1874.] 
 
 A Modern Financial Utopia. 
 
 441 
 
 A MODERN FINANCIAL UTOPIA: HOW IT GREW UP, AND 
 WIIAT BECAME OF IT. 
 
 There is one great, plain, practical 
 fact in respect to irredeemable paper 
 money, which in itself is a sufficient an¬ 
 swer to all the arguments that may be 
 advanced in its favor. And that is, 
 that there cannot begone single instance 
 referred to in the history of any state, 
 nation, or people, in which its adoption 
 and use has not been wholly disastrous. 
 The more conspicuous examples and 
 illustrations which prove this assertion — 
 namely, the John Law scheme of 1716— 
 1720, the currency of the American col¬ 
 onies before the revolution, the Con¬ 
 tinental money, the French assignats; 
 and later and in this century, the paper 
 money experience of Austria, Russia, 
 Italy, Spain, Turkey, and the South 
 American states—are all more or less 
 familiar ; but there is another example, 
 little known, and rarely if ever referred 
 to, which, occurring within a compara¬ 
 tively recent period, and under condi¬ 
 tions analogous to those which in the 
 opinion of many render the United States 
 an exception to all the rest of the world, 
 is no less interesting and instructive. 
 We refer to the fiscal experience of the 
 Republic of Texas, which, during the 
 brief period of its existence as an inde¬ 
 pendent nation, committed on a small 
 scale nearly all the financial blunders, 
 and tried nearly all the financial experi¬ 
 ments, which the greater nations of 
 Europe have before and since committed 
 and tried on a large scale, and, as might 
 naturally have been expected, with an 
 almost exact parallelism of results. 
 The details of this curious history were 
 first collected by the late William M. 
 Gouge of Philadelphia, — an American 
 writer on finance whose reputation was 
 never commensurate with his worth and 
 abilities, — who visited Texas after its 
 annexation for the purpose of specially 
 studying up this subject; and whose 
 work, published near a quarter of a cent¬ 
 
 ury ago, and now a rare volume, con¬ 
 stitutes the source from which has been 
 derived the following information. 
 
 Previous to the year 1835, Texas was 
 one of the states of the Republic of 
 Mexico; and its currency consisted of 
 gold and silver, and, to a very limited 
 extent, of the notes of the banks of the 
 United States. As the civilized popu¬ 
 lation was small, no large amount of 
 currency of any kind was required, but 
 as compared with other newly settled 
 countries, money was reported “ to have 
 been plenty.” A great part of the 
 Texan currency consisted of what were 
 termed “ hammered dollars,” or old 
 Spanish dollars from which the royal 
 effigy had been effaced by the Mexicans 
 as a testimony of disrespect for their 
 former rulers. Time contracts were 
 however made in new Mexican dollars, 
 which were termed “ eagle money,” and 
 circulated at one hundred cents to the 
 dollar; while the “hammered dollar,” 
 though containing fully as much pure 
 silver, circulated at only ninety cents; 
 the probable reason for the current de¬ 
 preciation of the latter being, that the 
 destruction of their certificate of value 
 effected by defacing the stamp, also 
 prevented their use in settling foreign 
 exchanges, and consequently their ex¬ 
 portation. 
 
 After the commencement of the revo¬ 
 lution, and the inauguration of a provis¬ 
 ional government, in November, 1835, 
 hammered money gradually disappeared 
 from circulation, and bank-notes from 
 the States came in more freely and con¬ 
 stituted the chief currency. In 1837, 
 however, the banks of the United States 
 suspended specie payments, and while 
 all of the circulating medium of Texas 
 became greatly depreciated, a very con¬ 
 siderable portion derived from the banks 
 of the State of Mississippi became alto¬ 
 gether worthless. “ Thereby,” says the 
 
442 
 
 A Modern Financial Utopia. 
 
 historian above referred to, “ many of 
 the people of Texas suffered severe¬ 
 ly, but their aggregate losses did not 
 equal their aggregate gains, as many of 
 these notes liad been obtained in loans 
 and many of these loans were not re¬ 
 paid.” 
 
 From the very first the Texans do not 
 appear to have ever allowed themselves 
 to be embarrassed by the idea of Old- 
 World bankers, political economists, and 
 doctrinaires that the circulating me¬ 
 dium of a country should be based upon 
 the precious metals. They were wiser 
 than all that; and they had in their 
 possession something more valuable than 
 gold and silver, — the element and 
 source of all wealth, — namely, an al¬ 
 most unlimited quantity of cheap, fertile 
 land. This was the true thing, in 
 their opinion, to bank on, and bank on 
 it they did. The first bank chartered, 
 nearly six months before the commence¬ 
 ment of hostilities, was the “ Commer¬ 
 cial and Agricultural Bank ” of the de¬ 
 partment of Brazos. Its capital was 
 not to exceed one million of dollars , 1 
 divided into shares of one hundred dol¬ 
 lars each. It was authorized to estab¬ 
 lish branches any where and everywhere; 
 receive eight per cent, per annum on 
 loans not exceeding six months, and ten 
 per cent, on loans exceeding that time; 
 and only the capital of the bank was to 
 be responsible for the notes it issued. 
 But the subscribers were required “ to 
 adequately secure the value of their shares 
 with real estate in the republic . ” In 
 short it was a most liberal charter, and 
 the only thing any way illiberal about it 
 was the single clause, “that as soon 
 as one hundred thousand dollars, at 
 least, have entered the vaults of the 
 bank, it may commence operations.” 
 “Dollars,” however, at that time, in 
 Texas, says our historian, “ meant just 
 whatever the people meant to make it 
 mean:' William M. Strong, of Penn¬ 
 sylvania, Associate Justice of the Su¬ 
 preme Court of the United States, had 
 not then taken his seat on the bench; 
 but the Texans in 1835 knew as well 
 as Judge Strong did, when he gave 
 the legal tender decision in 1871, that 
 
 [April, 
 
 “ value was an ideal thing; ” 1 that u ‘it is 
 hardly correct to speak of a standard of 
 value; ” 1 that “ the gold and silver thing 
 we call a dollar is, in no sense, a standard 
 of a dollar ; " 1 in fact, that anything is 
 a dollar which the law-making, powers 
 may imagine it to be, and that it is not 
 at all necessary that their “ imagining ” 
 for one year should be the same as their 
 “ imagining” for some other and subse¬ 
 quent year. And as the Bank of Agri¬ 
 culture and-Commerce appears to have 
 commenced operations, and as there is 
 no evidence that the one hundred thou¬ 
 sand dollars was ever paid in, we are 
 warranted in supposing that the “ideal ” 
 took in every respect the place of the 
 real. That the Congress of Texas had 
 also faith to a large extent in the ideal 
 standard of value is made evident by the 
 fact that, by an act passed in Decem¬ 
 ber, 1836, the secretary of the treasury 
 was authorized and empowered “ to ne¬ 
 gotiate a loan from any bank or banks 
 that may be established in this republic, 
 of sufficient amount for the payment of 
 all just claims ” held by certain cred¬ 
 itors against the government; and lest 
 the Bank of Agriculture and Commerce, 
 with its capital of one million of 
 “ ideal ” dollars, and the value of its 
 shares made good by the pledge of real 
 estate, should not be able to afford suffi¬ 
 cient banking facilities to a population 
 not exceeding fifty thousand, including 
 the “ State,” the “ Texas Railroad and 
 Navigation Banking Company ” was in 
 1836 incorporated in addition. The 
 capital of this company was fixed at 
 five millions, to be increased if desired 
 to ten millions, with the right of con¬ 
 necting the waters of the Rio Grande 
 and the Sabine by means of internal 
 navigation, and the privilege of mak¬ 
 ing branch canals and branch roads in 
 every direction; and this too at a time 
 when the Republic of Texas had not the 
 means of supporting a navy sufficient to 
 protect its coasts from the attacks of 
 one small sloop of war belonging to the 
 Mexicans. The five millions of stock 
 were immediately subscribed by eight 
 
 1 Decisions Supreme Court of the United States, 
 
443 
 
 A Modern Financial Utopia. 
 
 1814.] 
 
 individuals and firms; but the opera¬ 
 tions of the banking company were ex¬ 
 ceedingly limited, and are thus reported: 
 None of the subscribers paid in any¬ 
 thing. One sold his interest, however, 
 to a firm in New York, and took his pay 
 in store-goods. A second sold his for 
 ten thousand dollars; while a. third 
 swapped his for three leagues of land, 
 which he subsequently sold at ten dol¬ 
 lars and a half an acre. “ The rest 
 of the subscribers retain their original 
 stock to this day.” Other projects of 
 a like character were brought forward; 
 namely: “ A Joint Stock Company for 
 the erection of a Hotel and Bath House 
 at Yelasco, with Banking Privileges;” 
 “ The Texas Internal Improvement and 
 Banking Company; ” “ The Red River 
 and Aransaso Bay, Navigation, Railroad, 
 and Banking Company; ” and finally, for 
 establishing a bank on the faith of the 
 government. All these projects were 
 favorably received; but before the nec¬ 
 essary laws could be passed, to put them 
 in operation, news was received of the 
 general failure of the banks "0^ the 
 United States (1837), and the republic 
 was deprived of its prospective capital, 
 enterprise, and consequent development. 
 To supply the necessities of a circulat¬ 
 ing medium occasioned by the discredit 
 of bank-notes issued in the United 
 States, individuals and municipalities 
 commenced in 1837 to issue “ shin- 
 plasters,” or notes for the fractional 
 parts of a dollar, and continued to do so 
 until 1840, when an end was put to 
 them by the bankruptcy of the issuers. 
 
 It is now desirable to turn back and 
 consider more directly the means by 
 which Texas provided funds to carry 
 on the war. At the outset the new re¬ 
 public had, apart from the pledge or 
 sale of its lands, but few financial re¬ 
 sources. A financial report made to 
 the provisional government or council in 
 November, 1835, brought out the fact, 
 that although an army was in the field, 
 engaged in active operations, yet “ our 
 finances, arising from the receipt of 
 dues for lands, as will appear on file in 
 Mr. Gail Borden’s report, which were 
 in his hands, are fifty-eight dollars and 
 
 thirty cents. This money has been ex¬ 
 hausted, and also an advance by the 
 president' of the council of thirty-six 
 dollars. There were also several hun¬ 
 dred dollars in the hands of the alcalde 
 of Austin. Upon this money several 
 advances have been made; as such you 
 may consider that at the present mo¬ 
 ment the council is out of funds.” 
 
 But it will never do to despise the 
 day of small things. The men who had 
 undertaken to make of Texas a free and 
 independent republic were, in respect to 
 audacity, enterprise, and self-reliance, 
 typical emigrants from the great Amer¬ 
 ican nation, and having put their hands 
 to the plow had no intention of stop¬ 
 ping half-way in the furrow. But to 
 succeed in their undertaking “ways 
 and means ” were indispensable; “ and 
 finding,” says Mr. Gouge, “ that other 
 nations in their periods of exigency had 
 resorted to taxing, borrowing, begging, 
 selling, robbing, and cheating, they de¬ 
 termined to try all six,” and he might 
 have added, they in all six succeeded. 
 The first feasible and ready way of col¬ 
 lecting a revenue through taxation, that 
 suggested itself, was by duties on im¬ 
 ports, and the Texan legislators accord¬ 
 ingly took to the tariff after the most 
 approved American fashion; enacting a 
 given rate of duties on the 12tli of De¬ 
 cember, revising the same on the 15th, 
 and making a new tariff on the 27th. 
 In the ten years that Texas existed as 
 an independent republic, it had no less 
 than seven distinct tariffs. 
 
 Export duties on cotton were also 
 recommended. The chief reliance of 
 the government was, however, upon 
 loans, and commissioners were early ap¬ 
 pointed to borrow one million of dollars 
 at a rate not exceeding ten per cent., on 
 bonds running for not less than five or 
 more than ten years; the commissioners 
 being authorized to pledge the public 
 faith, the public lands, the public reve¬ 
 nues, and in short everything that Texas 
 possessed in the way of security, for 
 their repayment. 
 
 The idea that “ a national debt was a 
 national blessing ” was one for which it 
 has been generally supposed an agent 
 
444 
 
 A Modern Financial Utopia. 
 
 of Jay Cooke & Co., employed to write up 
 the 5-20 bonds, in 1863, was entitled to a 
 patent for originality; but the records of 
 the Congress of Texas show that the 
 unexpatriated Yankee was after all but 
 a poor though probably unconscious im¬ 
 itator, and that his conceptions of the 
 felicity of owing somebody nationally 
 never began to rise to the height of those 
 indulged in by a Mr. Chenoweth, who, 
 as chairman of the national committee 
 on finance, submitted to the first Con¬ 
 gress on the 16th of December, 1835, a 
 report, of which the following is an ex¬ 
 tract: — 
 
 “ At present our indebtedness is 
 small, and our liabilities almost entirely 
 to private individuals, whose claims, 
 your committee are of opinion, may 
 properly be merged and canceled by 
 the creation of substantial loans. An 
 outstanding national debt may in many 
 respects be looked upon as beneficial, 
 by a community isolated and dependent 
 as Texas, if the creditors, as such, can 
 affoi'd us substantial pati’onage. And 
 until we can stand immutable among the 
 nations of the earth, your committee 
 would advise that the pecuniary interests 
 of our creditors will excite for us the sym¬ 
 pathy and protection of mankind.” 
 
 In one sense Mr. Chenoweth’s “ad¬ 
 vice ” pi’oved correct, though not alto¬ 
 gether in the manner he anticipated; 
 for the various debt certificates of Texas 
 being largely disposed of in the United 
 States, an earnest sympathy for the 
 republic was thereby naturally created 
 among the holders; and this sympathy 
 ultimately was most powerful in secur¬ 
 ing the annexation of Texas to the 
 United States, and subsequently an 
 appropriation from Congress of the sum 
 of $10,000,000, with the understanding 
 that the same should be used in the 
 payment of the debts of the republic. 
 
 Under the head of 44 selling,” as an 
 expedient for pi-oviding ways and means, 
 the public lands were offered by the 
 government of Texas at low prices and 
 in any quantity; but as the cash value 
 of the article was small, — the price 
 fixed by the Mexican government be¬ 
 fore the war being less than four cents 
 
 [April, 
 
 per acre, — and as, furthermore, until 
 after independence was fully established 
 it was a question whether the vendor 
 could pass an adequate and sufficient 
 title, the receipts from this source were 
 inconsiderable. 
 
 Under the head of “begging,” the 
 foreign agents of the republic were au¬ 
 thorized to receive money or donations 
 of any kind that might be given by 
 citizens of any country they might visit; 
 and that the hat thus passed round did 
 not return empty is evident from the 
 circumstance that on the 30th of No¬ 
 vember, 1835, formal resolutions of 
 thanks were passed by the council to 
 John Hutchins of Natchez, Mississippi, 
 for his liberal donation of one hundred 
 dollars 4 4 for the use of Texas in her 
 struggle for liberty.” 
 
 Under the head of “ robbing,” the 
 council, on the 17th of January, 1836, 
 enacted, that whereas it was impossible 
 for the troops at Bexar 44 to drive beeves 
 and procure provisions for their use 
 without horses; Therefore he it resolved , 
 that the commandant be authorized to 
 employ as many Mexicans, or other 
 citizens, for the purpose of driving up 
 beeves, and procuring provisions, as 
 may be required for that purpose.” 
 Letters of marque and reprisal were 
 also early authorized and issued: but in 
 this department of robbery the Texans 
 could plead the precedents of the best- 
 established and most Christian govern¬ 
 ments. 
 
 Under the head of “cheating,” Mr. 
 Gouge groups the several acts and pro¬ 
 ceedings of the republic in respect to 
 the manufacture and issue of paper 
 money. The national treasury was first 
 established, so far as the election of a 
 treasurer could establish it, in Novem¬ 
 ber, 1835. Previous to this there had 
 been a fiscal committee, and this had 
 made a report, which, as the first offi¬ 
 cial financial document of a de facto gov¬ 
 ernment, destined in the course of the 
 following year to come into possession 
 and control of a territory larger than 
 France, deserves to be handed down to 
 posterity. The report related to a 
 matter of extortion and swindling on the 
 
1874.] 
 
 part of certain contractors, and alleged, 
 that one Thomas Bray, for furnishing 
 “ Cole’s company of wagoners with one 
 hundred and seven pounds of bread, had 
 charged twenty-five cents per pound, 
 or twenty-six dollars and seventy-five 
 cents, whereas he should have charged 
 but fourteen cents per pound; and that 
 one Madison M. Stevens had charged 
 an extortionate sum for “carrying one 
 express to Nacogdoches.” It was ac¬ 
 cordingly recommended that Bray he 
 allowed but fifteen dollars and seventy- 
 eight cents, and Stevens but ten dollars 
 and fifty cents in full of all accounts, 
 and the report was ordered to lie on the 
 table. A month afterwards, by some 
 skill of manipulation not unworthy in 
 these later days of a Chorpenning and 
 his counsel, Hon. John Cessna, the com¬ 
 mittee made another report, in which 
 it was recommended that Messrs. Bray 
 and Stevens be paid in full, — and paid 
 in full they'probably were. How good 
 a field there would have been for Chor¬ 
 penning and Cessna to have operated 
 in is illustrated by the following extract 
 from a message which the first governor, 
 Henry Smith, about this same time sent 
 in to the “ Honorable President and 
 Members of the General Council .” He 
 says: — 
 
 “ Instead of acting as becomes the 
 counselors and guardians of a free peo¬ 
 ple, you resolve yourselves into low, 
 intriguing, caucusing parties; pass res¬ 
 olutions without a quorum, predicated 
 on false premises; and if you could only 
 deceive me enough, you would join with 
 it a piratical cooperation. You have 
 acted in bad faith, and seem determined 
 by your acts to destroy the very constitu¬ 
 tion you are pledged and sworn to sup¬ 
 port. I have been placed on the political 
 watch-tower, and I hope I will be able 
 to prove a faithful sentinel. You have 
 also been posted as sentinels; but you 
 have permitted the enemy to cross the 
 lines, and you are ready to sacrifice 
 your country at the shrine of plunder. 
 Mr. President, I speak collectively, as 
 you all form one whole, though at the 
 same time I do not mean all. I know 
 you have honest men there; but you 
 
 445 
 
 have Judas in the camp, — men who, if 
 possible, would deceive their God. 
 
 “Notwithstanding their deep-laid 
 plans and intrigues, I have not been 
 asleep. They will find themselves cir¬ 
 cumvented in every tack. I am now 
 tired of watching scoundrels abroad and 
 scoundrels at home, and as such I am 
 now prepared to drop the curtain. 
 
 ‘ ‘ Look around upon your flock; your 
 discernment will easily detect the scoun¬ 
 drels; the complaint, contraction of the 
 eyes; the gape of the mouth; the vacant 
 stare; the hung head; the restless, 
 fidgety disposition; the sneaking, syco¬ 
 phantic look; a natural meanness of 
 countenance; an unguarded shrug of 
 the shoulders; a sympathetic tickling 
 and contraction of the muscles of the 
 neck, anticipating a rope; a restless 
 uneasiness to adjourn, dreading to face 
 the storm themselves have raised. Let 
 the honest and indignant part of your 
 council drive the wolves out of the fold. 
 Some of them have been thrown out of 
 folds equally sacred, and should be de¬ 
 nied the society of civilized men. 
 
 “ But, thanks be to my God, there is 
 balm in Texas, and a physician near.” 
 
 And the governor then, in the capac¬ 
 ity of a physician, proceeded to admin¬ 
 ister the balm by ordering the council 
 to be forthwith prorogued, “ unless your 
 body will make the necessary acknowl¬ 
 edgment of your error, and forthwith ” 
 (before twelve o’clock to-morrow) “ pro¬ 
 ceed ” (by issuing a circular and furnish¬ 
 ing expresses), “ to give it circulation 
 and publicity, in a manner calculated to 
 counteract its baleful effects.” 
 
 But the council wouldn’t be pro¬ 
 rogued, and refused to accept the balm. 
 They referred the governor’s message 
 to a committee, who forthwith reported, 
 4 4 That they are unable to express any 
 other views than indignation at lan¬ 
 guage so repulsive to every moral feel- 
 ino 1 of an honorable man, and astonish¬ 
 ment that this community should have 
 been so miserably deceived in selecting, 
 for the high office of governor, a man 
 whose language and conduct proves his 
 early habits of association to have been 
 vulgar and depraved. ’ ’ The report con- 
 
 A Modern Financial Utopia. 
 
446 
 
 A Modern Financial Utopia. 
 
 eluded with resolutions that they would 
 sustain the dignity of the government, 
 and that Henry Smith be ordered forth¬ 
 with to cease the functions of his office. 
 The next day they issued an address 
 to the people, in which they repelled 
 the charges brought against them in 
 “that impudential document,” and 
 brought counter-charges against his 
 excellency himself. A single paragraph 
 is given by Mr. Gouge to show the char¬ 
 acter of this address : “ All these acts 
 of stubbornness and perverseness were 
 not sufficient to gratify his thirst for 
 sole dominion. His dignity was in¬ 
 sulted at the idea of the existence of 
 the coordinate branch of government 
 to curb his acts and check his usur¬ 
 pation. He became more and more 
 restless, until, enraged at the presump¬ 
 tion of the council, in the exercise of a 
 constitutional right, he ignites; his fury, 
 in a blaze, consumes his prudence 
 (what he had); he orders the council 
 to disperse, shuts the door of communi¬ 
 cation between the two departments, 
 and proclaims himself the government.” 
 
 At this rejoinder and counter-attack 
 Governor Smith seems to have been 
 considerably astonished ; and sought to 
 reconcile matters with the council by 
 sending the next day a message, in 
 which, after confessing that he had used 
 “ much asperity of language,” he con¬ 
 cludes as follows: — 
 
 “ Believing the rules of Christian 
 charity require us to bear and forbear, 
 and as far as possible overlook the 
 errors and foibles of each other, in this 
 case I may not have exercised towards 
 your body that degree of forbearance 
 which was probably your due. If so, I 
 have been laboring under error, and as 
 such, hope you will have the magna¬ 
 nimity to extend it to me, and the two 
 branches again harmonize to the pro¬ 
 motion of the true interests of the coun¬ 
 try.” But it was of no use; Governor 
 Smith’s “ Christian charity ” was ex¬ 
 ercised too late. The council deposed 
 him so far as they could, and for the 
 remainder of the session, Lieutenant- 
 Governor Robinson “reigned in his 
 stead.” 
 
 [April, 
 
 The formal establishment of a nation¬ 
 al treasury was one thing; the filling 
 it with money was quite another and 
 different thing. And as sufficient funds 
 for defraying the expenses of the 
 government and the army did not come 
 from any of the expedients of taxation, 
 loans, the establishment of companies 
 with banking privileges, the sale of 
 lands, begging, or seizing private prop¬ 
 erty by land and sea, the republic next 
 undertook to pay its way by drawing 
 drafts on itself. To give these drafts 
 credit and circulation an act was passed, 
 December, 1836, “That it shall be the 
 duty of the several collectors (of cus¬ 
 toms) to receive the orders of the audit¬ 
 or upon the treasury of the republic 
 when offered by importers in payment 
 of duties at the time of importation;” 
 and in June following, it was enacted, 
 “That properly audited drafts on the 
 treasury of the republic shall be received 
 in payment of taxes imposed, except 
 on billiard tables, retailers of liquors,* 
 and nine-pin alleys, or games of that 
 kind.” By these two acts, Texas gave 
 her audited drafts a greater value than 
 they would otherwise have possessed, 
 and caused them to pass into hands that 
 otherwise would not have received them. 
 From first to last, the issue of these 
 audited drafts amounted to about eight 
 millions of dollars ($7,834,207). They 
 do not appear to have ever to any ex¬ 
 tent answered the purpose of currency; 
 and the circumstance that they were 
 issued for odd numbers of dollars and 
 cents, and when passed from hand to 
 hand required a calculation, doubtless 
 contributed to prevent such a result. 
 They gradually depreciated in value, 
 and in December, 1837, one year after 
 the passage of the act authorizing their 
 reception for custom dues, another act 
 was passed declaring that the state 
 would no longer receive such drafts in 
 payment of debts due to itself. 
 
 The greatest and best stroke of finan¬ 
 cial policy on the part of the new re¬ 
 public was, however, reserved to the 
 last; and in November, 1837, when 
 borrowing, begging, selling land scrip, 
 and issuing audited drafts had been 
 
447 
 
 A Modern Financial Utopia. 
 
 1874.] 
 
 exhausted as expedients for raising 
 money, the government commenced the 
 issue of treasury notes. These notes 
 were in the form of bank-notes, and by 
 law were required to be printed “ in 
 neat fonn. ,, They were also for round 
 or even sums, and mainly for small 
 amounts, and specified on their face 
 “ that they will he received in payment for 
 lands and other public dues, or be re¬ 
 deemed with any moneys in the treasury 
 not otherwise appropriated .” 
 
 And here commences by far the most 
 valuable of all the lessons deducible 
 from the study of the fiscal experience 
 of the Republic of Texas, — a lesson, 
 moreover, exceptionally interesting, 
 from the circumstance that we find in 
 it a showing and demonstration that 
 the working and effect of a system of 
 irredeemable paper money is one and 
 the same, whether the field of its in¬ 
 fluence be a rich, densely populated old 
 country like Austria or Great Britain, 
 or a disturbed, thinly populated com¬ 
 munity, with little accumulated capital, 
 and occupying, as it were, the very bor¬ 
 der line between barbarism and civil¬ 
 ization. 
 
 The first noticeable and most interest¬ 
 ing fact connected with the history of 
 these Texan treasury notes is, that al¬ 
 though the credit of Texas at the time 
 of their issue was so bad that a foreign 
 loan could not be negotiated, and the 
 audited drafts on the treasury had so 
 far depreciated as to have but a nominal 
 value, and that of less than fifteen cents 
 on the dollar, yet the notes themselves, 
 though practically unredeemable, were 
 when first issued at par, or nearly par, 
 with specie, and furthermore were kept 
 so for months, or until their issue ex¬ 
 ceeded in amount half a million of dol¬ 
 lars. The explanation of this curious 
 phenomenon is, that the people of 
 Texas, at the time of the authorization 
 of these treasury notes, had practically 
 no circulating medium for effecting ex¬ 
 changes, or none that was really worthy 
 of the name; and although a commu¬ 
 nity can get along in its business with¬ 
 out a currency, as it can without horses 
 and carts, ships and steam-engines, — all 
 
 alike instrumentalities for effecting the 
 interchange of commodities, — there is 
 no community that will dispense with 
 any of these agencies if it can help it. 
 With the outbreak of the revolution the 
 hammered money and the eagle money, 
 as already stated, soon disappeared. 
 With the failure of the banks of the 
 United States in 1837, the notes of the 
 banking institutions of the southwestern 
 States, which had come in like a flood 
 and had supplied to Texas the void 
 occasioned by the disappearance of its 
 specie circulation, became worthless ; 
 while the issue of sliin-plasters or frac¬ 
 tional notes of persons and firms, al¬ 
 though continued, was by law forbid¬ 
 den. The want of some medium that 
 should have one value, and would reg¬ 
 ulate prices and facilitate exchanges, 
 was therefore much felt; and when the 
 government gave the people the best 
 medium they could, thi’ew around it .all 
 the guarantees that it was in their power 
 to supply, and issued no more of the 
 ‘ ‘ medium ’ ’ than was necessary to meet 
 a specific want, the people in turn ac¬ 
 corded to the medium a value propor¬ 
 tional to the work it performed, or the 
 necessity it supplied. The first issue of 
 notes, in addition to a pledge of govern¬ 
 ment faith to receive them in payment 
 of all public dues and to redeem them as 
 soon as there was anything to redeem 
 them with, carried also a promise of ten 
 per cent, interest; a rate easily calcu¬ 
 lated, and which offered an inducement 
 for hoarding the notes, to such Texans 
 as could afford it and had also faith in 
 their ultimate payment. The whole rev¬ 
 enue from customs was also devoted to 
 sustaining the credit of these treasury 
 notes, and about this time the laws for 
 raising a revenue from imports began 
 to be effective; the gross revenue accru¬ 
 ing from the customs for the quarter 
 ending September 30, 1837, having been 
 about sixty thousand dollars. 
 
 The Texans were, moreover, exceed¬ 
 ingly wise in their day and generation 
 in another matter. 'The original treas¬ 
 ury notes, although intended to serve as 
 currency, were nevertheless, from the 
 fact that they carried ten per cent, in- 
 
448 
 
 A Modern Financial Utopia. 
 
 terest, in reality a species of national 
 “bond;” and being issued in round 
 sums of small amounts, as low even as 
 one dollar, they were taken up as in¬ 
 vestments, or speculated in by persons 
 of very small means, who never re¬ 
 garded themselves in any sense as cap¬ 
 italists. Very considerable sums thus 
 found their way into the United States 
 and were permanently held there, and 
 even the negroes of New Orleans were 
 enabled to enjoy the luxury of speculat¬ 
 ing in foreign securities. It is also cu¬ 
 rious to recall that at the time of the 
 formation of the syndicate in 1870- 
 1871, for the purpose of funding the na¬ 
 tional debt of the United States at a 
 lower rate of interest than six percent., 
 this very same plan that worked so suc¬ 
 cessfully in Texas in 1837 was brought 
 forward and urged before the commit¬ 
 tees of Congress with great ingenuity and 
 ability, by the then head of the Euro¬ 
 pean banking firm of Bowles Brothers, 
 as a condition precedent and essential to 
 placing permanently a large amount of 
 Federal securities among the masses in 
 Europe, at a very low rate of interest. 
 According to Mr. Gouge, Texas treas¬ 
 ury notes continued to be at par, or 
 nearly at par, with specie, until their 
 amount exceeded half a million of dol¬ 
 lars. If we take the population of Texas 
 at that time as about forty thousand, 
 and suppose that one fifth of the entire 
 issue of half a million was hoarded, or 
 floated off into the United States, then 
 the result affords a very striking and 
 curious confirmation of the theory held 
 by many of the best informed bankers 
 and economists, that an average of about 
 ten dollars per capita is the utmost limit 
 of paper money that a community can 
 permanently float, and at the same time 
 keep on a level or par with specie. 1 It 
 is also a fact in regard to the Continental 
 money, that, so long as its issue was not 
 in excess of thirty millions, or at the rate 
 of about ten dollars per capita , or up to 
 January. 1778, its maximum depreciation 
 
 > The theory is that if the notes are redeemable 
 in specie on demand, and more than ten dollars per 
 capita is issued, the excess will be presented for re¬ 
 demption and be thus voluntarily retired. If the 
 
 [April, 
 
 was not in excess of five per cent., as 
 compared with specie. 
 
 But all history shows that when a na¬ 
 tion has once embarked in a scheme of 
 irredeemable paper money, it is extreme¬ 
 ly difficult, if not wholly impossible, to 
 resist the current and drift of its influ¬ 
 ence; and the experience of Texas con¬ 
 stitutes no exception to this general rule. 
 The five hundred thousand paper treas¬ 
 ury dollars had done good service; they 
 had doubtless been printed in a “neat 
 form ’ ’ as the law provided; had proved 
 attractive to the masses, and had re¬ 
 lieved the most urgent financial necessi¬ 
 ties of the republic. Why should not 
 the people of Texas have more of so 
 good a thing ? They accordingly, 
 through their legislative agents and 
 representatives, determined to have 
 more; and in the spring of 1838, a bill, 
 bearing the familiar title of “ An Act to 
 define and limit the issue of promissory 
 notes ” was reported in the House of 
 Representatives, which authorized an 
 additional issue of one hundred and 
 fifty thousand dollars. The Senate, 
 however, increased the-existing amount 
 to one million, and as thus amended, the 
 bill passed both houses by large majori¬ 
 ties. Sturdy and honest Sam Houston 
 was then President, and when the bill 
 came up for his signature, he promptly 
 vetoed it, and gave his reasons therefor 
 in a message, so full of common-sense 
 and sound principles that there is noth¬ 
 ing which the people of the United 
 States could to-day read with greater 
 profit and instruction. Indeed, it would 
 almost seem as if he had before him, at 
 the time of writing, the present condi¬ 
 tion of the United States, rather than 
 that of his own people. He says, ‘ ‘ When 
 the (treasury note) currency was pro¬ 
 jected, both the government and the 
 country were without resources. Na¬ 
 tional existence and freedom had been 
 achieved, but the struggle had left us 
 destitute and naked. There were no 
 banks! There was no money! Our 
 
 notes are not redeemable on presentation, the mo¬ 
 ment the line of excess is passed, that same moment 
 indicates the commencement of permanent deprecia¬ 
 tion. 
 
449 
 
 A Modern Financial Utopia. 
 
 1874.] 
 
 lands could not be sold, and the public 
 credit was of doubtful character! To 
 avoid the absolute dissolution of the 
 government, it became necessary to re¬ 
 sort to some expedient that might fur¬ 
 nish temporary relief. This could only 
 he effected by creating a currency that 
 should command some degree of credit 
 abroad. 
 
 “ It was hoped and believed, that if 
 a small issue of government paper was 
 made, with specific means of redemp¬ 
 tion pointed out, which appeared to be 
 ample and well guaranteed, and the 
 government should evince a prudent 
 and discreet judgment in its manage¬ 
 ment, it would command such articles in 
 the market of the United States as were 
 indispensable to the country. 
 
 “ The result has justified the expec¬ 
 tation.” 
 
 But he continues, and his words are 
 as full of truth now as then, “ The gov¬ 
 ernment will never he able by all the issues 
 it can make, to satisfy the demands of pri¬ 
 vate speculation and interest. The vast 
 issues of all the banks in the United 
 States (reference being here made to 
 the condition of things in 1836-1837), 
 in their most extended condition, failed 
 to attain this object. There has not 
 probably been in circulation at any 
 time, more than half a million of dol¬ 
 lars. The present bill requires the sec¬ 
 retary of the treasury to increase the 
 issue to a million. No time or discre¬ 
 tion is allowed to that officer. The cir¬ 
 culation of the country is to be doubled 
 in as little time as is required to issue 
 the paper. ’ ’ 
 
 The objections of the executive for 
 the moment prevailed; but another bill 
 was passed a week after, which allowed 
 the president to increase the amount of 
 treasury notes to one million, if in his 
 judgment the interests of the country 
 required it; and at the same time, it 
 specifically appropriated four hundred 
 and fifty thousand of such notes, or an 
 amount nearly equal to the whole exist- 
 ln o issue, to the payment of army, navy, 
 and civil indebtedness. The barriers 
 against unlimited inflation were thus 
 mdirectly removed, and from this time 
 
 V 0L. XXXIII. — NO. 198. 29 
 
 there does not appear to have been any 
 effort to restrain further action in this 
 direction. The first issues of these 
 notes, as already stated, carried interest. 
 The new issues were without interest, 
 and on account of a red impression on 
 their back, were everywhere known as 
 “ red-backs; ” thus affording another 
 example in illustration of the trite prov¬ 
 erb, that “ history repeats itself.” 
 
 As might have been expected, with the 
 authorization of the new issues the notes 
 began to depreciate; and the deprecia¬ 
 tion increased with each additional emis¬ 
 sion. In all, paper money in the form of 
 treasury notes to the nominal amount of 
 $4,717,939 was issued. In January, 1839, 
 these notes were worth no more than 
 forty cents on the dollar ; in the spring 
 of 1839 they were worth thirty-seven 
 and a half cents; in 1841, from twelve 
 to fifteen cents; and in 1842 they fell to 
 ten cents, to five cents, to four, to three, 
 to two, and finally became utterly worth¬ 
 less. In the characteristic language of 
 the times, it required, before the close 
 of President Lamar’s administration, 
 ‘ ‘ fifteen dollars in treasury notes to buy 
 three glasses of brandy and water, with¬ 
 out sugar.” To the treasury notes suc¬ 
 ceeded what were termed ‘ ‘ exchequer 
 bills; ” but they were comparatively few 
 in number, and never passed to any ex¬ 
 tent into circulation. “ By this time,” 
 says Mr. Gouge, “ there was little cir¬ 
 culating medium of any kind in Texas ; 
 but this was no great calamity, as the 
 people had but little left to circulate. 
 The evils this system did were immense, 
 and such as for which, even were it so 
 disposed, the government could afford 
 no compensation to the sufferers. They 
 no doubt, however, like others in similar 
 circumstances, attributed to the want of 
 circulating medium the evils they suf¬ 
 fered from want of circulating capital .” 
 In all, from first to last, the amount of 
 “promissory notes,” “audited drafts,” 
 “exchequer bills,” bonds, etc., issued 
 by the Texan treasury, and serving to a 
 greater or less extent as “circulating 
 medium,” amounted to $13,318,145; or 
 reckoning the population at fifty thou¬ 
 sand, more than two hundred and sixty- 
 
450 
 
 A Modern financial Utopia. 
 
 six dollars per capita. If paper issues 
 could, therefore, have made a people 
 rich, the Texans ought to have been the 
 richest people in the universe. 
 
 One other thing in connection with 
 this subject ought specially to be men¬ 
 tioned in all honor to the Texans. In 
 the midst of their poverty, and crushed 
 almost to the earth with their burden of 
 financial necessities, they never made 
 their government paper a legal tender in 
 the payment of private debts; but every 
 man was left at liberty to refuse or re¬ 
 ceive treasury notes at his option. The 
 result was, that when “ red-backs ” were 
 almost the exclusive circulating medium, 
 specie was the standard of ultimate ref¬ 
 erence. If a man bought an article on 
 credit, he gave a note promising to pay 
 dollars in silver, or so many treasury 
 notes, as should, when the note fell due, 
 be worth an equivalent of the amount 
 owed in silver. 
 
 But another and no less curious part 
 of this history yet remains to be told. 
 The experiment of paper issues, not re¬ 
 deemable in specie on demand, to sup¬ 
 ply the office and function of money, or 
 circulating medium, had been fully and 
 fairly tried in Texas, and the people, 
 one and all, were so entirely satisfied with 
 their experiences, that they wanted no 
 more for all time, like it. They accord¬ 
 ingly did not content themselves with 
 mere ordinary legislation ; but when the 
 convention came together, immediately 
 after the consummation of the act of 
 annexation to the United States, to form 
 a State constitution, the delegates, by 
 one of their earliest acts, inserted in the 
 constitution the following sections, which 
 were afterwards ratified by the people: 1 
 
 “ In no case shall the legislature have 
 power to issue ‘ treasury warrants‘treas¬ 
 ury notes,' or paper of any description in¬ 
 tended to circulate as money.' ’ 
 
 1 The movement against the continued use of 
 paper money, in fact, commenced in Texas at a 
 date considerably earlier than that above indicated j 
 the last president of Texas, Anson Jones, in Decem¬ 
 ber, 1844, using in his inaugural the following lan¬ 
 guage : " The fallacy and danger of a factitious 
 
 paper currency having been demonstrated by every 
 civilized nation upon the earth, and Texas having 
 once participated in this demonstration, should now, 
 when she is able to do so, abandon the experiment 
 and resort in time to what the experience of tho past 
 
 [April, 
 
 ‘ ‘ No corporate body shall hereafter be 
 created, renewed, or extended, with bank¬ 
 ing or discounting privileges.” 
 
 “ The legislature shall prohibit by law 
 individuals from issuing bills, checks, or 
 promissory notes, or other paper, to cir¬ 
 culate as money.” 
 
 “It is never,” says Mr. Gouge, in 
 noticing the peculiarities of this con¬ 
 stitution of Texas, “without deep ex¬ 
 perience of the evils of paper issues that 
 the people impose such restrictions on 
 their rulers.” 
 
 And the first legislature that convened 
 after the adoption of the constitution, or 
 in the succeeding year, made the follow¬ 
 ing further enactment: — 
 
 “ No person or persons within this 
 State shall issue any bill, promissory 
 note, check, or other paper, to circulate 
 as money.” 
 
 “ Every person who may violate this 
 act shall be subject to indictment there¬ 
 for, by a grand jury, as for a misde¬ 
 meanor, at any time within twelve 
 months after so offending; and shall be 
 subject to a fine of not less than ten dol¬ 
 lars, nor more than fifty dollars, for each 
 and every bill, promissory note, check, 
 or other paper, issued by them in viola¬ 
 tion of the first section of this act.” 
 
 These measures practically put an end 
 to the paper-money system of Texas. 
 Various subterfuges were afterwards re¬ 
 sorted to, and by means of them paper- 
 money, to a very limited extent, found 
 its way into circulation in Texas after 
 its annexation to the United States. 
 But as a rule, the community never 
 again looked with favor upon any other 
 currency than specie. The result of 
 such a policy on the development and 
 business of the State was thus reported 
 by Mr. Gouge in 1852 , —seven years 
 after its adoption: “ The result of this 
 hard-money policy is, that business in 
 
 has conclusively shown to be the only safe expe¬ 
 dient for governments — a hard-money currency as 
 a circulating medium.” In accordance with this 
 recommendation, the Congress of Texas, in almost 
 on© of its last acts, forbade the further issue by 
 the government of " any description of paper repre¬ 
 senting mouey intended for circulation, or to be ie- 
 ceived in payment of any class of revenue ; ” »Dd re¬ 
 quired the secretary to cause to be destroyed a 
 the exchequer bills received at the treasury depar 
 ment. 
 
451 
 
 A Modern Financial Utopia. 
 
 1874.] 
 
 Texas rests on a more stable foundation 
 than it does in many other parts of the 
 Union. That it is absolutely free from 
 vicissitudes is what we do not assert. 
 But, unbolstered by bank-credits, and 
 governed by that best of all regulators, 
 gold and silver, her merchants limit 
 their purchases of goods abroad by the 
 actual demands of the planters at home, 
 measuring that demand by the surplus 
 crops the planters have to dispose of. 
 Exchanges are regular. The maximum 
 rates never exceed the cost of transport¬ 
 ing specie, and often fall below it. A 
 gentleman at Austin told us that he had 
 in the course of years negotiated bills on 
 New York, to the amount of two hun¬ 
 dred thousand dollars, and had seldom 
 given either premium or discount. At 
 Galveston, exchanges on New York 
 have not for years been at any time 
 more than one and a half premium.” 
 
 Prices, Mr. Gouge observes, were 
 not low, but quite as high as they are 
 (other things considered) in the most 
 paper-loving portions of the Union; thus 
 showing that “hard money and high 
 prices are not incompatible.” 
 
 “ The rate of interest is high, because 
 the profits of trade are great. Money 
 is scarce, as money ought to be, for 
 without scarcity it would lose its value. 
 But gold and silver is in Texas quite as 
 plentiful, in proportion to other circulat¬ 
 ing wealth, as paper money is in New 
 York or Massachusetts.” 
 
 Mr. Gouge also, in his record, brings 
 out two other series of facts in connec¬ 
 tion with the history of the paper money 
 of Texas, which from their parallelism 
 with results obtained on a larger scale, 
 but under similar circumstances, in the 
 United States and other countries, are 
 especially worthy of notice. The first 
 relates to the incentive given by paper 
 money to national extravagance and in¬ 
 crease of expenditures; and in this re¬ 
 spect the experience of Texas was as 
 follows. The revolution broke out in 
 1835. From that time until the close 
 of 1838, the period covering the main 
 military operations and the practical 
 achievement of independence, the Re¬ 
 public of Texas incurred a debt of less 
 
 than two millions of dollars. This small 
 amount was not due to the circumstance 
 that the government had any objection 
 to running in debt; “but because few 
 would trust, except such as could not 
 well avoid so doing.” In 1838, Mira- 
 beau B. Lamar was elected president, 
 and held office for three years, or until 
 December, 1841. The period of his ad¬ 
 ministration was one of comparative 
 peace, but it was also the era of paper 
 money and profusion. Lamar in his 
 three years’ term increased the national 
 debt from less than two millions to up¬ 
 wards of seven millions. The average 
 annual expenses of his government were 
 also Si ,618,405. 
 
 In 1841 General Houston took office as 
 president for a second term. The paper 
 money bubble had exploded, but Mexi¬ 
 can hostilities, which in General Lamar’s 
 administration only threatened, now 
 actually broke out. Yet in General 
 Houston’s last administration not only 
 was the national debt not increased, ex¬ 
 cept by increments of interest and by 
 the bringing in of back accounts; but 
 the average annual expenses of the re¬ 
 public were reduced from $1,618,405 to 
 $170,361. Mr. Gouge claims that this 
 experience of the republic under Presi¬ 
 dent Houston, from 1842 to 1844 inclu¬ 
 sive, shows ‘ ‘ that if it had been possible 
 for the Texans to be hard-money and 
 prompt-payment men, they might have 
 achieved their independence and de¬ 
 frayed all the expenses of the republic, 
 at a cost of two hundred thousand a 
 year. But the Texans never became 
 economical until constrained by neces¬ 
 sity.” So long as they could borrow, 
 or induce any one to take their paper 
 money, they were extravagant; but when 
 they could borrow no longer, and their 
 paper money refused to circulate, then 
 they became saving. 
 
 The second series of facts relates to 
 the influence which an excess of paper 
 currency in Texas exerted in encour¬ 
 aging imports and discouraging exports. 
 Thus during the administration of Lamar, 
 
 _ 1839-1840,—when treasury notes 
 
 were the circulating medium, and money 
 was, as it is termed, “abundant,” the 
 
452 
 
 A Vision. 
 
 imports were nearly six times as great 
 as the exports; or an average of $1,442,- 
 733 of imports per annum as compared' 
 with an average of $247,459 of exports. 
 On the contrary, in two years of Hous¬ 
 ton’s second term, 1843-1844, when 
 such notes were no longer current, the 
 exports nearly equaled the imports; the 
 average annual import being $578,854 
 as compared with an average annual ex¬ 
 port of $506,444. 
 
 Whether the memory of the events 
 and experiences thus recorded has been 
 kept alive in 'Texas, we know not ; but 
 one thing is certain, that from the an¬ 
 nexation of Texas to the present day, 
 her people have evinced no love for 
 
 [April, 
 
 paper money. During the rebellion, 
 Confederate money found little favor in 
 Texas, and circulated only under the 
 pressure of military law and necessity; 
 along the lines of the several rail¬ 
 roads, fares and freights have been lat¬ 
 terly paid in currency; and since the 
 opening of the Missouri, Kansas, and 
 Texas Railroad, currency has gradually 
 entered to a greater or less extent into 
 the transactions of merchants; but in the 
 interior, cattle and cotton can be pur¬ 
 chased only for specie, and with the 
 average Texan, who travels with an ox- 
 team or on mule-back, the greenback 
 obtains no recognition. 
 
 David A. Wells. 
 
 A VISION. 
 
 Within the breast of winter 
 A spring thought stirs to-day. 
 
 The sailless fleet upon the lake 
 Will all its anchors weigh, 
 
 And, white before the gentle wind, 
 
 Float down the great blue bay. 
 
 Through all the dead trees’ branches 
 The happy secret thrills; 
 
 A sudden memory of flowers 
 The wild wood hollows fills, 
 
 Though yet a solemn silence seals 
 The lips of these white hills. 
 
 Again quick life is beating, 
 
 With sudden hope and power. 
 
 It matters not that joy must die 
 Within this one bright hour, 
 
 Quick fleeting as the glory born 
 Of meeting sun and shower. 
 
 The icy squadron whitens 
 The water’s blue in vain, 
 
 And days of wintry storm deny 
 The promise of the rain: 
 
 The heart that once has dreamed of spring 
 Cannot grow cold again. 
 
 Ellen Frances Terry.