A Sj- 1%% CONTRACTION vA LEGAL TENDER NOTES VS. REPUDIATION AND DISLOYALTY. By DAVID A. WELLS. “ He who is not in favor of contracting- the currency is not in favor of paying it, and he who is not in favor of paying it, is a repudiator.” NEW YORK: EVENING POST STEAM PRESSES, 208 BROADWAY, COR. FULTON ST, 1876. (From the Cincinnati Commercial.') PLAIN TALK WITH A SOUTHWESTERN INFLATIONIST. BY DAVID A. WELLS. [The following letter, addressed by David A. Wells to Colonel Enoch Ensley, a prominent citizen of Memphis, Tennessee, has been handed us for publication. It was called forth by a letter from Colonel Ensley to Mr. Wells, originally published in the Nashville American of March i8th,T876, and since somewhat widely circulated in pam¬ phlet form under the title “ Contraction and Inflation Con¬ trasted,” in which a further issue of greenbacks (legal tender), or at the very least an entire abandonment of the contraction policy advocated by Mr. Wells, was demanded as some¬ thing absolutely essential to the industrial resuscitation and future development of the western and southern sec¬ tions of the country. Mr. Wells’ disposal of his assumption, his analysis and clear exhibit (we think, for the first time) of the influence of causes (which are natural, and which legislation can not control), in forcing a contraction of the present volume of currency, and especially his demonstra¬ tion of the close relationship between the opponents of specie payments and repudiators and enemies of the Gov¬ ernment, we commend to the careful perusal and consider¬ ation, not only of the gentleman to whom the letter is 4 addressed, but to all others—North, East, South and West —who think that National prosperity can be restored by some better method than of hard work and economy, and that a good way of securing credit and capital for the future is to destroy existing credit by defrauding present creditors.. —Ed. Com.] Norwich, Conn., May 26th, 1876. To Colonel Enoch Ensley, Memphis, Tennessee. Dear Sir,—In the Nashville Daily American of March, 10th, 1876, you present, in the form of a letter addressed to me, what purports to be a Southern view of the currency question, in which the policy of the withdrawal and de¬ struction of the greenbacks (legal tender, irredeemable paper) is condemned\ as certain to prove injurious to the industrial interests of the whole country, and more particularly of the South; and the adoption of an exactly opposite policy — namely, an increase of the supply of irredeemable paper —is advocated , as certain to be attended with exactly op¬ posite results, or industrial prosperity. I have not hitherto answered this letter, because it seems to me that sufficient has already been offered in the w^ay of fact and argument to satisfy any man, who was unable to come to the truth naturally, that permanent prosperity can not be attained on the part of either a nation or individual which uses false standards of value, or fails to scrupulously observe its pledges or promises; but, as you demand of me, publicly and privately, that I shall reply, I will, without further apology, proceed to do so. WHAT IT IS CLAIMED THE SOUTH AND WEST NEED.' You state that the people in the South are in debt; that they are unable to pay their debts ; and, therefore, you: claim that it is expedient, on humanitarian, as well as on economic grounds, that such a National policy shall be adopted in respect to the issue of currency as will enable 5 debtors to be relieved in all, or part, from the obligations tliey are under of paying these debts. The exact method ■of this relief you propose shall be “ by the issuance of more legal-tender notes , in order to impair confidence in them to such .an extent as to cause the owners of them to desire to exchange them for other kinds of property or man s wants.” This being done, you are further of the opinion “that immediately the dark and gloomy clouds of distress that have been hovering ■over the land for so long a time will commence to rapidly clear away, and soon the sunshine of happiness and content will pervade the whole-country.” All of which translated into plain English is, that you desire that greenbacks may be issued by the Government in such quantity as to render them (as happened under like circumstances with the Con¬ tinental currency) nearly or quite valueless, and that then by virtue of the legal-tender quality made inherent in them by the fiat of the Government, debtors may discharge their debts by tendering to the creditors that which has cost the debtors little or no effort to obtain, and which, except for the force of arbitrary law, would not be accepted by the creditors as a fair consideration for the property previously parted with. I have no doubt that to many debtors the “dark.and gloomy cloud of distress ” would under such circumstances rapidly clear away, for there is nothing more disagreeable to a certain class of minds than to take and use jour neighbor’s property, and then not to be able to return it. But how would it be with the poor creditors ? Would they not be able to fully appreciate this little story credited to Mr. Lincoln? “Tom, do give your little brother your wagon, and see if you can’t keep him quiet,” said a father, whose equanimity was much disturbed by the persistent bawling of one of the minor members of his family. “All right, father,” said Tom; “but if I do, what are you going to give me to keep me quiet?” 6 ECONOMY IN WICKEDNESS. But, jesting aside, I would, in respect to your proposition,, say, first, that if it is only a relief from debt by the arbitrary action of the Government that the South and West require,, it is desirable to proceed to its accomplishment in the most direct and effective method. The times require economy ! Let us, therefore, strive to be economical when we propose to practice wickedness (repudiation), as in all other things. Let us, instead’of wasting more good ink and paper and labor in printing and issuing more legal-tender notes, adopt the cheaper and more effective method of Govern¬ ment decree or fiat, authorizing the repudiation of all pri¬ vate debts, or the scaling them down to the degree that may be deemed expedient. For it must always be borne in mind, if we are to reason intelligently, that it is not the little engraved pieces of paper that constitute the legal tender, but the fiat or arbitrary decree of the Government that inheres in them, and compels the creditor, against his. will, to receive one debt for another debt. THE TRUE AND EQUITABLE FUNCTION OF LEGAL TENDER.. Again, if humanitarian considerations are to be determi¬ native, why confine the fiat of the Government to the liqui¬ dation of debts in an arbitrary manner ? Why not equally compel the owners of tangible, visible property to part with it to people who are poor and need it; pr sell it for legal- tender notes at the prices which would be accepted if gold were offered in exchange ; or part with their property with¬ out receiving anything in return; and consider that they are compensated by the decree of the Government? But the exercise of arbitrary power is always dangerous, and when once entered upon is liable to be carried to dangerously logical consequences. He who would repudiate a debt can not be relied upon to make any romantic distinctions be¬ tween debts or the titles to property which they represent and the property itself. If it is proposed to appropriate debts—titles to property due me, or any portion of them, without compensation, what more natural and fair that I in turn, who have been rendered poorer by such appropriation, should wish to ap¬ propriate your plantation, saw-mill included, without com¬ pensation, or on the basis of partial compensation? Why not ? Is my credit title any less sacred than your fee-simple titles ? What arbitrary or capricious rule do you propose to set up for discriminating as to the kind of title that may be invaded ? But right here allow me to call attention to a circum¬ stance often overlooked : That if legal-tender, irredeemable paper, may be used to scale debts, it cannot be used to scale property, unless its issue and use are coupled with an arbi¬ trary decree fixing the price at which property shall be sold. The seller, if not restricted by law, will always make his price to correspond with the depreciation of the “ fiat ” cur¬ rency. Legal-tender irredeemable paper money, therefore, has no force except as a means of repudiating debts, unless it is by law made available for the purchase of property at legally enacted prices. In France, during the period of the assignats, the Government was consistent in this respect; for the assignats were not only made legal-tender for the payment of all debts, but also for the purchase of all kinds of property at officially established maximum prices ; or in other words, the assignats were made to scale or repudiate credit titles and fee-simple titles alike. Those who refused to sell at legal prices, or refused to bring their produce to market, were declared public enemies, and as such suffered punishment. This was a uniform and logical application of a fiat currency. NATIONAL DISHONESTY INCONSISTENT WITH NATIONAL . PROSPERITY. Scaling of debts will relieve but a very small part of the distress which is alleged as existing at the South. The mass of the people, who have no property, can only acquire property and credits by labor and economy, or by robbing other [people of their property and credit directly, or by taking advantage of an arbitrary decree of the Government (legal-tender), in which latter case it is the Government that primarily plays the part of the highwaymen. But gains accruing by violations of the rights of property, or vio¬ lations of the rights of creditors, are fleeting and transient. As well curse a country with famine and pestilence as with a policy which renders either credits or property insecure.* And the cause of our present financial and industrial depres- * There is an Eastern story which illustrates this proposi¬ tion better than any argument: “ A man of the caravan of the pilgrims slept a long time, and then awoke and saw no traces of the other pilgrims. So he arose and walked on; but he wandered from the way, and he proceeded until he saw a tent, and an old woman at its door, and he found by her a dog asleep. He approached the tent, saluted the old woman, and begged of her some food ; whereupon she said to him, ‘ Go you to the valley and catch as many serpents as will suffice thee, that I may broil some of them for thee. ’ The man replied, ‘ I dare not catch serpents, and I never ate them.’ The old woman, therefore, said “ I will go with thee and catch some of them, and fear them not.’ Then she went with him, and the dog followed her, and she caught as many serpents as sufficed, and proceeded, to broil some of them. The pilgrim could not refrain from eating, for he feared hunger. And after this, being thirsty, he demanded of the old woman some water to drink, and she said to him, ‘ Go to the spring and drink of it.’ Ac¬ cordingly he went to the spring, but he found the water bitter, yet he could not refrain from drinking of it, notwith- 9 sion is due, in no small degree, to the uncertainty in the future respecting the rights of property and of creditors. Where do you expect to find people who will lend capital, if arbitrary power can intervene to diminish or discharge the obligations thereby created by an increase of legal-tender, as advocated by you, for the purpose of depreciating the value of debts; or, what is the same thing, allowing those who have borrowed to return something different from what they have contracted to return ? Who will accumulate the products of his labor, if it is subject to be taken by purcha¬ sers at prices established by the caprice of a government ? Furthermore, of this you may be sure, that merchants and manufacturers who have in the past held, or have produced* large stocks of goods at high legal-tender prices, and have suffered severe losses by the decline or fluctuations of such standing its exceeding bitterness, on account of the violence ■of his thirst. He therefore drank, and then returned to the old woman and said to her, 1 I wonder at thee, old woman, and at thy^ residency in this place, and thy feeding thyself with such food, and thy drinking this water!’ ‘ How, then,’ said the old woman, * is your country ?' He answered her: ‘Verily, in our country are spacious and ample houses, and delicious fruits, and abundant sweet waters, and excel¬ lent viands, and numerous sheep and everything good—the blessings of the like of which exist not save in Paradise that God (whose name be exalted), has described to his just ser¬ vants,’ ‘ All this,’ replied the old woman, ‘ I have heard ; but tell me, have you any Sultan who ruleth over you, and oppresseth in his rule, while ye are under his authority, and who, if he desire, taketh your wealth, and turneth you out of your houses?’ The man answered ; ‘ That doth some¬ times happen.’ Then the old woman rejoined : ‘ If so, by Allah, that dainty food and elegant life, and those delight comforts, with fraud and oppression, are penetrating poison; and our food with safety, is a salutary antidote.” 10 prices, are not going to reinvest and hold stocks of any kind of commodities more than sufficient to meet the most press¬ ing demand of the hour, except at extremely low old gold prices. And thus the industry of the country is actually being paralyzed by the fear, of the fluctuating prices, which inevitably have resulted (and. alwa}^s will result) from the maintenance and use of an irredeemable paper money. PUBLIC CREDULITY WILL NO LONGER MAINTAIN IRRE¬ DEEMABLE PAPER MONEY PRICES. The extent to which an irredeemable paper money can be kept in active circulation is dependent upon the extent of the credulity of the people in high prices. When peo¬ ple flail to have confidence in high prices, or in prices higher than normal gold prices, the volume of currency in active circulation in any country will diminish down to the normal volume of a coin circulation, or of a currency redeemable on demand in coin. This is the natural law ; and you 1 , Mr. Ensley, and Mr. William Allen, and those who are with you, have got to submit to it, whether you will or no. Look about you and see what is going on at present, in spite of protests against contraction, the de¬ mands of political conventions for the repeal of the Re¬ sumption Act. Public opinion, in establishing low prices for commodities, or for property generally, is making at the same time a demand for a comparatively small volume of currency, and any excess of the present authorized volume over and above this demand has to remain idle at the money centres. Thus, for example, the amount of law¬ ful money reserve (in addition to the excess of National bank notes) held by the National banks alone (May 11) was $251,000,000; or more than one hundred millions in excess of the reserve required by law. If it is asked why this excess is not used—especially when it can be -borrowed on. II good collateral for a lower rate of interest than was almost ever known in this country — the only answer is, that public credulity does not any longer accept or tolerate the high prices which it is necessary should prevail in order to absorb it. The great mass of our people at present have traditional ideas of gold prices, and consider it hazardous (as it really is) to purchase or hold any property at higher rates. The prices resulting from irredeemable legal-tender paper are fluctuating and hocus-pocus prices, because this currency is fluctuating’and does not represent in any sense a product of labor. No person of sound mind can have confidence in the stability of such prices; for if the Simon, which our present currency typifies, can say up at one time, he can say down at another, or wig-wag , as at present. It is, therefore, not more legal-tender notes that you seem to want, but more public credulity. Irredeemable legal-lender paper can attain to no circulation in a com¬ munity where public opinion rejects it, and can only be brought into circulation when unnaturally high prices,— i. e., prices above gold prices—are created to use and ab¬ sorb it. In Texas, California, Colorado, New Mexico, Arizona, Nevada, Oregon and Washington Territory irre¬ deemable legal-tender paper fails to obtain circulation for want of public credulity to maintain it; and the prices which such paper generates are unknown there. And what is true of all these places in respect to legal-tender prices is rapidly becoming true of all the other sections of the Union. Say what you will, people do not believe in such prices. Human nature asserts itself in the most ram¬ pant inflationist. His credulity has been dissipated, and he believes only in gold prices, for he refuses to buy com. modities, except at such prices. Do you know.any one, I would ask, in Tennessee or Ohio, so in love with a large volume of irredeemable paper that he will try to maintain 12 the conditions of its active employment by offering to pdy old prices for what he at present desires to purchase ? So far from this, popular credulity in the reign of high prices is daily diminishing, and, from this want of credulity, it is not improbable that prices may decline by the effect of natural laws following financial revulsions, even while the legal tender is unredeemed by the Government, to a point below the specie line, and the people—especially the debtor classes—will yet clamor for specie resumption as a means of raising prices. At all events, nothing less than the gold prices contingent on contraction and resumption will ever restore confidence and again put the wheels of industry in full motion. The donkey which, supplied with green goggles, was fed upon shavings, is dead ; and the surviving donkeys, having been apprised of the fate of their comrade, have gone back on the shavings, and demand the genuine grass. No debtor will continue to be an advocate of,irre- deemable paper money when it ceases to be an instrumen¬ tality for defrauding his creditors—that is, when its value or purchasing power is equal or greater than gold. SPECIE RESUMPTION, LOYALTY TO THE GOVERNMENT; OPPOSITION TO RESUMPTION, REPUDIATION AND DIS¬ LOYALTY ! But there are other questions of more importance than, the amount of currency that ought or can be kept in cir¬ culation, involved in the consideration of this subject. Fidelity to National honor, loyalty to the Government, and the plighted faith of debtors to creditors, all require that the legal-tender notes should be paid and not repudiated. Delay of payment is, for the time being, always repudiation. Repudiation, or failure to pay, is a negative crime—a sin of omission. 13 The legal-tender note is a promise to pay. It was issued od the credit of the Government. Every legal-tender note has on its face, “The United States will pay;” and the United States Supreme Court (Bank vs. Supervisors, 7 Wallace, page 26), has decided that “ United States notes, (legal-tender notes) are' engagements to pay dollars and “ the dollars intended are coined dollars of the United States.” The Act of March 18, 1869, also provides that “the faith of the United States is solemnly pledged to make provision at the earliest practicable period for the redemp¬ tion of the United States notes in coin.” The law of the 14th of January, 1875, also provides that specie payment shall be resumed January 1, 1879. It is a Is° a well settled principle of law that all obligations not made payable at a designated time, are payable on demand. Now, all the laws in existence, when a contract is made, enter into and form a part of it, and these laws, to which reference has been made, and the pledges which they contain, have entered into and have formed a part of every contract that has been since made, with as much force as though they were actually written in such contract. Every debtor, therefore, has promised to pay by continuity or circuity of obligation in coin; for he has promised to pay in lawful money, and his Government has promised to pay the lawful money in coin. Every debtor, therefore, has promised to pay, at least indirectly, in coin. Do you, now, Mr. Enoch Ensley, Mr. William Allen, Mr. Sam. Cary, and all others in Ohio and Illinois—Democrats and Republicans—who are asking for more paper and the repeal of the Resump¬ tion Act, propose to repudiate and nullify these contracts ? Do you maintain that any relief thereby likely to accrue to present debtors, will, in any degree, compensate for the violation of all those principles of law and equity which 14 •constitute the basis on which alone rnan can deal with his fellow-man with confidence and security? This is the question that becomes you to fairly meet and answer. Again, debtors have borrowed money, knowing these provisions of law. They have used the money thus bor¬ rowed from time to time in business transactions; and whether these transactions have been profitable of unprofit¬ able, the obligation to pay remains the same. The debtor has had the chances of profit, and on the highest grounds of equity, he is subject to the chances of loss. It would be a peculiar rule of morality and equity for the borrower to take all the profits, and be subject to none of the chances of loss. Would any borrower, who had made great profits out of legal-tender money borrowed, Joe willing to return to the lender all or any part of his profits over and above the stipulated interest. The magnitude of the question involved cannot well be overrated, for it involves not only the delay, or, for the time being, repudiation of National obligations, but also the partial repudiation of private debts. National repudiation is a National crime, and individual repudiation an individ¬ ual crime. There is no medium ground in this discussion. Resumption of specie payments is loyalty to the govern¬ ment, strength to the Union, fidelity to the National honor, and 'fidelity to private obligations. Failure or indisposition to resume is disloyalty to the Government, and repudiation of National and private obligations. There is no way in which a Government or an individual can discharge his debts except by paying or diminishing them, and paying and diminishing is contraction. He who is not in favor of contracting the currency is not in favor of paying it accord¬ ing to the stipulation entered info when it was issued ; and he who is not in‘favor of paying it, is a repudiator and dis¬ loyal to the National honor and to the Government itself; i5 more especially -when there is an acknowledged and mani¬ fest ability to pay ; for a Government or Nation whose credit is impaired or destroyed is incapable of withstanding any serious strain tending to affect its continuance. All are agreed that it is of the highest importance, at the present time, to suppress corruption in public office ; but the field of crime in this particular is comparatively limited, and at the utmost embraces only some eighty thousand office holders. Repudiation, on the other hand, of National obligations, involves the moral turpitude of a whole people, and in itself constitutes evidence of National gangrene, decay and de¬ composition. But while open repudiation is one of the meanest of acts of which a citizen of a free country can be guilty, there are some who seem anxious to descend to a still lower depth of meanness ; namely, those who propose*to resume specie payments without contracting a recognized redundant cur¬ rency. Such a proposition involves an impossibility, and an absurdity, and those who advocate it take upon them¬ selves the double character of a charlatan and a repudi- ator. One more word, Mr. Ensley. There is undoubtedly a feeling of distrust throughout the Northern portions of the United States toward the South, even on the part of men well and kindly disposed. They fear that hostility to the honor, credit and obligations of the restored Union will manifest itself again in the form of hostility to the resump¬ tion of specie payments. By all such, any serious opposi¬ tion on the part of the South to the withdrawal, cancellation and payment of the legal-tenders will be considered as a hostile act, and will infallibly increase the distrust between the two sections. If this hostility on the part of Southern men should become general, the result will be a union of i6 all patriotic citizens of the North, irrespective of party, that will be determinative of all elections, postpone the day of full fraternal reconciliation between the formerly warring' sections, and hinder the return of that material prosperity to the South which is so eminently desirable. The path of honor, of good faith and of strict integrity, hard though it may temporarily be to pursue, is the path of loyalty, safety and of ultimate prosperity. I am, yours most respectfully, DAVID A. WELLS.