe. Undoubtedly. The Chairman. Now, whenever prosperity takes place, these impor- tations increase. I will not say that the exports may not increase also to some extent; but that the large gap between the aggregate of impor- tations and of exportations will diminish is as certain as that prosperity begins. Does not that accord with your experience ? Mr. Coe. I suppose it is naturally so. The Chairman. So that when prosperity sets in, and when prices ad- vance, importations will increase, even if exportations do not decrease, because the very class of men who are now driven to production will stop work and go to trading, and the rise in prices will cutoff exports ! Mr. Coe. That is undoubtedly true as a general fact. But I think that there should also be kept in view this other fact, that such a revel of luxury as we have had in this country for the last fifteen years (you RESUMPTION OF SPECIE PAYMENTS. 215 might almost call it a carnival), duriug which all of us have raised the tone of our current expenses to a point at which we never had any ex- perience before, has been very exhausting to the country. We have spent more than we earned. We were deceived in regard to our expend- itures by the fact that we supposed we had real money of commerce, when in fact we had not. We have been simply expending legal-tender notes, which now prove to have been not money in hand, but debts to be paid. Now, the process of resumption is a process of realities. We see just what we can spend; and the country is not going to run at once to the summit of great expenditures as before. We shall all go back to the place of departure, and continue on the plane of reasonable expenditures, such as you and I, sir, were accustomed to practice in our earlier life — before the war. That course will generally prevail, and it may continue long enough to set us back to a healthy and honest con- dition of things, and prevent so immense and sudden a revolution as you seem to apprehend. The Chairman. Then, if I correctly understand your views about the ability of the government to resume, the specie basis is not a matter of so much importance as the experience we have had in economy, and the greatly diversified capacities of production in this country? Mr. Coe. I think so. If you look at the attempt at resumption in Great Britain in 1818 you find that it was commenced at a time when the exchanges were agaiust that country (as here they are not), and it failed. It was repeated in 1821, when the exchanges were the other way, and it succeeded, because during the three or four years that inter- vened all those natural and healthy influences had set in. The Chairman. It seems to me that there is one great element in this question which you gentlemen do not sufficiently take into considera- tion ; that is, that then Great Britain was the great creditor nation of the world, whereas we are attempting to do that which no debtor nation that I know of in the history of the world has ever been able to do. There is the rock on which we are going to split, in my judgment. Mr. Coe. Unfortunately, our foreign debt consists largely of railroad bonds and of securities and debts that have come to grief, so that the debt to be paid is not so enormous, when compared with this period of history, as it was in Great Britain. The Chairman. I suppose that a great amount of these debts have been sponged out? Mr. Coe. Yes, sir ; unfortunately they have. The Chairman. Still our foreign debt is a large element to be con- sidered in the question of prosperity. Mr. Cos. Our whole debt abroad is about $1,000,000,000. The Chairman. Ernest Seyd says that it is double that. Mr. Tappen. I think that the statement made yesterday by Mr. Bliss was about as accurate as you can get it. He put the amount of our debt held abroad at about $950,000,000. Mr. Phillips. Does that include the indebtedness of our railroad companies held abroad? Mr. Tappen. Yes; and includes all the corporate indebtedness which is good, and on which interest has to be paid. It is all about $950,000,000. Mr. Bell (to Mr. Coe). What is your estimate as to the amount of our corporate indebtedness held abroad, that is not good 1 Mr. Coe. I suppose that about $600,000,000 of our corporate indebted- ness has really gone out of existence, and never will rise again. The Chairman. You do not mean by that that it will pay nothing ? 216 RESUMPTION OF SPECIE PAYMENTS. Mr. Coe. I do. I doubt if the railroad securities, in this estimate, will ever pay anything. I do not give that as the amount that is held abroad, but that is the aggregate amount of such railroad securities. Mr. Ewing. About how much of that is held abroad 1 Mr. Coe. I should think more than half. Mr. Seligman. Yes ; about one half. Mr. Coe. 1 think that the poorest sort of railroad securities have been sent abroad. Mr. Seligman. Yes. Mr. Ewing (to Mr. Coe). You say that you think that after resump- tion the excess of paper money will necessarily retire itself, or be re- tired? Mr. Coe. Yes ; much better than if we attempt any artificial process. Mr. Ewing. Which of the two kinds of paper money will be likely to be retired in that way 1 Mr. Coe. I think that the government notes will naturally retire them- selves sooner. Mr. Ewing. You say that there is a law which governs the amount of paper money that can be kept afloat in a country in reference to gold. Mr. Coe. Yes, sir. I do not know that there is a law in reference to the ratio ; I meant to say that there is a law in reference to the charac- ter of paper money that can be kept afloat. There is a vast difference in paper money. Mr. Ewing. Does not the experience of this country, and of other countries, furnish data for determining approximately the amount of paper money that can be kept afloat redeemable in coin, that is, the rate of coin to paper in any specie-paying country f Mr. Coe. No, sir; for this reason : that every country has a peculiar- ity of its own. France, for instance, has a circulating medium issued by but one source, the Bank of France. Its issue is about $500,000,000. You must remember, also, that the people of France do not use, as the people of the United States and Great Britain do, bank checks for cir- culation to any great extent. Mr. Ewing. I am not speaking of the volume of currency in a coun- try, but of the ratio of specie to paper in a specie-paying country, what- ever the volume may be. I was asking you whether there was not such a concurrence of experience, abroad and at home, as to indicate that there was a law of relation between the amount of specie and the amount of paper money that can be kept afloat in a country, redeema- ble in specie. Mr. Coe. I do not think that that law can be stated absolutely, but there is an approximation. Mr. Ewing. Take our condition in 1857. Is there any reason to think that, after resumption here, the proportion of specie to paper, when things settle down, will be very different in 1879 and 1880 from what it was in 1857 and 1858? Mr. Coe. 1 think not. The law will be very much the same, taking into view the increased capacity of the country. Mr. Ewing. In 1857 we had $214,000,000 of paper currency outstand- ing, and $281,000,000 of coin in the country ? Mr. Coe. Yes, sir. Mr. Ewing. Assuming that the ratio of coin to paper in 1879 and 1880 will not be very different from what it was in 1857 and 1858, we can come approximately at what paper currency we would be able to keep afloat in coin. We had in 1857 $214,000,000 of paper to $285,000,000 of coin in the country. We shall have on the 1st of January, 1879, RESUMPTION OF SPECIE PAYMENTS. 217 $647,000,000 of paper, and (according to the estimate of Dr. Linder- man) about $250,000,006 of coin in the country. Do not these figures simply seem to indicate the extent, approximately, to which our circu- lation should be reduced to keep it redeemable in coin? Mr. CoE. It bears some proportion, but you must keep in view that in 1857 the deposits were $230,000,000, which has not entered into your calculations. There is a constant tendency to recur from checks to cur- rency, and from currency to checks ; sometimes one expedient is more convenient, and sometimes the other. Mr. Ewing. Including the deposits and currency in 1857, we had, of both combined, $444,000,000, and we had $285,000,000 of coin in the country; but in 1879 we shall have $1,257,000,000 in deposits and cur- rency combined, against $264,000,000 coin in the country. Mr. Coe. In 1857 we had deposits to the amount of $230,000,000, but thev had gone down in 1858 to $186,000,000. In 1857 our circulation was $214,000,000, and it had gone down in 1858 to $155,000,000. The recession was very great, and the law of the thing (as you perceive) always is that when there is a sudden change from an inconvertible to a convertible currency there is a recession greater than the healthful con- dition requires, like the pendulum swinging to the extreme point until it comes back again to its equilibrium. In 1861, when the war began, we had $236,000,000 deposits to $194,000,000 circulation. You see, there- fore, that economy (or the sudden arrest of commercial operations) is ex- pressed by the effort which is necessary to restore a healthful condition or resumption. Mr. Ewing. I am trying to estimate the extent of the healthful exer- tion that will have to be made here, and therefore I want to make the comparison. Mr. Coe. I think your proposition should be stated in this way : what was the contraction between the period of suspension in 1357 and the period of resumption in 1858 ? In other words, according to the rule of three, if so much recession took place from 1857 to 1858 on such an amount of currency, what would be the amount of recession in 1878 on this other amount ? Mr. Ewing, The recession from 1857 to 1858 was in order to get things back to their healthful relations to coin, was it not ! Mr. Coe. Yes, sir, entirely. Mr. Ewing. 1858, therefore, shows the healthful relation of deposits and circulation to the volume of coin in the country. Mr. Coe. Hardly 1858; I think that two or three years should be allowed. Mr. Ewing. Well, say 1861. Mr. Coe. That is fair. Mr. Ewing. Well; in 1861 that healthful relation was established with these conditions: $202,000,000 currency outstanding, and $459,- 000,000 of currency and deposits combined, against $280,000,000 of coin in the country. The coin in the country being the governing element indicates the extent of the recession necessary, does it not? Mr. Coe. I do not think that that is a perfect criterion. Mr. Ewing. Is it not approximate ? Mr. Coe. I will admit it for the moment. Mr. Kwing. If that be the governing element, the question is, with $264,000,000 of coin in the country on the 1st of January, 1879, how much will we have to reduce the paper circulation and the deposits com- bined, our present paper circulation being $647,000,000, and the paper and deposits combined $1,257,000,000? 218 KESUMPTKN OF SPECIE PAYMENTS. Mr. Coe. I do not know how that proposition would work out in fig- ures. You can work it by the rule of three. Mr. Ewing. It would leave us with a couple of hundred millions of paper in circulation. Mr. Coe. That is not a fair statement, because in 18C1, when we had $200,000,000 of circulation, our population was 30,000,000, and now we have 42,000,000 or 43,000,000. You have to take that into view. There is a larger necessity for a circulating medium now than there was then. Mr. Ewing. I take it that the volume of currency redeemable with a given volume of gold in the country does not depend upon our necessi- ties but upon the size of the volume of gold. Mr. Coe. It does not depend really on the gold on hand, but on the resources of the country to procure the gold as it is wanted — the rela- tions of this country to other countries. That is an equally important element. Mr. Ewing. When we make the recession necessary to the situation as it exists in 1879, and thereafter, of course our increase of gold will help us. But I wish to know what extent of recession we must make in order to accommodate circulation and deposits to the quantum of gold that wo then have. I think that we have the data here for determining it under the law which you have mentioned. Mr. Coe. It is impossible to determine that. We must be governed by our former experience on that question. History will repeat itself as surely as it is possible on this question. Mr. Ewing. I have no question at all about that. And your idea is that resumption can be maintained by withdrawing from circulation just that amount of paper currency that will be necessary in order to make it float redeemable in the sum of gold which the country is able to command. Mr. Coe. I think I can say yes to your proposition, as you state it. Mr. Phillips. You have stated that while Prance does business mostly with paper and coin we do it mostly with checks ; can you give the proportion of the business done in this couutry with checks ? Mr. Coe. Ninety-six per cent, in New York. Let me explain that : Men have never substantially changed their original way of doing busi- ness ; that is, by giving one thing for another. Trade is carried on at this day by barter just as much as it was when there were but few men living. Two commercial expedients have grown up in the progress of time. One was when men commenced selling by reference to money value instead of by directly exchanging specific things, and the other was when they began the use of paper instruments. Por instance, here we are a little community in this room, we have our various industries, and all that we can possibly do, in the nature of things, is to exchange among us one article for another. If we were all to go on in one day and exchange by means of pieces of paper whatever we want to ex- change, and we come at night to a place called a clearing-house, where our papers are all counted up against us, we have transferred our property between each other by means of pieces of paper containing written orders for the values of the various things exchanged ; we add up these papers, every article being estimated at what it is worth in money, and we find, perhaps, that the chairman proves to be a debtor. He has got more articles of value from us than we have got from him, and he has to pay the difference in money. That is the whole system of a clearing- house. Many transactions of great value take place, and but a small amount of real money is used in performing them. All legitimate paper money must thus carry the value of every article exchanged by it or it RESUMPTION OF SPECIE PAYMENTS. 219 is a bogus instrument. If there is introduced, by the force of law, anything that changes the relations of such paper instruments to the coin, value of what they transfer in trade (which fact must ever be de- termined by its convertibility into coin at pleasure), it compels one man to take what he would not voluntarily do. Of that nature is the false element in an enforced paper currency. Remove that and the country will come back to its normal condition with as much power and celerity as a healthy man will revive in the open air. It cannot be prevented. Our self-imposed restraints are all the difficulties in the way. Mr. Phillips. Tou have just stated that these bank-cheeks and cer- tificates are a kind of currency. Mr. Coe. They are. Mr. Phillips. According to your statement of the business of the country 95 per cent, of it is done with checks. Mr. Coe. That is to say, that instead of passing money between the people they have used paper orders, as described, to the extent of 95 per cent, of the aggregate business done among them, and, finally, the actual money used is in paying only the differences. That is, money resulting from the numerous transactions in trade. Mr. Phillips. But these bank-checks are currency ? Mr. Coe. Yes, sir. Mr. Phillips. What is their coin basis ? Mr. Coe. The things exchanged — that is, the value of them. If you transfer a horse to me worth $100, by means of a paper order on his keeper, and I give yon another animal in the same way and of the same value, there is no money required. The value of that currency is the two animals. Mr. Phillips. When you draw a check in San Francisco on your bank in New York for $1,000, that check is floating for some time; what is the basis of it 1 Mr. Coe. The article which I sent from San Francisco to New York to cover it. Mr. Phillips. Suppose nothing has been sent ? Mr. Coe. Then it is a bogus check ; it is a fraud. Mr. Phillips. Do you mean to say that all the bank-paper drawn is not drawn on the credit of the house that draws it ? Mr. Coe. No, sir; that would be clearly legal tender, private paper. No bill of exchange can be drawn unless against something shipped or transferred to pay it, and all honest paper transactions are in the nature of bills of exchange. Mr. Phillips. But my impression is that these checks are drawn on the credit of the drawer. Mr. Coe. No, sir; but on the credit of the fact that the drawer has sent something of equivalent value to pay for them. That is all the credit that there is in it ; that is the final truth. If there was not some- thing on which to draw the cheek could not be paid. Mr. Phillips. Yon have stated that you think there must be a re- duction of the present volume of paper currency before there is safety? Mr. Coe. Yes, sir. Mr. Phillips. Do you think that we ought to retire the legal-tender notes rather than the national-bank notes from circulation ¥ Mr. Coe. We need not make that election. If you will open your Treasury doors the public will take care of the question. Mr. Phillips. Which do you think it will be safest to retire, the na- tional-bank notes or the legal-tender notes ? 220 RESUMPTION OF SPECIE PAYMENTS, Mr. Coe. If you ask me which I assume will be naturally withdrawn I will tell you. Mr. Phillips. Very well. Mr. Coe. Unquestionably the legal-tender notes. , Mr. Phillips. Has not the legal-tender currency been a better means of exchange than the national bank currency ? Mr. Coe. No, sir. Mr. Phillips. Do you not, in your clearing-house, require legal-ten- der notes to be the basis of transfers and not national-bank notes % Mr. Coe. That is because the law compels us to do it. Mr. Phillips. Do not legal-tender notes be sometimes in demand f Has it never occurred that there has been a premium on them ? Mr. Coe. 1 do not know but it has occurred. If it has it is because the legal-tender note is made money by force of law. Mr. Phillips. Whatever it be, you admit that legal-tender notes are more valuable in the clearing-house than national-bank notes'? Mr. Coe. No, sir. Mr. Phillips. Then why should they be in demand ? Mr. Coe. I do not think that they are in demand. There is really no difference between them intrinsically, as I have already explained ; the bank-note is the best, because it is based on commercial property, for which it is given in addition to the government debt. Mr. Ewing. And the legal-tender note is based upon the promise of the people. Mr. Coe. Yes ; but that is not commercial property. The bank-note has that also and the property besides. Mr. Ewing. The bond on which the national-bank note is issued is only a promise. Mr. Coe. I know that; but it is issued also against commercial value in exchange. Mr. Phillips. Yon have heard of this sale to the syndicate of $10,000,000 of 4 J per cent, bonds ? Mr. Coe. Yes, sir. Mr. Phillips. Do you think that after May the Secretary would not have a demand for 4 per cent, bonds ? Mr. Coe. No, sir ; not sufficient. Mr. Phillips. Sufficient for what purpose? Mr. Coe. I have been fearful all the time that the Secretary of the Treasury was not earnest enough in his desire for resumption, because he has insisted on selling bonds at 4 per cent, interest, and would sell nothing else. I do not believe that the credit of the country now, in Europe and at home, is sufficient to float a 4 per cent, bond to the extent of insuring the money for resumption. I have no idea that it could be done. Mr. Phillips. We have never been able to draw any amount of coin from England, during our history. Do you think that we can draw $50,000,000 in gold from European countries for this $50,000,000 of bonds? Is there any hope or possibility of it? Mr. Coe. I think that we shall draw all that is needed, by degrees. You do not require all that coin immediately. Mr. Phillips. Then what is the use of selling the 4J per cent, bonds to get it? Mr. Coe. Because the sale of 4 \ per cent, bonds will get it, and the sale of 4 per cent, bonds would not. Mr. Phillips. Will we get it by selling the 4J per cent, bonds 1 Mr. Coe. I think so. RESUMPTION OF SPECIE PAYMENTS. 221 Mr. Phillips. You think we will add thereby to our stock of gold ? Mr. Goe. I believe so. Mr. Phillips. Do you think that it will bring us $50,000,000 of gold coin from Europe 1 Mr. Coe. Yes, sir; I think it will gradually do so. Mr. Phillips. In the experience of the history of this country, have we a single thing that gives us reason to believe that we can draw fifty millions of coin from Europe'? Mr. Coe. I do not know. I do not think that it is necessary to draw all that coin from Europe. Our own production of gold and silver is a very important item, and it is the same thing whether the bonds are sold here or in Europe, provided we retain the gold and silver produced here. ' Mr. Phillips. We exported on the average, for the past three years, forty-two and a half millions of coin more than we imported. Mr. Coe. You know the reason of that. The couutry has exported it because it was not money at home, and therefore was of no use here. We always sell that which is the least use to us. Mr. Phillips. It could be converted into money. Mr. Coe. Not here. It was not money for any practical purpose, and has not been money since the legal-tender act was passed. Mr. Phillips. But it could be converted into what could be used as money. Mr. Coe. It could be sold for legal-tender notes, but was not money here for any other purpose. Mr. Ewing. I understood you to say that greenbacks are not money, and now I understand you to say that gold is not money. Mr. Coe. Greenbacks are not money intrinsically. They are made, by force, a substitute for money. Mr. Phillips. At one time it took $2.40 in greenbacks to buy $1 in gold, which fixed its value at that rate. If the law fixed the value of a greenback dollar, why not get a dollar in gold for it? Mr. Coe. The law can determine what you shall take for the dollar, but it cannot determine the value of it after you get it. Mr. Phillips. The greenback dollar has ranged from $2.40 until now it is at one-eighth per cent, discount. Mr. Coe. That was on account of the peril in which the country was at the time, and of the chance whether the greenback would ever be redeemed. Mr. Phillips. Had it no commercial value? Mr. Coe. None outside of the United States; it never had. Mr. Phillips. It must have had commercial value somewhere. Mr. Coe. None outside of the United States. Mr. Phillips. If the law fixed its value, it was always worth $1. Mr. Coe. The law has not fixed its value, but fixed the rate at which it must be taken for private debts. Mr. Phillips. Outside of that it has a value, being exchangeable for gold. Mr. Coe. ~No; this exchange never was made outside ; it was always a home transaction. Mr. Phillips. What made the difference 1 Mr. Coe. The difference was the condition of the country. The day before the battle of Gettysburg it was a very grave question whether the country was to be saved or lost, and we stood with a great deal of apprehension and doubt wondering which it was to be. The debts of this country were just the value of that doubt; and whoever bought a 222 RESUMPTION OP SPECIE PAYMENTS. bond or a public note bought it with that peril before him. He ran the risk. That determined its value. But the government itself had the power over its people to say that, although this paper dollar is not worth over 40 cents, you shall take it for a dollar. Mr. Phillips. Before the battle of Gettysburg the green baek was worth 40 cents in gold, and after the battle of Gettysburg it was 60 cents. It was not the law that did that. Mr. Coe. It was the flat of the Lord himself that gave us that battle. Mr. Phillips. Then the fiat of the Lord has given value to green- backs. Mr. Coe. No, sir. The human law attempted to interpose its puny arm over the law of the Lord in this case. Mr. Phillips. The greenback had always a commercial value, beyond doubt. Mr. Coe. It always had an actual value as a debt. Mr. Phillips. Its actual value now is within one-eighth of par. Mr. Coe. That is its commercial value. Mr. Phillips. Do you think that the country has more currency to- day than it needs for its business? Mr. Coe. Yes, sir. Mr. Phillips! I understand Mr. McLeod to say that a country will have no more currency than it needs. Mr. Coe. And the test of that will be on the 1st of January, 1879. If you open the doors for redemption the country will have just the currency that it needs, and you may ascertain just what it needs by what it retains or what it redeems. Mr. Phillips. You mean, then, that, after the 1st of January, part of this circulation will be driven out 1 ? Mr. Coe. That is my judgment, if redeemable in coin. Mr. Phillips. Yon think that the legal-tender notes will be driven out of circulation ? Mr. Coe. I think that the tendency of the country will be to with- draw the legal-tender notes, to a greater or less extent. Mr. Chittenden. I should like to sum up your doctrine, as you ex- press yourself, or as you seem to me to express yourself. If I under- stand you, you believe that it is perfectly practicable for the Secretary of the Treasury to resume specie payment on the 1st of January next without any further legislation 1 Mr. Coe. Much better than with any. Mr. Chittenden. And you believe that under the operation of natural laws the paper circulation will contract or expand according to the course and demands of trade? Mr. Coe. Yes, sir. Mr. Chittenden. And that, in case the resumption act shall result in the extinction of the greenback currency, we will have in the present bank-note currency all the circulation that the commerce of the country requires? Mr. Coe. I think so. Mr. Ewing. Which can be redeemed in gold? Mr. Coe. Yes ; which will be redeemable in gold. Mr. Ewing. And it can be maintained redeemable in gold? Mr. Coe. Yes, sir. Mr. Hardenbeegh. What do you think would be the effect of a fail- ure on the part of the government to continue resumption ninety days after the day set apart for it? Would not the effect be more disastrous to the country than a temporary repeal of the law, leaving it, without- any fixed date, to the natural operations of trade ? RESUMPTION OP SPECIE PAPMENTS. 223 Mr. Coe. We have, of course, looked at the contingency of a failure, because it is, after all, an effort, as I understand it, to restore what would be the natural state of things — what society itself, without any law or regulation, may of its own volition and free will deem the best thing to do for itself. That I call resumption; because I think that all men agree that for one nation to be out of harmony in reference to its money, or to the measure of trade and commerce with other nations, is a grave mis- take. I answer that question in this way : That an effort to resume, even if it do not succeed, had better be made in the interest of the country, because it sets the whole country in preparation for an event which must sooner or later come ; and the effort to make it, even if it be a temporary failure, will bring us nearer to the preparatory condition than if we did not make the effort; and, in that case, we should follow just the experience of other nations in the same circumstances. Mr. Hardenbergh. Is there, to your mind, any probability that re- sumption can ever be practically accomplished by this country so long as the Secretary of the Treasury or Cougress deems the requirements of the people to demand the reissue of these 347 millions of legal-tender notes ? Will not the volume of paper currency afloat be too great, and the demands on the Treasury too frequent, to enable it to sustain those demands in coin? Would it not be better, under the circumstances, either to leave the date of resumption optional with the Secretary of the Treasury, or else leave it to the natural operations of the laws of trade ? Mr. Coe. I think not. Had the day never been fixed by Congress, I should question whether it was wise to fix a day. But it has been fixed; and now that everything has been working to the point, to change it is simply to remit the whole country back again to the uncertain condition which will float us away from that point, and we shall lose all that we have gained. I think it much better to continue the effort and let the trial be formally made, whether it succeed or not. Mr. Hardenbergh. Will it cause any further contraction of business between now and the 1st of January next? Mr. Coe. I do not think it will. I believe that its effect has been all discounted, as we say in commercial terms. Mr. Hardenbergh. Are not all operations between now and the 1st of January next that are likely to be made, with a day fixed for resump- tion, made upon a coin basis f Mr. Coe. Yes ; I think the whole country has prepared itself. There is much more in that idea than we think. That expectation constitutes a positive element in the power of resumption: the will of the people to do it. Mr. Hardenbergh. Capital is being hoarded and hid away waiting for some positive settlement of this question. Will capital be likely to make any new ventures and give any new employment to labor while we are pushing on toward redemption rather than it would if the day were blotted out ? Mr. Coe. I think that if the day were blotted out it would impair the confidence of capitalists in our institutions and would send the whole country in the other direction of doubt and uncertainty. Mr. Phillips. It has been stated by the press that when resumption occurs the gold will be forced into circulation and the currency thereby expanded. Is that likely to occur; is the gold likely to go into circula- tion? Mr. Coe. Gold will to a great extent go into circulation. Mr. Phillips. What proportion of the amount that is now locked up will go into circulation ? Mr. Coe. It will all go practically into circulation. 224 RESUMPTION OF SPECIE PAYMENTS. Mr. Phillips. Then it will not be held in such a volume for resump. tion purposes; if it goes into circulation it cannot be held in the Treas- ury 1 Mr. Coe. No, sir ; that is one of the points already involved in the question whether the legal-tenders would go in. If the law of com- merce would carry the legal-tender notes home into the Treasury, it is because they are not needed for commercial purposes. In that case the coin received for them will go in and out of commercial, depositories and will circulate just as the blood circulates in a healthy body. It will not be kept where it will be idle and useless. Mr. Phillips. If the legal- tender notes are reissued may not this be repeated at times when the whole reserve is gone out f Mr. Coe. Yes, sir ; there is the mischief of this reissue. If the legal- tender notes be reissued they will have to continue to be redeemed, and redemption will go on with as much activity, you may be sure, as the emission, if not with a little more. Mr. Phillips. Then, according to your theory, as the legal-tender notes were redeemed, they would have to be retired I Mr. Coe. Tes. In other words, we believe that they will cease to be legal-tenders. My idea is that the law of commerce is a law which draws everything in beneficently, without compulsion, entirely by its voluntary action. But if you interpose (as the legal-tender act did in- terpose in reference to those notes) a new element, giving them a power and character which they had not naturally, that produces mischief. It was that which produced the original suspension. It was supposed then to be a war necessity, and the act was sustained by the Supreme Court on that ground alone. But the war necessity being over, the law of commerce comes in and takes its place, and everything is restored to its normal condition. Mr. Phillips. But the Secretary argues that he should be authorized to reissue at least three hundred millions of legal-tender notes. Mr. Coe. I see that he does, but we must leave him to vindicate that action. Mr. Philltps. You think that it cannot be done 1 Mr. Coe. We shall find out when it is tried. Mr. Phillips. Will it be necessary to retire legal-tender notes in order to maintain resumption ? Mr. Coe. So soon as you open the doors and say that you are ready to resume specie payments (that is, to pay gold for legal-tender notes to everybody who wants it), just that proportion of the legal-tender notes that are wanted for circulation will be kept out, and the other portion will flow in. My own judgment is, that a considerable proportion of them will come in and be exchanged for coin, which is a more useful commercial agent, because a more natural one. In other words, com- merce will not keep coin locked up in the Treasury of the United States when it has the option to hold the notes or the coin itself. Coin is a commercial tool and also a real property which the country has been accustomed to use, and will use again whenever it has a chance. Mr. Phillips. Is not paper money more convenient than coin ? Mr. Coe. For some purposes it is. If it be more convenient, that will make itself felt. I do not believe that you can theorize on that ques- tion sufficiently to justify any conclusion in reference to the volume of paper money that will be kept out. At any rate, you cannot justify the conclusion that people will prefer to use legal-tender notes in preference to coin when they have their option. Mr. Eames. To the extent that the existing paper currency is now in RESUMPTION OF SPECIE PAYMENTS. 225 circulation and required for the purposes of trade, will it not be likely to continue in circulation for the purposes of trade in case resumption takes place on the 1st of January next? Mr. Coe. If the legal-tender currency be required for the purposes of trade, it certainly will be kept out. Mr. Eames. Then only to the excess of what is not required for the purposes of trade will it be likely to be presented for redemption I Mr. Coe. Undoubtedly. By necessity. Mr. Eames. So that, if the three hundred and forty-seven millions of legal-tender notes that are now outstanding as part of the circulation of the currency be required for business purposes, but a very small amount of it, in your judgment, will be presented for redemption in case of resumption ? Mr. Coe. If it proves to be required for the purposes of trade, upon a coin basis, it certainly will not be presented. Mr. Eames. I will ask you the same question in reference to national- bank notes. To the extent that the national-bank notes, in addition to the legal-tender notes, are required for the purposes of trade, is it prob- able that any considerable amount of them will be presented at the counter of banks for coin ? Mr. Coe. Probably not, because the redemption system already estab- lished is the chief avenue by which national-bank notes are brought in. Mr. Eames. Then the only coin required in order to resume on the 1st of January next is whatever will be required to meet this excess, and also to meet the interest which must be paid in coin on the public- debt? Mr. Coe. And whatever commerce wants. Mr. Eames. Would any coin be requisite for commerce if the paper- circulation were equal to the demands of business f Mr. Coe. That would be the question just now asked — whether people prefer paper to coiu or not. Our experience is that they would desire to take both so far as they can. The constant test of a paper circula- tion is its continued redemption. As long as it goes in day by day andi is redeemed, the volume of it will take care of itself. Mr. Phillips. It is a little more convenient to have a twenty-dollar note in one's pocket than a double eagle. Mr. Coe. The great point is the constant test of assurance that it is worth gold. Mr. Eames. If the assurance comes, after the 1st of January, that every legal-tender note presented for redemption will be redeemed, so that the legal-tender note will be equal in its purchasable value to coin, will the business community prefer legal-tender notes and national-bank notes to coin in their transactions ? Mr. Coe. To a great degree they would do so, with perfect assurance that the notes will be redeemed. View* of Mr. Joseph Seligman. Washington, D. C, April 26, 1878. Mr. Ewing. You have been present and have heard the conversation of the committee with Mr. Coe ; and, as it has covered the ground of our inquiry pretty fully, I will simply ask you whether you concur gen- erally in his views ? Mr. Seligman. I do. I have listened with a good deal of interest to H. Mis. 62 15 226 RESUMPTION OF SPECIE PAYMENTS. the exhaustive remarks of Mr. Coe. I think, however, that on one point the question was not properly put to Mr. Coe so as to elicit his views as to how much currency the country would probably be able to take after the 1st of January, 1879. Mr. Coe had remarked in one of his answers that Great Britain had about sixty million pounds sterling of paper in circulation (three hundred million of dollars.) 1 did not fully understand whether Mr. Coe meant anything further than just to mention that fact. It is my opinion that, in this country, by reason of its great size and of the great industry of its people (nearly everybody being interested in some kind of trade or barter, or having a bank ac- count, which is not the case in England, except to a limited extent), the country can float, even after the resumption of specie payment, five or six hundred millions of good paper money in which the people have confidence — that is, the national bank-notes and the greenbacks; the national bank-notes being fully as good as the greenbacks, as they are secured by the bonds of the nation. Mr. Ewing. Do you think that we can float that amount of paper cur- rency with the two hundred and sixty-four millions of coin in the coun- try that Dr. Linderman estimates ? Mr. Seligman. Yes, sir, we can. All that you require is the confi- dence of the people that they can get coin for their notes when they want it. With that confidence the great majority of the people will not go for coin. Mr. Ewing. In order to get that confidence, must it not be based upon such a relation between the volume of coin and the volume of pa- per money in circulation as indicates that resumption is a safety and a certainty? Mr. Seligman. Yes. I think that one hundred and fifty millions, or thereabouts, of gold will prove sufficient to redeem the three hundred or three hundred and forty-seven millions of greenbacks. Eespecting hoarding, the intelligent people in this century do not hoard any more. You will find that, in place of hoarding, people put their money in sav- ings' banks or some other institution, where, if they occasionally do lose money, in other times they are apt to get interest on it. Mr. Ewing. I think the intelligent people who can get coin to hoard will rather put it away in their pockets or in their stockings than in savings banks. Mr. Seligman. They are liable to lose it if they do. You will find among the negroes in the South hoardings of silver, and you will find that they prefer silver to gold. It looks better, and there is more of it. But you will not find much gold hoarded in this country. Mr. Ewing. You think that one hundred and fifty millions in gold will redeem Mr. Seligman. Three hundred and forty-seven millions in legal-ten- der notes. Probably not one half of the one hundred and fifty millions of gold will be asked for. Mr. Ewing. There are three hundred millions of bank notes in addi- tion, redeemable in gold, that have to be practically floated by this one hundred and fifty millions of gold in the Treasury. Mr. Seligman. The banks will take care of themselves by providing greenbacks and gold. We, as a nation, have nothing to do with the national bank circulation. Mr. Ewing. We have this to do with it : Here are six hundred and forty-seven millions of paper afloat, forming part of a redeemable cur- rency. To the extent that people want coin as part of that currency, to that extent the Treasury has to respond. RESUMPTION OF SPECIE PAYMENTS. 227 Mr. Seligman. I take it that the Treasury only responds to the amount of three hundred and forty-seven millions of its legal-tender notes. Mr. Ewing. That is true ; but if a man has national-bank notes and wants gold for them after the 1st of January, 1879, he can draw legal- tender notes from the banks in exchange for the national-bank notes, and he can draw gold from the Treasury in exchange for the legal- tender notes ; so that whoever holds any part of the six hundred and forty- seven millions of paper money and wants gold for it, gets it from the Treasury directly or indirectly. So that the Treasury reserve responds for the whole demand of gold made on that volume of paper money. Mr. Seligman. In a certain sense, of course it does. Mr. Bwing. And, practically, is it not about the same as though the Treasury should undertake to float six hundred and forty-seven millions of legal-tender notes with one hundred and fifty millions of gold in the Treasury 1 Mr. Seligman. Not entirely. Mr. Ewing. Pretty nearly/is it not ? Mr. Seligman. Yes, sir. I take it that, practically, the Secretary of the Treasury has only to look out for three hundred and forty-seven millions of legal tender notes, and that, practically, he will not be run upon at all for gold for them. When I say not at all, I mean that in my opinion he will not have to expend in the whole year for the redemp- tion of greenbacks fifty millions of dollars. Mr. Bwing. The best authority that we can get on the subject — the Director of the Mint — estimates that the people of this whole country east of the Rocky Mountains now have but fifteen millions of gold among them, a part of which is in special deposits in the banks. Do you think it likely that, with six hundred and forty-seven millions of paper money redeemable practically in gold, the people will not draw for their own use (for their current use and for hoarding) over fifty mill- ions of gold f Mr. Seligman. I do believe so. Mr. Ewing. The country is practically bare of gold now. Mr. Seligman. You forget one factor. You have recently enacted the silver bill, under which the Secretary of the Treasury is empowered to pay out silver for greenbacks, and he will pay out probably from twenty-five to thirty millions of silver coin in the course of the year. When people are supplied with this large amount of silver dollars, and when they have (as I believe they would have) full confidence in the redeemable quality of the greenback, I hardly think that there will be any run for gold. Mr. Ewing. I know that confidence is a great substitute for coin for redemption purposes ; but that confidence must be based either upon ignorance or upon data which goes on absolute certainty. Now it can- not be based upon ignorance as to the condition of the Treasury, be- cause the drain of gold from the Treasury would be shown week by week. How can any one assume that the people of the country will have confidence that one hundred and fifty millions of gold will main- tain at convertibility six hundred and forty seven millions of paper, when, in our own history, and in the history of every other country, there is no parallel for anything approaching a redemption supported by so small a basis of coin 1 Mr. Seligman. That is very true, but you leave out of sight that the circulation of national-bank notes is secured, first of all, by a deposit 228 RESUMPTION OP SPECIE PAYMENTS. of United States bonds, and, second, by actual values, by merchandise, by products, or by something representing products. Mr. Ewing. I do not apprehend any run upon the Treasury for gold from the fear that the national-bank notes or the legal-tender notes would lose their ordinary purchasing power, but merely from the free choice of the people to have gold instead of paper, or from a feeling that the Treasury may not be able to maintain resumption, and that, if it failed, gold would be worth some premium over paper. Mr. Seligman. Of course there is that possible contingency; but please remember that we are producing from eighty to ninety millions of gold and silver annually within our own borders, and that, if .we can keep up the present rate of imports and exports, this product of our mines will augment our stock of gold and silver. Mr. EwiNG. Assuming that we can maintain an average production of eighty millions of gold and silver, one-fourth of that is used in the arts. That brings it to sixty millions; and assuming that we can main- tain the favorable balance of trade for the past three years in merchan- dise, we still see that on the average, for three years past, we have ex- ported forty two millions of gold and silver more than we have imported ; so that the accumulations from the product of our mines might be com- paratively small, while the balance of trade in merchandise was in our favor. Mr. Seligman. Please recollect that the agitation of the silver ques- tion has caused a large amount of United States bonds (which were not due for many years to come) to be returned to our shores, and for which we have remitted and are now remitting. I presume the amount of bonds so returned was not less than $75,000,000. Mr. Phillips. Who bought them ? Mr. Seligman. The people of the United States — the institutions, the savings banks, the national banks. They bought them out of their own resources. Mr. Tappan. I bought nine hundred thousand dollars of bonds on the 1st of January. Mr. Seligman. And the very fact of the American people taking up these bonds that are not yet due, at a price above par, in gold, has again created confidence in the European market (notwithstanding that the silver bill was very unpopular), and this has caused our bonds to be on a par in London and New York. Mr. Phillips. Was the reason of their coming back on account of the silver agitation ? Mr. Seligman. Partly. Mr. Phillips. Was it not on account of the fact that we were send- ing something there for them ? Mr. Seligman. Partly that. Mr. Phillips. They would not have sent them unless somebody wanted to buy them f Mr. Seligman. The same people who bought our wheat and cotton did not, probably, own our bonds. The people of the United States were ready to purchase them. Mr. Phillips. The people here preferred buying bonds to buying cloth, and wine, and steel? Mr. Seligman. They preferred buying them to buying railroad stocks and railroad bonds, or to putting their money in savings banks. If we had had nothing to send to Europe for the bonds, and if we had been so poor as not to be able to take them up, of course they would not have been returned. RESUMPTION OF SPECIE PAYMENTS. 229 Mr. Ewing. Still, our bonds may be returned, irrespective of the state of our trade abroad, for causes affecting the views of the foreign holders. Mr. Seligman. Certainly. Mr. Ewing. They can send our bonds here and can always get some price for them, and can ship our gold away 1 Mr. Seligman. Certainly. Mr. Ewing. You are one of the syndicate who made the recent pur- chase of bonds from the Treasury Department 1 Mr. Seligman. Yes, sir. Mr. Ewing. What was the amount of the purchase outright 1 Mr. Seligman. Ten millions firm, with forty millions optional, paya- ble five millions a month. Mr. Ewing. Then you may take or not take the forty millions, as you please I Mr. Seligman. We have already taken fifteen millions, because we subscribed for five millions in addition to the ten millions some weeks ago. Then, in addition to that, I would say that it is deemed prudent by bankers, when they are dealing in large amounts, to get an option — not to take a very large amount, like fifty millions firm, which might be a trifle for a nation, but is a great deal for private individuals. It is necessary to have an option in case of a general war in Europe, for in- stance, or in case of any hostile legislation on the part of Congress whereby United States securities might not be a popular investment, in which case we would cease subscribing for any more than we had already subscribed to. Mr. Ewing. Do you anticipate that, if you take the whole of the re- maining thirty-five millions of 4£. per cent, bonds, the entire transaction will result in adding very largely to the coin of the country by importa- tion I Mr. Seligman. Not very largely. Not more, in my opinion, than from ten to twenty million dollars. We have sent, I think, eight mil- lions of these bonds to London, but have as yet received no account of their being sold ; but I am of opinion that they will be. But whether they be sold in London or not, if we are able to retain the eighty or ninety millions of annual gold and silver products in this country with- out exporting it abroad, then we have accomplished the same purpose ; we have added to the Treasury or to the wealth of the nation so much gold and silver. Mr. Phillips. You say that you have taken fifteen millions of 4J per cent, bonds? Mr. Seligman. We have subscribed already for that amount. Mr. Phillips. They are not yet paid for, are they % Mr. Seligman. A portion of them has been paid for ; I cannot tell the exact amount. Mr. Phillips. In coin or in coin certificates ! Mr. Seligman. In coiu or coin certificates. The account goes through the bank of Mr. Belmont in New York. Mr. Phillips. Was the money paid into the Treasury in coiu, or paid in coin certificates ? Mr. Seligman. There is very little American coin afloat in the banks. They generally hold it in coin certificates. Mr. Phillips. For this fifteen millions of bonds, has there been re- ceived any portion of coin from Europe? Mr. Seligman. 1 believe not. No portion of the fifteen millions sub- scribed for has yet been received from Europe in gold. Mr. Phillips. It was stated by the Secretary of the Treasury that 230 RESUMPTION OF SPECIE PAYMENTS. during the months of January, February, and March the Treasury, did not increase its coin, but tbat the banks had increased their coin to the extent of eight or ten millions dollars; do you know whether that is correct ? Mr. Seligman. I believe it to be correct. Mr. Phillips. When we go to specie payment, the banks, of course, ought to increase their reserves in coin, ought they not ! Mr. Seligman. Either in coin or in greenbacks. Mr. Phillips. Would then the effect of specie payments on the first of January next not have this double tendency — first, to lock up the gold in the Treasury to meet the greenbacks, and next to lock up the greenbacks in the banks to meet the demands on the national-bank notes ? Mr. Seligman. To a small extent it would. Mr. Phillips. Do you know to what extent ! Mr. Seligman. I do not. Mr. Phillips. That would be the natural tendency ? Mr. Seligman. Of course, they would all prepare for the day of re- sumption. Mr. Phillips. The government would hold one reserve for one pur- pose and the banks would hold another reserve for another purpose ? Mr. Seligman. Yes, but please remember that what the government holds is not money now, nor will it be money until the 1st of January, 1879. It is merely metal ; so that the government injures no one by holding on to the gold and silver. Mr. Phillips. If it had to be held in order to meet the outstanding volume of legal-tender notes, it could not go safely into circulation. Mr. Seligman. Part of it will go, very shortly after the 1st of January next. Mr. Phillips. If exchange should be against us, will there not be a demand for gold that will make all holders of legal-tender notes want to exchange them for gold f Mr. Seligman. Fortunately, in the fall of the year and in the winter exchange is rarely against us. We commence shipping in October and November our large crops of cotton and cereals and petroleum, and everything else that is of use to mankind. We are not importing much from Great Britain, France, or Germany, because we do not need much from them. Anything that is of use we can manufacture ourselves. The few knick-knacks and the wine that we import do not amount to much in comparison with the great volume of our importations ten or fifteen years ago, and the useful things we can manufacture ourselves. Mr. Phillips. But there is a constant drain of gold for interest on our thousand millions of debt held abroad. That is a drain of, say, sixty millions a year that is constantly against us. Mr. Seligman. Certainly. Mr. Phillips. In case we should have a bad crop or low prices, is there not a certainty that exchange will be against us f Mr. Seligman. Where do you expect the bad crop, in Louisiana or in Minnesota 1 ? Mr. Phillips. I cannot tell. Mr. Seligman. It isn't apt to be a bad crop in both places at once. Exchange is generally against us in the summer months. Mr. Phillips. It is against us now, I understand. Mr. Seligman. Exchange is just about on a level, 489 to 489£. You cannot export gold today at a profit. Mr. Phillips. It will be in our favor in two weeks, will it not? RESUMPTION OF SPECIE PAYMENTS. 231 Mr. Seligman. I should not be surprised if it should go against us for the next few weeks or more, and if we should export five or ten or fifteen millions of gold. That is possible. Mr. Phillips. The understanding of this agreement between the syndicate and the Secretary of the Treasury is that these 4£ per cent, bonds shall not be sold to any other parties than the syndicate. Mr. Seligman. Except those which he may be obliged to sell, through the action of Congress, for the Halifax award and for the Geneva award, which would be about ten million dollars in the aggre- gate. Mr. Phillips. Would he be prohibited from selling 4 per cent, bonds ? Mr. Seligman. No ; he goes on with the sale of the 4 percent, bonds. Mr. Phillips. But he caunot sell any of the 4£ percent, bonds to any other but the syndicate. Mr. Seligman. Not until after the first of January next. Mr. Ewing. And he can only sell for funding purposes. Mr. Seligman. That is all. The Secretary of the Treasury expressed himself satisfied with the amount of one hundred and fifty millions of gold in the Treasury on the first of January next. We asked him, "What are you going to do with the gold which you will receive from the 4 per cents ?" He said, " If you think that it will add to the credit of the nation, and add to the operation of the 4J per cents negotiation, I will call sixes to the amount of gold which I received from the sale of the 4 per cents," and we asked him to do so. Mr. Phillips. The Secretary is not to be a purchaser of gold with the 4 per cent, bonds 1 Mr. Seligman. No ; except by an agreement or understanding with the syndicate. If he should say to us that he might want to make a large operation in 4 per cents for gold, I have no doubt that the mem- bers of the syndicate would be very glad to give him an opportunity. Mr. Phillips. But he cannot do it without your consent ? Mr. Seligman. No ; he cannot sell the 4 per cents except for funding purposes until after the first of next January. Mr. Phillips. Can he sell any other bonds for resumption purposes before the first of January to the amount of over fifty millions ? Mr. Seligman. No ; he cannot. Views of Mr. George Opclylce, banker, of Neic York. Washington, D. C, April 27, 1878. Mr. Ewing. Do you think it practicable, and consistent with the pub- lic welfare to resume and maintain specie payment on and after the 1st of January, 1879? Mr. Opdyke. That is my present-conviction. Mr. Ewing. Our supply of gold and silver in the country is estimated by Dr. Linderman, Director of the Mint, to be, now, $250,000,000. That includes the coin in circulation on the Pacific slope, the subsidiary coin, and all the coin in the banks, the Treasury, and among the people. We have now $647,000,000 of paper money, without making any deduc- tion for money lost or destroyed. Do you think it practicable to main- tain redemption of that volume of paper money without any larger vol- ume of coin than that? 232 RESUMPTION OF SPECIE PAYMENTS. Mr. Opdyke. My impression is that the amount of coin named is ample ; but I desire to add that I anticipate an increase from the effect of this syndicate sale of government bonds. Mr. Ewing. Mr. Seligman estimated yesterday, in his conversation with the committee, that the gold which we would be able to get from abroad for those bonds would probably be from ten to twenty million dollars. Mr. Opdyke. I should think that a fair estimate. We cannot get any from England, because she has none to spare, but Germany and France have each a very large supply. I desire to add that the effect of placing a large portion of that $50,000,000 of government bonds abroad will have a direct tendency to diminish the exports of the pre- cious metals which we are constantly producing ourselves, so that we will gain in specie reserves from two sources: one from importation from abroad, and the other from retaining our gold product at home. Mr. Ewing. Have you any reason to think that the proportion of gold and silver coin to redeemable paper will not be about the same after resumption in 1879 as it was in 1858 and in 1861, prior to the opening of the war! Mr. Opdyke. I think we will have fully as large a reserve of gold and silver as we ever had in proportion to circulation. From the pres- ent volume of greenbacks and bank-notes you should deduct about $100,000,000 for those that are held in reserve by the banks under the national-banking act, which specie will take the place of. Mr. Ewing. The amount is about $70,000,000. Mr. Opdyke. The last report I saw it was $100,000,000. Mr. Ewing. Their lawful reserve is about $70,000,000. Mr. Opdyke. They generally keep above that. I think that the average for some years has been over $100,000,000. That amount of greenbacks is not in circulation. We should also deduct from our ag- gregate circulation of paper money about $50,000,000 for the loss and destruction of greenbacks and national-bank notes since their first issue. Mr. Ewing. But when people have the choice of gold or silver coin or paper you anticipate that a considerable portion of the currency out- standing among the people will be coin ? Mr. Opdyke. No ; a very small proportion. The people prefer paper. Mr. Ewing. Is it not the experience of this country that at all times a large proportion of the currency in the hands of the people has been coin I Mr. Opdyke. Not according to my best means of ascertaining. Only a very small proportion. Mr. Ewing. In 1857 the coin iu the country was estimated at $240,000,000, of which $58,000,000 was iu the banks, so that there was $182,000,000 of the then coin circulation among the people. Mr. Opdyke. I do not know the source from which you get these fig- ures, but I venture to say they are erroneous. Mr. Ewing. I get them from the report of the Comptroller of the Currency for 1876, and from Fawcett's "Gold and Debt in 1861." There was estimated to be in 1861 $285,000,000 of coin in the country, of which $87,000,000 only was in the banks, leaving $198,000,000 among the peo- ple. There was then only $202,000,000 of paper money outstanding, showing that the coin held by the people was nearly as large an amount as the paper held by the people. Mr. Opdyke. You can rely upon it that that estimate is an exaggera- tion, unless that condition of things emanated from abnormal causes existing at these two periods. W~e had a panic in 1857, when the people RESUMPTION OF SPECIE PAYMENTS. 233 drew a great deal of gold from the banks, when the banks suspended specie payment. Mr. EwiNG. These figures were made up in 1857, anterior to the panic. Mr. Opdyke. Then I have no hesitation in pronouncing this estimate of gold circulation a very great exaggeration. Mr. EwiNG. Going back to 1843, there was estimated to be $90^000,000 of coin in the country, of which about $33,000,000 was in the banks, leaving $57,000,000 in the hands of the people, with only $58,000,000 of paper currency. Mr. Opdyke. There again you get at the tail of another panic, as severe as this which we have been passing through for the last three years. From 1837 to 1843 all the business of the country was paralyzed as badly as it is now. At the various periods you name Imade an esti- mate of the coin in the hands of the people. I did so in pursuance of my studies on this very subject. I estimated, from the best statistics that I could get — and subsequent events have proved their accuracy — that in 1853, between these panics, the amount of small coin required for circulation did not exceed $45,000,000, Tou could not find a man in the city or in the country who had any more gold or silver in his pocket than he required for change. That estimate is found to be quite large enough from our experience in the issue of fractional currency and of the present subsidiary coin. The people could not use more than $40,000,000, so that my estimate is large enough. And 1 tell you that there never was any material amount of gold in circulation in the hands of the people prior to the discoveries of gold in California. If money is hoarded it is not in circulation. To be in circulation it must pass from hand to hand. There has always been a little hoarded on the part of misers, but we never had any such circulation of gold in this country as that estimate shows. Mr. Ewing. This is not the estimate of the coin actually in circulation, but of the coin in the country. Mr. Opdyke. The coin in the country is either in the possession of the banks, or of the government, or in the hands of people in circula- tion, or else it is hoarded. And hoarding we cannot count. It is not money ; it is not in circulation. Mr. EwiNG. These figures demonstrate that when you get to specie payments you may expect the people to hold, outside of the banks (whether hoarded or not), an amount of specie about equal to the paper money afloat. Mr. Opdyke. That is an error. The people hold more gold to-day than they will hold after resumption. In view of the strong confidence of the people in our present paper money, grounded on its perfect security, the banks and the government would be likely to receive from the people a larger amount of gold than they would draw out. Mr. EwiNOr. Tou differ from all these authorities, and from Dr. Lin- derman, who estimates that the whole amount of gold held east of the Eocky Mountains, including all special deposits in the banks, is only $15,000,000. In 1857 Amasa Walker, and other authorities, estimated the amount of gold and silver coin in the country (including that in the banks) at $240,000,000, of which there was in the banks $58,000,000, making outside and among the people an amount of gold very nearly equal to the amount of redeemable paper money. Mr. Opdyke. I can only repeat that I have never seen any facts that would warrant any such estimate at all, and I do not think that they have existed. I repeat what I said just now, that in my belief the 234 RESUMPTION OP SPECIE PAYMENTS. resumption of specie payment will bring more gold from the hands of the people than it will take from the banks and the government. Mr. Ewing. How much gold do you estimate to be held by the people, outside of the Treasury and of the national banks, east of the Rocky Mountains ? Mr. Opdyke. 1 have no means of making any estimate of the amount. Mr. Ewing. You questioned Dr. Linderman's estimate, and I did not know but that you had some figures in your own mind. Mr. Opdyke. My own idea is that with a normal condition of national prosperity the amount of gold in the hands of the people is very mod- erate. There is nothing to induce men to hoard gold. There is no occa- sion for it. In 1857, especially before the panic, I should not estimate that there was over $25,000,000 of gold outside of the banks. I think that a very liberal estimate. I think that there is more gold in the hands of the people to-day, mainly hoarded, than there was then in cir- culation, and that much of it will come out when we resume specie pay- ment. Mr. Ewing. Do you think that the people have been hoarding gold for the last seventeen years ? Mr. Opdyke. I think that the amount is reduced to a pretty moder- ate sum. At one time I have no doubt that there were very large hoards. Mr. Ewing. That was soon after the war commenced. But so far as my observation goes, there is hardly any gold hoarded now by the peo- ple. The big premium on gold brought it all out. Mr. Bell. There is not any gold hoarded at the South at all. What gold there was in the South was so taxed by the Confederate Govern- ment that it was sold in order to get rid of the taxation. Mr. Opdyke. But hoarders do not let anybody know of t.'ieir hoards. But I will tell you a fact which I do know. I know that some of the wealthiest men in New York invested largely in foreign securities — in English consols and French rentes — during the war. That was an indi- rect way of hoarding gold. Mr. Ewing. The amount of coin and bullion in the Bank of England, according to the London Economist, was, in last December, $120,000,000. The amount in the English and Scotch country banks is not given, but it could not exceed, probably, half that sum. Mr. Opdyke. So ; nor one-fourth. Mr. Ewing. That would make, say, $150,000,000 or $160,000,000 in the banks in Great Britain. Mr. Opdyke. Hardly ; because the provincial banks in Great Britain held their reserves in Bank of England notes. Mr. Ewing. And yet there is $772,000,000 of coin in Great Britain. Mr. Opdyke. No one knows that. Mr. Ewing. No one knows it, of course ; but those are the best estimates that can be got. That is the estimate of the deputy master of the British mint. Mr. Opdyke. We know how much subsidiary coin the people of this country hold, by the amount which they took of our paper fractional currency, and since then of subsidiary silver coin. The amount is some- where in the neighborhood of $40,000,000. In England they do not have any notes below £5, save a moderate issue of £1 and £2 notes by the provincial banks ; but during the long Napoleonic wars they had notes as low as £1. I went into an estimate of how much currency Great Britain required to supply the circulation, below £5, during that RESUMPTION OP SPECIE PAYMENTS. 235 period (when the bauks had suspended specie payment). They had to take Spanish milled dollars to supply their fractional currency. The amount that they had in circulation then was a very small sum. It did not amount to over $15,000,000; and they issued of notes below the denomination of £5 not over £15,000,000 at any one time. So that the whole amount of small notes and subsidiary coin that was in circulation in England to supply the vacuum in their currency from the withdrawal of coin was not over $90,000,000. Mr. EwiNGr. I only give the estimate of the deputy master of the mint, who gives the amount of gold in Great Britain at $772,000,000. Mr. Opdyke. I unhesitatingly pronounce that estimate to be erro- neous. One of the highest English authorities lately estimated that the amount could not exceed £80,000,000 ; but in arriving at this con- clusion he made no deduction for the British coiu melted into bullion or consumed in the arts, nor for that which is hoarded or carried out of the country by private hands. These important omissions render his estimate of no practical value, save as a demonstration of the falsity of higher estimates. Mr. EwiNGr. Probably the best way of ascertaining the amount of coin in Great Britain is to take the estimate of the master of the British mint. He could have no reason for overestimating it, and he would have perhaps the best attainable means of making the proper estimate. Mr. Opdyke. I think we had better stick to our own monetary sta- tistics. We know how much it takes to supply the circulation of frac- tional currency. Mr. Ewing. Here is $772,000,000 of coin in Great Britain, of which the banks have but $150,000,000, leaving $522,000,000 out among the people. Of course there is a very much larger proportion of coin used there than there would be here, because the Bank of England issues no notes under £5 notes, and the country banks nothing lower than £1 notes. Still there is $552,000,000 of coin in circulation according to this estimate, against $225,000,000 of paper circulation ; so that according to this, the British people use twice as much coin in their circulation as they do paper ; and, according to our statistics of the periods of 1861, 1857, and 1843, we have held among the people, outside of the banks, nearly as much coin as paper. It seems to me that these facts lead to the conclusion that we must expect the people to take of the gold coin, when resumption is established, about as much as there is paper, and that in order to establish redemption you must be prepared to equalize the quantity of coin and paper in the hands of the people. Mr. Opdyke. Tes, sir. If these estimates were correct, it would re- quire a large sum for that purpose, but 1 dissent from those estimates entirely, both in regard to ourselves and in regard to Great Britain. I have made the study as carefully as any one. Mr. EwiNG. Have you noticed this table on page 35 of the conference with the Secretary of the Treasury ? Mr. Opdyke. I have not. Mr. EwiNG (handing the pamphlet to Mr. Opdyke). It is made up from the best official authorities that we have. Mr. Opdyke (after examining table). If these figures are accurate, it would look as though, in the present condition of things, resumption were hazardous. I agree with you on that point ; but I very decidedly dissent from the accuracy of the figures. Mr. Bell. You say that you dissent from the accuracy of these figures. Can you give us now your own estimates and the data on which they are based ? Have you the means at hand of doing that f 236 RESUMPTION OF SPECIE PAYMENTS. Mr. Opdyke. I have, to some extent, more particularly of our own country. There is one invariable principle in our system of banking and currency, the truth of which has been verified by the entire series of our banking statistics, which is, that the aggregate deposits of banks and the aggregate circulation of notes are equivalents. To-day the amount of national bank-notes and greenback circulation is about equal to the amount of deposits in the banks and subtreasuries. I have studied a long time to find out the principle which should produce that result, and I never have been able to find a better one than this : that the bank-note circulation is equivalent to the payment of the retail busi- ness transactions of the country, and that deposits are equivalent to the payment of wholesale transactions. The wholesale and the retail trans- actions show the same property sold twice and paid for — in its wholesale aspect, by deposits in banks through the use of checks upon the banks, and in its retail aspect, by circulating notes. That is the uniform prin- ciple which has existed in our banking system from the day it started until to-day. It is taken for a series of years, uniform with slight tempo- rary variations, and it gives data on which to make a good many esti- mates. In the first place, it shows that this imaginary circulation of gold coin does not exist. We all know that it does not exist. J8o gentle- man in this room carries gold coin in his pocket when he can get a bank- note to put there. If he uses coin at all, he hoards it and puts it away where it is not of any use. Mr. Ewing. Is that true as to gold coin f Mr. Opdyke. It is especially true as to gold. Mr. Ewing. That has not been my experience before the war. Mr. Opdyke. If we were using both gold coin and paper to-day, you would not go to your hotel or anywhere else and pay gold, but you would pay paper, and the party receiving it would prefer to receive paper — bank- notes or greenbacks — rather than gold. I have never used gold when greenbacks or bank-notes would answer the same purpose. Mr. Ewing. To the extent of $15 or $20 or $ 25, 1 don't think that gold is a cumbrous currency at all. Mr. Opdyke. Well, we do not carry it. Mr. Ewing. You say that the deposits in all the banks are equal to the aggregate of circulation 1 Mr. Opdyke. Yes, and 1 can prove it by these figures here (referring to the table handed to him by Mr. Ewing). The American banks in 1837 had $149,000,000 of circulation, $127,000,000 of deposits. In 1858 they had $155,000,000 of circulation, $125,000,000 of deposits. (There were special causes at both these periods to disturb the principle tempo- rarily by a run on the banks.) In 1877 they had $643,000,000 of circu- lation, $614,000,000 of deposits. That is all the figures that are given in this table. One year the circulation will get a little ahead, and the next year the deposits will get a little ahead, but equality is the normal condition of things. Mr. EwiNG. The difficulty about that is that you have now, say, $647,000,000 in circulation. Mr. Opdyke. But from that you must deduct about $100,000,000 of reserve held in the banks and about $50,000,000 for the loss by destruc- tion of bank-notes and greenbacks since their first issue. Mr. Ewing. That would leave $500,000,000 in circulation, and the report of the Comptroller of the Currency shows an aggregate of $1,240,000,000 of deposits. Mr. Opdyke. I can only say that the Comptroller is wrong. I have not looked at the figures, but his figures are certainly wrong. Here RESUMPTION OK SPECIE PAYMENTS. 237 they are (again referring to the table): " American banks and Treasury, $643,000,000." Mr. Ewing. But tbat table relates to no other banks tban banks of issue. Mr. Opdyke. Exactly. In the banks that do not issue currency you will get but a very small portion of deposits. You would not get $100>000,000 of them in all those banks. Mr. Hardenbergh. Do you include savings-banks ? Mr. Opdyke. No, not savings-banks ; they never carry deposits. If they have money on hand, they deposit it in another bank, in a bank of issue. Mr. E wing. The statement of the Comptroller of the Currency is that there are $1,220,000^000 of deposits in the various banks (there are 4,000 banks in the country besides national banks). Mr. Opdyke. Private banks do not keep deposits in their vaults. In my own private banking firm, for example, most of the drafts upon us come through banks and are settled at the clearing-house. To meet drafts presented at the counter for payment, we draw currency in the morning from banks of issue, and whatever balance we find over at the close of the day's business we redeposit. This is the habit of most of the private banks in New York. Our savings-banks in the State of New York have from depositors hundreds of millions of dollars, but they do not keep them in hand. They invest them in securities and in loans to other banks. Mr. Bell. I understood you to say a while ago that, on the basis of these figures showing the relative amount of coin in the coun'ry and paper circulation, you think that resumption would be extremely haz- ardous. Mr. Opdyke. Yes, in the face of the figures you present but I deny their accuracy. If in a normal condition of business (in the absence of panics and other disturbing causes) we require the amount of coin cir- culation that is put down here, I. should say that resumption would be hazardous ; but, in the face of this, I declare my conviction that we have more gold hoarded in the hands of the people to-day than will be in the hands of the people in circulation after we resume ; and hence that re- sumption will increase rather than diminish the gold reserves in the Treasury and the banks. Mr. Bell. Is it your judgment, in view of the condition of the country, that it is wise policy to increase the coin-bearing debt of the United States to this extent in order to redeem the outstanding legal-tender notes which have now attained almost equality of value with gold? Mr. Opdyke. My judgment is that it will have the most salutary effect on the business of the country to resume at the earliest practicable moment, and it is a very small sacrifice to get what specie may be re- quired for that purpose in exchange for our bonds bearing 4J per cent, interest and selling them at 2£ per cent, premium. We get the coin very cheaply. I do not think that our people will feel that they are on safe ground until we resume. I think that resumption will give a great in- crease to business and a great restoration to confidence. Mr. Bell. Assuming an equivalency in the value of gold and green- backs without resumption, what advantage would resumption give us! Mr. Opdyde. It would give us confidence, which will not come with- out it, nor can business prosper without it. Mr. Bell. Do you think that the appreciation of legal-tender notes has resulted from the operation of the resumption act or from natural causes — from the tendency of everything to a normal condition f 238 RESUMPTION OF SPECIE PAYMENTS. Mr. Opdyke. From the latter, most decidedly. I think that the pas- sage of the resumption act has been a hinderance rather than a help to resumption. Mr. Bell. If that be true, would we not attain resumption by the re- sult of these natural causes as speedily as we would under the operation of law? Mr. Opdyke. Tes ; more speedily and more safely. But, according to my views, which are very strong and decided, we have reached that point to day. Mr. Bell. You think that we have attained practical resumption now? Mr. Opdyke. Yes ; I think that if the Secretary of the Treasury and the banks of the city of New York (it would not require any others), were to publish to-day that they would resume specie payment on any given date between now and the 1st of July next, they would not lose $10 of their gold. There would be no demand for their gold. Mr. Bell. Is it not your judgment, in Yiew of the disparity between the amount of gold in the country and the amount of paper circulation, that the question of maintaining resumption would depend mainly, if not entirely, on the confidence of the people in the government? Mr. Opdyke. That is one of the elements always required; and the people never had any better ground for their confidence than to-day. The indebtedness of our people, both at home and abroad, has probably never been so smaller capita within the last quarter of a century, and our material condition has never been better. Mr. Bell. There being less gold in the country than paper to be redeemed, would not the question of maintaining resumption depend upon the amount of paper which was presented for redemption ? Mr. Opdyke. Certainly ; and that would depend upon the degree of confidence existing. Mr. Ewing. You think that our debt abroad was never less within the last quarter of a century than it is now ? Mr. Opdyke. Never less per capita. We have paid off an immense amount by insolvency and the depreciation of our securities held abroad, and we have paid foreigners $500,000,000 of government bonds within the last three years ; and the mercantile debt, which is usually very largely against us, is, I think, in our favor to-day. Mr. Ewing. Have you any data showing that we have paid off to the extent of $500,000,000 of the national debt? Mr. Opdyke. I saw a statement within the last few weeks of the amount of government bonds held abroad three years ago and now, and the difference in the amount was about $500,000,000. Mr. Bell. What is your estimate of the United States debt held abroad 1 Mr. Opdyke. That table to which I refer was prepared by one of the best financial statisticians in New York — the financial editor of the Commercial. I dare not say at what amouut he figured the debt held abroad. Mr. Bell. Have you an estimate of your own ? Mr. Opdyke. No ; I have not. He kept the run of that better than I could. Mr. HabdenberGtH. If Congress should adjourn leaving the finances as they are to-day, would there not be considerable contraction looking toward resumption 1 Mr. Opdyke. I should think not. I have noticed the financial views of the Secretary of the Treasury for a good many years as a financial RESUMPTION OF SPECIE PAYMENTS. 239 authority, in the Senate and recently in the Treasury. He looks upon greenbacks very much as I do; and he does not intend taking in any more of them than is necessary. Mr. Hardenbergh. What do you suppose would be the effect of a failure in resumption ninety days after the 1st of January f Mr. Opdyke. The effect of a failure would be disastrous. It would prolong the agony. Mr. Hardenbergh. Would it be more disastrous than a temporary repeal of the law and leaving the Secretary to say when we should re- sume? Mr. Opdyke. That resumption law I have always looked upon as a stumbling-block in the way of resumption. Resumption, when it comes, will come from natural causes, and I think that the natural causes have already made the circumstances ripe for resumption. I would not like that we should make the mistake that Great Britain made in 1817; but I do not think there is the slightest danger. England had not then con- tracted her currency anything like what we have done now. Mr. Hardenbergh. Was not England better prepared for resump- tion then than we are now? Mr. Opdyke. Not at all. Englaudwas entirely unripe for it. It was only two years after the close of the great Napoleonic wars. England had expanded her currency, until it was depreciated, as compared with gold, some thirty per cent. The Bank of England bought gold on the Continent. She had £5,000,000 in her vaults and bought about £5,000,000 more, and she advertised to resume on her small notes upon a given day. None of these small notes came in on that day because they were employed in the retail business of the country. That gave the Bank of England confidence, and then she advertised that she would resume in full at the end of four months — on the 1st of October. Mr. Ewing. What was the extent of the depreciation in England when the resumption law was passed ? Mr. Opdyke. It was a mere nominal figure — less than 1 per cent. The bank had not contracted the currency, but had fortified herself by buying gold on the Continent. When the day for full resumption came, the bank opened its doors, and the bullion-dealers stepped in and took half of the bullion in the first hour that the bank was open. They took £5,000,000 out of the £10,000,000. The bank officers hastened to the Parliament house and got an order passed forbidding the bank to pay out any more specie. The Bank of England again closed its doors, and then a law was passed requiring resumption at the end of six years — in 1823. It was the most prolonged agony that Great Britain ever had in her industrial interests. That intense contraction, which brought the currency far below its normal figures, broke nearly everybody who was in business; and in 1821 the bank, from natural causes, resumed — two years before the time appointed. We are in no such condition to-day. I maintain that our currency today (making the deduction which I have suggested) is not more expanded than it was prior to the war, when we were paying specie. The debt of the country is reduced. We are rich in material wealth. We have promising large crops. Come what may, we cannot become debtors in our foreign intercourse at all largely. The balance of trade is in our favor, and it is entirely safe to presume that nobody wants the gold. The people here do not want it, and the people abroad have no means of getting it. Mr. EwiNG. You made a comparison between the situation in 1861 and the situation now. In 1861 we had of paper in the country $202,000,000, and of coin $285,000,C00. 240 RESUMPTION OF SPECIE PAYMENTS. Mr. Opdyke. I want to persuade you that that estimate is a gross error. Mr. Ewing. We have, according to your estimate, $550,000,000 of paper now, and, according to Dr. Lindermau's estimate, $250,000,000 of coin. Mr. Opdyke. That is an abundance of coin. I have alwa5 r s main- tained that $150,000,000, aside from the subsidiary coin, would be ample. Mr. Ewing. No one can claim that we are in a better situation now than we were in 186 1, when we had but $202,000,000 of paper ; and, according to Mr. Amasa Walker's estimate, we had then $285,000,000 of coin iu the country. Mr. Opdyke. I do not want to say a word against Mr. Amasa Walker, because he is really my own pupil. 1 first inducted him in the prin- ciples of political economy. But he is deceived as to the amount of coin that was in circulation in the country in 1861. Mr. Ewing. I am not speaking of the coin that was in circulation. A large part of the coin of the country is necessarily hoarded. Mr. Opdyke. Do you take the position that, in a normal condition of affairs, there is a large amount of coin hoarded in the country "? Mr. Ewing. A very large amount. Mr. Opdyke. O, a very small amount. There is more coin hoarded when we are not paying specie than there is when we are paying specie. Mr. Ewing. You must recollect that nearly half the people of this country do not live within two hours' ride of a bank, and, of course, they carry their money with them. Mr. Opdyke. In times of distress, and when we had banks whose notes were very uncertain, the people would naturally keep a little coin at home to guard against mishaps ; but, with the present greenback currency and the present national-bank currency, secured as it is by the actual credit of the government, and by a large margin in government bonds, there is no such fear and never will be such a fear. We have got the best paper currency that the world ever saw. It would be still better in my judgment if we had all greenbacks instead of national-bank notes. But I know that the banks would growl very much if their cir- culation was taken away from them, and I doubt both the justice and the expediency of doing so. Vieivs of Mr. Qeorge M. Weston, of Maine. Washington, D. C, April 30, 1878. Mr. Ewing. Have you had occasion to study the question of cur- rency and finance to any extent % Mr. Weston. Yes, sir ; I have been, for something more than forty years, a writer, more or less, on such subjects, as an editor of several , papers, and as a writer for financial magazines. I have latterly been connected with the Monetary Commission, as its secretary. I may be said to have been studying the subject all my life-time. Mr. Ewing. What is your opinion as to the practicability of resuming and maintaining specie payment on and after the 1st of January, 1879, with the present volume of paper money ! Mr. Weston. I supposed that that was the principal question to be asked, and in order to give my ideas with precision, 1 have put them on paper and will read them in answer to that main question. RESUMPTION OF SPECIE PAYMENTS. ' 241 (Mr. Weston thereupon read to the committee the following paper): It is undoubtedly practicable to resume to-day, inasmuch as the favor- able balance of our foreign trade prevents any demand for the export of the precious metals, except the constant and permanent demand for silver by the East, for the supply of which our silver mines produce more than enough. As to the future, and even for a future only eight months distant, there is always some uncertainty. But no circumstances seem likely to occur to make it impracticable to resume specie payments on the 1st day of next January. The practicability of permanently maintaining specie payments is another matter altogether. We have no example of a permanent main- tenance of the convertibility of paper in this or any other country, with as large a proportion of paper to coin as will exist here eight months hence. I make this answer on the assumption that the aggregate of greenbacks and national-bank notes is to remain substantially what it is now. Examples and precedents are, to be sure, not absolutely decisive, as every case of this kind differs from others in some circumstances. This country, with paper money of as low a denomination as one dol- lar, can get along with a less proportion of coin than England and Germany, which have no circulating note less than about $25, or than France, which has no circulating note less than about $20. So, too, comparing the United States now with the United States in 1861 and in the years before 1861, when specie payments were main- tained, it is not doubted, as I suppose, that such payments are possible with a greater proportion of paper now than then, from the circumstance that about one-half of our paper circulation — the greenback half — has the function of being a legal tender given to it. This circumstance distinguishes the United States of 1878 from the United States of 1861 and prior years, but does not distinguish this country from England, where Bank of England note shave been legal tender since August, 1834, under a law carried through by the Earl Grey administration. It is true that under that law they are a legal tender only so long as the Bank of England redeems them in specie, but nobody doubts that this is a merely nominal condition, and would be taken off whenever the bank should stop specie payments. It is on the same footing with Sir Robert Peel's fundamental restriction on the note issues of the bank, which is always suspended when the government decides that public exigencies require it. I suppose that, looking merely to the great power of the government^ based on its resources and credit, to command coin, it is practicable to commence specie payments with the present volume of paper, and to continue such payments, but only by such redemptions in excess of reissues as would largely reduce its quantity. No other opinion than that a contraction of the volume of paper was an essential condition of resumption was ever expressed in this country until recently. The present Secretary of the Treasury, just before the 4th of March, 1877, wheu he was still in the Senate, although his designation for his present office was already announced, pressed, through a wearisome night session, but without success, the passage of a law authorizing the cancellation of $100,000,000 of the existing volume of greenbacks. Such a reduction, or some large reduction, was then treated by all the friends of resumption as essentially necessary to it. The United States Monetary Commission, under the Congress resolu- tion of August, 1876, was charged, among other duties, with the duty of investigating the question of resumption. All the witnesses who favored resumption agreed that it was impossible without reducing H. Mis. 62 16 242 RESUMPTION OF SPECIE PAYMENTS. the volume of paper money. On the views which they then unani- mously concurred in, it cannot be long maintained without such re- duction, although it may be possible to commence it without such re- duction on account of an exceptionally favorable condition of foreign trade. Practicability, as applied to measures affecting the currency, is a word of many possible meanings. It was and is financially practicable to establish the single gold standard in this country, and would be so if the quantity of gold in the world was only one-half what it actually is. The question of a standard is only a question of prices, and it is possi- ble to conduct business on any scale of prices. But the establishment of a single gold standard in this country proved to be politically im- practicable, because it involved a reduction of prices to which the pre- ponderant political forces of the country were opposed. Practicability in a legislative sense, that is to say, on such a view of all probable consequences as law-makers should take before adopting any proposed policy, involves a very wide range of consideration. Ee- sumption and the continued maintenance of resumption will hardly be regarded as practicable if it is shown, as I think it is, from an examina- tion of the essential nature of a redeemable paper money, and from the uniform results of trying it, that it is productive of intolerable mischiefs. I admit at once and without reserve that the restored coinage of sil- ver diminishes the difficulties of resumption and of maintaining resump- tion. The coinage of silver, invested with the 'functions of gold, reduces 2>ro tanto the value and the difficulty of obtaining gold, and has already reduced its market price. The United States Mint, to the extent that the law of February 28, 1878, permits it to coin silver, has the same effect upon gold that a new gold mine would have which was certain to turn out two millions per month, or might turn out four millions, at the option and pleasure of its managers. Furthermore, there is good reason to hope that the final and not long-postponed effect of the law of February 28, 1878, will be to substitute silver entirely, or nearly entirely, for the gold now held in this country. The concurrent use of i;wo metals is impossible where the difference of their market value is appreciable. That difference, to-day, between gold and silver is about ■eight per cent., and as there is no present visible cause for a relative rise in silver, except its absorption in our coinage, it is plain that such a rise is not to be looked for until that absorption has made a great and decisive progress. It is not, perhaps, pertinent to the question I am answering to refer to the immense advantage to us of transferring our gold to Europe, where it will tend to raise the prices of our exports, iswmewhat more than four-fifths of which are sent to Europe. It is per- tinent to consider the effect upon the practicability of maintaining resumption, of changing our money metal in use from gold to silver. That effect must be favorable. Silver money will not protect us against European money perturbations as effectually as the greenback has pro- tected us, but still the measure of protection from it is important. India finds in the use of silver a very considerable degree of exemp- tion from the effects of the constantly-recurring money crises in Eu gland, with which the most of its trade is carried on, and we shall reap an equal advantage from the same policy. But with every allowance for the beneficial influence upon the possi- bilities of resumption from the restored coinage of silver, there is a fatal defect in any system of paper, redeemable in either gold or silver, when the metallic redemption fund is not equal, dollar for dollar, to the paper issued. All imaginable expedients have been tried to make such RESUMPTION OF SPECIE PAYMENTS. 243 a System work well in practice ; but the failure has been uniform, and especially in the vital particular of not preserving that essential quality of a sound money, stability in quantity. The promised redemption of paper, not based upon the metals dollar for dollar, is inherently a sham and a cheat. Albert Gallatin said, fifty years ago, of the bank-notes of this country, that they were payable in coin, but always with the understanding that nobody was to call for coin. Stability in -quantity is tolerably secured in metallic money, in which. I include paper issued dollar for dollar ou metal actually deposited and held in deposit, such as the gold and silver certificates of deposit now issued by this government. It is also possible to secure it in an incon- vertible government paper, receivable for taxes and made a legal tender. Of course, the stability of the quantity of such a money as that depends upon the wisdom of the government issuing it. There have been many examples of such stability, as for many years and still in Brazil, and in this country in the greenback. There have been many contrary exam- ples of instability in the quantity of such money, but it is doubtful if some of the cases frequently referred to as contrary examples really are such. The French assignats were substantially notes redeemable in land, and there was an overissue compared with the value of the land. As to the paper schemes of John Law, I have read as many books about them as 1 think their importance demands, and certainly as many as I ever shall read. I have never read one which gave any clear, distinct, and intelligible account of what they were. In respect to the quantity of convertible paper money, it is always and necessarily, from the nature of it, as unstable as water. It fluctu- ates with the fluctuating balances of foreign trade and according to the tendencies of the times and public feeling, whether toward buoyancy and hopefulness, or toward depression and panic. Its range is from frost to midsummer heat, but without the regularity of the seasons. It is one of the worst inventions of perverted human ingenuity, and has inflicted untold miseries upon mankind. When an adverse balance of foreign trade compels the export of any given quantity of coin, the resulting contraction of paper is necessarily greater in the proportion that the paper exceeds its coin basis, and is in fact very much greater than that, as all money contractions involve elements and features of panic. The only way to maintain the convert- ibility of paper against these foreign drains of coin, which always recur at intervals longer or shorter, is to check the drain by making money scarce and reducing prices. The process has been, unhappily, too fa- miliar to Englishmen since their gold resumption of 1821. Their first experience of it after that resumption was the memorable panic of 1825, when the coin of the Bank of England was reduced below one million sterling, and when suspension was only prevented by the discovery at the critical moment of a box of one-pound notes, the use of which was lawful under the (so called) small-note respite act of 1822. In testimony given April 26, 1828, before a Parliamentary committee, Alexander Baring said (No. 119, State Papers, first session Twenty-first Congress) : A sudden change from peace to war, a bad harvest, or a panic year arising from over- trading and other causes, immediately impose the duty upon the Bank of England, which is the heart of all our circulation, for the purpose of protecting itself, to stop the egress of specie, sometimes even to bring large quantities into the country. These in- dispensable remedies are alw ays applied with more or less of restriction of the currency and consequent distress. No care or prudence can enable the great ban k to avoid occa- sional resort to those measures of defense. * * * That the efforts of the bank, in 1825, for self-protection made great havoc among its dependents throughout the country is well known. 244 RESUMPTION OF SPECIE PAYMENTS. la giving these views in 1828, Mr. Baring specially advised the re- rmonetization of silver, because it would facilitate the bank in its efforts to maintain its stock of coin, but the most which he hoped from renione- tizing silver was, that it would cause the disasters inseparable from redeemable paper to recur at more distant intervals. His language was: The greater the facility of the bank to right itself in these constantly recurring ebbs and floods in its specie, the less frequent will be the sudden jerks and changes so fatal to credit and commerce. The truth, established by reason and experience, is, that " sudden jerlcs, fatal to credit and commerce,''' 1 are inseparable from a redeemable paper money. The wildest inflation we ever had in this country, and the one most completely affecting every species of property, real and personal, was that of 1835-36, when all the bank paper was actually redeemable in coin. This was followed by a corresponding fall. The frequent suspensions of coin payments under the system of a pretended and impossible convertibility are the least of its evils. In fact it is only by reason of these suspensions that the system has ever been in any degree tolerable, just as the Eussian Government, not as we now know it but as it was a century ago, was described as a despotism tempered by assassination. Occasional suspensions temper the violence of the contractions of pa- per money and reduce the range of the fluctuation of its quantity. But the inherent vice of fluctuation remains, and that vice belongs to any system of paper money which is convertible at the will of the holder into anything, whether metal, lands, or government bonds. We have had, in recent times, the proposition to make greenbacks convertible into government bonds bearing a low rate of interest. The rationale of this proposition is, that a low rate of interest is the result of superabundant money, and that the conversion of it into bonds would only occur when it was superabundant and would correct such superabundance. But the fact of a low rate of interest of money has always been witnessed when business is prostrated by diminishing mouey. In this country money was as cheap to hire after the collapse of the inflation of 1835-'36 as it is now. Of the contraction of the currency attending the British resumption of 1821, Alison (England in 1815 and 1845) says : There can be no doubt that the reduction of interest has injured the holders of the available capital of the country nearly as much in many cases as the producing classes have been injured by the fall in the money prices of their commodities. * * » Probably it has reduced the incomes of creditors forty per cent. The result of making greenbacks convertible into low interest bonds will be to cause greenbacks to disappear in that way precisely at the times when they are most deficient. The only remedy for that is to make such bonds reconvertible at the will of the holder into greenbacks; but the sole reason which makes that a remedy is that such bonds, being instantly convertible into money, would be accepted and be current as money. In other words, the conversion of greenbacks into reconverti- ble bonds would not reduce the amount of money, because such bonds would be practically money. This remedy is therefore only the substi- tuted mischief, not quite so bad as the reduction of money, but still very serious, of causing the money of the country to be carried, so far as the charge of interest is concerned, at the expense not of its owners but of the tax-payers. In addition to that burden, this would diminish by so much the motive which the owners of money have to invest it in pro- ductive enterprises. When money is abundant and pr : ces rather rising the greenbacks will RESUMPTION OF SPECIE PAYMENTS. 245 be converted into bonds and kept in that form for the sake of the inter- est; but the bonds would circulate freely, each successive taker allowing for the interest which had accrued to the time of taking. The mischief would be limited to the burden thrown upon the tax-payers of an inter- est account on the whole volume of currency. But when prices were falling from a deficient currency, the disposition to hoard at such times, until prices had reached what would be generally considered as hard bottom, would be stimulated by the fact that the hoarders, instead of losing income by keeping their money idle, would be receiving on it what is in dull times a good rate of interest, the security being perfect. Under such a state of things as exists to-day, if we had in addition a 3.65 inter- convertible bond, nearly the whole mass of greenbacks would go out of sight. The plain principle is, that if anything having the function of money, or, in other words, of legal tender, has in addition any intrinsic value, whether a bullion value or a value consisting of convertibility into the metals, or into bonds, or into interest-bearing bonds, the (so-called) in « trinsic value is suspended and useless when it is less than the money or legal-tender value. But when the intrinsic value exceeds the money or legal-tender value, it becomes fatal by destroying the money. In the American half-dollar of to-day the bullion value, being less than the money value of the coin, is totally useless. Everybody knows that the government stamp of half a dollar on the now superseded fractional paper was just as good. A contrary illustration is the well-remembered case of the American silver dollar for twenty years prior to 1873. The silver in it was worth 102 or 103 cents, and that destroyed it as money. It will be just so if you give to the greenback the intrinsic value of con- vertibility at will into a 3.65 bond or any other species of bond. That intrinsic value will be suspended and idle so long as it is less than the value of the greenback as money ; but the moment that intrinsic value becomes greater than the money value of the greenback it will destroy the greenback. The same thing is true of paper money if it is made convertible into bonds, or into the metals, or into anything else what- ever. The plain, common-sense idea of money is that it should be abso- lute, convertible into nothing, but practically exchangeable for all things by virtue of its sovereign function as the solvent of all debts, including debts to the state, or taxes. The supporters of what is called a redeemable paper money, knowing that its fluctuations are fully established by experience, have invented the theory that the quantity of money ought to be fluctuating, or, as they attractively phrase it, elastic. The case requires for its justifica- tion precisely such a theory as that; but in these days, when the market for educated talent is so depressed by an over-supply, no case need lack exactly the defense which is called for. Speaking broadly, money is used in purchases for either consumptive or reproductive purposes. Nobody will maintain that purchases for consumptive purposes, taking the average purchases of a great popu- lation, vary in amount from day to day; nor can it be shown that, in a country of the extent, range of latitude, and varying climate of the United States, and with its diversified crops and productions in manu- factures and mining, more money is required for reproductive purposes in any one week, in any one month, or in any one season than is required in all the weeks, all the months, aud all the seasons. The theory that elasticity is required in money rests upon nothing but the necessity of such a theory in order to justify the fluctuations of redeemable paper money. 246 RESUMPTION OP SPECIE PAYMENTS. The longest maintenance of the actual redemption of convertible paper has been shown in England, where there has been no suspension since, 1821. The Bank of England has been ou the verge of it repeatedly, but has escaped so far at the expense of periodically squeezing and ruining its customers and of spreading bankruptcies through all branches of British commerce and manufactures. In order to maintain specie pay- ments, the Bank of England changed its rate of interest 233 times iu 27 years following 1847, the range of fluctuation being from 2£ per cent, to 10 per cent. In order to maintain specie payments, the Bank of Eng- land has been obliged to reduce England to such a condition that it has been truly and vividly described by a recent English writer as "the pecu- liar seat of monetary crises, just as Egypt is of the plague and India of the cholera." — (London Statistical Society, vol. 34, page 352.) If we go to specie payments, it will be with the certainty of the same accompanying evils, but without the certainty of the same success in maintaining resumption. Because Eugland, which had the whole world indebted to it when it resumed in 1821, and still has the whole world indebted to it, has been able to maintain resumption, although at enor- mous sacrifices, it by no means follows that this country, with its great debts held abroad, can do the same thing. The lesson derivable from the British example is precisely the contrary of that. We know precisely the method by which the Bank of England has checked the outflow of coin, when such an outflow was set in motion by an adverse balance of trade. This method, which was ruinously effec- tual for fifty years, was such a raising of the general rate of interest in England, by raising the rate of its own discounts, as would produce a scarcity of money and a fall in the prices of commodities. Within a year or two it has been found that the Bank of England, although it can control the rate of its own discounting, can no longer control the general rate of interest in the British markets. English financiers and financial writers are at their wits' end to discover some new method by which the outflow of specie can be checked, when it becomes necessary to check it. They admit, in so many words, that " England has outgrown her banking .system,'" but nobody yet suggests the new system to be sub- stituted. If in all the discussions about resumption and its effects in this coun- try there has been any suggestion of the method by which this govern- ment can control the outflow of specie, after beginning to redeem the greenbacks, it has escaped my attention. No possible method occurs to me. The government discounts no notes, and has no such means of affecting the market rate of interest as the Bank of England has had; he government must be merely passive under an outflow of specie, and under its necessary consequences, a demand for the redemption of green- backs and a reduction of the quantity outstanding, no matter to what extent those consequences may go. The only thing which can be done in the way of legislation to prevent an almost complete retirement of greenbacks under certain circumstances which may occasionally arise, is to take away from the national banks the option of keeping certain required reserves in coin or greenbacks, and to compel them to keep such reserves in the form of greenbacks only. Some other useful pur- poses would be served, as it seems to me, by legislation of that kind. Mr. EwiNG. About what amount of paper money do you think may be usually maintained redeemable in coin in this country 1 Mr. Weston. It must be an amount far less than the present amount of paper currency. But the circumstances of the case differ so much in RESUMPTION OF SPECIE PAYMENTS. 247 this country from any other country that nobody can undertake to fix the exact amount. Mr. Eames. Do you think that the paper currency now outstanding (the national-bank notes and the legal-tender notes) is any more than is requisite for the legitimate business of the country? Mr. Weston. The amount of money which it is desirable to have de- pends upon the scale of prices which you wish to maintain. The present amount of currency of all kinds is inadequate to maintain the scale of prices wbich the equity of old contracts requires to be maintained. Mr. Eames. In other words, if I understand you, there is a deficiency of paper money for the business of the country ? Mr. Weston. Yes, sir; a deficiency of money to maintain that scale of prices wbich justice requires to be maintained. Sir. Eames. Suppose that the legal-tender notes and the national- bank notes should be convertible into coin on presentation ; to what extent would the outstanding paper currency of the country be pre- sented for redemplion on the 1st of January next? Mr. Weston. Unless circumstances change between now and the 1st of January I do not see any reason to suppose that there will be any immediate presentation of paper currency for redemption, because the balance of trade is now in our favor. Mr. Hardenbergh. About how much coin do you suppose can and ■will be accumulated by the banks between now and the 1st of January if Congress should adjourn with the finances as they now are? Mr. Weston. I have no idea that there would be accumulated any more reserves, of either greenbacks or coin, than the present amount. The character of the reserves may be changed somewhat, as from greenbacks into coin, but I think that that ought not to be permitted. The banks, as a rule, never keep more reserves than the law requires them to keep. They have done nothing in the way of accumulating reserves that I have any knowledge of. Mr. Fort. Do I understand you to state that redeemable paper cur- rency convertible into coin is not more stable than irredeemable. Mr. Weston. I did not compare redeemable currency with irredeem- able currency, but I attempted to show that redeemable money was essentially and necessarily so unstable as to be an unfit circulation, on account of its instability and fluctuations. Mr. Fort. Is irredeemable paper money fitter or better as a currency than redeemable money 1 Mr. Weston. What I have said in the paper I have read (and I wrote it with some care), is that an irredeemable paper money may be made stable, but that that would depend upon the wisdom of the government which issued it; that we had examples of a fair degree of stability, and examples of a contrary nature. The Brazilian money has been kept steady in quantity for years, and so has our greenback currency. Mr. Fort. Then you think that it would depend mpre upon the sta- bility of legislation. Mr. Weston. Exnctly. The stability of that kind of money depends entirely upon the stability of legislation, but not more so than does the stability of metallic money, when governments exercise the power of demonetizing them, and restricting their coinage. Mr. Hardenbergh. Then the laws of trade would be obliged to con- form to the laws of government ? Mr. Weston. I did not intend to advocate any theory, but to oppose this theory of a redeemable paper currency, which I think to be the greatest curse that ever afflicted mankind. 248 RESUMPTION OF SPECIE PAYMENTS. Mr. Tort. If the government had the ability under prosperity to redeem its paper in coin, would it not be for the general welfare to do ■ so? Mr. Weston. No sir. My objection to redeemable paper money is tbat, as all experience has shown, it is necessarily fluctuating. We had the greatest inflation in 1835 and 1836 when the banks all paid specie. They did not suspend until May 10, 1837. The inflation of all kinds of property was greater then than any inflation that we had during the war. Mr. Fort. When yon speak of all the banks paying specie, you mean, of course, all the solvent banks. Are you not aware that, at that day, and since then, until they were taxed out of existence, we had a class of private and State banks that filled the country with a paper money that was not redeemable 1 Mr. Weston. There was redemption in 1835 and 1836. Mr. Fort. Eedemption by all the banks? Mr. Weston. There may have been some banks in the West which did not redeem their notes ; but in Boston, New York, and other prin- cipal cities, the notes of the banks were as good as gold. Mr. Fort. Are you not aware that banks did exist in New York and Boston, which while having their locality in the Bast, circulated their money in the West and which was not redeemable except at a discount, sometimes of 25 per cent. ? Mr. Weston. In 1835 and 1836, when a bank did not pay its notes, it failed. There have been failures of banks in every year. The paper money of the country in 1835 and 1836 was actually redeemable in gold and silver, and was equivalent to gold and silver. Mr. Fort. By what right could a government issue paper money without a purpose and promise to redeem it 1 In other words, how could the government furnish a legitimate and honorable paper money that was irredeemable 1 ? Mr. Weston. That is one question in the United States and another question in England and another question in Brazil. I did not discuss the constitutional power of this government to issue such paper, but I am ready to discuss it. Mr. Fort. I should like to have your views about that. Mr. Weston. I think that that matter, as a constitutional question, was settled by the decision of the Supreme Court in the legal-tender cases. The Supreme Court, in that decision, did not affirm that the government had any express grant of the right to issue compulsory legal-tender notes, but that the government might issue such notes if their issue were necessary to the execution of other powers of the gov- ernment. The court held in that case that, as the issue of such notes was important, and perhaps essential to the maintenance of war — to the raising and maintaining of armies, &c. — it was justifiable and constitu- tional. Now, it is sometimes said that the court decided in that case that the necessities of war only could justify the issue of legal-tender notes. But the court made no such decision. The court decided that if such issue was necessary in order to execute any of the conceded powers of the government, the government might issue them. Congress might decide that the government could not collect its revenues or taxes, or execute some other of its powers, without the issue of legal-tender money ; and if Congress should come to that decision, I think that the Supreme Court would sustain it. Mr. EwiNG. You state the case a little too strong against the legal- tender power. The decision was, that if the issue of legal-tender money RESUMPTION OF SPECIE PAYMENTS. 249 was an appropriate means of executing a granted power (not a necessary means, but an appropriate means), then it was constitutional. Mr. Fort. (To Mr. Weston.) When these necessities and proprieties shall have passed or may have passed away, what should be done 1 Mr. Weston. Then that constitutional basis of the right to issue legal-tender money falls and ceases, and Congress would have no right to continue the issue of paper money after the necessity for it had ended, or after it had ceased to become an appropriate means to carry out conceded powers. Mr. Hardenbergh. We have reached that state to day. We reached it at the close of the war. Supposing we had an issue of $400,000,000 of irredeemable paper money, founded on nothing but the faith of the government; and supposing that that paper money should become counterfeited (as it very likely would be), how long would it take for the whole of it to be repudiated through the want of faith of the peo- ple in it! A counterfeit bill now can be withdrawn from circulation in some shape, but on your plan it would not be. Mr. Weston. It does not occur to me that there is is any more danger of counterfeiting irredeemable paper than of counterfeiting redeemable paper. Mr. Hardenbergh. When paper is redeemable it frequently reaches the source of its issue and is destroyed, while in the case of irredeem- able paper it would not do so. Mr. Weston. An irredeemable government paper would not come back as often as a redeemable paper. It would never come back for redemption; but still it would come back frequently, because it is re- ceivable for taxes. Mr. Ewing. Is not that redeemability ? Mr. Weston. Yes, sir. Mr. Ewing. Then when you said irredeemable you meant irredeem- able in coin ? Mr. Weston. Yes ; I have so expressed it in the paper which I have read. The receivability for taxes would bring the paper under examin- ation of the Treasury frequently, but not so frequently as if it were re- deemable in specie. Mr. Ewing. Suppose a paper money, receivable for all public dues and private dues, and not redeemable in coin, fixed in amount and in- creased every year in a ratio which would approximate the increase of business demands, what would you say of the stability of such a cur- rency as that ? Mr. Weston. I think that that would be the most perfectly stable money that you can have, and I think that a stable money is what you want. Mr. Eames. How often do you think it would be necessary to change the amount that is now fixed in order to adapt the currency to the changing business of the country ? . Mr. Weston. I am inclined to think that a rule of iucrease corre- sponding with the increase of population would answer. Mr. Eames. Do you think that the money used in the business of the country now is in proportion to the population of different localities ? Mr. Weston. I should think not. Mr. Ewing. Is it important that it should be? Mr. Weston. No; I do not think so; but, taking the iucrease of pop- ulation on the average of all the conditions of the different parts of the country, I do not at present see why an increase of 10 per cent, in the 250 RESUMPTION OF SPECIE PAYMENTS. population is not met by an increase of 10 per cent, in the circulating medium. Experience might show that a different rule for increasing the amount of money than the rule of population might be necessary in order to secure the paramount object of stability in prices, but I do not anticipate it as a matter of theory and present judgment. Vitivs of Mr. Benjamin H. Wright, of Rome, HT. Y. Washington, D. C, April 30, 1878. Mr. Ewing. Please state your views as to the practicability of resum- ing and maintaining specie payment under the law as it stands, as in- terpreted by the Secretary of the Treasury. Mr. Weight. I do not see that it may not be maintained, but I con- sider the plan as very crude and imperfect from its origin. It had not the basis to start upon — not a sure basis. It was done, in my opinion, simply to satisfy the people who are complaining and discontented with the issue of notes, without any specification for payment. The Secre- tary of the Treasury proposes to collect a certain sum in coin prepara- tory to resumption, but he does not bring in, the banks to co-operate with him. The people may seize upon the national-bank notes, present them for exchange in legal-tender notes; get the legal-tender notes, and thus swallow up the whole of the gold in the Treasury. In this way you can see the danger of not having the banks in unison with the Treasury. I think that the amount of legal-tender notes afloat should be at least $400,000,000, and that we should provide for them all. I have heard a good deal said as to the danger of a run on the banks ; but we ought to take into consideration the circumstances in connection with such runs. The run on a bank comes from a suspicion as to its solvency; and that cannot occur now, at least not with any proper man- agement of the government finances. Mr. Hardenbergh. How much gold do you think we ought to have on hand for $400,000,000 of legal-tender notes. Mr. Wright. One-third is amply sufficient; I do not believe that so much will be wanted. Only I propose to establish the credit of the government by having an accumulation of coin which will show to every- body that specie payment can be maintained all the time. Mr. Hardenbergh. You want the coin to lie in the Treasury as a basis ? Mr. Wright. Tes, sir. Mr. Hardenbergh. Then you would not pay it out in order to have resumption 1 Mr. Wright. Tes; I would pay it out if it was demanded. The fal- lacy that exists here is, that the paying out of gold increases the circu- lation. It does*not increase the circulation to the amount of a dollar. It is a mere substitute for the paper circulation; and if you pay out a dollar in gold you take in a dollar in greenbacks, and keep it in for the time being, so that there is no increase in the circulation. In the bill which I prepared, I have provided for the amount of $400,000,000 in legal-tender notes, because I think that that much circulation is needed. I happened to address a Senator yesterday in reference to that very question, and I have here some written remarks in reference to the bill before the Senate committee which, with the consent of the committee, I will read as part of my statement. (Mr. Wright read the following paper) : RESUMPTION OP SPECIE PAYMENTS. 251 Sufficient objection is expressed, in the remarks to be found in a pam- phlet entitled " Resumption made easy," to the plan the Secretary of the Treasury is essaying to carry into operation on the first of January, 1879. But a bill having been introduced in the Senate, by its Finance Committee, the provisions of which'are modifications of that plan, the question now arises, do the modifications correct the previous defects and guarantee success f The present resumption law meets the condemnation that is certain to be the fate, sooner or later, of every law passed by any legislative body with undue haste or without careful consideration. It was solely a declaration, made to quiet the public demand for the removal of the discredit attached to the circulation of notes stipulating no time of pay- ment. It had no certain basis. Its birth was in a party caucus, a cen- surable adjunct of a legislative hall; excluding those whose patriotism will not permit them to make party interest paramount to the welfare of the nation. A party caucus is the recourse of a designing individ- ual to accomplish his purpose through force of numbers alone, silencing reason and sound judgment. Every public measure is entitled to free discussion upon the floors of Congress; and even if the present law was perfect, its provisions, we think, might still be a question of princi- ple, when the power comes to do it, whether it should not be repealed and re-enacted for the express purpose of discountenancing such initia- tory proceedings and outside combinations that moreover in their con- tinuance imperil the liberties of the country. But there exist other rea- sons, without those just referred to, demanding the repeal of the pres- ent law, and as the latter is a mere declaration it leaves to chance that which should be brought under a regularly organized system. The bill reported by the Senate Committee on Finance does not cover the objections to the present plan of resumption. It makes the promis- sory notes of the government receivable for customs after the first day of October ; but it should be seen that this measure cuts off for the period of three months the collecting of resources from that source for resumption on the day appointed. If the fund was already full at the time of the passage of the law and a* surplus besides that would not allow it be impaired meanwhile, then there could be no objection. But there is to be a specified amount in the Treasury on the first day of January, and if that amount should not be there, what then ? If noth- ing more, it would of itself be a discredit to the Treasury. " There is a time for all things under the sun," is a forcible adage equally applica- ble to political affairs. The present law is overflowing now with uncer- tainty' in regard to its execution ; and as the proposed measure simply increases them, it is unwise to adopt it. The law itself should be repealed, desirable as resumption may be. Resumption is practicable in a safe and certain method, and we think can be maintained by means of our production annually; all gold demands from abroad are now met, and we see no reason to doubt, by the immense increase of our resources, will continue to be. Most emphatically, on no account should resumption take place, of the government notes, without bringing the banks into full co-operation and equal footing to the extent that may be necessary. Assumed agreement or assent is to be rejected, however promising in the outset. The action of the banks must be controlled by superior authority, and the whole brought into a system of perfect unison. It is the same as any mechanical system ; there must be a regulator. It is indispensable. If there was no other grouud to question his financial ability, all that would be necessary is to read the crude views of the Secretary of the 252 BESUMPTION OP SPECIE PAYMENTS. Treasury in his conference with the House committee. He says : "The banks will take care of themselves; will resume on legal- tenders." Is he so short-sighted as not to foresee that when gold is asked for, at per- haps a distant point, it will be tantalizing to offer legal-tenders that the receiver may himself be obliged to send to the Treasury with transport privilege to procure what he needs 1 That will be a certain breeder of discontent. Brought all under one system, the bank-notes will be good in the commercial cities without discount, being redeemable there if wanted, but a discount exacted otherwise. Another provision in the bill directs that the calling in of the govern- ment notes shall cease ou the 1st of October. The writer has had the misfortune to present a plan of resumption that cannot have received the attention of the members of the committee that it deserves. One most important omission we have referred to in the last paragraph. The subject demands large and comprehensive views. Now let us just for a moment bring before our minds the strides this country is taking. Who is it that fails in foresight, or does not have sufficiently enlarged views to keep up with its progress 1 All of us. In 1874 the writer had the audacity, against the opinions of so called financiers, to recommend that the volume of government notes should not be reduced ; on the contrary, again extended from 382 to 400 mill- ions. We are now in the year 1878, the volume of government notes reduced to 347-48 millions, 70 millions of that out of circulation in the banks, and always will be to a considerable extent, as deposits ; 33 millions in the Treasury. The most of it and probably all the amount will remain, because reductions will be replaced; and the country at large deficient in currency (see bankers' statements before House commit- tee), despite the great depression of value and consequent increase of purchasing power. What means this ? Nothing more nor less than that the nation is absorbing currency in districts not before supplied, and in its increase of population faster than it is provided. Legislators, look at the facts! The notes of the government are wanted for daily use, gold for little besides commercial purposes. Take up the plan pro- vided by the writer, study its provisions carefully, and if they are the result of sound judgment, restore the issue' to 400 millions, just as it is in the plan, with the supplement when needed, and provision is made for its convertibility. It should be done at once, to show to the people that the time for action is come. Then will you see coinage revive, and if the plan is carried out the credit of the nation will advance as the coin accumulates, and you will be regarded as worthy representa- tives of the wishes of the people. Mr. Wright (continuing). The Senator to whom I spoke said that not one-third of the Senate would be in favor of the repeal of the re- sumption act; and he told me to mark his word for that prediction. Still, when they see things in the proper light they may change their opinion, if there is time enough to do so. Iu the pamphlet which I pre- pared and had published, I did not go into the figures in relation to the circulation, or to our distributive share of the world's circulation, &c, because I think that such figures are all uucertain. I see that you all get bewildered with the carrying out of that idea; but you must come to the plain matters of fact. We are in debt. Let us see if we can maintain our credit. But there is no resumption proper until you bring all into co-operation with the government. The banks must be drawn in to co operate with the government; otherwise they will not do so, and resumption will fail. RESUMPTION OF SPECIE PAYMENTS. 253 Mr. Fort. I do not exactly see how you propose to have the banks co-operate. Mr. Weight. I would make them furnish funds for resumption. Mr. Port. In what way ! Mr. Wright. In the way that I have suggested in my pamphlet. The Secretary of the Treasury, for instance, may say to the bank in the town where I live (a bank of $100,000 capital), "Send me $5,000 in legal-tender notes." He takes that $5,000, and makes an exchange with a bank in New York that holds a large amount of coin ; and inthis way he strengthens himself. Mr. Fort. Under what obligation would the bank be to sendTthat $5,000 in greenbacks when called upon by the Secretary of the Treas- ury? Mr. Wright. The Secretary should be authorized to exchange with the bank. Mr. Fort. Exchange for what? Mr. Wright. Exchange for coin. Views of Mr. Henry A. Heiser, of New York. Washington, D. C, May 3, 1878. Mr. Ewing. What business have you been engaged in ? Mr. Heiser. In the banking business. Mr. Ewing. Do you think that it is practicable for the Secretary of the Treasury to maintain specie payment with the present volume of paper currency 1 Mr. Heiser. No, sir ; it is impossible. Mr. Ewing. Please to state why. Mr. Heiser. Because the drain on the Treasury for gold will reduce the supply to such a small amount as to alarm the holders of green- backs, and to cause a general presentation of them at the Treasury for payment in specie; also because we are liable at any moment to be called upon to ship gold to Europe, and an export of twenty-five millions would cause an immediate suspension of specie payment after resump- tion. I do not think that the estimates in the public press and the ideas that the papers are holding out to the people, in connection with specie payment, are correct. They add to the amount of gold in the Treasury the amount that is in the banks, and in that way the people are led to believe that there is a much larger amount of gold in the country than there actually is. If the gold certificates that are in the banks were presented at the Treasury and were paid in coin, the government would necessarily hold that amount less of coin than it holds to-day ; and if these certificates be paid to the government by the syndicate, on account of its subscription to the 4^ per cent, bonds for resumption, the banks will lose all the gold that they apparently hold at present, while the amount in the Treasury would not be increased one dollar. Mr. Ewing. Do you think that, after resumption shall have been com- menced, there will be any considerable demand for gold for home use "1 Mr. Heiser. Yes, sir; I think that, after resumption is commenced, any person who has a balance in a bank to his credit can ask to have that balauce paid in gold or currency, and I think that the fact that gold is such a novelty to a large proportion of the present population of the country would lead a great number of storekeepers and others 254 RESUMPTION OF SPECIE PAYMENTS. throughout tbe country to give notice to their customers that they have resumed specie payment, and that they will take pride in payiDg their customers in five-dollar, ten-dollar, and twenty-dollar gold pieces ; and on account of the novelty of such payments, the people who receive such pieces from the storekeepers will take them home and put them away, so that they will be virtually retired from circulation. I think that the amount of gold that would be so retired would be at least forty millions of dollars, which would be less than one dollar per capita of the popula- tion of the country. Mr. Ewing. After specie payment had been established sufficiently long to give the people their free choice between paper and gold, what proportion of the currency actually in circulation among the people do you think would be in gold and what proportion in paper? Mr. Heiser. I think that one-third of it would be in gold. The people have become so familiar with paper currency that they really like it. It is convenient. Mr. Ewing. Taking gold and silver together, what proportion would they form of the money actually in use among the people ? Mr. Heiser. I think about 50 per cent.; that is, provided that the silver coinage is maintained. Mr. Ewing. And that 50 per cent, of specie would be in addition to the amount that would be held by the government as reserve for re- demption 1 Mr. Heiser. Yes ; that 50 per cent, would be in circulation among the people and in the banks. Mr. Ewing. If we are to maintain in circulation six hundred and forty-seven millions of paper money, then we should have a like amount in coin ? Mr. Heiser. No; because that would be 100 per cent. Mr. Ewing. What proportion of the whole volume of the circulation would be coin and what proportion paper ! Mr. Heiser. I mean that if there was six hundred and fifty millions of paper money in circulation, the country would also maintain three hundred and twenty-five millions of gold and silver in circulation — one- half of the amount of the paper money. Mr. Ewing. What amount of gold coin would you estimate to be in the country now, outside of national banks and of the Treasury, east of the Eocky Mountains ? Mr. Heiser. I think that ten millions would be a very large estimate. When the banks estimate the amount of coin on hand, they include coin certificates. There is not much actual coin in the banks; but they count as gold on hand coupons and gold checks, payable through the clearing- house, and in that way, on account of the system of counting checks as gold, the amount of gold in the banks is sometimes overestimated. For instance, I may have ten thousand dollars in gold to-day in the Park Bank, and I may draw checks against it in favor of different merchants who want the gold to pay duties; and they put those checks in their banks and make checks against them to pay the custom-house broker ; and then the custom-house broker may put the checks in his bank and draw against them ; so that that gold would be counted three times in all, which would triplicate the apparent amount of gold. I am satisfied that the bulk of the gold which we have looked upon as being hoarded has been sold by the people. The people commenced to sell their gold just after General Lee's surrender, and they have sold it since then, from the idea of specie payments and on account of the decline in the RESUMPTION OF SPECIE PAYMENTS. 255 premiums; so that I think there is a very small amount of gold in private hands. There is another feature in connection with the gold in the New York banks, and that is, that that gold belongs almost entirely to foreign bankers. Mr. Belmont, who represents the Rothschilds, owns a large amount of it, and so does the Bank of Montreal and other Canadian banks. They keep their gold in New York because they have been able heretofore to lend it out at better advantage than they could lend cur- rency. And these bankers are liable at any moment to withdraw their gold. If the gold that is in the banks actually belonged to the banks, and if they were willing to give that gold to the government in ex- change for 4J per cent, bonds, and if they were authorized by Congress to hold those bonds as a reserve, then I can see how the government could say, " We have got this gold and can keep it." But the fact is that the gold is here to-day and may be gone tomorrow. Mr. EwiNG. When you speak of the gold in the New York banks be- ing owned largely by foreigners, you refer to the gold represented by gold certificates, as well as to that on deposit in the banks. Mr. Heiser. Yes ; I refer to the gold and the gold certificates in the banks of New York. There is also another feature connected with this resumption ; that is, that if the bill which has passed the House in re- gard to the reissuing of greenbacks shall become a law, that will give us ultimately a very large inflation of national bank currency, because the national banks can, by depositing bonds in the Treasury, receive from the Treasury a certain amount of circulation. They have only to hold 25 per cent, of reserve against their circulation and deposits, and if the volume of greenbacks be kept up to its present amount — three hundred and forty-seven millions — that would give us ultimately over twelve hundred millions in national-bank notes; and, in order to main- tain that amount in circulation at par with gold, it would be necessary to have more gold than we now have. Besumption can be effected, so far as the Treasury goes, by a rigid contraction and by the ultimate payment in gold of the last greenback ; but that does not mean resump- tion so far as the country and the banks go. What the people want is to be on a specie basis, not only with the government but with the banks and among themselves, and I do not see that we are anywhere near to such a point. Mr. Ewing. What would probably be the effect of a foreign war on our maintenance of resumption ? Mr. Heiser. I think that the first effect of a foreign war would be large purchases of gold by speculators in the New York market. I am speaking of it now when gold is at a premium. I think that the specu- lators would buy a large amount of gold, because it takes very little money to buy gold when the premium is so low. I think that the rise in goid woulu tend to attract the attention of others. I mean that of men who have money on hand in banks, and who would buy gold, not as a speculation, but simply as an investment for safety. I think they would be apt to buy gold with greeubacks and hold the gold, because they have seen what effect wars in Europe have had on the gold market before. At the time of the Austrian-Prussian war, and also of the Ger- man-Franco war, we had large exports of gold from this country. No one can foresee the results of a war in which England would be en- gaged, nor how long it would last, and people would want to have gold on hand to secure themselves. If England and Russia go to war, I think there will be a system of privateering on the part of the Russian Government which would destroy British commerce. The destruction 256 RESUMPTION OF SPECIE PAYMENTS. of British commerce would affect its credit, and the rate of exchange ■would be advanced up to the point of shipping gold, and then gold would be shipped from this country to the other side to a very large amount— possibly $50,000,000. 1 also think that the effect of a war on the other side would tend to send back from there most of our securities, in the first place, on ac- count of the Bank of England advancing its rate of discount ; next, on account of the loss of gold from this country, showing the people on the other side our inability to resume specie payment ; and next, be- cause the Treasury would have to take greenbacks instead of gold in payment of duties; and so the stock of gold would be depleted, and the bondholders would have to take the risk of being paid in green- backs, not only for the interest, but also for the principal of the bonds. I think, therefore, that a war m Europe would tend to send our bonds back, and there would be no hope of selling any more 4 or 4J per cent, bonds for some time to come. Mr. Eaving. The Secretary of the Treasury was under the impression that a foreign war might create a feeling of distrust in European se- curities, and might dispose capitalists there to invest in American se- curities. Mr. Heisee. I do not think that it would have that effect. The Eng- lish mind thinks that there is nothing so good as English consols. During the war, consols might go down to a low price, thereby increas- ing the amount of interest to the investor, and then I think that an Englishman would rather have his consols at any time than United States bonds. Mr. Ewing. Do you think that we can safely rely on continuing the balance of trade in our favor 1 ? Mr. Heiser. No, sir, I think not. The balance of trade which now is in our favor, is produced by two causes which are not likely to remain in force. One is the great poverty of the American people, which lias caused a large falling off in the importation, not only of articles of lux- ury but of articles of actual need, and which, on account of our poverty, we have been forced to do without. Tbis has reduced the volume of our imports very greatly. On the other hand, on account of foreign complications and of the war between Turkey and Russia, there has been a very large amount of grain exported from this country, a large portion of which was on speculation, as is seen by the number of fail- ures that have taken place in the grain trade on the other side. It had been thought in Europe that the war would make a larger demand for our cereals than has really taken place. Now, if there should be no war between England and Russia, the chances are that with the present amount of grain which they have on hand in Europe and with the re- turn of the Russian soldiers to the paths of peace and industry, there will be less demand for our crops in the next year than there has been this year. Consequently, our exports will fall off. We exported very largely of pork, but pork to-day is at $8.75 a barrel, as against $17 a barrel a year ago in Cincinnati. Mr. Sherman made a statement that the decline in the gold premium of nearly 10 per cent, within the jear has hurt no one; but I consider that that decline has caused this country losses which would really amount, if figured up, to as much as the whole principal of the public debt. The shrinkage in the value of real estate and of all classes of merchandise throughout this country, is something enormous, producing bankruptcy and ruin. Of course, if we can have resumption, some losses must ultimately be sustained, but the question RESUMPTION OF SPECIE PAYMENTS. 257 is whether it is proper to make these losses in order to attempt resump- tion which cannot be maintained. Mr. Ewing. When resumption is established would all the banks practically have 1o pay gold freely to their customers as they demand it? Mr. Heisee. Yes; the banks would stand the same as they stood in April, 1861, before Port Sumter was fired on. At that time we had specie payment, and the banks were ready, without any dispute at all, to give a man all the gold that his check called for. They have got to occupy that position in order to have a real resumption. They must be ready to meet all demands. Mr. Bell. Do you not think that the apprehension of the inability of the government to maintain specie payment would result at once in a panic ? Mr. Heisee. It would be very apt to have that effect. People would say, " We have been for seventeen years under suspension of specie pay- ment, and some of the papers say that they do not think specie pay- ments can be maintained, as the Treasury has only got so much gold — one hundred and twenty-five millions as against seven hundred millions of paper money. I think I will take out some gold anyhow, as it will not do any harm, and we will see after a week or two how the thing works." If any bank falters in paying specie there will be an immediate demand for it. If a man goes to his bank in the country and says he wants gold, and if the bank says that it has no gold, but that it will pay him in greenbacks, he will be apt to say, "I do not call that resumption ; I want gold." And the result will be that every country bank will have to be supplied with gold in order to meet any possible demand that may be made upon it. At present the bulk of the gold is in the seaboard cities, and it is in that form which, in my judgment, has been always dangerous — in the form of gold certificates. The smallest denomination of gold certificates is, I think, $20, and, therefore, if a bank wishes to meet the demand for five-dollar gold-pieces it will have to do so from actual coin, and that will cause the presentation of a large amount of gold certificates to the Treasury for redemption in small coin, which will be shipped by express here and there to the different banks throughout the country; and these coins will be taken out of the banks and carried around in people's pockets, and will disappear. That thing is already taking place in New York City. Mr. Bell. That accords entirely with my own view. Mr. Heisee. I have had a good deal to do with people in buying and selling gold and bonds, having acted as agent for the government dur- ing the war in disposing of its bonds, and I know human nature pretty well. A good many men carry their hearts in their pocket-books. Mr. Sherman thinks that the American people will be like the Prenchman, and that they will not want gold if they know they can get it ; but I do not think that that will be the case after an experience of fifteen years with depreciated currency. Mr. Ewing. You spoke of the use of gold certificates to meet this popular demand for gold, and you think that the certificates will not be available ? Mr. Heiser. No, sir. Mr. Ewing-. Because the greenback becomes a gold certificate after the 1st of January, 1879, and is just as high a demand upon the Treas- ury as a gold certificate itself ? Mr. Heisee. Certainly, I think that. But, while a man would not want to carry around $1,000 in gold in his pocket, he is willing to take a gold certificate and fold it up and carry it in his pocket-book. If there H. Mis. 62 17 258 RESUMPTION OF SPECIE PAYMENTS. is any doubt at all in the mind of the people, the preference would be given to gold certificates over greenbacks, on the idea that the govern- ment could not refuse to pay the gold certificates. Mr. Ewing. The Comptroller of the Currency reports two thousand two hundred and twenty millions of deposits in all the banks of the United States ; add to that six hundred and forty-seven millions of paper money. That makes two thousand eight hundred and sixty-seven mill- ions of demand claims, all of which are practical demands for specie so far as the people want specie. The preparation for resumption must include the supplying of gold for so much of that two thousand eight hundred and sixty-seven millions as the people want to turn into gold. Mr. Heiser. Yes, exactly. Mr. Bell. Then the whole question will depend upon tbe amount of gold that the people want ? Mr. Heisee. Yes, sir. An advance of one point in exchange might take out of New York in one week five or six millions of gold, and the people would get to talking about shipping gold and would become alarmed and would begin to convert greenbacks into gold. Mr. Ewing. Irrespective of any doubt in the minds of the people as to the success of resumption, is it not true that the people, if they have their free choice, will use at least half as much coin as they will use paper ? Mr. Heiseb. I think so. Mr. Ewing. Even though they regard resumption as a certainty? Mr. Heisee. I think so. I think that the coin will gradually enter into circulation in the different branches of trade and business more and more widely, and be more and more absorbed, and that it will require a much larger amount of coin to maintain resumption than seems to be now contemplated on the part of the Secretary of the Treasury. Mr. Ewing. A large number of people who hoard money — not people in cities, but people out in the country who keep considerable sums of money in their houses — farmers, trades-people, &c. — would they not naturally hoard gold in preference to paper ? Mr. Heiser. They will, unquestionably ; and I think that that idea of hoarding will become more and more prevalent for the next year or two, on account of the great doubt thrown upon onr savings-banks sys- tem. People have met with such heavy losses through the savings- banks, and they get so little compensation for their work, that they will want to keep their money at home, and they will keep it in gold. I think there will be a very large amount of gold locked up in that way. Mr. Ewing. You spoke of the probability of an increase of bank cur- rency on the theory that resumption is fairly established. What will be the effect of that increase on prices and consequently on exports ! Mr. Heiser. If there should be a lot of new national banks started to-morrow they would have no effect at all, because the money would simply lie idle on account of there being no means for its employ- ment. But, with the restoration of confidence, if there comes a revival of the industries of the country, and if the result of those industries will give accumulated capital, so that parties who have made money can meet together and say, "Let us organize a bank," I think that the or- ganization of banks, under that condition of affairs, would give us what we call inflation, and eventually raise the prices of commodities in the country. Mr. Ewing. And what would the effect of that be on the balance of trade ? Mr. Heiser. The effect of that on the balance of trade would be to RESUMPTION OF SPECIE PAYMENTS 259 turn it against us, because the moment we have what is called better times here, we immediately commence to import the articles which we have heretofore denied ourselves on account of our poverty. The popu- lation, of this country is constantly increasing, and we need more and more foreign articles from year to year. Mr. Bell. And does not that increase of population necessitate an increase of currency? ~; Mr. Heiser. Yes, of course we want more currency. I do not think we have as much currency per capita to-day as we had in 1861. In 1866 the currency was at its maximum of inflation. At that time the war was just over. Prior to the close of the war all of the currency was in the North, East, and West, and even then we found it scarce at times, and found a stringency in the money market in New York, particularly at seasons when money was most needed for the movement of crops. I claimed at that time that the settlement of the war did away with the barrier against the extension of the currency, and let it spread over a larger surtace; that that brought about a natural and healthy contrac- tion of currency; that these greenbacks were the tools of commerce which the country wanted in order to repair the devastation and de- struction of war, and that these greenbacks floated the commerce of*the country. In 1868, when Mr. McCulloch made his Fort Wayne speech, in which he advocated contraction, Mr. Wendell Phillips said in Boston that we had now entered into the valley of the shadow of death. That contrac- tion has been urged upon the country ever since 1868. It culminated in the panic of 1873. Ever since 1873 we have had the idea that, as we have had the smash, now we should let ourselves go to " hard pan," and we have been getting to " hard pan" ever since, but have not got there yet. The country is growing poorer and poorer. But the cause that gave us all this inflation exists to-day — that is, the bonded debt of the country and the debts of States, cities, towns, and villages, and also the watered stock of corporations in this country — for instance, the New York Central Bailroad, with its fifty millions of watered stock, charging extra rate for freight. We raised a large building and got the roof high up, and now we are going to work very industriously to take away all the foundations. Mr. Ewing. Will not the rise in prices result necessarily in diminished exports? Mr. Heiser. Yes, sir, of course. Mr, Ewing. And therefore tend to make gold the article of export to supply balances ? Mr. Heiser. Exactly, it will tend to turn the exchanges against us by stimulating imports and contracting exports. Mr. Ewing. Have you any means of estimating the amount of our indebtedness abroad of all kinds ? Mr. Heiser. I have no reliable data to go on. I have discussed that subject very frequently in the subtreasury, in New York, with the assist- ant cashier. He can, from the amount of coupons presented by the for- eign bankers from time to time, estimate it pretty closely, and he esti- mated that there was about six hundred millions of our government bonds held abroad. But, in addition to the amount of government bonds so held, there is a very large amount of bonds of different States, New York, Connecticut, Rhode Island, Massachusetts, &c, and a large amount of the bonds of our leading railroad companies. I think it fair to assume- that the amount of American indebtedness held on the other side 260 RESUMPTION OF SPECIE PAYMENTS. requires a remittance from this country, to pay the interest, of at least seventy millions a year. Mr. Bell. Is there not also an element of individual indebtedness abroad ? Mr. Heiser. There is a very large element there which is scarcely considered — that is, what I call absenteeism — Americans living and traveling abroad. There is also another very important element, that is, the amount of freight-money paid on our foreign commerce, all our foreign commerce being done in foreign bottoms. That is also another thing which is not properly considered. Then, again, in our tables of exports and imports, we rely entirely on returns from the custom-house of the invoice value of those goods, but there is, and always will be, a very large amount of smuggling and undervaluation of goods, which amounts to a great deal more than there is any idea of. Mr. Bell. That has been true in all ages and in all countries. Mr. Heiser. Yes, sir, and always will be. Mr. Ewing. What would you suppose the drain through absenteeism would amount to 1 Mr. Heiser. It is very difficult to get at that, because a large num- ber of our people are living abroad now on account of cheapness. The character of absenteeism now is different from what it was before, when people went abroad merely for pleasure and to spend money. I think that it is within bounds to say that at least ten millions a year is spent abroad by Americans. Prices in this country are lower to-day than they were in 1861. Mr. Ewing. And is not the tendency still downward ? Mr. Heiser. Yes, sir; cotton goods are lower to-day than they have been for thirty years. Mr. Ewing. What would you say as to our having touched bottom if we were to try resumption 1 Mr. Heiser. I do not think that we have touched bottom. I think that the evils which we have already gone through are nothing com- pared to what we will have to go through if we attempt resumption. Mr. Ewing. You think that there will be a very large contraction of the paper currency ? Mr. Heiser. I do. Mr. Bell. Will not that necessarily involve a still further shrinkage in values'? Mr. Heiser. Of course, and in an accelerated ratio of proportion. If a railroad company fails and goes into the hands of a receiver, he com- mences at once to practice economy. The credit of the company is gone. The rolling-mills and the workshops that had been supplying it before have immediately to dismiss their operatives. These operatives have no money to spend and they immediately cut off their purchases in the country store. Mr. Bell. And that state of affairs extends through all the circle of industry? Mr. Heiser. Yes ; just like a stone thrown in the pond. The ripple has to reach the shore. There is no stop to it. The only way to revive business is to do something that will turn the current of public opinion and check this continued decline. That would have been done before if General Grant had not vetoed the inflation bill. That veto was a death-knell to all our hopes. Mr. Bell. What is your opinion as to the agency which the financial legislation of the last decade has had in producing this state of affairs — for example, the act pledging the faith of the government to pay the RESUMPTION OF SPECIE PAYMENTS. 261 public debt in coin; then, the act of 1873 demonetizing silver, and then the resumption act ? Mr. Heiser. They have been all pernicious in their effect. I think that the first damage done to the country was by the act making the bonds payable in gold. Mr. Bell. That nit changed the contract? Mr. Heiser. Yes ; the bonds were not payable in gold. I, as agent of the government, remember distinctly that when the 10-40 bonds were issued, Jay Cooke & Co., at the expense of the government and as gov- ernment agents, advertised in every paper throughout the country, call- ing the attention of investors to the new 5 per cent. 10-40 bonds, as bonds having forty years to run, redeemable at the pleasure of the gov- ernment after ten years, and being the only bonds yet issued whereof the principal as well as the interest was payable in gold. About the same time a very large banking-house in Amsterdam wrote a letter to Secretary Chase, asking whether the principal of the 5-20 bonds was not payable in coin. Mr. Chase said that he could .not say positively that they would be so paid, but that he was then paying off the Mexican indemnity bonds and some other bonds which were maturing at the time, and that he was paying them in gold, and supposed that the bonds already issued would be paid in gold when due. The people abroad who had refused to help us in our hour of need (many of them having bought Confederate bonds as preferable to our own) said, all of a sudden, when the war was over and when we were successful, "Now, if you only make those bonds payable in gold, we will take some." Ex-Minister Schenck, of the Banking and Currency Committee of the House at that time, saw the President, and told him that if the bonds were made payable in gold a very large amount could be placed on the other side. Then there was a little combination made up in New York and Washington to buy a large amount of these 6 per cent, bonds, and the money was borrowed on them. I know that $500,000 was loaned by the Bank of America to Mr. Corbin. And then the passage of the bill making the bonds paya- ble in gold was advocated very strongly. The bonds advanced some 4 or 5 per cent., but that advance only benefited a few, while it inflicted an immense loss on the many. Mr. EwiNG-. Do you know what persons made purchases of bonds at that time with a view to that legislation 1 Mr. Heiser. I only know about Mr. Corbin, but the thing was known in New York and discussed at the time. The bill had a tendency to put up the price of bonds and to check all other enterprises, as the people all wanted to buy government bonds. Mr. EwiNG. What was the amount of the purchase of the bonds ? Mr. Heiser. It was estimated at the time at about ten million dol- lars. Mr. EwiNG. That was in contemplation of the passage of the act of 1869 f Mr. Heiser. Yes, sir. Mr. Bell. In other words, there was a combination formed to specu- late in the bonds ? Mr. Heiser. Yes. Then the next legislative step that was a dam- age to the country was the demonetization of silver dollars, and then afterward the establishment of the trade dollar, which had more silver in it. That dollar was a legal tender up to 1876, when it was demone- tized. Now I consider that what this country wants is exactly what General Grant said in his first inaugural, when he said that a great civil war had ended and that we were now about to enter upon the paths of 262 KESUMPTION OF SPECIE PAYMENTS. peace ; that we had lost a large amount of treasure and sacrificed a great many lives, and that now we should go to work and repair the disasters of the past ; and that it seemed as if a beneficent Providence had given us in the far West and in the bowels of the earth all the gold and silver that was requisite to restore prosperity. Mr. Bell. In the event that our foreign debt was refunded among our own people, and the interest paid out here, what is your judgment (with our immense agricultural and mineral resources) of the future prosperity of this country "I Mr. Heiser. Unbounded. I can see the time coming when this coun- try will be the great financial center of the world. There is no question about that. Views of Mr. J. W. Schuckers, of Philadelphia. Washington, D. C, June 5, 1878. Mr. Ewing. We are informed that you were private secretary to Mr. Chase while he was Secretary of the Treasury. Mr. Schuckees. I held a confidential position under Mr. Chase during nearly the whole of his administration of the affairs of the Treasury Department, and for a considerable part of the time was his private secretary, as well as when he was Chief Justice. Mr. Ewing. I suppose you have given a good deal of study and at- tention to the currency question ? Mr. Schuckers. Yes, sir; I have. Mr. Ewing. Particularly with reference to resumption of specie pay- ments ? Mr. Schuckees. Yes, sir; specially with reference to the question of resumption. Mr. Ewing. Will you please state whether, in your judgment, it is practicable and consistent with the public welfare to resume specie pay- ments on the 1st of January next, according to Mr. Sherman's proposed plans? Mr. Schuckees. In my judgment it is not consistent with the public welfare to resume specie payments on the 1st of January next, nor at any other time ; and I see no reason for believing that Mr. Sherman can establish a successful system of specie payments, as he says he can do eight months hence. Mr. Ewing. The premium on gold is down to one-fourth and three- eighths of 1 per cent. Mr. Schuckees. Yes ; gold has fallen. But the decline in the price of gold is due to progressive prostration of the industries and commerce of the country under the surgery of the resumption act, and to "rigging" of the exchange-market by the bank-syndicate. This method of de- pressing the price of gold is not new. Mr. Chase tried it during the early part of the war. It produced temporary effects, and was a good thing for bankers and importers, but was a poor thing for the Treasury, and was abandoned. Mr. Sherman and the syndicate will abandon it also. My belief is that it will be found a good deal more difficult to get rid of the present apparently nominal premium of one-half to one per cent, than it was to reduce the premium from 8 or 10 per cent, down to 1. The season of the year at which Mr. Sherman will begin operations will be favorable to him, but I feel assured that he cannot bring gold and paper to an actual par between this time and the 1st of January next. Besides, a nominal par does not constitute specie payments. RESUMPTION OF SPECIE PAYMENTS. 263 Mr. Ewino. You say that you do not believe it consistent with the public welfare to resume specie payments on the 1st of January next, nor at any other time. Will you please explain this ? Mr. Schuckers. In my judgment the public welfare lies in exactly the opposite direction. I think it of the greatest possible importance that the country shall be permanently relieved of the despotism of the bank-paper or semi-metallic system. I am aware that this is not an orthodox New York or New England or Old England view, and that I am likely to be referred to our continental bills of credit and the French assignats as dreadful examples of the evils of inconvertible paper notes. The bills of credit and the assignats seem to constitute the entire stock in trade of the resumptionists. I have read a good deal about both, and am willing to allow that many hardships attended upon their use; but can't see how the American colonists could have got along without the bills, nor has the possibility of so doing been pointed out by any- body. The Eevolution would have failed before the end of the first year of the war except for their use, and the French never could have made their revolution successful, nor prevented themselves from passing under the dominion of foreigners, but for the assignats. Both the bills and the assignats were the inexorable necessity of people struggling for freedom, and they wrought immense services. The revolutionary war was sustained for five years by the bills. There was little or no specie in the country; the Continental Congress had no power to tax, and all they could do was to print bills, which they did; and I think rightly. Mr. Breck says specie was so scarce, that in the two years 1777 and 1778 the whole amount of metal disbursed by Congress was less than $157,000; a sum, he says, which in gold would weigh 700 pounds, and might have been put in a wheelbarrow; and it was used by the com- missaries of prisoners in places where the bills would not pass, that is, in places in possession of the British. Bad as the bills were, they were far better than no money at all. But I am sure that the mischiefs wrought by them bear no sort of proportion to the mischiefs wrought since by paper notes professedly convertible into specie on demand. It seems to be forgotten or unobserved that although our national life under the Federal Constitution began only eighty-nine years ago, we have spent nearly thirty of them in the use of inconvertible paper money, and that thirteen of the thirty have been spent in operations for bringing the people down to what in the resumption slang is called "rock bottom." There are more people out of employment in the coun- try at this hour and in actual want, as a consequence of operations under the resumption law, than there were inhabitants in the whole thirteen colonies during the war of the Eevolution. I may add, too, that the operations of the last three and a half years for "hard-pan" (which is another of the truly-elevating watch-words of the resumption- ists) have wrought more injustice and suffering than resulted from all the monetary disorders of the country during the rebellion and up to 1875. The convertible system is one that can stand no severe strain. Adam Smith said a hundred years ago that a nation might as well go to war with paper guns as with paper money, but experience shows that a resort to inconvertible paper is the one fundamental fact of modern war. The convertible system always collapses in war; then the inconvertible system is resorted to ; then, when the war is over, the people are forced into the hardships and losses attending upon a restoration of the me- tallic standard ; and after it is restored we are no better off than we were before. We suffer as great fluctuations in prices, speculation is as rife, and commercial convulsion as frequent and severe, if not more frequent 264 RESUMPTION OP SPECIE PAYMENTS. and more severe, than under the paper system. Besides which, we have seen that system explode three times in this country in time of peace } and, what is remarkable, the more brilliant and promising the outlook, the more imminent was the danger of collapse or explosion. The Chairman. But has not the system operated well in Great Britain f Mr. Schuckers. The convertibility of the paper-notes has been bet- ter sustained in Great Britain than in the United States, but in other respects the metallic system has been no better than in this country; and there is the distinguished authority of Lord Overstone for saying that the Bank of England between 1825 and 1844 was three or four times on the verge of suspension, and saved herself by producing an extra- ordinary and destructive pressure on the commercial community. There was a great panic in England in 1825, up to that time unparalleled in the history of the kingdom, so extensive and distressing in its effects that even Mr. Tooke, in commenting upon it, said that it was doubtful if the evils of the convertible system were not so great and preponder- ating as to outweigh all considerations that could be urged in its favor. Then there was the panic of 1837 and the "pressure" of 1839, and then the panic of 1847, and those of 1857, 1866, and 1875, to say nothing of difficulties and pressures of greater or less intensity at intervening times. Bichard Oobden,in his evidence before a committee of the House of Commons in 1840 on banks of issue, declared that the fluctuations in the British currency in the two years 1836 and 1837 had produced greater evils, pecuniary, social, and moral, than had resulted from the direct failures of all the banks of issue that had taken place since such banks were first established in the kingdom ; which shows that, in the judgment of so eminent a man as Bichard Cobden, the measures neces- sary to sustain the convertible-paper system operated more destructively upon the public than an outright explosion. That system puts the whole commerce and industry at the mercy of a few millions of metal. I don't know that 1 can give any better illustration of its malignant character than by recounting its operation in Great Britain in 1847, at a time of extraordinary calamity and distress. It was the year of the Irish famine, as you will recollect. The suffering from the famine was appalling. The number who perished of actual hunger and deprivation in Ireland, andfrom disease engendered by want, from beginning to end, is estimated at over a half million of persons. England did not escape, and the extent of the suffering in that part of the kingdom is shown by the fact that in Liverpool there were a hundred and thirty-two thou- sand applications to the parochial authorities for poor's relief in the course of a single week. The facts are these : There had been a failure of the potato crop in 1846, and a serious deficiency besides in the wheat harvest. There was a partial failure also on the Continent, so that in the fall of the year there was an extensive rise in the price of bread- stuffs, which continued throughout the winter into the spring of 1847, at which time the greatest apprehensions of impending famine pre- vailed. In these circumstances the British merchants began the im- portation of corn from the Continent and from America, and to with- draw gold from the Bank of England to export in payment. One r would suppose that, in circumstances like these, the presence of a' great reserve of gold to be freely had in exchange for notes, solemn promises to pay gold on demand, would prove a true national blessing. But it was not so; the promise was a cruel and infamous lie; for, in the midst of these operations of the merchants, the Bank suddenly, and without warning to them or to the general public, shut down upon KESUMPTION OP SPECIE PAYMENTS. 265 them with effects so powerful and trenchant that gold already in ships at Liverpool ready for departure to America was actually relanded and restored to the custody of the Bank ! The expected and intended conse- quence of the measure of the Bank was — panic; and the whole kingdom was plunged into financial disorder and distress, which continued with more or less severity throughout the whole summer, and finally culmi- nated, in September and October following, in business failures which, according to Mr. Tooke, were beyond all precedent in the history of the country. And thus it was that, to the horrors of famine in some parts of the kingdom and want in all parts of it, were added financial calam- ity and suffering. The losses occasioned by this panic, produced by the action of the Bank, were stated by Mr. E. S. Oayley, a distinguished member of the House of Commons, at three hundred millions of pounds sterling, or fifteen hundred millions of dollars ! — a very dear price, he said at the same time, to pay for the convertibility of a hundred millions of bank notes ! But it was a roaring time for the Bank and the money- lenders; they garnered what others, with exceeding labor and pains,. had sowed and reaped. The Bank of England made profits in 1847 amounting to more than 2500 thousand dollars as against 1100 thousand in 1846; and in the three panic years, 1847, 1857, and 1866, made over nine millions of dollars, while its profits in twenty-two years of ordinary business were a yearly average slightly over eleven hundred thousand ! Nowj I defy you to find in all the annals of inconvertible paper money, either in war or peace, anything more shocking and infernal than this honest-money smash-up in Great Britain in 1847. And I may observe here, that after this panic, as after every other that has taken place since resumption of specie-payments in 1821, an event which, according to Mr. Peel, Mr. Eicardo, Mr. Canning, and the rest, was to make panics forever impossible, the British people have been regularly lec- tured by the honest-money press and sophisters of the kingdom about their extravagance, their overproduction, and their general deviltry and " cussedness," but they lecture not at all about overbanking, which is the real difficulty at last. Bankers and money-lenders are like the king,. of whom it is said that he can do no wrong. Mr. EwiNG. But was not the Bank compelled to resort to severe meas- ures in order to keep her reserves from utter exhaustion ? Mr. ScnucKERS. ~So doubt it was. There is no doubt at all that, under the paper system existing in Great Britain, the Bank had no alter- native but to destroy as she did. But what I say is, that a system which imposes such necessities is radically vicious and profligate, and ought not to be allowed to exist in any country. Mr. Bell. Suppose there had been an inconvertible paper system existing in Great Britain at that time, such as now exists in the United States ; what then ? Mr. Schuckeks. I will tell you what I think. Having no gold to send, they would have sent commodities to France and America to be exchanged for corn and beef at lower prices than formerly. No doubt this would have compelled increased exertions and sacrifices on the part of the laboring people, but the capitalists would have had to bear their share of the sacrifice, if not of the labor ; and in the greater activity of the markets of the kingdom, and in the certainty of work to do and pay for doing it, the workers would have had some compensation at least for their sufferings. As it was, thousands and tens of thousands of them were put out of employment, and the miseries of themselves and their families fearfully intensified, while scores and hundreds of merchants and manufacturers were bankrupted and ruined, and the 266 RESUMPTION OF SPECIE PAYMENTS. trade of the kingdom immensely obstructed. Although there was a great fall in prices, in the absence of work and wages, the laboring peo- ple could not profit by the fall ; but, as I have before said, it was a rous- ing good time for banks and bankers ; and they made money. Lord Ashburton, in his celebrated pamphlet on "The Commercial Crisis Con- sidered," commenting on the occurrences of 1847, says that the charac- ter of the demand for gold that then took place ought to be regarded ; "it was," he says, "for food suddenly wanted." Mr. Ewinc You would prefer the inconvertible system? Mr. Schuckees. Yes, sir; I would. Mr. Bell. How would you regulate such a system? Mr. Schuckees. I would prefer a constitutional provision, but in the absence of that would be willing to intrust the regulation of the cur- rency to Congress. Mr. Bell. There is great prejudice in the public mind against giving Congress the power to regulate the currency. It is believed that it would be badly exercised. Mr. Schuckees. Yes; such an objection is urged. I would like to see a constitutional provision on the subject, but would not be afraid to trust Congress. We intrust great powers to Congress ; among others, those of laying taxes, of borrowing money, of regulating commerce, of coining money and fixing its value, of declaring war and making peace, and, of course, of raising armies and providing a navy, and, in a word, of conducting all the great affairs of state. The exercise of these powers touches every interest, public and private ; and while it is undoubtedly true that in some instances weakness and corruption prevail in legisla- tion, the general rule is, that the legislative powers are honestly and wisely exercised, and that the real wish of Congress is to promote the public good. I don't believe it would be very dangerous to intrust to it the further power of regulating the currency. The country would be as watchful and jealous of its rights and interests in that respect as it is jealous and watchful of its rights and interests in respect of the other matters committed to the action of Congress, and there would be no serious danger, in my judgment, of any great abuse of that power. Besides, if it is not limited by constitutional provision, it must be exer- cised either by the banks, or by the Secretary of the Treasury, or by Congress. Mr. Sherman informs us that, so far as the United States notes are concerned, he is himself going to regulate them after the 1st of January next. 1 don't know where he will get authority to exercise so extensive a prerogative ; there is nothing in the resumption act confer- ring it, that I am able to see, and I don't believe Congress could consti- tutionally delegate to bim such a power, even if it would, but he says he is going to exercise it any way. He proposes to erect a great national bank, of which he will be president, vice-president, board of directors, and grand sanjandrum generally; and a great deal a " bigger man" than Nicholas Biddle ever dreamed of being, when he reigned as king of the money-markets of this country. Mr. Sherman will make United States notes scarce or plenty as he shall think best; at times and in such ways as he shall think best ; with or without notice to the public, or to Congress, or to the banks, as he shall think best. He says he won't abuse this power, because he will always be under the eye of Congress. To be sure he won't always be under the eye of Congress; but it strikes me that if Congress is wise and honest enough to regulate a Secretary who regulates the currency, it is wise and honest enough to regulate the currency with- out the intervention of the Secretary. And I may here remark, that the Secretary's proposition to make legal-tenders scarce or plenty, as he RESUMPTION OF SPECIE PAYMENTS. 267 shall think best, in order to keep them convertible into coin, exhibits in a sentence the vicious character of the methods necessary to that kind of a currency. It implies a systematic unconstitutional coercion and in- terference with the business of the country which is not likely to make Mr. Sherman very popular, or to be long endured. Our present system needs no such coercion and interference with the business affairs of the people by aFederal officer. Theduty of Congress with respect to it is very simple, and this duty is discharged by keeping the volume uniform and ex- panding it proportionately to the growth of the country. That Congress has been more steady and attentive to the public interest, or, at any rate, to what Congress believed to be the public interest, in the management of the United States notes, than the banks have been with respect to the management of their part of the circulation, a reference to our financial history during the last ten years will prove. The outstanding green- backs on the 1st of January, 1868, were 356 millions, increased to 382 millions, or 7^ per cent., on the 1st of January, 1875 ; and reduced to 349 millions, or 9f per cent., on the 1st of January, 1878. The reduc- tion since 1875 has taken place in pursuance of the resumption policy — a policy supposed to be, most mistakenly, as I think, however, in the public interest, by restoring the metallic standard. The banks increased tbeir circulation from 300 millions on the 1st of January, 1868, to 354= millions, or 18 per cent., on the 1st of January, 1874, and down to 300 millions, or 18 per cent, again, on the 1st of January last. Their reduction in 1876 was 25 millions, or 7|- per cent, in the course of a single year. This reduction was not in the interest of the public, but was exclusively in the private interest of the banks, and was done to secure the high price of bonds prevailing iu that year. While it would no doubt be altogether the best to have the circulation limited by con- stitutional provision, it is quite certain from this showing that Congress would be more likely to keep it uniform in volume than the banks. The government circulation has varied 17 per cent, in ten years, and would not have varied so much but for the persisteut and pernicious influence of the banks on Congress; while that of the banks has varied 36 per cent., not in answer to the requirements of the public, but solely to pro- mote the private interests of the bankers. Mr. Bell. Would a currency regulated by Congress be sufficiently flexible? . Mr. Schuckers. A really flexible currency does not exist. A cur- rency to be flexible, in the sense in which you use the phrase, ought to be sufficiently so to meet great exigencies, but no convertible currency is so or can be made so ; and I do not know, indeed, that the object of making bank or other notes convertible into coin upon demand proceeds at all upon the idea of securing flexibility. The real purpose of convertibility is to make the whole currency uniform in volume and value. The proof that a convertible currency cannot be flexible is found in the constant necessity the banks are under to prevent the free movement of gold and silver between the nations by coercive measures, sometimes productive of great calamities and suffering. If the system were really flexible the metals would, of course, be allowed to come and go without artificial obstructions of any kind. But they are not allowed to do so. The British panic of 1847 furnishes a painful illustration in point. Although there was at that time the greatest possible necessity for the exporta- tion of gold — none greater can well be imagined — it could not be allowed. At the very moment an expansion of bank-notes became necessary to the public in order that the gold might go, it became necessary to the system to contract the notes that the gold should not go. When plentier money 268 RESUMPTION OF SPECIE PAYMENTS. and low rates were of the first importance to save the public, scarce money and high rates were necessary to save the system. In September, 1846, the circulation of the Bank of England was 107 millions, and the rates of discount on first-class bills 3 to 3£ per cent. ; in October, 1847, the circulation was down to 93 millions, and the rate of discount, nom- inally at 8 and 10 per cent., was anywhere from 10 to 30 per cent., according to the time the bills had to run. The system was saved, but at an expense of frightful physical suffering and vast public and private losses, for among other things the revenues fell away. Now, what the country really needs is a system which, if it cannot promptly expand in seasons of extraordinary pressure, at any rate will not contract, as the metallic system necessarily must, for the reason that, as the paper notes of a bank must conform to the gold and silver at the command of the bank to pay them with, so as the gold and silver diminish the notes must diminish also. In this sense the system is flexible, but it is a kind of flexibility destructive of all regularity and stability in business. Mr. Bell. Do yon think a system of inconvertible notes is more likely to promote speculation and fluctuation in prices than take place under the convertible system ? Mr. Sohuckers. There is no proof that it is. Mr. Tooke says, dis- tinctly, that liability to expansion and collapse of credit have not been confined to the inconvertible state of the British currency, and he says, too, that the example of the currencies of Continental Europe is to the same effect. There is no proof that the causes leading to the panic in this country in 1873 were due to an inconvertible currency any more than that the causes which led to the great British panic of 1866 were due to a convertible currency. The Euglish writers on currency have pretty much got over the habit of attributing to the paper notes all the ills that attend upon our modern commercial and industrial system. Lord Overstone says that even under a circulation exclusively of gold there might be great abuse of credit, delusive appearance of prosperity, consequent revulsion and commercial embarrassment ! and admitted, moreover, that under the stringent and restrictive convertible system of Great Britain the spirit of commercial speculation had been pushed to the most extravagant lengths. Colonel Torreus calls attention to the fact that in 1845, under an exceedingly restricted state of the paper notes of the kingdom, the amount of railway capital Parliament was asked to authorize at a single session amounted to 1700 millions of dol- lars, and says that if he included all the other new schemes in which scrip or letters of allotment were selling in the London market in Au- gust and September of that year at a premium, the grand total could not be estimated at less than 2500 millions of dollars ! Yet the whole outstanding paper circulation of Great Britain, at the same moment, was only 193 millions of dollars! and convertible into coin at that. Lord Overstone sums up the causes which affect the state of trade in an admirable way. They are, he says, "the bouyant and sanguine character of the human mind ; miscalculations as to the relative extent of supply and demand ; fluctuations of the seasons ; changes of taste and fashion; legislative enactments and political events; excitement or depression in other countries connected by active trading intercourse; an endless variety of casualties acting upon those sympathies by which masses of men are often urged into a state of excitemeut or depression; these, all or some of them," he says, " are generally the original excit- ing cause of variations in trade, the currency being a subordinate agent." "So long," he says, "as human nature remains what it is, and hope springs eternal in the human breast, speculations will sometimes occur RESUMPTION OF SPECIE PAYMENTS. 269 and bring with them their attendant train of alternate periods of excite- ment and depression. Those who expect to find in the most perfect management of the circulation the magic power to secure perpetual ease and undisturbed steadiness in commercial affairs, are like the alche- mysts in search of their mysterious secret; and the discovery if made would prove equally useless. Storms and tempests are not more cer- tain and inevitable in the material world than are the periodical con- vulsions of commercial affairs ; " and he adds that " they both serve similarly useful purposes." "What we are in the habit of calling the ' state of trade,'" he says in another place, "is an instructive lesson. We find it subject to various conditions which are periodically returning ; it revolves, apparently, in an established cycle. First, we find it in a state of quiescence; next, improvement; then growing confidence, prosperity, excitement, overtrading, convulsion, pressure [pressure is Lord Overstone's constant synonym for panic], stagnation, distress, end- ing again in quiescence." This is Lord Overstone's description of the constantly recurring revolutions in commercial affairs under a system which is supposed to be the final attainment of honest-money wisdom. Nothing worse, certainly, can truly be charged against the American system. Now, as to fluctuations in prices, it is demonstrable that they are just as great and frequent, if not indeed greater and more frequent, under the specie-paying system of Great Britain than under the non-specie- paying system of the United States. One of the most persistent of the charges made against our system is that under it prices are peculiarly liable to fluctuate. The Secretary of the Treasury charged this in his conference with this committee. But I venture to say that the Secre- tary has never made any investigation at all into the subject; he simply assumed the whole case ; and I venture to say, moreover, that of all those who have made this charge not one in ten thousand ha,s made any comparison whatever with a view to reach the truth. Lord Overstone said that he was unable to detect any clear or marked differences in prices under the two systems, the convertible and inconvertible, as they have existed at different times in Great Britain ; which was really an admission in favor of the inconvertible system, seeing that it existed in war times, when everything was in a greater or less condition of turbu- lence, while the other system had the advantage of peace. Mr. Tooke says as much. In the History of Prices, after the most exhaustive induction of facts during the suspension by the Bank of England, from 1797 down to 1827, he declares that whatever variations took, place were due to other causes than the operation of the currency ; that is, that they grew out of the disorders of the wars. It is not possible to make any really just comparison of our prices with prices in England since 1867, owing to disturbing causes that have operated exclusively among us, but it is perfectly certain that if the variations growing out of modi- fications in taxes, the panic of 1873 and the resumption act, be counted at only 40 per cent, even, then our paper prices have not varied so much as the metallic prices of Great Britain. Forty per cent, is a very low estimate of the effects produced by the causes named. That the prices of the country have been affected by some agency operating upon them all is proved by a progressive and uniform decline throughout the whole range of our markets. Without going further into this branch of this great subject — the greatest to which this people can at this time give their attention — the history of paper notes in all countries warrants me in saying that whatever choice exists as between their two principal forms, the con- 270 RESUMPTION OP SPECIE PAYMENTS. vertible and inconvertible, it is clearly with the latter. At all events, the advantages of the convertible system are not so great and prepon- derating as to justify the further pressure that must be put upon the country in order to substitute it for our existing system. Mr. Bell. You say " the further pressure that must be put upon the country in order to establish the metallic in place of the existing sys- tem." You mean by that expression that we have not yet reached bot- tom, and that further sacrifices are necessary 1 Mr. Schuckers. Yes, sir; that is what I mean. Mr. EwiNG-. But if further sacrifices are necessary, then Mr. Sherman will not be able to resume next January 1 Mr. Schuckers. I do not mean to say that Mr. Sherman cannot pay gold and silver in exchange for United States notes, and in discharge of other obligations of the government, after the 1st of January next, so long as he has gold and silver to pay with ; but what I do say is, that a genuine and permanent system of specie payments, such as now exists in Great Britain, France, Germany, and the other specie-paying coun- tries of Europe and upon our Pacific coast, is impossible to be estab- lished in the circumstances of this country as they will exist at that time. Either a continuous artificial pressure must be exerted to pro- tect it, or it will collapse from constitutional weakness. My belief is that continued operations upon the currency after the 1st of January will be impossible; that the country will not submit, and that if any attempt at specie payments is made at all, it must be a real one; in which case, in my judgment, its collapse is a question of a few months at furthest. I must repeat, however, that 1 do not see by what means the apparently nominal premium of J or 1 per cent, on gold is to be broken down ; and of course until that is done no resumption can be even attempted. Mr. Bell. The Secretary says the people will not want gold and silver when resumption takes place. Mr. Schuckers. If Mr. Sherman's resumption be genuine, that is, if Mr. Sherman pays out gold freely to those of the people who will want gold for notes, and to those of the public creditors who in good faith will ask for gold in payment of their claims, he will very early be unde- ceived on this point. If they do not want it for their own personal use, they will want it to sell. By this I mean that the American people are not likely to allow 50 or 60 millions of gold to lie idle and useless in the Treasury vaults when they can export it at a profit. If they can have gold as freely as they can have notes they will take the gold and send it to Europe. Mr. Bell. Why do you say that the people will not allow 50 or 60 millions to lie idle and uuused in the Treasury 1 ? According to Mr. Sherman's calculations there will be in the Treasury, available for resump- tion, 125 or 135 millions of gold and silver, independently of that held . by the banks. Mr. Schuckers. Mr. Sherman greatly overestimates his resources — at any rate, those available for resumption of specie payments. And if the committee will allow me to do so I will go into this matter with some particularity. I was present during the conference with the Sec- retary on the 1st and 4th of April, and heard him explain his plans with great minuteness. They are very plausible; as the detectors say of good counterfeits, "they are well calculated to deceive." But they can- not stand a very close examination without discovering their weakness. Mr. Sherman says he expects to have in the Treasury on the 1st of Janu- RESUMPTION OP SPECIE PAYMENTS. 271 ary next,* the date at which resumption is to take place, $188,357,000. But in order to arrive at the final sum that will be available to him at that time for resumption he deducts four items : Coin-certificates out- standing, interest due and unpaid, called bonds and interest thereon, and credits to disbursing-officers and outstanding checks — a total of $75,799,000; thus leaving, as "actually available," according to Mr. Sherman, for resumption purposes, $112,558,000. Mr. Sherman says, however, that in an emergency, which he does not think will ever arise, be can use at least one-half the balances standing to these several accounts (excepting coin-certificates), amounting to nine millions, thus enlarging his "available" funds in what he calls "a business sense" to $121,558,000. He proposes further, should the emergency be great, to issue nine or ten millions of coin-certificates to pay off legal-tenders, which, he says, he has a right to do under the law, thus adding, in "a business sense" again, nine or ten millions more to his available funds. But no such absurd claim as this can be conceded, as you will agree. After resumption of specie payments, coin-certificates ana United States notes will be demands against the Treasury of exactly equal obligation, though the former are held against a special fund ; and that Mr. Sher- man gravely proposes to pay one paper note with another paper note, nominally its coin equivalent but actually less in value, seeing that the note to be paid is a legal tender, and that the note he proposes to pay with is not, shows the lamentable confusion reigning in his mind as to what "specie payments" really means. Mr. Micawber's method was ex- actly this, so that Mr. Sherman's has not even the merit of a ridiculous novelty. Mr. EwiNG. Clearly, the Secretary will not be able to use coin-cer- tificates in the way he suggested. Mr. Schuckees. Undoubtedly not. Conceding all Mr. Sherman's other claims, he will have just $121,558,000 of funds in the Treasury belonging to the government available toward resumption, according even to his own showing. But he makes no reservation whatever on account of interest accruing on public debt due in January next — about sixteen millions — but includes in his funds "available for resumption" the whole supply of coin in the Treasury when the operation begins. * In his interview with the committee on the 4th of April, Mr. Sherman submitted the following table, showing the condition of the Treasury at that time, and its "prob- able condition" on the 1st of January next : Actual condition April 1, 1873. Probable condi- tion January 1, 1879. Demand liabilities, April 1, 1878 : Legal-tender notes Coin-certificates Interest overdue Debt, matured and interest Currency-certificates Fractional currency Demand notes Unclaimed Pacific Kailroad interest Totals Demand resources, April 1, 1878 : Coin 'Currency Totals Percentage of resources to liabilities $347, 848, 712 00 57, 883, 400 00 4,121,146 77 8, 439, 391 04 35, 215, 000 00 16,950,115 62 62, 342 50 7, 267 03 460, 527, 374 96 138, 357, 608 14 35, 966, 851 35 174, 324, 459 49 .37 $340, 000, 000 00 57, 883, 400 00 4, 000, 000 00 8, 000, 000 00 25, 215, 000 00 435, 098, 400 00 188, 357, 608 14 35, 966, 851 35 224, 324, 459 49 272 RESUMPTION OF SPECIE PAYMENTS, That this will be a daring and perilous experiment is attested by the fact that, while his whole "available" funds aggregate one hundred and twenty-one and a half millions, one hundred and seven and a half mil- lions will be borrowed money! leaving fourteen millions as the amount derived from surplus revenues specifically set aside by law for interest on public debt, and not enough to make good the outstanding interest accrued up to the day resumption begins! and this, too, after depleting the sinking-fund of over thirty-two millions in the past four years. And you will allow me to observe, that as no bank or government has- ever yet succeeded in supporting a system of convertible notes on borrowed coin, so no bank nor government ever will. Again : The point of redemption of the legal-tenders under the resump- tion act is fixed at the assistant treasurer's office in New York. The aggregated demand for redemption is thus concentrated upon a single fund, and to make actually available all the coin belonging to the gov- ernment in order to meet it, Mr. Sherman must denude every other sub- treasury, mint, and assay-office and bank depository in the country of every dollar in its possession. But this cannot happen, nor, obviously, can any considerable part of the coin held elsewhere be made available. The positive requirements of the public business forbid ; specie pay- ments will exist everywhere in the country after the 1st of January next, and public creditors may ask coin in good faith at all points where the government pays at all ; and if you will take the trouble to foot up the metals at other places than New York, as shown in tables 2, 3, and 4 of the appendix to the printed conference I hold in my hand, you will find that on the 1st of February last it was over twenty millions, on the 1st of March twenty-three and a half millions, and on the 1st of April twenty-five millions. If you take the smallest of these sums as representing the average and necessary holding of the government at other points than New York, then the whole amount of coin available at that city will be $100,558,000. Even this, however, does not conclude the case. For the truth is, that the amount of coin really available to Mr. Sherman for resumption purposes on the 1st of January next, or at any other time, is that sum only of his whole reserves which, according to recognized and estab- lished principles of banking, he can pay out before he must either sus- pend payment or lay an artificial pressure upon the money market to prevent their exhaustion. Mr. Sherman's reserves, I beg you carefully to remember, have no automatic and natural connection with banking and commercial movements, and his resources for maintaining them are of a surprising and extraordinary kind. They are derived wholly from taxation (surplus revenues) and by borrowing (through sale of bonds). Whatever gold and silver he already has or may get is relatively an un- varying and fixed mass, upon which the debts of the government and the demands of the banks and of the general public will exert a con- tinuous dead pressure. It is not necessary to enlarge upon the novelty of this proposed sys- tem, to justify me in saying that it is so abnormal in principle and so wholly untried in practice, and so complicated, besides, with public-debt payments and other public disbursements, that, to establish and preserve confidence, a reserve large enough to sustain considerable depletions without exciting apprehension and alarm must be steadily kept up. I don't think any good banker in New York — Mr. Vermilye, Mr. Ooe, or Mr. Cisco, for instance — would put the limit below which it could never fall so low even as 70 or 80 millions. When the metallic reserve in the Bank of England falls even to 100 millions, the greatest alarm, if not EESUMPTION OF SPECIE PAYMENTS. 273 actual panic, prevails alike in banking and commercial circles in Great Britain. Mr. Sherman proposes to begin paying, you see, at the very point where the Bank of England stops paying and applies the severest pressure. Let us say, however, that the minimum below which Mr. Sherman's . reserves can never fall is 60 millions, which is 40 or 50 millions too low; then his ultimate and efficient preparation for resumption, so far as its metallic side is concerned, will be represented by the sum of $45,558,000, and no more, if even so much. Now, this is neither fallacy nor trifling with facts and figures. The Treasury is no stronger than its weakest part, and hence no stronger than its disposable reserve. If the disposable reserve be strong, the Treasury will be strong ; if the disposable reserve be weak, the Treasury will be weak. And it will be strong or weak with relation, of course, to the demands to which it must respond. The demands to which it must respond on and after the 1st of January next will be, directly, 340 millions of legal tenders, and, indirectly, 300 millions of national- bank notes and the whole bank deposits of the country. That this dis- posable reserve bears no real or even approximate relationship to these demands is clearly evident. A depletion of 15 or 20 millions, possibly even of 10 millions, would precipitate a "run" utterly exhaustive of it in a single day. Mr. Ewing. The Secretary says his reserves are independent of the banks. He says the banks must take care of themselves. Mn Schuckees. Yes; I know he says so. I heard him say it. But it is not difficult to show how fallacious his belief is on that point. But before doing so 1 wish to call your attention to one of the most serious of Mr. Sherman's many misapprehensions upon this subject, and which illustrates perfectly the narrow view he takes of it, and which is par- ticipated in by many others, I am very sorry to say. If you will turn to appendix No. 7 of the printed conference, you will see that he there makes a statement in which is shown the present condition of the Treasury and its probable condition after the 1st of January next. This statement distinguishes the demand liabilities as they will then exist into two classes, "coin" and "currency." The country has been so long accustomed to "coin" and "currency" as distinct things, that Mr. Sher- man, for one, seems unable to disengage himself from the notion that these distinctions are to continue after resumption of specie payments is established, and that no coin liabilities can exist except such as are specifically for coin. But this is certainly an entire and most important mistake. I submit that after the 1st of January next, if the resumption act is enforced, there will be no obligation of the government which will not be payable in coin. Specie payments means this or means nothing. If I am right, then all the creditors of the government who desire coin are entitled to receive coin. This fact is of supreme importance in this respect, that the business of the subtreasurer's office at New York is between seven and eight hundred millions of dollars a year; and noth- ing in the world is more certain than that Mr. Sherman's whole disposa- ble reserve may be drained away from him by public creditors in 20 or 30 days, or even less time, without the presentation of a single legal tender for specific payment in coin! It was not necessary for General Ewing to seek to show, therefore, that a "run" by the national banks was the particular peril menacing Mr. Sherman's reserves; although Mr. Sherman showed decisively enough — despite his repeated assever- ations, that, the legal-tenders being scattered all over the country, enough of them could not be concentrated upon his reserves to imperil H. Mis. 62 -18 274 RESUMPTION OF SPECIE PAYMENTS. thein — that it could be done with the utmost possible ease. On pages 48 and 49 of the printed conference, he said that five millions out of the fifteen millions of five per cent, redemption fund of the national banks held in the Treasury was continually in course of transfer between the Treasury and the banks, and that each bank was allowed ten days within which to make good its legal-tender* reserve. This im- plies a movement of five millions of legal-tenders into and out of the Treasury every ten days, or fifteen millions a month, or one hundred and eighty millions a year! But, in point of fact, the redemptions of bank- notes, notwithstanding the difficulties in the way of assorting and pre- senting them at the Treasury for payment, described by Mr. Sherman on page 58 of his conference with this committee, proceed much more rapidly even than at the rate of one hundred aud eighty millions a year, for in 1876 they amouuted to two hundred and four millions of dollars, and in 1877 to two hundred and thirty-six millions! How long would it take the banks at this rate to exhaust his disposable reserve should they once begin upon it f And could they not make the movements twice or thrice as rapid if they should exert themselves to that end ? and by what possible means at his command could Mr. Sherman re- plenish his reserves as rapidly as the banks could exhaust them f If you suppose a drain of fifteen or twenty millions to have taken place for export, just to that extent not only is the Treasury depleted but its power of replenishment lessened, for Mr. Sherman will find no metallic reserves among the people nor private hoards from which to draw. He will fish in a dry well. Moreover, the banks hold a large sum of "cur- rency certificates," aggregating twenty -five or thirty millions, which may be precipitated upon the Treasury gold, by concert of action among the banks, in a single hour! And this brings me to say that Mr. Sherman's declaration that the na- tional banks must take care of themselvesis another characteristic fallacy. In one of his colloquies with General Ewing he undertook to show an analogy between his proposed bastard-bank system and that of the Bank of England. But it failed, because no such analogy exists. The Bank of England — technically the banking department of the Bank of En- gland — issues no circulating notes. The "issue department" of the Bank of England is, in the language of Lord Overstone, a department of state. It is entirely distinct and separate from the banking department, and in its functions wholly automatic and mechanical. It issues notes to th& public in exchange for gold and gold in exchange for notes. This is its function, and absolutely all • unless retiring worn-out or mutilated notes in exchange for new notes be also called a function. It can neither in- crease nor diminish the paper circulation except in absolute obedience to the public requirements; and the Bank of England, properly so called — technically the banking department of the Bank of England — buys its notes with gold exactly as any other banking establishment or private person must do, and in this respect is in no better position than the humblest of the Queen's subjects. This "issue department" connects itself directly and intimately, therefore, with the banking and commercial interests of the kingdom, and this naturally and without any effort of its own. Its position on the 3d of April was this : It had outstanding circulating notes to the amount of $187,880,375, and gold coin and bullion in its vaults to the amount of $112,880,375, aud govern- ment debt aud other securities to the amount of $75,000,000, making a total of $187,880,375. Leaving entirely out of sight the government debt and other securities, it still has more gold to meet one hundred and eighty-eight millions of notes (fifteen millions of which, by the way, RESUMPTION OF SPECIE PAYMENTS. '275 are constantly in use upon the Continent) than Mr. Sherman will have to meet three hundred and forty millions, with this further difference, that Mr. Sherman's gold is borrowed — borrowed to the very last dollar of it — and is, besides, complicated with various public and private accounts : interest accruing, interest due and unpaid, called bonds and interest, disbursing officers* and other demands, subjecting it to more or less con- stant draiu, while the gold in the issue department of the Bank of Eng- land is solid capital, held for one purpose only, and can be applied to no other — namely, the redemption of circulating notes. It is impossible to see any likeness between this powerful and im- pregnable British department of state and the bastard bank system Mr. Sherman proposes to establish next year. But if you will take into view the whole British banking system and this issue department or department of state, and then the relations that must arise between the national banks and the New York sub- treasury next year, we can see the true likeness, so far as it goes, and the supreme mistake Mr. Sherman makes in supposing it possible to separate the Treasury from the banks. I will show you how this is : Bank of England notes are a legal tender everywhere in England except at the counter of the Bank itself, where they are payable in gold on demand. After the 1st of January next United States notes will be a legal- tender everywhere in the country except at the office of the subtreas- urer in New York, where they will be payable in gold and silver'on demand. The reserves of the Bank of England, technically the banking depart- ment of the Bank of England, as well as of the other joint-stock and private English banks, are made up of gold coin aud Bank of England notes — chiefly of notes. The English country banks keep a large part of their reserves or balances with London banks. These London banks trade with some part of the reserves or balances of the country banks, and keep the remainder on deposit with the banking department of the Bank of England. The Bank of England holds these reserves subject to call, of course, and when demand is made for gold, converts its notes into metal by presenting them at the counters of the issue department for payment. It is in this way that the issue department is constituted the ultimate metallic reserve of all the banks in England. The reserves of the American banks follow a precisely analogous course. Their reserves are made up of United States notes and gold and silver coin; at this time almost exclusively of notes. The "coun- try banks" keep a large part of their reserves or balances on deposit with certain " city banks" in what are called the redemption cities, and some of them in New York, and the "city banks" keep a large part of their reserves on deposit with "New York banks," and the " New York banks" in their turn keep a large proportion of their reserves — both paper notes and coin — on deposit in the subtreasury in that city; both, however, under special contract, as witness the Revised Statutes and the "coin" and "currency" certificates held by the banks. The course of banking affairs in the United States and England is, as you perceive, precisely analogous ; and when a demand is made upon the New York banks for coin, no matter from what quarter it comes, whether from "country" and "city" banks, or from the general public, those banks must meet it by presenting their paper notes, either coin-cer- tificates or legal-tenders (and preferably the latter, of course, as the for- mer are held against a special fund under a special contract, and there- fore entirely safe, while the latter are not), at the subtreasury for pay- 276 KESUMPTION OF SPECIE PAYMENTS. ment. The coin in the subtreasury at New York thus necessarily be comes the ultimate metallic reserve of all the banks in the country, as the gold in the issue department of the Bank of England is the ulti- mate metallic reserve of the English banks, and must respond in exactly the same way. How long it could respond to any serious demand is easily computed. * Mr. Bell. Your analogy undoubtedly shows the true state of the case. Mr. Schuckebs. 1 i-eally think it does; but I am not yet at the end. It is possible to show, by what seems to me a sort of mathematical dem- onstration, the impossibility of anything like permanent resumption of specie payments in this country next January. Nobody will dispute that specie payments means a condition of the monetary circulation in which the prompt and certain convertibility of the paper notes, by whom- soever issued, into metallic money upon demand, is completely and per- manently assured. But this is not all. It means, further, a condition of the banking and commercial interests in which all values and prices are at the metallic level, and in which merchants and manufacturers freely deposit their gold and silver in the banks and as freely draw it out ; it means, that is to say, the voluntary and spontaneous flow of the precious metals into and out of the banks and among the people precisely as the paper notes do, and their payment in all cases where in good faith required. This is, in brief, the system of specie payments prevailing in Great Britain, Germany, and France at this day, and is the only system that can exist in this or any other commercial country in this age of the world. No artificial restraints,norartificial arrangements orcombinations of any kind can prevail for the support of a merely nominal convertibility. The forces that govern the movements of the precious metals among the nations operate with an irresistible pressure, and can no more be defeated by device and contrivance than device and contrivance can operate to defeat the ebb and flow of the tides. Two facts attend upon the specie-paying system, which both reason and experience show to be necessary and inseparable from it, and which constitute, indeed, the law of its being. These facts are : 1. The presence in &11 specie-paying countries of a great central re- serve or hoard of metal, upon which must primarily fall all the unusual and extraordinary demands of the banks or the public for gold and sil- ver. In France this great central reserve or hoard is found in the Bank of France at Paris ; in Germany, in the Imperial Bank at Berlin ; in England, in the Bank of England at London ; in the United States, after the 1st of January next, it may or may not be found — "that will depend " — in the subtreasurer's office at New York. 2. The presence of an extensive metallic circulation among the people and private hoards of greater or less extent, to supplement or aid the central hoard when in course of serious or extraordinary depletion Experience shows that these depletions usually take place for export abroad ; according to Lord Overstone they fall both upon the metallic circulation among the people and upon private hoards, while Mr. Tooke says that there is always a mass of bullion in such a country as Eng- land, which, however, does not necessarily form a part of the internal circulation, that is kept for the purpose of settling international bal- ances ; though some of it, he says, as coinage is free in England, may be kept in the form of sovereigns. But that a large metallic circulation among the people, and private hoards of greater or less magnitude, must exist wherever specie payments exist, is proved by all experience. RESUMPTION OF SPECIE PAYMENTS. 277 The Chairman. These conditions do not exist in this country ; that is, there is no metallic circulation among the people except a greatly debased subsidiary one, and no private hoards. Mr. Schuckers. There is certainly no gold and silver coin circulating among the people Jhis side of the Eocky Mountains, other than subsidi- ary, except, perhaps, to some small extent in Texas ; and if there be any private hoards they are of no importance ; not extensive enough, at any rate, to afford relief in case of extraordinary demand. But we have a notable illustration of this universal law, that wherever specie payments exist — the reason of which I shall presently undertake to explain — there must be a large metallic circulation and private hoards among the people, right here in our own country. It seems to have escaped observation that the specie-paying system on the Pacific coast is a complete refuta- tion of the belief of Mr. Sherman and the resumption doctrinaires, that it is possible to establish in the United States a system of convertible paper notes without any coin among the people ; in other words, that the public will prefer paper notes to gold and silver when gold and sil- ver can be freely had in exchange for notes. The metallic system, as you know, has never been given up on the Pacific coast. The paper circulation of that coast does not exceed five millions of dollars, includ- ing national-bank notes, gold-bank notes, and legal-tenders, while the metallic money in the banks and treasuries and among the people is, according to Dr. Linderman's estimate, thirty-two and a half millions. I concede this state of facts, existing among an entirely characteristic American population, who keep up the metallic system, fatal to Mr. Sherman's whole system of reasoning. The unrelenting law that gov- erns convertible currencies in all countries does not fail, and cannot fail, to assert itself in America as it does everywhere else. Mr. EwiKGr. This law requires that Mr. Sherman shall largely reduce the paper circulation and increase the metallic circulation. Mr. Schuckers. Yes, sir. The conditions existing on the Pacific coast, and in all specie-paying countries, must be established before re- sumption can be permanently successful here. Those conditions are in pursuance of laws that govern the distribution of the precious metals and the convertible currencies among the commercial nations, and no resumption can be successfully established which does not conform to those laws. They have been laid down by Mr. Ricardo with great clear- ness and precision. According to that great economist, the precious metals employed in circulating the commodities of the world are divided among the nations in proportions according to their wealth and com- merce, and therefore according to the number and frequency of the pay- ments they are required to make. If there be no disturbing causes in operation, the prices of all countries will be at the true metallic level, and no temptation will exist either to send metal abroad or to import it. If, however, from any cause, a rise of prices takes place in any par- ticular country, it will become profitable to export the metals from that country, and more or less will go abroad, according to circumstances ; but when the amount exported has so reduced prices that no further profit is derived from sending them abroad, their export will of course cease. These principles, which are fundamental, may be illustrated by a hy- pothetical case. Let us suppose the currencies of France, Great Britain, and the United States to be purely metallic, and that the quantity nec- essary to circulate the commodities of France is 1,000 millions; to cir- culate those of Great Britain, 750 millions, and those of the United States, 500 millions. These are rough approximations to the true pro- 278 RESUMPTION OF SPECIE PAYMENTS. portions. Suppose, now, the discovery of a prolific gold-mine in the United States. Prices will rise here as the newly-mined gold is coined and put into circulation, and presently the excess will flow off into France and Great Britain, and as it does so the level of the metals will rise everywhere according as the production of ^he mine is greater or less. But suppose that, instead of the discovery of a gold-mine, banks of issue are set up in the United States, whose metallic reserves aggregate 150 millions of dollars, and that, proceeding upon the belief and prac- tice of bankers generally that they may issue three dollars of circulating- notes to one of metal held in reserve for redemption, they push out 450 millions of their promises to pay. The process both of creating the banks and pushiDg out the notes will, of course, be gradual ; but as it goes on, prices will steadily be stimulated, and gold displaced by the notes and exported till an entirely new order of things is established. The active circulation of the United States consists now of 450 millions of paper and 50 millions of gold and silver, with 150 millions of metal in the banks, while the aggregate of the metals in Great Britain and France is enlarged to the extent exactly of the displacement in Amer- ica. But meantime banks of issue are established in France and Great Britain also, and to the extent to which these French and British banks issue notes, the metal received into those countries from America is dis- placed and returned. If they issue 450 millions of paper, 450 millions of their gold and silver will be driven back and the original distribution of the metals restored. It is thus seen, and very plainly seen too, that the convertible currencies of the several countries of the world, if availed of to their full extent, as they are, must bear relations to each other in the ratio of their several metallic currencies. But it is known that neither the banks nor the government of any country has ever absorbed all the gold and silver in it as a fund against which to issue circulating- notes in the proportion of three to one or of two to one. If such a power really existed, either in banks or governments, banks for profit and gov- ernments under the pressure of necessity, whichever exercised it, would certainly push it to its limits, as Mr. Sherman vainly imagines he can do, and proposes to attempt to do, after the first day of next year ; and we should then see nominally convertible notes far more abundant than we now see inconvertible notes, and correspondingly less valuable as they were greater in quantity. But such a power does not exist. The power of a bank or a govern- ment to issue convertible paper notes is dependent on its power to pay them ; that is, by the extent and solidity of its capital. But capital employed in this way, whether by banks or government, is itself limited; it is limited by the wants and necessities of the commerce and industry it is set apart to aid and promote. In other words, there is always exist- ing, in every country, a real and approximately fixed proportion between its banking and note-fund capital anft its capital eugaged in production and exchange. These proportions exist in the nature of things, and if the touudation of the business system be metallic, it must be broad enough and solid enough to support the whole fabric, industrial, com- mercial, and bank, with safety ; for it is incredible that one form of the working capital can be securely lodged upon gold and silver, and that all other forms — and those, too, which constitute the real capital — can be suspended wholly upon circulating bank paper. To say that this can be so is to say that there can be a circulation of arterial blood in a man's arms, and none in his head or his body or his legs. But the fact is, that wherever the banks are upon'the specie basis it is because the RESUMPTION OF SPi-CIE PAYMENTS. 279 whole commerce and industry of the country are on the specie basis ; and this, not through the merely intermediary agency of bank-notes, resting upon metallic reserves hidden away in bank-vaults, invisible to the sight and impalpable to the touch, but because of the actual physical presence of the metals everywhere throughout the industrial, commer- cial, and banking fabric, in quantity proportioned to the requirements of each and sufficient for each. Of the metals thus necessarily dispersed throughout the whole society, the banks can appropriate no more than that proportion of them requisite to the easy and safe performance of their share in the production and exchange of the country. Their issues of convertible circulating notes, if the convertibility of the notes be real and not merely nominal — and I repeat that no merely nominal converti- bility can now be sustained in the United States, any more than in Great Britain, France, or Germany — must conform strictly to the amount of their metallic capital, and this capital, it is entirely apparent, necessarily comprises far the smaller part of the whole gold and silver of the coun- try. And nothing is better settled than the principle that even a mod- erate excess of issues results in the exportation of metal. Hence it is that convertible currencies, even in the richest nations, are so small in amount relatively to the whole metallic capital. They are limited by laws which neither banks nor governments can evade. Where any marked and extensive disproportion exists in any country, as compared with those currencies in other countries, it may be known that that country is out of relation to the system, and that it cannot retain ^Psliare either of the metals or of the convertible notes till its true relations are re-established. The interpretation of this is that the United States, in their present circumstances, are entirely out of place as regards the convertible paper system of the world. I mean by this that there are too many paper notes and too few gold dollars and gold eagles. We must have less paper and more metal. General Warner, in his evidence the other day, gave tables showing the proportions between coin and paper as they now exist in Great Britain, France, and Germany, and as they existed in this country in 1854, 1857, and 1861. They so completely and forcibly illustrate what 1 have just been saying, that I wish to recall them to your attention. Accord- ing to those tables, the proportion now existing in Great Britain is $3.33 of coin to one dollar of paper ; in France, $3.10 of coin to one dollar of paper; in Germany, $4 of coin to one dollar of paper. The proportion in this country, in 1854, was $1.24 of coin to one dollar of paper; in 1857, before the bank explosion of that year, $1.16 of coin to one dollar of paper; and in 1861, $1.41 of coin to one dollar of paper. On the 1st of January next, if all Mr. Sherman's hopes are realized, there will be in the country forty cents of coin (including the 50 millions of greatly debased subsidiary silver] to one dollar of paper. But even this is sub- ject to modification. The coin on the Pacific coast is over thirty mill- ions and the paper five millions. fWe must leave the Pacific coast out of our calculations, because specie payments have never been suspended there; and the proportions of coin to paper on that coast are not differ- ent now from what they were four years ago. Leaving out the Pacific States, therefore, and calculating the proportions between coin and paper as they will exist in what I shall call the " legal-tender States," we find that after the 1st of January next we shall have in those States about thirty-two cents of coin to one dollar of paper! General Warner's tables, put in another form, illustrate what I have said even more forcibly than by stating the per cent, of the proportions. Assuming that our supply of coin and convertible notes would be 750 280 RESUMPTION OF SPECIE PAYMENTS. millions if we were at specie payments, General Warner shows that to have the same proportion of coin to paper that now exists in Great Britain we should have 579 millions of coin to 171 millions of paper. This would require us to accumulate 329 millions more of coin and to retire 479 millions of paper. To have the same as in France, we should have 562 millions of coin to 188 millions of paper. This would require us to accumulate 312 millions of coin and to retire 462 millions of paper. To have the same as in Germany, we should have 600 millions of coin to 150 millions of paper. This would require us to accumulate 350 mill- ions of coin and to retire 500 millions of paper. To re-establish the proportions existing in this country in 1861, we should have 439 millions of coin and 311 millions of paper. This would require us to accumulate 189 millions more of coin and to retire 349 millions of paper. To re-es- tablish the proportions of 1857, we should have 403 millions of coin and 347 millions of paper. This would require the accumulation of 153 mill- ions of coin and the retirement of 303 millions of paper. To re-estab- lish the proportions of 1854, we should have 415 millions of coin and 335 millions of paper. This would require us to accumulate 165 millions of coin and to retire 315 millions of paper. These figures of General Warner's seem to me entirely decisive of the whole question. Mr. Sherman cannot reverse the law that governs convertible curren- cies in all countries, and at this period in the world's history more than ever before. He may reverse the existing conditions by a continuous unrelenting pressure upon the country, by five or eight years m^e of the " weary agony and struggle toward resumption" of which he spoke in his interview with the Senate committee, and so, by diminishing his notes and increasing his gold and silver reserves, bring the conditions into conformity with the law, but more than this he cannot do. The truth is, that he has the real work of resumption yet to accomplish. He must charge the channels of circulation to their natural necessary full- ness with the metals ; he must infuse 200 to 300 millions at least, at the same moment that he expels from them the excess of paper notes, what- ever that excess may be; in my judgment not less than 250 or 300 mill- ions of dollars, possibly even more. I do not mean to say that the paper notes are in excess of the requirements of the country with its business performed wholly with paper, but that they are immensely in excess as respects the specie-paying system. Mr. Sherman's difficulty is there- fore of a double kind : unless he provides a sufficiency of metal he will fail ; if he provides the metal and does not expel the excess of notes, he will fail just as certainly. This process of withdrawing paper and pushing out gold involves five or eight years more of the depression we have suffered during the last four years. I don't believe the country will stand it, but it must if specie payments are to be made permanent. Mr. Ewing. The Secretary thinks the balance of trade now ap- parently very much in our favor will continue so, and that under the operation of a continued favorable balance he can continue to accumu- late gold. Mr. Sohuckers. The balance of trade is a deceptive thing. It is frequently the effect purely of operations on the currency. I believe that to be the case now. A rise in general prices to the extent of 10 or 15 per cent, will reverse it, and it will be against us again. Mr. Bell. But is a rise in prices certain to take place when specie pavment is established ? Mr. SCHUCKEES. If there be a real confidence in the stability of Mr. Sherman's resumption, there will undoubtedly be a prompt and rapid RESUMPTION OF SPECIE PAYMENTS. 281 rise ; but in the absence of confidence we may expect a continuance of the present stagnation. If we assume that confidence is established, a rise in prices of 10 to 20 per cent, would lead to the exportation of gold. You must not forget the circumstances. If we count the gold in the banks and Treasury as taking the place of the paper notes that have been retired, the volume of the currency on the 1st of January next will not be materially different from what it was three and a half years ago, though its character will be somewhat changed ; nor will the volume of commodities be materially different. If the national wealth has not been actually diminished it certainly has not been in- creased. We have gained in some respects, but we have equally lost in others. Prices, however, by the joint pressure of the Federal Treas- ury and the national banks, have been forced down 50 to 60 per cent. When this pressure is relieved and there is an assurance that operations on the currency are at an end, prices will certainly rise. A rise of 10 to 20 per cent, will reverse the balance of trade, by which I mean that gold will be exported. The loss of ten or fifteen millions of the Treas- ury reserves of metal will precipitate a demand fatal to them ; then gold will go up to 3, 5, 8, or even 10 per cent. This is the course I think events will take. On the whole, I am not able to see any prospect at all of a successful resumption at the time fixed by the law; and this leaves entirely out of view the effects of the silver bill (which demonetized gold as effectually as if thafehad been the specific purpose of the bill) and various other circumsflhces of vital importance, the chief of which are : an immense foreign debt, an extensive absenteeism of Americans traveling and residing in Europe, and transportation of our freights and passengers in foreign bottoms. War, political events, deficient harvests, and com- mercial difficulties at home and in other countries are also facts pecu- liarly affecting specie payments in the United States. "The long and weary agony and struggle toward resumption," spoken of by Mr. Sher- man in his interview with the Finance Committee of the Senate, have been made endurable to the people by the promise of a swift and brilliant revival immediately that specie payments is established. Mr. Sherman promised it in the little speech he made the other evening at Cleveland. If it does not come, the country will most certainly explode resumption by an enlargement of the currency sufficient to restore prosperity ; if it does come, Mr. Sherman's resumption will collapse from organic weak- ness. My belief is that the difficulties in the way of establishing the metallic standard in this country are so preponderating and insuperable that no member of this committee will live to see it accomplished ; and that the paper system will last till it is destroyed by some social or polit- ical calamity which will be fatal to it and to the union of the States at the same instant. What is before us is, as I think, measures for its wise and permaneut regulation. Mr. Bell. It is not very difficult to see that, in your opinion, the re- sumption act ought to be repealed. Mr. Schuckees. It ought to be repealed with as little delay as legis- lative forms will permit. IIsTDEX BAIRD, HENRY CARET, Views of: Resumption cannot be maintained in the circumstances of the country, 183 ; the French financial system ; its advantages, 184 ; Bank of England in its relations to the BritiBli people, 184-185 ; war of the Treasury Department on the people, 185 ; fallacy of the "balance of trade," 186; destruction of the industries of the people the cause of it, 187; illustrated by the condition of British India, 187 ; the question of prices, 187 ; what effects the movement of gold and silver among the nations, 188 ; losses of the country by reason of the resumption act, 189 ; if resumption takes place gold will go into circulation and out of the country, 190 ; the great need of more money, 191 ; "the example of France," 192; the practical remedy for onr present depres- sion an increase of circulation, 193 ; a premium on gold operates as a protection for American in- dustries, 194-195 ; the wrong done to the South by contraction of the currency since the war, 195 ; effects of farther contraction of the currency, 196; resumption will fail, 197 ; contraction of the currency the sum of all crimes, 198; the power of the country with a sufficient volume of cur- rency, 198. COE, GEORGE S-, Views of : His belief that according to the resumption act of 1875 the whole volume of legal-tenders was to be retired, 208 ; does not think the volume of convertible notes can exceed three or four hundred millions of dollars when the just equilibrium between coin and paper is- established, 209 ; origin of the legal-tenders, 210 ; their uncommercial character, 210; 650 millions of paper cannot be sustained convertible into gold and silver, 211 ; what the practical result of resumption will be, 212 ; the laws of trade will determine the volume of convertible paper, 213 ; the PnpBr of the country, 214 ; the process of resumption a process of realities, 215 ; our debt about 1,000 millions, 215; the exact proportion between coin and paper not to be determined ex- cept by experience, 217 ; proportion of business performed in the United States by bank credits,. 218; the basis of bank credits the things exchanged, 219 ; the legal tenders not money, 221 ; the- character of their value, 221-222 ; effects of resumption discounted, 223 ; a considerable proportion of the legal-tenders will be retired when resumption takes place, 224-225. COLGATE, .TA AfF. S B., Views of: Resumption doubtful with 140 millions of coin in United States- Treasury, 72; does not think there can be any permanent resumption with 640 millions of paper circulation, 73; all the paper notes should be retired and issues made exclusively upon gold and silver, 74 ; the paper notes should represent dollar for dollar of gold and silver, 74 ; all the govern- ment issues should be retired, 75; resumption by natural means the best, 76; remonetization of" silver reduced the price of gold, 77; the remonetization of silver has had a beneficial effect upon the country, 77; but resumption may run on for years if balance of trade continues in our favor, 77 ; 500 national banks will exchange greenbacks for gold, 78 ; government indebtedness abroad between 300 and 400 millions, 79; a large circulation of gold will take place in exchange for greenbacks, 80; a country is always impoverished by having its money spent abroad, 80. HEISER, HENRY A , Views of: Does not think resumption practicable with the present volume of paper currency, 253 ; thinks there will be a good deal of demand for coin after resumption begins, 253-254 ; one-third of the whole circulation will probably be gold, 254 ; not more than 10 millions of gold among the people east of the Rocky Mountains, 254 ; most of the gold in the New York hanks belongs to foreign bankers, 255 ; effect of a foreign war would be large purchases of gold by specula- tors, 255; the present balance of trade not likely to be permanent, 256 ; apprehension of the ina- bility of the government to sustain resumption likely to result in panic, 257; coin will gradually enter into circulation, 25R; with a revival of industries there will be an increased organization of national banks, 258; the country needs more currency, 259; thinks 600 millions of United States bonds are held abroad, 259; balance of trade deceptive, 260 ; the United States bonds were not payable in gold, 261 ; the act of 1869 for strengthening the public credit the result of a com- bination, 261 ; the demonetization of silver a damage, 262. OPDYKE, GEORGE, Views of: Thinks resumption may be maintained with 650 millions of paper, 232; views on proportions of coin to paper at former periods, 232-234 ; a good deal of gold hoarded, 234 ; the paper circulation of the country usually about equal to the bank deposits, 236 ; hoarded gold will go into the banks after resumption, 237 ; the passage of the resumption act a hindrance rather than a help to resumption, 238 ; the example of England 1816-21, 239 ; does not think much hoard- ing will take place after resumption, 240. PULLAN, RICHARD B., Views of: Does not think resumption can be made permanent, 125 ; equiv- alency of coin and paper the Secretary's idea of resumption, 126; equivalency non-established, and will continue if the present condition of things is continued, 126; power of the alliance be- tween the government aid the banks, 127; the whole circulation will be exclusively of national- 284 INDEX. PULLAN, RICHARD B., Views of— Continued. bank notes if the resumption act is enforced, 127 ; what is meant by the power of reissue, 12S ; what will be required to effect real resumption, 128 ; the cost of the national banks to the people, 130 ; bank issues will absorb all the legal-tenders, 134 ; the liability of the stockholders in national banks adds nothing to the security of national-bank notes, 136 ; the difference between "nomi- nal" and "practical" resumption, 199; effects of suspension of specie payments, 200; effects of legalized suspension, 200; resumption iu the present condition of the country perilous, and will sooner or later result in a disastrous crash, 202 ; public sentiment against the national banks, 203 ; plan for a monetary system, 204 ; what money is, 205-207. SCHTJCKERS, J. TV., Views of : Does not think resumption practicable nor just, 262; importance of the continental bills of credit and French assignats, 263 ; evils of the convertible system, 262-263 ; the British panic of 1847, 263; the inconvertible system preferable, 266; Congress may be trusted to regulate the currency, 266; evils of bank management of the circulation, 267; a convertible cur- rency not flexible, 267 ; the inconvertible system not more liable to speculation and fluctuation than the convertible system, 268; Lord Overstoue's views, 268; reasons why Mr. Sherman cannot successfully rssume, 270-274; no analogy between Mr. Sherman's proposed system aud Bank of England, 274-275 ; what the convertible system requires, 274-275; convertible currencies mast be proportionate to the metallic currencies of the several currencies of the world, 277; why specie payments exist, 278; proportion of coin to paper in United States and foreign countries, 279; the work of resumption yet to he accomplished, 280; the paper-system will be permanent, 281. SELIGMAN, JOSEPH, Views of: Approves generally of what Mr. George S. Coe said, but thinks five or six hundred millions of paper can be floated payable in coin, 226; the banks must take care of themselves, 226 ; his reasons for believing that resumption may be maintained, 228 ; not much coin to be expected from Europe, 229; the foreign balance in our favor in the winter, 230. SHERMAN, Hon. JOHN, Views of : Statement of the condition of the Treasury March, 1878, 3-7 ; amount of standard silver that will probably circulate along with gold, 8-9 ; threatened struggle between the Treasury and the banks disadvantageous to the banks, 9 ; power of reissue of legal- tenders given by the Revised Statutes, 10 ; can't sell four per cent, bonds, but ca n^flfiU four and a half per cents sufficient for resumption, 10, 11; the currenoy not greatly in excess, jR the banks must get 30 to 50 millions for resumption, 13; dedactions to be made from coin in the Treasury, 14 ; balance available for resumption, 14; proposed issue of coin-certificates, 14; what items of coin balances may be used in emergencies, 14-20 ; accruing interest on public debt not to be deducted, 21 ; Mr. Sherman's theory of the sinking-fund, 22-25 ; preparation of the banks for resumption, 26 ; con- dition of the banks, 26,27; "the banks must take care of themselves," 27; the government must take of 340 millions of legal-tenders and not the national-bank notes, 28 ; the deposits of the banks not dangerous, 29 ; have no connection with the Treasury, 29 ; deposits of the Bank of England the great danger of that bank, 29 ; comparison of the Federal Treasury with the Bank of England, 29-33 ; condition of the national banks, 33 ; probable amount of gold and silver in the country 250 millions of dollars, 36 ; state of the sinking fund since 1869, 37-38 ; 50 millions of gold to be had by sale of bonds, 37 ; as to paying out silver dollars, 38 ; legal-tenders held in the Treasury, 39 ; thinks legal-tenders in excess of 300 millions cannot be reissued, 40; would like Congress to determine this, -41 ; the sinking fund again, 42-45; the ten-million fractional-currency fund, 46 ; the five per cent, national-bank redemption fund, why it is apparently smaller than the law requires it to be, 47-48 ; in case of a drain of gold will hoard greenbacks to make them scarce, 49 ; can't resume if the premium on gold be } of one per cent., 49 ; suspension also a remedy for drain of gold, 49 ; with 130 or 140 millions of gold in the Treasury resumption entirely safe, 50; resumption not harsh, 51 ; the national banks secure after resumption, their resources being abundant, 52 ; not likely to make a combination against the Treasury, 52-53 ; and not even able to do so, 53 ; would sell 5 per cent, bonds in case of emergency, 54; the banks not likely to withdraw their gold from the custody of the Treasury, 54-55 ; wants to reduce the legal-tenders to 300 millions, 56; expects a greater balance of trade in our favor, 56 ; United States bonds returned because of silver legislation, 57 difficulty of assorting national-bank bills for redemption an element of strength for them, 58 values will be more stable after resumption, 59; imports not likely to be largely increased, 59 we can compete with foreign countries when values are upon the gold basis, 60 ; submits a table showing the diminution in one and two dollar legal-tender notes, 61 ; the Secretary will maintain resumption by methods similar to those exercised by the Bank of England, 63; will withhold legal-tenders if necessary and sell bonds if necessary, 63 ; the bonded debt to be increased in order to maintain resumption, 63. STEWART, JOHN A., Views of: Thinks resumption practicable, lit; the balance of trade not likely to turn against us for a year, 111 ; 50 millions of gold will satisfy the people, 111; amount of national debt held abroad probably between 500 and 600 millions of dollars, and whole amount of our foreign indebtedness possibly 1,000 millions, 112 ; the balance of trade not likely to turn for the next twelve months, 112 ; resumption is going to be expansion, not inflation, 113 ; expansion and inflation both raise prices, 113 ; the great demand for gold will be for foreign use, 114 ; cannot look ahead more than six months, 114; the banks must take care of themselves, 115 j the prln- INDEX. 285 STEWART, JOHN A., Views of-Continued. cipal difficulty ie that we are a debtor nation, 115 ; repeal of the resumption act would raise the price of gold, 115 ; the demand for gold in the panic of 1857 was confined to hill-holders, 116 ; it was a stigma upon a depositor to ask for gold, 116 ; does not think the banks of New York abso- lutely own six millions of coin (that in their possession being chiefly special deposits), 117 ; thirty millions of special deposits, 118; the proportion of coin to paper need not now be so great as formerly, the paper being legal tender, 118; failure to maintain specie payments would be a oalamity, 119; the Secretary will check a drain of gold by hoarding greenbacks, 121 j thinks a management of the circulation too great a power to intrust to any one man, 122 ; the Secretary's power to sell bonds probably too wide a discretion to be exercised by one man, 122 ; if the balance of trade continues in our favor, specie'payments can be maintained, 125. VERMTLYE, J. D., Views of: Sees no difficulty in resuming on the 1st of January, 1879, 95 ; sees noth- ing ahead for eight or ten months to draw away coin, 96 ; a reserve of from 25 to 28 per cent, of coin sufficient for specie payments, 96 ; 10 to 13 per cent, formerly the rule among country banks, 96 ; the whole question one of faith, 97 ; resumption an inflation of the currency, 97 ; resumption will add 140 millions of gold to the circulation, 97 ; 30 m illions of special deposits of gold in New York banks, 98 ; why there may be a good deal of gold in the country, 99 ; not so much coin nec- essary now as formerly, 99 ; does not think paper notes better than gold and silver, 100 ; does not know why there shall be any great demand for coin after resumption, 100 ; for 10 or 15 days there may he a pretty large demand, 101 ; should like to see 140 millions of greenbacks at once destroyed, 101 ; balance of trade, 103 ; we have lived extravagantly, 104 ; the country does not want 900 or 1,000 millions of circulation of gold, silver, and paper, 105; the banks will seek to convert their greenbacks into gold, ia a measure, 105 ; sees no plan by which the Secretary can check a demand for gold if the people insist upon having it, 106 ; not coin enough in the country to maintain spe cie payments in case of alarm, 107 ; prefers fractional paper currency to fractional silver, 107; Congress should do nothing concerning the finances, 108; people have gone too much into the cities, 108; would be willing to see the national-hank notes go out of circulation, 109 ; after all, the whole question of specie payments is one of confidence, 110. "WARNER,. A. J., Views of: Does not think it practicable to establish and maintain resumption ex- cept by reducing the paper circulation, 137 ; coin must be provided to the full extent to which the people will prefer coin to paper, 137 ; an excess of coin and paper will drive the coin abroad, 137; effects of an increased volume of money, 138; proportion of coin to paper in former times in the United States and in foreign countries, 138-139 ; demonetization of silver the cause of de- pression in Germany, 139; amount of convertible paper that can probably be supported in the United States, 140-143; 50 per cent, of the whole circulation must be in coin, 14S; is in favor of maintaining the paper currency at an equivalency with coin, 144; equalization of coin and paper not resumption, 144 ; example of England in 1816-23, 144-145 ; effect of contraction of the currency upon credit, 145 ; effects of increase in the volume of money, 145-146 ; panic of 1857 the result of exportation of coiD, 148 ; paper may be preserved at the value of coin by limitation of quantity, 149; proportions of coin and paper in Great Britain, France, Germany, and the United States under the convertible system, 150-152 ; deceptions of balance of trade, 153 ; resump- tion only practicable by establishing the true proportions between coin and paper, 154; a run for gold not so likely with greenbacks as under the old State-bank system, 156 ; potent effects of pub- lic debt held abroad upon the question of specie payments, 156 ; different consequences of dimin- ished money and diminished commodities, 156-157; effects of diminution in inconvertible paper money the same as diminution of money made of metal, 157; estimated amount of American debt in foreign countries, 2,250 millions, 158 ; gold may be drained away by return of bonds held abroad, 159 ; rate of interest on debt held abroad, 160 ; different effects of diminished money and of diminished commodities, 160-161 ; rate of interest does not depend upon the kind of money, 161; effects of outflow of gold after resumption takes place, 163; preparation for resumption involves continuous contraction of the paper currency, 164 ; co-operation of the banks necessary to resumption, 165; disastrous effects of the resumption act upon the industries of the country 167 ; estimate of the loss entailed by the operation of the act, 167-174 ; estimate of the debts, public and private, of the American people, 174; if resumption is to be accomplished, the present state of depression must continue, 175; resumption impracticable with tbe present volume of paper, 176; importance of repealing the resumption act, 177 ; the value of paper may be kept at an equality with coin by limitation of its quantity, 178 ; this better than the national banking system, 178; urges the principle of limitation, 179 ; wants United States notes substituted for national-bank notes, 179; effect of retiring inconvertible paper notes in other countries, 180; Ricardo's proposition for paper notes, 182 ; the adoption of the gold standard bad in economy and worse in morals, 183. WESTON GEORGE M., Views of; Resumption practicable with present favorable foreign balance of trade, 241 ; its permanence another question, 241 ; paper money excessive in volume, 241 ; remonetization of silver increases the practicability of resumption, 242; the evils of the convert- ible system, 243-246; no means of preventing an outflow of specie, 246 ; the paper notes must be greatly reduced to make specie payments permanent, 247; advocates no particular theory of 286 INDEX. "WESTON, GEORGE M., Views of— Continued. money, 247; the constitutionality of the legal-tenders, 248; paper money receivable for public dues and increased every year in a ratio approximate to the increase of business, would be a stable money, 249. "WINDER, "WILLIAM H., Views of: If creditor countries were to make their legal-tender of paper it would be at a pi eminm, 81 ; it is the condition of a country as debtor or creditor which alone deter- mines its ability to maintain specie payments, 81 ; the convertible system an evil, 82 ; our foreign debt 2,000 millions, 83 ; the premium on gold a good for a debtor nation, 84 ; the importance of the premium on gold, 85 j how it works as a good, 85 ; the advantages of paper legal-tender for domes- tic use, 86 ; contraction of the currency murderous and insane, 87 ; its effects, 87 ; why a rise in the price of gold is an advantage to home industries, 87 ; resumption impracticable, 88 ; an assured ability to pay necessary to resumption, 88; illustrations of this, 89; resumption impossible till the country is out of debt, 89 ; greenbacks ought to be substituted for bank notes, 89 j an increase or decrease of the currency always injures somebody, 90 p>the resumption act a snare, 90 ; the bank- syndicate could raise the price of gold if so disposed, 92; resumption places us at the mercy of foreign creditors, 93 ; what resumption means, 94. "WRIGHT, BENJAMIN H., Views of: The present reumption law defective, 251 ; the banks must be brought into co-operation for resumption, 251 ; his plan, 252. ST. HICKORY. Democrats' Day! Grand Celebration Of The Eighth of January. '*"*! ■■■! A Happy Commemoration Of T$e Great Jackson's Democracy, $! l_ • -■•■■ r A Green Day in the History of the Ohio Democrats~-Unity, Har- mony, arid Fellowship, Grace the Hour. Great Speeches By Pendleton, Ew- ing, Morgan, Ward, Warner, ' Bishop, G Josiah Kinnear, Geo. L. Converse, ' DeWitt C. Jones, Joseph F. Wright, N. TV. Miller, J. J. Hopkins, G. M. Sa'tzgab er, C. j 8. Parker, D. Joy, General Durbin Ward, Emanuel May, S. Johnson, Joseph O'Con- : nor, J.S. Sherrick, S. L. Reeves, L.S.Brown, | John C. L. Pugh, Lyman J. Jackson, J. G. | Menuser, A. J. Sevain, Ed. J. Dowdall, J. : A. Heitman, David R. Jones, R. J. Tan- jning, R. H. Higgins, F. M. Senter, D. Wor- jley, Fred Green, William Bell, -jr., H. C. iGroschner, J. G. Sextro, S. S. Wolf, H. J. Walls, J. D. Selzer, J. L. Tyler, C. W. JBoyd, Geo. B. Wright, J. Flynn, J. J. ! Burns, Henry C. Filler, Win. H. G'aVer, P., J. Sulivan, John Duffy, J. K. Newcomer,- J. Finley Brown, J. P. Smith, Geo. A. Grove, W. Poston, J. D. Poston, Frank Davis, Isaiah Pillars, P. H. Clark, Anthony Ho wells, H.P. Clough, Robert Bell, Geo. B. Okey, J. W. Okey, R. W. Jones, Allen O'Myers, J.J3. Townsend, H. E. O'Hagan, D. W. Brooks, W.Ji.Rowe,. Calvin Brice, W, Neil Dennison, Carl Buerhaus. Jas. W. jOwens, Jas. E. Spear, C. B. Flood, T. Wet- zler, Levi Hite { Henry J. JSeiraund,!. Stan- ley, John C. Fisher, D. S. Fisher, Ben Le Fever, W. H. Little, J.'""G. Reeves, W. .H Eeed, Jas. A. Norton, Hiram Peck, T. E. Cunningham, T. E. %r,-* penteV . fiush < Field, . W. "P. "Brown,' P.-Oailhtaii, W>-W.-Medary, W. T, Wal- lace, E. C. Briggs, Lewellyn Baber, James Burns, Jas. E. Neal, A. W. Thur- man, A. F,. Pean, ' James L.i Ahdrews^CF.,' J. Brennan, D. McConnville, F. H. Medary, W. V. Marquis, J. F. Achauer, D. L. Wodsworth, F. W. Green, F. McKinney. L. T. NeaV'A/P.-' Winslow, W. L. O'Brien, Theo. Marsh, H. T, VanFleet, Jas..A. : Bishop, R. H.. Bishop, Gov. R. M. Bishop. W. R. Wing, Hon ; Geo. ^H.. Pendle- ton. S. S. Linton, W. W. Redfield, W. J. Gilmore, P. Murphy, I. An- derson, Geo. P. Tvler, J. D. Burnett, G. W. Saviers, G:H. Lfee, J..M6rehead,;a F, Sch^fjer, S. Knoweis, J. H, Anderson; A. D. Heffnef, H. T. Snowbridge, Col. S. Innis, Geo. Maul, P. W. Corzilius.C. Roose, F. 0. Hunsel, Jno. M. Pugh'. J. G. Peetry, W. J, Clark,. Jno. F. BroCk^W.Fairchilds,; C. H, Mathews, James Crosson, D. Has- kell, George Lincoln, J. O. Amos, J. Kirk- patrick, D.J.'Gbuld, A» A. Train', G.. B, Christian, L. D. 'Murphy, A. Allan, A. H. Roose, Gen. Thomas Ewing, W. T. Cessna. P. O'Marrah, J, D. Sullivan, J. W. Heisley, J. C. Richards, A. R. VanCleaf, S. S, Bloom> ,Wm. Heisley, C, H. Gray, L.:G. Curtiss, J. R. Elrick, J. G, Adel, Theo. Marsh, J. M. Armstrong, J. B. Wright, Hon-. A. J. Warner, Charles Ross, W. S. Haines, S. B. Porter, John A, Shank, T. J. Godfrey, A. B. Coit, W. W. Ross, J. B. Fitch, A. VanHorn, O. J. Dodd, Isaac Glaze," Win.' McGbrd, Milb'C. Dodds, W. A. Daughterty, M. Burns, T. J. Duncan, George W. Geddis, M. McMilliori, W. Oties, J. W. Harter. THE DAY Was spent in social intercourse, the gentle- men at the leading hotels shaking hands, renewing old acquaintances, and inter- changing views. During the afternoon a reception was held in the parlors of the Neil house. "At an early hour in the evening the faithful began congregat- ing at the Neil house, and long before the hour for - . " "the banquet. The flfflco was. crowded as in the times of a state convention. Promptly at 9 o'clock the' doors were thrown. -Open and 'the guestsbegan passing into the dining room of the Neil house which had been beautifully decorated with flags and'' bunting,' portraits of Genera Andrew Jackson and Hon. Samuel Medary, were hung on the walls. As the guests entered the hall . they were met at She door bv ushers, arid escorted to seats. Three long tables reached the length of the dining room. At the end of the first table sat General Thomas Fwing, surrounded by his friends. Opposite him sat Hon. George L. Converse. At the end of the middie table sat Governor Bishop, with the president of the club, Mr. John Sullivan. Opposite sat Hon. Geo. W. Morgan, with Hon. H. J. Booth on his right, and Hon. H. E. O'Hogen at his left. At the end of the ! third table sat Hon. Geo. H. Pendleton, I senator elect; on his left sat Hon. Gil. Atherton, and on his right sat Hon. Jas. E. Spear, of Cincinnati ; at the opposite end of this table sat General Durbin Ward in the midst of some of his warm ad- [mirers. As the guests were being seated the band discoursed music. Shortly after nine o'clock, all the guests being seated, and ' every seat taken, permission was granted the company to proceed to busi- ness, and they began the demolition of one , of the finest spreads ever seen in Colum- bus. THE PROGRAMME, It was not until ten o'clock that the inner-man was appeased, and the flow of soul began. The programme for the even- ing's exercise was asiollbws: l ' THE ADDRESS OF WELCOME. : , Mr. John D. Sullivan, on behalf of the club, ; delivered the following address of 'welcome: Democrats of Ohio: In behalf of the democracy of Franklin county, I bid you a hearty welcome to the capital of the state on this auspicious occa- sion. The yoiing men's democratic club, of which I have the honor to be president, having for its Object the keeping alive and promulgatSng-democratic principles, deem- ed it wiseand proper to revive that grand old custom of commemorating the eighth Wl ■ JPWHW^p^^wfc?:fc> that' "private corporation^ the sovereign power to make money, andthus to rule the business of the people by changing at pleasure the values of their labor; and property. Hamilton and the lovers of a strong government, favored the Bank; so did Madison and most of the state rights republicans; and Washington, too, who sat peerless above all party classifica- .. tion. /The unerring instinct of Jefferson "*! alone saw and condemned in it the evil principle of an alliance between the gov- ernment and a class, and the surrender of a sovereign prerogative to a favored few, which would in time breed a money aris- tocracy such as has ever sat behind all thrones and chairs of state, and enriching i itself by the subtle devices of power, brought the masses to poverty and the nation to decay. Renewed, in 1816 without senous o£pb- sition except from Jefferson, who stub- bornly maintained that the general goy- , eminent alone should issue the paper cur-' rency, the bank reached the end of its second -lease of power_ in the last term of Andrew Jackson. Established by the fathers of the republic; its constitutional- ity fettled by the supreme court; its power and its capital swollen fo.m>fold ; sustained by the press, by the great commercial and manufacturing interests, by all the whig party, and by a powerful wing of the de- mocracy—a • renewal of; its charter seemed a foregone conclusion. Ev- ery consideration of party concord andof administration success appealed to Jackson to let the bank alone. A weak man; or a stfo'rtg but selfish man; or one who saw no evil principle in bank money and go vernna.^jMij need fear that he who but yesterway seized* the two greatest railway corporations of the earth, and made them submit to the just demands of the people, lacks either the nerve or the strenghth to wield the battle- axe with which Jackson clove the helmet of the money power. General Thomas Ewing was heartily ap- plauded at the first of his masterly effort. SENATOR ALLEN G. THURMAN's LETTER. ' The next toast in order was "The Jackson Democracy." Hon. Allen G. Thurman had pledged himself to respond to this toast, but remaining in Washington, he sent the following letter, which was read, and on its reading was very favorably received : United States Senate Chamber, 1 Washington,, L), 0., January 6, 1879. J .^Messiis. J. D. Sullivan, A. D. Heffner. and Others, committee, Columbus, Ohio: ' Genttemen: I I fufly expected to attend the banquet Jon'the 8th instant, at Columbus, and en- joy that re-union of political and personal friends, on a day so memorable in the his- tory of the republic, and so much cherish- ed by the democracy. But at the last mo- .ment, to my great regret, I find it will not <£b,e in my power to have that pleasure. I +&*Mrf*» KAte^Z** ^Atta^i am just beginning to recover from a severe cplavthatt ha§. afflicted me for a. week or more, and I can not-but recognize the fact that, it would be imprudent forme, in such ! v extremjely -cold weather tri 4 make ai trip requiring eight hundred mileairavel, and crossing the mountains twice. Permit me to offer a few reflections upon the toast, ."Jacksonian Democracy," the theme oeL which ' I was appointed -to speak. Of course some other speaker will take my place and do justice to the sub- ject, but the privilege may be accorded me of jotting down some very brief, pertinent observations. I wish to; recall, the attention "to some of the most marked characteristics of the de- jmocracy of the time of Andrew Jackson. I refer to the time yrhen he was thedemo- cratic candidate- for the presidency, and when he filled the presidential chair. First, the democracy , were then emi- nently, if not pre-eminently, distinguished by their devotion to the union of the States, south and north, east and west.- -Thatsentimenf was cherished by every true democrat. "Subsequent events, at length, for a time suspended it in the south, but the happy circumstances of our present condition-^-thahks to the influence of democratic principles — is that love of the unjoniias everywhere restored, and has "preserved the fix.ed principle of the democratic party in the south. Secondly, the party was equally distin- guished by its love "of the constitution, and has sought to preserve it in all -its vigor, and beneficence, by giving to it a natural, rational interpretation, and it bat- tled manfully and constantly against those; ', constructions that threatened- to convert ! the government into an unlimited, central- ized despotism, anithe other hand against all theories that /fnenced the existence of the union. «w Permit me to say that -the prin- ciples of the Jacksonian democracy are as important to-day as they ever were at any period of our history. Thirdly, the Jacksonian democracy were the determined foes of monopolies. They could not be otherwise, for the very foun- dation of the party was the doctrine of equal rights. By whatever names they may have been Galled, there has been, and perhaps ever will be, but two great parties in America. The democratic party, asking nothing but-equal rights, and an opposing party whose .leaders, ever have sought and ever will seek, special privileges, accorded bylaw.- Who can forget the great battle fought, by the democracy under the lead of Jackson • against the bankfr of the United States. "Who can fail to see that a desperate struggle against a fa? jnore powerful combination of capital and.piivilegs r than' was presented by that institution is now impending? Will the deniopracy or. to-day -follow", the example set by their fathers of invincible opposition to special privileges, or will they prove recreant'to the principle's and history' and traditions of their party? This is a question that must, ere lone. h« answered. My own belief is that it will be I answered as it ought to be, and that I the democrats of to-day will prove them- selves to be what their fathers were, "true men." They will be earnest but not rash, 1 determined but not unreasonable, destruc- tive of wrongs and abuses alone, and con- servative on all that_ should exist in a free republic. Fourthly, the Jacksonian democracy were a party of economy. The ordinary annual expenses of the Jackson adminis- tration (that is, the expenses of govern- ment, exclusive of payments in discharge of the public debt) "were but fifteen mil- lions, or thereabouts. Now our ordinary annual Expenses arenearly ten times that sum. "What a contrast! "While our popu- lation has increased but little more than three-fold, our expenses have increased nearly ten-fold. Is it not time that we should return to the economical principles and practices of the Jacksonian democracy ? These points, few in number, but trans- cendent in importance, I thought it proper to note for the consideration of our friends. Others might be given, but these must suffice for to-day. . I know that the banquet will be enjoyed by those who : attend it. I trust it will prove beneficial to others i as well. I trust that its influence will be felt in reviving the Jacksonian dem'fjcracy, in combining in opposition to tliaHci -■■ft.l'i-i eaii party, in a genejswiEii^'fowsySbi-^^ country from misrule and corruption. I' have the honor to be, with much respect, yours truly, A. G. Thukman. HON. GEO. If. PENDLETON Responded to "The Ohio Idea." After the fairy strains of the Marsellaise Hymn l\ad die,d away, Hon. Geo. H. Pendleton was introduced and responded as follows to the toast: "The Ohio Idea." $Er. Chairman and Gentlemen : •ill thank you most heartily for this cordial greeting. The proprieties of the occasion, :the lateness of the hour, the excellent ispeeqhea we have heard, our natural im- patience to hear the eminent gentlemen who are yet to speak, admonish me to ac- knowledge in briefest words the courtesy of the committee in assigning to me the sentiment, and your kindness in approving their action. . , I have had something to do with the Ohio idea as well as in 1867, when its chief object was the payment of the five-twenty bonds in greenbacks, asin.these latter days when it was foreseen and endeavored to i avert the manifold sufferings and wrongs which the policy of the republican party has inflicted on the country. . Qui- oppon- ents boastingly assert .that .the late elecr tions, and thestjll later equalization of pa- per and coin, have destroyed its vitality and silenced its supporters. In .this hour of its supposed discomfiture, amidst the Jeers of its enemies, I desire again to de- fine its scope, to point out its purposes, and to vindicate its necessity as a part, of a sound financial system. "Strike hut hear me." , ' . The ijime is propitious for a deliberate consideration of this subject. Specie pay- ments have been commenced in New York, $nd every man, hopes they maybe perma- nently maintained. No party seeks an- other suspension. The refunding at lower interest progresses rapidly. No one would obstruct it. Do not go to the opponents of a creed to learn its tenets. The Ohio idea does not favor indefinite inflation, or a depreciated currency, or a currency fluctuating in value or liable to entail losses on the holders, Or a currency of less value than coin. These are the false assertions of men who can most easi- ly overthrow the manriakins whom their ' imaginations sets up. No democratic au- , thority, whether convention or individual, sustains them. On the contrary, by every means through w-hich-the jnlLoi the party ppiiliWlrfiillOTfTI'I'iliyiljTIfJTii'Vi'i if "Till i de- clared its policy to be in favor of a sound, stable, non-fluctuating cui rency, whose stabibility of volume shall give assurance of its stability in value — value as measured by every commodity which men use,wheth- ergold or silver, or manufactured articles, or th$> .products of the soil. Our ' republican administration boasts that by the equalization in value of coin and paper, which it chooses to call resump- tion of specie payment, it has made the money of the country "honest money;" has obliterated the stigma of illegitimacy which itself imposed on the greenback, and how receives it for all dues; and has realized a perfect currency, in which every dollar of paper can be converted into coin at the will of ' the holder. Need I remind them and you that only the persistent efforts of the democratic • party made possible even the partial re- monetization of silver, and the consequent enlargement of, the coin basis, and that these results were accomplished over the veto of a republican president? Shall I recall the fact that the resumption act de- creed: the total destruction of the green- back issue, and that tke democratic party, after a l»3ag struggle, compelled the retention of $346,000,000 as a permanent part of the currency? The democratic party has for years demanded that green- backs be received in payment of custom i duties. The republican administration 'ever refused to changeithe law and permit ' this to be done. -Now the secretary re- ceives them in defiance of law. These are the splendid achievements of the Ohio idea, while yet advocated only by a minority party. I rejoice in this equal- ity of paper and coin. : It has been accom- plished by the harshest means over ruined fortunes' atid bankrupted merchants and prostrated trade; amid the tears and sweat and blood of the energetic and brave and enterprising business,. men of the country. But the suffering has been endured, and I am glad that it lias not been wholly in yarn. I do hope most sincerely that, in spite of the tbre'ateii&l dangers, this equal- ity may be steadily and permanently maintained. I do hope that the volume of the currency &s it now exists may bemain- tained, undiminished by cancellation or ' hoarding, or bv being locked up in public or private vaults; and that all of it shall be always as " good as gold." No democrat will put an obstacle in the way of consum- mation. ... We are told that the industrial interests of the country need rest for agitation. That may be true; but there 1 can be no rest!, nc ' freedom from agitation so long as the ad- ' ministration or the banks pf the republican party seek to evade the law for the remone- tization.of silver, or to linjit its tender quality, either in law or in fact, or to reduce the Volume of greenbacks. These questions are far-reaching in their ramifications, and if pressed, the argument will stir the public mind to the very bot- tom. Currency is the instrumentality to effect the exchange of values, embracing in that term, labor and time contracts. Stability of value is essential to the proper discharge of this function. Stability of volume is es- sential to stability of value; for the value of currency, as if every thing else, depends largely on the quantity. At present gold arid silver, Coin and bul- lion, effect the exchanges between nations according to population or business. The volume in each constantly changes as the exigencies of war or indebtedness of trade arise. Erance is supposed to have $1,200- 000,000, against $520,000,000 in the United Kingdom, and $250,000,000 in the United States. . The fluctuations are constant and eccentric. When the precious metals are drained from any nation, as they have at times been drained from all nations^-our own among them — by any of these causes to such an extent that it must sell bonds to pay for its importations, obviously that nation has no precious metals for a cur- rency to effect exchanges of domestic pro- ductions among its own "citizens. At the very momentf when a full currency is most needed to, foster and exchange products of I indouatny, the coin currency is abstracted by the foreign,; creditor,, and if the paper Curr enc y depends for its value, solely on ! convertibility into coin, it must be con- tracted by double the amount of the coin abstracted. At. the moment when- the nation needs the largest currency it has Wefenjby no exemption from the com- mon misfortunes. We may again lose, as we have heretofore lost, a portion' of our coin. What must be the inevitable conse- quence which neither desire nor skill can avert? Either the paper currency must, be contracted at the same time and in the proper proportion as the coin disappears, or specie payments, specie redemption, specie convertibility — call it what you will — must be suspended. If the proportion of paper to coin is to be kept up so as to insure convertibility,- the paper must be reduced at the rate of more than two dollars for one of com lost. Under the pressure of this threefold contraction by the loss of coin arid the re- duction of paper, the business of the coun 1 try would be destroyed. The debtors would be bankrupted. If the other course should be adopted and specie payments should be< suspended, the country would not only have endured in vain the terrible sufferings of the last five years, but would also incur again that dishonor and disaster from which the re- publican administration tells us they have just rescued it. - ■:-, :. ■ Mark exactly what I say: Unless, we ^re exempi-fssHa the common misfortune "which during this century 'has befallen every nation of the civilized world, our- selves included, we will lose a portion of our coin and be driven either to another suspension of specie payments or to a con- traction so rapid and so great as no people, however long-suffering, have been willing to endure. . . • It is the part of wisdom to forsee and to provide for the emergency. I appeal to every candid man — I would appeal to Secretary Sherman himself with, entire confidence.— for the accuracy of this statement. And if the statement is true what be- comes of the boasted perfection of this financial system? • ■ No perfect financial system has yet been devised . Certainly, that system is radically defective, which, ..according to Secretary Sherman, is essential to prosperity, and j even to honesty, and yet, according to the i statement of his annual report, "is proven by the experience of many nations to be impossible in periods' of great emergency." It is a solecism to say that speoie pay- ments are essential to prosperity and hon- esty, and yet are impossible. Certainly, the system, is radically de- fective in which paper is an essential part df the currency,' and so entirely dependent for its value on the convertibility into coin circulating equally with itself, that the volume of pdper must be reduced propor- tionately whenever the. exigencies of for- eign nations or our own, or the complica- tions of trade, reduce the volume of coin of the country, and thus. destroy all its in- dustries. Let me illustrate: The secretary of the treasury says that 40 per cent, of coin as compared with paper is necessary to main- tain specie payment. The greenbacks amount to $346,000,000. The necessary coin amountsto $138,000,000. The total coin and i greenbacks are $484,000,000. If the coin ■ should be in any way diminished, $40,000,000 the paper would have to be reduced im- I mediately '$100,000,000. The contraction \ would amount in all to $140,000,000, and i the currency would fall to $344,000,000. It 1 is mere mockery to tell us in the same i breath that we must have a steady, stable, f honest currency and that we must have t this System. It is mere mockery to tell us that system of currency is sound, in which ordinary foreign exigencies may drive, us to sacrifice either the quantity or quality to preserve the other. "The 'great problem of statesmanship in this age, not only in our own country, but in every country, ; s to devise a currency for the exchange of values among its own people — for domestic use — which will rate as high as the average world Value of the precious metals, and will be free from their local fluctuations by reason of causes over which neither the government nor the people can have any control — a currency which shall be possible in periods of even the greatest emergency. Every country is struggling to establish such a currency. The bank of France was established partly to furnish such a currency for that country. Its notes. are received for all government dues and are a legal tender. When specie payments were suspended in 1870; the inequality of value between paper and coin never exceeded 2 J per cent., and the paper currency sustained that great industrial activity which paid the war indemnity before it become, due. . The national bank currency has proven perfectly safe to the holder, and has floated at uniform value over the whole country. It is protected by the credit bonds of the" government, and is redeemable in the credit notes of the government. To this hour it is not redeemable in coin. The system is. of doubtful constitutionality; it is expensive to thepeople ; it confers privi- leges on a business ' and ' a class. Under manipulations of parties it becomes a great political instrumentality, controlling elec- tions and demoralizing our politics. It must yield toa better. , The greenback currency is an effort in this direction, and is far better. It is cheaper. It avoids political complications. It pays debts and taxes. . Notwithstanding the, inferiority imposed' on it, by the gov- ernqien't, it has sustained' 1 for sixteen years' 'the industrial interests of our country, and they were years df great pros- perity until the fatal policy of the Repub- lican party intervened. . Even the green- back may be improved. The OhiiQ, I^a recognizes; the Necessity of this improved currency,' and peeks, to supply It. Success alone; will finish its' 1 ef- forts. ' Its right' toV exist is. fo be found .in the fatal weakness '.[ of 'the. pres- ent system. Its, object is to strength- en it. Its methods are to bring the closest study arid.' calmest jiidgmerit to the analysis , of the lessons of experience, and to adopt the results. Its progress hag been to demonstrate that government should issue all the currency, and should make it receivable for "alfclues and taxes, as far as possible giving to it elements of value besides convertibility into coin, thus avoiding the disasters of foreign complications. Its belief is that human ingenuity can devise a scheme which will make the issue self-adjusting to the true demands of business, thus avoiding the perils of great fluncfuations in volume or value. Its efforts Will be to stimulate the best thoughts and keenest observation to this work until the reforms shall be as perfect as the conception is beneficent. Its hope is to have the co-operation of all good men, and thus" the more speedily to free industry from the>;tramm.els of a bad currency system, an evil which has caused more public disaster and private distress than the failure of crops or the visitations of pestilence. Its success thus far has been to compel the femonitization of silver and restore it to the category of coin mentioned in,, the bond act of 1870; to remove the stigma, from greenbacks, by making them. receiva- ble for duties, and to incorporate in the permanent currency of the country $340,- 000,000 of greenbacks, a home currency too stable in volume and value to- fail when coin shalLtake wings and fly away. , To this work it has pledged its fidelity, and in it will never falter until it has reached complete success. It does riot be- lieve that in political economy, alone the human intellect is stricken wifh paralysis, andean make no progress. It disregards the sneers of those who arrogate all wis- dom to themselves. _' Thirty years .ago they clamored as loudly for bank-paper, and therefore irredeemable, as they clamor now for coin payments. Twenty years ago they denounced the spe- cie clause of the sub-treasury system. Ten years' ago they .demanded /payments m gold and silver as ferociously as they now demand that payments be made m gold alone. To-day they apply the same choice i epithets — the same delicate terms of ap- i preciation — dishonest, repudiators, luna- '< tics, thieves to the republicans who advo- cate silver money, as these apply to the staunch democrats who support the Ohio idea. . The Ohio idea is not confined to the cur- rency alone. It embraces economy in administration; a tariff for revenue only; devotion, to the constitution and the amendments; rigid adherence to the doc- trines that all powers not granted to con- gress are reserved to the people and the stateH. It embraces the doctrine of the equality of rights of all citizens before the law, and that other doctrine still more important, of the equal and absolute protection of all citizens in all their civil and political rights. It inculates and enforces, that the right qf suffrage is the basis of republican_ gov- ernment-— the vital breath of its continued life— and that is free enjoyment without hindrance or restraint, or molestation or interference must be assured to every citi- zen of every race in every part of the re- public. This right of suffrage must be maintained in the states by all the power of the states, because it is essential to re- publican antonomy. It must be sustained as to federal officers by all the power of the federal government, if necessary, becaus* 41; .5(8 Essential to, iU ' ~'-- u ~' ] '-- mn cal. power, wrnm H sfciiutional union, ■ •« The Ohio idea embrace also a firm, un- faltering adherence to the principles, the traditions, the organization of the demo- cratic party as the soundest expounder of correct doctrine, as the safest depository of political pOwer, as the surest agent of good administration and progressive reforms.. , And lastly if you will let me whisper it to you as in the confidence of alove feast,so that the reporters will not publish it, and the republicans shall not hear it, and no man's modesty shall be shocked as if it applied only to himself— the Ohio idea is, that Ohio democrats, upholding its principles, enforcingits doctrines and persuading to its support can worthily fill all the high j places of power and honor which have been confided to Ohio republicans. GENERAL PROSPERITY AND GOLD REDEMPTION CANNOT CO-EXIST. SPEECH OF HON THOMAS EWING, OF OHIO, IN THE HOUSE OF REPEESENTATIVES, FEBRTJAEY 22, 1879. WASHINGTON. 1879. SPEECH HON. THOMAS EWING. The next business on the Speaker's table was the bill (H. E. No. 805) to repeal all that part of the act approved January 14, 1875, known as the " resumption act," authorizing the Secretary of the Treasury to dispose of United States bonds and redeem and cancel greenback cur- rency, returned from the Senate with amendments. The amendments of the Senate were read, as follows : Strike out all after the enacting clause and insert : That from and after the passage of this act United States notes shall be receiv- able the same as coin in payment for the 4 per cent, bonds now authorized by law to be issued ; and on and after October 1, 1878, said notes shall be receivable for duties on imports. Amend the title so as to read : "An act to make United States notes receivable for duties and imports, and for other purposes." Mr. EWING. I am instructed by the Committee on Banking and Currency to move to concur in the Senate amendments, with amend- ments which I send to the Clerk's desk to be read. The amendments were read, as follows : Strike out the words "on and after October 1, 1878," and insert in lieu thereof the words " from and after the passage of this act ; " so that it will read : " That from and after the passage of this act United States notes shall be receiva- ble the same as coin in payment of the 4 per cent, bonds of the United States now authorized by law to be issued, and for duties on imports." Add to the Senate amendment the following : "Provided, That the money hereafter received from any sale of bonds of the United States shall be applied only to the redemption of other bonds bearing a higher rate of interest and subject to call ; And provided further, That whenevor from time to time the proceeds of the sales of bonds shall aggregate $3,000,000 the Secretary of the Treasury shall issue a call for that amount ot bonds, and interest on the bonds called for redemption shall cease in thirty days from the date of such call : And provided further, That the United States notes received into the Treas- ury shall be reissued and kept in circulation without change in the aggregate of the amount of the several denominations existing on the 31st of May, 1878, and it shall not be lawful to issue legal-tender notes of alarger denomination than $1,000.*" The bill and amendments having been discussed by Messrs. E wing, Phillips, Kelley, Garfield, Price, Burchard, Cannon, Chit- tenden, Hazelton. and Eames— Mr. EWING said: Mr. Speaker : No argument has been presented to impair the rea- sons I gave in the opening of the debate this morning for the adop- tion of the amendments proposed by the Committee on Banking and Currency. I therefore see no occasion to discuss those amendments- further. But the exultant and braggart tone in which gentlemen have defended the resumption scheme, and the rosy and, I believe, erroneous view they have taken of its effects on the country, lead me into a much fuller discussion of the scheme than my proposed amend- ments necessarily call for. OUIt CHANGED STANDA1SD OF VALUE. The resumption to which the country hasat last been brought is sim- ply and purely gold resumption. All prices have been forced to or below the gold level, and cannot rise above it without upsetting gold resump- tion. The limited quantity of silver permitted to be coined oau have for a long time no considerable effect on prices. The silver dollars, ■worth as bullion 18 per cent, less than the gold dollars, are, like the nickel and fractional silver, merely token coins, as long as the great mass of the currency which is paper is convertible at will into the higher-priced dollar. Hence, though the gold and silver dollars are equally full legal-tenders, yet our sole and absolute standard of values is now the gold dollar, and must so remain while our paper currency is convertible into it. The fall of prices we have suffered was the necessary condition- precedent to successful gold resumption. From 1862 to January l r 1879, we used a currency of paper redeemable only by receipt for pub- lic dues, and performing all the uses of money in every private trans- action except in payment of customs ; and every value in the land was measured and fixed by the volume of that money actually cur- rent, compared with the aggregate of our business uses for money. These values had no fixed relation to gold values, because gold was a mere commodity used by the people only in paying customs and in adjusting foreign balances; and its price in our markets fluctuated precisely like other commodities under the law of supply and demand. But the gold prices to which we have now been brought are determ- ined by the grand aggregate of the currencies of the several gold re- demption nations, compared with the grand aggregate of their business demands for money. Values are kept at something approaching a level among such nations by the operations of international trade. As long as each of such nations has its proportion of currency compared with its proportion of demands for its use, gold will not flow from one of such nations to another : but if one such nation gets an undue pro- portion of currency including gold, a rise of prices follows ; it at once becomes a dear market to buy in and a good market to sell in ; exports fall off, imports increase, the balance of merchandise trade turns against it, and its gold is then Ehipped off to pay the balance. A con- traction of its currency follows, and a fall of prices. It then becomes a bad market to sell in aud a good market to buy in ; imports there- fore decrease, exports increase ; the balance of trade turns in its favor and gold comes back to pay the balance, thus restoring its propor- tional volume of currency, and bringing its values up again to what is called the gold level. This is the method called by its advocates the system of regulation of the currency by " the laws of trade," which the gold resumption law establishes here. TUE ROAD TO GOLD PAYMENTS FROM 1866 TO 1879. The reason the scheme for gold resumption has so profoundly agi- tated our politics for several years past is that it necessarily involved a great and permanent lowering of the prices of labor and property, great business stagnation and distress during the period of falling prices, and an immense increase of the burdens of debts and taxes. The discussion, which did not fully begin until after the resumption law had been secretly concocted and forced through Congress in 1875, has been befogged by the craft of the money power playing on the ignorance, the prejudices, and the thoughtlessness of the people. To the great holders of money securities of this debt-rid- den world the gabble about "honest money," "public faith," and the thousand sophistries with which legislation in their interests is obtained or supported, are merely their tools of trade. Their anx- iety about the kind of money a people may use goes no further than to have affairs so managed that great public and private debts shall be made in a cheap currency and paid in a dear one. They have played that trick on England, the United States, and other nations, until they have filled the world with princes and paupers. When our great rebellion broke out they withdrew their gold and forced us to a large issue of money, not redeemable in coin, but in receivability for public and private dues. The volume reached in 1886 $1,545,000,000 of United States legal-tender paper, over two-thirds of which ($1,117,- 000,000) bore interest, it is true, and therefore did not circulate as freely as other money, but which, being legal tenders for all public and private dues, had a great effect in increasing prices, and which, added to the bank.-notes, gave us an aggregate paper money of $1,803,- 702,726. We made our national debt almost wholly in this money, or rather in labor, and property increased in prices by it. Our 6 per cent, bonds, which were rated at par in this money, brought us on an average about fifty-six cents on the dollar in gold value. From 1886 to 1871 all but thirty-three and one-half millions of the . $1,117,000,000 of in terest-bearingcurreney was redeemed and canceled; nearly all of it-being funded in per cent, bonds payable originally in legal-tenders, but subsequently, in violation of the contract, made pay- able in coin. While that large volume of currency existed, the people were almost wholly out of debt. Its withdrawal resulted in building up a vast credit system which to a large extent sustained prices and business until the gathering burden of debt and the shrinking volume of currency brought on the collapse of 1873. Then, aided by an increase of the currency issued in obedience to the demands of embarrassed capitalists, the country was rallying from that collapse, when (silver, having been quietly demonetized and half of our coin resources thus cut off) the gold resumption law was passed ; involving in its execu- tion a vast additional fall of prices to the gold level, and the liquida- tion of an unparalleled burden of public and private debts in prop- erty and labor shrunk to an average of not much more than half of their values when the debts were made. Mere humanity would have dictated to the manipulators of this scheme of gold resumption to attain their end by the more direct method of having a law enacted which would uot have shrunk the currency or lowered values of labor and property, but would merely have doubled the number of dollars of each public and private debt. But the practical difficulty was that the robbei-y would be open and palpable, and the people could not be fooled into submission to it. Yet it would have been vastly more humane — for the industries of the country would have gone on at full play, the robbed could have made up their losses by profitable business, the nation would have kept on growing richer, and the furies of vagabondage, starvation, and in- sanity, born of the stagnation of falling prices, would not have been turned loose to desolate every industrial center of our land. ! 6 Even if our people had been free from debt and lightly taxed, this forced lowering of prices could not have been accomplished without vast injury to our industries. A fall of prices necessarily makes all current business unprofitable, if not ruinous. Capital shrinks from business when prices are falling, embarrassment and losses to traders and manufacturers follow, labor loses employment, and the indus- trial energies of the people are impaired. How great is the calamity of impaired production may be realized by comparing the annual productions with the accumulated wealth, of our people. The most reliable estimate of our annual productions is that of David A. Wells, who placed them in 1869 at $6,825,000,000, while the whole assessed value of taxable property, real and per- sonal, in all the States in the following year (1870) was but $14,021,- 000,000. Assuming the property to have been worth one-third more than its appraisement for taxation, say $21,000,000,000, it follows that all the accumulations of our people for two hundred and fifty years, including all their lands and improvements, are worth only the products of three years of successful industry. Assuming that our last ten years of increase in population, and improvement in machinery, will offset the fall of prices since 1869, and that we could now, with our industries in full play, produce $6,825,000,000 of values at present prices, then the gross product of all our industries for eighty-eight days would pay our national debt, and the loss of production for eighty-eight days would lose the value of that debt. Mr. Wells esti- mates that only ten millions of men, women, and children, or a little more than one-fourth of our population, were in 1869 producers of values — producing on an average $682 each a year. Harper's Weekly estimated the number of wage-people — men, women, and children — in enforced idleness in 1876 at three millions. The Maryland con- vention to consider the tramp question last year put the number of tramps alone at one million. I think it a reasonable estimate that on an average each day for four years past the producers of values have lost one-fifth of their usual working hours through enforced idleness. Assuming that they numbered eleven millions of persons, and that each one would produce $500 of values a year, instead of $682, as estimated by Mr. Wells in 1869, then our annual loss of pro- duction, from stagnation of business through the fall of values inci- dent to gold resumption, has been $1,100,000,000 a year, or $4,400,000,000 in the four years from 1875 to 1879— two and a half times our whole national bonded debt ! But the descent from the paper to the gold level of prices carried with it not only this enormous loss of production from business stag- nation, but also incalculable losses to tax -payers and debtors by the fall of values of everything by sale of which money is realized to pay debts and taxes. These causes combined have made the four years of preparation for resumption the darkest era in our industrial and social life — a period that has stripped millions of their hard-earned savings, turned hosts of willing laborers into vagabonds, filled the gazettes with bank- ruptcies, suicides, and sheriff's sales, and crowded our mad-houses, asylums, and jails with the victims of a law more diabolical than man's inhumanity to man ever before enacted or enforced. It is the great boast of the republican party that by its financial policy it has reduced the interest-bearing national debt $453,000,000 in the last twelve years. But they got from the people, in the same years, $4,054,000,000 in taxes. Had they been as economical hereto- fore as the democratic House has compelled them to be for four years past, they would have reduced the debt three hundred and twenty- four millions more than they have done, without additional taxes. But has the public debt beeD reduced at all ? It has in name, but. not in fact. Notwithstanding the enormous sum of taxes paid by the people, and the application of $453,000,000 to the payment of the bonded debt, it takes more of labor, or of wheat, corn, pork, beef,, cotton, petroleum — everything with which it must be paid — to pay either tho interest or the principal of the debt now than it did at any time since it was incurred. The farmers have lost in the price of their crops of wheat, corn, and oats alone in 1878, as compared witht 1873, $478,000,000— more than the whole of the boasted reduction of the debt. They have lost in the prices of their corn, oats, wheat, hay, and cotton, in 1878, as compared even with the low prices of 1877,. $327,000,000. The wage-people alone have lost since January, 1875, in wasted time and reduced wages, directly resulting from the fall of prices incident to gold resumption, more than the whole sum of the- national debt. Measure the debt by the prices of anything which goes to pay it — by labor, or land, or products — and it has been steadily increased, until it is now from one-third to one-half larger than it was when the policy of silver demonetization and gold resumption was inaugurated. But we are told, Mr. Speaker, the deed is done — prices are now brought to the gold, level— debtors, tax payers, and wage-men have already been robbed, and their lost property and wages cannot be re- stored by any measures we may adopt ; that we had to reach that level some time by either a slow or an abrupt descent, and now, though bruised and bleeding by the fall, we should stay at the bottom and make the best of it. We are even assured that if we accept the situ- ation cheerfully and hopefully we will rise from these trials and sac- rifices, building on firmer foundations a renewed prosperity, because gold will now How out in circulation with silver and paper, swelling the volume of an "honest" currency, and giving a healthful rise to prices and stimulus to enterprise and industry. Sir, I have re-examined this whole subject in no factious spirit, but with a sincere and patriotic desire to acquiesce in gold resumption if it be for the general welfare. And I now reaffirm my conviction,, that if prosperity be restored gold resumption must fail ; and if gold, resumption be maintained the people must grunt and sweat under their weary load of debt, taxation, and industrial malaria for many, years to come. Let us now turn our backs on the terrible period of preparation for resumption, on its business failures of a thousand millions, its four thousand millions of loss of production, its armies of willing laborers turned to tramps, its desolated hearths, its broken hearts, its wails of human agony; and look at the sacrifices yet to come to maintain it. THE EXOIOIOU3 UISE IN THE PURCHASING TOWE1! OF G0L1J— ITS CAUSE AXD ITS EFFECT.. Mr. Speaker, the advocates of gold resumption tell us that great industrial distress prevails in Great Britain, Germany, and other na- tions as well as in the United States, and therefore insist that resump- tion cannot be the occasion of our trouble, but that it must come from some world-wide cause. One says it is providential ; another that it is the result of a devilish spirit of communism in the wage classes; 8 while Professor Jevons, a high priest in the temple of science, declares it is the result of the malign influence of spots on the sun, which he says return at periods approximating the recurrence of great famines and panics. But it seems to me hardly philosophical or fair to put the blame on the workingmen, or Divine Providence, or the sun spots, or the Old Nick, if an adequate and obvious cause be apparent. Here is the cause of the industrial distress in England, Germany, and other nations — a cause at once adequate and easily understood — one which satisfies the reason though it does not give the play to the imagination which the theories of Professors Jevons, Garfield, Sher- man, and Co. afford. It is that for the past five years gold has been steadily increasing in purchasing power, and land, labor, and prod- ucts steadily falling in gold price, not only in the United States but wherever a currency convertible into gold exists. This fact has been repeatedly stated by the London Economist, the highest English au- thority, for several years past. The New York Public, a strong gold resumption paper and the best authority on prices in the United States, iu its issue of the 12th of December last, referring to its former arti- cles showing the fall in the gold prices of commodities in the New York market for several years past, says : Our examination of prices has now been greatly extended. "We have before us tables covering the prices of over eight hundred articles, which represent over four-fifths in value of all articles entering into commerce or consumption in this country. * * * The approximate correctness of the following ratios, re- ducing quotations to gold, may therefore be affirmed, namely, $100 in 1860 equals in purchasing power $126 in 1864, and $124 in 1873, and $81. 67 November 1, 1878. The shrinkage in the average gold value of commodities {exclusive of all stocks or bonds and of all real estate) from January, 1, 1873, to November 1, 1878, appears to have been about 34.1 per cent. This enormous fall in the gold prices of commodities in New York in the past six years has necessarily been accompanied by a similar and approximately an equal fall throughout the nations whose cur- rency is redeemable in gold. In other words, the gold level of com- modities throughout the commercial world is more than one-third lower than the gold level of five years ago, and about 19.23 per Cent, lower than it was in 1860. Why is this fall of prices or rise in the purchasing power of gold ? Partly because the world's annual product of gold has gradually and steadily fallen off from one hundred and ninety-three millions in 1853 to less than one hundred millions in 1878 ; while the loss by wear and tear, the consumption in the arts, and the increased demand by growth of business, have steadily gone on. Thegreatinoney sharksof the world seeing this, and seeing the product of silver steadily increasing, delib- erately formed and executed a plan for the demonetization of silver and the establishment of the scarcer and dearer metal, gold, as the sole standard of values and only full legal tender in all the great nations. They induced Germany, whose currency was almost wholly silver, to demonetize it in 1873, and thus brought on a demand for $385,000,000 of additional gold (according to the estimate of Soetbeer, the most eminent of the German statisticians) to fill up her measure of cur- rency. They also induced France, Italy, Belgium, Switzerland, and other nations to limit and finally stop the coinage of silver, thus in- creasing the demand for gold in those nations. And they at the same time by stealth demonetized silver here and forced us to gold resump- tion, thus creating a new and large demand for gold in the United States. Apparently as a result of the scheme the great banks of Europe (according to the Commercial History and Review for 1877, as quoted by the London Economist for December last) have added in 9 "ten years the enormous sum of $413,250,000 in gold to their hoarded reserves. When we recollect that the eutire gold coinage of all the nations is hut about $3,300,000,000, we can readily understand the tremendous effect on gold values of these new and sudden demands for aboul; one-third of the entire gold accumulations of the world. This cause, added to the falling off in the annual production of gold, is ample to account for the immense fall of the gold prices of •commodities from 1873 to 1878, as shown by the tables of the New York Public. Labor, on an average, has fallen in nearly equal, and leal estate in still greater, proportion. During this fall of prices in England, Germany, and generally "throughout Europe, all business has been necessarily disastrous ; mills, mines, and factories have reduced or stopped work ; armies of willing laborers are thrown out of employment, and many millions of men, -women, and children are put to the slow torture of nakedness and starvation. But it has been a heyday for the creditor class. A fall of 33J per cent, in the prices of land, labor, and commodities means an increase of 50 per cent, in the purchasing power of money. The five Koths- «hilds alone, who are reputed to own three thousand millions of se- curities, have had about $1,500,000,000 added to the purchasing power -of their bloated fortunes by it. The national debts of the world, payable almost entirely in gold, amount to $-23,000,000,000 ; and the other public debts and the corporate and private debts running through this period of fall of prices, and which must yet be paid in land, labor, and commodities at gold values, would probably swell the aggregate of such public, corporate, and private debts of nations having the gold standard of prices to at least $50,000,000,000. This rise in the purchasing power of gold, or fall in land, labor, and com- modities, will be a gain, therefore, of about $25,000,000,000 to the ■creditors, and an added burden of about $25,000,000,000 on the shoul- ders of the mass of the people. The press of the world almost wholly, and the pulpit and the rostrum very largely, are, in effect, bribed out •of the huge gains of the creditor class to hide this gigantic villainy irom the eyes of men ; while the workers, who create the wealth, sinking under their added burdens, sit like the helpless Job to be .jeered at in their leprosy of want and despair, their comforters tell- ing them there is no hope of relief and n&thing to do but to curse ■God and die. Men and brethren ! Can this unparalleled robbery and torture of the people be carried on by nations boasting of the humanities of Chris- tian civilization 1 Will the masses stand like sheep to be shorn, or like «attle drawn to the bull-ring to be slaughtered? A thousandth part of this cruelty and wrong, if perpetrated openly, would set the world aflame with revolution. Are men so dull that ordinary observation •cannot discern the villainy ? Do not believe it. It is plain to the com- monest apprehension when stripped of the lies, the sophisms, and the dogmatism of the venal press. The masses have their own newspa- pers and their unions, where the wrongs done them are made plain as day. Look at the organizations of trampled labor throughout the world! Mark the stern fanaticism with which those who in Europe madly strike at the breasts of kings meefr the headsman. They walk, as John Brown walked, to the scaffold, with bead erect, self-approv- ing, and defiant. This great wrong, infinitely greater than African k slavery, will grow more hideous as the fog in which it strives to veil v.. itself is penetrated by the keen eyes of suffering but discerning men, [. . .and relief must be given or the Avenger will come. . f This fall of gold prices of labor and property does not indicate the 10 total fall -which the United States has suffered. Our prices in 1873 were measured by our paper currency, worth on' an average that year but eighty-eight cents on the dollar in gold. Gold was then worth in purchasing power 34.01 per cent, less than in 1878. Hence the dif- ference between our currency prices of 1873 and the gold prices of 1878 is 43.07 per cent. ; that is, we have suffered a fall of prices nearly one-third greater than that which is filling England, Germany, and other nations with an industrial distress unparalleled in the last half century. GOLD RESUMPTION IF MAINTAINED NECESSITATES CONTINUED LOW PRICES. The country has been assured, during the excitement and distress caused by this contrived fall of prices, that as soon as we reached resumption prices would rise and general prosperity return. Mr. Speaker, the natural buoyancy of our people, and the facilities for bank inflation, may bring about a rise of prices and a revival of in- dustries, in spite of gold resumption. But I assert, and am sure events will verify the prediction, that, in our condition of unexam- pled indebtedness and taxation, general prosperity and gold resumption cannot coexist. We must have a rise of prices to restore prosperity. But we must keep gold prices if we are to maintain gold resump- tion ; and gold prices cannot rise for the obvious reason that the pro- duction of that metal is still falling off and the demand for it increas- ing. The German demand to take the place of demonetized Bilver is not yet supplied. Italy is being led by the Shylocks to early gold resumption ; Austria and Russia will, as soon as possible, be made to follow ; thus causing a large new demand for gold and further fall of prices. Meantime, as we in the United States have as a redemp- tion fund only $1 in gold for every $5 of paper, the necessities of re- sumption will require us to retain our gold product and hoard it in the Treasury or the banks for many years to come, which, as it is a new demand, will have the same effect on prices generally as if half of the present diminished production of gold in the world were cut off. Gold prices, therefore, instead of rising, will, I believe, rather fall throughout the commercial world. We have joined the gold " bund" of Europe, and our prices must be kept on the general level of prices elsewhere or our gold resumption will fail. We have put our gold in oue heap ; it is practically all in the Treas- ury. We have fenced our people from it. They get no redemption for their greenbacks. A man in New York with $25 in legal-tender notes cannot command gold, because he must present $50 or upward. A man in Colorado, Texas, Ohio, or Virginia cannot get his green- backs redeemed, because they are redeemable only at the sub-treas- urer's office in New York. The people are given equalization, but not redemption. Their labor, land, and products are reduced about one- half in value to reach gold prices, but they are not permitted to touch the gold itself. With redemption confined to one counter for all the United States and a cordon of faithful banks to guard the holy treas- ure from the rude touch of the people, gold resumption is apparently safe from all danger but a foreign drain. Against that danger there is but one safeguard — continued low prices, cheap labor, cheap cotton, cheap breadstuffs. The distresses of the past five years have reduced at once our purchases of foreign and our consumption of home products, and given us a surplus to be sold abroad at whatever it will bring. If we maintain the present low piices aud bear the consequent distress and poverty, our purchases 11 abroad will continue to fall off and our surplus products, unsalable at home, will continue to be shipped abroad, thus giving us a big mer- chandise balance to meet interest on our foreign debt aud expenses of foreign residence, travel, ship-money, aud insurance— the aggregate of which demand is certainly not less than $150,000,000 each year. But let prosperity return to us ; let prices of labor and products rise ; let our people become able to buy tea, coffee, and other foreign articles as much as formerly ; our imports will increase, our exports fall off, the balance of merchandise trade in our favor will fall below the annual drain for interest, travel, ship-money, and insurance, and our little pile of gold in the Treasury will melt and flow abroad like a boy's snow giant under an April sun. Hence, gold resumption means low prices, and low prices mean continued depression of business, diminished production, lack of em- ployment, and distress to men whose labor or fortunes depend on industrial activity and progress. It means that our vast public, cor- porate, and private indebtedness and our enormous taxes shall be paid henceforth in values of labor and property shrunk nearly one- half in debt-paying power. EFFECT OF LOW PRICES OS BURDEXS OF DEBTS AND TAXES. Consider, Mr. Speaker, the vast aggregate of debts and taxes now oppressing the people, and tell me whether they can or ought to be paid in land, labor, and products shrunk to nearly one-half their value when the debts were created and the rate of taxation fixed. Let us look at the items of our public, corporate, and private indeb- tedness as given by the best authorities: National bonded debt, December, 1878 - SI, 910, 881, 000 State debts, (Spofford) 352,E66,000 One hundred and twenty-seven cities, (Galaxy, Sep- tember, 1877) .' 644,378,000 Other cities, towns, and counties, (estimated) .... 400, 000, 000 Total public debt ?3, 308, 125, 000 Railroads, (Poor's Manual) 2, 459, 000, 000 Canals, (United States monetary commission) 105, 000, 000 Total debts of railways and canals 2, C04, 000, 000 Debts of other private corporations, and of individuals and partner- ships, dating back to 1873-75, say 4, 000, 000, 000 Total 9,872,125,000 The amount of this last item of $4,000,000,000 can only be roughly guessed at, as there are few statistics on which to base an estimate. It includes, I think, at least half of the mortgages existing in 1875, which have been tided over the fall of prices through thecombined influences of appraisement, stay, aadbankrupt laws, and the leniency of creditors and the struggles of debtors to avoid ruin by forced sales. It includes also a less, though still a very large, proportion of unsecured debts existing, say in 1875, carried along by the same influences. To give some idea of the extent of individual and partnership indebtedness, the United States monetary commission calls attention to the fact that there were 630,099 traders on the books of Dun, Barlow & Co.'s mercantile agency in 1876, of whom 9,022 failed, with an average lia- bility of $21,020 ; and that, if the average who remained sound were equally indebted, the total aggregate of the debts of those firms alone would be $13,245,000,000. Those who failed were no doubt indebted much more than the average ; but, on tbe other hand, that agency 12 does not contain the names of half the persons who are in debt, nor '.!] '„,:::■ I ■ . ! '-' {¥ftOM THE dONG«liS$!nmA£ BECOKD.] C^i SPDE]EOH B0N. THOS. EWINGr, " " ,ilO! OF OHIO, IN THE H^USEaF REPRESENTATIVES;, FRIDAY and SATURDAY, APRIL 25 and 26*1879. ;» -+ ' m » '*» — - The H'0use'beTng in Committee of fhe~Whole on 'tfte state of theUniob', anil laving under consideration the' bill (H.,R»JNo; 2). making appropriations For the legislative, executive, and judicial expenses of the Government for the fiscal year ending June 30, 1880, and for other purposes — , '. Mr. E WING said : , \ v Mr,. Chair Jf an ; Qught we to repqal the jaw^s, which the ,de ( mo- cratic party ' in Congress propose to repeal ? Has Congress the power, and is it expedient^ to place the provisions of repeal oh ap-. propriatibn bills I 'These, and these 'on fy, are the legitimate ques- tions for discussion here and how. But instead of confining them- selves to a discussion of these questions, the gentlemen on the other, side have seized upon these propositions.' for repeal as a pretext for inaugurating a presidential campaign upon the issues of sectional hate anif disti'wst 1 , bbpihg jthiere% to escape trial and'^idtiiiomatibn at the bar of public ppinion.fprthe vicious legislatiop fc^r, which they so richjy deserve to be expelled; from, power. These 1 prbvislbris^ of law we propose! 'to Repeal are ho part of the war settlement. The clause s permitting ;' troops' at the polls, and the jurors' test oath/ e'lBuees^aireibeiatediierainaniffof. War legislation, but no part of the wansiettlemenit ; while the supervisors arid marshals' code was invented six years atftejr the end' of the' war by the repub- lican party to protract ■ its hold on ! poW.etr iagiainst the will of the people, 'i •/■! ,.• , hut; .■•■•■ ' '■■• .■■■'■ <,;■/■■ Sir, I yield to no man in determination to preserve' and pdrpetu- ate all the just settlements and results of the war. I would not yield one jot or tittle of them at the demand of any party or section. But as a Union soldier, proud, of my service, and;unwilling that any- thing we won should be surrendered, I denounce this legislation as a plague spot upon the body-palttfc, and I denounce the clamor raised against its repeal as calculated to cheat the people of the North of the great object of their sfnGflrnngsand sacrifices — a re- stored, harmonious, andprospe'rouS' Union. If I know the feeling and purpose of those with whom I bore arms under the Union flag — of that million of men who, like my colleague, General War- ner, and myself, went from the republican party into the Army, or that other million who, like niy^ colleagues, Gaptain/FjNi!|Y$an;d General ,Le Fevre, wetof from t'Bpidejhqcr^tictparty into i^, they did not fight thai the North' might first strbdue and then rule' over the South, but only to preserve the Union, " with all the dignity, equal- ity, and rights of the several States, unimpaired." [Applause.] Nor did they fight that the party which conducted the war might have an unlimited lease of power either by perpetuating its passions, qr by trespassing upon the" inherited(5libei$e^ Wf/the people. '• [Applause.] Two short months ago my distinguished colleague from Ohio [Mr. CrARFiiiiSt]; thrilled' this House and the "country 'by the noble decla- ration that it was time for sectional strife to cease, and that no man could gain position in intelligent public opinion by further protract- ing it. At the very close of last session he declared his willingness to vote, for the clauses prohibiting the use of troops at/the polls and repealing the jurors' test oath, as they are now on these, very appropriation bills. . ! Mr. GARFIELD. No, sir. Mr. EWING. Yes, sir. ' * ' Mr. GARFIELD. ,1 do not want to be misunderstood and my colle&giie I am sure does hot want^to misrepresent me. I have said repeatedly, and have so said in the course \ of tpis debate, tha,t I was willing to repeal the. whole law of 1865 that gehtleftien on the other side found fault with. But I have never said that T was willing'to pass this modification Of the law which would make the condition of matters infinitely worse than it was originally. Mr. EWING. I will quote the gentleman's language. L> He said: I am free to admit for one that these enactments were passed at a period so different from the present that probablv we can,' without serious harm, muster thertf out now as we mustered out of service the victorious,, armies wjien the - war was done. For myself I see no practical serious objection to letting 'these sections go. , Mr. GARFIELD. The sections.ofthe law of 1865. ' Mr. EWING. That meant just what we are proposing to repeal. Mr. GARFIELD. And if the: gentleman will allow ime, letme remind him that we introduced on this .side at this session a resold tion to repeal the two sections of that law, and every republican ' Voted foTlfand "everydemocrat voted against it. , , ; ; : Mr. E WING. . We were differing about three things. The first was the clause that we inserted on the Army appropriation bill. Second, the jurors' test oath. ' Third, the supervisors 1 and marshals law. Those provisions as to the use of the Army at the polls arid as to the test oaths were in the appropriatibh bills of last session in the very words in which they are now in 'these appropriation bills. And the gentleman from Ohio said : jr - . ■'■•"[ '••■•<(•-/'.' - - ;l . .'■'..''■ '■ ■ '■"' ': " _ ■■■ :■ .ll- 1 for one am willing to abandon the first of these > two differences, t0 gi'P upthe clause in relation to the use of the Army and to give up the jurors' test oaths if the other side will abandon the attempt to repeal the' election law. Mr. GARFIELD. . I wish to ask my colleague will he ag^ree to : that himself now ? If we will give up the first two poinds, will you : give up the other ? [Applause on the republican side,.]-, i Mr. EWING: We are not talking about what I will, agree to. That is utterly. idle.,. We then differed on three provisions, and you agreed to give up, two of them just as we had agreed upon them and put them oh the appropriation bills. Mr. .GARFIELD. Are yon willing to give up the, other? / Mr. EWING. I will talk to you about that at another time.; "Then he was willing to put these clauses on the two appropriation bills. They were all right. But in less than a month a proposition to do the same thing exactly was met by him with the thundering declaration that it was practically a renewal of the civil war by southern democrats, who, having failed to shoot the Government to death, were now resolved, to starve it;to death: -! What is there to justify ithis -renewed and protracted clamor against the South ? Nothing, absolutely nothing. The great ques-| tion about which. the North andjthe South went to war is settled forever— the question of the right of secession. Our forefathers dif- fered about it; they. failed to settle it in the. Constitution. Tbe southern people, believed, the right to exist after the Constitution was adopted ; the, northern people believed it did not exist. Both were sincere^ both : had eminent authority for their interpretation;^- Hamilton. and Washington on one side, Jefferson and Madison on the othet"> The..first gun fired on Eort Sumter swept the- question from the fdrum to the battle-field, the highest of, human arbifcra? merits. .There it was irrevocably settled.! The South now, without coneediiig that they, were originally wrong or unfaithful to th«ir honeftt interpretation ,o,f'the Constitution-r— which, is a concession we have ho right, to expect pr ask-fT-do concede, at all times and every- where, and with absolute unanimity* thaijhe question isdecidecl against them, and that from that, decision .there is, and can be,!no appeal. ,,,"' . ;<;n , ; , u ., , .,,,, ,\ , , ., v " ■ The amendments of the Constitution to secure liberty, the ballot, and equal, rights of person and property to the emancipated ■slaves.; to guarantee the public debt and pensions and bounties- to Union soldiers; to prohibit payment- for slaves, or for debts; or losses incurred in aidin^^J^^fi^liQr^ar^.alLaec.epted^and jaequj- ©seed in throughout the South. ,,Eyery security asked hy the: ^vic- tors haa been yielded honestly by the vanquished. Teq years have passed since the last of the cond,itjons, of settlement prescribed by the republican party were fixed in, the fundamental law. In that ten yearanQ. more of constitutional! guarantee has been, demanded; and no man i ean say that in this country, now, from, one end to the other, .there is an intelligent being who thinks for pne moment of ques- tioning the absolute finality of the settlement. [Applause on the democratic; side of the 1 House.] i °' 1 ; 1 ," i . 1 do not deny that here and there,; in the South outrages on the rights of colored men occur. But these wrongs are alniostin every instance the inevitable resujt of the systematic attempt of the repub- lican party to keep up the color line ; to array the blacks in hostility to the whites under the lead ot white Adventurers supported by Federal power, and by a partisan enforcement of this harsh, exas- perating, and vicious legislation which we now propose to repeal.' You know, gentlemen of the republican party, that it is idle to expect that the white race of the South, or the white race of the North, anywhere, in any State, county, orbity; will submit to negro domination. You know that there is not a city or county in a Northern State in which, if the negroes had the numerical majority, they could .take and. hold political ipower without as much riot, re- sistance, and political disturbance. a» have occurred in the most dis- ■ , turbed portions of: the South., [Applause on. the democratic sideof the House.] . ,*-.)■ .■;.■■■.. J Mr. OSCAR TURNER. Yes; and more too-. ' Mr. EWING. Yes;' because there! is not that kind 1 feeling to- wards the blacks in the North that there is in the South. Race antagonism is fiercer and' stronger with us; far stronger. ' You built tip your negro and carpet-bag party in the 'Sduth, and propped it with bayonets ah d marshals, and supervisors and packed juries, knowing perfectly well it must tumble down, and intending to breed discord between Whites and blacks, and thus keep alive throughout the North the fifes of sectional hate arid distrust in order that your party might retain that* control of the North which you could not hold on the real living issues 'of the day. [Great applause from the democratic and greenback members.] '■■ i But we are told, Mr. Chairman] that this Federal jfttervefitiohin 1 the South was neceBsary to protect the rightt of the negroes. I deny* it, sir. The whole history of reeonstrilcti oil since 1869 disproves it. Federal intervention has been, the cause, the one, great, lasting cause, of race disturbance there. ■ , ;Frbm the States' from which the Federal power was early withdrawn-^Virginia, - Texas, Georgia, North Carolina — there has come up hardly a complaint of race dis- J turbanee from iKhe end of theiwar until now. Theoutcry has come from the States where you; haive, kept' the Federal arm longest; whereyou organizeditnpst thoroughly your machinery of supervisors and marshals? where you: most persistently forced that impracticable i and monstrous organizafci.9^o£ip£|,r ; tJ v es. c 9fl4h,e laolarJline;;,, where you constantly Weld 1 over the white 1 race the threat of black rule, under carpet-bag direction, which 1 has always proved a rule of ignorance, profligacy, and viee. [Applause on the democratic side.] When you take into consideration the natural -'dominating' spirit of our race; no stronger in the South than in thei North; when/yOu take further into consideration the fact that the whites in the South own nearly all the property, and that negro and carpet-bag suprem- acy has always resulted in taxation of property up to the very verge, of confiscation, you have conditions that make black domination in any Southern State utterly incompatible With civil order. [Re- newed applause.] Must negro sufff'age, therefore, be abolished? Not at all. But the color line must be abolished. If we want peace, we must not have race organization in the South or anywhere. Withdraw from the southern whites this threat of black domination, and they will' divide into political parties on local and State and national issues just as do the whites of the North. The colored people will divide . also, and be courted for their votes by both parties. The angry an- tagonisms of the past will not again be revived by straggles for a race supremacy as hurtful to them as it is intolerable to the whitest- Their usefulness as the chief prop of the industrial organization of the South, and their natural' kindness and docility, so strikingly displayed throughout the war, and even during the passionate i struggles' in which they have be cers in the performance of the same duties. And when one appoints officers to do acts which it has a right to have dome, the other, ex necesUaierei, is an intruder if it attempt to inspect or direct the acts of that sovereign or of its officers. The vice of this legislation which we propose to repeal is that it leaves all the State registration and election officers to execute the whole code of regulations for conducting tbe elections, and yet sets over them Federal supervisors to inspefet Leffingwell his appointment as marshal, went to Leffingwell and said, (I quote from Barnard's own deposition :■)■'■■ '••' > ' < ' . "You have got instructions from the Attorney-General to enforce the Taws of the United States." " Yes; sir." ■ «' If you" don't execute your orders I. will see that you are not marshal much longer*; ,The man that makes can unmake." Then said he to me, '< What am I to do ?" I said to him, " I can. relieve you of that, dilemma. Give me control of those marshals," and he saysj "I will do it." Question. Well did he do it?- Answer. I think so, sir. 11 Q. Was there any more necessity for the appointment of marshals for that election than 'for any previous electidn ? " ,-. ;. A. Oh, well; you gentlemen know verywell'that in apolitical stryggle for party as- cendency itis necessary for the co-ordinate brdnches of the Government to be in accord ; and there' was an effort on the part, so I interpreted it, of the party which I acted with to gain control of the House of Representatives. -One thousand and. twenty-eight deputy marshals were thus ap- pointed in Saint Louis to work for' the election of the threfe repub- lican candidates for Congress. A large part of them were democrats. They were selected through a Mr. John Codding and other reliable republican' partisans. Democrats were preferred as deputies', pro- vided they pledged themselves to vole for the Republican candidates for Congress. Thomas Barrett/ J. J 1 . Ryan, 1ST. "Vjti De'voy, Michael Carroll, Matthew HOran, and Michael Wdsh testified that they were appointed deputy .marshals' on the distinct condition that they would vote for the republican candidate 1 , and that others'were ap- pointed on the same pledge. Carroll testified that, after some talk about his politics, Codding said : " I tell you I don't care a d n what you are ; I want you to do one thing, and I will get you the commission.". Says.1, " what is that one thing?" Says he, " if you will vote for Metcalf I will get ydu 1 a commission. That's all I want you to do. I don't care what you do for the. rest of the party. , I want you to vote for Metcalfe." He asked if I would promise to do that, and I told him yes ; and then he went and got my com- mission, and brought it and handed it to me. Thomas MeNamara, a deputy marshal, testified that he was ap- pointed eight days before the electio/i, and was instructed "to move around the ward" and do all he cduld to help Metcalfe, the repub- lican, candidate for Congress. ; The' deputy marshals were given lists of the voters, prepared by the republican^ central committee, and went from house to house inquiring whether the voters. would be at home on election day. . Whenever tfae answer was not, positive, if the voter inquired about was a democrat, h\s narne was marked for challenge or arrest* .Witness said he took the oath .as deputy .mar- shal, and prepared to do the duty he was put there for.. , , Question. Now, what duty were you put there f<>r? ,■< -■ •.,;■ ••> .•*, Answer. 1 had understopd I was put there for Mr. Metcalfe's interest. The marshals were divided into companies under captains^ and Michael Welch testifies that his company were instructed on election day by their captain, ? Connory "to bring in < (that is,) arrest) all the democrats they could, and keep them from: voting — damn them !" 1 By the expenditure of $20,1000 in hiring these one thousand and twenty-eight bummers, and by marking five thousandseveii hundred names of registered democratic votei's for* intimidation by challenge or arrest, the city-of Saint Louis, which returned three democratic Congressmen at a fair and peaceful election inl874ywas made to return three republican Congressmen in 18.76. -Bank Examiner Barnard was notidispdseditd hide.his light under a bushel, but came to Washington to report to the Grant .adminis- tration 'the' 1 manner of his success in electing three republican 1 Con- gressmen from three democratic districts;, In ,his .testimony he re- ports an interview with Attorney-General Taft. : He .says,;. ■:* , 12 Mr. Taft asked Mr.; Mudd how marly marshals. , he had. Mr. Mudd referred, him 1 to me, and said I had charge of the marshals; and he turned to met and I said, "One thpusand.and twentyeightr" The old gentleman wheels round in his chair and isays, "Were there no others out in Missouri you could, have mi.de marshals?" , Says; I, "Mr. Taft, we went ia to win," * * * and he said, ^You bring a good deal of sugar in your spade." ; , Recollect, gentlemen, that this entire statement as to, the execu- tion of the Federal election laws in Saint Louis*by the Grant ad- ministration is taken from the testimony given in a contested-elec- tion case in due form of law? two years ago, where both parties were represented by counsel; and that its truth has never been ques- tioned. Disgraceful as it is to the officials implicated, it is only what may be expected, on a grand scale if the people shall consent to leave in the hands of the President the dictatorship over elections which these vicious laws confer upon him. [Here the hammer fell, the hour for closing the general debate having arrived.] SATURDAY, APRIL 27, 1879. The House having the Bame bill under consideration, under the five-minute rule, Mr. Ewing, in continuation of his remarks of yes- terday, said. : , : i -nn. OUGHT THE REPEALING CLAUSES TO BE PUT IN |APPRdpRIATi6N 'BILLS. Mr. Chairman, the' next questidri I wish to discuss briefly 1 is 1 whether we have! the 1 rights and if so, whether it be expedient, to' put these provisidris of repeal on appropriation bills. That we Have the right is unquestioned. THe Constitution gives 1 this House the exclusive power to originate revenue bills, atid it is Well settled that an appropriation is a revenue bill within the meaning of the term as used in the 'Constitutidu. It alsOgives to each House the exclu- sive power to " determine the rules of its' proceedings;" and'the rules of the House permit this legislation on appropriation bills, as it is "germane to the subject-matter ahdi retrenches expenditures." But we are told that for us to exercise this fight is a threat and an insult to the President' I deny it. He has no reason to concern himself respecting the manner of dur legislation transacted accordr ing to the forms of the Constitution. It is a threat and ins'ult to Congress, and an impertinence to the President, for party wranglers here to drag into this debate a discussion of his preferences respect- ing the method of our legislation. He should have, /and doubtless, has, no preferences to express oh the subject— -for it ' is none of his 1 business. But my colleague [Mr. Garfield] says that this legislation^ 'is insulting, because dictated by a caucus, which resolved to starve the Government to death if the President did not sign these bills. ; I beg pardon of the gentleman. The democratic caucus, if I may be permitted to refeHo its action, did; nothing at all, except; to deter- 13 mine -whether we I would put these repealing classes through as sep- arate bills,; or put them on the appiscipriation bills; not going! one ■step further than that.,. And prior to that conference, the; caucus of the. republican party, determined that thare should be, no legislation done at this session pf; Congress except to pass, the ; appropriation bills. As they have members enough to carry outtfyeir threat,; we were : fhus presented the alternative of repealing this had legislation ' through i 'the appropriation bills, or letting rts,tand unrepealed. Iu suiting to the President to put these measure on appropriation bills! Why, sir, ^es my colleague forget that in 1867, when he and the present President; of; the; United States were in' this House, they pijfc on ansapprflpriajiion biljl .3 cla(i«e plajnly ^violating thecon- stitutipnalj power j of >the> PresidentiPfjthe^IJnited States as Com- mander-in-Chief of the Army — requiring him^p sepd, his orders to the Arroyin a particularmethod prescribed by his politicsd enemies? Surely Congressman Hayes would not have been guHty of the gross impropriety of insulting the Chief Magistrate of the Republic! Surely my colleague, [Mr. Garfield;] would not have been guilty of attempting to inaugurate a revolution! A few years ago my colleague had charge of an appropriation bill on which the "salary grab " was put; buttboughihe was opposedto the clause, he did not. object to it as revolutionary, or as insulting to President Grant, though it doubled his salary for the term to which be had just been elected, in violation of the spirit of the Constitution. We all know that half the appropriation bills enacted since 1861 have had riders repealing or modifying or adding'to 'existing laws. In fact, the bddy of this very 1 election 1 law rode into our statutes on an appro- priation bill ; and it is eminently fit that it now ride out on one. It is not the democrats who are insii king the President of the United States. It is the stalwarts of the republican party, who have , denounced and vilified him for twoyearspast because, like a patriot and a man of sense, he sought to put an end' to their sectional agita- tion and restore peace to the country. It is they who are now hold- ing the laah over him arid threatening him with party expulsion if he dares to be governed by his own judgment and sense' of duty instead of by the necessities of the party- for a sectional : political issue, My friend and colleague [Mr. Garfield] who was not a stalwart last session, but 'is a sword-and-bUokler stalwart now, has recently very broadly intimated oh the floor of- this House that if the President signs these bills he will be acting "contrary to his conscience, contrary 1 to his sense of duty.'', The gentleman from Maine [Mr. Frye] assumes in debate here to'pliedge the President of thei United State* to veto these bills. The vecy pledge is but a .sugar-coated threat. Another distinguished gentleman from Maine, toe ieaderof the staLwarts.-in a speech recently made, not the length of this Capitol from here, said that the President ought to send back these' bills without approval, and say to us, with all the scorn befitting his high station, *' la thy servant, a dog that he should do this thing?" This is a delicate intimation that if he dare to sign these bills the whole leash of stalwarts will be turned loose on him. 14 Another radical leader, equal in renown, days that " If the Presi- dent be firm, the democracy mu3t back down." That is, party. ad- vantage and not'public good should" control the President, >and if he sign these bills he lacks backbone! patriot statesmen ! >0 watchful guardians of the President's dignity and honor ! ■ [Here' the hammer fell.] ■>.:■■',■■ , Mr. MULUROW. If I am recognized I will yield my time to the gentleman, from Ohio, [Mr. ,Ewing,] Mr, EWING. I am much obliged to my friend. Mr. CONGER. I think I must object. Mr. REAGAN. The titnehas been extended 1 for several gentle- men. I ask unanimous consent that the gentleman from Ohio have ten or fifteen minutes. Mr. CONGER. I withdraw the objection,. But 1 there are only two hours allowed' for the discussion of all the amendments. If the gentleman's time is extended, there certainly ought to be an oppor- tunity of reply. • CLAMOB ABOUT THE SOUTH. Mr. EWING. , Mr. Cliairmap, I see even, the highest leaders of the republican party get down to the small business, t;o use no harsher word; of ^publishing lists .of confederate soldiers who sit here jn Congress. I am amazed that 1hey are not ashamed of it. Why are the confederate soldiers: here? Because the whole South, all the sweep of manhood from .the cradle to the gravej, had to eater the confederate army to t meet /our .overwhelming n umbers. The southern people have scarcely any other men of experience to; choose, from to whom they are attached by the, sympathy of com- mon struggles, -commoB calamities, 1 and common submission to the- result. [Applause.] i ;,,,, ,.-,,,,..., , lijeraind the gentlemen on the other side that sin and. In*de/rotion to our common country and its. laws. [Applause;], • You do injustice to your. own hearts' if you say otherwise. You . know theje/is not a latent purpose of disloyalty either in them or j a th e grgat ; masses, of -th« : .soufchecn • .people they represent. . Ansd . 15 you know that if the honor of this country were assailed now, any- , where or in any way, they would fly tp. its support, with an ardor as strong as ever burned in your; own 'breasts., [Applause on the democratic side.] ,., A ...;,..- r ... Southern claims will be prated, ahout on ., every stump at , the North, in the eomiug campaign. Southern claims!— when you paid over, $ 4 ,OQ,000,0.00 of the people's money on them, andwheh, since the South.has had true representation here, the; whole sputh- . h ern claims business has been, in effect,- finally squelched, You re- publicans, only ten days &go, came up with absolute unanimity and voted against the bill of the gentleman from, Wisconsin [Mr. Bragg] to repeal the law establishing the southern, claims commission;, while the southern Representatives voted to repeal it. ,..,.,,,, [Here the hammer fell.] Mr. McMILLIN. I move. to strike out the last word, and will yield my time to the gentleman from Ohio, [Mr. EwiNa.']! . Mr. CANNON, of Illinois. If the same courtesy is extended to , this side. .'"■■■ ■'- Mr. CONGER. With the understanding that unanimous con- 1 sent will be given to this side for 1 the same purpose. Several Members. Of course. The CBCAIRMAN. '%%*&. will be the unders^nding.;. ,, '„': '.*. Mr. EWING. 'You are crying out for peace at the South and protection for the negroes, when you are inaugurating a policy which you know necessarily makes, peace impossible and endangers the- happiness arid prosperity of the blacks. > Tou know, tooy that this whole country pants for peace. You know that every great interest is suffering because it is covered!, with the cloud of dust yOu raise in every campaign to obscure the issues that the people ought to be thinking and voting about. And you know, moreover, that you would meet those 1 real issues now, if you' were not aware that the moment they become the controlling questions the; republican party will be: driven from power ; ■'■-.- Possibly you may again win pow'er-' by renewing tliis sectional! agitation; but 'you omit from your "calculation one important fact Within two years past a half million'of men in the North have left the republican party and joined the nationals; Will you call therU, back by blowing the old bugle? "Will .ybu thrill them again with, sheet-iron thunder about the South ? 'Will they shed tears again, over ybtir Eliza Pinkston stories? ' [Laughter.] No, gentlemen^. Two or'three years agb they were troubled about the negroes ; they are distressed about their own wives and children now; ' -! We are denounced as inaugurating partisan legislation. Not so. What we ask is that there shall be no. partisan legislation, but obe- dience to the Constitution and respect for the traditions bf local self-gqvernijienjt, in. which you and ourselves; your fathers and our fathers, were reared. If you fear the democratic city of New York, we fear the republican rftyof 'Phi^#elphiftVwh«r^ we suflW as much^ 16 by illegalvotirig as you do in Sew York. But Tutterly reject the prop- osition to change our 'constitutional forms and usages to Meet local exigencies in a few great cities. Let ftiem and the States in which they lie meet their local troubles as best they may. Moreover, the chief cities of the North are about evenly poised between the two great political parties. Either party can' come forward now and ask for the repeal of these laws without just accusation of seeking undue advantage. We ask their repeal solely for the purpose of bringing this Government back to" " the old paths, where is the good way "•—to the theory, that the people are the pure fountain of gov- ernment, and that every step you carry power from them is a step toward making the Government more corrupt and irresponsible. If it be true that the people of this country cannot be trusted to hold congressional elections conducted by State officers under State laws, without the intervention of the Federal civil and military power, without troops and marshals and spies to watch and com- mand their officers aud drag; them ft>r disobedience to remote courts, for trial and puulshment — if the people have become so corrupt that good government requires that they be subjected to this despotic and hateful espionage— then our Republic is already rotten and its foundation built on stubble. But it is not true. Outside of the cities. the purest governments of this country are those that come nearest the people : first, the town and township governments ; next, those of thecounties ; next, those of the States ; and last of all, the Federal Government. Any abuse in our State and local administrations is almost always promptly pun- ished, because the power is in the hands of those who kuow the wrong an gold. It was dishonest money then. They made Germany demonetize it, but circumstances did not favor a general raid on gold, and the effort failed 'of any great result. But, ever watch-" ful for an opportunity to make money scarcer and dearer, and to add to the value of their accumulated bonds, they seized the pliant hour when Germany received its in- demnity of a thousand millions of dollars from France, and whispered into the ear of her statesmen that they should take this " best money of the world " ( as their only money; that they Should stand with England aloof from the common herd of nations and take only the best metal, which they falsely claim gave to England her envied su- premacy. Germany did it, and inflicted on her' people a blow from which they may not for a generation recover. And Soon afterward the United States did it— not openly > not with an understanding of what was being done/ for it was not till two years after demonetization that our people awoke to the fact that the deed was done. Who did it, no one knows. You might as well search for the murderer of Nathan, as to search for the man or men who did it.' , ^Demonetization was accomplished by the combined effect of two acts of Congress. \ First the, coinage act of 1873, whjch merely omitted the silver dollar from the, coins authorized to be struck. ' At the session when that act was passed not one word was said -by any man on either .side about leaving out the old dollar from the list of coins. Itpassed the House on the report of a conference committee without even being read. It passed the Senate without one word from any Senator to show that he knew of the meditated villainy. But when the coinage act of 1873 was passed there -were several millions of Sliver dollars in the banks and in the hainds and stockings of the people. They were not de- monetized by that act, but remained legal tender. The existence of these old dollars' was a cause of uneasiness to the gentlemen who secretly procured the passage of the ■coinage act. Accordingly the half- finished job was completed in 1874 by inserting a clause in the Revised- Statutes demonetizing, the silver dollars then in existence. , The secrecy of this last-movement was undisturbed by even a suspicion that it was intended. The Codifiers had no right to 4° anything, and.it was not suspected that they would do anything, but simplify.the law as it existed. Their code passed the House without a reading, and passed the Senate, as I have been informed by an eminent Senator, with- out the bundle even being untied as it lay upon the Vice-President's table — and there wasthat damnable fraud hid in it. [Applause.] In 1876, two years after demonetization was completed, Mr. Coktkling- rose in his place in the United States Senate and asked his brother Senators whether there was any truthin the ugly rumor then getting afloat that the dollar of the fathers had been stricken down ? Nobody answered but Mr. Sherman Mr. DUNNELL. Is it in order W the gentleman to allude to proceedings in the Senate? ',, Mr. EWTNG. I am speaking of history— the history of an extinct Congress. Mr. Sherman, the only Senator who answered, merely said that the silver dollar had not in fact been in circulation in the United States since 1853 I In 1875, President Grant, in a message approving the resumption law, urged on Congress the necessity of coining largely of the silver dollar as a preparation for resumption— showing that he, who had signed both acts of demonetization, and his Cabinet, were utterly ignorant of the fact that the silver dollar had already been demonetized. Of coarse, nobody was to blame,! Of course, nobody intended to do it ! It only added a/ew billions of dollars to the burdens of the American people. It only added a few billions to the wealth of the creditor class, 7 Of course, it was a mistake ; but men do not often make so 1 much money inadvertently. [Laughter.] Now, h am quite as much disposed to be charitable in my judgments of men as most people are, but I be- lieve that this was a'well-devised, secretly-executed, gigantic fraud on the American people, [applause ;] and the profound secrecy with which it was done illustrates anew the saying of Shakespeare tha|t — "XT money go before, all ways do lie open." EFFECTS OF DEMONETIZATION; By striking down silver in Germany ; by forcing us to resumption in gbld alone ; by compelling the states of the Latin union to stop the further coinage of silver, there was created an increased} a Hew, demand for gold to the extent of many hundreds of millions of dollars. Superadded to that, and in part induced by it. was an increased hoarding of gold by the banks of Europe, which the London Economist for December last puts at over four hundred millions of dollars. This new demand and hoarding combined withdrew over a thousand millions of gold from its accustomed channels of business ; that is, contracted the gold currency of Europe nearly one-third. The result was a fall of gold prices of labor; and of all commodities throughout those nations- hav- ing the gold standard, and a general distress unparalleled in m'odern times. . The New York Public, one of the most reliable of our statistical journals, and strongly on the side of the money power, in its issue of the 12th of December last, makes this statement : We have before ns tables covering the prices of over eight hundred articles, over four-fifths In value of all articles entering into commerce or consumption in this country. The shrink- age in the average gold VALUE op commodities (exclusive of all stocks or bonds and of all . real estate) prom January 1, 1873, to November 1, 1878, appears to have been about S4.1 per CENT. , , What is true of New York is true of Europe, because this writer speaks of the gold prices of commodities, which are on an average nearly the same in all commercial na- tions. Assuming that land and labor have fallen in the same proportion, the acts of demonetization have added 52 per cent, to the burden of all the debts and taxes of Germany, England, and America. It is to be specially borne in mind in ' considering the effect of this scheme of robbery and extortion on the people of the United States, that it followed close on the heels of. an almost equal increase of debt and tax burdens resulting from our being forced from the greenback prices of 1867-'68 to the gold and silver'prices of 1873. Thus we had " Ossa on Pelion, Pelion on Ossa piled." In my speech on the 22d of February last I showed, that our public debts of all kinds amount to three billions three hundred and eight millions of dollars ; and our railway 'and canal debts to two billions five hundred and sixty-four millions of dollars ; and our debts of other corporations and of individuals and partnerships, dating back as far as 1873, and still unpaid, to about four billions of dollars — making a grand aggregate of nine billions eight hundred and seventy-two millions of dollars of debts, which have been in- creased over 50 per cent, in effective burden by the shrinkage of gold values caused by silver demonetization. In other words, the acts striking down silver have added about five billions of dollars to the burden of public and private debts, and an equal sum to the effective wealth of the creditor class. It has added, too, 50 per cent, to the amount of labor and commodities necessary to pay our Federal, State, and local taxes, which were already grievously oppressive to the masses on whom the weight of the burden rests.' Is-it any wonder, Mr. Speaker, that Europe and the United States are shaken with popular commotion ; that kings, ministries, and parties are alarmed for their safety ; and that the remonetization of silver is now the foremost question in the poli- tics of the world ? Relief mVst be given by those who rule, or it will be seized by those who suffer. A restoration of prices to the former bimetallic level ; or the scaling of debts, salaries, and taxes to the gold level ; or widespread bankruptcy and repudiation, are the only alternatives frdm which to choose. But we are told that we must not be the first to remonetize silver; but wait until, other nations have acted. That is the cry now of the most considerate of those who a year ago applauded demonetization. They admit the terrible effects of the act, but assure'us that, if we will only stand still awhile, the sufferings of the, people of England and Germany will force those nations to join us in restoring bimetallism ; while if we, act- ing alone, now restore it, the strain for gold will slacken and the demand for remonetiza- tion abroad become less imperative. That suggestion would do very well, Mr. Speaker, if we were not meanwhile suffering intensely ourselves. I have heard of a man who lost all patience one winter night at the whining of his wife's lap. dog. Getting up in his night- shirt, he seized the dog and rushed out of doors, determined to hold it there until ' 'it froze to death. [Laughter.] Such is the plan proposed by these gentlemen to lis,, and we no doubt could freeze out Germany and England, provided we could stand the freezing ourselves. [Laughter.] THE HONEST DOLLAE. I very much wished, if my time had allowed, to have paid due attention to the cry for "the honest dollar" which my distinguished friend from New York [Mr. Chitten- den] rai'pd on lustily. .- The honest dollar 1 What is it? It is the dollar of the con- tract — ui. changed in value by the act of the Government. All our newly funded public 1 : & ■ ••'■.'■'■"■ ■ debt is payable by the terms of the law, which terms are set Forth ori the face of the bonds, in our standard coins as they existed in 1870 when the refunding act was passed. The trick of demonetization did- not, and could not, affect the contract between the Government and the bondholder. On the 24th of July, 1876, within a month or two-of : the time when the secret and fraudulent acts of demonetization came to light, the House of Representatives, by a vote of 119 yeas to 68 hays, declared that the old silver dollar should be restored to unlimited coinage as full legal tender. '_ The' Representatives of .*: the people have repeatedly since proclaimed {heir purpose to restore it. Every public - and private coin debt created since demonetization, was made with the certain assurance that it would become payable in the American silver dollar. That dollar is jwprth; to- day in wheat, corn, pork, land, labor, or property of any kind except gold, fulj 30 per cent, more than before it was demonetized. But 'that is not enough to satisfy tWgreed of the money power. It demands all the fruits of its accomplished rascality. It de- < mands not only the pound of flesh, but every drop of blood that will flow. , It will not get it. [Applause.] Nor can my friend from New York impose that view of the eth- • ics of this question on the Common-sense people of America. [Renewed applause,] CONCLUSION. Mr. Speaker, however men may differ on the question as to who should make the money, or how its volume should be regulated'and its value kept stable, all men agree that it is indispensable to the prosperity of a growing people that its circulating medium be bdth sufficient and increasing. If it be too little, elastic enterprize finds! vent in private credits, which rise expanding beyond the money base, only to topple over when jarred, and, spread* distress and ruin on all around. If it be decreasing, values shrink, business becomes unprosperous, capital withdraws its helping hand, stagnation follows, and loss and suffering to all whose fortunes are erhbarkjed in indus- trial enterprise, and especially to that vast number who depend on each month's wages for that month's bread. ^ All admit, too, that great public debts and taxes are destructive pf the prosperity of the masses — consuming the narrow margin between earnings and cost of living, and preventing accumulation, without which the great body of the people cannot rise in in- telligence and independence. All agree, too, that on the prosperity of the masses depends the stability of our republican system of government. [Applause.] Whatever tends to degrade and im- poverish them, tends inevitably and swifty to the establishment of a class rule, which has always and everwhere cursed, humanity. [Applause.] Here "we have a money metal which before Abraham was— before Troy or Tyre or Sidon — and down through all the ages has" remained, pre-eminently the nioney of civ- ilized man. It was the torch of civilization. It lighted Rome to her imperial grand- eur ; extinguished, it left Europe for, a thousand years in night ; relighted, it led to. the civilization of two continents. We have in pur mountain safes a supply of this great instrument Of, association, .this motor of progress, ample for all the, wants of our un- bounded growth and destiny. t Shall we bring it forth ? Shall we epen pur mints to its unlimited coinage? Shall we employ it to rid us of our intolerable bondage of public and private debt; to lighten the load of taxation which now oppresses the ener- gies pf the people ; and to send through all the arteries ef pur industrial bpdy the, throb of renewed and vigorous life? Honesty, statesmanship, patriotism, all demand that we tear from pur statute-books these acts of demonetization which the subtle hand of the money-power inscribed there in the dark ; and, in the name of the people, and in the full light of day, reinstate silver where it stood from the foundation of our Gov- ernment. [Applause and cries of " Good I "] R. 0. Polkinhprn, Printer, Washingtpn, D. C. [from congressional record.] "THIS COUNTRY IS FREE BECAUSE THIS HOUSE IS SO; .WHICH THIS HOUSE CAM NEVER BE, BUT -FROM THE FREEDOM OF ELECTIONS TO IT."— [Arthur Onslow, Speaker of the House of Commons, A. D. 1741.] SPEECH, HON. THOMAS EWING, OIF OHIO, In the United States House of Representatives, .• TUESDAY, APRIL 13, i88to. :o:- The House having under consideration the bill (H. E. No. 5523) making appropriations for the sup- port of the Army for the fiscal year ending June 30, 1881, and for other purposes— Mr. EWING said : Mr. Speaker i There has been a great deal of unfavorable comment by gentlemen on the other side and by the republican press, oh the fact that democratic members have failed to defend in debate the amendment to the pending bill, which provides : , . That ncjnoney appropriated in this act is ; appropriated or shall be"paid for the subsistence, equips ment, transportation, or compensation 6f any portion of the Army ofthe United States to be used as a - police force to keep the peace at the polls at any election held within any State. >"■ ;What reason had we to suppose that this section would meet with serious opposition on the republican side? It is in the exact language of a provision of the law now on our statute-books, making appropriations for the support ofthe Army for the year end- ing 30th June next.J> That provision was adopted in June last in a very full House by the votes of all but twelve of the republicans present. It was crowed over by the leaders of that side, and we democrats were taunted that we did not give it as many votes as the republicans gave it. As there is at least as mu$sh reason for putting that provision on this year's Army bill as there was on the bill of last year, how -could we anticipate and prepare to meet their furioiis assaults on the identical provision which ten months ago they so unanimously and enthusiastically supported? , Their objections come now in a Babel of cries. They are all distressed at the artfencU ment, but each ' 'wears his rue with a difference' ' — from my colleague, [Mr. Gabfiel d, ] whose vacant chair is an eloquent protest against the unseemly somersault of his party, down through all degrees of opposition to the gentleman from New Jersey, [Mr. Robe* son,], who, having been absent when the vote was taken last June, escaped making a record in favor of the amendment, and is therefore free 1;o dip his pencil in the blackest colors in painting its purpose and effect. Their chief objection, however, is that so elaborately urged by the gentleman from Connecticut, [Mr. Hawley.] He says: , ■ The more important question concerns the alleged right to place general legislation on appropriai- tion bills. It is a persistent endeavor to incorporate herea revolutionary policy: a policy revolutionary ofthe parliamentary history of Great Britain and ofthe United States. It is subversive ofthe freedom of debate and ofthe freedom of voting. * * * It is logically, clearly, distinctly, a revolution iit EBEE GOVERNMENT, AND IB TO BE RESISTED ACCORDINGLY. Mr. Speaker, how utterly and egregiously preposterous this is. The republican party, from the time it first obtained control of the. House of Representatives, for twenty . years, session after session, put general legislation ou appropriation bills. That party, initialed, its control of the House by putting on the, Army bill, 'in 1856, a political "rider" declaring that the troop's should not be used in the Territory of Kansas to en- force the laws — a Territory under the sole jurisdiction of the. United States. That "rider" was. adhered to by the republicans of the House,: led by Mr. Sherman, re-', stilting in 'a failure of the Army bill, and an extra session of Congress. , We all recol- lect the political rider which the republican Congress put on the. Army bill in 1868; a provision which forced cin the President the alternative of a disbanclrnent of the Army or a surrender of his constitutional authority! In twelve years-— as my friend from Texas [Mr. Reagast] and my friend from Pennsylvania [Mr! Beltzhooveii] have shown— in twelve years, from 1863 to 1875, the republican party have enacted three hundred and eighty-seven provisions of general legislation on appropriation bills. If the gentleman from Connecticut [Mr. HawleyI were an entirely new member, pneinight be, disposed to overlook his monstrous and distorted arraignment of the 1 Democratic House. But he was a member of the Forty -third Congress — a. Congress that put more political "riders" on money-bills than any two Congresses that ever, sat here. Forty rfour political riders were put on in that' Forty -third Congress, and J have no doubt that, with a party fidelity which never flinches„or fails, the gentleman from Connecticut voted for every one of them. Only think of it] Forty l four t revolu- tiohs in One Republican Cbngress ! I think it was the gentleman from Minnesota [Mr. Dottreli;] who, growing hot , on this subject, warned us that the Republican party would make this issue— the issue of parliamentary reform — against the Democracy, and carry it before, the people at the polls this fall. I am not much of an advocate of general legislation on money bills. Igreatlyprefer the more usual and orderly methods of legislation; but I do not shake in my shoes at the sober and solemn threat that the Republican party will ap» •peal to the people on this issue. We can safely compare records with it, whether we consider the frequency or the purpose of a resort to such general legislation. Mr. Speaker, prior to the Forty-fifth Congress, in which sat the first Democratic Bouse chosen in twenty years, the rules gave wide latitude to legislation on appropri- ation bills, The Democracy at once amended the rules so as to provide that no pro- vision Changing existing law shall be placed on such a bill,,, unless it be germane and retrench expenditures. Here was the first check on the inveterate practice of Republican Congresses of resorting to riders on appropriation bills. It was wise statesmanship in the Democracy to check such 'indiscriminate legislation, and, at the sametime, welcome all amendments tending to economy in public expenditures. What is the character of the legislation placed by the Democratic House on money ' bills which has so excited 'the indignation of the Republican party? It includes but four disputed measures. First, the provision on an apprppriation biil in 1878 prohib- iting the base and degrading use to which the army had been put in dispersing it in petty, squads, and placing each squid at the beck and call of a United States deputy marshal as part of his ordinary posse comitatus. When the Republicans arraign the Democracy for this "rider," let them show the people wherein it is better to rely on a standing army instead of on the people for the force needed in*arrestihg offenders; and also show why a Republican Senate and a Republican President approved this . Democratic measure. ', The next offensive democratic rider was the provision in the judicial appropriation pill of last session, which repealed the odious and unjust jurors' test oath and abol- ished packed partisan juries in Federal courts. Before the gentleman from Min- nesota [Mr. Dunnell] puts himself on the country on this issW, let him explain how and why it'was bad to, give to the whites of the South an equal chance with the negroes to sit on juries; and also why the provision "was only feebly resisted by ' the republicans in Congress, and was promptly approved by the republican President ? - Our next act of "revoliitidh " was the rider on the immediate deficiency bill which we passed the other day, providing that, when deputy marshals are hereafter appointed v tp intermeddle with State elections, they shall be chosen by United States courts in- stead of by partisan marshals, and shall be citizens of gPOd character taken equally from each political party— thus giving the country the best attainable assurance that these officers will hot be appointed or used as mere instruments of party triumph. Several of you republicans voted for that amendment. Your most distinguished leader [Mr. G-areield] framed it with his own hand and sent it to the Clerk's desk, i declaring he Would support it if he were the only man in the House to do it. But when the pressure of party interest was brought to bear on him— when he reflected that sectional agitation was essential to republican success — he lost the courage of his convictions, and voted against the very amendment he had framed and offered and pledged himself to support. Will you take issue with us on this Garfield' amendment 1 Do you; think the masses of the republican party are so 'debauched by partisanship that; they do not feel that it is just and fair to provide that, if there must be marshals at the polls, they shall be so chosen that they will not -be, as they were in 1876,jiiade ' up chiefly of the. ruffian scum of our large cities— bullies and bribe-takers— whose' conduct, as shown by congressional investigations in New York, Philadelphia, Cin^ cinnati, and Saint Louis, was, only less disgraceful \o the Administration than the reckless partisanship which dictated their selection and employment. You will go to the country, I suppose, on these democratic measures of reform ; and on the amendment to the pending Army bill, prohibiting the use of troops as a police force to keep the peace at the polls— an amendment which, at the extra session received almost every Republican vote — and that, too, as, a rider qn the Army appropriation bill. Very well. Go tp the people ! Show them your Rule 120 regulating general legislation On appropriation bills— a rule which your republican Speaker held was inteviiedto permjt increase Of expenditures — and contrast it with the same rule as modified by the first Democratic Congress in 187b which forbids such legislation unless it decreases expendi- tures. Without intending to challenge your rider in 1856, prohibiting certain uses of the troops in Kansas— for that rider was in the iifterest of freedom and fair play, and I have therefore ho adverse criticism to make of it — without, I say, criticising thatrider, or any other, which belonged to the period of the war and its settlements, I challenge you to contrast the Democratic riders with those for which you are responsible. Con- / -trast our riders in favor of economy, impartial juries, rescuing the Army from ba?e and degrading party uses,, and so regulating the appointment of deputy marshal's as to give' hopes of reformation of thp grossest abuses to which the pdwer to intermeddles with State elections has been put ; contrast,. I say, these riders, eveTy one of them in the interest of good, impartial, and economical 'government, with the riders you 1 have placed on appropriation bills. Contrast them with your rider on the Army bill in 1868, robbing President Johnson of his command of the Army because he adhere'd to _ Lincoln's policy pf reconstruction. ' Contrast them with the salary-grab rider, which ' passed a Republican House and Senate and was signed by a Republican President— who thus, with the same pen, approved a rider Which doubled his own salary and ■ vetoed a separate bill equalizing bounties among the soldiers who lifted him to honor and glory. Contrast them with your- rider on an appropriation bill Which took thousands of dollars from the hard-earned treasure of the people to pay the expensesOf a. political parson on a junketing tour around the world. Contrast them with your political amendments on an appropriation bill in 1871, by which the worst features of the marshals and supervisors laws Were ingrafted on our code Mr. MITCHELL. Will the gentleman yield one moment? Mr. EWING. No ; my time is too short. Mr. MITCHELL. Just one remark, for I suppose the gentleman does, not wish to misrepresent The SPEAKER. The gentleman from Ohio £Mr. Ewing] declines to yield. Mr. MITCHELL. I simply desire to say- — [Cries of "Order!"] , The SPEAKER. The gentleman from Ohio declines to yield; and the gentleman from Pennsylvania surely knows that he has no right to. interrupt the member, on the floor without his consent. ' Mr. JEWING. (Irregular and objectionable as the practice of general legislation on ' appropriation bills may be, it certainly does not lie in the mouth of .the republican party to arraign the democracy for it. When we shall have put three hundred and' eighty-seven riders on money bills in twelve years and forty -four in a single Congress — ! When we shall have used that.power to degrade and break down a co-ordinate branch of the. Government, to squander the people's treasure, to overthrow their time-honored methods of election, and to impair and put in peril gheir,inherited liberties— when we have put it to the base uses to which the republican party has so often put it, ■ then may the republican leaders, with less brazen effrontery than now; appeal to the people to condemn the democracy for putting general legislation on appropriation bills. Our republican friends during their control Of this House, and when putting "riders" on money bills at an a\*ferage rate of thirty -two a year forlhe last twelve years of their power, never once reflected that they were guilty of the crime of ' ' revolutionizing tree government." Infact, so accustomed had' they become to that method of legislation, that, in casting about for objections to the wholesome reforms the democracy were in- augurating, it never occurred to them until the extra session to object because those reforms were put on appropriation bills. But now they know of nothing so shocking as such legislation. The gentleman from Connecticut, [Mr. Hawley,] after voting for riders all his Congressional life, now declares that— — "Whatever the amendment may be, whether it he altogether bad or only tainted and colored with badness, or whether it be altogether good, whether it be the devil's creed or the New Testament, I vote, against any political amendment on an appropriation bijl, and vote 'against that bill when the amendr ment shall have been put on. "We have here an illustration, Mr. Speaker, of the beneficent effect of frequent changes in the control of our Government. Gentlemen on the other side would never, have seen the terrible tendency of indiscriminate legislation on appropriation bills had not the people taken from them the power and the temptation to keep on at that sort of work. Should the republicans be turned out of the executive department, also, they would very soon seethe evils of that extravagance, corruption, and assump- 1 tion of extraordinary and dangerous powers which have characterized the last three Administrations, and to which they are now stone blind. They would then be found fighting for the rights of the States as declared in the Constitution — for honest and economical government — for free elections — and, reformed by the wholesome dis- cipline of adversity, might possibly grow fit for power again. But my friend from New Jersey [Mr. Robeson] arraigns the democracy, most savagely, not because we have put a rider on an appropriation bill, but because, he says, to prohibit the use of the_ Army as a police force to keep the peace at the polls will destroy civil government. I read from his speech as published in the Record. Addressing this side of the House, he said: . Gentlemen, pause. Some of you have formerly been arrayed against this Constitution and this Government; * * * but now you are enlisted under the banner of that Government ; you are its chosen representatives ; you are sworn into its service: you have pledged your honors and your oaths, that you will maintain its Constitution and carry out its laws ; you are armed with its weapons, ad- mitted inside the defenses of its strength, have control of its citadel, make its defensive garrison. "Would you now saw off its nag-staff, undermine its walls, spike the cannons of its strength, bind its der ■ 'fendei's hand and foot, and poison the pure well-spring of its power at its source? ' . This is certainly an appalling question ! [Laughter. ] Mr- ROBESON. I thank the gentleman for giving it Democratic circulation. Mr. EWING. Yes ; we will both circulate and answer it. Here is the act of June SB, 1879, making appropriations for the Army for the current fiscal year, the Sixth sec- tion of which is in the very words of this amendment : Seo. 6. That no money appropriated in this act is appropriated or shall be paid, for the subsistence, equipment, transportation, or compensation of any portion'of the Army of the "United States to be used asa police force to keep the peace at the polls at any election held within any State. Who enacted this treasonable section ? The other side of the House cast more votes for it than we did. Where was the gentleman from New Jersey [Mr. Robeson] when , the bad Republicans who surround him were thus binding the defenders of the Consti- tution hand and foot, undermining its walls, poisoning its well-springs,, and sawing off its flag-staff? [Laughter.] He was not off junketing, surely, , at such an hour of peril as -that. [Renewed laughter and applause.] Mr. ROBESON. I was paired with the leader of the opposition on the other side, the gentleman from New York, [Mr. Pebnando Wood.] Mr. EWING. Ah 1 sir ; ho pair is , valid when treason is binding the defenders of the Constitution" hand and foot [laughter] and sawing off its flag-staff. [Renewed laughter.] ...'., Now, Mr. Speaker, what is this terrible amendment? It merely enacts hore in the United States what has been the constitution of Great Britain for Bundreds of' years — that troops shall riot be brought to the polls, nor be stationed so near them that the most timid voter seeing them might, by any misapprehension or threat, be shaken one particle in the freedom of his sufirage. One might suppose we were inserting in this bill some new proviso placing an unexampled and unconstitutional check on the powers of the Executive in the use of the Army. No, Mr. Speaker, it is only a declaration of one of the most ancient liberties of-our race. The declaration would be wholly superfluous but for the fact that section 2002 of the Revised Statutes, enacted in 1865, by implica- tion authorizes the stationing of troops at the polls as a poliSe force; and because, dur- ing President Grant's administration, the Army was repeatedly used to carry elections. I send to the, Clerk's desk to be read a few passages from the report of the committee ; in the contested election case of Tillman vs. Smalls, showingfhe use to which the Army was put in South Carolina in the Congressional and Presidential election in 1876. The Clerk read as follows : After stating many cases of violence and, intimidation toward colored democrats by colored republi- cans in Aiken County, Mr. Croft says (see record, page 041) : "In regard to the United States soldiers, I will say this, that at the election held in November last, an*l for some time previous thereto, there were quartered in this county some five or six companies ; that preceding the election some four weeks the United States marshals, accompanied by soldiers, and manjr times in the night, paraded the lower portion of onr county, making numerous arrosta-of old and young- white and colored democrats." '■' * * * * ( * - s * :,*..;. Saint Julien Yates (page 633), says ; "Q. Did you attend any political meetings duringthe canvass in Aiken County 7-^-A. Iwas present at every democratic meeting in. the lower campaign, and all but two of the repuhjieans.,. "'<$. Did you meet any United States soldiers at those meetings?— A. I met' a squad of United States soldiers at every republican meeting, and two United States marshals at most of the meetings." * * * * * " ' # * ■'{S „■ Abraham Jones, who voted at Edgefield Court-house (testimony, page S96), swears : , 4. " ,"I saw the United States soldiers as a guard around the door outside, and a crowd of voters outside 'pressing this guard, who kept them back with their guns, and an officer in command with his swOrd drawn ; and he Would select with his sword by touching those who were to go in next to vote. As the 5 colored man at the door would call out, 'Sendin ten men,' the officer would again select by touching; with his sword those to go, not taking them as they came, but .selecting 'them from the crowd* some- - times reaching over to toueh one behind another; and sometimes skipping two or three. I was selected , from the crowd with another white man at the same time, and none dared go in but those who were , so touched by this officer." ■ I * * ' * * * f ■ - . * ■: Joseph Meriwether, manager at Shaw's mill precinct, Edgefield County, says (page 600) : * " Q,. Was the box removed at any time from where you first proposed to have the vpting; and if so, by whose orders?— -A; It was,; ahd.by theorderof the command-erof therms*. : "tt." At whose instance did the commandant of tbepos't order the box tobe removed to another place? — A. At the instance of United States deputy field-marshaL Cole Kinner." 1 ' * * *' * * * * *■. . IN BBAUTOET OOTTNTY. Philander McC. Zeane (colored) swears (page 126) : "There was a general talk" among colored republicans that Chamberlain and Grant would send troops on day of election to make the colored men who wanted to vote democratic tickets vote republic can ticket. Colored republicans said if colored men voted the democratic tickets they Would be taken. 1 up by the troops.' This deterred them from voting— that , is, many from voting-^and caused others to» vote republican tickets who desired to vote democratic tickets." , Zach Daniels (colored) testifies (page 119) : "Republicans said that at the election they would have United States troops to support them,. arid , would show democrats that colored men should not vote democratic tickets ; would get troops from' Grant and Chamberlain. Said also that the colored men who voted democratic tioket were voting to* put the negro back into slavery." . :' : Andrew Howard (colored) says (page.117) : " Mack Patterson and these colored men brandished their stickB and said that they had heard that G-rant would send outtrOops in a few days to protect them in their undertaking ; that they were now at GHUisonville, and would divideithe land— cut it up and divide it so that every republican would have % a home, and no,democrat should have one." Stephen Black (oage 156) says : 1 " I know of threats made by colored republicans that if any colored men voted the democratic ticket they would whip them; that a troop was coming from Brunson Station to see that they should not vote the democratic ticket. 3 intended to vote the democratic ticket and left heme with the intention of doing so, and after I got to the precinct at Brighton I was afraid to do it from the threats." Mr. EWING. Mr. Speaker, I have had read but a small number of the instances given in this testimony of the bad use to which the Federal troops were put in that congressional district. In the contested-election case of Bichardson vs. Rainey, the testimony shows that a like attempt was made in that district by intimidating black and white Democrats. The occasion of the interference and the method of operating, as shown from this uncontradicted testimony, were as follows: The votes of South Carolina in Congress, and especially in the electoral college, were of the utmost im- portance to both parties. The negroes had a clear majority in, the State, but a very large proportion of them had been won over to the Democracy by the wise and con- ciliatory policy of Governor Hampton. For the purpose of demoralizing and alarming the white and black Democrats, several regiments of infantry were sent to South Carolina, and scattered in petty squads 4n sixty-seven voting precincts. The white and black deputy marshals, with these soldiers at their back, scoured the country night and day for a week or two before the election, arresting or putting to flight white and black Democrats— taking charge of the political meetings and the polling places— and by their open partisanship and display of military force intimidating Democrats, and gjying an air of official sanction to the violent threats made by Republicans against colored Democrats. Now, if gentlemen want to know the exact meaning of this amendment, I tell them' that its purposejs to stop that sort of interference by Federal troops in the elections. That is the meaning of it. It does not mean any abandonment or abridgment of the ppwers of this Government exercised consistently with our traditions of liberty, . which condemn the use of the Army not only as a 'police force at the polls, but also in the ordinary enforcement of the laws. "What is the Army for? It is to guard against and repel invasion; it is to suppress insurrections against the authority of the State When the United States is asked by the State to suppress them ; it is to overcome open and armed revolt against the authority of the United States any-, where and on any day where such revolt is too great for suppression by the civil offi- - ' , ' ; 6 ; :.;■ .■ ,, cers aided by the civil posses. But, Mr. Speaket, it is a monstrous 1 and shocking abuse, insulting and degrading alike to the Army and the people, to put troops bebind each writ; or around each poll,, on the pretext that the masses in any locality' may or ■will resist the ciViM>fficers of the United States, or refuse to aid them in the' enforce- ment of the laws. Such are the methods and pretexts of despotism, and if they be tolerated by the people, they will tend to the overthrow of self-government and' the establishment of arbijrary power. Gentlemen on the other side protest that the republican party has no intention to •put the troops to such use. Then why retain the power ? Such use brought younear enough to a majority uvthree Southern States in 1876, to suggest your audacious seiz- ure of their electoral votes. T confess, Mr! Speaker, that the unanimity and readiness of the republicans last June, when no important elections were pending, to prohibit such use of troops, contrasted wjth their eagerness to retain the power now, when we are entering the penumbra of the presidental contest, impresses one with the belief that they expect and intend to use,- troops this year to control elections in some of the Southern States. The pretext for using them is an alleged necessity for protecting blacks in the free exercise of suffrage. The real purpose is to keep up the color line ; to command all the colored people to fall into republican ranks — using the troops to inflame the pas- > sions of the majority of the negroes and enable -them to force colored democrats back to their old allegiance. The claim that the political rights of white and colored republican^ cannot be maintained in the South without Federal troops is aTalse pretense. They are protected both by the authorities and by the public sentiment of almost every precinct in the South, and by an exacting public sentiment in the North, which avenges a thous- and-fold on the democratic party every sporadic outrage on the political rights of the col- ored people. , These are the safe and effective methods of correcting offences against the political rights of the minority; while interference by the soldiery at elections breeds greater wrong and mischief. I was greatly surprised, Mr. Speaker, to hear my friend from Kansas [Mr.. Has- kell] say that troops had never been used to interfere with elections in the United States — not even in the Territory of Kansas. The passage I have had read as to th£ , South Carolina election in 1876 will inform him better. I guess many of his constit- uents, with whom I fought shoulder to shoulder for a free State inl8S6-'77- 78, will cor- rect the error of his encomium of the Federal troops in Kansas as having been "always a blessing." Sometimes they were a blessing, as when Colonel Joe Johnston saved Lawrence, and then again they were a curse, as when Colonel Sumner dispersed the free State legislature at Topeka, and ( when the troops "kept the peace at the polls," at Kickapoo, in 1858, by changing their jackets and voting the pro-slavery ticket over and over anil over .again. \ Mr. KEIFER. What ticket? Mr, EWING. I say the pro-slavery ticket. I am glad to state this instance from my own memory, in connection with instances where the troops have been corruptly used for the benefit of the republican party, in the hope that I may" more strongly im- press on my fellow-citizens the feet that the only thing the organized soldiery should have to do with elections is to keep awsLy'from them. They cannot be used at or in sight of the polls for any good purpose which may. not be as well accomplished with- out them; and when brought there they are almost sure to become the base instru- , ments of the party whose President commands them. The fact that the constitution of England forbids the mere presence of troops, at the polls, and the reasons of the prohibition, are stated by Blackstone (volume!, page 178)' i 'as follows : • Mr. Locke Tanks it among those breaches of trust in the executive magistrate which, according to his notions, amount to a dissolution' of the government, if he employs the force, treasure, and offices of ,the society to corrupt the representatives or openly to pre-engage the electors and prescribe what man- , ner of persons' shall be chosen. * * * * As soon therefore as the time and place of election, either in counties or in boroughs are fixed, all soldiers quartered in the place are to remove, at least one day" '■ - before the election, to the distance of two miles or more, and not return until one day after the poll'is ended. , '. To show that jealousy of the use of troops at, the polls has not died out in the British heart I ; mention, Mr. Speaker, that at the 'late exciting" elections in Great Brit- ain, although they occurred a£ the time of the annual drills, orders were issued that - the militia should not convene until aiter the elections were entirely! over. Is the reason of this jealousy of the use of troops at the polls any less strong as ap-c"* plied to us and our institutions than to those of Great Britain ? Hot at all. The law— the people's collected will— is made and declared by the people's representatives. ' J£ing and President alike must bow to it, But if the executive interfere with and Con- t ,':■ ;\ '•.'■' trol the election of legislators, he becomes at once the maker of the laws and the mas- tor of the people. Hence it has always been an axiom in American and' British political science that free government can only be preserved against, executive power by utterly and; resolutely forbidding the slightest, display of such power! at the polling places when the people are .choosing their representatives. In,* fact, we Americans have even greater reason than the British to forbid the pres- ence of troops at the polls. They have an executive , for life, ,with succession of blood, and the sovereign can have no motive to control parliamentary election's other than, a desire to carry out some policy of administration. But With us, as members of Cojigress are chosen in almost all the States on the same day, at, , the, same ballot-box, apd on the same ticket with tae presidential electors, not only has the ' President a motive to interfere in the desire to carry out a favorite policy, but he has a stronger and more compulsive, motive, in the desire to re-elect himself. , Some gentlemen on the other side said in this debate that we should not impute, to Mr. Hayes that lie would use the Army to control, elections. Sir, if George "Washington were President heshould'not have, as I am sure he would not exercise, the power to use ' troops at the polls.' Possibly the present ExScutive would not put the Army! to such base uses; but you know our next President might not be such a goody-goodyas Mr: Hayes is. ; He might be a man of ordinary flesh and blood— of ordinary ambition and willfulness. Patrick Henry warned his countrymen a century ago that "there nearer was an age or Country where the rights and liberties of the people were placed on the sole -chance of their rulers being good men without a consequent "loss of liberty." My friend, Mr. ,,McCoid, of Iowa, said in this debate that, "American troops at American polls, to protect American citizens, have no alarms for me." And another gentleman, I think it was my friend from New Jersey, [Mr. Robeson,] said that, "American bayonets think." However much it may think, the bayonet, whether car- ried by Christian or Turk, Russian serf or American freeman, obeys. Bid the bayo- net obey less because it thought when the republican soldier, 'Colonel Sumner, dis- persed the free State Legislature in Kansas, or When De Trobriand dispersed the Leg- islature of Louisiana, or whenRuger prevented the Legislature of South Carolinafrom assembling? No,, no, Mr. Speaker, the spirit of obedience, which is essential to Army discipline, makes the soldier, like his musket, a mere^instrikment in the hands of whomsoever has supreme command. Mr. Speaker, as I sat listening for two day to the speeches on the republican side and noticed the eagerness of one and all to -vindicate the ' act of Congress' 1 ', which sanctions the use of troops at the polls, I questioned whether the love of liberty is not dying in our midst. How can that sentiment exist, and what is, it worth, if We are willing to see every safeguard of liberty* destroyed ? The dread of the use of .[ troops at elections was rooted in the hearts of, our forefathers ere they touched the sands of Jamestown or the rock of Plymouth. Interference with elections was one of the charges which cost Richard the Second his crown. An act to prohibit 1 such exe- cutive interference was passed in the reign of Edward the First — five hundred years ago. In 1741, at an election for a member of Parliament for the borough of Westmin- ster, three magistrates of the city, apprehending a riot, sent for a detachment of sol- ' diers and had them stationed near the poils in Saint Paul's churGh-yard, Covent Gar- den. It was not claimed" or pretended that the troops were brought to or in sight of the polls, or that their'presence in the neighborhood had the slightest effect on the elec- tions; yet Parliament, then being in session, at once declared the election void; and further declared, "that the presence of a regular band of armed soldiers at an election of members to serve in Parliament is a high infringement of the liberties of the sub- ject, a manifest violation of the freedom of elections, a/nd an open defiance of the con- stitution and laws of the kingdom." The house also brought to its bar the three mag- istrates 1 who sentforthe troops and compelled them, on their Mnees, to beg pardon for ' their offense against the majesty of British law. , In his lofty and eloquent rebuke of the magistrates the Speaker of the House of Commons, Mr. Arthur Onslow> said: ■ This country is free because this House is so; which this House can never 6e, but from the freedom of elections to it I Seven years before the Declaration of Independence, at an election in Bos- ton, Samuel Ada,msi John Hancock, James Otis, and Thomas Cushing were can- didates to represent that city in the colonial assembly. There was a British post in Boston commanded by General Mackay. , Before proceeding with the election, the people assembled in Paneuil Hall, and by resolution required the selectmen to demand of the general that he remove his troops twomiles from the voting precinct, as required by the British constitution. The commanding officer replied that he could not leave g-. -r....... -.,;■■ , — : Ais post ungarrisoned; bijt that lie •would .bring every armed man into the barracks i and confine them there throughout the election day. When this answer was made : public, the citizens .assembled again in'Faneuil Hall,, and passed a resolution saying '*' that they eannot proceed to the election without declaring their clear and full sense • that the residence of an armed- force in the town during an election of so great an im- portance is a /gross infringement of their constitutional rights. " And how, Mr. Speaker, beneath this Dome of freedom, in the glory of the nineteenth century, the people's representatives stand up and defend a law which tramples in the dust the priceless jewels of our race; which destroys the defenses' of liberty which were ancient and sacred before our independence was won ; which puts it in the power /Vof the' President to re-elect himself time and again regardless of the will of the people. ..' Ay; and they assail all who maintain the sacred axioms of liberty -as inaugurating revolu-' . y tion and destroying civil government. Oh, Mr. Speaker, I Would despair of the Republic-:; if I believed that one-halt, or one-fourth of the people really entertain such: senti- ments as their representatives have uttered here. • "Can it be that the' diffusion ©f knowledge,- the sj>Iendprs of civilizationj the power Jo exj$qrethe hidden dgpihs,pf the... ' 'uifverse, to learn all itsharrnonTes, to seize 'the' subtle and Invisible forc'esof eartihand air, and harness them to the chariot of progress — can it be that the wonderful triumphs of the human intellect have been achieved at the cost of the love of liberty in the human heart ? If I felt they had, I would pray to God to take back the steam and the lightning, and let us return to the Wooden plow and the log-cabin of our liberty Moving sires. [Ap- plause on the Pem§cratio.;S,ide. ] But no, Mr.jSpeaker, I too devoutly believe in the high destiny, ordained for .man to fear that as the human race is gaining knowledge and power it is losing the nobler sentiments, and aspirations of the; soul; and, above all, I cannot apprehend that Amer- ■ ica, the torch-bearer of freedom; will so soon sink liberty in luxury, and— This fair mountain leave, to feed s . And batten on that moor. , * No doubt, Sir, a large class of wealthy and influential men dislike our Democratic institutions and would gladly overthrow them. They ally them- selves with the Republican .party — the party of extravagance, subsidies,' exemptions, . and privileges— which helds fast to these extraordinary executive powers to prevent itsi overthrow at the polls, and which makes every attempt to restore and preserve the ancient methods ot election a pretext for fresh tirades of denunciation and slander against the South. Ten thousand presses, with millions-of circulation, stand at its back, < -. ready to — , -" . ;> Distort the truth, accumulate the lie, And pile the pyramid of calumny. . ■■ And so the Republican party, ' surrounding itself with all the powers which ambition, corruption, fear df change, hatred of equality, and distrust or dread of the South can- muster, has in effect established a dynasty, and laughs afall attempts to overthrow it at the polls.. - /* - : ' Mr. Spe'aker, - 1 beltevefeie ,day is not ■ distant- when that,£ectional'hatredi which is i. /J kQjyythj Ltofi^^ T?K'"' grand ,,3nd .fatal mistake of that party has Been it's fdrcmg tjie couiStry ; .t6 look J- pnly to the democracy 1 to unite the discordant, sections and restore Jhe GovernmerTt to ? its purity and simplicity. To'have done this work itself, promptly and /nobly, as Lin- ■ coin intended, would have immortalized the republican party, But it chose rather to foment discord between the races and sections, and preach the gospel of hate, not charity. ; It deliberately adopted a policy hostile to the principles of Christianity, civil, liberty, and national prosperity. It has made a losing fight. Tear by year it has lost prestige and power— from 1868, when, on the popular vote, Grant had a majority over Sey- mour of more than 300,000, to 1876, when Tilden had a majority over Hayes of more than 350,000; from 1872, when it elected a President and held both branches of Con- gress, to 1876, when the people commanded it to surrender every department of power. Lbelieve that in ' the great and decisive contest of 1880 the people will approve the noble fight the democracy has made since the war; and teach the republican party that the bloody chasm is not wide or deep enough to ingulf our liberties, or to longer prevent the restoration of that fraternal uhion for which the best blood of the North was shed. » R. O. Polkinhorn, Printer, Washington, D. C. AT KENT, OHIO, MONDAY, OCTOBER 31, 1887. Fellow Citizens of Portage County: I am happy to address an Ohio audience again, and es- pecially here in Kent, where there was given me a most cordial reception a few years ago. For six years past I have been absent from Ohio and practising law in New York, taking no part whatever in politics. I now come back home — for I claim Ohio as still my home — to make a few speeches in this campaign ; not because I have anything to say of special interest to the public, but because of old political and personal friendships which have drawn me ( here in spite of a resolution to keep out of politics. On state questions I have nothing to say, except to ex- cept to express my admiration and regard for Thomas Powell, than whom no worthier person has graced the gu- bernatorial chair of Ohio. He is every inch a man and a gentleman — a worthy son of one of the best of the Ohio lawyers of the generation just gone by. If he be chosen i governor, neither the democratic party nor the people of Ohio will have reason to regret it. I am not "up" on local issues, and shall leave to others the task of discussing Governor Foraker and his adminis- tration, and devote my time, today, exclusively to some questions of national politics. Ohio was an October state so long, and therefore the skirmish grourd in all national conflicts, that her people are disposed from habit to give more consideration to federal than to state issues. More- over, the shadows of the presidential campaign of '88 are falling over us, and national questions now naturally come to the front. LABOR PARTIES NOT READY FOR 1888. "We may assume that no third party will contest for na- tional power next year, with any possibility of success. 1 ' In fact, l noticed that at the national convention of the knights of labor, at Minneapolis, a few days ago, a large majority of the delegates were interviewed and generally expressed the opinion that the labor organizations had ! better, for the next few years, at least, act as a balance of power, rather than attempt an independent national can- vass. Whatever the industrial organizations may do here- i after, when they shall have united and organized and mod- I ified their political issues; it is apparent that they can | do nothing in the presidential contest next year further than to decide whether the democratic party shall be I retained, or the republican party restored "to power. | Knowing them to be earnest and honest, I take it for I granted that they will make a choice between the old par- i ties, especially if they can see that one of them has been generally true to the interests of the people on industrial questions, since the war, and the other generally false to I them. PRESIDENT CLEVELAND. I shall not discuss candidates today, but parties. Just I. now it looks as though next year would be a repetition of i '84, with Cleveland and Blaine on the track. But neither may be nominated, and it is idle to assume that either will be. Parties are long-lived. They survive the storms of decades and generations, while a breath makes and un- I makes a party leader. Today he is in the field ; tomorrow i he is cast into the oven. I do not say this to escape a crit- icism of President Cleveland. He has shown himself hon- est, brave, considerate of the public welfare, faithful to the constitution and laws, to his pledges of a purer admin- istration, and generally to the interests of the people. He has made mistakes — what president has not ? But he has i rectified them, as few presidents have had the courage to do. The whole people are wiser than the politicians. They rarely err in their estimate of a public man. Those presi- dents whom they tried and took to their hearts in spite of the politicians, are now recognized as the great leaders of our history—Jefferson, Jackson, Lincoln. The people have tried Cleveland and believe in him; in his common sense, bis honesty and fidelty. This good opinion is not limited by party lines, and has not been won by partisan- ship, but by keeping steadily in view the best and highest conceptions of the duties of his office. IMPORTANCE OF NEXT YEAR'S ELECTION. A political speaker usually magnifies the coming elec- tion. The one now at hand is only important in its rela- tions to national politics, as showing the drift of opinion — the trend of the currents as they form and set in approach- ing the plunge of '88. I do believe, however, that the elec- tion next year, which will decide whether the republican party shall be restored to power, is one of the most im- portant ever held by the American people. It will deter- mine, for a long time, whether the tendencies to the aggre- gation of wealth in the hands of a few, and to the impov- erishment of the many, shall be arrested, or shall go on until the masses be stripped, not only of past accumulations, but of the power to earn more than a bare subsistence, and thus lose the happiness and independence which are the natural fruits of popular government. HOW WEALTH HAS BEEN CONCENTRATED. The enormous expenditures during the war furnished the hot bed in which these baleful tendencies sprung up. As soon as the struggle ended the money power took possess- ion of the republican party and framed all its revenue, debt, money and land policies. The national banks, the subsidized railroads, and the great manufacturing firms and corporations filled the republican seats in the senate and the house with their associates or their hirelings. They shunned the democratic party — to its honor be it said — as their traditional foe, and fought it everywhere with money, intimidation and the fire of sectional hate. Their word was law. They squandered the public lands by enor- mous donations to railroads of no national necessity. They abolished the most just of all taxes, the income and succes- sion taxes, and steadily resisted the efforts of the great body of the democrats in congress to restore them. They in- creased the war tariff in the interest of pet manufacturing companies, already protected beyond all justice ; and largely reduced the tariff on wool which was the chief com- pensation Ohio farmers had for the burdens put on them in the interest of eastern manufacturers. By the act of 18U9 making greenback bonds payable in coin they added at least six hundred millions of dollars to the wealth of the bond holders and the burdens of the people ; and by means of an enormous contraction of currency extending from 1807 to 1878 ; and the law secretly enacted demonetizing silver ; and the resumption law, whereby they attempted to destroy all the greenback currency, and force specie payments in gold, they caused a fall of values, and conse- quent increase of the pressure of debt and taxes, which im- poverished vast numbers of the people, while piling moun- tain high the wealth of rich. men and corporations. The democratic party struggled in vain to arrest these wrongs; and predicted the evils and disasters which have fol- lowed. But the prejudices of the war carefully nursed and fanned by the republican party overcame all argument, and were as decisive in every canvass as the red flag in a bull fight. As the necessary result of these policies of the republican party, steadily pursued through ten years of undisputed power following the war, we now see around us an aggre- gation of wealth and ^jower in a few corporations and individuals, which amaze and alarm all thoughtful and patriotic men. Thousands of small manufacturing and commercial industries have been destroyed, and their owners become wage-men. Aggregation and consolidation of capital, and expulsion from business of small operators, have gone on generally and everywhere until competition has been brought down to a few great operators in each branch of manufacture and exchange. HOW COMPETITION HAS BEEN DESTROYED. It is an axiom of political economy that competition is the true regulator of prices. Those who have watched this process of consolidation go on have assumed that the great ; capitalists and operators, after crushing out the small ones, would necessarily so compete among themselves as to save the people from oppressive charges and exactions. The event has not justified the hope. We see one giant corpora- tion— the Western Union Telegraph Company— swallowing rival after rival, until now, having swallowed the Baltimore & Ohio, and having forced the united lines to a practical surrender, it has nut a rival left. It has been demonstrat- ed by repeated and disastrous experiments that the West- ern Union will not suffer a competitor to live in the United States, and therefore that the business of this country must henceforth pay a tribute to that company of three or four times a fair return on its actual investment. So the Standard Oil Company has crushed all com- petition, and no persons or corporations but itself can successfully produce and market any mineral oil although it be pumped from their own wells. The nu- merous small railways of the country have been consoli- dated into a dozen giant systems each of which when mark- ed on the map looks like a centipede. Ir-^Rd of compet- ing among themselves these great systems pool and co- operate at all points of competition, and parcel out to each other the rest of the territory of the United States, as Roma* generals were wont to parcel out and plunder the helpless provinces of the empire ~~~ RAPACIOUS TRUSTS. A new device has recently been invented to more com- fletely squelch competition between rival corporations, t bears the euphonious and attractive name of "trust." It consists in the placing, by the owners, of the majority of the stock of a dozen rival and competing corporations in the hands of a trustee to be voted as a majority of the whole combination may direct. By this device a dozen corporations, created by the indulgent statutes of th© sev- eral states, and forbidden by state laws to combine with competing companies — in order that the public might re- ceive in return for the franchises fair prices for product and service — are worked as if they were one corporation, for the express purpose of crushing out all competition. Thus electric light trusts, standard oil trusts, anthracite coal trusts, bituminous coal trusts, coke trusts, iron ore trusts, salt trusts, leather trusts, lumber trusts, warehouse trusts, elevator trusts, cattle trusts, are establis led and multiplied all over the United States. The great body of the people— the farmers, who comprise nearly one-half the population, and the wage-men, who comprise nearly the other half, and, in fact, all the people of no means, or of small or moderate means, who do the work on which the life, happiness and prosperity of the land depend — are the victims of these rapacious combinations. It is no extrav- agance to say that, if the masses tamely stand like sheep in the hands of the shearers, while this work- of spoliation goes on, they will soon be stripped of their property, and sink into industrial slavery to the millionaires. INPOVERISHMENT OF THE MASSES. If you think this statement too strong, consider for a few minutes what amount of increase of wealth there is in the United States each year, after deducting the living expenses of all the people. David A.Wells who is as high an authority as we have on economical statistics puts it at a thousand millions of dollars. That is only about sixteen and two- thirds dollars for each man, woman and child in the United States. If it were all equally distributed, which of course is impracticable, there would be a gradual advance in the comforts and independence of the masses. But the trouble is that where wealth becomos greatly concentrated one man often receives the distributive share of many thousands. I can name twenty men each of whose annual incomes aver- age two millions and a half of dollars and each of whom thus receives, if the increase of wealth were evenly distrib- uted, the share of 156,000 people. The whole twenty re- ceive the share of three millions of the people. When we consider the railroad companies with their three hundred milions of dollars of net earnings, and the countless thous- ands of capitalists, corporations, firms and individuals straining every nerve and filling every avenue of manu- facture and exchange to gather up the surplus of industry and to take advantage of the unskilful and the unwary, we can realize the fact that the farmers and the wage-men whose labor creates all the wealth get but a meagre share of the surplus. I suppose the fact to be that nineteen-twen- tieths of our people get not a single penny of the one billion of dollars of aggregate increase of wealth, and that they end the toil of each year at least as poor as they began it. The swift growth of large fortunes is at once the sign and the cause of the impoverishment and degradation of the masses. A great fortune is like a great snow-ball, which boys roll down hill on a mild day in winter and which grows bigger and leaves bare a wider swath at every turn. It is hard for persons living in agricultural regions, blest like our grand state of Ohio with fertile soil and fa- voring skies, to realize the terrible danger of this tenden- cy. I saw in last Monday's newspapers an account of 4000 children in the beautiful city of Vienna, the capital of Austria, attending public schools daily, and yet found to be perishing for want of food. Today in London so vast are the numbers of unemployed and starving people, that the great stores are all furnished with iron shutters, which are closed and barred whenever the idle and hungry work- men parade the streets and raise their angry and piteous cry for work or bread. Americans shudder at the cry and thank God it does not ascend to heaven from our streets and as an appeal from our social system. But we need not hope to be long exempt. The same tendencies to the ag- gregation of wealth are operating in both countries, sav- ing only those which in Great Britian spring from monop- olization of the land. Like the British we have done noth- ing to effect a fair distribution of wealth as it is created, but have encouraged capital to get all it can by consolida- tion and brute power. On the east side of New York city the laboring masses are jammed together in tenement houses so densely that there are said to be 290,000 people in one square mile, while in the most populous quarters of London there are but 170,000 to any one square mile. The fact that 68,000 voters in New York city broke loose from the old parties, chiefly from the democratic party, last year, and voted for confiscation and Henry George, should be a warning to all considerate men in the United States, and set them to the work of arresting the rapid concentra- tion of wealth and power, of which the labor movements are the protest and the counterblast. Action and reaction are equal in politics as in physics. To the tremendous growth and aggression of the capitalist class are due the extreme measures of the fieorge party and the socialists. WHAT CAN THE PEOPLE DO ? What can the people do to check these great aud growing evils? They are largely of political origin. They have arisen from bad legislation, or neglect of needed legislation by both the federal and the state governments. Their cure is political, as was their cause. It can only be accom- plished by the people taking control of both the state and the national governments for that purpose through a thoroughly equipped and ably led political organization. THE REPUBLICAN PARTY CAN NOT BE TRUSTED ON THESE QUESTIONS. The republican party cannot be trusted by the people in this emergency. It is largely responsible for, and is the political representative of all these bad and dangerous results and tendencies. It is the party of capital, of mon- opoly, special privileges, consolidation. Its restoration to power would make the battle for the people harder than it ever yet has been. RECORD OF THE DEMOCRACY ON INDUSTRIAL QUESTIONS. Against all these baleful measures and tendencies the democratic party has fought for over twenty years. I do not claim that it has done all that it ought to have done, or might have done, on the people's side. It has been held back by unfortunate divisions in its own ranks. A power- ful minority of the party has been out of sympathy with the masses on the money, tariff, internal revenue, and other industrial questions, and has shortened the arm of the party in lighting for tho people. But in spite of this drawback the democracy has a record of good done and evils resisted on which it has a right to the sup- port of the industrial classes. I know that sincere friends of the people doubt and dispute this; but I ask them to recollect how in every national struggle since the war the banks and the moDey power generally have fought the democracy, especially throughout the south and west, thus attesting its fidelity to the people. And I ask them too, to go back over the measures of the last twenty years in con • gress and note how the great body of the democracy has stood for the people on every industrial question, and the great body of republicans has stood against them. I ask Ohio men, especially, to recollect how the Ohio democracy as far back as 18B8, resisted the contraction of the currency, and the payment of bends in gold ; and from 1875 to 1879 led the fight which remonetized silver: compelled its coinage; added the silver certificates to the money of the country ; saved three hundred and forty-three millions of greenbacks from destruction; and paved the way to that most beneficent decision of the su- preme'eourt, which has established the greenback — whether issued in war or peace, whether redeemable in coin or not — as a constitutional legal tender money of the republic. Let them recollect too that the democratic party in congress two years ago defeated the republican scheme for the per- petuation of the national bank currency, and put that cur- rency in the way of a gradual and blessed extinction. And let them not forget ho w the democracy set its face like flint against the renewals of land grants; how it has rescued and restored to the public domain nearly thirty-two mil- lions of acres of lands; how it has sternly stopped the abuses of the land administration, and cancelled thousands of fraudulent pre-emption timber culture and swamp land entries by which all that was left of the public domain fit for farming, was being seized by home and foreign capitalists. How it stopped the impor- tation of Chinese; and, under the lead of Allen G. Thur- man compelled the Pacific railways to provide for paying their vast debt to the general government which never would have been paid or provided for under republican auspices ; and how it has forced the republican party since the war ; to cut down and abolish the war duties on a few great stapler of consumption and has struggled to reform every obvious excess and abuse of the tariff, without hurt- ing a single industry. I do not claim that all the democrats in congress sup- ported these useful measures, or all the republicans op- posed them ; but I do emphatically claim that the people owe to the democratic party, as a body, whatever good has been done, or evils averted by them ; and that a large ma- jority of the democrats in congress, ever since the war, have been true to the people on these questions, while an equally large majority of the republican members have been false to them. THE LABOR PARTIES HANDICAPPED. "Whether a new party may hereafter spring up to rescue the industrial classes may be a question ; but certainly there is none now able to do it. All tho labor parties are handicapped by measures of policy on which a majority of the American people will never unite. The united labor party, which has a tremendous, enthusiastic and sincere following in New -York city, proposes to confiscate, for the benefit of the whole people, the rental value of all land and lots, exclusive of improvements, by whomsoever owned. This proposition necessarily shuts out of that party the farmers and all the rest of the industrial classes who own their own homes, and who certainly will not help to confis- cate them. They comprise a large majority of the Amer- ican people, and therefore the success of the confiscation proposition is as hopeless as its injustice is obvious and rank. The progressive labor party, which in- cludes the socialists, rejects George's cure-all, but demands of the general government a system of paternal legisla- tion such as has been commonly agitated for by European socialists ; while the union labor party of the United States demands that the general government shall own and man- age all the railways and telegraphs. This last proposition involves an increase of the power and patronage of the general government so enormous that its adoption would threaten the subversion of our system of government. It is as impracticable as the confiscation scheme of the united labor party, for the American people know too well the dangers of consolidation, ever to commit to the general government a power and patronage ten times greater than all it now possesses. While the several labor parties adhere to any or all of these objectionable measures, they cannot hope for anything more than occasional and local successes. Fellow citizens, there is no need of confiscation, or of abandoning our political traditions, or of importing; the violent remedies proposed by downtrodden and despairing people in monachical governments. The people can rule in this country if they will, and accomplish all wholesome re- forms without a departure from our political system. The powers of the federal government are strictly limited. But the powers of the state government are as broad as the social compact, and are restricted only so far as is necessary to provide against heedlessness and tyranny. We can keep our respect for private property ; our jealousy of remote federal power, our love of home government; our American individualism, as distinguished from Euro- pean socialism, and yet remedy all the political wrongs in- flicted or threatened on the masses. I am sure that the considerate men among the labor organizations, especially those of American birth and training, will see that no more hurtful blow can be struck at the liberties of the people than by increasing the power and patronage of the general government ; and instead of increasing they will seek to diminish them by taking from the President the appointment of marshals, district attorneys, judges, post- masters, pension agents, and many other offices; and by hav- ing them elected by the people of the districts and localities in which they serve. THE SURPLUS AND THE TARIFF. Fellow citizens, for five years past our national taxes have exceeded our expenses by over one hundred millions of dollars annually. Until recently this surplus was used in redeeming United States bonds, but now there are no more bonds redeemable, and the money received from taxes is accumulating in the treasury at the rate of about nine millions a month. The result has been a contraction of the currency so great that last summer the administration was compelled to buy a large amount of bonds in open market at a high premium in order to put out enough of the ac- cumulated and idle money to prevent widespread business disaster. All parties now admit that we must immediately either cut down our national taxes or increase our expendi- • tures so as to pay out all the money as fast as it shall come Assuming that the true remedy is to reduce taxation , the question is — how shall it be done? The democrats say cut off the thirty millions of internal revenue tax on tobacco and reduce the more extra vagent duties of the tariff. In the presidential campaign of 1884 so obvious was the need of such tariff reduction that both political parties emphat- ically promised it in their national platforms. The re- publicans pledge themselves in their platform "to correct the irregularities of the tariff and to reduce the surplus. " But nowthey have gone back on their pledges and resist a revision of the tariff, might and main. They attribute to the high duties all the prosperity of the country and accuse the democrats of being free traders and enemies of the indus- trial classes because we insist on reducing the enormous protective duties established during the war. Fellow citizens, there is no free trade party, and very few free traders, except dreamers and pedagogues. No Ameri- can statesman since the war has proposed to abolish all protective duties. To do so would involve perpetuating the internal revenue taxes and imposing high duties on tea coffee and sugar. That is, it would necessitate laying all the burdens of government, practically per capita, on rich and poor alike. The democratic party never will do that, It would be unworthy of its name and traditions if it did it. It has never proposed the abolition of protective duties, but only a readjustment and reduction of them in the in- terest of the industrial classes. Extremely high protective duties tend to great fortunes, but blight general prosperity. Every reduction of the tariff since the war, save one, has not only been forced on the republicans by the democracy, but has also resulted beneficially to the people. That exception is the duty on wool which the republicans placed in the tariff in order to reconcile the farmers to it, and then they turned about in 1873 and reduced the duty, against the vote of the democracy, at the instigation of the wool manufacturers. John Sher- man led in the reduction. In 1873 the democrats forced the removal of the duties on tea and coffee Was that bad? Would any one now restore them? A heavy duty on quinine had been levied for the benefit of a single manufactory in Pennsylvania. The democrats took it off, and thu3 lowered the price of that indispensable drug. Was that not a beneficial reduction? We forced, too, a reduction of the duty on Bessemer steel rails, from twen- ty-eight dollars per ton to sixteen. It had been put enor- mously high at the dictation of eleven corporations which owned the patents for the United States, and which thus had a monopoly as against all other American manufac- turers. We forced a reduction of the tariff on pig iron from seven dollars to five dollars a ton, and also a reduc- tion of the duty on iron ore, against the determined oppo- sition of a majority of the republican party in congress. No one now has the hardihood to say that the reduction of these protective duties by the democrae,' was hurtful to any class of producers and wagemsn, or otherwise than beneficial to the general public. The tariff ought to be revised and adjusted to tha circumstances of the country, which have greatly changed since the duties were im- posed. As it stands on our statute books, it is an incon- gruous medley, made up of dozens of acts and amendments, from 1861 down. It is a thing of shreds and patches. Its bad provisions are generally the result of bargains which the republican party made from time to time to keep itself in power. The obstinate refusal of the republican party in congress to even permit the tariff to be considered is prompted not only by its devotion to petted industries which have got extravagant protection in return for political support, but also because of the spirit of extravagance which character- izes the republican party. Extravagance and corruption go hand in hand, and breed millionaires and paupers. Senator Erarts, of New York, illustrates the spirit of his party in a speech at the Cooper Union, iu New York city, a few nights ago. He urged that instead of cutting off surplus revenues we should increase expenditures; and Senator Sherman, in his recent speech at Wilmington, sueered at the democrats, saying that they don't know how to increase expenditures ! Here, then, are the differences between the two parties on the tariff and the surplus. The republicans want to keep up the duties which go beyond reasonable protection to capital and labor. The democracy want to reduce them so far as it can be done without harm to American indus- tries. The republicans want a superabundant revenue sa as to have plenty to spend. The democrats want taxation cut down to the actual needs of the government economic- ally administered. Senator Evarts says that a hundred millions of extra tax on the people is a small matter. But, fellow citizens, recollect that Ohio pays one-twelfth of that unnecessary tax, being about eight millions of dollars a year, and this good county of Portage pays about seven- ty-five thousand dollars of it. It is paid in internal rev- enue and tariff duties which, though unseen, are neverthe- less as burdensome as are the taxes on the farm lands which Governor Foraker wants to increase by raising laud valuations. Fellow citizens, do you wish to throw off this worse than useless tax of eight millions a year, put and kept on the ' people of Ohio by the republican party? "Will you have a strict and wholesome economy, or a wild and wasteful extravagance in the expenditures of the general govern- ment? Will you have the federal and state governments exert their respective powers over the revenues and cur- rency, public lands and corporations, so as to mitigate or prevent the industrial evils we have been considering? If so there is as yet no other party through which to accom- plish these ends but the democracy. To appeal to the republican party is to appeal to the maney power itself. The democracy, by its long record of fidelity to the people since the war, has won the right to be trusted. Through it the people can promote our manufac- turing industries by correcting the abuses which breed monopolies and by applying the principle of protection only to the healthy demands of general industries. Through it, too, the people can, without invading any right of prop- erty, or freedom of contract, or limitation of state or federal power, mitigate if not remove the chief industrial evils of the day by securing, as far as laws can secure, a just distribution of the wealth which labor and capital combined create. \o SEVENTH ANNUAL MEETING OP THE BAK ASSOCIATION STATE OF KANSAS. HELD IN THE CITY OF TOPEKA, JANUARY 7 and 8, 1890. TOPEKA, KANSAS : THE REED-MARTIN PRINTING CO., PRINTERS AND BINDERH. 1890. SEVENTH ANNUAL MEETING OP THE BAE ASSOCIATION STATE OF KANSAS. HELD IN THE CITY OF TOPEKA, JANUARY 7 and 8, 1890. TOPEKA, KANSAS : THE REED-MARTIN PRINTING CO., PRINTERS AND BINDERS. 1890. Officers for the Years 1883-4. President, Albert H Horton I Secretary, W H Rossington Vice President, N T Stephens | Treasurer, D M Valentine Executive Council. D M Valentine, Chairman. James Humphrey David Martin J H Gillpatrick Frank Doster Officers for the Year 1885. President, . Albert H Horton I Secretary W H Rossington Vice President, W. A Johnston | Treasurer, Daniel M Valentine Executive Council. Daniel M Valentine, Chairman. James Humphrey David Martin E S Torrance L Houk Delegates to American Bar, Association. A S Everest A L Redden James Humphrey Officers for the Year 1886. President, Albert H Horton I Secretary, John W Day Vice President, E S Torrance | Treasurer Daniel M Valentine Executive Council. W A Johnston, Chairman. John Guthrie A W Benson M B Nicholson John H Mahan Delegates to American Bar Association. David J Brewer W H Rossington Fred D Milis Officers for the Year 1887. President Solon O Thacher I Secretary, John W Day Vice President, Henrt C Sluss | Treasurer, D M Valentine Executive Council. W A Johnston, Chairman. C B Graves Robert Crozier Geo S Green T F Garver Delegates to American Bar Association. W W Guthrie A L Redden T A Hurd Officers for the Year 1888. President, W A Johnston | Secretary John W Day Vice President, Eugene F Ware | Treasurer, D M Valentine Executive Council. John GrjTHKiE, Chairman. S B Bradford George J Barker J W Ady J H Mahan Delegates to American Bar Association. Solon Thacher Albert H Horton Henry C Sluss Officers for the Year 1889. President John Guthrie J Secretary, Chas S Gleed Vice President TF Garver | Treasurer, DM Valentine Executive Council. B F Simpson, Chairman, WW Scott L B Kellogg A W Benson Chas S Hayden Delegates to American Bar Association. J W Green J H Gillpatrick Charles Monroe Delegates to National Bar Association. Robebt Crozikr M B Nicholson Robert M Eaton George S Green H L Alden J W Ady OFFICERS FOR THE YEAR i8go. President, . Vice President, Treasurer, Secretary, Robert Crozier. Charles B. Graves. Howell Jones. C. J. Brown. EXECUTIVE COUNCIL. John Guthrie. W. W. Scott. B. F. Simpson, Chairman. Case Broderick. R. M. Eaton. DELEGATES TO AMERICAN BAR ASSOCIATION. George S. Green. W. C. Perry. L. B. Kellogg. DELEGATES TO NATIONAL BAR ASSOCIATION. W. A. Johnston. A. H. Ellis. G. F. Little. B. P. Waggener. J. W. Gleed. J. F. McMullen. MINUTES OF THE SEVENTH ANNUAL MEETING. Topeka, January 7, 1! The Seventh Annual Meeting of the Bar Association of the State of Kansas was called to order at 7:30 o'clock P. M., in the senate chamber, with the President, John Guthrie, in the chair. The Secretary being absent S. B. Bradford was, on motion, chosen Secretary pro tern. The reading of -the minutes of the last annual meeting was dispensed with. On motion of A. H. Horton, a committee of five on nomi- nation of officers for the ensuing year was appointed by the President, as follows : A. H. Horton, George S. Green, S. O. Thatcher, W. W. Scott and B. F. Simpson. The annual address of the President was delivered by John Guthrie. Addresses were delivered by Thomas Ewing, Jr., of New York ; S. A. Kingman, of Topeka ; L. D. Bailey, of Garden City ; S. O. Thatcher, of Lawrence, and A. L. Williams of Topeka. The Memorial Committee, through its Chairman, John Mar- tin, reported the following resolutions on the death of John P. Usher, which were adopted : Since the last session of your body, death has visited the ranks of the legal profession, in common with our fellow men, though the grim mes- senger has not called a single member of this Association. On the 13th day of April, 1889, at the City of Philadelphia, Hon. John P. Usher, of Lawrence, one of the oldest, the ablest and the most dis- tinguished members of the Kansas Bar, quietly and peacefully passed away, and was subsequently buried in the beautiful cemetery near his home. In view of the fact that a memorial address upon the life and char- acter of Judge Usher will be delivered before this Association at its present session by Hon. A. L. Williams, your Committee deem it proper to refrain from any extended notice .of the character and services of our BAR ASSOCIATION OF KANSAS. distinguished friend and brother, and content ourselves with submitting, for the consideration and action of this Association the following pre- amble and resolutions, in substance, recently adopted at a meeting of the Bar of the United States Circuit Court for the District of Kansas, and which admirably portrays the character and services of Judge Usher, and most fittingly express our appreciation of his life and character as a lawyer, a citizen and a friend. Whereas, John P. Usher, having departed this life, since the last annual session of this body, we take this occasion as an appropriate time to give expression to our profound sorrow at the sad event, and .of our sincere respect for his memory. Judge- Usher was born in the town of Brookfield, in Madison county, New York, on the 19th of January, 1816. He was admitted to practice law before the Chancery Court of New York, January 17th, 1839, by Chancellor Walworth, to the Supreme Court of that State, January 18th, 1839, and to the Supreme Court of the United States, February 1st, 1859. His services and character, in the faithful and honorable discharge of public duty, as a member of the cabinet of Abraham Lincoln .and as one of the ablest and most accomplished mem- bets of the legal profession, and as one of the most distinguished and useful citizens of the Republic, is kindly remembered and affectionately revered by all the people. The Bar, more than all others remember with gratitude and pardonable pride his unsullied character and masterful ability, as a typical American lawyer, and point thereto as proof of the exaltation and power which can be achieved by the practice of integrity and an honorable devotion to duty. His never failing courtesy and uni- form kindness of heart have won for him the universal and cordial esteem, admiration and good will of his fellow citizens, and makes it fitting that this Association should in this manner make a lasting record of the deep and sincere regret which its members feel at his loss ; therefore, Besolved, 1st, That the members of the Kansas State Bar Association tender to the berieved family of our dead brother, their warmest and tenderest sympathy, with the further assurance that John P. Usher will always live in our memories, as an ornament to his profession, and as an honor to his age, to his race and to his country. Resolved, 2d, That an engrossed copy of the foregoing preamble and resolution, duly signed by the President and Secretary of this Associa- tion, be transmitted by the Secretary to the family of the deceased. The same committee also reported the following resolutions on the death of John P, Greer, which were adopted : On the 28th day of November, 1889, Hon. John P. Greer died at his home in the City of Topeka, and now peacefully rests from his labors. Judge Greer was one of the pioneer lawyers of Kansas, and materi- ally assisted in founding its jurisprudence, and his death demands something more than a merely passing notice. He was born in the County of Montgomery, in the State of Ohio, on the 21st day of October, 1812. In early life be moved with bis parents to Darke County, Ohio , SEVENTH ANNUAL MEETING. and continued to reside in that county until his removal to Bluffton, Wells County, Indiana, in 1841. In November 1856 he left Indiana and settled upon a farm, near the City of Tope"ka, which he afterwards pre- empted. Judge Greer was a poor boy, and by his own unaided energy and in- dustry, won and retained an honorable and useful position amongst his fellow men. He had read law to some extent and had practiced before Justice Courts in Ohio before moving to Indiana, and continued this practice after his removal to that State, and in 1842 was regularly ad- mitted to practice in the Circuit Court of "Wells and adjoining counties. Feeling the need and value of as perfect a knowledge of the law as possible, in 1848 he entered the law department of the University of In- diana, and in 1849 was regularly graduated. Judge Greer was married June 20th, 1837, to Miss Elizabeth Patty, at Milton, Miami County, Ohio, by whom he had seven children none of whom survive him. Mrs. Greer still lives in Topeka, honored and respected by all who know her. Soon after his settlement in Kansas, Judge Greer opened a law office in Topeka, and soon afterwards formed a partnership with Hon. Wm. P. Doughitt, which continued for many years. From the early part of 1857 until his death, Judge Greer was a regular practitioner in the District Court of Shawnee County, and in the Supreme and Federal Courts. Upon his settlement in Kansas, he took an active interest and prominent part in the great questions then com- manding public attention. He was an ardent Free State man. He was one of the Representatives of the County of Shawnee in the Convention that framed our present Constitution, and was Chairman of the Com- mittee on the formation of the Executive Department of the State Gov- ernment. In that body he was a quiet, but an earnest and intelligent worker, and by his uniform courtesy and kindness, soon won and ever afterwards retained the respect and confidence of his associates. Judge Greer was a sincere and ardent lover of his country. He served with gallantry in the State militia during the Price raid in Octo- ber 1864, and in the battle on the Blue, between the Kansas State troops and the confederate forces, he was seriously wounded in the knee. For a brief period in 1866 and 1867 he was associated with Hon. A. L. Williams in the management and editorial control of the Topeka Daily Tribune'. Judge Greer was a good citizen, loyal and faithful to his friends. He was a man of strong convictions. He was kind hearted, but severely earnest. He had no appreciation of humor, and indulged a hearty con- tempt for all jokes. He was sincere in his friendship, honest and ear- nest in his convictions. He was essentially a man of facts, without the shadow of fancy in his make-up. As a lawyer he was an excellent type of the old fashioned attorney. He had a keen appreciation of the duties and amenities of the pro- fession. He believed that a lawyer's word should stand, unchallenged, and that his promise should be equivalent to a performance. He was not a progressive lawyer. He believed in old books, old BAR ASSOCIATION OF KANSAS. forms, old styles and manners, and in old times. To him all reforms and all progress were only shams, subterfuges and false pretenses. He be- lieved firmly that the Pandects and Bacon's Abridgement were epitomes of all legal learning, and that Coke upon Littleton and Blackstone's Commentaries were the perfection of human reasoning, and to the day of his death, his favorite book of reference in the court room was Blackstone. Occasionally he referred to Wick's Practice, and the early Blackford Reports, but it was only for the purpose of establishing the fact that Judge Wick and the old Supreme Court of Indiana acknowl- edged and followed the leadership of Blackstone. In conclusion your Committee respectfully submit the following resolutions for the consideration of your body: Besolved, That we have learned with regret of the death of Hon. John P. Greer, and we tender to his family our sincere sympathy in their bereavement, and assure them that we shall ever kindly remember his many virtues, as a man, and his sterling worth as a lawyer. Besolved, That a copy of the foregoing resolution, signed by the president and secretary of this body, be transmitted by the secretary to the family of our deceased brother. On motion of J. W. Day, Thomas Ewing, Jr., S. A. King- man and L. D. Bailey were elected honorary members of this Association. The Association adjourned to 10 o'clock A. M., January 8th, 1890, at which hour it reconvened in the Senate Chamber. The Executive Council made the following report, which was adopted: The Executive Council report the names of the following appli- cants for membership and recommend their election: J. F. McMullen, Winfield; George Getty, Syracuse; A. J. Abbott, Garden City; Rankin Mason, Topeka; T. B. Wall, Wichita; Howell Jones, Topeka; W. E. Brown, Newton; R. B. Welch, Topeka; E. A. McFarland, Lincoln; Milton Brown, Garden City; L. H. Thompson, Norton; G. A. Huron, Topeka; John E. Hessin, Manhattan; A. A. Godard, Clay Center; G. F. Little, Junction City; G. A. Vandeveer, Hutchinson; J. B. Larimer, Topeka; E. W. Cunningham, Emporia; C. S. Bowman, Newton; G. L. Douglass, Wichita; ,S. J. Osborn, WaKee- ney; Henry Keeler, Topeka; W. F. Rightmire, Topeka; K. E. Will- cockson, Oakley; H. J. Radcliffe, Cottonwood Falls; C. E. Benton, Iola ; E. C. Little, Ness City; H. C. Johns, Lamed ; E. F. Robinson, Osborne; A. L. L. Hamilton, ElDorado; Dennis Madden, Cottonwood Falls. The Treasurer made the following report, which was adopted; SEVENTH ANNUAL MEETING. To the Bar Association of the State of Kansas:— It appears from my last report to the Association that on January 8th, 1889, there was in the Treasury $ 23 04 Since that report was made, and up to the present time, I have received as admission fees of twenty-eight mem- bers 140 00 Total $163 04 Since my last report, I have paid out on the orders of the Executive Council, as expenses of the Association $163 04 Hence nothing remains in the Treasury. There is still due to the George W. Crane Publishing Co., as a balance due for pri ntin g proceedings , etc $1 1 21 All annual dues up to the last meeting have been remitted. Respectfully submitted this January 8th, 1890, D. M. Valentine, Treasurer. On motion of T. F. Garver, and after a general discussion of the matter, it was resolved that the public and private in- terests of the people of this State demand the adoption of the proposed constitutional amendment, increasing the number of Justices of the Supreme Court. The- Committee on Nomination of officers for the ensuing year, through its chairman. A. H. Horton, reported the follow- ing nominations, and the nominees were elected : President: — Robert Crozier, Leavenworth. Vice-President : — Charles B. Graves, Emporia. Treasurer: — Howell Jones, Topeka. Secretary: — C. J. Brown, Blue Rapids. Executive Council: — B. F. Simpson, Topeka; John Guthrie, Topeka; VV. W. Scott, Emporia; Case Broderick, Holton; R. M. Eaton, Atchison. Delegates to the American Bar Association: — George S. Green, Man- hattan; L. B. Kellogg, Emporia; W. C. Perry, Port Scott. Delegates to the National Bar Association : — W. A. Johnston, Minne- apolis; B. P. Waggener, Atchison; G. P. Little, Junction City; J. P. Mc- Mullen, Winfield; A. H. Ellis, Beloit; J. W. Gleed, Topeka. The President announced the following Committees : Judiciary Committee: — S. O. Thacher, Lawrence; C. W. Smith, Stock- ton; A. J. Abbott, Garden City; W. C. Webb, Topeka; H. C. Sluss, Wichita. Committee on Amendments .to the Laws: — P. P. Harkness, Clay Cen- ter; George S. Green, Manhattan; C. Angevine, Mankato; C. S. Gleed, Topeka; T B. Wall, Wichita. Memorial Committee :— John Martin, Topeka; E. Hutchinson, Marys- ville; J. W. Ady, Newton. A. H. Horton, J. Jay Buck and David Overmyer, the Com- 10 BAB ASSOCIATION OF KANSAS. mittee appointed to draft suitable resolutions on the promotion of David J. Brewer, a member of this Association, to the Bench of the Supreme Court of the United States, presented the fol- lowing resolutions, which were adopted : Whereas, The president of the United States has recently ap- pointed to the Bench of the Supreme Court thereof, one of the first members of this Association, a former practicing attorney of this State, and who for twelve years adorned, dignified and graced the Supreme Bench of this State — bringing to the discharge of all his various duties a thorough knowledge of the law, the habits of a student, a ripe scholar- ship and an unblemished character ; therefore be it, by the State Bar Association of Kansas, Resolved: That in the appointment of Hon. David J. Brewer, as one of the Justices of the ablest and most respected judicial tribunals of the world, this Association, the Bar of Kansas, his old neighbors and friends, and the large circuit over which he has recently presided, all rejoice — all are honored. Resolved: — That in this worthy recognition of merit, the President who nominated, and the Senate who confirmed, have done themselves honor and won from us renewed manifestations of gratitude and esteem. Resolved: That a copy of these resolutions be sent to the President of the United States, our Senators in Congress, and to our esteemed f rater, Hon. David J. Brewer. The Committee on Amendments to the Laws, through its Chairman, A. H. Horton, submitted the following report, which was received and ordered to be printed in the report of the annual proceedings of the Association: The Committee on Amendments to the Laws begs leave to report that various matters have been, from time to time, considered by it, from which it has selected a few subjects only for present report. The most difficulty in the preparation of this report has been to determine where to begin in suggesting amendments and where to stop. We call attention to the Act of March 2, 1872, relating to the death penalty. Under the construction given by all the Governors of the State to the language of that Act ever since it has been in force, capital pun- ishment has been practically abolished. The law as it now stands is inconsistent and inharmonious. The attention of the Legislature has been directed to this subject by the Governors for nearly seventeen years, but as yet no action has been decisively taken. It seems to us that this matter calls for immediate attention when the next Legislature shall convene If a majority of the members of the Legislature desire to abolish the death penalty, it should be done in express terms. On the other hand, if a majority of the members of the Legislature are in favor of restoring capital punishment, then the Act of March 2, 1872, should be materially changed or repealed. A SEVENTH ANNUAL MEETING. 11 part of the people of the State seem to desire to abolish the death pen- alty, another portion seem desirous of retaining it. It is unnecessary to discuss in this report, pro or con the policy of the restoration of the death penalty, as the members of the Committee differ widely in their views, but all concur that the statute relating to capital punishment should be changed. Recently, the subject of divorce has been largely discussed in the legal and other public journals of the country. It is contended upon the part of some, that marriage is a failure, because freedom from the mar- riage bond is too easily obtained. On the other hand, many argue that greater liberty should be allowed in divorcement. It is not an argument against the law that oftentimes gross injustice is done in individual cases when divorces are granted. The real question is, whether the good the statute does is sufficient to counterbalance the wrongs which are often brought to pass. The statute relating to divorces, like all statutes, must necessarily work both good and harm. If upon the whole, more good is effected than harm, the law is desirable, although it has defects. We do not think the happiness of married parties is promoted by placing obstructions in the way of legal separation. To require a woman to be bound in marriage to a man who has defrauded, deceived, or betrayed her, who has inflicted upon her personal abuse, squandered the me'ans for which alone perhaps he sought her hand, who refuses either " to love, honor, or keep her," is not only a gross injustice to the woman, but is a crime against society. Has such a man, in so wronging a confiding woman, whom under false pretense of love he has inveigled to be his wife, committed no crime'! 1 If he is a thief of property, the corrupt forger of another man's name, a swindler of another man's money, he can be arrested, tried and sent to the penitentiary. But if he has stolen the affection of an innocent arid loving woman, gambled away her pat- rimony, squandered it in dissipation and riotous living, abandoned and refused to provide for her, he has committed no offense under the exist- ing statutes, of which the State takes cognizance. He steps from the court room, freed by the decree of the judge, on payment of costs, from the obligatiom of the marriage contract he has basely violated, ready to seek another victim. The better remedy, we think, is to make the con- duct of the party to the marriage contract, who is guilty of fraud, wrong or cruelty, punishable by fine or imprisonment, or both. The statute permits the courts to grant a divorce for the following, among other causes: Abandonment, adultry, extreme cruelty, fraudu- lent contract, habitual drunkenness and gross neglect of duty. If some amendment were made to the laws under which the guilty party who commits any of these acts, when a divorce is granted, could be punished by heavy fine or imprisonment, such action, in the opinion of your com- mittee, would result in a diminution of divorce suits on the dockets of the State,— especially in cases where the guilty party is a resident of the State and amendable to its laws. The divorce procedure should be in the nature of a criminal prosecution, and when allowed, should furnish ground for an information or indictment. The County Attorney should 12 BAR ASSOCIATION OF KANSAS. be required to attend the hearing of all divorce actions, and the testi- mony at such a hearing should be reduced to -writing, and the party found guilty of any of the acts or offenses above stated, be required to give bond for immediate prosecution. Society has an interest, as well as the parties to a marriage, to see that the obligations thereof are not violated intentionally or willfully. Abandonment, extreme cruelty, fraudulent contracts, habitual drunken- ness and gross neglect of duty on the part of a party to a marriage, ought to be severely punishable for the public good. They are offenses which society ought not to overlook, or too easily condone. Upon a free ballot and an honest count stand the whole super- structure of a Republican form of Government. Anything that will assist to a free ballot, untainted and unpurchased, adds strength and stability to our popular institutions. The Australian method of voting, as it is called, has been tried in various States within the past year, and thus far very successfully. Lately, in Massachusetts, this system more than fulfilled every anticipation of its friends, and falsified every pre- diction of its enemies. The law in that State was an application of the Australian system. In all important principles it was a copy of the bill which was drafted by the Committee of the Commonwealth Club of New York City in the winter of 1887, and which became the basis of the two so-called Saxton bills that Governor Hill vetoed in 1888 and in 1889. These principles are secret voting in compartments, exclusively official ballots, printed and distributed at public expense, and nominations by means of petitions or nomination papers, as well as by regular party or- ganizations and conventions. The names of all candidates are printed on the same ballot, and the voter must indicate his choice by an "X'' opposite the name of each candidate for whom he wishes to vote. Under this method, the voter is taken charge of from the moment he enters the polling booth, is guarded against annoyances of all kinds, is helped in every way to prepare his ballot, has a path marked out for him to follow in depositing it, and a separate door for him to depart from when his work is done. He could not go astray if he tried. That such a system as this should be called "complicated" is, in the light of experience, an ab- surdity. It is small wonder that the success of the Massachusetts law has created so general demand for similar laws; it is a safe prediction to make, that within five years every State in the Union will have adopted a like statute. We therefore suggest the trial of this system in our State as soon as appropriate legislation can be enacted. This system is not as necessary in Kansas as in Chicago, Boston, New York and other large cities where the corruption of the voters is the rule, and not the except- ion, but if the system has worked so well in all other States, there is no reason why Kansas should not also adopt it. Kansas generally takes the best of everything that is in sight, and if there is to be a ballot re- form, we want it adopted. If this ballot reform were practicable in county seat elections, possibly the courts might be relieved of some of the gross charges of fraud, bribery and violence, which always attend the contests in those cases. SEVENTH ANNUAL MEETING.' 13 One of the members of the Committee, the learned District Judge of Wyandotte County, suggests that the Mechanics Lien Law, passed last session, should be repealed and the old law adopted with amend- ments in a few matters; the amendments, however, to be drawn by a person who has had more practical experience concerning a lien law than the party who framed the present act. He also suggests that the law relating to garnishments passed last session, should be repealed, or modified, but a copy of it, he says, "should be preserved as a thing to be worshiped," "for there is nothing," he writes, "like it in the heavens above or in the earth beneath," and therefore it will be entirely proper to bow down to it. The Committee further suggests, as great trouble and difficulties continue to arise from the incongruous and inharmonious amendments to the statutes, that the Committees of Judiciary of the House and Sen- ate, should be extremely careful to examine the whole law to which any amendment relates, before making a favorable report thereon. Of course, unless the amendment would better the statute, it should not be considered or adopted. The lawyers of the State are the architects of government and the builders of the law, therefore, the lawyers in the Legislature, above all other men, should see that no useless or unneces- sary amendment is enacted. And the Judiciary Committees of the House and Senate should give sufficient time to their respective reports to prevent the frequent errors of legislation occuring from amendments, which are so often rushed through without consideration or discussion. The following letter and accompanying suggestions are submitted to the Association, in connection with this report : Kansas City, Kas., Dec. 28th, 1889. C. S. Gleed, Esq., Secretary State Bar Association, Topeka, Kansas. Dear Sir: At the request of Judge O. L. Miller, of this District, a member of the Committee on Amendments to the Laws, I make the enclosed notations that have occurred to me as desirable changes in our laws. There are no doubt many others, but these are prominent, brought to notice in my practiee, and I herewith enclose you a copy for what they are worth. Yours truly, F. D. Mills. First— Chapter 46 Compiled Laws of 1885; subject, Guardian and Ward. The Comp. Laws of 1868 had a provision directly providing for the sale or mortgaging of the real estate of the minor for such reasons as were therein provided, upon a petition therefor to the Probate Court, Chap. 78, Sec. 3 of the Laws of 1874, repealed Sec. 11 of the Laws of 1868, above referred to, and evidently intended to supply its place but omitted to do so clearly as will be noticed by a foot note to Chap. 46, mentioned 14 BAB ASSOCIATION OF KANSAS. on page 465 of Dasslers Statutes of 1885. By the amendments of 1875 which appear in Sees. 27 and 28 of Chap. 46, provisions relating to sales or mortgages are out of their natural order and make the chapter as a whole a very bungling enactment, as will be seen by the comparison of several sections, and should be revised and rearranged in their proper order. Second — In actions of ejectment for the trial of title to real estate, Sec. 603 of Art. 25 of the Code of Civil Procedure, provides for the em- paneling of a jury of twelve men by the sheriff and clerk. By Sec. 604 the duties of this jury are in a manner specified. They are to assess the value of all lasting and valuable improvements made previous to the party receiving actual notice to the adverse claim ; they are also to assess all damages lor waste, together with the net annual value of rents and profits which the occupants may have .received, etc No provision is made for a hearing before the jury ; nothing is provided as to the method of procedure, the introduction of evidence or the argument of counsel. It seems to contemplate only an actual view by the jury without evi- dence to determine many important questions that actual experience has shown could not be determined by the mere view of the premises. The writer tried such a case before the Hon. David Martin, while Judge of the Second Judicial District, in Doniphan county, wherein it was held that under this statute no evidence could be heard by the jury and that nothing could be done to throw any light on the value of rents, the cost of improvements, the nature and amount of waste, or the actual profits received by the occupant, when it was apparent to the Court in that case that the jury should have been so informed had the statute provided for the hearing of the questions presented. We think the form of procedure should be pointed out by the statute. Tliird — In many, if not most of the states of the Union, there is a provision of law requiring the municipal authorities offering any muni- cipal bonds for sale to advertise for bids and to sell to the highest bidder - We think this is a wise provision for the citizens and tax payers, and some proper provision therefor should find its way upon the statutes of Kansas. Fourth — The tendency of the times is toward the formation of cor- porations for the accomplishment of individual enterprise, requiring combination of capital, where once it took the form of partnerships, or joint stock companies, having only partnership rights and held to part- nership liabilities. At this time nearly every enterprise known to the business world is by law a proper object of corporate existence. The result is that legislation in new states has not kept pace with the neces- sity for reaching these corporate bodies through proceedings in court. Many, if not most of the States provide for reaching the interest of an individual in a corporation, by his creditors, by proceedings in attach- ment. No such provision is found in the laws of this State. If a debtor is absent from the State whereby personal service and consequently per- sonal judgment cannot be obtained, whereby equitable interests may be reached in aid of execution, he may have ever so much property tied up SEVENTH ANNUAL MEETING. 15 in corporate stock without his creditors being able to reach the same. We think the law should be amended in this respect. Again, many of the states have provisions for dealing with corporations, so far as indi- viduals are concerned, very much the same as though a partnership relation existed, by provision for the dissolution of the corporation by a suit of one of its members upon a proper showing therefor. The appoint- ment of a receiver to wind up its affairs and distribute its assets. The provisions in the Eevised Statutes of Illinois fairly illustrates, in many particulars, the needs of our own laws in this respect. Fifth — It is believed that much of the work of the Supreme Court of this State is imposed by the appeals or writs of error in cases involving small amounts, and where no question is involved that has not already been passed upon and settled by the court of last resort in the State. Unless the trial court should certify that some new question not yet set- tled, or some constitutional question was raised in the case, it is believed it would be wise to so amend the right to appeal as to restrict it to cases involving $500 or upwards, except where the trial court certifies that some question is reserved for the decision of the Supreme Court. Sixth — If the ancient fossil of a trial by jury in civil cases is to be maintained forever as a part of the jurisprudence of this country, we submit that the law of challenge of jurors for cause should be so amend- ed as not to exclude fair and honest men, who will say upon oath they will hear and try the cause upon the law and evidence, even though they have heard the facts in the case and formed some opinion about it from what they have heard. A man willing to hear without prejudice, and to be convinced without favor to either side, should be a competent juror, even though he may have heard of the facts, known all the parties, and from what he has heard may have expressed himself about the sub- ject matter. There are many other things that might be suggested and perhaps ought to be submitted, but we will not inflict them upon you at this time.. On motion of W. A. Johnston the Committee on Amend- ments to the laws was instructed to present to the next Legis- lature the recommendations made in this report. The Executive Council was, by resolution, directed to take such action as it may deem necessary to collect the de- linquent dues and initiation fees. ADJOURNED. The addresses delivered before the Association, except the extemporaneous addressess of Judge L. D. Bailey and Judge S. O. Thacher, appear in the following pages. It is re- gretted that these were not reported at the time of their de- livery, and thus preserved for publication. C. J. BROWN, Secretary. POWERS AND DUTIES OF THE JUDICIARY. JOHN GUTHRIE. Gentlemen of the Bar Association : —The constitution of Massachusetts declares that "In the Government of the Commonwealth, the Legislative department shall never exercise the Executive and Judicial powers, or either of them; the Executive shall never exercise the Legislative and Judicial powers, or either of them; the Judicial shall never exercise the Legislative and Executive powers, or either of them; to the end that it may be governed by law and not men." Alex- ander Hamilton held that "The accumulation of all powers, Legislative, Executive and Judicial in the hands, whether of one, or few or many; and whether hereditary, self-appointed or elected, may justly be pro- nounced the very definition of tyranny." The government of this State is vested in the Executive, Legis- lative and Judicial departments, and these departments are independ- ent of each other in their powers and attributes, and the duties and obligations of each of them are clearly defined in the constitution, and neither of them can rightfully obtrude itself upon the province of the other, or usurp functions or prerogatives not delegated to, or vested in it; and yet, while each of these departments possesses and maintains sepa- rate powers and attributes, they are nevertheless, dependent on each other for their separate existence. The Legislature may pass laws, but it can not execute or expound them. It is the province of the Governor to execute, but he cannot make laws. The Judiciary must expound and apply the laws to particular individual suitors, but can neither make nor execute them. The Legislature holds the initial in almost all public affairs. The Governor cannot execute, nor the Judiciary expound a law until the Legislature has acted. The Legislature must first, therefore, in the exercise of its prerogative, pass on the meaning of the constitu- tion, and the extent of the powers of the Legislative department. The decision of the Legislature in regard to its duties and powers, must be regarded as prima facie correct, and must stand, and the Execu- tive must obey and enforce it until the Judiciary shall pronounce it wrong, and the statute a nullity. Though it be a new departure in the science of government, it remains for the Judiciary to expound the constitution and laws of the State, and to define and mark the powers, boundaries, functions and attributes of the co-equal departments of the government. The courts of Great Britain do not, nor ever did, possess this high governmental attribute. The British Government has no written constitution, but the constitution of the government consists in SEVENTH ANNUAL MEETING. 17 tradition, usage and acts of Parliament, and the powers of the Legisla- ture are not limited, and the constitution is, in effect, what Parliament may at the time pronounce it to be. It is not possible, therefore, that a question should arise in the courts of Great Britain, whether, in the passage of any statute, Parliament has exceeded its powers. In our State, as in other States of the Union, the jurisdiction of the courts plainly results from our written constitution, or, organic law, as it is sometimes termed. The government of Great Britain is Parliament, consisting of King, Lords and Commons. The Parliament is in fact, supreme, and when we talk or read of the constitution al rights of the British subject, we mean such rights as Parliament has conferred, or, has suffered him to enjoy. And, the same body that bestows may take away. Parliament deposed one King, and established a military rule under the name of the Protectorate; declared that another King had abdicated; and presented the crown, under many restrictions to a suc- cessor. Parliament might abolish magna charta, or the writ of habeas corpus; it might take at its own pleasure and its own will the estate of any of its subjects, or any class of subjects, and divide such estates among such others as it might choose; it is, as far as human government can be, omnipotent. That it has not exercised its full power; that it is bound by tradition andancient law; that it represents and acts for the people, and not against them and their interests; that it is in a true sense conservative and not destructive, I do not here deny. I am not speak- ing of what may probably, but what may possibly happen. But such is not the theory or practice of the Eederal, or State governments of this country. The powers to be exercised are granted and vested in the three departments of government by a written constitution. Neither Congress with or without the assent of the Executive, nor the State Leg- islature with or without assent of the Governor, can abolish or abrogate the bill of rights, or suspend the writ of habeas corpus, unless the public safety requires it in case of invasion or rebellion. No expost facto law or bill of attainder can be passed by Congress or the Legislature. Neither Con- gress nor the State Legislature can pass any law impairing a contract or a private right; neither can levy any tax, nor authorize any political sub- division to levy a tax, unless the power to do so is vested by the con- stitution in the Legislature; and, when an act is passed which exceeds the powers vested in the Legislature, it then becomes the duty of the courts to expound the constitution and the act of the Legislature, and if the courts conclude that the Legislature has exceeded the powers vested in it by the constitution they must so declare, and this determi- nation binds the Executive and Legislature. The Executive depart- ment of this State consists of a Governor, Lieutenant Governor, Secre- tary of State, Auditor, Treasurer, Attorney General and Superintendent of Public Instruction. The Legislative power of the State is vested in a House of Representatives and Senate, and the Judicial power of the State is vested in a Supreme Court, District Courts, etc. The several persons chosen to All these respective offices of trust, are required by the constitution before entering upon their respective duties, to take and 18 BAB, ASSOCIATION OB KANSAS. subscribe an oath or affirmation to support the constitution of the United States, and the constitution of this State, and faithfully dis- charge the duties of their respective offices. I may be pardoned if I should observe here that in the early history of the government of the United States, there was a difference of opinion among public men in respect to the interpretation of the Federal constitution. The contest then was : First — Does the function of interpreting or construing the constitu- tion in a final and authoritative manner reside in the United States, as a body politic, or in the separate States ? Second— Does it reside in all the departments of government or in some one of them? These inquiries are distinct and neither involves the other. If the government of the United States is by the people as one self-existing political society, then the function of interpreting and construing the constitution in a final and authorative manner resides in the general government as a body politic and not in the separate States. The march of historical events during the last thirty years abund- antly settled the former question. Then, does the function of interpret- ing and construing the constitution in a final and authorative manner reside in all the departments of the government or in the Judicial de- partment. Mr. Jefferson contended that each department of the gov- ernment was the sole judge of the extent and character of its powers under the constitution ; and, when Bresident, he acted upon this theory in some instances, and he was its earnest 'advocate in his political writ- ings. Afterward Bresident Jackson reiterated the same theory and based much of his offical action upon it. It is probably true that the theory of these great statesmen was the result of education and environment or personal qualities. Mr. Jefferson was bitterly hostile to the National judiciary from the birth of the Union. He prefered a form of govern- ment more democratic than ours, and looked upon the check and bal- ance contrived to restrain the action of the more immediate representa- tives of the people with no favor. General Jackson possessed an iron will and determination, and was unable to yield his own opinions to those of another. Hamilton, Jay, Marshall and Story were the leaders of the other school of thought. They contended that the Union was not merely a union of States, but a government by the people to form a more perfect Union, establish justice, increase domestic tranquility, pro- vide for the common defense, promote the general welfare and secure the blessings of liberty to themselves and their posterity; and that the judiciary department was invested with power to expound the constitu- tion and define the duties and obligations of suitors and all persons en- trusted with public duties. I shall be pardoned for this digression if these historical facts and the theory and contention of these great statesmen and jurists shed light upon the constitution of this State, and better enable us to under- stand the powers, duties and obligations of those entrusted with public duties in the three departments of our State. It is only necessary for us SEVENTH ANNUAL MEETING. " 19 to examine the two cases arising in our own court, one affecting the pre- rogative of the Legislature, and the other the tenure of the office of the Executive, to illustrate the powers vested in the Judicial department to ultimately expound the constitution as affecting the other departments of the State government. The constitution of this State provides that the House of Repre- sentatives shall never exceed one hundred and twenty-five members. In 1879 there were one hundred and twenty-nine members admitted to seats, being four more members than were permitted by the constitu- tion. The members from Books, Rush, Harper and Kingman counties were not under the constitution and laws, entitled to seats in the House of Representatives. An act was passed that year by the Legislature making an appropriation for a specific purpose, but only with the assist- ance of these four members. If these votes should be counted the act received the constitutional number of votes required to become a law. The attorney-general brought an action to enjoin the state treasurer from paying a certain warrant drawn by authority of 'this act. It must be remembered that our constitution provides that " each house shall establish its own rules and shall be judge of the election, returns, and qualifications of its own members. ' The House of Representatives gave its construction to the constitution when it admitted the members from these four counties, but when this action was brought before the courts it became the duty of the judiciary under the grant of power vested in that department to expound the constitution and define its limitations on the legislative department; and in the performance of its undoubted duty, the Supreme Court held that this act had not become a law with- in the meaning of the constitution. State ex rel. vs. Francis. 26 Kans. 725. In 1859, and before the State had been admitted by Congress into the Union, State officers and members of the Legislature were chosen under the State constitution. The ttate was admitted January 29th, 1861, and the State officers chosen in 1859 entered upon the duties of their offices. There was no provision in the constitution fixing a time for choosing a successor of Charles Robinson the first Governor. The Legislature met. in the early part of 1861, and passed an act fixing a time for the election of Governor Robinson's successor at the general election to be held in November, 1862. The friends of Geo. A. Craw- ford contended that Robinson's successor should be elected under the constitution at the general election of 1861. Crawford was voted for for governor at the general election of 1861, and applied to the Supreme Court for the writ of mandamus to compel the State board of canvassers to canvass the votes for governor and issue to him a certificate of his election. The power and duty of the court was invoked to expound and construe the constitution and the act of the Legislature, and the parties interested in the executive office must be bound by the determination of that court. The opinion of the court was delivered by the first chief justice, our distinguished guest on this occasion. The court in pursu- ance of the power vested in it and its duty under the constitution decid- 20 BAR ASSOCIATION OF KANSAS. ed that no election could be held for governor in this State at the gen- eral election of 1861, and that the successor of the first governor should be elected at the general election of 1862. State ex rel. Crawford, vs. Robinson, 1, Kans. 10. This judicial determination bound the execu- tive and all his successors. No court in Great Britain or any of the continental countries is invested with such powers and prerogatives. In Great Britain, should a controversy arise" as to who was elected to the crown, parliament would decide, and from its judgment there would be no appeal except an appeal to revolutionary methods. Time forbids the examination of other similar actions arising under our constitution. The powers and prerogatives vested by the Constitution in the three co-equal departments of the State government are balanced to secure the highest and best results to the people of the State, and should never be disturbed or changed. The power of the courts, to hold in actions between parties, that legislative enactments are unconstitutional and refuse to enforce them is one of the most peculiar and distinctive prac- tices of our American jurisprudence and political system. By it the Judiciary is elevated to the most important factor, indeed, in the coun- try. The great frequency of its application, the extent of its effects in any view, and the final decisive power so commonly claimed for it render it so great a feature in our system, that no time spent in its study and investigation can be wasted. Whatever its origin it is undoubtedly a new departure in governmental science. To enable the courts of this State to perform the governmental functions vested in them and dis- charge the great trust imposed by the Constitution, the Constitution needs modification, or some change, to meet the wants and condition of the people. The jurisdiction of the courts is ample, and may not be ex- tended, but must never be limited so long as the people of the State are to enjoy the blessings of a written Constitution. When the State was admitted into the Union, January 29th, 1861, provision was made for a Supreme Court, consisting of one Chief Justice and two Associate Jus- tices ; the State was divided into five Judicial Districts, and provision was made for the creation of other Districts by the Legislature. The number of Justices of the Supreme Court has not been increased, although the Judicial Districts have been increased to thirty-five, and in many of these Districts the business of the courts has increased so rapidly that a speedy trial cannot be afforded suitors, and justice is practically denied to the citizen. And this just cause of complaint exists in both the trial and supreme courts. It is the theory of free government that every citizen shall be secure in his person, property and character, and if he suffers a wrong to either he shall have a speedy trial and ample redress but, until the judiciary article of the Constitution is changed to meet the wants and conditions of the people the remedy against existing evils cannot be secured. The last Legislature submitted to the electors of the State an amendment to our Constitution increasing the number of Justices of the Supreme Court to seven. This amendment will be voted for and against at the approaching general election held next November. If this amendment to the Constitution is adopted by the people it will SEVENTH ANNUAL MEETING. 21 amply relieve the Supreme Court, and secure to the suitors in that tri- bunal speedy determination of their causes. Every consideration of economy and justice should induce the people of the State to adopt this amendment to the Constitution. The Justices of the Supreme Court for many years have been over worked, and have perhaps tried and deter- mined more cases than any like number of Justices should have been required to hear and dispose of, in the interest of public policy. No State can afford to deny justice to its citizens, and the environments should be such that when a controversy has been settled in the highest court of the State, that the action has been decided according to the law of the land, and, anything short of this is a public misfortune. This measure of justice cannot be secured so long as each of the three Justices of the Supreme Court is compelled to examine and decide about one hundred cases each year and perform the other duties imposed upon him by law. Measured by the experience of the other courts of final resort our Justices are doing more than double work. It is asking too much of human en- durance to,expqet that the work thus done is satisfactory to those who perform it. The Legislature at its session of 1887, authorized the Execu- tive to appoint three persons, citizens of this State, of high character for legal learning and personal worth, Commissioners of the Supreme Court and made it their duty under such rules and regulations as the Court might prescribe to assist the Court in the performance of its duties in the disposition of the numerous cases pending in the court. The Com- missioners have been faithfully employed in the performance of these duties, and, notwithstanding the untiring labor on the part of the Justices and Commissioners, the docket of the court continues to increase in volume, and it now requires about two years after a petition in error is filed in the court before the case can be decided. While it is undoubt- edly true that the commission has and is doing valuable service for the State, I think the Bar is agreed that the service of the persons would be of much more value to the State if they were clothed with the powers and attributes of Justices. The Constitution, however, limits the number of Justices to three, and the only possible remedy the Legislature could afford was the creation of the office of Court Commissioners. The popu- lation of the State is now sixteen or seventeen hundred thousand, and we have about nine thousand miles of railroad in this State, which, with our diversified pursuits and activities admonishes us that litigation must continue to increase rather than diminish, and that to meet the wants and conditions of the State there should never be less than seven Justices on the bench of the Supreme Court, and they should be gentlemen learned in the profession and distinguished for integrity and with sufficient cour- age of conviction to fearlessly expound the Constitution and interpret the laws enacted by the Legislature. Pardon me for a few reflections respecting the constitution of the District and Probate Courts of the State. I may again remark that the Judicial power of the State is vested in a Supreme Court, District Courts, Probate Court, Justices of the Peace and such other courts in- ferior to the Supreme Court as may be provided by law, In some of 22 BAR ASSOCIATION OF KANSAS. the counties of this State it is impossible for a District Court as now constituted to discharge its duty to suitors with the care and delib- eration that is due the administration of justice. It is true that the Legislature may create other courts inferior to the Supreme Court, but the constitution has vested the District Court withexclusive jurisdiction of classes of litigation that the Legislature cannot transfer to any other court, such as actions for divorce, all appeals from the Probate Courts and Justices of the Peace. It must follow from this that when the Legislature creates other courts inferior to the Supreme Court, such courts must be courts of limited jurisdiction. The bar in general agree that it is not competent for the Legislature to provide for the election of more than one judge for a District Court. If this be the proper con- struction of the constitution, it is most unfortunate. The constitutions of Nebraska and Colorado admit of a different construction. In Arapa- hoe County, Colorado, there are two judges sitting in the District Court. The Legislature has prescribed certain general rules for the disposal of the business of the courts; every Monday morning the two judges meet in the court room of the senior judge and divide the business for the week. Then the junior judge retires to an adjoining room and tries motions, demurrers and equity cases and the other judge remains and tries jury cases. Substantially this practice is followed in Lincoln and Omaha, Nebraska. In this State we can have no adequate relief under our present judiciary article of the constitution. It is my opinion that the constitution should be so amended that where the public business demands the services of two or more judges of equal rank and dignity the Legislature might provide for such service. In this connection 1 beg lo call the attention of the bar to the probate system engrafted on our Judiciary article of the constitution. It is said that as a rule all the property of the State passes through the courts having the jurisdiction of estates and the care and custody of minors and wards once in thirty- three years. It is not meant by this that every piece and parcel of prop- erty so passes through the courts the first thirty-three years of the State's existence, or in any given time, but in the course of time an aver- age of all the property will so pass through the courts each generation. The constitution fixes the jurisdiction of the Probate Court and it is perhaps not competent for the Legislature to deprive it of this trust until the constitution is modified or changed. The business of these courts is not conducted as courts of record, or, in that open, public manner that should attend the administration of justice; and yet there is no trust that should be administered with so much fidelity and in- tegrity as the care and administration of the estates of deceased persons. To waste an estate acquired by the hard toil and frugality of a deceased person, and deprive hi* widow and orphan children of such estate shocks the sensibilities of every right thinking man. The law directs how executors, administrators and guardians shall be appointed and the manner of conducting and disposing of the assets of an estate; how the estate of a deceased person may be sold or mortgaged and for what purpose, by ihe authority and under the direction of the Probate Court, SEVENTH ANNUAL MEETING. 23 and what compensation may be paid executors, administrators, guardians and judges of the Probate Court for their services. There are of course honorable exceptions, where Probate judges conduct the business of these courts on that high plane contemplated by the laws of the State, but every lawyer knows that the restraints of the law thrown around this sacred trust are lightly regarded by many of those who administer the law. As a rule it frequently happens that incompetent and un- scrupulous persons are appointed administrators and guardians of minors without regard to, or rather, in disregard of thfc rights of the persons beneficially interested. The lands of the deceased are fre- quently disposed of under the direction of the Probate Judge without consulting the limitations of the law, or the interest of widows and orphan children. In short, the administration of these trusts is a re- proach to the State and an unpardonable wrong to the weak, helpless and desolate heirs of deceased persons. I assume that it is agreed by the profession that the third article of the constitution of this State should be changed or amended, and that the judiciary article should be more flexible so as to meet the wants and conditions of the people. Whether this much needed reform is to be obtained through a constitutional convention, or by submitting an amendment to the judiciary article of the constitution to the electors of the State, is a debatable question. Some of my predecessors have favored a constitutional convention, but so far all such recommenda- tions and efforts have been fruitless. There are those-in the State who are persuaded that there is no probability that the constitution of this State will be submitted to a constitutional convention for revision during the next generation of men, and that the profession cannot hope for any relief in this direction or by this method. The provisions of the constitution limiting the debt of the State to one million dollars, except for extraordinary purposes not necessary in time of peace, meets the approval of the people of this State, and the electors would hesitate to trust a convention with the safe guard that has heretofore saved the State from financial distress. The homestead exemption engrafted on our constitution is a feature of State policy that has the earnest and sincere approval of a large majority of the people. I think perhaps, that no other State in the Union has so effectually, completely and liberally hedged about the homestead as the fathers of our present constitution did at the birth of this State. The provision that one hundred and sixty acres of farm land, with all the improvements thereon, occupied by the owner and his family, should be exempt from forced sale under any process of law, and should not be alienated without the joint consent of husbaiid and wife, when that rela- tion exists, was wise and humane and was an advance in our civilization. They may have builded better than they knew, but the pioneers of this State are entitled to the lasting gratitude of our people. The people of this State are jealous of the many good qualities secured to them by our present constitution, and it seems tome that the profession must secure the needful change by amendment to the constitution, The homestead 24 BAR ASSOCIATION OF KANSAS. and the family, the church and the school house are types of the civili- zation in Kansas These are the shrines of the people of this Common- wealth and at these altars all kneel with reverence and veneration. I need not speak of other provisions of the constitution that have the approval of a large number of earnest people in this State. The policy of our government in many respects is in advance of all the other States, and this policy is fixed in the constitution and meets the approval of the wisest statesmen and philanthropists. When we con- sider the environments the legal profession may well pause and consider whether they will wait for relief from a constitutional convention. The people may submit our constitution to a convention for revision, but it will not be without a persistent and determined struggle. It would be plausibly contended that we could scarcely expect a constitutional convention to give back to the people anew constitution with the pres- ent limitation on the State debt, or the homestead exemption unchang- ed or unmodified, or some household Gods unprofaned. There is now pending an amendment to the constitution to be voted for or against at the next general election, extending the biennial session of the legis- lature, from fifty to ninety days. It is believed by many that fifty days is not enough for a biennial session of the Legislature of this State, yet there was a meeting of representative citizens held in this city within a few weeks from every section of this State, which pronounced against the measure. These gentlemen, composing this representative body, were men of intelligence and integrity and as much interested in the welfare of the people of this State as any other class of citizens. Others may honestly differ with them, but I think it safe to assume that this same body of citizens would approve the constitutional amendment for the relief of the Judicial department of this State. They would concede that the one measure was necessary, while they believed the other to be useless and unnecessary. These gentlemen represeut largely the thought and sentiment of the State, and I only speak of this incident as indicating public thought. But, be this as it may, it is not my purpose to contend for either method for the reorganization or reform in our judiciary system. I only venture to suggest some of the difficulties and environments that surround the problem to be solved in securing the end to be attained. There is no department of the government that the people have so much interest in, as that entrusted with the administration of justice. Every statute, every administrative act, and every exercise of jurisdic- tion must be tested by and conform to the fundamental utterance of the people's will as expressed and defined in our constitution; hence, the bar and the bench are called upon to exercise a function unknown to other countries — that of pronouncing upon the validity of a statute by comparing it with the constitution and deciding as to the power of the Legislature to enact it. English courts are constantly compelled to construe and interpret, but they may not declare an act of parliament void for want of authority in that body. This new departure in the science of government jg only vested in American courts, and plainly re- SEVENTH ANNUAL MEETING. 25 suits from the power vested by the people in the judiciary by a written constitution. There is no branch of human government productive of so much good to the individual or the commonwealth as the judiciary. To this the oppressed fly for refuge, the wronged for justice; it lies at the foun- dation of our civilization. In the fabric of our constitution it is the grand " Doric column " founded by the people upon which rests their liberties. "Without it, the world would be a chaotic mass of wrong un- requited, and wrong-doers would go unwhipp'd of justice. JUDICIAL REFORMS. THOMAS SWING. Mr. President and Gentlemen of thf Kansas State Bar Association ; Ladies and Gentlemen :— Thirty years ago I had the honor to be chosen by the people of Kansas Chief Justice of the Su- preme Court of the then proposed State ; and when, in the year follow- ing, after her long struggle and rude rebuffs, Kansas was admitted to be a State in the Union, I presided at the first term of the Supreme Court held near the spot where we are now assembled. How changed the scene! A splendid city rises. now, with its temples, electric railways, flashing lights and elegant mansions, where then scarcely a graded street cut the primeval sward, or crushed the tendrils of the wild strawberries and the blue bells as they rode in wind and sunlight on the unbroken waves of the prairie. During the first term and a half of the Supreme Court, when I was on the bench, and before I resigned to enter the army, we heard but one cause of great interest — that of the people on the relation of George A. Crawford el al vs. Charles Robinson et al. It involved the title to all the State offices. The decision, though disappointing to a large wing of the Republican party, greatly increased the respect of the people for the court, as it was contrary to the supposed personal preferences of a ma- jority of the judges. Of the first members of the Supreme Court all are living and here present— Samuel A. Kingman, Laurence D. Bailey and myself. Broth- ers, I greet you ! I am rejoiced to see how few are the wrinkles time has written on your brows. If we had not been comparatively youngsters then we probably would not all be here to-night. But, of the Bar, nearly half will nevermore answer the call-of the docket. Sam Stinson, the brightest and wittiest of all ; Billy McDowell, Perry, Holman, Gamble, Helm, Ruggles, Carpenter, Parrott, Purkins, Havens— a majority of these were younger than either of us three, but they are all gone forever from the scenes of their forensic struggles. There was Governor Shannon, too, who in his prime, as a pro-sla- very partisan, lived through the political blizzard in Kansas, and then passed the long evening of his days here in the serene and successful practice of his profession. There, too, was Dan McCook, my partner and friend— God bless his patriotic and daring spirit ! —who went to glory in the wild storm at Kenesaw. And there, too, was Ben Monroe, the equally noble and gallant Southron, who fell mortally wounded at Don- elson, fighting for what he believed to be the right — both companions at the Bar — fast friends and bosom cronies until the war broke out, when they parted as enemies, never to meet again. Peace to their souls ! And may the bitterness which armed against each other all the splendid SEVENTH ANNUAL MEETING. 27 youth of North and South disappear from their survivors in the proud recollections of their virtues and their valor, and in the beneficent re- sults of the war to North and South alike. As I look.back at the bench and bar of that day, the Falstaffian figure of Judge Pettit rises in my memory, and with it the first line of Sol Miller's apostrophe : " John Pettit ! Mighty Demijohn !" Appointed by Buchanan because of his hostility to Douglas and popular sovereignty, he filled the office of United States District Judge for about three years without grace or dignity, but with ability, fairness and absolute integrity. The free state cause having been practically won soon after his arrival in Kansas, he acted towards the free state men, who chiefly composed the bar of his circuit, much as you might imagine Dr. Sam. Johnson would have acted toward a bar of Scotch lawyers who took special pains to keep him stirred up. With all his savagery, he had a warm heart, a vigorous intellect and a sound under- standing ; and, though intensely worried by the triumph of his political enemies, he never soiled the ermine by an act of injustice or partisan- ship. And how the State has changed ! The Pilgrim Fathers, though tossed by rough seas and starved on barren shores, were not so rudely tried as were the pioneers of Kansas. "When a rest came after the ex- hausting struggle to make her a free State, the seasons brought famine instead of plenty in their hands. A more feeble State in population and property, or a greater State in the splendid spirit and hardihood of her people, never knocked at the door of Congress for admission. With a population of but 107,000, impoverished by the long struggle against force and fraud, and by the total loss of crops by drouth, she set out on her career with empty barns and an empty treasury. The State officers were paid poor salaries and in scrip. As Chief Justice, I sold my State scrip at sixty cents on the dollar, so that my whole official income was $1,080 for the first year. We then thought the utmost limit of cultivable land was about the meridian of Fort Riley, and never dreamed of a day when the sun would look down from west of that line on boundless wheat fields, harvested by steam, and on millions of cattle fattening to feed the . world ; nor of a day when Kansas, instead of being least of her sisters, should stand as she does now, with 1,750,000 people, the thirteenth in power of the forty-two States of the Union. There is a longing in' the human heart, akin to that for immortal life, to have our names live after us associated with illustrious or benig- nant events. I think all of us who fought for freedom in Kansas, and who followed up the fight through the war for the Union, may feei this longing fully satisfied. It was the sling of the stripling Kansas which slew the Goliath slavery. Few men have ever had the chance to serve mankind so signally as those of us who wrested this splendid region from the haughty and reckless Southern propaganda; and then formed the right wing of that glorious army which swept both rebellion and slavery from the land forever. 28 BAB ASSOCIATION OP KANSAS. I visit the State of my early manhood now with a heart full of grat- itude to Almighty God for all the good of which he made her poor, gal- lant and struggling sons the instruments— for sending them here when the Missouri compromise was 'broken by the South, to meet force with force and give blow for blow— for arousing North and South alike to the fact that the conflict on this outpost was the deadly struggle of two hos- tile and irreconcilable civilizations — and for leading the antagonists on to the settlement by the sword which alone could (make the Union free, fraternal and perpetual. A new republic was born of the war. Almost all great and sudden evolutions are painful and destructive. Old institutions generally per- ish under blows, at the sacrifice of their hapless and often blame- less upholders. Not only secession and slavery, but also the infinitely mischievous idea of the ignobility of labor, perished by the war. The youth who fought in both armies and survived came out of them brighter and broader men for their trials — especially in the West where the ser- vice was most strenuous and the play of individual character most am- ple. All the latent powers and faculties of the people were called into action, and when the struggle ended the impetuous currents of war turned into the channels of business and swept away old impediments which custom and prejudice had set for boundaries. In spite of the in- finite losses of life and health by the war; in spite of the demoralization of labor and industry throughout the South during the long period of reconstruction ; in spite of the enormous burdens of public debt ingen- iously doubled through contraction of the currency, the last two decades have witnessed a greater development of American civilization and in- dustry than was ever known in any equal period of our history. The people have thus been lifted up to recognize their own powers, the infi- nite resources of their country and its mission as the torch bearer of freedom and civilization for the world. There are two radical changes in the judicial system of our States to which I ask the attention of the people and the Bar of Kansas. I say the people and the Bar, because the reforms I recommend are such as to greatly affect the general public and such as can be settled in the light of common experience by the people at large, from whom at last proceed all great reforms. I know how difficult it is to induce lawyers to change judi- cial methods and usages which have been handed down unquestioned for centuries, and that to try to change them seems as futile as trying to "beguile nature of her custom." But I know, too, that in addressing the Bar and the people of Kansas I speak to men who are wont to rea- son about things, and are willing to apply to any custom however ven- erable that touchstone which is the guide to progress. The first proposition of reform is that in civil actions, after a jury has retired and failed to reach a unanimous verdict, for a fixed period of say four hours, three-fourths, two-thirds or a majority of the jurors may then render the verdict, SEVENTH ANNUAL MEETING. 29 Trial by jury in civil actions is one of the guarantees of liberty in the Constitution of the United States, and in the Constitutions of most of the States. The provision of the Federal Constitution is : "In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved.'' This provision is confined in its operation to causes tried in the federal courts. The States are free to amend or abolish the jury system in civil cases in their own courts. I hope no one will suppose that I lack appreciation of the trial- by jury or wish to see it supplanted. On the contrary, I regard the jury as not only the best means for trying issues of fact between man and man, but as one of the forces of our civilization, which we can only afford to amend if we are sure thereby to increase its efficiency and promote its preservation. The requirement of unanimity in civil cases is, I think, unsustained by either reason or experience. In criminal cases it is a just and neces*- sary safeguard of liberty. The brand of crirne carries with it civil and social death, and it should never be fixed on the brow of a man until his guilt has been absolutely proved. The presumption is the accused is ' innocent, and to rebut it the proof of his guilt should exclude all reason- able doubt, not only in the minds of the majority, but of each and every one of the jurors. But there is no presumption in a civil action that the plaintiff is wrong. Our experience, I think, teaches that he is oftener right than wrong. The average plaintiff does not incur the annoyance, trouble and expense involved in a litigation unless he believes he has been wronged, and is advised by counsel that he is entitled to relief. Then why should he be handicapped by requiring him to convince each one of the twelve jurors that he is right ? In arbitrations, which are provided for in our laws as a substitute for jury trials, only a majority of the arbitrators need concur in an award. If the jury should be unanimous, why should not the arbitrators be ? There is no other tribunal composed of several persons, whose action is hampered by this requirement. Even in the trial of an impeachment, which is a quasi criminal proceeding, three-fourths or two-thirds of the Senators in Congress or in any State may convict. Congress, the State Legislatures, the Appellate Courts of the Eepublic and the States, all act by a majority or, in some special in- stances in legislative bodies, two-thirds or three-fourths. There is in my opinion but one good result obtained by the require- ment of unanimity, which is, that, in case of any doubt, it compels the jury to compare views instead of deciding without consideration instan- ter. But a provision that only a unanimous verdict will be received for, say, the first four hours after the case goes to the jury; and that, after the expiration of that time, a three-fourths or two-thirds or a majority verdict will be received, would just as effectually insure dis- cussion and comparison of views and at the same time avoid the unjust verdicts, the mistrials, delays, expenses and innumerable hardships in- volved in the requirement of unanimity. We search in vain the history of the jury system for any other SO BAB ASSOCIATION OF KANSAS. reason for the requirement of unanimity. The Scandinavian nations had from their earliest history a trial by a body of twelve men, the ver- dict of a majority of whom was decisive. But these men were judges as well as jurors ; they decided questions of law as well as of fact. The impracticability of obtaining twelve capable judges from the body of the people by lot, led to the gradual disuse and final abandonment of this so called jury system. The jury in its present form is claimed to date from the reign of Henry II, in the twelfth century. But the so called jury of that day was no jury at all. It was a body of twelve witnesses by whose concurrent testimony as to the facts a litigation between individulas was decided. In other words, the concurrence of twelve witnesses as to the facts was the minimum proof then accepted to establish a civil cause. When the twelve witnesses first chosen could not agree, new men were added until twelve came to one conclusion and ren- dered the verdict — when the dissenters were generally fined as for contempt! It having prttved inconvenient to thus water the jury, this practice was abandoned, and unanimity was thereafter required with- out adding to the jury. This made the jury of to-day ; but the date of its creation is lost in the mist of England's early judicial history. It probably was two or three hundred years after the establishment of the jury of witnesses — about the fourteenth or fifteenth century. When the present jury system was thus established, unanimity was obtained by fining the obstinate minority or by punishing the whole jury — as by driving them in open carts from one assize to another, or more recently, imprisoning them sine cibo el aqua until cold, hunger and thirst compelled the weak, or ill, or mean-spirited, to commit moral per- jury by assenting to a verdict against their consciences. This enlight- ened and humane method we took blindfold from our savage ancestors, and still resort to it unquestioningly in the best courts of the States and the United States. Why a unanimous verdict thus obtained was better than a majority verdict, no one has attempted to tell since the prepos- terous system was inaugurated. The evil effects of this requirement of unanimity are many and great. Where the verdict cannot in the nature of the case be a compro- mise, as in an action of ejectment or on a promissory note, mistrials occur from the corruption or dullness or crankiness of a small minority of the jury, resulting in delay, expense and trouble which sicken the heart of the suitor. In almost all other cases the verdict is a compro- mise forced by a small minority and accepted by a large majority as only better than a mistrial,— a compromise founded on no testimony or ■principle, and generally not representing the judgment of a single man on the jury. No intelligent people not enslaved by custom could accept and preserve an institution which so lamentably fails to perform its functions. The growing discontent with the jury system, resulting almost wholly from this useless requirement, leads very frequently to the sub- mission of jury cases to the court, and to arbitrations, and to assents to SEVENTH ANNUAL MEETING. 3i majority verdicts, by reason whereof the jury as known to the common law is gradually falling into disfavor, greatly to the public detriment. The tendency to its disuse is increased by the change already made in the jurisprudence of about three-fourths of our States abolishing the distinctions between courts of law and equity. The jury alone stands in the way of the complete assimilation of legal and equitable proced- ures. As this most beneficent merger grows more and more acceptable to the profession, the tendency to disuse the jury becomes strengthened; and the day is not far distant when, if the absurd and injurious require- ment of unanimity be adhered to, trial by jury in civil cases will be abandoned. . I think it a political duty of American patriots and statesmen to 4 /ree the jury system of this defect, and thus insure its perpetuity. It is one of the vital forces of popular government. It educates the citi- zen in the law which declares civil rights and governs civil procedures. It dignifies each one in turn by having him sit as a minister of the law, hearing able and educated lawyers and judges discuss the cases; and calling into action his highest faculties of reason, experience and con- science in determining the facts and applying the law. It lifts him out of the dust and humdrum of every day business into a higher realm of thought and conscience, where divine principles of justice are applied by the courts to the protection of the liberty and the property of the peo- ple. No institution of government is better worth strengthening and perpetuating, for none is more powerful for the public good. It offends me to hear it spoken of often, if not generally, in a tone of contempt, arising chiefly, I am sure, from the delays and failures incident to the requirement of unanimity which we have accepted from the hands of semi-savages of many centuries ago— from men whose highest concep- tion of the administration of justice was satisfied with the trial by twelve witnesses ; or trial by combat in which the man who could kill his adversary won the suit ; or a trial by compurgators in which the re- sult was determed by the mere number of men who would swear they be- lieved either party was right ; or a trial by horsned in which the guilt of the accused was determined by the test whether, after making solemn oath of his innocence, he could swallow a chunk of dry bread without choking. Prom these enlightened law-givers we derive, not the jury sys- tem, which existed in embryo in Borne and in most countries of Europe throughout the Middle Ages, but this irrational and injurious provision of unanimity. This requirement illustrates how a custom once established lives on for ages after the reason which established it is past and forgotten In a great paved court leading to one of the fronts of the old winter palace in St. Petersburg, a solitary sentinel treads a beat of about one hundred yards, relieved every few hours. Generations of Russian sen- tinels have marched there, back and forth, day and night, through storm and sunshine, with nothing to guard, nothing to do. No one knows or has known for two centuries why the "sentinel is posted there. A recent antiquarian search in the archives of the War Department dis- 32 BAR ASSOCIATION OF KANSAS. closed the fact that early in the last century Queen Catherine I, wife of Peter the Great, had a flower bed there, and caused a senti- nel to be posted to guard her tulips ! So, the requirement of unanimity, a belated relic of a forgotten and barbaric form of trial by witnesses, became incorporated, without a reason to support it, in the English sys- tem of jury trials in civil cases, and has been handed down from gener- ation to generation as though it were one of the precious jewels of our race. If it were merely useless, we might excuse our weakness in pre- serving it; but, as it is also hurtful and tends to weaken the respect of the people for the jury system, it ought to be abolished. Another mooted reform to which I ask the favorable consideration of the Bar and the people of Kansas, is the adoption of a civil code ; that is, a code in which shall be embodied in plain language and orderly ar- rangement all those general rules of law which are commonly known in treatises as "the private law." Since the adoption of the codes of civil and criminal procedure, and of crimes and punishments, we may say as to the States of the Union generally that all their public law is in their statute books. The public law covers all the machinery of government, state and national, and the modes of conducting business in public tribunals or by public officers. All this public law is consistent, accessible ; and every eitizenis charged with constructive knowledge of it. ' ' But the other large body of the law, the private law, which controls the property, business and relations of men, is scattered, discordant and largely unknown to the people. Our government is based on the theory that all law, public and pri- vate alike, is an expression of the collective will of the people. The pri- vate law and public law alike, there fore, should if possible be in the statute books, published and accessible to all. But we built our government on an inherited civilization, and took with it a jurisprudence, the outgrowth of monarchial and aristocratic institutions. A natural respect for our ancestors, and the pressure of great political problems, led us to transplant this jurisprudence here with almost all its idiosyncracies, resulting from the influence of alien institutions and the conditions and events of centuries gone by ; and, until about the middle of this century, we reverently cherished them, good and bad, as though they were all of the very warp and woof of our civilization and our liberties. But about forty years ago an agitation for judicial reform arose in New York, and under its influence one after another of the most objec- tionable features of our inherited system of jurisprudence was changed to meet the free and advancing thought and spirit of our people. The distressingly burdensome double system of courts of law and equity was abolished, and all the courts united into one ; the common law sys- tem of pleading, with its fifty-nine forms of declaration, and its special pleas, replications, rejoinders, rebutters, surrebutters, general counts SEVENTH ANNUAL MEETING. 33 and. general issues, was swept away, and one plain form of action and defence substituted for the ingenious and subtle devices of centuries. The criminal pleadings and procedures of the common law were sup- planted by simpler and plainer procedures, a complete code of all crimes and misdemeanors and their punishments was adopted, abolishing all mere common law offences which lurked in the dust of forgotten prece- dents to spring out and sting the unwary, and now all this body of public lawf'ins.tead of being hidden away in black letter statutes and scattered and contradictory decisions, is in plain print and orderly arrangement in the State Statutes, where every lawyer, judge and citizen can see it on a moment's notice. Although these great and radical changes met with the stern oppo- sition of a large majority of the bench and bar of America, their wis- dom has already been fully established by their adoption in three-fourths of the States and Territories of the Union; and finally in Great Britain itself, where, in 1873, Parliament passed an act combining the Queen's Bench, the'Exchequer, the Court of Chancery, and the Courts of Admi- ralty, of Probate, 6f Divorce, and of Bankruptcy in one tribunal, called the Supreme Court ; abolishing all distinctions between law and equity jurisprudence, and establishing but one form of action in the adminis- tration of justice between private suitors. These great reforms, including the codification of all the law which can by any construction be called public law, being on the way to com- plete adoption in all the States, we are brought face to face with the ques- tion whether all the remainder of the law— the private law— that which most nearly affects each citizen, which governs his business and personal relations to his family and his fellow man, should not also be codified. Where is this private law to be found ? Part of it is already in the Constitution of the United States; part in the Constitutions and Statutes of the States severally. So far, that is publication enough. But, unfor- tunately, at least three-fourths of it is still buried in ancient English statutes, extending from the Norman Conquest to the reign of James II — in English, Irish and Scotch decisions, old and new,— in decisions of the Supreme Court of the United States, the nine Circuit Courts, and the fifty or sixty District Courts— in decisions of forty-two Supreme Courts of the several States, and the thousand Inferior Courts of the States- decisions which are as the sands of the .sea for multitude, and are in- creasing at the rate of thousands of volumes and hundreds of thousands of cases a year ; decisions, all of which were never assembled in one library or seen by one man — scattered, inaccessible, unsearchable. In an address before the State Bar Association of Virginia, delivered, last year, entitled " The Provinces of the Written and Unwritten Law," Mr. James C. Carter, one of the most eminent lawyers of New York, presented an elaborate and able argument against codifying the private law. He says that all public law should be written in the statute books, and all private law should be left unwritten, so that, as he says, the judge may apply perfect justice to the circumstances of :each case as it arises— because " the fact must always come before the law." 34 BAR ASSOCIATION OF KANSAS. This argument, I think, is purely fanciful. Of any one hundred questions of private law arising in litigations here in Kansas, perhaps twenty have been settled by express provisions of existing statutes. Another twenty, perhaps, involve questions of general private law which have been in effect decided by the Supreme Court of Kansas. Another twenty would, perhaps, be found on examination to be settled by a great preponderance of authority of courts outside of Kansas. The remaining forty, however, would be found to be cases (except a very few present- ing new and undecided questions) in which the decisions conflict, and a large weight of reason and authority is found on both sides. In these doubtful cases, who shall weigh the authorities by numbers, when not half of them are to be found in the state library, and not one-fifth of them in all the lawyers' offices of any town in Kansas ? Who shall weigh them by reason, when the qnestions may be of mere arbitrary law ¥ Who shall weigh them by conscience, when they may present no conflict solvable by the moral sense ? . Now, so far as the general principles of private law are'settled be- yond doubt in adjudged cases, there certainly can tie no insuperable difficulty in stating and arranging them in plain language in a well-sys- tematized code. So far as such principles are not settled in Kansas, because of contradictory decisions here or elsewhere or because the prin- ciples have never been declared at all, a body of code commissioners, who are able lawyers, could give each of such questions a more thorough and satisfactory examination in the light of reason and authority than can an overworked judge on the circuit, where he cannot consult the authorities, or at the State Capitol where a necessarily limited study of contradictory decisions often adds to the perplexities instead of solving them. Such commissioners would incorporate in a proposed code what they believed to be the best settlement of such disputed and doubtful questions. The code would, before adoption, undergo inspection and criticism of the Bench and Bar of the State, so that when enacted it would be a compre- hensive and clear declaration of all the private law, leaving no known question unsettled. The volume containing such a code would not be larger than this volume of about 700 pages in large type ; that is, it would be not much more voluminous than the code of civil and criminal pro- cedure. This volume is the civil code prepared many years ago in New York, pursuant to a requirement of the Constitution of that State— a code twice passed by the legislature, twice vetoed by the governor, and still under consideration at Albany. It comes from the hand of David Dud- ley .Field, the father of both American and British law reform. Eminent as a lawyer, pre-eminent as a publicist, he has done more for British and American law reform than any other man of the nineteenth century. The private law is necessarily progressive. It must advance with advancing civilization forever. Men and their recognized relations and obligations to their fellows are incessantly changing by the silent power of the Divine law of evolution which constantly raises them to higher ideas of right. The law governing our personal relations and our busi- nesses must be constantly modified to conform to the requirements of SEVENTH ANNUAL MEETING. 35 improving moral perceptions. Besides, new applications of physical forces, new enterprises, new business relations, call for new principles and new applications of law adapted to ever changing exigencies. Mr. Carter maintains that, if the private law were codified, these necessary changes would stop, and that, anyhow, all but very radical improvements can best be made by the judges. I think not. The legis- lature makes butfew amendments of the private law now only because it is uncodified: and for that body to make amendments without the entire law of the whole subject being before it would be like altering an intri- cate machine without seeing the relations of the part altered to the otlrer parts. If the private law were codified, the legislature could make changes intelligently, and without injury to litigants. At present, the courts amend the private law, but every change is at the cost of a suitor who has perhaps risked his fortune on the assumption that the existing law would be applied. Jeremy Eentham said in England a hundred years ago : " It is the judges that make the common law. Do you know how they make it V Just as a man makes law for his dog. "When your dog does a thing you want to break him of, you wait until he does it again and then you beat him ; and this is the way the judges make the law for you and me." Mr. Carter, in the lecture I have referred to, intimates that to incor- porate the private laws in statutes would be inconsistent with the prin- ciples or traditions of free government. If by free government he means popular government, I say that the reduction of all law to writing is a logical result of government by the people. Unlike the British monarchy, our republic was founded on a written constitution in which the people gave the new government each power it was authorized to exercise, and withheld all others. Every authority of that government ; every duty it imposes ; every act it prohibits, is written down. So the people of each State defined the powers of its government and distributed them among its several departments. The power given the judiciary is to declare and enforce the law, not to make or modify it. So far as a court changes the law, it usurps power. Judicial legislation is sanctioned by the British constitution which is but a general assortment of historic precedents, but is utterly repugnant to our constitutions, State and National. Hence, the argument of Mr. Carter that the private law should not be put in the statute books. because that would prevent judicial legislation, might per- haps be good if addressed to British lawyers, but is certainly bad ad- dressed to an American Bar. It involves him in the dilemma that our State constitutions should be forthwith amended so as to confer this special legislative power on the judges ; or that the judges should con- tinue to exercise these powers in disregard of the constitutions they are sworn to obey. The advantages of codification of the private law are great and ob- vious. It will bring this most important and least understood body of the law within reach of everybody, to be consulted, discussed and studied by all who have any interest or duty affected by it. The minister 36 BAB ASSOCIATION OF KANSAS. of the law everywhere, the judge, the magistrate, the lawyer, would have the law within his reach, and on most questions could decide or advise with confidence and comparative certainty upon it. The law would thus be brought down to the people, and largely to popular understanding. Of course, there will often be doubt and misinterpretation and mistakes such as occur in the interpretation of the public laws, but only those which necessarily spring from defect of expression in forming the code, or of judgment in interpreting it. The ambiguities, obscurities and other defects of expression in the code would soon be cured by interpre- tation of the courts ; and in a few years its meaning would be quite fully understood, and its latent defects and omissions cured by legislative amendment. Mr. Carter says that his opposition to codifying the private law is confirmed by the observation that, in the natural growth of the law of a nation, its public law is written and its private law unwritten— ll left to be shaped by its judicial tribunals." I think this is a grave error of fact, and that the tendency of American jurisprudence is clearly and strongly towards codifying all the law. In addition to the comparatively recent enactments of the codes I have mentioned — covering, as they do, large tracts of the law heretofore unwritten— a glance at the statute books of the several states will satisfy almost any lawyer that the decided tend- ency is to a codification of the private law. Take the revised statutes of New York, for example, and in the domain of private law we find : First. The absolute rights— the liberties— of the people defined or recognized in the constitution. Second. We find, too, one of the grand divisions of private law, that relating to real property, minutely, clearly and elaborately set forth in a code of eighty pages which is almost a complete substitute for that vast wilderness of learning known as the common law of real property. If there were a title of the common law which a modern codiflex,- with a decent respect for 'the early 1'athersfshould have left unchanged, it was this masterpiece of subtle refinements of the schoolmen — those intellectual revellers in entities and quiddities— whose delight it was to "— distinguish and divide A hair 'twist south and south-west side. 11 But sixty-five years ago three able lawyers— two very young, and one near middle life— Ben j. F. Butler, afterwards Attorney. General un- der Jackson; John C. Spencer, afterwards Secretary of War under Ty- ler; and John Duer, afterwards Chief Justice of the Superior Court of New York City— were made a commission to compile, not codify, the laws of the state. To the horror of the older lawyers, but with the applause of the people, they irreverently swept away the whole pile of learned rubbish— the riile in Shelly's case, and all the stuff that had no sound and living reason to support it — and reported a code which the legislature enacted, and which has since become in effect the American code of real property. Turning to other parts of the Eevised Statutes of New York, we. SEVENTH ANNUAL MEETING. 37 find, the private law to a considerable extent codified in chapters covering the law of marriage, divorce, rights and liabilities of husband and wife, parent and child, master and servant, apprentices, partnership, interest, notes and bills, chattel mortgages, assignments, property of idiots, luna- tics, etc. And turning to the private law relating to artificial persons, we find that, instead of prescribing only in general terms the mode of creating private corporations, their general powers and the manner of perpetuat- ing and dissolving them, leaving all else to remain as it lies in tbe un- written law, the legislature has prescribed an elaborate code of over 600 pages, covering more than one-fifth of the whole body of the Revised Statutes. We find, too, that Massachusetts has codified the private law as fully as has New York, and Georgia still more fully, while California and North and South Dakota have severally adopted the complete civil code now pending before the New York legislature. So far, then, from the tendency of our jurisprudence being toward leaving the private law unwritten, itis all the other way. In codifying it we will only be doing what, it seems to me, common sense dictates— that everyone should have the best attainable means of knowing what are his private rights and duties as recognized and enforced by the State ; what patriotism dictates— that the changes made in such rights and duties necessary in the progress of civilization shall be made by the agency designated by the people to make the laws ; what the experience of mankind dictates— the reasons for codification being similar and al - most as cogent to-day as when 1,350 years ago the Emperor Justinian proclaimed that code of private law which lighted all central and north- ern Europe from barbarism to civilization. The Eoman and the English systems of jurisprudence are the. only ones of which we have a full history from their rudest beginnings to their completest development. The parallelism in their growth is striking. In the infancy of each, justice was subordinated to form— a limited num- ber of forms of action were prescribed, and the subtlety of the lawyers and judges was exerted oftener in defeating than in establishing a just cause. As the nations advanced in civilization, a better conception of the objects of courts prevailed and the judges added new forms of action, and grew more liberal in furthering each just cause. Finally, the prse- tors of the Roman, and the judges and chancellors of the English judi- ciary, disregarding barbaric forms and precedents, boldly and avowedly legislated on each new question; and thus built up the systems of juris- prudence which illustrate, and largely created, the civilization of their peoples. While the Roman law remained uncodified there was no uniform- ity of decisions in the various divisions of the Empire. Codification brought order out of chaos throughout its wide dominions. When the Empire fell, its jurisprudence, had it remained uncodified, would have fallen with it, a mass of shapeless ruins; but the code survived as a model for other nations, the most beneficent work of man in the domain of 38 BAE ASSOCIATION OF KANSAS. philosophy and government. One-third of Brackton's "English Law and Customs,'-' the earliest commentary on the common law, written in the thirteenth century, was taken bodily from it; and a century ago Lord Mansfield created the British mercantile law by legislation from the Bench, which he adopted almost wholly from the codes of Justinian. A like necessity which led to the codification of the Boinan private law by Justinian has already forced the partial codification we have ac- complished in America, and will in time, I am sure, lead to a complete codification of all our law. " When Justinian ascended the throne," says Gibbon, "the reformation of the Boman jurisprudence was an ardu- ous but indispensable task. In the space of ten centuries, the infinite variety of laws and opinions had filled many thousands of volumes which no fortune could purchase and no capacity could digest." In a pamph- let published in 1866, the Lord Chief Justice of England said: "We seem to be making no progress whatever towards reducing to any intelligible shape the chaotic mass — common law, equity law, crown law, statute law, countless reports, countless statutes, interminable treatises — in which the law of England, by those who know where to look for it, and not always by them^is to be found." The western States of our Union have a spirit of intellectual inde-' pendence, and freedom from the servitude of custom, beyond their east- ern sisters. They are equally with them inheritors of a genius for self- government. While New York has delayed and hesitated, three of the western States, California and*the two Dakotas, have already adopted the Code of private law. I would be proud to see intrepid Kansas join the head of the column in conforming our entire system of American jurisprudence to the principle of popular government, and to the con- venience and interest of the people— so that all our law shall be plain, consistent, and open, and so that every amendment shall be made by the legislature, and reflect the growing conscience and judgment of the people. And now, my friends, I have only to thank you for your attention and bid yon good night. It has given me great pleasure to revisit Kan- sas—the State of my early political, professional and married life ; which honored me with its dignities ; with a seat on its Supreme Bench, and with the still higher trust and authority to be captain over a thousand of the best and bravest of its sons in the glorious fight for the Union. Though separated from Kansas and its affairs by half a lifetime and - half a continent, I have almost daily gone back in memory to its billowy and beautiful landscapes, and to my old friends arid companions here; and, after this brief charming visit, I shall bid adieu to them again but' with revived and strengthened affection. May God bless Kansas. May her heroic service for freedom and the Union be treasured as the proudest inheritance of her sons and her daughters forever. May length of days be in her right hand, and in her left hand riches and honor. May her ways be ways of pleasantness, and all her paths be Peace! S. A. KINGMAN". This is a most interesting occasion, to me, as well as you. To you who are in the arena struggling for place, for leadership and for mas- tery in our chosen profession (you observe I use the words "our pro- fession" although now but a hanger on to the skirts thereof), I say to you it must be interesting in its useful hints and wise suggestions. Naturally your thoughts are with the present and for the future. The pressing duties and inviting opportunities of the hour that is, and the anticipations and aspirations of the hours to "come, command your attention. To me the time is full of interest as it invites me to look back- ward. "When the heat and glare of the mid-day and the brightness of the late afternoon is past there comes an after glow — fit time for mem- ory. There is an after glow in life that comes as a consolation to old age, and also as a partial compensation. The presence of our first Chief, whom I early learned to regard for his estimable personal qualities, and to respect for his great attain- ments,!^ eminent ability, and strong forceful character, naturally leads me to recall the time when my associations with him were so pleasant, for I look on my acquaintance with him as one of the great pleasures of my life, and I have always regarded his friendship as a benediction. If I do not say more or speak with more emphasis, it is because it may not be becoming in his presence, and not because I do not feel like it. The pleasure of greeting him once more is so great, that it half reconciles m§, for the moment, to the great loss our State sustained when he deemed it to be his interest to cast his lot elsewhere. I might with truth speak like kindly words of our worthy associate, J udge'Bailey, but I forbear for you all know his worth, but can not know in what high esteem I hold him. A court of last resort moves on so calmly and quietly, with so little friction that little public interest is usually awakened to its proceedings. Unlike a trial court where a case of importance invites public attention and attracts a large audience who speculate on the varying develop- ments of the trial as it prqceeds,take sides and rejoice at every success- ful point made, and become deeply absorbed as to what the result may be, and all this though no personal interest will be affected by the result. In the appellate court no one appears interested save the law- yers in the particular case, though the settlement of the principle in- volved in the question before the court may be of vital importance to every man within its jurisdiction. There are exceptions to this general 1 rule, and perhaps the first case submitted to the Supreme Court is one. J^ ' l \ If the interest it excited was general it was a fictitious one, Its decision ' 40 BAE ASSOCIATION OF KANSAS. affected in no wise the morals, prosperity or property of the State, or any individual therein. No real interest was touched save that of the half dozen that might be affected thereby. Perhaps a glance at the (Kmdition of things at that time may not be without interest. There was a quarrel between Lane and Robinson. Lane hated the Governor with an intense, active and ceaseless hatred. If any one thinks that Lane's sentiments were not heartily reciprocated by the Governor he hardly understands the disposition of that amiable gentle- man. Lane had got what he had long set his heart on possessing — a seat in the United States Senate and the control of the immense federal patronage which the war had produced. This would have seemed enough, but Robinson was still Governor; "Mordecai was sitting in the Kings gate" and the Senator decided to oust him. Then in "the secret recesses of his own mind, capacious of such things," he found a way by an interpretation of the constitution in which, while every other clause of that instrument lav dormant and inoperative, the one limiting the terms of office was to have full play. Upon that theory a ticket was put in the field and a canvass and election followed, and the head of the ticket, a most estimable gentle- men, brought his action with a view ultimately to oust the Governor. Now as before observed society had no substantial interest in the settlement of the question involved. Nobody had conceived of a vacancy till the later part of October preceding the election. The Republican State Committee had over looked the fact till their atten- tion was called to it in a petition in which was stated, if true, cause enough for impeaching the Governor, and but a bare assertion that a vacancy existed. Yet the great agitation that had been begun in October and kept up, had infected the whole community, and the most intense anxiety seemed to prevail. To such an extent did this exist that the counsel for the relator, in view of outside rumors, felt called upon in his argument to disavow in behalf of his client any purpose to resort to any other than legal meas- ures in case his application should be refused. A conclusive proof that the apparent interest in this case was largely manufactured and purely fictitious is found in the fact that all talk about it subsided at once, and no unfavorable criticism was made on the decision to my knowledge. Everybody seemed satisfied. All this long talk has grown out of my purpose to state in this paper one curious fact. In passing upon the question the justices were virtually passing upon their own terms of office, but I can not remem- ber that the matter was spoken of in consultation, nor can I recall that it occurred to my mind at the time. I have never known of the singular fact being adverted to in the way of criticism or otherwise since. Indeed if the criticism had been made and had any force, it would not have applied to Justice Bailey, for curiously and suggestively enough no one was nominated or elected for his place, and he could have held his place till his successor was elected and qualified. One more reminiscence and I have done, SEVENTH ANNUAL MEETING. 41 It is pleasant to know that one long a valued member of this Asso- ciation and of our courts has been transferred to a tribunal with a wider jurisdiction and a more extended fame. It is still more satisfactory to know that he will worthily fill the exalted place, not only with credit to himself and added respectability to the court of which he is a member but will reflect honor on the State and institutions which trained him for the high place. It is gratifying to reflect that others equally well equipped still occupy the Bench and adorn the Bar of our State. I well remember the first time Judge Brewer appeared in the Supreme Court. It was in the case of Harris vs. Harris, 5 K. Judge Brewer had been Judge of the First District Court and had decided the case himself. His term having expired he argued the case in the Supreme Court as counsel for the plaintiff in error. Standing there to complain of his own. decison, he seemed to feel that the situation was somewhat awkward, and in half apology the Judge said he could not see why he should not complain of his own decision, as everybody else had done so. The record shows that the Court agreed in opinion with the advocate and over-ruled that of the Judge. When an old man gets to talking of the past he is apt to become garrulous, and the best place to stop him is— just before he begins. I commend this truth to the Executive Council of the Association who will have in charge the preparation of the program for our next meeting. I had intended to say something of the members of the Supreme Court and Commission, but as what I had to say was to represent the Court as the result of the doctrine of evolution and in the presence of the first chief, and with his voice still ringing in my ears, I can not. Whereby the Justices and Commissioners miss some very pleasant remarks. A. L. WILLIAMS. " I take with awe the taBk assigned: It may be that my friend might mies, In hie new sphere of heart and mind, Some token from my hand in this." • Gentlemen : Whenever a friend dies, we all ask the question— which countless generations have asked before us, and to which the unre- sponding mystery gives back no answer, — " Is this the end ? " And yet, whether death is indeed the end, as asserted by the philosophers, or the beginning, as believed by the Christian, it is neither philosophical nor religious to mourn over-much for those who die. For, if to die is to enter on a dreamless and eternal sleep, then are the dead at rest ; and if death is but the dawn of an eternal and painless day, then are they blest indeed, and all our mourning is but a selfish sorrow at our loss and* not theirs. And especially is this so when death, the slandered friend of man, brings release to one full of years and honors, and inflicted with an incurable malady. At the funeral services of the late Bishop Vail, Dr. McCabe, who knew and loved that great and good man, and believed that he had earned release, reminded his hearers that to mourn the death of such a man was almost to renounce their creed. We see the workings of nature and proclaim them wise in all things save the one law of death for man. We know that she is neither kind nor pitiless ; neither capricious nor fitful, but simply logical and inexor- able. She smiles upon our greatest griefs and roars in wintry storms upon our holiest festival, and yet we know that for every seeming caprice there is a fixed law which she can no more evade than can the creatures she has fashioned. We love to see the bending grass, the blooming flower, and to inhale the sweet-scented air of spring, untroubled by the thought that when the chilly blasts of winter come, the grass will wither and the flowers decay, for we know that they will wave and bloom again in their old forms, or by the subtile chemistry of nature be changed into some new shape of life and beauty to gladden and enrich the world. If, then, such lpving care is bestowed upon beast and bird and grass and tree and flower, may we not believe that for the noblest of her creatures Nature has equal care ? May we not, holding with Pascal that this " life is a vale between the peaks of two eternities," believe that when our dead penetrate the mystery that hangs behind man's creeds and dogmas, they enter on a new life, with new activities and new duties ? This is the consolation and the faith of most, the hope of all who live; and hold- ing fast this faith, I will proceed to a brief sketch of the life and charac- ter of the emancipated Nestor of our Bar. John Palmer Usher was born in the town of Brookfield, Madison SEVENTH ANNUAL MEETING. 43 county, New York, on the 19th day. of January, 1816, and was in his sev- enty-fourth year when he died, in Philadelphia, on the 13th day of April, 1889. I do not know what his early educational advantages were, but pre- sume from some things I have heard him say, that he received only such training as the ordinary schools of that day afforded. He taught school in his native county for awhile, but used all his spare time in the diligent study of law, and on the 17th day of January, 1839, was admitted to the Court of Chancery of New York, by Chancellor Walworth, and on the next day was admitted to the Supreme Court of that State. In the latter part of 1839 he removed to Terre Haute, Indiana, making the journey in a buggy. Erom a professional standpoint, it was a very lucky time. The State of Indiana was then more of a wilderness than Kansas was in Territorial days. Admitted to the Union in 1816, a steady stream of population set in from the Eastern States ; about 1830, all forms of speculation were extravagantly engaged in ; the Legislature granted charters to eight different lines of railroads, and was about to engage in the building of the largest canal then known in the world. Public land sales were enormous; values were inflated, and the State was passing through what has since been known as a " boom." In 1837, the natural reaction set in, and the State was involved in what seemed a hopeless bankruptcy. When Judge Usher arrived there the depressed condition of affairs still existed. The State was hopelessly in debt, and so were her citizens. Values had shrunk to almost nothing. None of the projected railroad lines had been completed. The canal seemed to be a flat failure, and the result was— universal litigation. No finer field could have been chosen by a young man for the beginning of his profes- sional career; for it is a fact, whether we like to admit it or not, that depressed times contribute largely to the volume of litigation. Life on the frontier at that time was very peculiar. The notable events of the year were the county court, political barbecues, horse races, and the land sales. All of them were attended by almost the entire popu- lation of the county. The only money in circulation was that brought to the land sales by money lenders, who carried it in saddle-bags, to lend to the people to pay for the pre-emption of their land, taking as' a matter of course security upon the land at cut-throat interest. The money thus paid at once went into the coffers of Uncle Sam, and consequently was not circulated among the people. In lieu of money, there was universal barter. At these land sales, horse races, card playing and whisky drink- ing were a part of the regular amusement. There was very little busi- ness of any kind to be transacted, and the only sources of litigation were the attempts of the creditors to collect their money, and neighborhood quarrels over division fences, boundary lines, or the title to some stray animal. The latter class of cases, of course, was fought on what is called "principle," and it was universal to find one-half of the county arrayed as witnesses on one side, and the other half on the other. For fees, of course the lawyers had to take personal property, town lots, interests in farms and anything but cash. The only cash clients were the creditor 44 BAR ASSOCIATION OF KANSAS. class who had loaned money for the purpose of pre-empting lands. Like all .money lenders, this class of clients demanded the greatest amount of service for the smallest amount of money. The necessary consequence was that they procured as attorneys men whose actual stupidity was compensated by their look of wisdom— a class, by the way, not entirely extinct in this day. The result was that all the really bright lawyers were engaged by the debtors to fight their battles ; and as their only hope was in delay, the efforts of their attorneys were directed in every instance to procure delay. In fact, this was so in all kinds of litigation. None but creditors desired immediate action. The litigants in neighborhood quarrels enjoyed the perpetual wrangling, and liked to attend court and hear their lawyers ''plead," as they called it; besides, to have a law suit was in some sort a mark of distinction, and the investor in such amuse- ments would have something to talk about and crow over his less fortu- nate neighbors with. The effect of this state of things was bad upon the lawyers. As a delay, or a continuance rather, of a case meant postpone- ment for six months at least, lawyers directed their efforts to procuring such delays, and paid much more attention to the process of the court for the purpose of detecting an error than they did to the merits of the case. To quash a summons was of itself a victory ; to set aside the pro- cess of the court, thus making a delay and entailing some costs upon the other side, was a notable victory. I have suggested that the times fifty years ago were very different from the present, and I may add that the practice of a kind that will never occur again on this continent. All lawyers of any prominence "rode the circuit." That is they practiced in all the counties of their judicial district, and accompanied the judge on his semi-annual trips to the various county seats. Railroads were comparatively unknown, and travelers either rode in two-wheeled " gigs " or on horseback, the latter being the usual conveyance of the lawyers. They carried saddle-bags in which were packed their clothes and a few law books, usually not more than two, and these were always such as might be useful for tech- nical purposes during the trial, such as Chitty on Pleadings and Starkie on Evidence. Reports of law which might enable the court to render correct decisions on the merits of a case were seldom taken, partly be- cause there was no way to carry them, but chiefly because a lawyer rarely knew in advance what books he needed. In a vast majority of cases the circuit-rider never knew what suits he would be called to try until he reached the county seat, and it very frequently happened that he was not called into a case until the jury was being impaneled to try it, and would acquire his first knowledge of the questions involved by reading the pleadings while his local associate was asking prolix and needless questions touching the qualifications of jurymen, every one of whom he knew, as he did also their relations with the parties to the suit. To successfully conduct a suit under such circumstances required great ability, combined with rapidity of thought, and when it is remem- bered that while the amounts involved were insignificant, the questions at issue ran through the whole gamut of the law, it will not appear sur- SEVENTH ANNUAL MEETING. 45 prising that such a practice produced men of gigantic intellect and technical habits — a combination of qualities only possible under such surrounding. There were any amount of criminal cases, from malicious malice to murder, and a surprising number of cases which might be called — to borrow a word to which a distinguished jurist has acquired a prescriptive and exclusive right by immemorial user—" quasi " criminal, such as slander, for intance. If it be true that the slang of one century is the classic of the next, fifty years from now our cultured people will fill their vocabulary from the reports of the period I am describing. There seems to have been a mania for slander suits. If one in anger used an expression out of the common in regard to his neighbor, forthwith the aggrieved party sought out a lawyer to see if he couldn't make the slanderer " prove it." In addition to these sources of litiga- tion, every neighborhood quarrel bred law suits. To-day the lawyer would be called on to defend a man whose hogs had rooted through a worm fence and done some small damage to a neighbor's corn patch. To-morrow he would defend the same man's title to his home. In the trial of these cases he had no precedents either to guide or befog him; he had to trust to his own resources, and by force of pure logical reasoning impose the law upon the court, and the law thus made was all the better that it was founded on reason and not on precedent. When court ad- journed for the day a new duty devolved upon the lawyer, though the unintiated always supposed it was his pastime: he had to enter into a contest of wit with his fellows for the delectation of the out-siders, and many a man has been retained in an important case in the morning solely on account of a witty remark, a quick repartee, or a well-told story of the night before. At the country taverns all the litigants and most of the witnesses gathered in to hear the lawyers engage in these encounters, and he was the best lawyer who was foremost in them. That such contests degenerated into mere buffooneries at times before such audiences, cannot be denied; but it is equally as true that they sharpened the intellect, quickened the wits, and gave impetus to the faculty of quick and sound reasoning. That Judge Usher felt the in- fluence of such surroundings and was both the better and worse in con- sequence, was manifest to all who knew him well. The ill effects were, however, superficial; the good were permanent and far-reaching, giving him the knowledge of juries, the vigorous grasp of all the facts and the knowledge of the relation they bore to each other, together with the power of presenting them logically arranged and illustrated by apt anecdotes, which so eminently characterized him. Under such circum- stances and such surroundings, Judge Usher began his professional ca- reer, mixing with it, as did all lawyers- in those days, a strong taste for politics. Judge Usher was a Whig, and in the contest of 1840 took a mem- orable part, making speeches for General Harrison in all the counties in the judicial district in which he practiced. On the 15th day of Decem- ber, 1842, Governor Samuel Bigger appointed him prosecuting attorney for the Seventh Judicial District, which office he held for two years. In 46 BAR ASSOCIATION OP KANSAS. 1844 he was married to Margaret Patterson, at Rockville, Indiana, who with three sons, John P., Linton and Samuel, survive to mourn his loss. In 1856 he was the Republican candidate for Congress in the Terre Haute District, and was, as he frequently expressed it, " one of the mid- wives of the party." He was admitted to practice in the Supreme Court of the United States on the 1st of February, 1859. November 23d, 1861, Governor Morton, war Governor of Indian, appointed him Attorney General of the State, which office he held (filling it well, it is needless to say) until the 22d of March, 1862, when he was made Assistant Secretary of the Interior, being the first incumbent of that office after it was created. He continued to hold this office until the 8th of January, 1863, when he was appointed Secretary of the Interior by Mr. Lincoln. In all the years preceding his appointment as Secretary of the Interior, he had been actively engaged in the practice of law in the State of Indiana, and was, it is safe to say, as well known in southern Illinois and all through Indiana, as any other lawyer practicing in that region of the country, and during the course of his practice he had been frequently opposed to and associated with Mr. Lincoln in the trial of law suits in his own State and in the State of Illinois, and I hazard nothing in say- ing that his reputation as a lawyer was as great in the country in which he lived as was that of Mr. Lincoln's in his home. His connection with Mr. Lincoln's Cabinet was the first thing which brought him conspicuously before the country. His department, however, was one which had no special connection with the war, and therefore but little is found of him in the history of that time. But his department was conducted with great energy, skill, and honesty, and I think I may add without seeming to re-write history, that he alone, of all the Cabinet, fully understood and appreciated the greatness of Mr. Lincoln, and was in turn more largely trusted by Mr. Lincoln than any other member of the Cabinet. I do not mean by this that Mr. Lincoln was guided by Judge Usher's judgment or opinions in the conducting of war, nor that Mr. Lincoln had greater faith in the soundness of Judge Usher's judgment than in that of the other members of the Cabinet, biit that he had more confidence in the man, and was fully satisfied that any opinion which he gave him upon any subject was absolutely honest and unselfish. Their long acquaintance and intimate intercourse before Mr. Lincoln became President, gave him an opportunity to understand Judge Usher, and to know how thoroughly he might be confided in; and the confidence thus placed in him, it is needless to say, was never be- trayed. Neither was there at any time in Judge Usher's heart the slightest feeling of envy toward Mr. Lincoln; though it is an open secret that a good many less-conspicuous lawyers of Illinois and Indiana never quite forgave Mr. Lincoln for having been chosen President, and went to their graves imbittered toward the world because the choice had not fallen on them instead of him. Judge Usher was not only loyal to Mr. Lincoln in everything, but had for him personally an honest and enduring affection; and when that great soul whitened in immortality ■SEVENTH ANNUAL MEETING. 47 like a star into morning, the nation produced no more sincere mourner than he. Shortly after the assassination of Mr. Lincoln, Judge Usher be- came connected with the Kansas Pacific Railroad as its General Solic- itor, which position he held until the consolidation of the Kansas Pacific with the Union Pacific. His selection was eminently a good one. No man had done mdre from purely unselfish and patriotic motives in the interests of the Pacific railroads than he. After his appointment, sometime in 1866, he moved to Kansas to look after the interest of his road , and finally brought his family to Lawrence in '69, where they have ever since resided. After the consolidation of the roads before referred to, the Judge remained General Attorney and General Counsel for the Union Pacific in Kansas until the time of his death. During the twenty-five years of his connection with the road, he gave his exclusive time and entire at- tention to its interests, and served it with a loyalty and zeal which I venture to say have never been equalled by any man in America. It was his pet and his love; and so intense was his devotion to its interests that, while he forgave all things personal, he very rarely pardoned any man for even the assertion of a claim against it. As illustrative of this zeal and devotion, I may be pardoned for mentioning a little anecdote in which I was involved. We had tried a long and fiercely-contested personal injury ease at Wyandotte, and after the case had been given to the jury we started down town. We were both conscious of having done the best we could for our client, and ought to have felt comfortable, without being worried as to the result. The Judge, however, tramped moodily ahead while I lagged in the rear, laughing and talking with the counsel for the plaintiff. After supper the Judge brightened up some- what, and in pointing out to me my faults as a lawyer, gave emphasis to the peculiarities above referred to in his own character. He said to me, "You have two great faults as a lawyer: you never seem to think that the other side is an infernal scoundrel, and it deos not seem to hurt you to lose a law suit; but, by heavens, Archie, it breaks my heart." About two years ago a tumor formed on his neck, and soon assumed alarming proportions. When it was too late, he went to Philadelphia to have it removed. He was indifferent as to the result. He wanted relief or death. When the operation was performed it was discovered that the poisonous fibers of the tumor had reached the vital organs and poisoned his blood, making his case hopeless; and when the supreme hour had come, he met death with the same culm courage with which he had faced life. Nay, more than that, he met it gladly; for Death looks Janus-faced to youth and age. To the young and the strong, filled with the sensuous joy of earth, and loving life for life's own sake, he shows a face filled with terrors— stern, cruel, and relentless; but to the old and weary, on whom " dull Time feeds like slow fire on a hoary brand," his face is serenely sweet, soft and enticing; and when with loving care and gentle touch he folds the withered hands upon the withered heart of age, he is as benignly beautiful as his twin lister— Sleep. And so I am 48 BAR ASSOCIATION OP KANSAS. very sure that for him there was music in the voice that called him to lay aside the armor he had worn so long, and rest: and when his fading eyes were turned for the last time on earth and sky, death appeared to him, not as man's ruthless destroyer clad in terror, but as a merciful angel of deliverance, robed in beauty and enveloped in thenibus of the gods. "Why should not he whose touch dissolves our chain, Put on his robes of beauty when he comes As a deliverer?" It ;s a somewhat difficult task to point out the characteristics of Judge Usher as a lawyer, and needless to attempt to assign him his proper place in history, for the reason that a lawyer has no place in his- tory. Of all mortals, the lawyer is the most ephemeral. The very na- ture of his work precludes the possibility of his doing anything which shall survive him. The statesmen and the great inventors of the world have a chance for a certain degree of fame, while the reputation carved out by heroes with the red sword of war, and builded upon the bones of their victims, cemented by their blood, may last forever; but the lawyer is necessarily forgotten in a short time. Daniel Webster as a lawyer, would be no more known to-day than are fifty equally as good lawyers of Massachusetts with whom he practiced during his career. The most that any lawyer, considered simply as a lawyer, has to hope or fear, is the short-lived famed preserved by tradition; and tradition is to the memory of the dead what caricature is to the living — it seizes some salient feature and grossly exaggerates it at the expense of the others. Thus we know Tweed by his diamond, Eoscoe Conkling by his strut and curl; and Tom Corwin by his anecdotes. It may be said of Judge Usher, however, that he was a very powerful advocate, fertile in resources, and a born fighter. So tenacious and pugnacious was he, that if he should once abandon a position as absolutely untenable, he would charge with all of his force to recapture it if he found it occupied or defended by some one else. During the period when characters are being formed, and habits acquired which become second nature, the Judge's practice had been con- fined to Indiana, and to a period when law and the practice of law was a still greater travesty iipon justice than it is to-day, and necessarily he imbibed some of its faults. I have elsewhere said, that during this early period technicalities were more regarded than merits, and it is not strange that the Judge should have been, as he was, a great stickler for technicalities. We are all great reformers in our youth, and give im- petus to every forward movement which, to our heated imaginations, may aid the world; but when we have reached middle life we have be- come unconsciously enrolled among the conservatives, and look with distrust upon all reforms except those which we helped to accomplish. The Judge had reached the conservative stage of life before our im- proved practice had been adopted, and had learned to believe, with Blackstone, " That the common law was the perfection of human rea- son; " hence he never took kindly to modern practice, nor believed in it I have said that the Judge was a powerful advocate. I may add that in my opinion, had he been on the popular side of a case, standing as the SEVENTH ANNUAL MEETING. 49 tribune of the people to assert their rights and remedy their wrongs, he would have been the most successful advocate at the bar of the United States; and it seems almost like the irony of fate that a man magni- ficently equipped to achieve victories upon the popular side of questions, should have given the best years of his life to the service of a client for whom no amount of skill or eloquence could win a verdict. The Judge's habits of life and thought peculiarly adapted him to dealing with juries. A man of fine presence and fluent of speech, he was intimately acquainted with the homely side of a juryman's nature, nnd knew all the details of his daily life. Never a great reader of books, he was a great reader of men, and took a kindly and genuine interest in all the little details of their lives. In his frequent journeys upon rail- way trains, going to and returning from court, he invariably, and much to the astonishment of railroad crews, rode in the smoking-car instead of the sleeper, knowing as all intelligent men do, that one can obtain more information from the people in the smoking or emigrant car than he can in the other ; they are less guarded in their speech, more frank in the expression of opinion, less veneered with that social hypocrisy born of organized society, and have a narrow range of subjects of dis- cussion. The Judge was always fond of talking to such people, and his well ordered and powerful memory treasured everything they said, even the most trifling and apparently immaterial events, so that he could al- ways call them to his aid when necessary ; and he would listen with equal interest to the views of the politician discussing the governments of the world, and the quaint farmer explaining the difference between a bread poultice and one made of flaxseed ; and if in the views of the lat- ter a hot poultice was superior to a cold one, the Judge would remem- ber that fact, and the reason for such preference, so in discussing a case to a jury, he was, as I have said, equipped for his task by being able to talk to them about the little affairs which interest them, such as ex- plaining the proper manner of tying a name-string, shortening a trace- chain or mending a plow, etc. ; and while this kind of argument seemed irrelevant to the cultured lawyers sitting around, it was in fact very ef- fective ; it placed the Judge en rapport with the jury and they felt as much at home with him as though they were sitting at a chopping-block discussing neighborhood affairs ; and as 1 have said, had he been upon the popular side of cases, this faculty would have made him very effect- ive. Judge Usher, too, was very successful as a lawyer. It is true that he rarely secured a verdict while attorney for a railroad, because with- out the direction of a court, no jury in this State will render a verdict for a railroad company ; yet in the review of the cases in the Supreme Court the Judge was very successful in obtaining reversals, and in finally winning his cases. And in the Supreme Court of the United States he won some notable victories by the pure force of his great knowledge of law, and his clear headed way of presenting his case. I have spoken freely of the Judge's professional character, because it belongs to us, and because the faults suggested weve pot his, but be- 50 BAB ASSOCIATION OF KANSAS. longed to the times in which his legal character was being formed. Of him personally, all men speak well ; and while there is for him, as for us, no hope that his legal work will live, his memory will be preserved be- cause of his personal virtues. He was charitable and kind-hearted ; strong in his friendships and weak in his enmities. Though he tried to make himself believe that he was vindictive and unforgiving, he was not ; nor could he cherish malace for a personal wrong, although he was slow to forgive anyone who had wronged the Kansas Pacific, and any- one who asserted any claim against the road had wronged it. He was broad and catholic in his personal views; narrow and fixed in his pro- fessional. In a law suit, his client was always right. Of him could be said, as Lowell said of Gen. Jackson, "He couldn't see but jest one Bide: Ef hie, 'twas God's an 1 that was plenty! " But in the vast range of things outside of law he was generous and broad. He saw clearly that truth is many-sided, and quarreled with no man's beliefs. In his case the conservatism of age extended only to the law : outside of that, precedent was not binding on him. He would look one in the mouth as coolly as a sensible man would a gift horse. He rejected nothing because it was new : accepted nothing because it was old. I have said he was charitable— he was more than that : he gave alms that carried no sting, and conferred favors that did not wound. For all the erring he had kindly counsel and kindly thoughts, and sought always to pilliate the conduct of wrong-doers rather than ex- agerate it. He was a great story-teller, and his stories were always pointed and apropos. There is no faculty more valuable and less understood than the use of a good story as an argument. Well told it illuminates a subject, so that even the dull witted can see its force. In this faculty Judge Usher excelled, but like most men of this, stamp, he was a seri- ous man. There is no boundary line between humor and pathos. They blend together so quietly that the change cannot be seen, and yet the severely practical man always thinks the man of humor a mere jester, and nothing more. I have said that tradition was a post-mortem cari- cature, and the habit of telling stories is the trait in a man's character most easily remembered ; hence it is the one most magnified after death. Although our State is still young, many of our earlier dead are only known to us by some anecdote told of them. Had not Mr. Lincoln been called to his responsibilities, he, the greatest soul of the century, gentle as a child and pure as a woman— would to-day be remembered only as the teller of coarse stories, which conscientious dullards would repeat with tiresome details, omitting nothing but the point. Lowell, the sweetest singer America has produced, is almost unknown as a serious poet, and is compelled to wear the "cap and bells " because the " Big- low Papers " — the first mortal blow slavery received in the United States — was filled to overflowing with the crude humor of the "un- high schooled" New-Englander. Judge Usher cannot escape the fate of. SEVENTH ANNUAL MEETING. Si all men of broad and kindly humor, and many pointless jests lie would have scorned to tell, will be laid at his door, and accepted by those who did not know him, as indicative of his character. For the purpose of showing the character of his humor, which sometimes— though not often — had a caustic tone, I will mention one anecdote. One of the brightest young men of the State, whose untime- ly death we all deplored a few years ago, was the proprietor of a news- paper and a hotel. He got into a controversy with the Judge, and in an editorial denounced him as "haughty and fastidious." The Judge wrote him a good-natured letter, in which, among other things, he said: i\_ "I do not thin# I am haughty, for I always ride in the smoking. car • and I know I am not fastidious, for I once stopped three days at your hotel." In deference to the universal precedent, I ought not, in concluding, to omit the expression " he had his faults ! " So have the Pyramids, but from the dawn of history they have stood amid the beleaguering sands of the Desert and listened with indifference to the fault-finding centuries, and will continue to tower in serene and awful majesty until buried from sight beneath the accumulated dust of forgotten critics. The phrase was invented as a salve wherewith to anoint an irritated conscience, and is as pointless as an aphorism as the statement that two and two are four. The faultless man is, fortunately, an impossibility ; but were it possible to reverse the laws of nature and inflict the earth with such a monster, mankind would rise with one accord and slay it ! To say that a man has his faults, is merely to say that lie is human. It will be well, indeed, for the surviving relatives of the next who dies, if, standing above his open grave, some friend can say without blushing, as we can do and say of Judge Usher, he was a good friend, a good citizen , a good neighbor, a good husband and father, and an honest man ! He is at rest. Sorrow, suffering, and disappointments can torture him no more. The voice of calumny cannot wound his gentle heart, nor words of love and kindness reach him. "The joy, the triumph, the lament; the exultation and the pain" of life, are his no longer. Touched by the magic wand of deatn, the barrier at which all who live must pause flung wide its golden gate to let him through ; and closing, left us— not him — in darkness, Life beats in vain against that barrier and demands to know, but to its clamorous impor- tunings, its desparing cry for but one ray of light, one gleam of hope, one word of certainty whereon to build more firm its wavering faith, the grim guardian of the gate and secret returns the mocking and unsolving answer. Wait ! And so, barred from the light and knowledge, we hope, and fear, and question : he sees and knows. We grope among the shadows in the night of life ; he stands triumphant in the white radiance of perpetual day. And so we leave him to his rest, and wait the breaking of that cloudless dawn, when, out of darkness, we shall meet and know. ROLL, OF MEMBERS. NAME. ADDEESS. ADMITTED. NAME ADDKESS. ADMITTED. Ady,J. W., Newton June 4, '84. Foster, C. G June 6, '83. Alford, D. S June 6, '83. Foster, V. H Jan. 11, '87. Allensworth, J. T.. June 6, '83. Falloon, James... Hiawatha. ... June 6, '83. Angevine, C Mankato June 6, '83. Freeman, W. H. H. Blue Rapids.. Nov. 28, "83. Austin, James H. . . Kan. City, Mo. Jan. 9, '83. Fenlon, Thomas P. Leavenworth.. Jan. 9, '84. Austin, Edwin A. . Jan. 13, '86. French, C. O Salt Lake City. Jan, 9, 83. Anderson, T, P Kan. Citv, Kb. Jan. 8, '89. Frith, J. Harvey.. Jan. 8, '89. Alden.H L Kan. City, Kb. Jan. 13, '85. Abbott, A.J Garden City. . Jan. 8, '90. Graves, Charles B. Emporia Jan. 9, '83. Glasse, W. B Oswego Jan. 9, '83. Brewer, Dav'd J. .. Leavenworth . Jan. 9, '83. Green, J. W Jan. 9, '83. Baker, Sperry June 6, '83. Gillpatrick, J. W. Leavenworth.. Jan. 9, '83. June 6, '83. Bird, W. A. 8 June 6, '83. Gillett, Almerin. .. Jan. 13, '83. Kan. City, Ks. Jan. % '83. Jan. 9. '83. Leavenworth.. June 6, '83. Buchan. W. J Griffin, Chas. T.». June 6, '83 Broderick, Case . . . Holton Jan. 9, '83. Green, H. T.* Leavenworth.. June 6, '83. Bertram, G. W Jan. 13, '86. June 6, '83. Bond, T. L Jan. 13, '86. Gillette, F. E Kingman Jan. 13, '85. Barker, George J . . Lawrence Jan. 13, '85. Guthrie, W. W.... Feb. 3, '85. Bucher, Charles. .. June 4, '84. Green, George 8.. Manhattan ... Jan. 11, '87. Buck, J. Jay Emporia Jan. 11, '87. Gleed, J. W Jan. 8, '89. Bradford, S. B Jan. 3, '88. Jan. 13, '86. Council Grove Jan. 11, '87. Jan. 8, '90. Topeka Jan. 11, '87. Clay Center... Jan. 8, '90. Blue, R. W Pleaeanton — June 6, '83. Jan. 8, '90. Jan. 8, '90. Hutchings, C. F... Horton, Albert H. Kan. City, Ks. June 6, '83. Newton Jan. 9, '83. Garden City.. Jan. 8, '90. Jan. 8, '90. Houk, L., Hutchinson. .. Jan. 9, '83. Jan. 9, '83. Humphrey, Jamee Junction City . Jan. 9, '83. Crozier, Robert Leavenworth . Jan. 9, '83. Hayden, Charles.. June 6, '83. Chandler, George . . Independence. Jan. 9, '83. Hayden, Sidney. .. June 6, '83. Jan. 9, '83. Hudson, T. J June 6, '83. Campbell, W. P.... Wichita Jan. 9, '83. Hallowell, J. K... June 6, '83. Campbell, W. C... June 6, '83. Hurd, T. A Leavenworth.. Jane 6, '83. Clarke, Fabius M . Clarke, W. B Kan. City, Mo. Kan. City, Mo. Jan. 13, '85. Jan. 13, '85. Hagerman, James. Kan. City, Mo. Jan. 13, 86. Clogston, J. B Eureka . Jan. 1.3, '85. 1 Ray ward, F. M — Kan. City, Mo. Jan. 13, '86. Cornell, George G. Campbell, A. B Cunningham, H. S. Call, Henry L Jan. 4, '88. Jan. 18, "87. Jan. 8, '89. Jan. 8, '89. Humphrey, H. J . Hutchinson. .. Beloit Jan. 12, '87- Topeka Jan. 3, '88. Harris, Vernon fl. Harkness, F. P Lawrence Clay center. .. Jan. 4, '88. Topeka Jan. 8, '89. Jan. 8, '90. Hadley, D.B Kan. City, Ks. Jan. 8, '89. Jan. 8, '89. Douthitt, Wm, P... Jan. 13, '85. Harrison, T. W . . Jan. 3, '88. Jan. 9, '83. Hopkins, Scott.. .. Horton Jan. 3, '88. Dassler, C. F. W... Leavenworth . Jan. 8, '89. Hutchinson, F. — MaryBville Jan. 4, '88. DeGeer, Mrs. M. E. Jan. 13, '87. Hamilton, A. L. L El Dorado Jan. 8, '90. Day, John W Topeka June 6, '83. Hessin, John E. .. Manhattan Jan. 8, '90. Olathe June 6, '83. Topeka Jan. 8, '90. Wichita Jan. 8, '90. Johnson, W- A. . June 6, '83. Everest, AS Jan. 9, '83. June o, '83. McPhereon.. Jan. 8, '89. Johnston, W. A. . Minneapolis. June 6, '83. Ellis, A H Jan. 8, '89. Jan. 8, '89. Johnston, W. T. . Garnett Paola Feb. 3, '85. Eaton, Robert M. . . Jan. 13, '86 Emery, R. M Jan. 8, '89. Jetmore, A. B Jan. 11, 87 ROLL OF MEMBERS— Continued. Jewett, E. B Johns, H. C Jones, Howell Kellogg, L. B Kelso, David Kingman, Sam'l A Kimball, C.H Kellogg, Mrs. J. M Keeler, Henry Littlefleld, W Leland, Cyrus A.. . Lewis, Ellis LewiB, CO Lloyd, Ira E Lovitt, R. A Lawrence, S. S. ... Larimer, J. B Little, G. F Little, E.C Martin, David Martin, John Moore, H. Miles. . May, A. R Monroe, Charles.. Mahan. John H... Mills, P. D Milliken, J. D Maltby, J. O Miller, O. L McCleverty, J. D.. McClure, J.R McParland, J. D.. McLean, H A McCttmmon, G. W McDonald, C. W.. Madden, Dennis. . Mason, Rankin .. McFarland.E. A.. AlcMnllen, J. P.... Nellis.D.C Nicholson, M. B.. Overmyer, David. . Osborne, S. J Prescott, J. H .... Pratt, W. H Peck, George R... Patchin, A. L Perry, W. C Patterson, W. J . . . Peckham, Chas. J. Powell, Omar Porter, Silas W... Pierce, H. A Quinton, A. B Q,uinton, E. S Roesington, W. H. Redden, A. L * Deceased. ADDRESS. Wichita Larned Topeka Emporia Parsons Topeka Parsons Emporia Topeka Ottawa ElDorado Osage City Phillipsburg. . Ellsworth.. .. Salina Osborne Topeka Junction City. Abilene Atchison Topeka Leavenworth. Hiawatha Topeka Abilene Kan. City, Ks. McPherBon.. . Minneapolis... Kan. City, Kb. Fort Scott Junction City. Topeka Marion Topeka Concordia Cott'nw'd Fl's Topeka Lincoln Winfleld Topeka Council Grove Topeka Wa-Keeney. Salina Phillipsburg Topeka Stockton P'ort Scott. . . Lawrence . . . Winfleld.. .. Washington Ness City. .. Topeka Topeka Topeka Topeka ElDorado .. ADMITTED. Jan. 8, '89. Jan. 8, '90. Jan. 8, '90. Jan. 18, '85 Jan. 18, '85. Jan. 13, '86. Jan. 11, '87. Jan. 8, '89. Jan. 8, '90. Jan. 13, '85. Jan. 9, '83. Jan. 9, '83. Jan. 13, '85. Jan. 13, '85. Jan. 13, '86. Jan. 13, '86. Jan. 8, '90. Jan. 8, '90. Jan. 8, '90. Jan. 9, '83. Jan. 8, June 6, June 6, June 6. Nov. 28, Jan. 13, Jan. 11, Jan 11. Jan. 8, Jan. 9, June 6, June 6, Jan. 12, Jan. 8, Jan. 8, Jan. 8, Jan. 8, Jan. 8, Jan. 8, '83. '88. '87. '87. '89. '83. '83. '83. '87. '90. •90. '911. '90. Jan. 13, '85. Feb. 3, '85. Jan. 8, '89. Jan. 8, '90. Jan. 9, '83. Jan. 9, '83. Jan. 9, '83. Jan. 9, '83. June 6, '83. Jan. 13, '86. Jan. 11, '87. Jan. S, '88. Jan. 3, '88. Jan. 8, '89. Jan. 4, '88. Jan. 4, '88. Jan. 9, '83. Jan. 13, '85. Reed, Isaac G. . RiggB, S. A RobinBon, R. G. .. Root, H. C Redd, George S. .. Radclifle, H. J.... Rightmire, W. P.. Robinson, E. P. .. Stephens, N. T*. Smith, Clark A.... Strang, J. C Snoddy, J. D Slues, H. O Scott, W. W Stnrgis. P. W Sutherland, J. W. . Smith, C. B Simpson, B. F Sharer, J. D Heaver, B. A Stillwell.L Smith, Charles W. Smith, W. W Spencer, James M. Smith, G. P... . Seabrook, s. L, Stevens, Hiram Smith, Wni. R. Sheiidan, John Stewart, J. H. . Summerfield, M Spencer, Chas. F. Sedgwick, T. N Scott, Henry W Talcott, H. W. Torrance, E. S Thatcher, S. O Taylor, Irwin. Tomlinson, J. C Trouiman, J. A Tillotson, D. C. Thompson, L. H Valentine, D. M... Vandeveer, G. A.. Wagstafl. W. R. . . . Wilson, A. S . Webb, W. C... White, J. M Wilder, George C . Ware,E. F Wheat, L. B Waggener, B. P... Webb, W. D Waterburv, Ed. S. Walrond, Z. T Webb, L. J . . Wells, Abijah Wall, T. B. . Welch, R. B... .'..'. Willcockson, K.E Wellington — Lawrence Hoi ton Topeka Ness City Cott'nw'd F'ls Topeka Osborne Lawrence Cawker City.. Larned La Cygne Wichita Emporia_ Concordia Neodesha Topeka Topeka Leavenworth.. Troy Osage Mission Stockton Waterville Topeka Humdoldt Topeka Paola Atchison Paola Topeka Lawrence Topeka Emporia Larned lola Winfleld Lawrence Topeka ; Atchison Topeka Topeka Norton Topeka Hutchinson.. . t Paola Sioux City, la. Topeka Howard Manhattan Fort Scott ... Leavenworth.. AtchiBon Atchison Emporia Osburne Topeka Seneca Wichita Topeka Oakley ADMITTED. Feb. 3, '85. Jan. 13, '86. Jan. 11, '87. Jan. 8, '89. Jan. )-, '89. Jan. 8, '90. Jan. 8, '90. Jan. 8, '90. Jan. 9, "83 Jan. 9, '83 Jan. 9, '83. Jan. 9, '83. Jan. 9, '83. Jan. 9. '83. Jan. 9, '83. June 6, '83. June 6, '83. June 6, '83. June 6, '83. June 6, '83. June 6, '83. Jan. 13, '85. Jan. 13. '85. Feb. 3, '85. Feb. 3, '85. Jan. 13, '86. Jan. 13, '86. Jan. 13, '86. Jan. 13, '86. Jan. 4, '88. Jan. 4, "88. Jan. 4, '88. Jan. 8, '89. Jan. 8, '89. Jan. 9, '83. Jan. 9, '83. Jan. 9, '83. Jan. 13, '86. Jan. 13, '86. Jan. 12, '87. Jan. 8, '89. Jan. 8, '90. Jan. 9, '83. Jan. 8, '90. Jan. 9. '&3. Jan. 9, '83. Jan. 9, '83. June 6, '83. June 6, '83. June 6, '83. June 6, '83. Juneti, '83. Jan. 13, '85. Jan. 13, '85. Jan. 11, '87. Jan. 4, '88. Jan. 8, '89. Jan. 8, '90. Jan. 8, '90. Jan. 8, '90. •d^rL-^A-t