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THE 
 
 FINANCIAL CRISIS: 
 
 ITS EYILS A^D THEIE EEMEDY. 
 
 BY 
 
 JAMES S/PIKE, 
 
 LATE tnnTED 8TATB8 MINISTER AT THE HAOUE. 
 
 REPUBLISHED FROM THE NEW YORK TRIBUNE. 
 
 NEW YORK. 
 1867. 
 
^^t^ 
 
THE FINANCIAL CRISIS. 
 
 CHAPTER I. 
 
 Cause of the pecuniary prosperity of the country during and since the war. 
 
 Theee are two or three points in the financial question 
 which, it seems to me, need more elucidation than they have 
 yet received, either in the exhaustive reports of Mr. McCul- 
 loch, or in the elaborate exposition of Mr. Welles, and which, 
 at the present moment, when we are just entering upon a 
 new phase of our financial experience, it is important should 
 not be overlooked. 
 
 The first is, that while paper money has played an im- 
 portant part in our affairs during and since the war, and has 
 constantly given an artificial value to commodities and secu- 
 rities, it is not that which has made trade active, business 
 prosperous, and individuals rich, during this period ; but, on 
 the contrary, these results are to be imputed to the gigantic 
 expenditures of the Government, which would have produced 
 similar results, if the circulating medium had never been ex- 
 panded, or, indeed, if the war had been conducted (if that 
 had been possible) on the basis of specie payments. 
 
 The essential cause of the prosperity of the loyal portion 
 
of the country being the fact that a vast consumer of all its 
 products suddenly appeared, and steadily devoured them with 
 an insatiable appetite during four years and more. The Grov- 
 ernment, which had hitherto bought little of the people, all 
 at once became their best customer. And those whom the 
 Government expenditures made suddenly rich, also became 
 great consumers. It needs no ghost to tell us that every 
 productive force in the country was set in motion by the war. 
 Its manufactures and its agricultural products were all in 
 active demand. Every thing that could be raised or made 
 found a ready purchaser at high and rising prices. The man- 
 ufacturer of iron, of wood, of cotton, of wool, of leather, the 
 raisers of pork, of beef, of grain, the miners of coal, and cop- 
 per, and lead, the owners of railroads, and canals, and steam- 
 ers, factors and merchants, middle-men and laboring-men, all 
 had their labors stimulated to the utmost extent. Everybody 
 pocketed stupendous profits, and of course everybody got 
 rich. Government agents took as much as, and often more 
 than all other purchasers combined. Bounty money was 
 showered on the working population, and thus all came in 
 for a share in the golden harvest. Then came that compla- 
 cent reflection : " How strange ! " " How strange that war, 
 which always exhausts and prostrates, should change its char- 
 acter for us, and create prosperity and plenty ! How does it 
 happen ? Paper money. Ah ! we see. It is this which does 
 it." And here we see the birth ot that great popular delu- 
 sion which still holds possession of the public mind. The 
 instrument of the diffusion of prosperity was at the start con- 
 founded with the cause of it. " So good is four hundred mil- 
 lions of paper money," exclaimed Thaddeus Stevens, " that 
 we should have a thousand millions of it." The essential, fun- 
 damental, but remoter cause of the rise of prices and rapid 
 accumulation of fortunes, was then overlooked, and to a great 
 extent has been ever since. So that writers of financial arti- 
 cles are every day still sounding the praises of a redundant 
 paper circulation for being the cause of the prosperity of 
 
trade, wMle t"hej admit it onglit to be curtailed, and that the 
 countrj ought to return to specie payments; liaving a vague 
 idea in their minds that an inflated currency is somehow 
 injurious; while, if their views of the agency and uses of 
 paper money be correct, the last thing that ought to be done 
 is to diminish its volume. 
 
 These writers, and the public, overlook the fact that the 
 Government has scattered the prodigious sum of $2,500,- 
 000,000 and more, which it has given its notes for and owes 
 to-day, and has also distributed other hundreds of millions 
 which it has drawn from the people by taxation from all 
 classes ; and that to this fact, and to this almost alone, is 
 owing the extraordinary and exceptional prosperity the loyal 
 States have enjoyed during and since the wa,r. 
 
 This immense consumption of products was of itself suf- 
 ficient to enhance prices in a most important degree, what 
 ever the character or volume of the money in circulation. It 
 was great enough to. raise prices of many articles, not only 
 here, but in all the principal markets of the world. The im- 
 position of high duties and high taxes was, of course, another 
 element in the increase of price of commodities, and another 
 was most certainly the excess of paper money. It is, perhaps, 
 no wonder that while these agencies were acting in concert, 
 the public mind did not discriminate closely, and did not 
 look beneath the surface to measure the exact influence of 
 each. Paper money was plentiful, and the plentifulness 
 m.ade high prices. It was not necessary to go further to ac- 
 count for what was occurring. 
 
 But it is strange that, at this late day, the joint operation 
 of equally important agencies should be overlooked, or not 
 understood, and that the habit should still so extensively pre- 
 vail of ascribing the activity of trade, the extension of busi- 
 ness, and the advance of prices, solely to the excessive vol- 
 ume of the circulating medium. 
 
 It may be asked, if these views are sound, how is it that 
 the industrial activities of the country have, until recently. 
 
suffered no abatement since the war ended? How does it 
 happen that business continues good, and that prices have 
 kept up since the Government demand ceased ? 
 
 Outside the paper-money men there are those who have 
 endeavored to find the cause in some miraculous powers of our 
 nation over every other, in its capacities of consumption. In 
 the second place it is imputed to the habits of universal prodi- 
 gality engendered by a period of war and unusual prosperity, 
 and the general neglect of the old economies of living. In 
 the third place it is attributed to deficient production, caused 
 by the destruction of so many lives in the war. The first of 
 these suggestions is merely a dream of the bubblers. The 
 second is a very small cause to assign for a very great result. 
 The third seems to have weight, but really possesses little 
 soundness, for these reasons : 
 
 The productive force of the country in every thing but 
 agriculture, and to a large extent in that, is not in muscle, 
 but machinery. But the men we have lost by the war have 
 been nearly made good by immigration, wliile our machinery 
 of production has been enormously increased by it. The 
 manufacture of small steam-engines, as well as new inven- 
 tions for all manner of industrial purposes, within the past 
 few years, is something remarkable. The productive power 
 of the country is thus not diminished, but has really aug- 
 mented.* And the extraordinary activity and vivacity of the 
 national character always give tremendous impulse to the 
 agencies of production so long as a channel of trade is left to 
 be inundated. Our countrymen do not forbear driving ahead 
 from prudential considerations, under any circumstances. 
 Such is the genius of our people. They never half do or do 
 I just enough. They rush to extremes. It is the American 
 way. We never believe ice is weak till we have tried it and 
 gone through. We never believe a ship has got on all the 
 
 * The Governor of Massachusetts, in his annual Message of January, 1867, 
 reports an increase of seventy per cent, in the manufacturing capacity of that 
 State, during the last ten years. 
 
sail she can carry till we capsize her. We will not admit a 
 boiler will not bear more steam till we have burst it. 
 
 We are not, then, having high prices Irom deficient pro- 
 duction. The real cause of them, and of the general anima- 
 tion of trade since the war closed, is this : That period found 
 the country stripped bare ; ever}" commodity of consumption 
 had been exhausted; the industry of the country had been 
 taxed to its utmost to supply the wants of the Government ; it 
 was living from hand to mouth, and had been for a long pe- 
 riod. Those who believed that when the war ended demand 
 would instantly cease and prices fall, and among the traders 
 those who reduced their figures on their stocks, very soon dis- 
 covered their error. At this point the wonders of paper mon- 
 ey were again sung. " See how wonderful are its efi'ects ! It 
 maintains price and demand ; it carries us from war to peace 
 without a jerk. Great is paper money ! By no means let us 
 diminish its volume." The real cause of continued industrial 
 activity and high prices was not imagined. People did not 
 seem to reflect that vast quantities of every consumable thing 
 were required to supply deficiencies created by the war and to 
 replenish the stocks of trade. For the last year and a half, our 
 producers, on every hand, have been working to fill empty 
 warehouses and shops. Until the point of full supply is 
 reached, and in some cases a glut, there can be no cessation 
 of demand and no reduction of price. Industry has been em- 
 ployed in filling a void which is only now beginning to show 
 signs of disappearance. But at length the empty is becoming 
 full. One branch of trade after another is getting pletho- 
 ric. Demand is ceasing, and prices in these branches are giv- 
 ing way. Paper money, though still swelling the channels of 
 circulation in undiminished volume, does not hinder this de- 
 cline. It does not save Coal, nor Pork, nor Cafctle, nor Wool- 
 lens, and many minor articles from' a great fall in price. The 
 Great Consumer has disappeared, and the dearth he created 
 has been followed by fresh supplies, until abundance is being 
 reestablished in every quarter. Descending prices will now 
 
be the rule, until they become more and more unremunera- 
 tive. The producer has had his day. The consumer must 
 now have his, and all the contrivances in the world cannot 
 prevent it. 
 
 CHAPTER II. 
 
 The country entering upon a period of severe financial trial. — Legislation cannot 
 avert it. — Paper money cannot relieve it. — Wbat paper money does, and what 
 it cannot do. — Pressure on Congress for relief by paper-money men. — Their 
 errors. 
 
 Kext to convincing itself that it is the gigantic expendi- 
 tures of the Government, and not paper money, that has 
 given prosperity to our industry during the war, and that 
 since then, that industry has been employed to fill a void cre- 
 ated by the war, the thing most needed by the country, is the 
 conviction that it is entering a period of severe financial trial, 
 and that no contrivances of legislation can avert it. 
 
 As yet, it refuses to look this unwelcome fact in the face. 
 But we must come to this point. It is the only solid ground- 
 work on which we have to stand. We are not going to pass 
 from a tremendous war to a state of peace without a shock. 
 It is not in the nature of things. It has not been our own ex- 
 perience. It has not been the experience of other nations. 
 We have only to reflect that we have just lost a customer for 
 the products of our industry, who has swallowed five hun- 
 dred, six hundred, seven hundred millions of dollars annually, 
 to know that that loss will leave a glut in the market, and that 
 that glut must be followed by a fall in prices, and that this 
 fall of prices must bring stagnation to trade (for nobody buys 
 on a falling market), loss to all venders, and ruin to many. 
 This cessation of demand, of itself, creates a pressure, a revul- 
 sion, a collapse, a break-down in the mercantile world. There 
 is no help for it, except in the substitution of a new customer 
 or new customers, to take the place of the old. But these 
 
never can come fast enough in the natural order to prevent 
 such results. And thus their avoidance is impossible. This 
 country, and every country, must experience them in such a 
 transition as that through which we are passing. And what 
 the nation has need to do, is to rouse itself from the vain delu- 
 sion, the torpor and sloth of the supposition that we can legis- 
 late ourselves out of the essential difficulties and sacrifices 
 that inhere in our condition ; and more especially must it dis- 
 card the belief that the miserable expedient of an excessive 
 and irredeemable paper circulation, can be made an efficient 
 means of relieving the country from the burdens imposed and 
 the conditions created by an expensive and exhausting war. 
 
 It is so difficult to say any thing about paper money that 
 has not been said before, that one involuntarily shrinks from 
 the topic. The man who could invent a brief set of terms 
 exposing at once the virtues and vices of an excessive paper 
 circulation, showing when and where it is good, and when 
 and where it is bad, would be a public benefactor. Tlie pub- 
 lic mind is always in a haze on the subject, and as it cannot 
 or will not study the question through instructive essays, it 
 seems essential that some formula of the truth should be in- 
 vented to bore through and let daylight in upon the general 
 understanding. Then there is this unhappiness. In their at- 
 tempts to elucidate the subject, even our best and most thor- 
 oughly-grounded writers advance ^ery misty and equivocal 
 positions, while those who know nothing about the subject are 
 always darkening counsel by words without knowledge. Let 
 not this remark be taken as a reproach. To say one knows 
 nothing of finance, is no more than to say that he knows 
 nothing of law or surgery. It is no reproach to the man who 
 has no taste or talent for either, or who has never made 
 either a study. 
 
 But even if theory is discarded, our experience is amply 
 sufficient to show that our paper-money system is a fountain 
 of mischief. "We know that it prompts speculation and sup- 
 ports it in a way most injurious to consumers ; that it de- 
 
10 
 
 ranges regular trade ; that it is the food of the gamblers of 
 the stock exchange, and that it involves every kind of business 
 in perplexity. It makes the return of regular industry uncer- 
 tain, and by so doing discourages its exercise. Its fluctuations 
 in its relations to gold and silver constantly disturb prices, 
 and are a daily and hourly nuisance, by making every act of 
 trade a lottery, and every bargain a gambhng transaction. 
 
 If we may not undertake the tedious task of exposing 
 errors, and endeavoring to define specifically what is difficult 
 of brief definition, we can at the least hold fast to a few clear 
 ideas of what our paper circulation has not done, and cannot do. 
 We have already seen that it has not created the individual 
 wealth accumulated during the war, and we know it cannot 
 create consumers. It is powerless to counteract "the mighty 
 laws of supply and demand, even to the extent of maintain- 
 ing exorbitant prices, as has been shown in the fall of lead- 
 ing articles of consumption already enumerated. 
 
 The difficulty is, that even these simple truths are ignored. 
 People see a great growth of individual wealth along with the 
 expansion of the paper circulation, and they will insist upon 
 seeing in the two nothing but cause and effect. They oppose 
 the contraction of the currency on the ground that if it is con- 
 tracted, business will suffer and prices will fall. They are 
 not contented with this, but go further, and hold tliat if 
 the currency is not diminished, trade will not suffer and 
 prices will not fall. And herein is their vital mistake. 
 What is wanted to keep trade active, and business good, 
 and prices high, is demand and consumption ; and this is just 
 what paper money is powerless to furnish. Unless the de- 
 mand for commodities is kept up, trade must slacken, busi- 
 ness must decrease, and prices must fall. Thus if this nation 
 is not going to use as much, and destroy as much of the pro- 
 ducts of industry, in peace as it has done in war, these results 
 are sure to happen. This, it would seem, must be apparent 
 to everybody. Whether there is any diminution of the circu- 
 lating medium or not, it is inevitable that we must have a 
 
11 
 
 period of depression and prostration. Upon this period we 
 are only just beginning to enter. As yet there is no over- 
 whelming pressure upon Congress for relief, and there may 
 not be during this session. But it is sure to come in the end 
 with a tremendous clamor. The new system of national 
 banks will furnish a leverage such as was never yet brought 
 to bear on that body. It is not the habit of Congress to 
 resist great pressure, and it is to be proved that its character 
 has undergone a change. On the assumption that paper 
 money has done the country so much good, it will naturally 
 be urged that it should have more. At the least, it will be in- 
 sisted that it shall have no less. And when it is seen, as it will 
 be, that prices continue to fall and that trade gets more and 
 more depressed, this inevitable result of our transition from 
 a state of war to a state of peace, will be still pointed to as 
 an evidence of the necessity of the remedy proposed. 
 
 If it were not for the mischief arising from delay, it might 
 be worth while to wait the progress of events under the pres- 
 ent inflated state of the currency, without enforcing any of 
 the plans for its diminution, for the purpose of demonstrating 
 that we cannot be saved from loss and depression and stag- 
 nation, arising from diminished demand and the fall of prices, 
 through the agency of a depreciated currency. But the coun- 
 try cannot afford this loss of time simply to refute false ideas 
 and erroneous theories. 
 
 In brief, the nation has a lesson before it, which it has 
 very slightly studied, and it is high time it set about it. In 
 consequence of the war, the laws of trade and finance, which 
 can alone be safely relied on to govern the currency, have been 
 superseded by Congressional legislation. The opening of the 
 new year is coincident with a new phase of our experience. 
 It finds the currency at its full, and a marked fall in the price 
 of commodities, with all its threatening consequences. This 
 opens anew all the questions of trade and finance. Is it not 
 time we were thinking of remitting them to the control of 
 their own natural laws ? 
 
12 
 
 CHAPTER III. 
 
 What course to adopt with our paper circulation. — The prosperity of the country 
 no bubble. — Error of the inflationists. — How much circulating medium is rie- 
 quired. — How to settle the question. — The national banking system on a bad 
 basis. 
 
 In order to a proper understanding of what to do with our 
 paper circulation, it is necessary to perceive the precise part 
 it has played during and since the war ; and what has been 
 said on this head hitherto, has been uttered mainly with a 
 view to show what it has not done, but what has too often 
 been imputed to it. Whether we have had too much or too 
 little during the war, is not now a practical inquiry. It is 
 enough to know that more or less was indispensable. That 
 mistakes were made in issuing it, on more than one occasion, 
 we have now no need to affirm or deny. The question for 
 solution now is, what to do with what we have. Shall we 
 leave it as it is, shall we add to it, shall we diminish it ? 
 Shall we continue to govern the supply by artificial rules, 
 or shall we place it under the natural laws of supply and 
 demand ? 
 
 We may say here, that we do not hold the property created 
 by the war to be a bubble which is to disappear in some com- 
 ing financial collapse. The fact admits of no doubt, that 
 there has been an immense accumulation of private property 
 during and since the war, arising, directly and indirectly, 
 from the gigantic expenditures of the Government, which 
 have overflowed the country like a freshet, leaving its debris 
 everywhere. This property exists and will continue to exist 
 without any reference to whether the currency is increased, 
 reduced, or remains as it is. This wealth is no bubble : it 
 has taken form in stocks, bonds, real estate, establishments, 
 money. A vast number of people have been made rich, and 
 some, enormously wealthy. These riches are diiFused all over 
 the country. They are real, and will remain to a greater 
 or less extent, depending on the care and prudence with which 
 
13 
 
 they are husbanded, or the prodigality and extravagance 
 with which they are squandered. But the real value of 
 these acquisitions does not depend on the volume of paper 
 money. 
 
 Whether the property thus amassed is not represented 
 by a national indebtedness weighing upon the capital and 
 industry of the country, which is more than an offset for 
 these accumulations, is quite outside of the fact alleged. Let 
 it be admitted that it is the visible representation of the earn- 
 ings of a coming generation. It is none the less real and 
 tangible to the holders of it for all that. But it is a danger- 
 ous mistake to suppose it is the fruit of an inflated paper cur- 
 rency, and that the experiences of its accumulation can be 
 repeated by simply keeping up or adding to that inflation. 
 
 We have, then, seen what paper money has not done, and 
 we know there are things which it cannot do. It cannot 
 create markets or consumers. If Government should begin 
 the reissue of paper money and continue till it had shingled 
 every acre in the country with it, it could not thereby create 
 a market for a single extra dollar's worth of the products of in- 
 dustry. It is only when it becomes a consumer that it does this. 
 
 The same may be said of an excess of circulation of the 
 precious metals. And thus it is the paper-money men impute 
 to paper currency a degree and quality of efficiency impossi- 
 ble even to coin itself. But specie has at once an intrinsic 
 value and a commercial value, being susceptible of export 
 when in excess, and thus never clogs the wheels of traffic 
 and unsettles values, as an excess of paper money does. 
 
 The error of the inflationists arises from a mistaken view 
 of the functions of money itself, which is merely an agency 
 of traffic, and a lever of industrial development, limited in 
 this latter function by its profitable employment ; which, in 
 its turn, is obedient to those laws of supply and demand which 
 have the whole commercial world for their theatre, and con- 
 clude their circle of operations in any given instance by set- • 
 tlements in the universal standard of value. 
 
14 
 
 Thus the coin circulation of no country can ever be too 
 great, because the excess is always drawn away by the regu- 
 lar operations of trade. But there is no way of getting rid 
 of an excess of paper money, or of measuring the excess, 
 except by its conversion into gold and silver, or some obliga- 
 tion like bills of exchange, representing gold and silver in 
 some one of the great financial marts of the world, it matters 
 little which. Those persons who are always telling us that 
 we need this sum or that sum to supply the wants of trade, 
 talk without certain knowledge. They may be nearly right, 
 or they may be very wrong. There is only one way of ascer- 
 taining how much our currency, or rather our circulating 
 medium, is in excess. This is by subjecting it to the touch- 
 stone of redemption. If there is now none too much 
 paper money afloat for the wants of trade, as is sometimes 
 alleged, then, with all our numerous agencies of supply, it is 
 impossible it should be much diminished by bringing it to 
 this test. 
 
 The true measure of our circulating medium is the re- 
 quirements of the business of the country. These require- 
 ments vary from month to month, from season to season, 
 and from year to year. It is impossible for mortal man, how- 
 ever knowing or wise he may be, to state with any precision 
 what is requisite for this country at this moment, or for a year 
 or for years to come. Our only guide is in the statistics 
 of the past, and this guide is fallible. Those who believe we 
 require a very great increase above any previous period, and 
 those who believe we do not, can never settle the question by 
 argumentations, by statistics, or by any other method of ex- 
 position satisfactory to the disputants. We have just one 
 way to come to a sound conclusion, and only one, and this is 
 by bringing our paper money to the test of redemption. 
 
 The one practical point to which these remarks have been 
 tending is the question, " What shall be the limit of our paper 
 circulation ? " Shall the answer be left to A, or B, to your 
 Committee of Ways and Means, or your Finance, or your 
 
15 
 
 Banking Committee, your Secretary of the Treasury, or your 
 city bankers ? Who knows ? Not one of them ? There is 
 only one answer — leave it to the laws of trade. 
 
 But how ? Somebody may say : " Congress in its wisdom 
 has limited the volume of l!^ational Bank issues to three 
 hundred millions, whereas I agree with Mr. Thaddeus Stevens, 
 or Mr. Somebody else, that we ought to have one thousand 
 millions. You must not limit the supply to any arbitrary 
 sum if the laws of trade are to govern." 
 
 To this we might answer : In the present state of the sup- 
 ply and diifusion of the precious metals, the country has no 
 need of banks of issue, and would be better off without them. 
 But this judgment is in advance of public sentiment, and 
 we forbear, therefore, to make any such reply. We prefer to 
 m'eet it by saying the objection is well taken. On the basis 
 on which the National Banks stand, rotten as many of them 
 undoubtedly are, there should be no limitation upon their 
 multiplication. Under proper general regulations as to capi- 
 tal, management, etc., the rule should be, — give a bank 
 charter to whoever wants one, only hold the banks to an 
 inexorable provision of redemption, and at some central point. 
 The expansionists want a full swing of paper money. Let 
 them liave all that the banks already existing, and all that 
 the banks which can be established, can furnish. Only put 
 all, banks and circulation alike, under the absolute dominion 
 of the laws of trade. If a bank promises to pay, make it pay. 
 They are a precious set of paper-makers. Set them to work 
 as paper-redeemers. Make the law inexorable, and show no 
 favor and no mercy in its execution. The existing banks 
 have long been enjoying the privilege of banking at the ex- 
 pense of the people and Government, paying their lively divi- 
 dends of twelve to twenty-four per cent, per annum. It is 
 high time they were set to doing something useful to the pub- 
 lic as well as to their stockholders. 
 
 These views may be consistently entertained while holding, 
 as we do, that the national banking system rests on a wretched 
 
16 
 
 basis, from tlie fact that their capital is a torpid mass, useless 
 for all purposes of legitimate banking, or as a reserve in an 
 emergency. It is what is called in the Bank of England the 
 " dead weight." The banks are thus like those marine ani- 
 mals whose bodies are useless from being attached to the rocks, 
 while only their feelers have any motion or vitality. The 
 circulation of these banks is measurably secure, but the banks 
 themselves are likely to be found unable to withstand great 
 crises in our money affairs. 
 
 CHAPTER lY. 
 
 Remedy for our financial disorders. — Congressional control a vast evil. — Neces- 
 sity of getting the subject of paper money out of the hands of Congress. — Laws 
 of trade the only sound guide. — The prospective repeal of the legal-tender 
 act advocated. 
 
 Having laid down the foregoing general propositions, and 
 expressed some general views on the subject of our financial 
 condition, we come to the practical question of the remedy, 
 if remedy there be, for the circumstances in which the coun- 
 try finds itself. 
 
 If there be any weight in the statements made and judg- 
 ments given, we must accept the fact that the business of the 
 country is entering upon a period of depression and trial, 
 which comes of the transition from a state of war to a state 
 of peace. The precise why and wherefore has been explained. 
 At the same time, we are left with a great debt, on which we 
 must pay the interest, and with a great sum of irredeemable 
 paper-money afloat. I have shown that while to a certain 
 extent this paper money has been a useful instrument, and an 
 indispensable instrument, for the conduct of the war, the ex- 
 ceptional prosperity of the industrial interests of the country, 
 during and since that period, is in no sense to be imputed 
 to it. 
 
It 
 
 I hold DOW, that the time has come when this expensive 
 and demoralizing instrument of traffic should be set aside and 
 its use dispensed with. Because, first, the necessity for it has 
 passed away with the war which brought it into being ; sec- 
 ondly, because of its mischievous influences, which we have 
 already briefly depicted ; and lastly, and above all, because, 
 until it is got out of the way, stability in mercantile and 
 financial afi^airs is impossible. So long as it lasts, the trading 
 and industrial interests of the people will be kept afloat and 
 shivering in the wind, or standing on shifting and treacherous 
 foundations ; will continue to be the sport of legislative 
 ca'price, and the football of gamblers and speculators. Until 
 Congress retraces its steps, and removes its hand entirely off 
 the money concerns of the country, it is impossible to com- 
 mence the reconstruction of any stable basis for the future 
 prosperity of either its capital or its industry. 
 
 I hold that so much of this, if not demonstrated, is yet 
 demonstrable from the views already advanced and intimated 
 — views clearly defined, not recondite, or difficult of apprehen- 
 sion, but capable of being considered and judged by every 
 man of common sense in the country. 
 
 So long as the supply of the circulating medium is left to 
 the regulation of Congress or the Treasury, it is in vain to at- 
 tempt to make any calculations in regard to the future. That 
 supply will depend on changing opinions, on extraneous in- 
 fluences, on selfish and defective judgments. This uncer- 
 tainty is necessarily fatal to all sound opinion in regard to 
 the course of mercantile affairs. The manufacturer, the agri- 
 culturist, the ship-owner, the capitalist, the financier, will 
 continue to be, as they now are, alike embarrassed and baffled 
 and confounded in regard to the future. 'No man in any 
 branch of business is safe in any calculation he may make. 
 Prudent men will make none, beyond the necessities of the 
 hour. Up to the time of high water in our war-tide, it was 
 safe to indulge in a general calculation on the set of the cur- 
 rent. But now that that tide has turned, and no man can tell 
 
 2 
 
18 
 
 whether it will be the policy of Congress hereafter to erect 
 dams to arrest, or cut sluices to facilitate the flow of that cur- 
 rent, or how often it will change from one policy to the other, 
 it becomes an urgent necessity to get the whole subject of 
 paper money out of Congressional hands and out of Executive 
 hands. In a commercial country, as, indeed, in every coun- 
 try, the laws of commerce are the only sound guide in regard 
 to the amount of money that commerce requires. If Govern- 
 ment meddles, it only meddles to make mischief. 
 
 No legislator, no executive officer, no man, is wise enough 
 to see the operation, measure the influence, mark the bounds, 
 or direct the currents of the trade and enterprise of a great 
 nation like this. And what no man can do, no body of men 
 can do, and thus they have no right to claim the control. 
 General laws on such a subject may be enacted. Specific 
 provisions, never. 
 
 Without undertaking, therefore, to sit in judgment upon 
 the opinions of individuals as to the amount of paper circula- 
 tion this country requires at the present moment, or upon 
 their other theoretical opinions touching the same subject, we 
 have a right to demand of our legislators that they acknowl- 
 edge their inevitable imperfections, and that they leave mat- 
 ters beyond their ken and beyond their proper jurisdiction, to 
 the natural laws that govern them. 
 
 We got into our present dilemma in consequence of Con- 
 gress erecting an artificial standard of value in place of the 
 universal standard. We threw down the inflexible metallic 
 measure, and we set up this shifting and vacillating standard 
 of a government promise. What Congress needs to do, is to 
 get back from where it started. It needs to repeal the Legal- 
 Tender Act. This is the direct road, the short cut, to the only 
 policy upon which the reconstruction of the business and in- 
 dustry of the country on a sound basis is possible. Let Con- 
 gress, then, have done with flying its paper balloons ; let it 
 have done with trying to measure that variable and indefi- 
 nite quantity of promises to pay, requisite for the commercial 
 
19 
 
 needs of this great people. Let it establish the policy of re- 
 storing the state of things which existed before the war. 
 Thev should have no difficulty in doing this. The hard- 
 money men will, of course, agree to it. The expansionists 
 say there is no more paper money afloat than the business of 
 the country requires. If this be trae, resorting to the metal 
 lie standard will not diminish the quantity. For, with our 
 innumerable agencies of supply, the country cannot fail to 
 get all that is necessary. 
 
 So, too, those who hold that prices are qviite independent 
 of paper money, as was argued at length and approvingly in 
 the House the other day — -they surely should consent to this 
 policy. For if an midue supply of paper money does not in- 
 fluence prices, then its diminution will not. So that all such 
 persons are logically precluded from opposing the metallic 
 standard. This long hour's speech to which we refer, pro- 
 ceeded upon the idea indicated, and also upon this : that it 
 was evident we had none too much paper afloat, because 
 prices had fallen and were falling. An answer to which po- 
 sition can be comprised in a single sentence, and it is this. 
 Paper money does afiect prices, but it does not prevent the 
 laws of supply and demand from operating also. 
 
 This practical issue of the repeal of the Legal-Tender Act 
 is not suggested as a measure necessarily demanding instant 
 operation, in order to subserve the most useful purposes. It 
 is not necessary it should be made to take effect at once ; 
 neither to-morrow, nor next day, nor next week, hardly even 
 next year, though this we shall not say. If a bill for the re- 
 peal of the Legal-Tender Act could be passed with sufficient 
 sanctions and guaranties, fixing a prospective but unchange- 
 able period for it to come into operation, we might have 
 almost at once, many of the benefits of resumption of specie 
 payments. Only let the country understand that the legal 
 standard is to be restored at some fixed period in the future 
 — and from the hour it should be enacted, the business of the 
 nation could begin to erect itself upon a firm foundation. 
 
20 
 
 Every man would then know what was before him, and busi- 
 ness and industry would gradually resume its regular chan- 
 nels ; and stability and certainty in commercial and financial 
 affairs would begin to supersede the uncertainty, the confu- 
 sion, the embarrassment, and perplexity that have so long 
 reigned therein. 
 
 CHAPTER Y. 
 
 The national banks. — Their creation an error. — Their existence an obstruction to 
 the resumption of specie payments. — Proposition to suppress their circulation 
 and substitute greenbacks condemned. — Necessity of establishing a central 
 redemption. — PoUcy of resumption urged. 
 
 The proposal has recently been made in Congress to 
 substitute greenbacks for the $300,000,000 of national bank 
 notes. It is one of the numerous significant commentaries 
 upon the unwisdom of leaving the subject of the amount and 
 character of the circulating medium to be bandied about in 
 that body. The politics of the country are a disturbing ele- 
 ment in finance and business, even when confined to their 
 proper sphere ; but to have them made the axle and pivot 
 on which trade, and commerce, and industry turn, is to inflict 
 the greatest mischief possible upon a commercial and trading 
 people. 
 
 Here, now, is our new national banking system; bad 
 enough, no doubt ; but it exists, and is already thoroughly 
 interwoven with the business interests of the people. It has 
 been urged through, fought through, over the dead bodies of 
 the State banks. It has not been fully under way sixty days. 
 The Treasury Department is barely done with furnishing the 
 three hundred millions of notes, to which the issues of those 
 banks are limited. And now comes an eager proposal to 
 overturn the whole system by recalling these three hundred 
 millions and substituting greenbacks in their stead. 
 
 The promoters of this scheme seem to have just discovered 
 
21 
 
 hat the national banks are banking at the expense of the 
 Treasury. Why, this was the sound, original objection to 
 the first proposal to establish the system. It was the com- 
 plete answer to it, and the one which, if it had been intelli- 
 gently adhered to and insisted upon, would have given the 
 profits of the three hundred millions of the circulation of the 
 national banks to the Treasury. It was the clear policy of 
 the Government to have taxed the circulation of the State 
 banks temporarily out of existence, and they would willingly 
 have submitted to the process in the exigencies of the hour. 
 The Government needed and should have had the field to 
 itself It was only necessary to have said to the State banks, 
 " i^ecessity rules ; and this privilege we now recall shall be 
 restored to you the instant the exigency is over." That was 
 the time to have given the Treasury the benefit of the propo- 
 sition now urged. It was ten times more important then 
 than now. But the time has long gone by for any such 
 action. If Government had early taken possession of the 
 channels of circulation, by ssappressing all bank-note circula- 
 tion, as it might easily have done, we should now have 
 nothing but greenbacks afloat. Suppose that were the case, 
 and we had the old State banks in existence, or so many of 
 them as the war would have left us, after being shorn of their 
 powers of issue, do we not see how immeasurably better our 
 financial situation would now be than it is ? Eager to re- 
 sume their old privileges as banks of issue, they would all 
 have been to-day ready to do it on the condition of specie 
 payments. Every one would be on the side of resumption, 
 and so would the great body of their customers and the pub- 
 lic ; for the reason that resumption, in such a case, would be 
 bank expansion. How different is the actual state of the 
 case ! Nearly every national bank expanded to the failing 
 point, and every one (with of course honorable exceptions) 
 opposed to any contraction of the facilities by which they 
 are earning from 12 to 24 per cent, per annum. The 
 whole national bank system is at this moment a gigantic 
 
22 
 
 obstruction to an approach to specie payments. But while 
 this is the case, it will not improve things to simply exchange 
 their notes for greenbacks. This is not what is wanted to 
 get back to specie payments. Such a process of exchange 
 would only make a bad matter worse. And for this reason : 
 It would deprive the country in its approach to resumption 
 of all bank facilities whatever, based on bank issues. Unless 
 it is proposed to establish permanently the business of the 
 country on the rotten foundations of irredeemable Govern- 
 ment paper-money, what is now needed above all things is to 
 redeem the greenbacks and get them out of the way, and let 
 their place be taken by coin or notes of specie-paying banks. 
 There is an idea afloat that we can keep greenbacks in circu- 
 lation after resumption of specie payments, sufficient for the 
 business wants of the country. Never was there a greater error. 
 This is impossible, unless the Government turns banker and 
 issues its notes for mercantile paper. In no other way can it 
 keep them out or supply the necessities of trade and com- 
 merce. This, of course, it will not do. Thus its issues of pa- 
 per will be confined to its disbursements, which will often be, 
 where money is not wanted, when it is not M'anted, and in. 
 sums either too great or too small for business requirements. 
 Then the aggregate annual supply, even if it could be judi- 
 ciously distributed, would be totally inadequate to the wants 
 of the community. The upshot of the experiment would be, 
 that the greenbacks would be returned much faster than they 
 could be issued, and the country would find itself transacting 
 its whole business, not only on a coin basis, but actually with 
 a coin circulation mainly. Ilard-money men would have no 
 objectioQ to this. But such a process is not to give the 
 country the benefits of a paper currency, which it feels it re- 
 quires, but to rob it of those benefits. 
 
 So much, then, for the proposition to substitute green- 
 backs for the notes of the banks, while we are trying to find 
 our way back to specie payments. Such an exchange would 
 only be a hinderance, as it would be a sure means of increas- 
 
23 
 
 ing the mercantile pressure as we approached that goal, for 
 the reasons now given. 
 
 For good or for evil, then, the existing banking system 
 will stand for the present without material modification, be- 
 cause it will be highly injurious to the business interests 
 of the country to disturb that system. Indeed, the idea 
 of OYcrsetting it in a fundamental particular just at the 
 moment it is fairly afloat, will not bear respectful characteri- 
 zation. But one thing Congress might do, and ought to do. 
 It ought to force the banks to a redemption of their notes at 
 some central point, or central points. The subject is one of difl&- 
 culty, we know, but not impracticable. ISTo measure would 
 do more to insure a healthful action in the channels of circu- 
 lation than this, and none is more needful. At present the 
 bank circulation is a perfect Dead Sea. It is slimy from 
 stagnation. Banks issue their quota of notes, and never see 
 them afterward. Being never called upon to redeem, they 
 never hold themselves in readiness to redeem. Nothing 
 breeds unsound banking like this. A law compelling interior 
 banks to provide for their circulation at commercial centres, 
 would drain these stagnant pools of paper money, and create 
 sometliing like a healthy current. This step is really essen- 
 tial, and it is to be hoped that Congressional timidity, oper- 
 ated upon by the selfish hostility of the banks, will not be 
 kept from advancing this little way in the right direction. 
 Congress would take a great stride in the same course if it 
 would adopt a suggestion which has been made, and prohibit, 
 or essentially limit, bank dividends, until specie payments 
 are resumed. So long as the banks are permitted to divide 
 sums varying fron 12 to 24 per cent, among their stockhold- 
 ers annually, as the results of their paper issues and kite- 
 flying operations, it is not difficult to perceive what obstinate 
 enemies of resumption they will be. If they were prohibited 
 from using their enormous profits either in the way of loans 
 or dividends, they would soon be forced out of their hostile 
 position. 
 
24 
 
 Though the indications in Congress are that that body is 
 restive under the policy of contraction, it is nevertheless com- 
 mitted to that policy by the proceedings of the last session. 
 And it cannot escape this committal. It is not likely a ma- 
 jority could be got to reverse this action, but if it could, the 
 Treasury Department and the veto power would probably 
 frustrate the attempt. 
 
 If we may not count on Congress immediately moving 
 further on the direct line of resumption, we may yet entertain 
 the hope that that body will gradually come to the light on 
 the whole subject, and push forward in some of the directions 
 indicated. If Congress will only convince itself thoroughly 
 of the fact that we have not to arrive at, but that we are al- 
 ready in, a financial crisis ; a crisis precipitated by events not 
 subject to control ; a crisis the country must face, and through 
 which it must pass, they will not be far from reaching the 
 conclusion that the sooner we are through with it the better. 
 There has been pluck enough and endurance enough, to fight 
 the country through a horrible war, and to abandon the at- 
 tempt to do it on peace principles. It is a fair presumption 
 there are enough of the same qualities left to carry it through 
 the mire of paper money in which we are now wallowing, 
 and get us out on to hard bottom. 
 
 We do not want to be McClellanized in our finances, as 
 we were in our war, by a fear to move lest somebody should 
 get hurt. The resources of the country are vast. The world 
 is full of the precious metals, the universal standard of value. 
 Why, then, should this great nation stand groping in the fog 
 and floundering in the mire of irredeemable promises to pay, 
 and prolonging the disreputable position of the Government, 
 when a plain and open, though it may be a rough road, will 
 lead it out of its complications ? 
 
 It is the policy of sloth, of timidity, of weakness, to post- 
 pone doing a disagreeable thing, when we know it must be 
 done, and that the sooner it is done the better. This great 
 
25 
 
 commercial country must return to specie payments. Its in- 
 dustrial development, its standing before the world, its stable 
 prosperity, the just and regular reward of its labor, the 
 honor of its financial character, all alike demand a return 
 to the metallic standard. The golden streams of California, 
 and ISTevada, and Colorado, and of our other Territories, 
 which are annually pouring over the country, create totally 
 new conditions for us. Without the golden flood of the last 
 eighteen years we might have to accept paper money indefi- 
 nitely, and perhaps even bankruptcy, as the result of our 
 circumstances. But that flood saves us, as it does many 
 another debtor nation. The entire amount of the gold and 
 silver circulation of the world was estimated at not more than 
 $2,500,000,000 in 1848, the period of the discovery of Cali- 
 fornia gold. Since that time, we have added to the common 
 stock in use, probably not less than $2,000,000,000, after 
 making every allowance for its use in the arts, its waste, and 
 other causes of absorption. So immense is this addition in 
 proportion to the aggregate bank-paper circulation of the 
 commercial world, that if that paper circulation had, during 
 the accumulation, been wholly withdrawn, it is probable the 
 influence of that withdrawal would not have been sensibly 
 felt. The precious metals are thus at this moment in such pro- 
 fuse supply, that paper money is really now no longer a neces- 
 sity, but only a convenience. The truth is, that our expe- 
 rience during the war has slaved us to a preposterous idea 
 in regard to the necessity of paper money. A person has 
 only to read some of the speeches made in Congress to see 
 how inconsiderate and idle are the observations often made 
 on this question. 
 
 It needs only a, firm determination in Congress to take 
 us safely and promptly through our financial perils. The 
 country is abundantly able to surmount all its trials. It 
 can do it in finance as it has done it in war. Our great 
 enemy now is an irredeemable currency. We shall never 
 conquer it by any apprehensive policy, which will be just 
 
26 
 
 as fruitless in finance as it was in war. Our enemy now, 
 as then, must be attacked and destroyed. And tliere can be 
 no peace for trade and industry, and no solid prosperity for 
 the country, till that is done. 
 
 CHAPTER VI. 
 
 Specific action in favor of resumption needed. — Methods proposed. — Impossibility 
 of sudden action. — Necessity of deciding upon a fixed period. — When it can be 
 accomplished. — British example. — Ability of the country to resume. 
 
 I HAVE suggested the prospective repeal of the Legal- 
 Tender Act as the best specific action toward resumption, be- 
 cause the fixing of a definite period in the future for a return 
 to solvency would have tliese beneficial efiects : 1st. It would 
 commit Congress to a positive policy of resumption. 2d. It 
 would influence the banks and business interests of the coun- 
 try to shape their transactions with a view to this result. 
 3d. The sooner a period is decided upon for a return to coin 
 payments, the sooner we shall have them. If, a year ago, it 
 had been proposed to fix upon the expiration of three years 
 from that time as the period of resuming, it would have been 
 thought too distant. If the expiration of two years' time 
 were now proposed, there would be many to say it would be 
 too soon. Thus we may see that delay in naming the time 
 only tends to postpone it. 
 
 It is objected to fixing upon a specific period, in advance, 
 when the country will resume specie payments, that so much 
 depends on the course of trade, and upon crops, and the state 
 of the foreign exchanges, it is impolitic to do so ; inasmuch 
 as either of these causes, operating adversely, might frus- 
 trate the attempt. This is quite true. But the objection 
 cannot be held to be valid, since nobody proposes impossibili- 
 ties, and in case of any extraordinary or unusual concurrence 
 of circumstances, no prospective plans] are executed. The 
 
27 
 
 thing to do, is to canvass tlie probabilities, and propose what 
 can be eifected, no extraordinary contingency occurring. It 
 is in this view, that we think it not difficult to measure with 
 comparative certainty what the country is able to ac- 
 complish on the subject of resumption. It is only requisite 
 to fully consider the subject, to reach a conclusion ; and, 
 having come to a determination, to act so as to realize it. 
 Tliere is no doubt about the ability of the country to resume 
 spede payments within a reasonable time, if it chooses to do 
 so, and is willing to undergo the strain and the pressure 
 necessary to insure this result. It is not a question of power : 
 it is a question of will. Let the country but convince itself 
 that there must be a resumption of specie payments before 
 there can be any thing like steadiness, or certainty, or solid 
 prosperity in business and money affairs, and it will find but 
 little difficulty in agreeing upon a period when it shall take 
 place. 
 
 But besides this plan of repealing the Legal-Tender Act, 
 there are three other methods of resumption : 
 
 The first is, to resume instanter, and fight our way through 
 whatever obstacles may offer. Mr. Chase proposed this plan 
 immediately on the close of the war. He has been an advocate 
 of it ever since, believing it would produce less suffering than 
 the process of slow contraction. The idea has been warmly 
 urged also by the E ditor of The N^ew Yoek Tkibune. 
 
 A second mode has been proposed by eminent New York 
 financiers to reach resumption ; that is, to accumulate specie in 
 the Treasury sufficient to raise the value of greenbacks, gradu- 
 ally, till they reach the specie level. This, it is believed, can be 
 done by funding our Y.30s due this year and next, into long 
 Y.SOs, having fifteen or twenty years to run, and further, by 
 disposing of our compound legal-tender 6 per cents, in the 
 same way, or retiring them by the surplus paper money in 
 the Treasury. It is supposed we could, by this process, add 
 one hundred or more millions of specie to the existing stock 
 in the Treasury in the course of eighteen months or two years, 
 
28 
 
 and thus get a stock of coin sufficiently large to secure re- 
 sumption. 
 
 I may say, in passing, that an important objection to 
 this scheme is, that there is an element in Congress that looks 
 with impatience and distrust upon large accumulations in 
 the Treasury, and in the pressure that would attend resump- 
 tion, there is too much reason to fear that that element 
 would insist upon having the specie hoard scattered, by 
 way of relief to the people. The difficulty is to fix upon 
 any plan that, when the country calls for relief, Congress 
 would not be pressed to thwart ; and this, above all others, 
 would be the easiest to break down. 
 
 The third method of resumption is the gradual contraction 
 of the legal-tender issues of the Government. This mode, 
 as we know, was recommended by the Secretary of the 
 Treasury last year, and was adopted by Congress, limiting 
 the action of Mr. McCulloch to the redemption of four mil- 
 lions a month, after taking in his interest-bearing legal 
 tenders falling due in 1867 and 1868. But the majority 
 of the House have, under the moderate pressure which has 
 fallen on the money market, even before any contraction 
 has taken place, recently voted against retiring any green- 
 backs whatever. So that the country is almost as much 
 afloat in regard to what financial policy is to prevail, as 
 it was before contraction was voted for at the last session. 
 The same House, which was then for it, is now against it by 
 a decisive majority. 
 
 There are, then, but four methods of coming to resump- 
 tion. The first is a prospective repeal of the Legal-Tender 
 Act, with proper corresponding legislation. The second is for 
 the Government to declare resumption, and maintain it — if it 
 can. The third is for the Government to fund its obligations 
 maturing this year and next, in currency-paying bonds, and 
 accumulate specie enough meantime to enable it to resume 
 payment on its greenbacks. The fourth is to pursue a policy 
 of steady contraction on its demand legal-tender notes, and 
 
29 
 
 of funding or paying those drawing interest and maturing 
 in 1867 and 1868 ; likewise of exchanging the currency-pay- 
 ing Y.30s due in 1867-8 into 5-20 specie-paying six per cents. 
 
 This fourth plan is the one adopted by Mr. McCuUoch, 
 with one of the features of the third, namely, that of hold- 
 ing a good stock of specie. His plan, however, does not 
 contemplate the hoarding of coin with which to redeem 
 his greenbacks, because his conversion of the 7.3-10 currency- 
 paying bonds due this year and next, into 6 per cent, coin- 
 paying, would probably reduce his specie reserve so as never 
 to leave him any thing but a working balance. He must 
 then get rid of his demand legal tenders by the process of 
 steady contraction mainly. 
 
 The objection to Mr. McCuUoch's plan is, that while it i? 
 natural and in the regular order, it is a hard plan, gives him 
 the laboring oar, and makes him the hete noir of resumption. 
 Other interests in the country will not and cannot know just 
 how fast or how slow he is getting on, except at agonizing 
 intervals ; nor what influences are or will be brought to bear 
 on him to retard or to accelerate the time of resumption. 
 One month the prospects of specie payments will loom and 
 seem near ; the next it will recede and fade in the distance. 
 Then it gives opportunity and invites effort to influence the 
 operations of the Treasury according to the interests of 
 individuals, of corporations or of combinations. In a 
 word, it lays the whole strain of a most disagreeable and diffi- 
 cult duty on the shoulders of a single man, whom it is impos- 
 sible to suppose can be always insensible to the strong influ- 
 ences unceasingly besetting him. If he be bold and obstinate, 
 he will be thwarted by those whom those qualities offend. 
 If he be timid and yielding, he will disappoint and deceive 
 others, and be but a blind leader of the blind. And thus all 
 through the lingering process of a dubious resumption, the 
 country will be in an unsettled state, never knowing what 
 real progress is making toward it, and never knowing, there- 
 fore, how to regulate its affairs. The whole subject resting 
 
30 
 
 upon the judgment, it may be tlie whim, of one man, sooner 
 or later to be changed for another, no feeling of repose or 
 certainty can ever find a lodgment in the minds of business 
 men ; and no confidence can ever be placed in the result of 
 any mercantile or industrial enterprise whatever, till the 
 event is finally realized. 
 
 The desire of Congress to restrain and to change the 
 action of the Treasury Department, will be another element 
 of disturbance even worse than the first. Where nothing is 
 settled as to the period of resumption, the question will be 
 constantly made a football of the various interests, noble and 
 ignoble, which at difi^erent times bear sway in that body. 
 
 As to the policy of sudden resumption, I have no faith 
 that it could be maintained if undertaken ; because I believe 
 the credit we should require in Europe, over and above our 
 specie reserves, to retire the amount of currency it would be 
 found necessary to redeem of the existing inordinate supply, 
 in order to bring the volume down to the wants of our inter- 
 nal trade, would not be found available. That credit would 
 need to be, probably, several hundred millions, and the sum 
 is too great to be brought under control. 
 
 I argue, then, that the fixing of some definite period for 
 resumption, within which time all the interests of the country 
 would have opportunity to prepare for it and to accommodate 
 themselves to it, and in which everybody would be bound to 
 cooperate toward the result, or suffer the consequences of his 
 own folly, is the surest, and safest, and most satisfactory 
 method of reaching it. The Treasury would then have the 
 same responsibility as individuals for the result, and no more. 
 ,It could act more independently by being left to itself to pre- 
 pare for the redemption of its own obligations, at the same 
 time that everybody else would be expected to do the same 
 thing. It would not be looked to, as it now is, as the special 
 agent and manager of resumption, or as a power to postpone 
 or precipitate that result. It would have its own proper re- 
 sponsibility, till its own proper place, and discharge its own 
 
31 
 
 proper duties. And as it would be with the Treasury, so it 
 would be with the banks and bankers, and the whole trading 
 public. The responsibility of resuming would be divided as 
 it should be divided ; and solvency would be left everywhere 
 to its own resources and ability to protect itself. Nothing is 
 so much to be desired as that all interests should get rid of 
 their quasi connection with the Government. There is a 
 sentiment in the country that the Government is somehow 
 responsible, and pretty directly responsible, for the prosperity 
 of its business interests. If money is scarce, Government 
 should make it plenty. If it is plenty. Government should do 
 nothing toward making it scarce. Individuals look to Gov- 
 ernment to protect them, instead of relying on themselves. 
 This is a most pernicious state of things, and calls for reform 
 and deliverance. The greatest favor Government can do for 
 the business interests of a country is to withdraw itself from 
 all special connection with them, leaving them wholly to the 
 operation of general laws. This has been the character of 
 American legislation in the past, and it is what has created 
 American enterprise, American independence, and American 
 wealth. 
 
 As to the time when resumption should take place, we do 
 not desire to speak too positively. 
 
 In the present state of things there are two parties to pre- 
 pare for it. One is the Government ; the other, the public, 
 including the banks. It would seem that when the Govern- 
 ment is able to resume, the public should be, for the heaviest 
 work is on the Treasury. It has got to provide for $400,000,000 
 of demand legal tenders, $150,000,000 of legal tenders draw- 
 ing interest due in 186Y and 1868 ; and it must get into long 
 loans its indebtedness on its 7.30 bonds, due this year and 
 next, amounting to many hundred millions. 
 
 All this the Treasury must do before the Government is 
 ready. I think it is fair to conclude that it needs the calendar 
 years of 1867 and 1868, and it maybe to the end of the fiscal 
 year in June, 1869, to completely accomplish this end. But 
 
32 
 
 there seems to be no reason why it cannot accomplish it within 
 that period. The Government, in order to do it, has not to raise 
 much money ; it has chiefly to exchange and extend its loans, 
 and to this operation there seems to be no impediment. With 
 the compound-interest legal-tender notes taken up, and the 
 Y.30s disposed of in this way, only the $400,000,000 of demand 
 legal tenders would then remain. Even without the proposed 
 reduction of $4,000,000 a month, the Government could 
 probably successfully attempt resumption on that amount of 
 outstanding obligations with $100,000,000 of cash on hand, 
 and a credit in Europe of $100,000,000 more. It certainly 
 could do it if the resumption of $4,000,000 a month of these 
 $400,000,000 should go on for eighteen months or a couple 
 of years to come. 
 
 My conclusion would then be that, with average seasons, 
 no serious deficiency in the revenue, and no other special 
 drawbacks, the country will be able to resume after the crop 
 of 1868 shall be gathered ; and if this shall be thought a rea- 
 sonable conclusion, why should not Congress say so, and fix 
 upon some such or some other definite period for resump- 
 tion, and so let the country know what to expect ; at the same 
 time that it is offered an opportunity to adjust its business 
 relations and interests to the proposed change ? I submit 
 that some definite decision of this sort, coming in the shape 
 of a prospective repeal of the Legal-Tender Act, with the 
 necessary corresponding legislation, would do more to settle 
 the disorders which now perplex trade, and commerce, and 
 finance ; and to dispel the discouraging uncertainty which 
 prevails everywhere, than any other less specific policy. 
 What the country needs more than anything else, is certainty 
 of knowledge in regard to the disposition of the excess of our 
 paper money. It could even accommodate itself to inflation, 
 if inflation were a fixed and known quantity. If it were pos- 
 sible to prescribe positively that for twenty years we were to 
 have neither more nor less than just the amount of circulating 
 medium we now have, the trading world could adjust its 
 
affairs to that state of things. The difficulty is, that while we 
 are in a state of inflation there can be no certainty about any 
 thing, and this constitutes its greatest curs0 and the strongest 
 reason for putting an end to it. 
 
 Finally, we often hear it said by way of protest against fix- 
 ing upon any near period of resumption, that the Bank of Eng- 
 land was under suspension for four-and-twenty years, during 
 and subsequent to the great Napoleonic wars, and how can 
 we be expected to do better ? This naked statement conveys 
 a totally false impression. For a large portion of this period 
 of twenty-four years the suspension was merely nominal, the 
 notes of the bank being within three per cent, of par. This 
 was especially the case in the seven consecutive years, from 
 1803 to 1810 ; and though in 1814 the notes fell below T5 
 per cent., yet two years after the peace of 1815, they rose 
 again to be worth 97 cents on the dollar, which was substan- 
 tial resumption ; and they never fell below this mark until the 
 final and absolute restoration of specie payments in May, 
 1822. So that, if we are to take England as an example, it 
 is high time we had resumed. 
 
 England was engaged in a tremendous contest for most 
 of the time from the close of our Eevolutionary "War till 1815. 
 During the period from 1793 to that year, she borrowed 
 more than $2,300,000,000, and taxed herself prodigious sums ; 
 in the aggregate, we believe, far exceeding this amount, for 
 war purposes ; and yet she emerged from the contest with 
 such financial strength, and exhibited such financial integrity, 
 that the paper dollar became worth 97 cents within two 
 years from its close. England thus sustained her commer- 
 cial credit amid all the distresses of this exhausting period, in 
 a manner to reflect everlasting honor upon the British name. 
 
 It is well that we should have our attention drawn to 
 the contrast thus invited, between the suspension in England 
 during her trials, and the suspension here. There is little in 
 it to gratify our vanity, but much to excite our emulation. 
 With no national distress, such as pervaded the British 
 
 3 
 
34 
 
 M 
 
 Islands, but in the enjoyment of a wonderful national pros- 
 perity instead ; with extraordinary resources of manufactur- 
 ing, mining, and agricultural industry ; with a supply of the 
 precious metals in the world three times greater than existed 
 in 1815, rendering the specie dollar worth no more than half 
 what it was then worth ; and with an internal annual pro- 
 duct of gold of $75,000,000, daily increasing, we cling to in- 
 solvency with the childish cry of inability to pay ; and with 
 ignorant audacity point to British experience as an excuse 
 for our conduct. This is quite unworthy of the American 
 name and nation. We are to-day, after all our expenditures, 
 a rich and solvent people, and it is our business to act as 
 becomes such a people. "We challenge the good opinion of 
 the world for our military exploits. We are amenable to its 
 judgment, as well in our financial as in our martial conduct. 
 Let the nation act so as to be alike proud of both hereafter. 
 
APPENDIX. 
 
 From the Kew York Tribune of February 23, ISeY. 
 
 OUR FINANCIAL DANGERS. 
 
 A VERT proper complement of the late proceedings in Congress 
 on the currency question, is the proposition of Mr. Davis of the 
 House, a member from New York, to authorize the Secretary of the 
 Treasury to issue legal tenders, not bearing interest, to redeem the 
 7.30 loans due this year and next. This proposition was offered by 
 Mr. Davis after the passage of the bill for the issue of $100,000,000 
 of greenbacks, but a single objection was sufficient to arrest the 
 consideration of his resolution. Proposing to pay the 6 per cent, 
 compounds in this way, naturally suggests paying off the remainder 
 of our national liabilities in the same manner. It certainly would 
 be a great saving of interest to adopt Mr. Davis's scheme. We are 
 paying $50,000,000 a year interest on our 7.30's. Why shouldn't 
 we save it by paying them off, bodily, in legal tenders ? They are 
 payable in currency, and are not greenbacks currency, and legal- 
 tender currency? We are told on all sides that nothing can be bet- 
 ter, as a basis of banking, as an instrument of trade, as a currency 
 for the people, than Uncle Sam's promises to pay. They are claimed 
 to be just as good as gold dollars, or silver dollars, for all the pur- 
 poses for which money is required for our internal trade. If the 
 legal-tender notes are as good as is alleged, why not pay off the 
 7.30 loan in them, as proposed by Mr. Davis? Why pay $50,000,- 
 000 a year interest on this loan, when we can so easily get rid of 
 
36 
 
 such a burdensome tax? If the legal-tender notes of the United 
 States are just as good as coin for our internal trade and business, 
 as we are told — if they are, in fact, money — then we cannot have 
 too many of them, for no people can have too much money. The 
 argument is irresistible, that not only is it a good thing to have the 
 7.30's paid in greenbacks, but it is the very best thing for everybody 
 to have them so paid. And when we shall have paid the 7.30's, we 
 have only to pass one more Legal-Tender Act, and under it pay off 
 our 5.20's by the same process. When we have done this, we shall 
 have realized the logical results of the inflation policy, supported by 
 the thirty majority of the House in its vote of Thursday last. If 
 this policy is soimd for one step, it is sound for every similar step 
 in the same direction, until we end by paying our whole loan, the 
 entire national indebtedness, in irredeemable promises to pay. And 
 we say to the holders of the national loan, and of every form and 
 description of the national obligations drawing interest, that the 
 loo^ical result of the action of the inflationists in the House of Repre- 
 sentatives is thus the utter destruction of those securities by their 
 conversion into worthless paper-money. There is no end to the 
 mischief which can be wrought by the vicious principle of the infla- 
 tionists — that their redeemable legal-tendvT note o£ the Government 
 is money, or is as good as money for any purpose whatever. We 
 say that in its irredeemable state it is a treacherous, uncertain prom- 
 ise ; and that the whole fabric of trade, commerce, industry, specu- 
 lation, banking, based on it, is a rotten fabric, resting on rotten 
 supports, and liable to crumble and go down in one universal crash. 
 The more especially, we say, is this true when the whole super- 
 structure and foundation rests on a careless majority of inflationists 
 in Congress. They need not tell us they do not mean this, and they 
 do not mean that. They do not know what they mean. Their er- 
 ror and their vice is that they trust themselves to the guidance of an 
 tinsound principle which leads them, nolens volens, willing or unwill- 
 ing, straight down the precipice of individual and national bank- 
 ruptcy. They hold that to be security which is not security. They 
 hold that to be money which is not money. They bedevil them- 
 selves and they bedevil the country with the idea that the irredeem- 
 able paper-money of the Government is a blessing. Following the 
 lead of these false and pernicious ideas, they reason and they act 
 
37 
 
 accordingly. Adopting the vicious principle that a small inflation 
 is a good thing, they pave the way for a large inflation as a better. 
 
 If, then, the holders of Government securities do not wish to see 
 these securities substantially repudiated, and themselves stripped 
 they must send somebody to Congress beside inflationists ; whose 
 ideas and whose measures lead directly to this result. The country 
 must be made to realize that irredeemable paper-money is a bold 
 swindle, by whomsoever issued, and is a disgrace to its utterer • and 
 that they who would increase its volume, or prolong its existence a 
 day, except under the pressure of a dire national necessity — a neces- 
 sity which has long since ceased to exist in this country are as 
 
 much public enemies as they who would conspire for the national 
 ruin in any other manner. 
 
 The people have suffered enough from the evils of a depreciated 
 currency to insist on the demand for its extinction. The vast body 
 of consumers have been loug subjected to inordinate prices, in many 
 cases arising from the powerful combinations of gigantic speculators 
 dealing in and controlling all articles of consumption, and especially 
 the necessaries of life. These speculative combinations are sup- 
 ported by the banks, who earn their exorbitant profits by issuing 
 their promises to pay, which they are never called upon to redeem • 
 and thus they become co-conspirators with these plunderers upon the 
 public. The banks are, too generally, no longer administered for 
 the purpose of facilitating commercial operations by legitimate loans. 
 Released from all obligation to pay, except in paper promises, they 
 issue their notes, they afford their credit, they grant their aid to 
 bloated speculations on stocks and on commodities of every descrip- 
 tion. And still, not content with the enormous and ruinous ao-encies 
 of inflation now controlled by them, they, and the operators they 
 sustain, besiege Congress for such additional means of prosecuting 
 their illegitimate, oppressive, and dangerous courses, as is afforded 
 by the additional grant of the one hundred millions of greenbacks 
 voted by the House on Thursday.* 
 
 * In these animadversions, we do not, of course, include all banks. We are 
 compelled to deal in generalities, from the necessities of the case. But every 
 sound bank has the means of self-justification by pointing to the character of its 
 loans, and the measure of its expansion. 
 
38 
 
 We warn all concerned that the way of the transgressor is hard. 
 This sort of thing cannot long go on. The banks and the speculators 
 may have their way for a time, but the day will come when the 
 loose principles now avowed by their representatives, and the lying 
 pretences on which they operate, namely, that a promise may be 
 disregarded without shame, and that the shadow is as good as the 
 substance, will work their own disgrace and destruction. Every 
 solvent man and every solvent institution in the country is deeply 
 interested in maintaining the idea that there is and can be no mer- 
 cantile honor and no sound national financial credit inseparable from 
 strict fidelity to pecuniary engagements. How far we have wan- 
 dered and are wandering from this inflexible standard we forget to 
 remember, in the midst of this rolling, inundating sea of promises to 
 pay which the country has consented for these past few years to dig- 
 nify with the name of money. The people have become debauched 
 with its demoralizing example, and both individual and national 
 credit is in danger of going down before the influences and ideas it 
 has created in the great crisis upon which the country is now enter- 
 ing in its financial and industrial concerns. The cloud on the hori- 
 zon may be yet no bigger than a man's hand. We have intimated 
 what shape it may take, and indeed is likely to take, unless by com- 
 mon consent we are all willing to unite in the declaration that all 
 deliberate irredeemable promises to pay, whether bank promises or 
 Government promises, are audacious, juggling falsehoods, disgracing 
 their utterers ; and which must be relentlessly pursued and pro- 
 claimed as such, till they are driven out of existence. 
 

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