Cornell Universitv Uterary HG 525.J82 Banking and currency .S?]^sfei;i. 3 1924 013 681 444 ?tate Collese of Agriculture at Cornell WinibttSit^ iLiirarp MAV 19S3 Cornell University Library The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013681444 BANKING AND CURRENCY. SPEECH or HON. JOHN P. JONES, OF NEVADA, UNITED STATES SENATE, APRIL 1, 1874. WASHINGTON: aOVKBNMKNT PKINTINO OFFICE. 1874. SPEECH HON. JOHI^ P. JONES, The Senate having under consideration tlie bill (S. No. 617) to pro^ndi; for the redemption and reissue oE United States notes and for fi-ee hanking — Mr. JONES said: Ml*. President : It seems to me it is the Middle States, the Weetern States, and the Southern States that lack prosperity, when they come here and tell us they have no product with which they can get the kind of money that the world uses to transact its hnsiness, and which is acknowledged everywhere to he the standard of value. I cannot see how it is that the currency of this .country is at from 10 to 15 per cent, discount, and yet that there is not enough of it, unless it is he- cause the people distrust their Government and have no faith in its stability. - Senators tell us that we need more hanks in this, that, and the other locality in the Southern and Western States. Let me ask, is there any power in State lines that prohibits money going from one State across its boundaries into another ? If this money is wanted in one section of the country and it exists in another, will it not travel from the section in which it is to the place where it is wanted ? We find no difficulty in getting all the gold we require in California, Nevada, and Oregon. Gold and silver are the chief products of Nevada, and we pay out that gold and silver to whoever wiU come with what we want and give us the most for it ; and I presume that gold will travel to any country where it is not made a fugitive by vicious enactments that make irredeemable paper a legal-tender for obligations and debts. Whenever you make a paper money that has no intrinsic value whatever a legal-tender for the payment of debts, then gold will disappear from the circulation. Mr. MORTON. Let me ask my friend a question. Nevada, I be- lieve, is a State in the Union, and yet Nevada refused to accept that which the Congress of the United States did make a legal tender, and the legal-tender currency of the United States has been persistently rejected both in Nevada and California. Mr. JONES. The people of Nevada were honest enough to do this: When a man agi'eed to pay a certain sum in gold and silver, which were worth more than greenbacks, they forced him to do it. They were unable to see how the Government could be assisted by allowing a debtor to plunder his creditor. It is one of the glories of that State, and one of the glories of that coast, that debtors there were never permitted to plunder their creditors, as it seems to me is sought to be done here at this time. Mr. MORTON. Will theSenator allow me to ;isk a question right there ? Mr. JONES. Certainly. • Mr. MORTON. I ask him what would have become of our country if all the States of the Union had foUowea the example of Nevada and rejected the legal-tenders? Mr. JONES. We should have put down the rebellion for hfteen hundred millions less money than it did cost. Mr. HAMILTON, of Maryland. That is true. Mr. JONES. That is what would have happened to this country. And more than this, we should have been spared all the embarrass- ments and uncertainties which have nearly overwhelmed us during the past nine years. We should have saved since the close of the war a hundred millions a year, and prevented untold disasters yet to come if we do not retrace our steps, and which will, as I believe, imperil the honor and prosperity of the country. Why, sir, if the opportunity the war gave ua to issue the greenbacks had been denied us, and if such great benefits, as some seem to think, have flowed from such issue, I tremble at the contemplation of the condition we should have been in if peace had continued, and the glorious opening had been lost to us forever ; for with the increase of population and the alleged necessity of a certain amount of money per capita, we never could have owed enough on which to do our business. Now, sir, what did happen f Ignoring the history of other nations ; taking no warning from the wrecks of false financial systems strewn along their pathway, the first thing we did was to make irredeemable paper a legal tender, and thereby almost immediately advanced the price of everything 100 per cent. Having thus made everything we were compelled to buy double its former price, we then entered upon the negotiation of loans and a rigorous system of taxation to raise money with which to buy. This we should have done in the start, and what we could have done ; but we first thoroughly demoralized the whole country and aU its industries ; we plundered the creditors and allowed the debtors to discharge their obligations by paying from 30 to 50 per cent, less than they owed, and then we started to raise money for putting down the rebellion in the only way we should have done in the commencement. We resorted at the outset to measures con- demned by financiers everywhere ; to that which I would only have been willing to do at the last extremity. When every dollar had been raised that could be raised by taxation ; when every man had been put into our ranks that could have been forced into them by conscription, then, as a last resort, I would' have agreed to the issue of irredeemable paper money, A great "^^^ cannot be carried on by pieces of paper payable at convenience and bearing no interest. This paper currency, instead of adding strength to the imperiled country,- was a source of weakness. Its issuance was an impeachment of the patriotism of the nation, and an underrating of the resources of the country. It was a cheat upon the ])eople in teaching them the per- nicious idea that in carrying on a great civil war economyand indus- try were not necessary ; that production and destruction were con- vertible terms ; and that the activity of the printing-press in the pro- duction of paper money would amply compensate for the activity of armies in the destruction of wealth. Mr. MORTON. I wiU say to my friend that his position is con- sistent, inasmuch as he regards the greenback as a curse from the beginning. Mr. JONES. I do, most undoubtedly, and I further believe that it is the duty of men to face that question. I know that the loyal people of the United States have been disinclined to discuss the mo- rality or wisdom of the financial measures of tlae Government inau- gurated during the rebellion. So joyfu]. were they with the thought that we were able to put it down at all, that they have not cared to scrutinize the means by which it was suppressed. But it seems to me, if "history is philosophy teaching hy example," it is the duty of this body to investigate the subject, so that in case another rebellion shall arise we may see whether the last one was not put down at about double the cost that need to have been incurred. It seems to me that it was, and that the experience of the past is the best light to guide our footsteps in the future. Much is said about the value of the greenback; the superior quality of the Government money, the best, as they teU us, that the world has ever seen ; one Senator,iu a moment of supremest exaltation, declaring it " battle-bom." We are told that the honor and entire resources of this great Government are pledged to its redemption. What is this "great Government" so far as that pledge is concerned? At present, it is this Senate. Some appear to think that there is a power exclu- sive of this body whose honor is pledged to the redemption of the greenbacks. If this Senate votes that it will not pay them, then the honor of this coimtry is not pledged at this time to. their redemption. This Senate has voted on seversS amendments to the bill under con-* sideration that it will not pay them ; it has voted that it will take no means toward paying them ; and that it will not look to any day in the future when tjtie creditors of this country may expect that it will pay them at all ; and unless some future Senate shall be elected, unless some body shall hereafter convene in this Chamber, that will he more careful of the honor of the country than the present Senate seems now inclined to be, I do not understand how that honor is to be kept unsullied or the jjledge redeemed. Most certainly an additional issue of irredeemable paper money is a violation of the spirit of the pledge and a step in the direct road to ruin, bankruptcy, and dis- honor. Mr. LOGAN. Will the Senator allow me to interrupt him ? Mr. JONES. Certainly. Mr. LOGAN. The Senator spoke of the pledge of this Senate rep- resenting the Government. He does not mean to say that the Senate is the Government ? Mr. JONES. So far as the redemption of the Government's prom- ises are concerned, it is. Mr. LOGAN. Then every time the Senator is defeated a part of the Government is defeated. Mr. JONES. Of course, I mean that the Senate is the Govern- ment, not in its power to enact a law, but in its power to prevent the enactment of one. . No law can be passed without the assent of the _ Senate. When Senators grow eloquent about some great government, ' so sacred that we scarcely dare to raise our eyes and gaze upon it, be- ing pledged to the redemption of these pieces of paper, what do they mean ? Do they not know that whenever a majority of this body refuses to vote that this paper shall at some future time be redeemed, then that pledge is broken and the honor on which it rested is scat- tered to the four winds and vanishes into thin air ? I believe that the present financial system is an injury and only an injury to all the industries of this country, and a comparison of the census statistics for 1S50, 1860, and 1870 will make it manifest. When people complain that the banks of this country are viciously distributed, it can also be shown that the industries of the country are viciously distributed. Men have not been left free to select the 6 occupations wWoli they can best and most profitably follow. When-; ever an inflation occurs, such as has taken place, the first rise m price takes place in stocks, ^vorthless and otherwise; the stocks upon the market in Wall street, that are shiittlecooked between the battle- doorsof the " bulls" and " bears." The next thing to rise in thecountryis personal proper ty, fabrics that men can speculate in and the operations in which can be closed within brief periods. The next property to rise is city lots and rents of every description. You see yonr cUy property figuring magnificently on the a3se_ssment rolls, and men spending their anticipated incomes from the rents of such property. The next thing that rises in price is labor. The last of all that rises is agricultural lands. Now mark what the census tells us. In 1860 there were thir- teen hundred thousand people engaged in manufactories in this coun- try. The wages paid to them amounted to about $378,000,000. In dealing with figures I give round numbers, and do not pretend to be entirely accurate, because I am speaking from recollection. The capi- tal stock of the manufacturing establishments of the United States was about $1,000,000,000, the product was $1,800,000,000, and I will say that during that year our exports were much larger than our imports. We were exporting of cotton fabrics about $12,000,000, I believe, to China. In 1870 there were about two millions of people engaged in manufac- tories. They received about $775,000,000 in wa^es. In other words, about 50 per cent, more were engaged in the business of manufactures than in 1860, and they received about double the wages. The capital used in this manufacturing business was about $2,100,000,000. One would suppose that the product would he about 50 per cent., certainly not more than 75 per cent., above that of 1860 ; but the product, instead of being $1,800,000,000, was $4,200,000,000, or nearly 150 per cent, more than in 1360. This increase was in the price of the product and not the quantities produced. These figures seemed to show extraordinary prosperity in the man- ufacturing interests ; but the panic of September dispelled the illu- sion. The tremendous snperstructiu'e of credit upon which this apparent prosperity rested was based on too slender a foundation of actual capita], and the moment the public confidence was shaken the entire manufacturing interests of the country were paralyzed and many of the oldest houses ruined. The Superintendent of the Census computes the average increase in prices of manufactured articles at 56 per cent, in 1870 over those of 1860. The farmers and producers of our raw materials pay this 56 per cent, upon all they consume in the production of their crops, and in addition thereto they pay enormons profits which the retail dealers always exact when an inconvertible paper currency is the circulating medium. Those dealers always put their prices at rates which will insure them against the possible depreciation in value of the currency from the time of sale till the day of payment and also retiu'u them an exorbitant interest on the credit extended. And now as to the condition of the agricultui-al interest in 1870. The decade between 1850 and 1860 exhibited a much higher degree of prosperity in this direction than that between 1860 and 1870, view- ing it from whatever stand-point you choose. People seem to have left their farms and sought the cities to engage in the semi-gambUug business of manufacturing, made so by an inconvertible paper money. There were nearly six millions of people engaged in agriculture in 1870 ; the value of their farms, witli implements, machinery, and live stock, was $11,000,000,000. This enormous sum represents the capital then invested in agricultural pursuits in the United States. And what •vras the product of, or the return for, this vast investment ? About $2,400,000,000. We have thus seen two millions of people engaged in manufacturing, with a capital of $2,100,000,000, flood the country with a product valued at $4,200,000,000 ; now deduct the cost of raw material used in this great production, which was $2,400,000,000, and you have $1,800,000,000 left to represent the interest on the $3,100,000,000 of capital and the earnings of two million people employed. In other words, two million people, with a capital of $2,100,000,000, earned over|l,800,000,000 in the year 1870, while six million people, with a capital of over$ll,000,000,000, ♦yarned but $2,400,000,000 in agricultural pursuits during the same period. Three times the number of laborers, employing more than five times the amount of capital, receive but 33 per cent, more as the gross amount of their product. This is $900 to each person engaged in manufactures against $400 to each engaged in agriculture. And yet honorable Senators inform us here that we want more paper money, so that the inilation in prices of personal property and of stocks, and of the business that draws our population to the cities, flhall be indefinitely increased, that speculation shall be aggravated, and that the farmer shall receive less and less from year to year, while the gambler and the stock-jobber shall get more and more. They want money for what? I have seen nobody anywhere who wants to hire out, but everybody wants to hire somebody else. We do not want to have enterprise stimulated in this country. We want labor encouraged by better money. We want the laborer who receives his pay for a day's work to know that it will not shrink in -value on his way to the store where he buys the necessaries of life. We want no more banks of circulation without redemption, for though I admit that they are great institutions for the accumulation of wealth, they do very little toward its production. They absorb nearly all the surplus property in their immediate vicinity. They adorn with palatial residences the avenues where gamblers and stock-jobbers dwell, while they cover the farms with blisters in the shape of mort- gages. What need of more banks ? What relief can additional banks give to those who have no security to offer for loans ? Who fails now to obtain loans on sufficient security ? As it is claimed that there is but an insignificant profit of 2 per cent, on circulation, while money in the South and West readily commands from 1 to 2 per cent, per month, why are not banks of deposit, requiring no charter from Goveriunent, more to the purpose than additional banks of circu- lation? Will the money-lender refuse to be satisfied unless he re- ceives not only the interest on .his capital but also a charter from the Government to collect interest on what he owes ? For the bank issues, which we call money, are really mere evidences of the-bank's indebtedness. Does the much-eulogized bank currency lack the flexibility to enable it to reach the places where it is most wanted? Is the locality of the bank important to the borrower? Will not the best intere.st and security bring the money from any distance for investment? If all the banks of the United States were in Texas, would New York suffer for the want of money ? Did not the surplus capital of Europe come to carry on our war and build our railroads? Doubt that water will find its level; doubt that quicksilver will find the pores of the vessel containing ifc; doul>t that atmosphere will press toward a s Taounin, but do not doubt that capital will seek tiie best invest- ments as to interest and security. I can see nothing to result from additional issues of inconvertible paper money but inevitable disaster. It would work the confiscation now of a small portion of the creditor's property for the use of the debtor, to be succeeded from time to time by further confiscations. Most of the representatives here of States that are claimed to be debtor States desire an increase of this currency. I say to them that no nation can be strong and be dishonest ; no nation can be strong and attempt to confiscate the property of one citizen and give it to another ; no nation can make money plenty when it says to the cred- itor who has loaned it, " You shall receive back only a portio;a of -what yon have loaned in full satisfaction of the debt." A spoliation of this character will take away the inducement for the creation and accumulation of property, and, if such a policy continues, I venture the prediction that the time is not far distant when, as was said in the times of the worthless continental money, the hard-hearted and nimble-footed debtor will pursue his fugitive creditor and will pay him 'without pity and without remorse. 1 Does this Congress mean now to leave entirely out of view and to discard forever a standard of value ? Did any country ever accumu- late wealth, achieve greatness, or attain a high civilization without -such standard ? And what but gold can be that standard? What other thing on earth possesses the requisite qualities? Its value is represented by the average amount of labor required to produce it. Its scarcity gives a small quantity of it great value, so that it is easily transported from place to place. It is capable of division and subdivision, and also of being reunited— all without loss. It is in every commercial country made into coins and stamped, by national authority, with a certificate as to fineness and weight. It is flexible and self-regulating, and flows by natural laws wherever the exigen- cies of trade demand it. Gold is the articulation of commerce. It is the most potent agent of civilization. It is gold that has lifted the nations from barbarism. It has done more to organize society, to promote industry and insure its rewar4s, to inspire progress, to encourage science and the arts, than gunpowder, steam, and electricity. The use of ^old had its origin in the necessities of mankind. The human heart is set upon it. It will command the proper services of everybody at all times and in all plijces. The necessities which com- pel its use are as inexorable to-day as they were at the beginning, although improved systems of exchange have diminished the propor- tionate volume necessary to do the work. So- exact a measure is it of human efibrt, that when it is exclusively used as money it teaches the very habit of honesty. It neither deals in nor tolerates false pretenses. It cannot lie. It keeps its promises to rich and poor alike. While it has seen human institutioiis perish and human govern- ments crumble and decay, it is itself imperishable. The gold that ■was in Solomon's temple possessed the same qualities as the gold dug to-day from the sands of Africa. The gold of California and the gold •f Australia are precisely the same. It defies the corroding hand of time and the friction of the ages. It is the common denominator of values. It makes possible the classification of labor and the equita- fcle interchange of commodities. Gold h as intervened in the bargains made between men since the dawn of civilization, and it has never failed to faithfully fulfill its part as the universal agent and servant of mankind. But it withdraws from the companionsliip of the be- dizened harlot called irredeemable paper money, and says to every people, " Banish her before you look for my return." It is the oxy- gen in the commercial atmosphere, and its absence produces financial asphyxia. The value of gold is not affected by the stamp of Government. That is merely the final and reliable evidence of its weight and fine- ness. I You must have something with the attribute of extension when you measure extension ; to measure weight you must have something of specific gravity ; and to measure value you must have something of value — something thatiequireslaborto produce it. Gold has this requi- site. The stamp on a gold dollar says in effect : " This Government pledges its honor that this coin is nine-tenths fine and contains 25.8 grains in weight." The Government stamp on every piece of coin is a certificate to mankind that the bearer has rendered a service unto society which is measured by that piece of metal, and that he is en- titled to an equivalent service from society in return, payable on demand. Such a draft has never yet been dishonored. What does a piece of this Government paper say — this paper that the honor of the Government is pledged to redeem, and which the custodians of that honor refuse to redeem and refuse to take any steps toward redeeming ? It says: "The holder of this piece of paper has rendered a service unto society of an uncertain, unascertained, and unasoertainable value, dependent entirely upon the precise day of the week or month when such service was rendered, and is entitled to such service in return as the 'bulls' and 'bears' of "Wall street, or a vote of the Congress of the United States, or both, may determine." [Laughter.] We are told that money is the utensil of trade ; that it is the tool of the workman. Well, sir, it seems to me that our present currency, instead of being the spade of the husbandman, is the dice-box of the gambler. [Applause.] It is said that it is the grease that lubricates the wheels of com- merce. Well, sir, this iiTcdeemable paper money is a sort of grease that makes the hub expand, the spokes expand, and the axle expand. At one moment the grease spurts out on everybody, and the next this wheel without a tire is running dry on its axle. [Laughter.] Another difficulty is that the driver is too often diverted from the manage- ment of his wagon to speculation in the rise and fall of the grease. The money which consists of paper promises cannot be a standard of value. It measures nothing but the average hopes, fears, con- fidence, and doubts of this people as to the ability and intention of their Government to ultimately redeem it in gold, and is itself measured by gold. It finds its way into the pockets of speculators and gamblers, who win it, rather than the pockets of the laborers who earn it. ;;::i'r::;r: Mr. MORTON. I Avill ask my friend a question. He talks about gambling. I will ask him it there has not been as much gambling in California and Nevada in the last ten or fifteen years as in any other State in the Union? Mr. JONES. The people there buy what they think is valuable and likely to increase in price, and if they have anything which they fear will fall in price they sell it. We have never had any money panics. We have never called upon the Congress of the United States to relieve tlie gambler from any portion of his liabilities, or to issue more money in order that he might more easily pay his debts. [Ap- plause.] 10 Tlie siicculators in Califrirniu an'- not fully show the