Al-I 
 
 (SI'S 
 
 
VIEWS 
 
 OP 
 
 A. J. WARXER, OF MARIETTA, OHIO, 
 
 GIVEN BEFOIiE 
 
 THE COMMITTEE ON BANKING AND CURRENCY 
 
 IN RELATION TO 
 
 The resumption of specie payments. 
 
 Washington, D. C., April 22,1878. 
 
 Air. Ewing. As you are understood to have given a good deal of 
 attention and study to the question of resumption of specie payment, 
 we have invited you here for the purpose of obtaining your opinion as 
 to whether it is practicable and consistent with the public welfare to re¬ 
 sume specie payment on the 1st of January, 1879. Do you think that 
 it is practicable? 
 
 Air. Warner. I do not think it at once practicable and consistent 
 with the general welfare of the country; nor, indeed, do I think it at 
 all practicable to accomplish and maintain resumption, except by re¬ 
 ducing the paper circulation down to such a limit as would be indi¬ 
 cated by the exercise of the choice of the people between coin and 
 paper. That is, an equilibrium in the circulation itself must be first 
 restored if resumption is to be maintained, and by equilibrium I mean 
 such a state of the circulation as would be indicated by as many people 
 on the average taking coin to the Treasury or the banks for paper as would 
 take paper for coin. That is a state not reached, of course, at once. That 
 is a choice not expressed finally on any given day, nor once for all, but 
 it is a choice exercised from day to day, from time to time, in all the busi¬ 
 ness operations and transactions of the country—to go on from month to 
 month for oneor two years at least. To make myself better understood, 
 I will illustrate my view of the question in this way: When a currency 
 is made convertible into metallic money, or the money of the world, 
 then the quantity of circulation which any country will possess or can 
 maintain is governed solely by the laws determining the distribution 
 of metallic money over the world. No direct act of legislation, I take it, 
 can make it more or make it less. The first question, then, that arises 
 is, how large a volume of convertible currency would be maintained in 
 the United States now; and, secondly, how much of such a volume 
 (when left to the free operation of the choice of the whole people, to be 
 exercised as I have indicated) will be coin and how much paper. I 
 conceive resumption, then, to consist in nothing short of providing coin 
 to the full extent that the people may prefer coin to paper, and in pay-' 
 iug it out in substitution for the paper and retiring the paper down to 
 that limit. I think resumption can be maintained in no other way. To 
 illustrate further, suppose that the volume of currency which would nat- 
 1 w 
 
2 
 
 urally fall to us in the maintenance of the general level ol prices to be 
 seven hundred and fifty million dollars, and suppose further (for the sake 
 of illustration) that we had that amount in circulation now, and that it 
 was all coin, seven hundred million dollars of full coin and fifty millions 
 *jf subsidiary coin; and suppose that Congress should decide that the 
 country needed more currency, and should direct the Secretary of the 
 Treasury to purchase, with bonds, one hundred million dollars of the 
 precious metals from other countries, and pay it out in the course of 
 payments from the Treasury, it is a very plain proposition, I think, that 
 the coin so paid out in excess of the volume that would naturally fall to 
 us would leave the country after being paid out—not immediately as 
 paid out, but certainly soon after. The first effect of making our cir¬ 
 culation redundant, as compared with the currency of the world, would 
 be to raise prices, when exports would be checked, imports increased, 
 and the exchanges turned against us. Then the excess of coin would go 
 away. I conceive that that law holds good and would be just as true with 
 our channels of circulation filled with paper money. If, on the top of 
 legal-tender paper, the Secretary pays out coin, one of two things must 
 necessarily take place; either the coin will displace the paper, and remain 
 as a part of the circulation of the country, in lieu of paper, under the 
 operation of the choice of the people (as I have designated), or, if the 
 paper is kept in circulation per force of its legal-tender quality, then the 
 coin will as surely leave the country again as it would if we had already 
 coin in circulation, and the Secretary should pay out more coin on top 
 of that. That is, the coin will not stay in the country as an addition to 
 a full paper circulation. 
 
 The Chairman. You mean irrespective of the question of what is 
 termed the balance of trade ? 
 
 Mr. Warner. I conceive that that in itself would determine the bal¬ 
 ance of trade against us. That is the way that the gold would be sent 
 abroad. The first effect of an increased volume of money is to raise 
 prices, and thus to operate to determine an adverse balance of trade 
 when the exportable part of the currency goes away. I will say further 
 in that connection, that if it should turn out, as the Secretary of the 
 Treasury' seems to assume (and, apparently, very T many people in the 
 country), that on the announcement of resumption the people will not 
 take the coin, but will choose to retain the whole six hundred and fifty 
 millions, or all the paper now outstanding, rather than have any part 
 of the circulation coin, then, also, would the coin, when paid out, leave 
 the country for the same reason; and resumption, therefore, on that 
 supposition might just as well be begun to-day, with the coin which the 
 Treasury now possesses, as next January; provided always, of course, 
 that our distributive share of the money of the world would not be 
 greater than our present volume of paper, together with the fractional 
 currency aud the coin already in circulation on the Pacific slope, and 
 the reserve that the Treasury now has. Or, to state the proposition 
 generally, coin paid out from the Treasury, whether on top of paper or 
 coin already in circulation, in excess of what would be our distributive 
 share of the currency of the world, as determined by the laws of trade, 
 unless allowed to displace a part of that already in circulation, will not 
 long stay in the country, but flow to other countries. This I understand 
 to be the law of currency, the law as given by* writers on monetary 
 science, and as attested by the experience of this and all other coun¬ 
 tries. As to what our distributive share of the money of the world 
 would be now or at any given time cannot, of course, be set down before¬ 
 hand. The quantity of such a currency is determined by trade, not trade 
 
3 
 
 by tbe quantity of the money. Still I think there are data from which 
 we can arrive at an approximate idea of the volume. 
 
 Mr. Ewing. Give your views as to what you think the volume would 
 be. 
 
 Mr. Warner. I made some time ago some figures on that question, 
 taking as a starting point our currency at different periods before the 
 war, as in 1851, 1858, 1800, and 1861. I wish to premise, however, with 
 reference to all estimates made as to the quantity of coin iu the country 
 at any given time, either in 1801 or before that time or now, that we 
 must take all these estimates with a good deal of allowance; but I have 
 followed the estimates given in the Mint and Treasury reports as probably 
 nearer correct than any others. In 1854 the total circulation of the 
 United States, as compiled from the Treasury reports, was, in round 
 numbers, four hundred and fifty-four millions. Of that, two hundred 
 and four millious was in bank-notes, and the balance in coin and bullion. 
 The coin was divided into coin in circulation, one hundred and ninety- 
 one millions, and coin-reserve in banks, fifty-nine millions. In 1857 the 
 total circulation- 
 
 Mr. IIardenbergh. Before or after the panic? 
 
 Mr. Warner. Before suspension. Suspension took place on this 
 state of the currency. In 1857 the total currency of the country was 
 four hundred and sixty-two millious. Of that, two hundred and four¬ 
 teen millions consisted of bank-notes; the balance of coin. The coin 
 was divided into specie-reserve in banks, fifty-eight millious (there was, 
 as will be seen, an increase in bank-notes and a decline in bank reserves 
 before suspension in 1857), and coin in the circulation of the coun¬ 
 try, one hundred and ninety millions, a decline of only one million 
 from 1854. Iu 1801 the total circulation of the country (which in¬ 
 cludes actual circulation, reserves, hoards, and everything) was four 
 hundred and eighty-seven millions, two hundred and two millions 
 of which consisted of bank-notes, and the balance of coin, divided 
 into specie reserves in banks, eighty-seven millions, and the coin in 
 circulation, one hundred and ninety-eight millions. In that year, or 
 before the end of the year, there was a general suspension. In other- 
 words, there was in the country in 1801 when the suspension 
 of specie payments took place, $1.41 in coin to $1 paper. But, compar¬ 
 ing the Secretary’s estimate of the coin there will be in the country on 
 January 1, 1879, I find that, if there is accumulated by the Secretary 
 and the banks all the coin which the Secretary calculates will be accu¬ 
 mulated, we will have 40 cents of coin in the country to $1 of paper. 
 That is, the banks suspended in 1801 with $1.41 of coiu in the country 
 to $1 of paper money, and we will have in 1879, 40 cents in coiu to $1 
 iu paper, upon which state of facts Mr. Sherman proposes to resume. 
 
 Mr. Ewing. What was the percentage between coin and paper when 
 we suspended in 1S57 ? 
 
 Mr. Warner. We had in the country in 1857, when we suspended, 
 $1.10 in coin to $1 in paper. On that point the Secretary’s comparison 
 of the strength of the United States Treasury and of the banks with 
 other countries—foreign moneyed institutions—is, it seems to me, liable 
 to lead to error (and I believe a serious error), in this: that it does not 
 take into consideration the condition of the circulation in the different 
 countries. For instance, to restore even the equilibrium of the cur¬ 
 rency which existed in 1801 will require considerably more coin than it 
 is expected the Treasury and banks altogether will have by January, 
 1879. 
 
 Mr. Ewing. How much more? 
 
4 
 
 Mr. Warner. I will figure out the percentages and give them to the 
 committee again. As to the proportion of coin and paper in circula¬ 
 tion in different countries (taking the estimates made by Mr. Ernest 
 Seyd), there is in Great Britain about 33.33 of coin to $1 of paper; iu 
 France (according to the last report I have seen—that of January, 1878), 
 33.10 in coin to $1 in paper (taking the total circulation), and in Ger¬ 
 many, a little over $4 in coin to 81 in paper. Beyond those countries I 
 have not carried the investigation in that respect, but I will review 
 these figures and give the correct percentages to the committee. 
 
 Mr. Hardenbergh. Uow then do you account for the depressed con¬ 
 dition of affairs in Germany rather than in France, if the reserve is so 
 much greater in Germany than it is iu France? 
 
 Mr. Warner. It is not the reserve which is so much greater; it is the 
 proportion of coin to paper in the entire country. But that is not among 
 the causes of the depressed state of trade iu Germany. There are other 
 causes for that. It is mainly due, 1 think, to the demonetization of sil¬ 
 ver. Germany’s own economists, I believe, now almost universally agree 
 on that. 
 
 Mr. Ewing. That is, to the contraction of the currency by the demone¬ 
 tization of silver ? 
 
 Mr. Warner. Yes; and the changing from a cheaper to a dearer cur¬ 
 rency—from silver to gold, by a process that enhanced the value of gold— 
 the contraction involved in the chauge from a cheaper to a dearer cur¬ 
 rency. 
 
 Mr. Ewing. Just the process which we have been goiug through for 
 the past four years. 
 
 The Chairman. Have you given any thought to the question as to the 
 ability of this country to maintain resumption, growing out of the dif¬ 
 ference in the character of the paper currency that exists? 
 
 Mr. Warner. Yes; I have considered that, and I think this is true : 
 When a paper currency is, in fact, convertible, readily and easily con¬ 
 vertible, then there is the least difference in the world between a paper 
 that is legal tender and one that is not. The force of legal tender is 
 not exerted, does not come into play, when the currency is readily and 
 easily convertible into metallic money, which is a legal tender. The 
 legal-tender quality comes into force at the point and at the instant that 
 convertibility either fails or is made difficult or uncertain, and not be¬ 
 fore. The difference will depend, in my judgment, not so much on the 
 fact that the curreucy is legal tender as on the fact that convertibility 
 will be made easy, and that there will be no fear of failure of converti¬ 
 bility to-morrow. As long as bank-notes are actually and easily con¬ 
 vertible, then the difference between them and legal tender is but*little, 
 because the legal-tender quality does not come into play, except at the 
 point where convertibility fails or becomes uncertain. 
 
 Mr. Ewing. That is, it is your opinion that it will require as large a 
 reserve to maintain resumption as if the whole paper currency was bank 
 currency ? 
 
 Mr. Warner. 1 think a somewhat larger proportion of paper, green¬ 
 backs and national bank-notes, will be maintained than there would be 
 of the old bank curreucy ; resulting, not so much from any legal-tender 
 quality, as from its uniformity and the sustained confidence of the 
 country that the paper will be as good to morrow or next week as it is 
 to day, and that if convertibility fails its use as money will not be less¬ 
 ened ; but I should not expect to see the proportion very much more 
 than it would bo with readily convertible bank currency under the old 
 system. You ■will observe, from the data I have given, that the paper 
 
part of the circulatiou seldom exceeded 45 per cent, of the whole circu¬ 
 lation of the country. If it exceeded 45 per cent., we And (I think, too, 
 invariably, so far as I have examined different periods), that suspension 
 took place before it reached 50 per cent, of the whole. Generally from 
 40 to 45 per cent, of the whole seems to have been the safe limit of bank 
 currency before 1861. But I will add this further : that, if it should prove 
 that a very much larger percentage of the whole circulation would be pa¬ 
 per, then there can be no possible gain now in accumulating a large stock 
 of coin for the purpose of resumption. To illustrate that better, let me 
 give these figures. It has been proposed, I see, to retain six hundred and 
 fifty millions of paper after resumption. There is also in circulation fifty 
 millions of fractional currency and subsidiary coin; and, if we suppose 
 that there are fifty millions of coin on the Pacific slope in circulation 
 (which is an overestimate), and if we assume that eight hundred mill¬ 
 ions of the currency of the world would be our distributive share, and 
 no more, then you will see that there is only room for fifty millions 
 more ; and if you put out one liuudred millions, the result, as I have, 
 stated, must be, first, a rise in prices, which will affect exports and 
 turn the exchanges sufficiently against us to send the excess of currency 
 away, just as when a vessel is already tilled, if more fluid be added, it 
 will overflow; and, therefore, I can come to no other conclusion (and 
 so far as I have been able to study the question I do not see how any 
 other conclusion can be reached) than that coin, put out in excess of 
 w’hat will be our distributive share of the money of the world, will dis¬ 
 place paper or, on the other hand, if paper is maintained in circulation 
 by force of the legal-tender quality, or because it is preferred to coin, 
 then the excess of coin will flow away, and resumption might as well 
 begin to day as next January; and to accumulate coin would be a 
 detriment to the world. I do not believe, however, that paper, to 
 any such extent as now claimed, would be preferred to coin if 
 left to the free operation of choice. I gave the committee the cir¬ 
 culation in 1S54, 1857, and 18G1. I did not consider in that con¬ 
 nection the conditions, or the change of conditions, of our commerce, 
 or of the currency of the world, that would tend to affect, one way 
 or the other, the quantity of circulation which we would now prob¬ 
 ably have. There are four things, I think, which chiefly influence, or 
 are controlling in that matter: First, the increase of population since 
 1861; second, the increase in trade, commerce, and national wealth 
 since 1861; third (and a very important element), the additions to the 
 stock of the precious metals in the world from the mines; and fourth, 
 the effect of the issue of inconvertible paper in this and other countries. 
 For I think it is a principle which can hardly be questioned, that when 
 any country issues an inconvertible paper, and thereby displaces the 
 coin which was in circulation, which coin goes to swell the volume of 
 coin in other countries, to the extent that coin is displaced by such 
 issues, to that extent the effect on the total circulation of the world is 
 precisely the same as if so much coin was suddenly created and added 
 to that already in circulatiou; and, therefore, in considering the distrib¬ 
 utive share of the world’s money any country w T ould possess, we caunot 
 ignore the effect of the inconvertible issues of such countries as Russia, 
 Austria, Italy, Spain, and other States, as well as our own. Then a 
 fifth consideration (and one -which may be very controlling) is whether 
 more States of Europe will or will not demonetize silver, because it will 
 be very readily granted, I think, that our distributive share of the 
 money of the world, with gold alone as that money, would be a very 
 different sum from that which would fall to us with both gold and silver 
 
6 
 
 as mone.v for all countries. Probably the sum would be double in the 
 one case what it would be in the other. All the estimates I make, there¬ 
 fore, will be on the basis of bi-metallism. The increase in population in 
 the United States since 1801 has been, say, fifteen millions, or 45 or 40 
 per cent. The increase in national wealth, trade, and commerce is a 
 little more difficult to get at; but, divided into its different parts, we 
 find the increase in incomes from 1800 to 1809 was about 75 per cent. 
 According to our census returns our manufactures increased from a 
 little more than one thousand million dollars in 1850, and not quite two 
 thousand millions in 1800, to four thousand two hundred and thirty-three 
 millions in 1870, or an increase in ten years of nearly 125 per cent. The 
 estimate of 1870, however, was in currency, and therefore there should 
 be the proper deduction made. The increase in the value ot real and 
 personal estate, between 1800 and 1870 (we have no data to go beyond 
 that), was nearly 150 per cent. 
 
 Mr. Bell. That is on a currency basis, too ? 
 
 Mr. Warner. On a currency basis, too. Taking railroads, there 
 were but about thirty-one thousand miles of railroad in 1801 against 
 seventy-six thousand miles now, or an increase of nearly 150 percent. 
 The increase in the precious metals for the world since 1861 (according 
 to the table given in the parliamentary report on silver), and adding 
 $350,000,000 as the production of 1876 and 1877, was about twenty-six 
 hundred million dollars. The coin equivalent of the inconvertible paper 
 issued in Europe and the United States can hardly be taken at less than 
 fifteen hundred millions; the total quautity given by Ernest Seyd is 
 somewhere from two thousand million to twenty-two hundred and fifty 
 million dollars in 1876. I put the coin equivalent-of that, I think, 
 rather under than over, by giving it at fifteen hundred million dollars. 
 In 1876, the population of England, France, Germany, Switzerland, 
 Belgium, Holland, Denmark, and Sweden (generally put down as the 
 creditor nations of Europe) was one hundred and twenty-seven millions. 
 These states are all coin states, and, according to Mr. Seyd, possessed 
 a circulation of $3,400,000,000 of metallic money. The rest of the states 
 of Europe, usually designated as the indebted states, have, according 
 to the same authority, but five hundred and fifty millions of metallic 
 money, but have a population of one hundred and eighty-seven millions. 
 The difference in the circulation is made up by inconvertible currency. 
 It is much less per capita, it will be seen, than in the other countries; 
 and, except the $550,000,000, the currency of this large population is 
 made up of inconvertible paper, and all are indebted states. Now, put¬ 
 ting together these different influences which would affect the volume 
 of money that would circulate now in the United States (and I grant 
 that there are other influences), and counting all at 50 per cent.—that 
 is, as having the effect of increasing our currency 50 per cent.—that 
 would give us about seven hundred and thirty millions of dollars as an 
 equivalent currency in 1878, when compared with the currency of 1861. 
 
 Mr. Ewing. Do you not think that an underestimate? 
 
 Mr. Warner. I think it may be an underestimate. I have made it 
 under rather than over. It may happen that a larger volume of incon¬ 
 vertible paper will circulate in a country without raising prices above 
 the metallic level than of a convertible paper. The movement of the 
 precious metals is determined principally by movable commodities, and 
 a country where the larger part of the wealth is fixed will have pro¬ 
 portionally less metallic money than one the larger part of whose 
 wealth consists in movable commodities, and commodities that will 
 bear distant transportation. This, as well as the habits of the people, 
 
I think, has much to do in determining so large a currency to France. 
 Hence, a country with most of its wealth in fixed forms, or so situated 
 as to be without facilities for the easy movement of its exportable 
 wealth, might have a certain amount of currency comparable with its 
 fixed wealth unaffected by international trade. Such was the situation 
 of the first colonies on this continent. They had nothing to export, but 
 were in constant need of imports, and consequently they had little 
 money. A resort, under such circumstances, to some well-regulated 
 inconvertible currency would be a great gain, and in fact all the col¬ 
 onies—some of them in a cumbersome way—adopted such a currency. 
 Franklin’s idea of paper money doubtless grew out of this experience. 
 But of a convertible currency we should not expect to see more than 
 seven hundred and fifty, or at most eight hundred millions, both coin 
 and paper, in the present state of our trade, and that for other reasons. 
 Taking another line of investigation, I arrive at very nearly the same 
 result (a line of investigation perhaps more reliable in some respects). 
 Taking our paper currency at six hundred and fifty million dollars now, 
 with fifty millions of subsidiary coin and fractional currency, there is 
 at this time almost no premium on gold, but silver bullion is at a dis¬ 
 count as compared with paper of, say, 0 to 8 per cent. The fact of 
 silver bullion being at a discount is in itself positive, direct, and certain 
 proof that our currency is to day deficient, rather than redundant, as 
 compared with bi-metallism for the world. If it was not deficient, then, 
 with the restriction on coinage removed, silver would as certainly flow 
 into this country now as that water will flow to a lower level unless it 
 is prevented, as silver is now, through the restriction on coinage. Now, 
 taking the average of premium and discount on gold and silver, and 
 the two metals combined, as compared with our circulation, are at a 
 discount rather than at a premium. With unrestricted coinage a state 
 of equilibrium w 7 ould be established by an inflow of coin, which w r ould, 
 undoubtedly, in the present ratio, be silver. 
 
 Mr. Ewing. But the restriction on coinage does not impair the force 
 of the argument. 
 
 Mr. Warner. Not at all; the argument is the same; but I call your 
 attention to this one point which I think has great force, and is very 
 direct evidence, namely, that at the point at which the average of 
 premium and discount of the two metals (gold and silver) touched the 
 zero line of our currency (somewhere a year back) when perhaps the 
 volume was fifty millions greater than it is now, that marked exactly, 
 for that time, the equivalency of our currency with the currency of the 
 world in the condition of trade existing then; any variation in our trade 
 would, of course, vary the quantity of currency. 
 
 Mr. Ewing. We had then about sixty millions of paper more than we 
 have now. That would make seven hundred and ten millions in paper 
 and fifty millions in fractional currency—seven hundred and sixty mill¬ 
 ions. 
 
 Mr. Warner. Then include in the calculation whatever coin there is 
 in circulation in the Pacific States that would remain. 
 
 Mr. Ewing. Say forty millions. That would make the aggregate of 
 our currency to meet the equivalent curreucy of the world a year ago 
 eight hundred million dollars. 
 
 Mr. Warner. Yes; but in that connection I think this fact should 
 be considered : Since 1873-’74, our total volume of paper has not been 
 in actual circulation—has not been effective in determining prices. 
 Paper that is for the time being withdrawn, hoarded in bank vaults, has 
 no more effect on prices and no more influence on trade than a currency 
 
8 
 
 not in existence at all. But, on tlie other hand, the moment there was 
 a revival in trade and business, this currency would be called out. Its 
 effect, however, would be mainly taken up, I think, in the increased de¬ 
 mand for money ; that is, an increase in the business of the country. 
 
 Mr. Ewing. What, in your opinion, is the amount of coin which the 
 people will take, if left to their free choice, under easy and certain con- 
 
 Mr. Warner. My own judgment is that it would not be safe to rely 
 on any less than 50 per cent, of the whole circulation being coin. It 
 would be more likely to be more than less. In that I include the re¬ 
 serves of banks, the hoardings in the country, and the uses generally 
 for which coin will be preferred to paper. And I base that on our ex¬ 
 perience in this country and on the experience of other countries, not 
 relying, as many do, on the faith that when the people find they can 
 have coin they will not want it. I do not wish to be understood, how¬ 
 ever, as giving the opinion that this 50 per cent, of coin would be re¬ 
 quired at once, but in the course of one or two years. The demand for 
 coin would continue from month to month until that state of equilibrium 
 in our circulation was reached, indicated by as many people taking 
 coin to the banks or the Treasury for paper as would take paper to the 
 banks or the Treasury for coin. That I would call the state of equilib¬ 
 rium of the currency. 
 
 Mr. Hardenbergh. How do you reach that ? 
 
 Mr. Warner. In my judgment it can only be gained by the displace¬ 
 ment of a part of our present volume of paper by coin. 
 
 Mr. Hardenbergh. Then you are opposed to any further issue of 
 paper by the government ? 
 
 Mr. Warner. That involves other considerations; but if I were asked 
 my judgment upon that, 1 should say I do not think more paper now 
 was the remedy we needed. 
 
 Mr. Hardenbergh. Are you in favor of early resumption on the 
 part of the government ? 
 
 Mr. Warner. I am not. I am in favor, however, of maintaining the 
 equivalency of coin and paper; maintaining the paper at a level with 
 metallic money by limiting the volume of paper to the present amount, 
 or to an amount not greater than would be our distributive share of the 
 currency of the world; on this principle, that an inconvertible paper 
 currency actually in use, performing all the functions of money, if less, 
 or not greater, in amount than would be the distributive share of the 
 currency of the world for that country will always be on a level with 
 metallic money, and if it does not fill the channels of circulation full, 
 coin will flow in and fill the vacuum. The vacuum, however, must first 
 be made. Coin will go to a country only when it will buy there more 
 movable commodities than elsewhere. 
 
 Mr. Hardenbergh. Do you find any positive equalization of this 
 distributive share which you speak of ? Is it not affected more or less 
 by wars ? 
 
 Mr. Warner. Certainly; it cannot be fixed beforehand; it is impossi¬ 
 ble to do that. That would require omniscience. It fixes itself, or, 
 rather, is determined by the laws of trade. Wars, good or bad crops, 
 active or stagnant production and trade, all operate to affect the flow of 
 the precious metals. But it is quite possible to fix the limit of paper 
 within what would always be our distributive share of the world’s 
 money. Taking the condition of the country now into consideration, it 
 seems to me that the part of wisdom would be .to maintain our paper at 
 a level with metallic money, on the principle of limitation of volume. 
 
9 
 
 That would involve no further contraction, and uo further alteration in 
 the value of money. 
 
 Mr. Hardenrergii. That is resumption. 
 
 Mr. Warner. There is a very great difference, .1 think, between that 
 and resumption. I would maintain the value of paper at the coin level 
 by limitation of volume instead of by convertibility or resumption. 
 
 Mr. Hardenrergii. Equalization is resumption. 
 
 Mr. Warner. In ray judgment, resumption has only begun when you 
 have reached the point of equalization. Then the work of resumption 
 really begins, and consists in providing coin and actually paying it out 
 in substitution for paper—not in addition to it—to the extent that peo¬ 
 ple may choose coin to paper, and retiring the paper. 
 
 Mr. Ewing. What is the practical difference between equalization and 
 resumption ? 
 
 Mr. Warner. The practical difference is this : assuming that eight 
 hundred millions of dollars, or any other sum you may take, would con¬ 
 stitute our distributive share of the money of the world (as I have 
 before explained), then, if the currency is convertible, it will conform 
 to that volume. Now, if an inconvertible paper circulation be limited 
 in amount to a sum no greater than the eight hundred million dollars, 
 then it will not fall below the level of metallic money. But that is a 
 very different thing from resumption. For, having assumed our quota 
 at eight hundred million dollars, if you make it convertible then you at 
 once lay it open to the choice of all the people of the country (a choice 
 to be exercised, as I have said, in all their business transactions from 
 day to day and from month to mouth), as to what part of the eight hun¬ 
 dred million dollars they will have in coin and what part they will retain in 
 paper. Then, providing the coin and paying it out in substitution for 
 the paper, and retiring the paper to the extent that the people may pre¬ 
 fer coin to paper, is the accomplishment of resumption, and, in my 
 judgment, nothing short of that is; and when that is done I think it 
 will be found that at least half—more rather than less—of the entire 
 volume will be coin, or in an assumed volume of $800,000,000, 
 $400,000,000 of it, at least, would be coin, and not more than 
 $400,000,000 paper, ltesumption would be accomplished on that sup¬ 
 position, then, when the $400,000,000 of coin had been provided and all 
 paper in excess of $400,000,000 destroyed. The part destroyed, of 
 course, would be the greenbacks. The substitution of coin for paper 
 necessitates, in the very operation, prolonged contraction, and, in my 
 judgment, one to two years more of depressed business and trade 
 would follow such a course. The very process of gathering up paper 
 and presenting it for coin, and getting coin back, involves, practically, 
 more or less temporary contraction. 
 
 Again, if in the course of business as large a part of the whole circu¬ 
 lation should be required to be coin, as existed in 1801, or $1.41 coin to 
 $1 of paper, then resumption will have been fully accomplished only 
 when that proportion of coin has been provided and the paper in excess 
 of $1 to $1.40 of coin retired. And in this connection it is pertinent to 
 consider that before 18G1 we seldom had a truly convertible currency, 
 even when called convertible. 
 
 Mr. Eaaies. If the amount of paper currency in circulation is equal 
 to coin in its purchasing value, is there any probability that any con¬ 
 siderable portion of it will be presented for redemption after resumption ? 
 
 Mr. Warner. In mv judgment it will. But I will repeat that if it 
 should turn out that in the exercise of their choice the people do not 
 wish coin, but prefer paper, then you can as well resume to day as next 
 
10 
 
 January, because you have more coin now in the Treasury of the United 
 States and in the banks, if added to the present paper circulation and 
 the subsidiary silver coin, than will make up our share ot the coin of the 
 world, and all in excess of that will leave us after it is liberated. 
 
 Mr. Eames. State whether or not, in the transaction of business, 
 paper currencv is not more convenient than coin ; and for that reason, if 
 it is equal to coin, will it not be preferred and kept for the purposes of 
 business to the extent that it is required ? 
 
 Mr. Warner. Jt will to the extent that it is required; but in my 
 judgment that extent will not exceed (when the state of equilibrium has 
 been restored) more than 50 per cent, ot the entire circulation—-less 
 rather than more. As this same question was prominently up before 
 the secret committee of the English Parliament in 1819, 1 should be 
 glad to read the opinions of two or three witnesses as then expressed, 
 in regard to it—opinions which, if interpreted by the experience in 
 England which followed, will, I think, throw light on the question now 
 before this country. Mr. Alexander Baring expressed his decided belief 
 that it would not be safe for the bank to resume until a very considera¬ 
 ble part of the circulation in England had become coin. Mr. Harmon 
 in his evidence stated “that at that period (1817) he was induced to 
 Hatter himself that if the doGrs of the banks were opened, the public 
 would hardly know whether the}’ were open or shut—that was in a 
 moment of tranquillity—that people seemed indifferent about gold ; and 
 that instead of coming to the bank for gold, they brought their gold to 
 the bank; that remained until the financial operations in France began, 
 and as soon as they were talked of the tide turned.” 
 
 Mr. Stuckey [says the report], a gentleman very extensively connected with hanks 
 in the county of Somerset, gave evidence to the following effect: “ In the latter end 
 of the year 1816 and beginning of 1817, we had a circulation of coin for some months; 
 it cost us at that period nearly one hundred pounds to transmit a surplus quantity of 
 coin to London, of which four-fifths in value, at least, consisted of gold. We could not 
 get rid of it in the country, our customers preferring our notes. In the spring of 1817,1 
 brought with me to town near 1,000 guineas from oue of our banks ; on taking them to 
 our London banker, he requested as a favor I would not leave them there. They had 
 lately sent so many to the Bank of England that they did not like to trouble them 
 any more; besides, the bank only took thosq which were of full weight.” 
 
 Now, as to what followed. Iu 1817, the Bank of England gave notice 
 that it would pay all its one pound and two pound notes dated prior to 
 1813 and 1S1G. It began payment. The testimony of Mr. Harmon and 
 of Mr. Stuckey related to the beginning of that payment. The bank 
 paid out, during the first part of 1817, but little; but before the middle 
 of 1818 the bank had paid out nearly £7,000,000, and stopped. Three- 
 fourths of the amount paid out, Mr. Joplin says, was traced directly to 
 the French mints. 
 
 The committee, in 1819, reporting on this evidence, say : 
 
 Notwithstanding this evidence, it must be admitted that no satisfactory conclusion 
 can be drawn from the experience of so short an interval as that which is referred to 
 by Mr. Harmon and Mr. Stuckey. Great uncertainty must prevail with respect to the 
 amount of gold which may bo required for the purposes of internal circulation. 
 
 Also, 
 
 Your committee are satisfied that the bank, in undertaking to pay their notes in 
 cash, under the circumstances above mentioned, acted from the best motives, and from 
 a belief that the measure would tend to facilitate the complete resumption of pay¬ 
 ments in specie. Unfortunately, it has had a contrary effect. 
 
 In 1819 the resumption act was passed, requiring the bank, on the 1st 
 of February, 1820, to commence paying its notes iu bullion at the mar¬ 
 ket-price, instead of at the mint-price—the term which they use there. 
 
11 
 
 From February, 1S20, when the bank began paying bullion for bank¬ 
 notes, until 1823, according to Mr. Joplin, the bank imported into En¬ 
 gland from 20,000,000 to 30,000,000 pounds sterling. During that period 
 the mint issued ,£L9,000,000 in gold coin, and there was retired over 
 £21,000,000 of the paper currency. The total bank currency in 1818 
 was £48,000,000, and in 1823 it was about £27,000,000, £21,000,000 and 
 over having been retired. It was well known that guineas, when first 
 paid one in 1820, were largely hoarded. The state of equilibrium of the 
 currency was not reached until 1823, and at that time the paper part of 
 the currency was reduced, as shown, from £48,000,000 to £27,000,000, 
 the metallic part having increased till there was much more of it than 
 of paper. It is hardly necessary to add that the period of the greatest 
 distress in England came after the commencement of resumption in 1820, 
 the period known as the great agricultural distress. 
 
 Mr. Bell. Resulting from the depression in the prices of property 
 and wheat? 
 
 Mr. Warner. Yes, sir. According to Mr. Atwood, Sir James Gra¬ 
 ham, Mushet, and others, prices fell all the way from 35 to 50percent., 
 and some things even more. 
 
 Mr. Ewing. Mr. Tooke’s tables showed the fall ? 
 
 Mr. Warner. Yes; it showed the general fall in prices that took 
 place. 
 
 Mr. Ewing. What was the extent of the diminution of credits during 
 that time ? 
 
 Mr. Warner. That point I deem a very important one in the consid¬ 
 eration of this subject. Credit was almost entirely overthrown ; and it 
 is duetto that fact, very largely, that prices fell so much in England, 
 and that prices have fallen so much in this country. To give a summary 
 view, as 1 understand it, of that period between 1797 and 1816: England 
 had forced out of circulation and out of the country about £30,000,000 of 
 gold, by the issue of inconvertible paper money. The gold had gone 
 into France, and other countries in Europe which maintained a metallic 
 circulation. Austria displaced about $100,000,000; Russia, $75,000,000; 
 Prussia, from $40,000,000 to $50,000,000; and other states more or less, 
 during the Napoleonic wars. All the coin displaced in these countries 
 went into the few countries still maintaining coin; and, in consequence, 
 the value of metallic money itself was greatly depreciated; or, in other 
 words, prices generally rose. The failure to take that into considera¬ 
 tion was, I thiuk, where Ricardo made his great mistake in giving the 
 opinion that resumption in England involved only a difference of 3 or 
 4 per cent. After 1816, when all these countries together commenced 
 the withdrawal of their paper money, and when a redistribution of 
 metallic money took place in Europe, gold itself was greatly changed in 
 value, as compared with commodities generally. At the same time that 
 money was undergoing diminution in quantity, and a consequent in¬ 
 crease in value, credit was being undermined. Credit, which with 
 currency in a state of rest would be secure, always suffers when changes 
 of that kind are going on. To illustrate that further, where there is a 
 given amount of currency in a country, and things are in a state of rest, 
 credit assumes a certain relation to the currency. Authors have variously 
 estimated the effect of credit. McLeod says credit is ten times the 
 amount of all the money, aud Webster said it was more to us than all 
 our mines of gold and silver. But the moment that money is contracted 
 in quantity, credit is contracted in a far greater ratio ; aud if the con¬ 
 traction of the currency is sudden, and takes place to any considerable 
 extent, it very often results, as we have many times seen, in an almost 
 
12 
 
 entire overthrow of credit. I think one of the principal reasons of the 
 low prices of real estate, and property generally, now in this country, 
 at least in many parts of the country, is due to the fact that while the 
 contraction of the money volume is going on, credit is almost entirely 
 neutralized, and has little or no etfect in maintaining business or prices. 
 
 Mr. Ewing. And the contraction of the currency causes a shrinkage 
 in values ? 
 
 Mr. Warner. Undoubtedly; and the effect of contraction is multi¬ 
 plied by the overthrow of credit which it causes. 
 
 Mr. Ewing. And the overthrow of credit reacts on prices ? 
 
 Mr. Warner. Yes; aud often suddenly and powerfully. 
 
 Mr. Ewing. The primary cause is the contraction of the currency, 
 and the consequent shrinking of values, making the position of every 
 man who uses credit uncertain and unstable ; and that uncertainty and 
 instability are magnified, and thus credit is contracted three or four 
 fold ? 
 
 Mr. Warner. I think that is true. 
 
 Mr. Eames. You mean the contraction of the currency below that 
 point required for business purposes, do you not? 
 
 Mr. Warner. It is very seldom that a country has more currency 
 in that sense than business absorbs. I take it that if we should double 
 the volume of inconvertible paper money the country would very soon 
 absorb it. Prices would rise, undoubtedly, aud the money volume would 
 be absorbed. 
 
 Mr. Eames. Do you mean to say indefinitely and to any amount ? 
 
 Mr. Warner. Yes. Suppose $800,000,000 to constitute at a given 
 time our currency. Then if that volume should be doubled or made 
 $1,600,000,000, the whole would have no greater value than the $800,- 
 000,000 had, and would not until the increase of business had changed 
 the relations between the quantity of commodities and transactions and 
 the quautity of money. The effect otherwise would be consumed in rais¬ 
 ing prices. If at the same time that you doubled the money the busi¬ 
 ness of the couutry (the quantity of commodities and transactions) were 
 doubled, there would be no change in prices, except what was incident 
 to the act of changing. There can be uo general rise of prices in any coun¬ 
 try, and no general fall of prices, except it comes from a change in the 
 quantity of money. Prices of commodities vary, as compared with one 
 another, continually ; but a general fall or a general rise means, in effect, 
 a diminution or an increase in the quautity of money, and consequently 
 a change iu its value. The diminution of the quantity of our money has 
 not been at all iu proportion to the decline in values, and the difference 
 is made up, I think, in two ways: first, the change in the value of 
 metallic money itself, by the demonetization of silver iu certain countries, 
 and by a partial redistribution of metallic money, caused both by the de¬ 
 monetization aud by a withdrawal of paper money in this and other coun¬ 
 tries, and the demand made for metallic money to take its place; but also 
 largely from the breaking down of credit which so sustains prices when 
 based upon a stable currency. If we were to issue $100,000,000 of 
 inconvertible money and afterward to reduce it suddenly by $30,000,000, 
 the same consequences would follow as would result from a sudden re¬ 
 duction of $30,000,000 in the volume of coin. And I may state gener¬ 
 ally what I understand to be a law of currency—a law which bears di¬ 
 rectly upon this question of resumption. It is this: Having, say, 
 $650,000,000 of paper now in the country, to destroy any part of that 
 and buy coin from other countries to take its place must necessarily 
 produce the same consequences and have the same effect on business 
 
13 
 
 and prices as would be the case if, having a full volume of coin now in 
 circulation, we should propose to annihilate, step by step, as much of 
 the coiu as we propose to retire of paper, and to buy other coin from 
 other countries to take its place. To illustrate my meaning better: If 
 England now should determine upon the annihilation of $250,000,000 
 of her gold, with a view of buying other gold to take its place, the ef¬ 
 fect on prices and business of such a step in England could not be dif¬ 
 ferent from the eileet iu this country of destroying that amount of our 
 circulation, aud buying coin from other countries to take its place. 
 
 Mr. Ewing. You think, then, that if the people are left to their free 
 choice under the operation of resumption they will require as much 
 coin as paper If 
 
 Mr. Warner. I think that when the state of equilibrium has been 
 reached, we will have at least 50 per cent, of the whole circulation (re¬ 
 serves, hoards, and for other uses) in coin, and not more than 50 per 
 cent, in paper. 
 
 Mr. Ewing. The proportion of coin to circulation in 18GL and 1857 
 was about 03 or 04 per cent. 
 
 Mr. Warner. In 1800 we had just about 00 per ceut. coin to 40 per 
 cent, paper. In 1857 it got down as low as 534 or 54 per cent, coin to 
 4G£ paper, and then suspension took place. 
 
 Mr. Ewing. And you think that suspension took place from the dim¬ 
 inution of coin ? 
 
 Mr. Warner. Yes, sir. Just before that there was an increase of 
 paper—an increase in the quantity of the currency of the country—and 
 exchange was' turned agaiust us, coin went away, and then the suspen¬ 
 sion took place. That is an important point, I think, in the considera¬ 
 tion of the currency. It operates in this way: when banks issue the cur¬ 
 rency, if there is at the one period an increase in the bank’s reserves of, 
 say, $20,000,000 of coin (and the first increase of the metallic currency 
 always goes into the banks, and its first outflow is from the banks and 
 not from the circulation), there will almost certainly bo an issue of 
 $00,000,000 to $80,000,000 of paper based on the $20,000,000 increase in 
 the coin. That increases the volume, lessens the value of the entire 
 currency (including the metallic part), raises price, and turns the ex¬ 
 changes against us. Then the banks have to pay out coin, and if 
 $20,000,000 of gold goes away, in order to preserve the same relation be¬ 
 tween paper and coiu, they must contract the paper curreucy sixty or 
 eighty millions. It is the extreme fluctuation in the volume of currency 
 issued in this way (first by increasing and then by decreasing it) that 
 leads to the wide fluctuations iu prices which we had under that sys¬ 
 tem. 
 
 Mr. Ewing. Assuming $800,000,000 to be the distributive share for 
 this country on a metallic basis, you think we must at least have 
 $100,000,000 of that in coin ! 
 
 Mr. Warner. I think if left to the operation of the choice of the 
 people to determine what part of the $800,000,000 should be coin and 
 what part paper, that within a period of twelve or eighteen or twenty- 
 four mouths, at farthest, after resumption began, half, at least, of it 
 would be coiu. 
 
 Mr. Ewing. There will be no resumption of specie payment unless the 
 people be left to that free choice ’! 
 
 Mr. Warner. Manifestly not. You may, of course, initiate resump¬ 
 tion at any time, but the maintenance of it will consist in supplyingcoin 
 to answer all future demands. 
 
 The Chairman. You observe that the Secretary of the Treasury 
 
14 
 
 intimates that Congress ought to pass some law to provide against 
 what lie says is a necessary evil of metallic money (that there is no 
 provision by which banks or the government can pay in coin). Has it 
 ever occurred to you that that can be obviated by authorizing the Sec¬ 
 retary of the Treasury, in case he resumes, to pay his obligations at the 
 market rate of money, instead of at the mint rate? Have you ever 
 given that subject any attention ? 
 
 Mr. Warner. That question was discussed in England during their 
 period of suspension. It was carefully considered by Kicardo, Sir 
 Robert Peel, and others. In fact, resumption in England began on that 
 theory ; but, as a means of regulating the quantity of money, which alone 
 determines its value, I have never been able to see how that principle 
 is going to work so as to regulate the volume in such manner as would 
 preserve steadiness of value. As I have already stated, this, undoubt¬ 
 edly, would be true; we can maintain our currency on a level with 
 metallic money by simply limiting it to its present volume; I think 
 there is no question about that; that is a principle which has been 
 always admitted by writers on monetary science, and it that does not 
 constitute as much money as would naturally fall to us in the course 
 of trade, coin would come in to till up the vacuum—the vacuum being 
 first formed. Such a currency, $050,000,000, say, in paper, and fifty 
 millions in small coinage, and this supplemented by full coins, would vary 
 precisely as a purely metallic currency would vary—precisely as though 
 the whole of it was coin; and its fluctuations would be far less than a 
 convertible currency issued by 2,000 independent banks, which, on the 
 inflow of $20,000,000 of coin into their vaults, would issue, perhaps, 
 $60,000,000 or more of currency, and on the outflow of coin would draw 
 that much of their paper in. But that a purely metallic currency pos¬ 
 sesses the flexibility which is desirable in a curreucy I do not admit. 
 There is where that principle seems to have failed" in England. It 
 possesses, nevertheless, greater flexibility than the national-banking 
 system as at present constituted; that is, a purely metallic currency 
 has greater flexibility than our present national-bank currency has. 
 And a currency of $800,000,000, of which $050,000,000 is paper and 
 the rest subsidiary coin and full coin, will all vary precisely as a purely 
 metallic currency would. So an inconvertible curreucy fluctuates as 
 you increase or decrease the quantity, and by that means only; and to 
 say that all variations in the market price of gold, as on Black Friday, 
 marks fluctuations in our currency, is the absurdest nonsense. If that 
 were true, then prices generally would have varied in the same pro¬ 
 portion. 
 
 The CnAiRMAN. You might then have a paper currency that fluctuates 
 no more than gold or silver, and, in fact, fluctuates lessf 
 
 Mr. Warner. Certainly. 
 
 Adjourned until to-morrow. 
 
 Washington, D. C., April 23,1878. 
 
 Statement of Mr. A. J. Warner continued. 
 
 Mr. Warner. I have made out the percentages of coin and paper, in 
 reply to the question put by the chairman yesterday, as to what addi¬ 
 tional amount of coin would be required, and what amount of paper must 
 be retired, in order to place the circulation of this country now on the 
 same basis of equilibrium that existed in 1861 and 1857, and the change 
 necessary to make to place us on as good a footing relatively as exists 
 
in countries with which the Secretary makes comparison. Taking our 
 present volume of currency as a normal one, or as a full volume, made 
 up of paper, $050,000,000, and subsidiary coin and fractional currency, 
 $50,000,000, and allowing to the Pacific slope $50,000,000 coin (which is 
 something more than Dr. Linderman’s estimate), making a total ot 
 $750,000,000; to restore, then, the state of equilibrium existing in 1801, 
 when we bad $1.41 in coin out of a total volume of $487,000,000, to 
 $1 in paper, our circulation should stand to-day $439,000,000 coin and 
 $311,000,000 paper. That would place us on the basis of 1861. 
 
 Mr. Hardenbergh. That was at the time of the suspension of 18G1 ? 
 
 Mr. Warner. Yes. That would put us where we were when sus¬ 
 pension took place in 1861. To do that would take, besides the 
 $50,000,000 of subsidiary coin, and besides the $50,000,000 coin set 
 down for the Pacific slope—presuming that amount to be in cir¬ 
 culation there now—and the $150,000,000 more which it is proposed 
 to have in the Treasury and the banks by January 1, 1879, making 
 $250,000,000 in all. That is, in addition to this $250,000,000 of coin 
 which it is proposed to have January, 1879, it would require $189,000,000 
 more coin, and the retirement in all of $349,000,000 of paper, leav¬ 
 ing the circulation of $750,000,000 to stand, coin $439,000,000, paper 
 $ 311 , 000 , 000 . That would be the state of equilibrium that existed in 
 1861, when specie payments were suspended. Comparing in the same 
 way with 1857 (another period of suspension), when there was $1.16 of 
 coin in the country to $1 of paper, our volume of $750,000,000, to give 
 us the state of equilibrium existing then, should stand $403,000,000 
 of coin and $347,000,000 of paper, which would require, in addition to 
 the subsidiary silver, the coin on the Pacific slope aud the $150,000,000 
 of reserve which it is proposed to have January, 1879, $153,000,000 
 more coin still, and the retirement of $303,000,000 of the paper money 
 now outstanding. 
 
 Mr. Bell. Your estimate as to 1861,1 understand to be based on the 
 condition of the currency unaffected by the war and by iniiation 7 
 
 Mr. Warner. Y r es, it is based on the currency of 1861 before the sus¬ 
 pension of the banks, and before the issue of any legal-tender paper. 
 
 Mr. Hardenbergh. Is not the estimate of 1857 a safer one than that 
 of 1861, because from 1857 to 1861 the country was in a disturbed state 
 awaiting the secession movement, and therefore gold occupied a differ¬ 
 ent relation to the, circulation than it had done previously? 
 
 Mr. Warner. I have taken 1857 and 1861 both. If I should take 
 1859 or 1860, then the amount of coin that would be required now, ac¬ 
 cording to that ratio, would be still greater. 
 
 Mr. Hardenbergh. Do you not think that 1857 is a fairer test of 
 the true condition of the country, aside from the civil war, there having 
 been great financial disturbance from 1857 down to 1861 ? 
 
 Mr. Warner. Perhaps so. These periods, especially that of 1857, are 
 what may be called periods of depression in the proportion of coin to 
 the whole circulation. But if the political state of the country prior to 
 1861 bad any effect it probably was to increase the proportion of coin to 
 paper in the country. 
 
 Mr. Hardenbergh. But the panic of 1857 affected the financial health 
 of the nation, and the period of the secession movement in 18C1 affected 
 its life. So there was no financial peace in the country from 1857 to 
 1861. During that time capital was beginning to fly away, and people 
 were beginning to contract and withdraw their money in anticipation ot 
 the trouble connected with secession. Therefore the period previous to 
 
16 
 
 1857 was a much healthier time, I take it, as to the amount ot gold re- 
 mlired in the country than the period from 18o7 to 1801. 
 
 Mr. Warner. Well, I have given both periods. 
 
 Mr Ewing But really a better comparison would be with the years 
 nrecedimr the panic, because the panic occurred probably in part ou 
 account of the fact that there was an excess of paper money as com¬ 
 pared with the volume of coin. . 
 
 Mr. Hardenbergh. The panic itself grew out of one fact, the failure 
 of the Ohio Life and Trust Company. 
 
 Mr Warner. Taking the years 1857 and 1861 (years ol suspension), 
 we have years of the lowest amount of coin in circulation to compare 
 with now. However, in July, 1861, there was an issue of 50 millions of 
 demand notes for war purposes, before the issue of legal-tender notes. 
 
 Mr. Ewing. Does that go into the aggregate of paper currency which 
 you have calculated in your total ? 
 
 Mr. Warner. No, sir; I have calculated only the bank currency. 
 As an offset for that 50 millions of demand notes, I may say that that 
 amount would be no more than sufficient to provide for the additional 
 use for currency caused by the war. Comparing in the same way our 
 whole circulation with that of other countries, having reference to the 
 Secretary’s comparison on pages 32 and 33 ot his examination before 
 this committee, where he compares only the reserves, without taking 
 any account at all of the state of the circulation in the different coun¬ 
 tries, I find this to be the fact: In order to establish the same rela¬ 
 tions between paper and coin that exists in England, ours should stand 
 (taking the 750 millions as a full circulation), 579 millions coin, 171 mil¬ 
 lions paper. To establish this relation it would require the procurement 
 of 375 millions more coin than now exists in the country, or than it is 
 proposed there will be in January, 1879, and the retirement of 479 mil¬ 
 lions of the G50 millions of paper. Comparing with France, to establish 
 here the same state of equilibrium (with a total circulation of 750 mil- 
 lions), our currency should stand, coin 562 millions, paper 185 millions, 
 which would require us to procure 312 millions more coin than we have, 
 or expect to have January next, and the retirement of 465 millions of 
 our paper. Making a comparison in the same manner with Germany, 
 our circulation should stand 600 millions coin to 150 millions paper. To 
 establish this state of the circulation would require us to procure 350 
 millions more coin than the country possesses, or is expected to have 
 next January, and the retirement of 500 millions of our present paper 
 circulation. 1 That is, to establish the state of equilibrium in this country 
 that now exists in other countries, and that, at former periods, existed in 
 this country, we should have the following proportions of coin and paper 
 in a total volume of $750,000,000: 
 
 Proportion of coin to paper in the icliole circulation, as it should he, to estab¬ 
 lish the relation — 
 
 
 Coin. 
 
 Paper. 
 
 Existing in England.... 
 
 $3 33 
 
 3 10 
 
 SI 
 
 Existing in Franco. 
 
 Existing in Germany.... ._ 
 
 4 00 
 
 1 
 
 Existing in the United States in 1854.. 
 
 1 24 
 
 1 
 
 Existing in the United States in 1857 . 
 
 1 1(5 
 
 l 
 
 Existing in the United States in 18(51. 
 
 1 41 
 
 Proposed to have in 1879, when resumption takes place. 
 
 40 
 
 1 
 
 
 
17 
 
 ruble showing how a circulation of $750,000,000 would stanA 
 
 same proportion of 
 
 Paper to bo 
 retired. 
 
 To have the same proportion aa in England 
 
 we should have in *'.'.0,000,000 
 
 ?5:0, 000,000 # 1 71 , 000,000 f 32!t, 000, 000 i * 170 , 000, 000 
 r>02,000,000 185,000,000 312,000,000 000.000 
 
 To re-establish the condition exiting in 1*01 
 
 To establish tlm condition of 1*57. 
 
 'I'u establish the condition existing in 1854 
 
 Oil the other hand, on the supposition that the (550 millions of paper 
 is to be maintained, either by the force of its legal-tender quality, or be¬ 
 cause of the preference of the people to have the whole 650 millions in 
 paper rather than in coin, which is not at all likely, then with the 50 
 millions of subsidiary coin, and the 50 millions for the Pacific States 
 we have already, in these amounts, the full volume of 750 million dol¬ 
 lars; and on the supposition that this volume, with bi-metallism for the 
 world, would be our full proportion, then there is no room in our circu¬ 
 lation for coin, and if added to the paper it would not remain in the 
 country, and its accumulation in the Treasury for the purpose of resump¬ 
 tion, by the sale of bonds or otherwise, is only a disturbance of the money 
 market of the world, and one that affects injuriously not only t he United 
 States, but, more or less, other countries also. 
 
 The Chairman. Why does it not leave the country now? 
 
 Mr. Warner, It is under lock and key. 
 
 The Chairman. Not all of it. 
 
 Mr. Warner. That which is in the banks is not; and one reason why 
 that does not leave the country now is that banks are holding it in view 
 of resumption. Again, if 750 millions does not make up our full circu¬ 
 lation, and some small amount additional is required, it would exist in 
 the form of bank reserves. Besides, a given amount of coin, under any 
 circumstances, and with gold at any premium, would stay in the coun¬ 
 try, being required for international commerce, and that sum is aug¬ 
 mented by a given amount required to pay duties on imports. I believe, 
 even when the premium on gold was highest, there was never less than 
 eighteen or twenty millions of gold in the country; but this does not go 
 into circulation. 
 
 The Chairman. That is the idea; that while we have apparently a 
 certain sum of money in circulation, yet it is not in fact in circulation, 
 but is in the banks and the Treasury, and that it is really as if it were 
 dead and not in existence. 
 
 Mr. Warner. Yes; the same as though it were still in the mines, so 
 far as pertains to our circulation ; and so when gold and silver is taken 
 from the mines, all but a small part of it (say our natural share) leaves 
 the country. Just so, and under the same laws, and for the same rea¬ 
 son precisely, when the door of the Treasury is open the coin that is 
 there will leave us if paid out in excess of our natural circulation and 
 paper is not retired. There will be no difference then whatever between 
 
 2 w 
 
18 
 
 gold and silver dug from the mines and gold and silver let out of the 
 Treasury. „ . „ 
 
 The Chairman. You do not estimate at all the probable favorable 
 condition of our trade abroad. Von do not take that into your estimate. 
 
 Mr. Warner. Yes, I take that into account in estimating our proba- 
 able volume of money. It is that favorable balance which allows us so 
 large a volume. If the balance of trade turns against us, then some 
 part of our volume of money, if convertible into coin, will flow away 
 until the state of equilibrium is established. 
 
 Remarking further on the balance of trade and on its intlueuce, I 
 will say, first, as has been frequently said, nothing is more misleading 
 than figures showing the extent of a balance of trade. As an illustra¬ 
 tion : agjlk merchant of Lyons ships to this country $20,000 worth of 
 silks. They are entered as worth $20,000 in the New York custom¬ 
 house. lie sells the silks in New York for $25,000, and invests the 
 whole sum in flour, with which he.loads his vessel back to Lyons. The 
 custom house books would show $20,000 of imports and $25,000 of ex¬ 
 ports, but when you ask France for the difference, she will, of course, 
 say she does not owe you anythiug. If you find the merchant who 
 made the importation and the exportation, he will tell you that he paid 
 for the flour and owes nothing, and that the difference is his profit. 
 Therefore, just what amount of money comes to us in the balance of 
 trade is very difficult to calculate, but certainly no such sum as I GO 
 millions. Besides, there is the large amount paid out in the carrying 
 trade and for insurance every year and by travelers going abroad, 
 which never enters the custom-house returns. Again, a balance of 
 trade never sets constantly toward one country. If it did, such coun¬ 
 try would eventually have all the money, and some other country the 
 goods. The longer, therefore, that the balauce of trade sets in favor of 
 any given country, the more certain it is that it will grow less, and the 
 more probable is it that it will change, for the reason that the exporta¬ 
 tion of the precious metals from the countries importing goods lessens 
 the quantity of the precious metals in such countries and, of course, 
 depresses prices there and prevents further exportation of the metals. 
 
 Mr. Ewing. An increase of prices in the country to which the coin 
 goes? 
 
 Mr. Warner. Yes; lowering prices on the one side and raising them 
 on the other. 
 
 Mr. Hardenbergh: Under this examination that you have made con¬ 
 nected with the amount of coin now and in 1861, when can you ever 
 look forward, by your theory, to resumption of specie payments in this 
 country, without an immense and terrible contraction of the currency 
 which would shake everything from center to circumference ? 
 
 Mr. Warner. I do not think it possible without doing that. I give 
 it as the result of my own examination that the only possible way to 
 maintain specie payment is to supply coin and retire paper till the 
 quantity is reduced to a sum not exceeding 50 per cent, of the entire 
 circulation. W T hat that yet involves can be better imagined than 
 described. 
 
 Mr. Bell. I understand you to mean by resumption a redemption of 
 the paper circulation and its withdrawal from circulation, as was done 
 in Great Britain. 
 
 Mr. Warner. That is the only way, in my judgment, that resump¬ 
 tion can possibly be maintained ; that is, to make it properly resump- 
 tl0 1 n * .. Let l )a P er be reduced down as far as it will reduce itself, and 
 substitute com for it, and my own judgment, I repeat, is, that the paper 
 
19 
 
 will not stand, after a year or two, at more than 50 per cent, of the 
 whole circulation. It is opposed to all previous experience in this 
 country, and the experience of other countries, to calculate otherwise; 
 and I cannot see that anything has arisen to change greatly the laws of 
 currency or the preferences of the people. Monetary science is the 
 same now that it was fifteen years ago. Hence I think the country is 
 being drawn into a vortex by this resumption process that ought to be 
 avoided, and the. country spared the loss and agony it must entail. 
 
 Mr. Ewing. Comparing the situation now with 1857, what reason is 
 there to suppose that it is possible to maintain resumption without even 
 a. larger proportion of coin than we had in 1S5G? The banks broke 
 down in 1857 for want of coin. What reason is there to suppose that 
 we can now maintain specie payments? 
 
 Mr. WARNER. The only reason I can assign is this: the character of 
 the currency now existing being uniform, and the greenback part being 
 legal-tender, the confidence of the public in the currency will be better 
 sustained ; although, as I said yesterday, when a currency is actually 
 and conveniently convertible, there is no force (or almost none) to the 
 legal-tender quality. But the very moment that confidence fails, or 
 begins to fail, in the convertibility of the currency, then the legal tender 
 quality comes in just at that point to sustain it. It would sustain con¬ 
 fidence when any person having bank-notes, which, although converti¬ 
 ble to-day, might be open to suspicion that they would not be converti¬ 
 ble to-morrow, but if that person is sure that, even if convertibility 
 fails, the money power at the same nominal value will continue, 
 he will be less likely to present his notes at the bank, and I think, 
 therefore, we may reasonably count on a somewhat larger propor¬ 
 tion of paper than existed under the old system. On the other 
 hand, however, there is this to be considered: in the years with 
 which comparison has been made (1857 and 3SGI; or, for that matter, 
 generally under the old system of a specie basis) it is hardly cor¬ 
 rect to say that we had a convertible currency in the United States. 
 In large parts of the country the currency was not really convertible, 
 but to a large extent iu many States even when nominally convertible, 
 was practically an enforced circulation. Public seutiment was against 
 those who demanded coin. I remember that was the case in 3857; and 
 in some places that spirit was carried to extremes. Mr. Theophilus Fisk, 
 for instance, of Charleston, describing the condition of the currency 
 existing there before the panic of 1837, says they determined not to 
 suspend specie payment, but at a public meeting, at which the mayor 
 presided, it was proposed that it should be made death (!) for any man 
 to demand coin! 
 
 A paper that is convertible with difficulty, or against public senti¬ 
 ment, is in some degree to be treated rather as an enforced currency. 
 Then, again, Bank of England notes are legal tender, and we have shown 
 what proportion of the whole circulation of Euglaud is coiu. On the 
 other hand, it is to be considered (and it is important) that no notes are 
 issued by the Bank of England under five pounds. If small notes were 
 issued, undoubtedly there would be a larger proportion of the whole cir¬ 
 culation in paper than there is now. 
 
 Mr. Ewing. If you take the situation in 1857, when there wasan excess 
 of the volume of paper as compared with coiu (so large a volume that in 
 many parts of the country there was no actual resumption), and when 
 you had the whole power of the banks exerted to keep out the paper, 
 every bank dealing to a large extent with its own paper, and in its own 
 community, to keep it in circulation, is there good reason to think that 
 
20 
 
 we can get along now with a less proportion of coin supply than we had 
 
 then ? ... 
 
 Mr. Warner. After resumption banks will have no interest in keeping 
 any but their own paper in circulation. They will have the same inter¬ 
 est, I think, in keeping out their own paper that they had then in keep¬ 
 ing their paper out. But, ou the other hand, the banks are manifestly, 
 under the present resumption act, largely relieved from the obligation 
 of providing themselves with coin, except through the instrumentality 
 
 of legal tender notes. 
 
 Mr. Hardenbergh. In 1857, the circulation of the banks throughout 
 the country was not all secured, and there was a great difference of 
 feeling as to the different notes. Is it not probable that the gold which 
 we had then would have sustained the demand that would have been 
 made by the people if, instead of State bank issues which we then had 
 and of which the people were afraid, we had had greenback circu¬ 
 lation and national-bank notes? 
 
 Mr. Warner. That is, as I understand you, the same as if you ask 
 me this question : “ Suppose the same equilibrium in currency should 
 exist now that existed then, could it not be maintained ?” Well, in my 
 judgment it could be, and yet in New York circulation was well secured 
 at that time ; and it should be remembered that more than half of the 
 whole volume then was coin. 
 
 Mr. IIardenbergii. I have been the cashier of a bank for twenty 
 years. In 1857, every one wanted specie, and did not want bank notes. 
 But in 1801, and in 18G7, and in 1873, when they wanted money, they 
 did not care about the gold, but what they wanted was either green¬ 
 backs or national-bank notes, and the volume of gold required was not 
 one-tenth of the part necessary to meet the demand. People did not 
 care for it so long as they had confidence in the government. What 
 they wanted was either national-bank notes or greenbacks. 
 
 Mr. Warner. As you say, with a greenback currency, I do not think 
 there would be a run for gold coin even in a panic. In making allow¬ 
 ance for the difference in the quality of the paper, I have already given 
 it as my opinion that with the same proportion of coin to paper existing 
 in 1857, specie payment, under favorable circumstances of trade, could 
 very well be maintained; indeed, very probably with a less amount; 
 probably with 1 to 1 in the whole country. But we must not lose 
 sight, however, of a foreign demand for our coin that may at any time 
 spring up. 
 
 The Chairman. Recollect that there is a marked difference in the 
 condition of the country then and now. We had no public debt of any 
 consequence in 1857. A small debt that we had at the beginningof the 
 war accumulated subsequent to that period. We have now a very heavy 
 public debt. In addition to that, we have now a large private indebted¬ 
 ness abroad, as well as indebtedness of States and railroads. It seems 
 to me that that is an element which you have not regarded at all. 
 
 Mr. Warner. Not as yet, although I have had it in view and have 
 made some figures on the subject. I regard it as a very potent element, 
 and one that is likely to exert a powerful influence, and very possibly at 
 times when otherwise we would be in a state of equilibrium. The dif¬ 
 ference between a debt at home and a debt held abroad in its influence 
 on the currency of a country is very great. I often think of the remark 
 of Disraeli, that “a debt at home is like an irritating flea-bite, but a 
 debt abroad is an open, bleeding wound.” The influence of a debt 
 abroad on the currency of a country owing the debt is very great. It 
 may be illustrated in this way: Suppose our exports to be six bun- 
 
21 
 
 dred millions, and suppose, also, that we owe one hundred millions in 
 gold as interest, which is drawn away annually, then our distributive 
 share of the world’s money would be no more, with the six hundred 
 million exports and one hundred millions of debt to pay abroad, 
 than it would be if, without the debt, we exported but five hun¬ 
 dred millions. The difference, moreover, between paying a debt 
 abroad out of the circulation or the currency of a country and paying 
 it with commodities has not, I think, been generally taken sufficiently 
 into account. Indeed, most writers on economical science seem to as¬ 
 sume that it is the same thing whether a debt abroad is paid in coin or 
 whether it is paid in commodities, and that when coin is exported it is 
 really as a commodity. But I conceive the difference to be very great. 
 Bullion, or the product of mines that has never formed part of the cur¬ 
 rency, if exported, would be the sane, of course, as auy other commod¬ 
 ity, and would have no effect ou the circulation of the country different 
 from the exportation of the same amount of other commodities. But 
 when a country exports a part of its currency it is taking away that 
 which is the measure of the value of other things. Suppose, for instance, 
 the total wealth (taking convenient figures) of the United States how 
 to be thir y thousand millions, and suppose the currency circulating 
 that amount of wealth to be six hundred millions; now, this thirty 
 thousand millions of wealth stands as thirty thousand millions because 
 [ it is measured by six hundred millions of currency. That is the relation 
 that exists between the money and the commodities—so much currency, 
 so much wealth, the thing measured and the measure. Now, if you 
 export a hundred millions out of the thirty thousand millions of com¬ 
 modities there would be still left in the country twenty-nine thousand 
 nine hundred millions of wealth, of commodities. The change is less 
 than four-tenths of one per cent. Moreover, the one hundred millions 
 of commodities sold could be replaced in a few weeks, or mouths, at 
 j most, by the production of new commodities. But if you take away 
 one hundred millions of the currency of the country, then you have 
 taken away nearly 17 per cent, of it. The total wealth which was thirty 
 thousand millions becomes 17 per cent, less, or only twenty-five thou¬ 
 sand millions. Besides, you cannot restore the one hundred millions of 
 currency at will by new production. You must acquire it in your trade 
 with the rest of the world. You, therefore, cliauge the relations of 
 money to debt and commodities. You change the value of all commod¬ 
 ities when you export a part of your curreucy. You change the rela¬ 
 tion between money, debt, and property; that is, betweeu money and 
 the other wealth of the country. And not only that, but if you take 
 one hundred millions from your currency you affect the whole structure 
 of credit based upon it. That is shaken to its foundation, perhaps 
 overthrown, and the disturbance is increased tenfold, which is enough 
 to ruin half the producers in the country or bankrupt half the ordinary 
 [ dealers in any market. Hence I conceive the question of debt abroad 
 as having an important bearing on the whole problem of resumption. 
 | Specie payment that would be safe and reasonably certain without a 
 debt abroad may become very unsafe and uncertain with such a debt— 
 with the power in the hands of creditors abroad to draw away the very 
 coin needed for the maintenance.of resumption. 
 
 Mr. Hardenbergh. Coin is the nation’s wealth, while currency is its 
 debt, and therefore they differ very greatly. 
 
 Mr. Warner. In reply to that I beg to say this: whether the six 
 hundred millions of currency be derived from the precious metals, or 
 consists of paper, if it be reduced from $000,000,000 to $500,000,000 the 
 
22 
 
 pfl’ect on the value ot‘ the commodities which constituted the wealth of 
 the country would be the same, and the effect on production and busi- 
 ness the same. And, if permitted, I would say further on that point, 
 because as a principle of currency it is important in its bearing on 
 questions now at issue, that the value (call it a debt, it you please, but 
 the value, nevertheless) of our paper currency rests upon precisely the 
 same principle as that on which the value of metallic money rests. 
 From 70 to 80 per cent., it is estimated, of the value of gold is due 
 solely to its use as money, and but from JO to 30 per cent, to its use in 
 the arts and as ornaments. Seventy per cent, likewise ot the value of 
 silver is due solely to its use as money and about 30 pei cent, ot it to 
 its use in the arts. Now, when a government issues an inconvertible 
 paper, and it goes into use as money, having the same power and per¬ 
 forming the same functions as other money, then its value rests upon 
 the same principle, namely, its use as money; but not merely 80 per 
 cent, of its value, but its entire value, we may say, is due to its use as 
 money. This principle was stated by John Locke two hundred years 
 ago. 1 It is not new, although it does not seem to be commonly under¬ 
 stood. The value of inconvertible paper money, like the value of any 
 other money, depends wholly upon quantity as compared to use. On 
 this theory "only is it safe to treat the currency of a country. 
 
 I was going to remark, however, before this divergence, in reference 
 to our debt held abroad, that estimates which I find differ very widely 
 and are very unsatisfactory. The estimates which have already beeu 
 given before this committee, derived from information on this side of 
 the Atlantic, differ very widely, I find, from estimates on the other side. 
 
 Mr. Ewing. One estimate made up from this side and given to the 
 committee was that our debt held abroad amounted to two thousand 
 million dollars. That is Mr. Pullan’s estimate. 
 
 Mr. Warner. The data and information on which all these estimates 
 are made, so far as I am able to get them, are very meager, but I have 
 myself given more credence to those made from the other side as being 
 made from more certain data than those made on this side. Ernest 
 Seyd has given in different forms an estimate of the debts of this coun¬ 
 try held in Europe in 1870. He gives national and State indebtedness 
 of the United States, held in Europe, as $1,200,000,000; railroad and 
 other corporate indebtedness, $750,000,000; other loans, $300,000,000; 
 making a total of $2,250,000,000, calculated at $5 to the pound sterling. 
 
 Mr. Ewing. Where do you find that? 
 
 Mr. Warner. In Seyd’s Fall in the Price of Silver. He divides it 
 in another place as follows: Taking the full sum of £250,000,000, or 
 $2,250,000,000. Foreign holding in loans and mortgages, £20,000,000 = 
 $100,000,000; railways and public debentures, shares, &c., £150,000,000 
 = $750,000,000; national, State, and municipal, £200,000,000 = $1,050,- 
 000,000; miscellaneous (or what he calls international capital, such as 
 current balances, temporary, loans, &c.), £10,000,000 = $200,000,000. 
 Then he includes in the indebtedness here (what probably is also em¬ 
 braced in his first estimate) what he assumes as the amount of coin we 
 must buy yet from Europe in order to be able to resume specie payment. 
 He designates certain states in Europe that own debts of other states, 
 besides holding their own debts, as creditor nations and assigns them 
 sums as follows: England, from £800,000,000 to £1,000,000,000 of the 
 debts of countries other than her own ; Germany holds from £-150,000,000 
 to £500,000,000; France, from £400,000,000 to £500,000,000; Holland, 
 Belgium, and Switzerland hold from £100,000,000 to £125,000,000. 
 This would give in dollars to England from $4,000,000,000 to $4,800,- 
 
23 
 
 000,000; Germany, from 82,000.000,000 to $2,500,000,000; France from 
 82 , 000 , 000,000 to $2,250,000,000; Holland, Belgium, and Switzerland 
 from $500,000,000 to $000,000,000. ’ 
 
 Mr. R. Dudley Baxter, an eminent authority on public debts, accepts 
 Mr. David A. Wells’s estimate of the amount of interest due on the 
 bonds held abroad in 1870, which does not include, I suppose, other 
 debts, namely, $85,000,000. This does not differ very widely from the 
 estimate of Seyd, and is below rather than over. Dr. Edward Young 
 chief of the Bureau of Statistics, makes the total of our indebtedness 
 held abroad at thirteen hundred and fifty millions. I doubt not that 
 some part of the indebtedness held abroad a few years ago has been 
 returned, and some part of the corporate indebtedness lessened through 
 the insolvency of the corporations. I presume it is a hundred millions 
 less now than it was in 1876. 
 
 Mr. EWING. Have you any other estimate ? 
 
 Mr. Warner. Nothing that is sufficiently definite. Mr. Leone Levi 
 and others give some estimates, but in round numbers not differing 
 widely from the others, and probably drawn from-the same sources. 
 
 Mr." Ewing. Is there an instance of a debtor nation maintaining specie 
 payments? 
 
 Mr. Warner. I know of none. All those countries in Europe that 
 have large debts, which are held by four or five principal creditor na¬ 
 tions, are using inconvertible currency for the larger part of their circu¬ 
 lation. The precious metals seem to stay with the holders of these 
 debts. 
 
 The Chairman. I believe it is true also that in Italy, as well as 
 Austria, what is called the balance of trade is very largely in favor of 
 both of those states, and that they use inconvertible paper. 
 
 Mr. Warner. Yes, sir; and if we owe a hundred million dollars 
 abroad as interest, we must, in order to maintain stability in a currency 
 derived from the precious metals, have an actual balance of trade in our 
 favor of a hundred millions every year, and if we fail in that, then some 
 part of the currency will be drawn away. 
 
 The Chairman. Is not this a debt on demand practically of both 
 principal and interest ? That is, they may send into the market here 
 those bonds and sell them for whatever they are worth, to be paid in 
 gold or products ? 
 
 Mr. Warner. That, of course, may be done. But if they send them 
 very rapidly, the bonds would doubtless fall in price and in that way the 
 sale be checked. It is a demand debt, so far as interest is concerned, 
 and of course the creditor will demand coin unless we have something 
 else to offer him which he prefers to coin, or, in other words, keep a bal¬ 
 ance of trade in our favor. 
 
 Mr. Eames. What proportion of the two thousand millions of indebt¬ 
 edness held abroad—national, State, and municipal—is matured? 
 
 Mr. Warner. I think very little of it is matured. 
 
 Mr. Eames. Then all that the government at present has to do is to 
 provide the interest ? 
 
 Mr. Warner. The interest is all that is required of the government 
 now, I think. 
 
 Mr. Ewing. Why should not more be considered ? Suppose we had 
 positive assurance that the balance of trade would be in our favor equal 
 to the amount of interest on our debt held abroad, could we, with any 
 safety, resume specie payment ? Is it not a fact that our whole supply 
 of gold is practically held then at the will of our foreign creditors, who 
 
24 
 
 may send our bonds here and sell them if the} p.ease foi gold, and drain 
 our gold from us t 
 
 Mr. Warner. They certainly have a very strong lever. They have 
 a strong hold upon any part of the precious metals we may have. Not 
 only their interest must be paid, but, of course, they can send their bonds 
 here to be sold, and can allow them to be sold down until they would 
 drain very largely our coin. . 
 
 Mr. Ewing. If there should be an exigency in Europe, arising from 
 war or from any other cause, requiring a drain of one hundred millions 
 of gold from this country, and making it desirable for them to get the 
 gold from this country, is it not perfectly certain that they could get it 
 irrespective of the question of the maturity of those bonds, and irrespect¬ 
 ive of our demand, however exigent it may be, for the use of the coin 
 here as our currency ? 
 
 Mr. Warner. I think it would be a question of bargain between the 
 holders of coin here and the holders of the bonds. If the holders of the 
 bonds offered them at a price low enough to induce those having the 
 coin here to part with the coin, it could be certainly drained away. It 
 is a question of business, the same as it would be if they should send 
 anything else here. 
 
 Mr. Ewing. Is not this the fact which makes it impossible for a 
 debtor nation to maintain specie payment irrespective of the balance of 
 trade ? 
 
 Mr. Warner. The annual demand for interest, together with that, 
 makes it so. The annual demand for interest is in itself very exhaust¬ 
 ing, and then comes the fact that debts may be sent home, and the fact 
 that those having gold are always ready to part with it for bonds if the 
 bonds are offered a little down. That would undoubtedly.have a very 
 powerful influence in determining the movement of gold. 
 
 Mr. Bell. Are you advised as to the rate of interest which this debt 
 abroad carries—I mean the average rate of interest of our entire indebt¬ 
 edness ? 
 
 Mr. Warner. I have no figures on that point with me. But until 
 the funding operation began the rate of interest was generally C per 
 cent, for national, and C to 7 on municipal indebtedness. For corporate 
 indebtedness, mortgages on lands, and public works, &e., the rate would 
 run somewhat higher. I think that G per cent, would be as low as the 
 whole would now average. 
 
 Mr. Hardenbergii. You mean taking national, State, municipal, and 
 every other debt held abroad ? 
 
 Mr. Warner. Yes, sir; I think the interest on the whole would not 
 run less than G per cent. On loaus made on lauded security, they are 
 often at higher rates—from 8 to 10 per cent. Bail way bonds usually bear 
 interest at 7 per cent., ofte'ner over that than below it, and municipal 
 indebtment seldom bears interest below G per cent. A part of the na¬ 
 tional debt comes below 6 per cent., but the average, I should say, 
 would be rather above G per cent, than below it. 
 
 Mr. Ewing. Do you think it practicable to get this sum in gold or 
 coin which you regard as necessary iu order to maintain specie pay¬ 
 ments ? 
 
 Mr. Warner. If it is possible to obtain it at all it will be at a very 
 high price as compared with what we have to buy it with. We can buy 
 easily enough one hundred millions of commodities from England or 
 France or Germany. We could buy, probably, several hundred millions 
 of commodities from either couutry, with bonds, at the market rate of 
 such commodities as they stand now. But for the reason that I have 
 
25 
 
 given, that when you attack the currency of a country, drawing awav 
 a part ot its circulation, you are changing the relations betwefn that 
 which measures value and other things, I do not suiwora 1 at 
 
 tually buy one hundred millions of England’s coin and get th“eold to" 
 bring away for five times one hundred millions in bonds. Indeed to 
 abstract from the cireu ation of England one hundred millions of her 
 gold, would overturn all the established relations between money?dcbt 
 and property, and would involve the country in general bankruptcy 
 You may draw from a country a given part of its hoards or of ts K- 
 serves, but the moment you go beyond and touch its circulation, then 
 you begin immediately to aflect prices, and immediately the pressure is 
 put upon it, and, if the outflow ot coin is not stopped, panics will ho 
 sure to follow. It is easj enough for a country to sell its coin that is 
 to change its currency into capital. That is easy enough, I sav hut 
 when you come to convert capital back into currency, that is a ver’v dif 
 ferent thing. J 
 
 Mr. Hardeneergii. Have we not this advantage over England that 
 she cannot do without our food, but we can do without her reserves? 
 
 Mr. Warner. That is an advantage which we have undoubtedly in 
 the maintenance ot the balance of trade, but one that scarcely balances 
 England’s advantage as the holder of millions of our debt 'But I was 
 
 goingon to illustrate the difference between converting a metallic currency 
 
 into other capital, that is, selling it forcommodities and drawing currency 
 from other countries by selling commodities. On that point I hardly 
 think that any one would be risking much by advancing the opinion 
 that if we had on hand to day in this country, now, all the material, all 
 the commodities that we bought with the two hundred and eighty-five 
 millions of gold which was displaced and sent abroad in 18G2-’G3 1 
 doubt very much whether we could buy back with it all $85,000 000’of 
 the money of Europe, or even $50,000,000, and actually get the coin to 
 bring away. Hence, a country that first turns currency into capital or 
 material, and then capital back into currency, makes bad bargains. 
 
 Mr. Ewing. Have we ever in any year added to our stock of precious 
 metals by importation ? 
 
 Mr. Warner. No, sir; I thiuk not—not very lately; not siuce we 
 became producers of the precious metals. 
 
 Mr. Ewing. Our bonds and securities of all kinds that have been sold 
 abroad have not brought us gold or silver? 
 
 Mr. Warner. No, sir; they brought us commodities. 
 
 Mr. Ewing. And the balance of trade in the precious metals has been 
 against us every year, has it not? 
 
 Mr. \\ arner. Yes, sir, steadily so, I believe; that is, we export more 
 of the precious metals than we import. 
 
 Mr. Bell. Am I to understand, that in the sale of this vast amount 
 of United States securities .abroad we have actually realized no coin ? 
 
 Mr. W arner. Not any coin at all. The sale of our bonds abroad 
 brought us commodities, but not coin. 
 
 Mr. Eames. It the Government of the United States should meet 
 promptly and at maturity all of its legal obligations for the public debt 
 will any considerable amount of those bonds now unmatured bo returned 
 here for sale? 
 
 Mr. Warner. I do not think they would be in ordinary conditions of 
 trade; but in such an exigency as a great foreign war, or the balance of 
 trade turning heavily against a country holdiug our debt, as, for in¬ 
 stance, iti the years 1818, 1838, and 1847, the year of the Irish famine, 
 
26 
 
 then I should say the bonds would come here rapidly. But in ordinary, 
 Rf-ntes of trade they would not. , . , . 
 
 Mr Phillips Have not our bonds to the amount of a hundred mill¬ 
 ions and more come back here since last September ? 
 
 Mr Warner. It is reported, I believe, that over seventy-five millions 
 of them have come back, and that, I think, was large^ due to the expect- 
 ancy of war and to the troubled state ot Europe, but partly, perhaps, 
 
 to the silver agitation. „ , 
 
 Mr. Eames. I)o you think that the return ot our bonds from abroad 
 was affected by action of the House in repealing the time named for 
 
 resuming specie payment by this government? ... 
 
 Mr Warner I do not think that any action about resumption 
 affected tbe question at all. Holders ot bonds can have no direct inter, 
 est ill the resumption of specie payments. That cannot add to our abil¬ 
 ity to pay the bonds, or make them more secure. But it is very proba¬ 
 ble that the passage of the silver bill affected the movement somewhat 
 at first. However, I am inclined to think that even the effect of that 
 has been much overrated; and in this connection permit me to say I 
 discredit entirely the assumption that it was by funding our public 
 debt into gold bonds that we have been able to reduce the rate ot inter¬ 
 est, Rate of interest does not depend upon the kind ot money. Rate 
 of interest is always as low in silver to be repaid in silver as in gold to 
 be repaid in gold. The Secretary at any time could have sold “coin” 
 bonds, taking pay in silver or gold, at the option of the purchaser, and 
 with the coin so obtained taken up 6 per cent, coin bonds and saved as 
 much interest as has been saved. . 
 
 Mr. Ewing. There were two quite notable instances in our dealings 
 with England illustrating the reluctance of the Bank of England to 
 part with any of its gold. Mr. Boutwell stated in the Senate that 
 during his administration of the Treasury Department he sold twenty- 
 one millions of bonds for gold, and that he was notified by the Bank of 
 England, or by the British Government, that the gold could not be 
 withdrawn and that he must take other American securities, and he 
 did so. Again, in the case of the Geneva award of fifteen millions five 
 hundred thousand dollars, which was payable to us in gold, the British 
 Government in effect declined to pay it in gold and paid it in other 
 securities. 
 
 Mr. Warner. That illustrates the difficulty of abstracting a part of 
 the currency of a country. 
 
 Mr. Hardenbergh. Where is the Secretary to get his fifty millions 
 additional of gold ? 
 
 Mr. Ewing. If he gets it at all he will get it from this country. [To 
 Mr. Warner. 1 You have stated that, in your opinion, when the people 
 are left to their free choice of taking paper or coin, we will certainly be 
 compelled to have as much coin in the country as paper? 
 
 Mr. Warner. Yes, sir. 
 
 Mr. Ewing. And that we cannot expect to keep out more than one- 
 half of the aggregate of the currency in paper money ? 
 
 Mr. Warner. Yes, sir; that is my opinion. 
 
 Mr. Ewing. Xow, what proportion of the aggregate amount of coin 
 in the country (judging from past experience here and from the experi¬ 
 ence of other nations) would it be practicable for the redeeming agency 
 (whether Treasury or banks) to retain as a redemption fund? 
 
 Mr. Warner. The proportion of the whole coin of the country which 
 may be held as reserve by banks and the Treasury will, undoubtedly, 
 vary very greatly, not only from year to year, but will vary with the 
 
27 
 
 seasons. It will be more at certain seasons tlmn at others. I do not 
 know of any data that would enable any one to form an intelligent opin¬ 
 ion as to what it will be in any given month. 
 
 Mr. Ewing. In 18G1 we had two hundred and eighty -five millions of 
 coin in the country, and eighty-seven millions of it was in the banks- 
 bow much had we in 1857 ? 
 
 Mr. WARNER. In 1857 we had one hundred and ninety millions in 
 circulation and fifty-eight millions in reserves. 
 
 Mr. Ewing. That is, between one-third and one-fourth of the coin of 
 the country has been held at those periods by the redeeming agencies? 
 
 Mr. Warner. Yes, sir; the amount has oscillated between those 
 figures, but many banks, under the old system, would not have half that. 
 
 Mr. Ewing. Would that not seem to indicate that it is not practicable 
 for a redeeming agency (whether the government or the banks) to com¬ 
 mand more than one-third or one-fourth of the coin in the country? 
 
 Mr. WARNER. I do not think that they will command more than that 
 percentage, and I think the rest of the coin will remain out. It will go 
 into private hoards, and to the various uses for which coin is preferred 
 to paper. 
 
 Mr. Eames. What was the paper circulation in 1857! 
 
 Mr. WARNER. Two hundred and fourteen millions. 
 
 Mr. Eames. What was it in 1801 ? 
 
 Mr. Warner. Two hundred and two millions. 
 
 Mr. Ewing. Is hot about that same proportion maintained in France, 
 in England, and in Germany by the redeeming agencies? 
 
 Mr. Warner. A larger proportion is generally maintained there than 
 we have maintained. 
 
 Mr. Ewing. Speaking of the effect of the withdrawal of one hundred 
 millions of our coin—when it becomes actually paid out in the current 
 money of the people, will not that withdrawal (whenever it occurs) come 
 from the redeeming agency? 
 
 Mr. Warner. Yes; that would undoubtedly be first taken from the 
 reserves. 
 
 Mr. Ewing. Heretofore, and doubtless hereafter, the reserve of coin 
 has borne, and will bear, a proportion of only one-third or one-fourth of 
 the amount of paper outstanding to be redeemed. 
 
 Mr. Warner. Yes, sir; probably not more. 
 
 Mr. Ewing. If you withdraw say twenty-five millions of coin from the 
 redeeming agency for shipment abroad, does not that necessitate a con¬ 
 traction of seventy-five millions of paper? 
 
 Mr. Warner. In order to maintain safe proportions, it involves that 
 contraction ahvays. 
 
 Mr. Ewing. So that the effect of the shipmeutof twenty-five millions 
 of coin when we get back to resumption, will be a contraction of seven¬ 
 ty-five millions of paper money ? 
 
 Mr. Warner. Yes, sir; and an inflow of twenty-five millions of coin, 
 which would go first into the vaults of banks, would probably result in 
 the extension of the paper circulation by seventy-five millions. There 
 will be these fluctuations. And to withdraw fifty millious even of cur¬ 
 rency from a volume of seven hundred millions, would undoubtedly be 
 sufficient, at any time, to involve the country in very serious trouble, 
 overthrow credit, and bankrupt a very large percentage of the ordinary 
 dealers in any market. 
 
 Mr. Ewing. Speaking of the hoards of currency. When we get back 
 to specie payment, will not these hoards naturally and almost certainly 
 
28 
 
 be hoards of gold—of the metal which, by common consent, is the cur¬ 
 rency that is the best ? 
 
 Mr. Warner. I should say that there can be very little room to 
 doubt that, as long as gold can be had for paper. 
 
 Mr. IlABDENBERGH. Would it continue for any length of time ? 
 
 Mr. Warner, it would continue just as long as hoards continue. 
 Hoards are about so much; they vary, of course. One man may not 
 keep a hoard for a long time, but about so much will be kept in that 
 state. . . 
 
 Mr. Hardenbergii. Contingent on the prosperity of the country ? 
 
 Mr. Warner. Contingent both on the prosperity of the country and 
 on the prosperity of the individual. But usually times of adversity are 
 times of the greatest hoarding. 
 
 Mr. Ewing. On whom will the burden of making this large coin prep¬ 
 aration for resumption fall ? 
 
 Mr. Warner. It will fall almost wholly on the Treasury. While the 
 national banks will undoubtedly take care of themselves, yet nothing is 
 plainer than that they will do so through the instrumentality of green¬ 
 backs, and if greenbacks are reissued, that instrumentality is made 
 continuous to them. In other words, if the national banks now have 
 what would be deemed safe reserves in greenbacks, I do not nee that 
 they need concern themselves at all about gold ; and after resumption, 
 if the banks wish to convert their reserves into coin, they can do so, 
 and to the extent that their customers will want coin they undoubtedly 
 will do so. 
 
 Mr. Eames. The reserves and legal teuders now held by national 
 banks in the cities amount to 25 per cent., and in the country banks to 
 15 per cent. l)o 1 understand you to say that, in your judgment, that 
 reserve which may be converted immediately through the government 
 into coin, is sufficient to enable the national banks to meet the presenta¬ 
 tion of any national-bank notes that may be presented for redemption 
 after the 1st of January next? 
 
 Mr. Warner. That reserve would be sufficient, I should say, for any 
 probable presentation of notes; but the reserve would have to be kept 
 up by constant additions, or by new supplies of coin, as the people draw 
 it away for their own purposes; and as there are more greenbacks in 
 the country than national bank notes, of course the greenback currency 
 furnishes an ample fund to float the national-bank notes. I cannot see, 
 therefore, that there is any obligation imposed upon the banks which 
 the greenback does not at once afford them the instrumentality of ac¬ 
 complishing. 
 
 Mr. Phillips. Would not the natural tendency of resumption be this: 
 that the government would concentrate in New York all the gold needed 
 to meet the legal-tender notes, and that the national banks would hoard 
 all the legal-tender notes to offset the gold, being two reserves, and thus 
 causing contraction of the currency. 
 
 Mr. Warner. I think the result would be a contraction and a con¬ 
 tinuous contraction. Besides, you caunot substitute a dearer currency 
 for a cheaper one even without involving, during the whole course of 
 such a change, contraction to a greater or less extent, because there is 
 always a considerable time intervening between the collection of the 
 paper and its presentation, and the return of the coin to the same lo¬ 
 cality. That, in itself, must involve a prolonged contraction, which will 
 not be over until the state of equilibrium between the two parts of the 
 currency is fully established. 
 
 Mr. Phillips. Our conditions would change on resumption from what 
 
they are now, and all the gold would be held by the Treasury to meet 
 the presentation of legal-tender notes, and the legal-tender notes would 
 be held in the banks to meet the presentation of national-bank notes: 
 would not that be the tendency ? 
 
 Mr. Warner. That probably will be the tendency. I should hardly 
 apprehend, however, any very sudden demand for legal-tender notes in 
 exchange tor national-bank notes by the people. The demand for green¬ 
 backs will be mostly for the purpose of using greenbacks to get coin, 
 and that is a demand that will continue; but I should hardly expect it 
 to be very sudden. 
 
 Mr. Phillips, if the national banks intend to maintain a safe basis, 
 would they not accumulate legal-tender notes ? 
 
 Mr. Warner. 1 think so. That will be their policy. They will in¬ 
 crease the accumulation of legal-tender notes for the purpose of procur¬ 
 ing coin, and that, of course, will work temporary contraction. 
 
 Mr. Uardenbergh. After the 1st of January, 1879, when the first 
 | resumption of specie payment occurs, would not the banks suffer imme¬ 
 diately by the demand made upon them for gold by their depositors, 
 and also by the demand for gold on their bank-notes ? 
 
 Mr. Warner. If their deposits were really payable in gold, I should 
 , say that that would be the case. 
 
 Mr. Uardenbergh. Are they not all so payable? 
 
 Mr. Warner. They are payable in legal-tender notes, and so will the 
 1 banks’ own notes be. 1 have not supposed that the deposits would lead 
 [ to such an immediate drain of coin from the banks as some have antici¬ 
 pated. If the deposits in banks do not bear au unsafe relation to circu¬ 
 lation—that is, when the circulation is ample for the deposits, and when 
 the convertibility of that circulation is provided for, then 1 take it that 
 S the deposits are taken care of. It turns upon the question whether 
 i your circulation is sufficient to meet the demands from deposits—that 
 I is, whether it bears a proper proportion to the deposits or not. 
 
 Mr. Hartzell. Secretary Sherman, when he was before this commit¬ 
 tee, told us that he was making provision to secure sufficient coin to 
 enable him to redeem the outstanding government notes that would be 
 presented after the first of January, and that then, in his opinion, re- 
 | sumption would be consummated. Now, if resumption of specie pay- 
 i ment in January, 1879, should prove disastrous to the national banks, 
 
 | have they not got the power to combine and soon to abstract all the 
 I coin in the Treasury, and force an abandonment of resumption ? 
 
 Mr. Warner. There is no doubt but that the banks have the poiccr 
 | by combining to draw the coin from the Treasury. 
 
 Mr. IIartzell. If it should become a question of self-preservation 
 I with the banks, would they not be very likely to do so? 
 
 Mr. Warner. They can always be relied upon to protect themselves 
 I first. 
 
 Mr. Hartzell. Then, would not the ability of the government to 
 I maintain specie payment after the 1st of January, 1879, depend en- 
 I tirely upon the co-operation of the national bauks? 
 
 Mr. Warner. Without the co-operation of the banks, resumption 
 would fail quicker, but I do not think myself that the banks and the 
 government together have the power, by any co-operation, to maintain 
 specie payment without retiring part of the paper. No country can 
 have all its currency in convertible paper, because when the choice is 
 extended to all Unpeople of the United States in the course of their 
 trade (a choice to bo exercised continually in all transactions) to deter¬ 
 mine what currency they prefer, some part of the whole certainly would 
 
30 
 
 be coin, and most probably the larger part. In that connection I would 
 add this: If there is a hundred millions of coin now in the country, over 
 and above the fifty millions of subsidiary coin and the coin in circula¬ 
 tion on the Pacific slope, then, for the Secretary to gather up fifty mil- 
 lions of that ami put it in the vaults ot the .treasury, no more helps re¬ 
 sumption than a man enriches himself by taking money fiom one pocket 
 and putting it into another. You are increasing the bonded debt, but 
 how in any possible way the maintenance of resumption, or its final 
 accomplishment, is aided by that process I am unable to see. It makes 
 no difference whatever whether there are one hundred millions in the 
 Treasury and fifty millions in the vaults of the banks to start with, or 
 whether the whole hundred and fifty millions of coin is in the Treasury 
 and nothing in the vaults of the banks. The banks furnishing the coin 
 to the Treasury to lie there through the summer months drawing interest, 
 will keep larger reserves in greenbacks, aud, after January next, present 
 greenbacks and draw their coin. But how such a loan can possibly aid 
 resumption I am unable to see. If the coin comes from abroad of course 
 that is another thing. 
 
 Mr. II artzell. Without the aid of the national banks, the Secretary’s 
 attempt at resumption would be utterly futile, would it not? 
 
 Mr. Warner. Yes. If the banks should operate against him, his 
 efforts would fail quicker than with their co-operation. But I take the 
 position that it is absolutely impossible to maintain six hundred and 
 fifty millions of convertible paper in circulation in the United States by 
 any co-operation of the banks and the Treasury. 
 
 Mr. H artzell. The Secretary says that he has nothing to do with 
 the banks, and that they must take care of themselves. 
 
 Mr. Warner. They will undoubtedly take care of themselves; but 
 he furnishes the instrumentality. 
 
 The Chairman. The Secretary will have twenty-five millions of silver 
 in the Treasury at that time. If he offers it to the banks, they will not 
 want to take it for their legal-tender notes. Will he not be able to keep 
 up this balance by the use of silver, aud will it not be his duty to do so 
 as being a cheaper metal ? 
 
 Mr. Warner. Only for a short time, I take it. If there are twenty- 
 five millions of silver, and if back of that is the gold, it would be very 
 easy for the banks to combine and distribute that amouut of silver, and 
 then reach the gold that is behind it. Moreover, twenty-five millions 
 of silver would be taken up by the country in pocket pieces. 
 
 Mr. Ewing. It would be taken up because silver certificates can bo 
 used to pay customs. 
 
 Mr. Warner. Yes, sir; for that reason also. 
 
 Mr. Ewing. The Comptroller of the Currency states the amount of de¬ 
 posits in the national,State,savings, and other banks, at twenty-two hun¬ 
 dred and twenty millions. Add to that amount the currency, six hundred 
 and fifty millions, making twenty-two hundred and seventy millions of 
 coin demand. Must not the Treasury Department respond in the end 
 to the whole of that demand for gold and silver, if the holders prefer 
 gold and silver to paper ? 
 
 Mr. Warner. Yes, to the extent that they do so; but I think that 
 is all covered in this. Our circulation, when made convertible, will be 
 just so much coin aud so mucli paper as will be determined by the laws 
 of trade. The people, through their deposits, will take so much of it in 
 coin and so much in paper; and the whole problem, it seems to me, is 
 involved right in that. If the whole circulation is sufficient to take care 
 of deposits, that is of discounts, which are the principal source of deposits, 
 
and not excessive, then, when the circulation is made convertible, it 
 will still be adequate tor deposits. The whole question is one of pro¬ 
 portion of coin to paper in the circulation. 
 
 Mr. Ewing-. And the coin must come from the Treasury ? 
 
 Mr. Warner. The whole of it except what the banks may chance to 
 have at the time. 
 
 Mr. Eames. Under what obligation is the government to pay other 
 than its own debt? 
 
 Mr. Warner. It has no other obligation. But if it reissues its paper, 
 the power to repeat the demand on the Treasury for coin is renewed just 
 as often as it is reissued. 
 
 Mr. Eames. As far as the legal-tender notes are concerned, the extent 
 of the obligation of the United States is about three hundred and fifty 
 million dollars, is it not ? I mean to say that the United Statesgovern- 
 ment is under no obligation whatever in regard to national-bank notes, 
 deposits, or anything else. 
 
 Mr. WARNER. No, sir; but this will be the result: If, out of a total 
 currency of seven hundred and fifty millions, three hundred and fifty 
 millions of it is coin and the balance is retaiued as paper, then what 
 paper is retained as currency will certainly be national-bank paper, and 
 the paper retired will be the greenbacks, and the government must pro¬ 
 vide the coin for taking up the greenbacks, and in doing so will provide 
 thecoiu for circulation and for the bank reserves. 
 
 The committee took a recess for an hour. 
 
 Washington, D. C., April 23,1S78. 
 
 A. J. Warner recalled. 
 
 Mr. Ewing. What do you think has been the effect of the resumption 
 law upon the industries and productions of the country ? 
 
 Mr. W arner. I think the effect has been to greatly lessen the total 
 production of the country, and greatly to lessen,if not to stop altogether, 
 the increase of national wealth. It may not be easy to determine the 
 amount of the loss with any close approximation to correctness, and yet 
 there are data wdiich afford, I think, some fair grounds upon which an 
 estimate may be based. 
 
 But first I will state what I have found in my experience to be the 
 effect of the diminution of the volume of money under the resumption 
 act, and the consequent increase in value, upon the industries of the 
 country, and upon business generally. A thousand, ten thousand, or a 
 million dollars, or any other sum of money, locked up in the vaults of a 
 bank, or for that matter buried in the earth, four years ago, when con¬ 
 traction of the money volume began, and now dug up and invested (tak¬ 
 ing the average of the value of property in the country, at least in the 
 State of Ohio), will buy more than twice as much as it would have 
 bought when it was buried; that is, money has grown, as it were, not 
 by use or by the accumulation of interest, but through increased pur¬ 
 chasing power given to it by legislation, contracting the volume and in¬ 
 creasing thereby the value of the money remaining. 
 
 Mr. Ewing. You speak of this as an effect of the resumption law. 
 
 Mr. Warner. Yes. I speak of the operation of the resumption law 
 and other monetary legislation. If the same sum of money, instead of 
 being buried in the ground or kept from use in any other way, had been 
 invested in property at the time it was buried, or had been employed 
 any time since in sustaining industries, the consequence would have 
 
32 
 
 been that half of it would have been lost. It is plain enough, therefore, 
 to see that that road leads directly to bankruptcy for those who con- 
 tinue to employ money in sustaining industries, The operation may be 
 more particularly explained in this way : Manufacturing establishments, 
 such as mills, factories, furnaces, &c., where capital is gathered in large 
 amounts for the erection of such establishments and for machinery, 
 tools Ac., designed for reproduction, necessarily produce from month to 
 month bevond the orders they receive. If they did not, they would 
 find themselves, part of the time, out of work, and would not be ready 
 to answer immediate demands. The cost ot producing the goods any 
 establishment turns out is estimated from the cost of the raw material 
 at a given time, the cost of labor, &c., and manufacturers calculate 
 upon a given market price for their commodities and upon given profits. 
 But they find that as money increases in value other things decline. 
 The meaning of increase in tiie value of money is that it will buy more, 
 or that goods have fallen. They find, therefore, at the end of the month, 
 or of two or three months, that their productions in excess of immedi¬ 
 ate consumption—using the word consumption in the economic sense— 
 are worth less than they cost them. They then make a new calculation; 
 they find that raw material has fallen, and they cut down the wages of 
 labor and try again, thinking that, having cut down to the new level, 
 they may safely go on again ; and they go on for a time producing as 
 before. The same thing occurs over again. The product of their in¬ 
 vested capital and the wage-fund they had to provide have yielded only 
 loss. The commodities they produced have fallen again as money has 
 continued to rise, and they find further loss as the result of their opera¬ 
 tions. They either go over the same ground, perhaps making half-time, 
 or they suspend entirely. And the suspension of operations by fac¬ 
 tories, mills, furnaces, &c., where tools and machinery become necessary 
 supplements to the hands of man, involves, of course, the idleness of 
 labor. Only the most favored establishments in the various industries 
 live at all, and none escape loss. 
 
 Now, the relation that labor, in point of value, bears to productive 
 capital has been variously estimated. According to the Census Report 
 of 1870, the total capital invested in manufacturing, mining, and fish¬ 
 eries is only twenty-one hundred and eighteen millions of dollars—leav¬ 
 ing off the thousands—or about $1,000 capital to a laborer; but the 
 superintendent of the census, remarking upon the difficulty of obtaining 
 correct reports of capital invested in the various industries, observes : 
 “This sum is probably not one-fourth the amount actually contributing 
 to the gross product.” 
 
 Pursuing another line of inquiry, and taking such industries as I have 
 had some acquaintance with, I have found that the different kinds of 
 industries vary very considerably as to the amounts of capital invested 
 to a laboreremployed. Certain classes of manufacturing industries have 
 less capital in the form of real estate, machinery, &c., or as a wage-fund, 
 than others. The proportionate amount of capital, in the form of real 
 estate, machinery, tools, wage-fund, &c., to a laborer will vary from 
 $1,000 to $4,000. Wood-working establishments have less capital in 
 proportion to labor than the iron industries; but from two to three 
 thousand dollars, in the various forms, to a laborer, will probably be 
 within safe limits. 
 
 The number of hands employed in manufacturing in 1870 was 
 2,053,996; wages paid, $775,584,343. The gross product of all the 
 capital and labor employed in manufacturing, mining, and fisheries, for 
 that year, as given in the Census Report, was $4,232,325,442. Suppos- 
 
33 
 
 ing the total capital invested in manufacturing anil mining to be three 
 times that given in the Census Report, it will approximate the estimate 
 before given oi 8-,000 to $3,000 of capital to a man. The value of farm 
 products, including betterments of stock, &c M was $2,447,538,656 or a 
 gross total of products for that year, as measured in the currency as it 
 then stood, of $6,079,864,098. The average production per man for 
 capital invested in manufacturing was 82,115. The average wages 
 paid, according to the figures of the census, was but a little over $400 
 per individual for all classes employed. 
 
 Now, we may reason either way—that is, take a given amount of 
 capital as idle and determine from that the number of laborers idle and 
 the loss of production in consequence; or assuming a given number of 
 laborers to be idle, we have a given amount of idle capital, and from 
 that we may derive the loss. It is proper to say, in this connection, 
 that in this estimate of capital employed in reproduction, there is no 
 account taken of the productions which are the result of workmen who 
 employ their own capital or such as work at their respective trades as 
 day-laborers or in their own shops, &c. 
 
 Mr. Ewing. The larger establishments only are taken into account? 
 
 Mr. Warner. The larger establishments only; and if we assume 
 that 83,000 of capital are invested for every laborer employed in manu¬ 
 facturing establishments, and assume that one-third of the capital so 
 employed is idle, which I do not think is an overestimate, then we have 
 about three-quarters of a million of men, on the average, forced into 
 idleness because of the enforced idleness of capital. Allowing $2,000 
 as the value of the gross annual product of one laborer and the capital 
 employed with him, which is less than the average in 1870, and we have 
 a direct loss, resulting from forced suspension of capital and the enforced 
 idleness of labor of $1,500,000,000, in the manufacturing and mining 
 industries alone. But even here there is a further permanent loss in the 
 rapid decay of this kind of capital. Moreover, such establishments, 
 when forced into liquidation, are often in a large degree a final loss. 
 
 It is generally estimated that a larger number of laborers than I have 
 given are idle, and if we take into account the large number that work 
 independently as day-laborers or on repair-work and in their own shops, 
 and take into the estimate those who work but part time, I doubt not 
 the number of those who are idle, or the average number of idle days, 
 will be largely increased, and that the loss to the nation is actually 
 greater than the foregoing figures make it. This does not include any 
 loss in agriculture. I have not supposed there was any enforced idle¬ 
 ness there. That department would be the last to feel the pressure, and 
 lor the past two years good crops and foreign demand growing out of 
 war has kept up this industry. 
 
 The reason why labor is forced into idleness when capital is idle is 
 very apparent. Labor and capital, as modern industries are carried on, 
 are" so combined, that capital cannot be employed without labor nor 
 labor without capital; a machine cannot be used without a man to run 
 it, and vice versa. When the machine is idle the man cannot be em¬ 
 ployed, partly because he has learned nothing else anil partly because 
 almost nothing is done without a machine. If his occupation is to weave 
 cloth with a loom he can weave only with his loom, by the power of steam 
 or water; he cannot go out by himself anil set up a loom of his own. He 
 cannot live by making cloth by baud. A boy who has learned to tend 
 a nail-machine must stop work when the machine stops; he canuot 
 make nails without it; he canuot go out and make nails in the old way; 
 he has never learned such work, and could not live by it if he had; 
 making nails with a machine is his trade. The capitalist owns the 
 3 w 
 
34 
 
 machine, he owns his hands; and, so far as his work goes, the machine 
 is as much a necessary part in the production ot nails as his hands are, 
 and even if he should undertake to learn something else, he will find 
 that the same cause that operated to throw him out ot that particular 
 employment has turned others out of other employments, and there is no 
 room for him. All trades are alike overfull when prices are falling. If 
 he turns to the country, hoping for relief on some farm, he finds that im¬ 
 proved machinery has kept pace with agricultural wants, and although 
 there is less enforced idleness in agriculture than elsewhere, neverthe¬ 
 less there is not room on farms for the many forced out ot other depart¬ 
 ments of labor, and owning no land himself, and having nothing with 
 which to buy any, he finds little relief. Therefore, when capital is forced 
 into idleness, labor is necessarily idle with it, and that without any fault 
 of the laborer; while his own wants, and, albeit, that ot his family too, 
 
 continue all the same. 
 
 And this, I charge, is the direct and natural consefjuence of the ap¬ 
 preciation of money under the resumption act anil the act demonetizing 
 silver and other legislation which, diminishing the volume ot money, 
 has increased its value. 
 
 That increase going on from year to year in the value ot money, and 
 decrease in the value of everything but money and investments that 
 share the enhancement of money, has made it certain that, if employed 
 in production, some part of the capital so employed would be lost. 
 Money put in with capital in other forms as a wage-fund, is almost cer¬ 
 tain, under such a monetary policy, to be lost. 
 
 It therefore follows, as a consequence of this legislation, that it is 
 profitable to bury money in the earth, and hazardous to employ it in 
 producing wealth. It is the buried talent that, under such a policy, 
 secures the reward. 
 
 • The same cause is operative in other countries, though to a less ex¬ 
 tent, and produces like results. The appreciation of money, effected by 
 legislation, is cause sufficient to account for the depressed state of trade 
 in other countries as well as our own. The false and mischievous the¬ 
 ory of “overproduction” was long since exploded, and “want of confi¬ 
 dence” explains nothing. The difference between an increasing and 
 decreasing volume of money for a country growing in population and 
 wants is incalculable. Hume was right, and Alexander Baring right in 
 quoting him to the parliamentary commission of 1819. In no other 
 question has mankind a greater interest. 
 
 As to the exteut of the loss to the country through non-production, 
 if we take the figures before given, of $3,000 capital, on the average, to 
 a laborer, and take $2,000 as the value of the products of this capital 
 and labor combined for a year, then with 7.50,000 laborers idle we have 
 the enormous sum of $1,500,000,000 as the loss of wealth to the nation 
 from non-production in a single year. Or if we count that a million 
 men are idle, which is much less than the usual estimate, then the loss 
 would be $2,000,000,000 (a million of men, in 1870, produced more than 
 $2,000,000,000), which is more than double the net savings of the nation 
 in the most prosperous years. At $1,500,000,000 we have for four 
 years a loss of $0,000,000,000, or with $2,000,000,000 a year a loss of 
 $8,000,000,000, since the passage of the resumption act. If our produc¬ 
 tions had been two thousand millions more each year, probably one-half 
 of that would have been consumed in better living by laborers and 
 others whose living has been reduced to the barest necessities, and the 
 rest would have remained as so rnnch permanent addition to the wealth 
 of the nation; and the country is less able, by the amount of this les- 
 
35 
 
 sened production, whatever it may be, to pay its debts than it would 
 be with it as an addition to its present wealth. On the other hand, the 
 burden of debts has been increased by the whole amount of the appre¬ 
 ciation money has undergone. That is, the debt burden has increased 
 by the appreciation of money, while the ability to pay has been lessened 
 by diminished wealth. 
 
 Mr. Ewing. Have you taken into account the loss from idleness ot 
 laborers not connected with the large establishments 7 
 
 Mr. Warner. Not ill these estimates. The loss by only partial em¬ 
 ployment of that class of mechanics and laborers not connected with 
 established industries, such as carpenters who work about, maintaining, 
 keeping in repair, and producing on their own account, has been cer¬ 
 tainly considerable, probably as much as one fourth of the whole amount 
 of such labor; but as to the value of their products, 1 know of no relia¬ 
 ble statistics covering the subject. 
 
 If you extend the investigation from manufacturing and mining to 
 agriculture, the loss there, I take it, has been very slight, if anything. 
 This industry, at least for the last two years, partly in consequence of 
 foreign demand for breadstuff's, occasioned by the war in Europe, has 
 kept employed the usual number of laborers. Besides, a given amount 
 of labor in the field of agriculture will produce a grsat deal more one 
 season than it will in another. On the whole, therefore, I think a loss 
 of $1,500,000,000 to 82,000,000,000 per annum, since 1873, through non¬ 
 production, as a consequence of a continued increase iu the value of 
 money, would not be an overestimate. 
 
 This sum, as I have said, is considerably more than has been the 
 average annual savings of the nation. By that I mean to say this: If, 
 in 1870, the gross production of the United States was $6,200,000,000, 
 the cost of keeping up the pre-existing wealth of the country, the cost 
 of maintaining the population beiug deducted, then the residue would 
 be national profit or net gain. 
 
 Mr. Ewing. Mr. Wells put it at between seven and eight hundred 
 millions per annum. 
 
 Mr. Warner. I believe those are his figures. Probably in no one 
 year has the nation reached a net saving of the lowest estimate of loss, 
 or $1,500,000,000, and on an average not much beyond half of that 
 amount. 
 
 If this reasoning be correct, then we have not only had no net savings 
 since 1873, but have been actually consuming some part of previously 
 accumulated wealth. 
 
 Mr. Ewing. Living on our own capital 7 
 
 Mr. Warner. Yes, sir; living on our pre-existing capital. And that 
 involves another consideration, which is worthy to be noticed. That is, 
 that the large increase in the value of money, or, as we may call it, the 
 gain to holders of money aud public securities that share the enhance¬ 
 ment of money (which gain has been very large for that class), there 
 being no net national gain from which to derive this increase, must 
 necessarily measure a corresponding loss to another class. Therefore 
 the net result of legislation increasing the value of money may be 
 summed up thus: A contraction of the currency volume of $85,000,000 
 has cost ns iu loss of production from six to eight thousand millions of 
 dollars, and in loss of national wealth say one-half to two-thirds of that 
 amount; because if the million or more of idle laborers could have pro¬ 
 duced more, they would have consumed more, and the whole difference 
 would not have been net savings. There is a further loss, not measured 
 in money—loss from demoralization of labor, the increase of crime, aud 
 
36 
 
 the deterioration which idleness engenders—but it is by no means with¬ 
 out its significance. 
 
 Mr. Ewing. You commence with 1873, but attribute this loss wholly 
 to finance legislation. 
 
 Mr. Warner. Y'es, sir. 
 
 Mr. Ewing. I wish you would explain your reason for that. 
 
 Mr. Warner. I commence with 1873 because, notwithstanding there 
 was heavy contraction in various ways, rather of an indirect than a 
 direct nature, prices and the value of money previous to that year were 
 pretty generally sustained by credit, and especially by a very large in- 
 llow into this country of floating capital in various forms, which came 
 here in exchange for bonds and other forms of indebtedness that we 
 sent abroad. I think this inflow of foreign capital was one of the prin¬ 
 cipal causes of the maintenance of prices up to the period of the panic; 
 and this is a consideration which I think has been rather lost sight of. 
 This capital supplied the place of other forms of credit that had beeii 
 made use of as money, as that was withdrawn, and sustained prices and 
 business. 
 
 Mr. Ewing. When you speak of other forms of credit used in lieu of 
 money ycu refer, I suppose, to the interest-bearing legal-tender notes 
 of the government ? 
 
 Mr. Warner. Yes, sir; such as the demand notes, certificates, tem¬ 
 porary interest-bearing bonds, compound-interest notes, &e. 
 
 Mr. Ewing. All of which performed to some extent the office of cur¬ 
 rency ? 
 
 Mr. Warner. Undoubtedly; and helped to sustain prices, though 
 not to the full extent that the same volume of actual money would have 
 sustained them. Xor do I wish to be understood as advancing the 
 opinion that foreign floating capital made up entirely for the government 
 currency retired; but, I think, it was the chief reason why prices did 
 not fall before. 
 
 Mr. Ewing. Because they were in use sometimes as investment and 
 .sometimes as currency ? 
 
 Mr. Warner. Y’es, sir. I would draw a distinction between the 
 effect of money and the effect of credit on prices. I would admit as 
 coming within the true definition of money, metallic money and paper, 
 whether bank-notes or government issues; anything that has general 
 acceptance in the final discharge of obligations; and I make this dis¬ 
 tinction between money which has general acceptance in the payment 
 of all obligations, and mere instruments of credit, and substitutes for 
 money, which, while they may discharge obligations, have no such gen¬ 
 eral acceptance, and which, while in some degree they take the place of 
 money, nevertheless pass as such only within a limited sphere, or be¬ 
 tween few individuals, or in restricted channels, and are not generally 
 accepted as final payment. In other words, money proper may be saih 
 to exert a constant pressure in maintaining prices, a pressure that is 
 unintermitting, aud acting in all directions. While substitutes for 
 money—forms of credit that may largely supplement and take the place 
 of money, are intermittent in their effect upon prices, and exercise, I 
 eonceive, a much less force than money proper. These substitutes for 
 money, these forms of credit, aud credit itself, while they may and do 
 largely at times supplement the volume of money, at the same time owe 
 their stability and efficacy to the quantity and stability of the volume 
 of money upon which they depend. 
 
 Mr. Ewing. To what extent do you attribute to the resumption law 
 this loss, so far as it has occurred since the passage of that law ? 
 
3 i 
 
 Mr. ^ arner. I regard the resumption policy, coupled with silver 
 demonetization in this and other countries, as the sole cause of the loss 
 in production and the depressed condition of trade since 1874. In my 
 view, this condition is the direct and necessary consequence of these 
 acts. It is what would be expected to follow a priori from settled prin¬ 
 ciples ot monetary science. From like legislation in future like results 
 must flow, whether such legislation be enacted ten, fifty, or a hundred 
 years hence. Always, legislation that causes money to appreciate in 
 value, causes other things to decline, and makes it profitable to hoard 
 money for the growth it makes, and correspondingly unprofitable to use 
 it, and this must always be so. Money is the life-blood of industry, and 
 when it increases without use, then it leaves the veins and arteries of 
 trade, and gathers in money centers, while industries are left to die out 
 of syncope. 
 
 Mr. Ewing. Supposing that silver had not been demonetized, and 
 the resumption law had not been passed, flow much of this loss would 
 have occurred since 1875, from causes other than those of which you 
 have spoken ? 
 
 Mr. Warner. With the cessation of the inflow of foreign capital, and 
 with the other causes culminating in the panic there would have been 
 a temporary check ; but if there had been no subsequent adverse legis¬ 
 lation, that is, if the resumption act had not been passed nor silver de¬ 
 monetized, I do not think we would have sustained altogether more than 
 a half year’s loss, instead of the four years of loss which we have now 
 sustained. Indeed I believe that the effect due to the panic had been 
 mainly dissipated before the middle of 1874, and that the subsequent 
 decline of business has come from the reduction in the quantity of 
 money and increase in its value that has followed the resumption and 
 silver-demonetization acts. 
 
 Mr. Ewing. Mr. Sherman, in hisstatement to thecommittee,attributed 
 the mischiefs which we have suffered since 1873 to the fluctuations of 
 the currency, arising from its not being redeemable in coin—he called it 
 inflation—but at the same time said that we would have a larger volume 
 af currency as soon as we reached resumption, and that that would be 
 healthy inflation. 
 
 Mr. Warner. The assumption that our currency has fluctuated in 
 value since 1873 is one which I cannot accept as being a correct de¬ 
 duction from known facts, or as in accordance with known principles of 
 monetary science. 
 
 Mr. Ewing. On the contrary, it has steadily increased in value. 
 
 Mr. Warner. It has not fluctuated,” it has steadily increased in 
 value as its quantity has been lessened. ]Sot only has our paper cur¬ 
 rency increased in value toward the level of gold, but the value of gold 
 itself, in consequence of silver demonetization and in consequence, too, 
 of the withdrawal of paper from use, not only in this but in other countries, 
 has risen very considerably as compared with commodities generally. 
 When there has been a general fall in prices as compared with gold, it 
 would be more correct to say gold had risen, as John Locke two hundred 
 years ago said (I may not give his exact words, but nearly): “ When 
 the same quantity of money is passing up and down the kingdom in 
 trade, then any variation in price between commodities, one with another, 
 is truly a variation in the commodities themselves, but when you change 
 the quantity of money that measures the value of the commodities 
 then the alteration is in the money and not in the commodities.” I re¬ 
 gard that as a true statement of the fact, and one entirely consistent 
 with the principles of economic science. lienee, I do not think it can 
 
, i • i fi.nf ti.prp ins been a “fluctuation in currency when 
 
 be properly.sad thattherehasM*^ ^ will goon as long as tbe 
 tbere lias been » stea i . , <|Ual iCity of commodities, and 
 
 Mr &TOG Referring now to jour data as to unemployed laborers, 
 it seems W mo that they indicate a' much smaller number of tbe uuem- 
 
 1,l0 Jlf WAH N EE h Tbnow f it is below tbatgenerallymadeaudlthink it 
 under rather thau over; but results multiply so fast that I ha\ e kit con- 
 
 be'tht losfupon ?begenml estimate of three mill- 
 
 expect if a 1 the facts could be known, that the total loss was in excess 
 of rather ?han within, the limit I have given. That is to say, taking 
 $6 l, 00 000 000 as the value of the gross products of the country m 18<0, 
 and allowing that in a healthy condition of trade the rate ot increase 
 would have been as great on the average as in the decade P^eding 
 i^to nno-iit to have a cross production of nearly $o,uuu,uuu,ut u tor 
 ll ?’ measured in the money of 1870. If it does not reach $6 000,000,000 
 measured by that scale, or say $4,800,000,000 measured by the money of 
 to-day, then the loss has been greater than I have gi\ en. If the surplus 
 in agricultural products, due largely to the season, be deducted, then it 
 could be shown I think, that we have not produced commodities worth, 
 in our present currency, $ 4 , 800 , 000 , 000 , and if not, then the oss from 
 idleness of labor and depressed business was more than $2,000,000,000 in 
 1877. Indeed I am ready to admit that, so far as I have seen statis- 
 tics, data are wanting to establish a gross production for 187/ of even 
 84 000,000,000. This sum, and more thau this, would be required to 
 maintain pre existing accumulations and support the population, some 
 part of which would find then but meager support. 
 
 Mr. Ewing. What estimate have you of the amount of debts in the 
 United States of all kinds, public and private ? 
 
 Mr Warner. The public indebtedness, national, State, and munici¬ 
 pal is somewhere between four and five thousand millions. As to cor¬ 
 porate indebtedness, there has been a good deal of that practically 
 wiped out in the last three or four years through insolvency, but in 
 1875 it was probably not much less than the whole public debt. The 
 indebtedness of railroads in 1S75 was about $2,500,000,000. Perhaps 
 $1,000,000,000 will cover other corporate indebtedness, not including 
 banks. . , , , 
 
 Mr. Ewing. Now as to private indebtedness. 
 
 Mr. Warner. Private indebtedness secured by mortgages was over 
 $2,000,000,000 in 187G. It has increased since, and if to this be added 
 loans made on personal securities, the total would hardly fall below the 
 public or corporate indebtedness. 
 
 Mr. Ewing. You would make the aggregate, then, about what ? 
 
 Mr. Warner. The aggregate would range from ten to twelve thou¬ 
 sand millions; that is, more or less permanent. 
 
 Mr. Ewing. State what has been the effect of this resumption law 
 upon the debtors. 
 
 Mr. Warner. The effect upon the debtors of the country, especially 
 those debts created on the basis of a full volume of money consisting of 
 gold, silver, and paper, as it existed in 1874, has been, of course, to 
 
39 
 
 double, and, as compared with many kinds of property, to more than 
 double, the value of money and the burden of debts as compared with 
 the means of paying them. So that practically, taking the State of Ohio 
 by way of illustration, more than twice as much property, on the aver¬ 
 age, is required to pay a debt now as would have been required at the 
 time the debt was created; that is, there has been, in effect, a change 
 in the measure since many of these debts were created amounting to 50 
 per cent, or more. The debt was created according to one scale, and 
 the effect of legislation has been to apply to property taken in paymeut 
 another and enlarged scale. 
 
 Mr. Ewing. So much for individual debtors. Now, what is the effect 
 as to these corporate debts'? 
 
 Mr. Warner. The effect, practically, is the same, except, perhaps, in 
 the case of railroads. The effefct on railroads has been not only to in¬ 
 crease the burden of the debts, but the continued increase in the value 
 of money has operated to cut down their business very largely, and to 
 lessen their earning power; and hence a very large number of the rail¬ 
 roads of the country are bankrupt, and more must become bankrupt if 
 the present monetary policy is continued one or two years more. 
 
 Mr. Ewing. State the effect upon the tax-payers. 
 
 Mr. Warner. The effect upon the tax-payers is the same. The num¬ 
 ber of dollars required for taxes remains about the same, both for pub¬ 
 lic expenditures and interest on public debt; for expenditures have not 
 been cut down ; but it takes twice as much property, twice as much 
 labor, or the products of labor, to pay the same number of dollars of 
 taxes. Then, again, the amount of taxable property becomes less each 
 year as the shrinkage goes on. In my own town there has been a reduc¬ 
 tion in the personal property of about 40 per cent, since 1873, and if a 
 reappraisement were to be made of real estate, that would be reduced in 
 about the same proportion. The result is, the legal limit placed on taxes 
 will not permit a sufficient sum to be raised to pay necessary expenses 
 and interest on the municipal debt. 
 
 The same increase of debt burden is felt in the payment of the public 
 debt. It is not merely a change in the value of paper money, but gold 
 prices have changed nearly as much. For instance, if we suppose the 
 interest on our debt held abroad in 1873 to have been a hundred 
 millions, and to have been paid entirely by the exportation of cotton, 
 it would have taken in that year (taking the Liverpool price at 104 
 pence for the best grade, or, say, 21 cents at New York) about one mill¬ 
 ion and sixty-six bales to have paid that entire interest; but in 1877 
 (last year), it would have taken to pay the same interest, at the prices 
 then ruling for cotton, about eight hundred thousand more bales, or one 
 million eight hundred and sixty-six thousand bales. 
 
 Again, it is estimated by Mr. David A. Wells that the total taxes 
 paid in 1870 in the United States amounted to 8730,000,000. If the 
 taxes for that year had all been paid by the sale of cotton, it would 
 have taken about eight millions of bales, but at the price now ruling, 
 or ruling in 1877, it would take fourteen millions of bales. Taking pig- 
 iron and comparing in the same way, it would have taken in 1873, at 
 the prices then ruling, about twenty-eight millions of tons; it would 
 take now over fifty millions of tons, or nearly one hundred per cent, 
 more. 
 
 Mr. Ewing. That is, taking the New York price. 
 
 Mr. Warner. Yes; I take the New York price. 
 
 Mr. Ewing. What do you anticipate is to be the injury to our indus¬ 
 tries in the future from the execution of this resumption law? 
 
40 
 
 Mr. Warner. If the resumption law is to be executed, and resump¬ 
 tion is to be actually accomplished, and coin is to be substituted for the 
 paper currency now in use, as I have explained, to the extent the peo¬ 
 ple mav prefer coin, I can foresee no other result than that of a contin¬ 
 uance of the present state of affairs—that is, a continued increase in 
 the value of money and decline in prices until the end is reached by 
 establishing a state of equilibrium between coin and paper, with the 
 possibility, moreover, of convulsions. For I repeat that to destroy 
 two or three hundred millions of the paper money now in use and buy 
 coin from other countries to take its place can have no different effect 
 on prices and business from that produced by sinking in the ocean so 
 much coin, if that were now our currency, and buying more coin from 
 other countries to take its place. To appreciate better the necessary 
 effect here, consider what would be the effect in England ol annihilating 
 three hundred millions of her gold and buying with commodities, or 
 with bonds, as much more from other countries to take its place. The 
 two operations would be perfectly analogous. 
 
 The state of the public mind must be considered, too. I think that any 
 one who mingles much with the people of the country, and especially 
 in the West, finds that a deep sense of wrong pervades the couutry, and 
 is increasing in intensity ; a feeliug that the interests of a large class 
 have been disastrously affected by monetary legislation, enabling another 
 class, whose wealth is in money and such securities as share the en¬ 
 hancement of money, to derive enormous increase—au increase which 
 necessarily (there being no net national gains from which to derive it) 
 measures a corresponding loss to another class. I think it is very evi¬ 
 dent that that feeling is not only increasing in intensity, but is becom¬ 
 ing more widespread. 
 
 Mr. Ewing, Through how long a period would you expect that these 
 low prices would continue if the resumption scheme is attempted'? 
 
 Mr. Warner. Well, judging from the experience of England, I should 
 expect it would take from eighteen months to two years after resump¬ 
 tion has beguu to reach a state of equilibrium in the currency, and if an 
 adverse balance of trade, arising from failure of crops or any other cause, 
 or if the interest on bonds held abroad, or a special demand for the 
 precious metals from any other cause, should drain away a part of our 
 coin, then the time would not only be prolonged but the effort itself 
 must fail. It is very unsafe to rely on such harvests every year as we 
 had last year. We are as likely to have 75,000,000 bushels of wheat 
 below an average as above, and such a year is as likely to come next 
 year as any time. We do not, on the average, have five years in a 
 century like IS77. I should look, however, for a temporary reaction 
 upon the initiation of resumption. When it beginsand coin is first paid 
 out, the tendency will be to relieve currency that has been kept from 
 circulation. The belief that now seems to possess the country, that the 
 equalization of paper and coin is the accomplishment of resumption, may 
 also lead, for the time being, to the investment of money on the suppo¬ 
 sition that the end has been reached. But when it is found that the 
 accomplishment of resumption involves a change in a part of the cur¬ 
 rency from coin to paper, leading, probably, to an early adverse balance 
 of trade, then I should look for a more rapid reaction in the other direc¬ 
 tion, with, very probably, convulsions. 
 
 Mr. Ewing. You state that you do not believe resumption to be prac¬ 
 ticable; that is, you think the Secretary will break down. 
 
 Mr. Warner. I recur to my general proposition that neither the Sec¬ 
 retary nor the Secretary and the banks together, by any co-operation 
 
41 
 
 between them, can possibly maintain the present volume of paper in 
 circulation and make it readily and easily convertible. It is absurd to 
 propose to Lave all the currency paper and still make it convertible and 
 that is about what seems to be expected. If the Secretary and the banks 
 have only to look to their reserves, and if with 8150,000,000 of coin re¬ 
 serves they can float $G50,000,000 of paper, then on the same principle 
 with $350,000,000 of reserves they could float 81,300,000,000 of paper. It 
 is absurd. They must look beyond the reserves to the state of the whole 
 circulation and know that when paper is made convertible that there is 
 a limit to the total volume of currency that will stay in the country. I 
 have no hesitancy in saying that such an undertaking will sooner or 
 later break down, and the fear is that it may break the country down too. 
 I believe, at the same time, it is possible for the Secretary to accom¬ 
 plish resumption, and for a time, perhaps a number of years, maintain 
 it, but only by retiring the paper; and what that involves to the country 
 I have stated. 
 
 ]\Ir. Ewing. What do you call resumption? 
 
 Mr. Warner. By resumption, as I think the Secretary will have to 
 practice it, I mean redeeming the paper as presented. The Secretary 
 may also buy greenbacks with bonds and burn them up. If he destroys 
 all the greenbacks presented the coin paid out will doubtless remain in 
 circulation, and coin will also come in from abroad if there is any 
 vacuum, unless national-bank issues are extended. You can accomplish 
 resumption in that way and maintain it until the balance of trade, or 
 our debt abroad, or convulsion, panic, bad harvests, or other adverse 
 conditions turn things against us. The maintenance of convertibility 
 of paper will always depend more on the quantity of paper than on the 
 coin reserves. But if, as suggested in the question of Mr. Eames, the 
 paper be kept out, by bringing its legal-tender power into operation, or 
 by otherwise preventing free convertibility, then, I repeat, the coin will 
 be driven away ; because if the channels of circulation are already full, 
 no more currency, if convertible, will remain here. 
 
 Mr. Ewing. How is it possible to prevent free convertibility uuder a 
 system of resumption? 
 
 Mr. Warner. Kesumption, of course, fails when paper is not readily 
 convertible. Nevertheless, in 1862, when greenbacks were paid out, 
 they were paid out as promises to pay, and kept iu circulation per force 
 of being legal-tender,and being made money; and the same thing may 
 be done over again. The banks, by combining, may undoubtedly make 
 use of a certain influence against a demand for coin, as under the old 
 system the banks always exerted more or less influence in that way. 
 
 * Mr. Hardenbergh. Cannot the government resume of itself without 
 the national banks ? 
 
 Mr. Warner. The government cau take up greenbacks with bonds, 
 or buy bullion and coin it and redeem and cancel them; but the gov¬ 
 ernment cannot make greenbacks convertible into coin at the will of the 
 holder, and then keep in circulation 8350,000,000 or 8300,000,000 as a 
 system of currency independent of bank currency. While the national 
 banking system exists, the government cannot separate its own issues 
 from the issues of the banks, and separately maintain resumption. 1 
 think it is very plain that, first, banks will not, as they need not, look 
 elsewhere but to the government for their specie, which the instru¬ 
 mentality of the greenback affords them ample facilities for doing; and, 
 second, that the paper retired, in order to maintain the convertibility of 
 the whole, will be the greenbacks. 
 
 Mr. Ewing. You said at the meeting on Monday that the repeal of 
 
42 
 
 the resumption law, or some modification equivalent to a repeal, was 
 necessary. What modification do you suggest ? 
 
 Mr. Warner. The absolute repeal is best. 
 
 Mr. Hardenbeegh. What action do you propose Congress should take 
 whereby confidence may be so far restored as to invite capital into such 
 ventures as will give employment to labor? 
 
 Mr. Warner. First, repeal the resumption act and stop the further 
 alteration in the value of mouey. The alteration in the value of money, 
 as it has been going on for years, has been the one source of evil. Con¬ 
 fidence is a consequence, not a cause; it is a creature of success, and 
 will return only when success in business is the rule and not the excep¬ 
 tion. If it were known to-day that there was to be no more contraction 
 of the currency, no attempt at substituting coin for paper, and no more 
 hoarding of coin for that purpose, confidence would appear again and 
 industrial life revive immediately. 
 
 Hence, taking in view the present condition of affairs in the country, 
 and considering the whole question practically, I should say, repeal the 
 resumption act first, and limit the volume of paper money substantially 
 to its present volume, and thereby preserve the equality of value be¬ 
 tween paper and coin. It is a principle as well settled as is anything 
 in monetary science, that, by limiting the quantity of paper money to 
 a volume less, or not greater, than we would have of metallic money if 
 there were no paper, or than would be our share of the currency of the 
 world, then the paper volume would have the same value so much coin 
 would have, and would stand at a level with metallic money. It is a 
 mistake to suppose that the equality of value between metallic and paper 
 mouey can be secured in no way but by convertibility. It can be se¬ 
 cured as well, and more certainly, by arbitrary limitation of quantity 
 than by the promise of convertibility. Indeed, Peel’s act of 1844 was, 
 in effect, an assertion founded upon the experience of England with 
 bank issues, that the promise of convertibility alone could not be relied 
 upon to secure equality of value of the bank-note with coin, even with 
 but one issuing bank, and that closely allied to the government, and the 
 principle of arbitrary limitation was accordingly established by that act 
 to secure convertibility. The same principle, with an elastic margin or 
 limitation, has been incorporated into the German system. 1 cannot 
 think, therefore, that an economist or statesman could be found in Eu¬ 
 rope who would stand by a proposition to maintain the equality of value 
 between paper and coin by the promise of convertibility alone, with 
 two thousand or more independent issuing banks. It has failed in other 
 countries. It has periodically failed here. No other country, except 
 Scotland—if that be an exception—relies upon the principle of convert¬ 
 ibility, or rather the promise of convertibility, alone to .secure equality 
 of value. We have many times passed through Lord Overstone’s cycle 
 in this country, relying upon the promise of convertibility of independ¬ 
 ent banks, and I see no reason to believe the principle will work differ¬ 
 ently in the future. By limitation of the quantity of the paper to a 
 volume not greater, as I have shown, than would be our distributive 
 share of the money of the world, and its value is at once secured. With 
 this principle in force the currency would now stand, say, 8650,000,000 
 of paper, 850,000,000 of subsidiary coin; with, say, 850,000,000 on the 
 Pacific slope, and elsewhere in hoards, and then if the channels were 
 not filled to the level of the currency of the world, coin would come in 
 to fill up the vacuum. 
 
 If the restriction on the quantity of silver were removed and paper 
 limited to the present volume, then coin would now flow into the coun- 
 
43 
 
 try. The tact that silver bullion is at a discount now as compared with 
 paper affords abundant proof of this proposition ; on the other hand, if 
 the government continues to buy silver bullion, and to coin it after the 
 bullion and coin are at par, then silver coin will leave the country. Or, to 
 state in a sentence my proposition; limit paper to its present volume, 
 until some safe principle for regulating issues of paper can be adopted, 
 remove the restriction on silver coinage, and with the doors full open to 
 both the precious metals, if we need more money get it from the precious 
 metals, precisely the same as If all our money were coin now and we 
 wanted more. This will stop contraction and'the further alteration in 
 the value of money; will wrong not a being, while the policy of further 
 contraction involved in the resumption scheme, and the substitution of 
 coin for paper, cannot otherwise than work yet infinite wrong to multi¬ 
 tudes of people. 
 
 Then the whole currency, paper and coin, would vary precisely as 
 though it all consisted of gold and silver. Now, I do not say that a me- 
 tallic currency, or a currency varying precisely as a metallic currency 
 would vary, best preserves stability of prices, but it certainly much bet¬ 
 ter preserves stability than does or will a currency issued under our 
 present national banking system. There would be greater flexibility 
 even in a purely metallic system than our present national banking sys¬ 
 tem affords. Under that system the flexibility of the old State bank 
 issues is taken away. A given amount of currency is issued, and that 
 remains outstanding or issued the same for all seasons of the year. Under 
 the old banking system, or “ the Scotch system,” banks adapted their cur¬ 
 rency to the varying needs of their respective localities ; they increased 
 it at one season and decreased it at another, having in view only the 
 probable demand on them for coin. That is the case with the Scotch 
 system now. 
 
 Let me illustrate this. In Cincinnati, in December, during the pork 
 season, there is an extra demand for several millions of currency. With 
 a purely metallic currency, it would have to be gathered up from other 
 parts of the country or brought in from abroad. It may be wanted in 
 other places, too, at the same time. The scarcity created by the 
 increased use for money at that particular season, arising from an 
 increased amount of products, embarrasses trade and affects prices. 
 Now, under the Scotch banking system, the banks of Cincinnati, having 
 in view ouly the probable demand that would be made upon them for 
 coin, issue their notes to dealers in produce, taking in return the notes 
 of the produce-dealers, on the theory that when the notes of the pro¬ 
 duce-dealers are. paid to the banks they will be paid in the banks’ own 
 notes. If they are not, they are paid in the notes of other banks, which 
 are exchanged for their own notes; or if paid in coin, then the bank¬ 
 note is safe. The effect is that that particular work is performed by 
 credit instruments alone, which are created for that particular use, and 
 are. extinguished when it is done. There is a great gain in such flexi¬ 
 bility in any money-system. A purely metallic currency does not afford 
 it, and that is perhaps its one defect. But much less does the present 
 national banking system afford it. Under this system, if an increase of 
 currency is wanted in Cincinnati, before the banks can issue it they 
 must purchase bonds in the market, send them to the Treasury in \\ ash- 
 ingtou, and have the notes issued; and when the notes are once out, 
 they are out for all seasons—when they are not wanted as well as when 
 they are. Therefore, there is less flexibility, less adaptation to our 
 local wants in the national banking system tbau there would be iu a 
 purely metallic currency. 
 
44 
 
 And here, taking into full consideration the present situation of 
 affairs, the different views held in the different sections ot the country, 
 and the unsettled state of the public mind, as a practical solution of the 
 immediate question before the country, and one on which different 
 opinions might be harmonized, I recommend and urge for the considera¬ 
 tion of the committee, and upon Congress, the adoption of the principle 
 of limitation to be applied to the volume of paper, for the preservation 
 of the equality of value between paper and coin. This would, ot course, 
 involve the arbitrary limitation of bank issues. 
 
 The ultimate question of the regulation of paper issues, by which the 
 ratio between the quantity of money and its use, or the quantity of com¬ 
 modities and transactions, may be kept more stable than under either 
 the metallic or national banking system—while perhaps the most impor¬ 
 tant question pertaining to economic science, not only for this country 
 but for the world—the country is not prepared to act upon now, and ou 
 this point I am not prepared to express any opinion. 
 
 The constant factor in the equation of currency should be the ratio 
 between quantity of money and quantity of commodities and transac¬ 
 tions. Then you have stability of prices. 
 
 Mr. Hardenbergh. Would not the national prosperity be promoted 
 by a complete separation of the national government from control of 
 the currency and leaving it to the States ? Why should not the 10 per 
 cent, tax on State banks be rescinded ? 
 
 Mr. Warner. I would say, substitute greenbacks, or United States 
 paper in some form, for national-bank notes, both because this system 
 is an expense to the whole people, and a profit to a few, for which they 
 have no right to ask, and which the public are under no obligation to 
 concede; and, second, because that system, as it now stands, is so 
 wanting in flexibility that it does not perform the function of a good 
 bauk-of-issue system. As to a complete separation of the government 
 from the States in the matter of currency, and the removal of the tax 
 on State banks, that is, a returning to the policy of State control of 
 banks of issue, I do not think public sentiment in the country would 
 now favor that. There is, however, an advantage in State banks that 
 the national system, as I have explained, does not possess; and that is, 
 flexibility and adaptation to local wants; and this is an immense gain 
 to a people; an advantage, the loss of which, I am ready to admit, is 
 not compensated by the uniformity of the currency gained through the 
 national banking system. Flexibility and adaptation to local wants 
 have been sacrificed in the national currency system to security and 
 uniformity. 
 
 Mr. Ewing. Would you, then, fix the volume of the government 
 paper money at a little below what you consider to be our distributive 
 share of the money of the world, and let the coin flow in to bring it up 
 to the level? 
 
 Mr. Warner. Yes, sir; I think that the best practicable solution 
 now attainable; but I would not lose sight of the ulterior question con¬ 
 nected with the regulation of paper money hereafter. I deem that the 
 great question; but it is in the future, and upon that I am not prepared 
 now to express an opinion. 
 
 Mr. Ewing. What would be the effect if other states of Europe were 
 to demonetize silver ? 
 
 Mr. Warner. The effect would undoubtedly be, with our silver law 
 as it now stands, to lessen the quantity of metallic money that would 
 tall to us. But with the restriction on the coinage of silver removed, 
 
45 
 
 direction Pr ° bably ° perate to tuni the rio ' v of silver somewhat in this 
 Mr. Ewing. Would that be to us a beneiicial effect? 
 rn^ 1 !' ^ ARNRR * 1 s,1 °uld not think it would have anv adverse effect. 
 The best condition, however, would be one of bi-metallism, in a ratio to 
 be agreed upon between the different countries-eitker fifteen and a 
 ia or sixteen. ithout silver, or with gold alone as money for the 
 world, I believe all attempts at resumption, or the payment of debts 
 generally, with prices at the level of gold as it would then stand, to be 
 utterly impossible. The credit of the government, after private credit 
 had been generally destroyed, would itself fail, and that a long wavs 
 short ot mono-metallism for the world, or for Europe and the United 
 States even. All estimates of volume of money I have given are based 
 upon the continued use of both metals as money throughout the world 
 The share of metallic money that would fall to u's with gold alone as the 
 money of the world, would be little, if any, more than half the volume 
 we would have with both metals to draw from; that is, 350 or 400 mill¬ 
 ions instead of 750 or 800 millions. 
 
 Mr. Ewing. If other states of Europe demonetize silver and we had 
 ree coinage at sixteen to one, the probabilities are that our metallic cur¬ 
 rency would be purely silver ? 
 
 Mr. Warner. Almost certainly so. 
 
 Mr. Ewing. What would be the effect upon us if other states of 
 Europe now using an inconvertible paper currency were to return to 
 the coin standard ? 
 
 Mr. Warner. To the extent they withdraw their paper, and call upon 
 other countries for the precious metals, just to that extent will it tend 
 to lessen the quantity in other countries, and in the same proportion to 
 increase its value. 
 
 If, for instance, at the same time we are hoarding coin, Italy should 
 be doing the same, coin would be scarcer and dearer. The hoarding by 
 the governments of France and Germany at the same time two years 
 ago undoubtedly affected very materially the premium on gold in this 
 country. The premium was higher in this country then than it would 
 have been if there had been no extra demand for hoarding in their 
 treasuries by Germany and France. The rise in the premium here, ac¬ 
 cording to our Secretary and the Comptroller of the Currency, was due 
 to fluctuation in our paper currency, when there was no increase in 
 quantity, and, in fact, no such fluctuation. There was a rise in the value 
 of gold and a rise in the value of paper, and a fall in commodities, all 
 the result of contraction. 
 
 Mr. Ewing. Will we not have a more stable currency by retaining at 
 least our whole volume of paper money than we would have if we return 
 to specie payments ? 
 
 Mr. Warner. I think there is no question about that at all. Our 
 volume will be more stable, as I have said, with the paper limited to 
 any sum less than that which would be our distributive share of the 
 world’s money if there was no paper, leaving a vacuum to be filled by 
 the inflow of coin—and it would be more stable than is possible under 
 a state of promised convertibility with 2,000 and more independent issu¬ 
 ing banks. 
 
 Mr. Ewing. Please state your views as to the bill of the Senate Com¬ 
 mittee of Finance, amending the resumption law, and also the bill pro¬ 
 posed by Senator Matthews, if you have examined them. 
 
 Mr. Warner. The proposition reported by the Senate Finance Com¬ 
 mittee, in substance to retain the present volume of money, I think is 
 
46 
 
 .. „ antirplr incousisteut. if at the same time it 
 in the right law ; and that for the reason 
 
 is proposed to exec re impossible to till the channels of circu- 
 
 already g veil, that it re i ssue —and then make that 
 
 'paper convertible. Resumption in that way must be on the theory that 
 paper coin emeu.. i , t 0 f t h e circulation would be 
 
 This 0 h 8ho°«, woul^be^resninption by faith, and might us 
 we 'be Ut in operation one time as another. It is plain, however 
 h , if coin is paid out on top of a full circulation of paper and is not 
 that it com is. pa 1 co i n will soon leave the country 
 
 aud'convertibufty after a time fail. Hence, a proposition to retain all 
 our paper and still go on with resumption can hardly gam general ac- 
 
 Ce The amendment to the resumption act proposed by Senator Mat¬ 
 thews will! no doubt, 1 think, operate to preserve equality in value 
 between paper and coin ; and, after all, this is the great thing to be 
 attained by any plan of resumption.* This amendment proposes a so to 
 give full moueypower to greenbacks by making for 
 
 customs and exchangeable for four per cent, bonds. It will, m mj judg¬ 
 ment be a great gain to permit bonds to be paid tor m the currency of 
 Se people. Kotlfing will do so much to bring our debt home and dis- 
 tridiite t among our own people. People do not like to buy a thing to 
 get which they must first change the currency they ordinarily deal in 
 f nto another kind of money. It notes received in the Treasury for bonds 
 were allowed to accumulate, there might be at times heavy contraction; 
 but if greenbacks received for four per cent, bonds are paid out in 
 redemption of 5-20 bonds, contraction of the currency will not on y be 
 prevented, but a most desirable means of funding will lie provided lor. 
 I do not see. however, the necessity of always maintaining intact in the 
 Treasury fifty million dollars. 1 see no reason why that should not be 
 drawn upon,'if need be, for paying interest or other coin obligations. 
 
 Resumption, under the proposed .Matthews amendment, could, more, 
 over, as well be tried now as next January. Ii, as the Secretary seems 
 to think will be the case, the people will not take the com, then the 
 suspension limit provided for in the proposed amendment will not be 
 reached, and, for that matter, more coin to start with will not help the 
 case if the paper is to be reissued; and the difference between a lawful 
 and a forced and unexpected suspension is worthy the gravest cousid- 
 
 61 Mr 0 'Ewing. Would not our currency, with the present volume of 
 paper money inconvertible, be better than a return to specie payments 
 even though all the paper money we issue be government money? 
 
 Mr Warner. Decidedly so; and I think it would be better it it were 
 all government monev. And at that point I am reminded of the recom¬ 
 mendation by the eminent writer on money, thinker, and banker at the 
 same time, Mr. Ricardo. On that point his recommendation, I have 
 thought, was a very sound oue. His proposition for England, then 
 situated much as we are now, with a large debt—only England owned 
 all her own debt—and with a paper currency, was, instead ot taking 
 the capital of the country to procure a gold currency, to make her cur¬ 
 rency one of paper, and to maintain it at a level with gold bullion by 
 making it exchangeable for gold bullion only in sums of—my recollec¬ 
 tion is 1,000 ounces. 
 
 Mr. Ewing. Was it his idea that the whole volume of currency slio ild 
 be paper ? 
 
 Mr.' Warner. Yes, sir; that the circulation should be paper. 
 
47 
 
 Mr. Ewing. The whole of it ? 
 
 Mr. \\ arner. Y es; that the whole of it should be paper, but paper 
 maintained at a level with metallic money. And his mode of maintain- 
 in<> - it was by allowing it to be exchanged in large amounts for gold 
 bullion for international trade. ® 
 
 Mr. Ewing. You allude to his posthumous work ? 
 
 Mr. \\ arner. Yes, sir ; to an essay published after his death. The 
 proposition, indeed, was first published, I think, by Mr. Joplin, but in a 
 different form, but substantially the same proposition, but elaborated 
 by Mr. Kicardo. And I think tor us now, in the situation of the coun¬ 
 try, so overwhelmed with debt—national, State, municipal, and indi¬ 
 vidual—to take from our capital, which we need for productive purposes 
 to produce the things with which alone we can pay our debts, and con¬ 
 vert it into currency—that is, use the capital to buy a currency with to 
 take the place of our paper currency, would be very much like a mer¬ 
 chant who, already very much In debt, should take from his capital in 
 trade and buy a gold yard-measure to use, instead of a wooden one of 
 the same length. While he made use of his gold yard-measure he would 
 earn no more, his trade would be no greater than it was when he was 
 using his wooden one. On the other hand, his capital in trade would 
 be lessened by the cost of the gold measure. Of course he could recon¬ 
 vert his gold yard-measure into capital; but so long as he used it merely 
 as a measure, he would be no better off than he would have been if he 
 had not possessed it at all. So with a nation situated as we are. If we 
 convert capital into currency to take the place of a currency that we 
 already have, the result will be that, while we use it only as currency, 
 our earning power will not be in the least increased, but diminished by 
 the cost ot the new currency. YV e may convert such a currency again 
 into capital, as we did in 18G2; but a country that is constantly con¬ 
 verting its currency into capital, and then capital back into currency, 
 as I have said, is constantly making bad bargains. 
 
 Mr. Ewing. Can we, in justice to the people, the tax-payers and 
 debtors, change the measure under which the debts were created, by 
 returning now to this gold standard ? Is it fair to them for us to do it? 
 
 Mr. Warner. Yo, sir. It can be justified on no principle of morals 
 or ethics. It is bad economy, and worse in a moral point of view. If 
 Congress should change by a single inch the length of the yard-measure 
 or the standard bushel, the courts would undoubtedly compel adjust¬ 
 ment of contracts according to the measure in force when contracts 
 were made. But when you change the value of money by legislation, 
 50 per cent, or more, as has been the case—a change that must still 
 go on, if the resumptiou law is executed—there seems to be nowhere a 
 remedy, except iu Congress itself; but the injustice and the wrong 
 remain the same. 
 
 Mr. Ewing, Y'our illustration of the gold yard-stick does not express 
 the chief objection. There is this additional objection to which we have 
 just referred, that of injustice to debtors and tax-payers, and the 
 further objection that when you get to the convertible currency, you 
 will not have as good a currency as you would have had if you let it 
 remain inconvertible. 
 
 Mr. Warner. I grant that. I only used that illustration to show the 
 bad ecouomy of such a step, to show what would be the direct national 
 loss in the change from paper currency iu use to a metallic currency.