F\ B\(x\n 1ja\K on ishe THE UNIVERSITY OF ILLINOIS LIBRARY A PLAIN TALK ON THE SILVER QUESTION. By FRANCIS E. NIPHER. HOW VALUES ARE FIXED. Ir^ONGRESS has enacted that the value of 23.22 grains of gold shall be the unit of value. This does lot, as many people think, fix the value of 23.22 grains 3f gold, but merely determines that whatever that value nay be, it is to be the legal unit of value. In order to determine the length of an iron rod, we must find how many times longer it is than some other Jamiliar length, called the foot. The unit of length lust be a length. Precisely so the unit of value must le a value, and it is the value adopted by Congress. The value of any article is not a definite thing, nor is It a fixed thing. It differs with different people, and with the same person it varies from day to day. Person- ally I now consider the value of 23.22 grains of gold, in my hand, greater than five tons of pig-iron in my door- yard. I wouldn’t know what to do with the iron. I couldn’t use the iron myself and I couldn’t market it to my advantage. Some other person having knowledge and facilities not possessed by me, might see a bargain in exchanging the gold for the iron. The value of gold in a pig-iron standard, or of pig-iron in a gold standard. 2 How Valuer Are Fixed, is then different for different people. I would trade the gold for 20 dozen of eggs, for I know how and where to market them. at a profit. | We estimate the value of any commodity in terms of the value of a definite quantity of some valuable substance^ and our estimate is based on our ability to market the twci articles, the commodity bought, and the equivalent given! In a large city there is always a community of peophl who are interested in iron, or hay, or flour. Theiil competitive bidding establishes the market price. The market value of hay is fixed by the man whose estimate of the value of hay in terms of gold is greatest, or whose estimate of the value of gold in terms of hay is least. Evidently Congress can have nothing to do with fixing the price of silver, except as a purchaser or seller. Legislation is powerless. That Congress has made silver a legal tender for any amount has not materially affected its price. How many people know or care that the notes of a National bank are not a legal tender ? When the government prints a dollar bill, it assumes responsibility for the whole amount of the obligation. When the government coins a silver dollar, it must buy the silver, which is worth 53 cents, and it must assume the obligation for only 47 cents, if it is to be exchange- able with the gold dollar. If you burn a dollar bill, you cancel the obligation of the government for 100 cents. IfJ you melt a silver dollar, you cancel the obligations of thel government for 47 cents, and you have left 53 cents’J worth of bullion. This silver is in less available forr. I for trade than it was before you melted it, for it has lost the certificate of good character which the government stamp gave it, and you must prove what the metal is. With a small amount of metal this might cost you more than the piece is worth. Melt a million silver dollars and you lose $470,000 in gold. The pig-silver you have left will be worth $530,000 in gold. Melt a million gold dollars and you have still a million dollars’ worth of gold. Burn a million dollars in treasury notes and the ashes will be worthless. If the The Results of Free Coinage, government were hopelessly unable to give a gold dollar for its one dollar notes, and for the silver dollar, the notes would be worth nothing and the silver dollar would be worth its market price as pig-silver. If there were hope that the government might some day redeem its notes and silver coin in gold, they would have some additional speculative value which would depend on what the most hopeful in the community thought about the probability of redemption. What would we think of a milk dealer who should advertise that he had bought a stamping machine, and that any person who might bring him sheet brass might have it coined free into milk checks good for a quart of milk. That the owner of the brass might take the checks away as his property, and that the dealer would deliver milk to all comers, on presentation of the checks. That would be the free coinage of brass, at a definite ratio, determined by the weight of the check and the weight of the quart of milk. If the brass check weighed one- sixteenth of the weight of a quart of milk, it would be the free coinage of brass at the ratio of i to i6. The dealer would probably fail in business, unless he changed his policy, and took the brass at its junk value. THE RESULTS OF FREE COINAGE. /^UR friends who favor free and unlimited coinage of silver, justify themselves against the charge of injustice and violation of their contracts, by denunciation of a more or less Bryanesque character. They point to the greedy money-lender, and the banks who wish to have their payments in a gold standard. You will find little, if any, reason in the free silver orator. We simply have a denun- ciation of those who hoard money, and oppress the people, accompanied with a high resolve of debtors to be inde- pendent of their creditors. 5 ■ O r »» 4 The Results of Free Coinage, Does anyone suppose that banks and trust companies enjoy the operation of hoarding their money ? Can a bank afford to pay rent on a building, and provide itself wdth steel vaults, merely for the privilege of acting as a warehouse for the safe storage of its depositors’ money? The banks and trust companies always wish to lend as large a fraction as they dare, of their deposits. They will lend a larger fraction when times are peaceful, and men are busy and confident, than when men begin to rave in real or apparent indignation at those who have lent money, and begin to talk of paying in a baser metal than they have borrowed in. The banks have borrowed the money which they lend. They owe this money to their depositors, and they are always anxious to have enough money on hand to pay their depositors. The present situation is well calculated to make depositors fearful. Those who are intelligent are watching the situation very closel 3 ^ Whatever may be the true theory of finance, there is danger that depositors will raid the banks in a dreadful panic, in order to save themselves from loss. They will not be doing the banks any injustice. They have lent money as good as gold, and they fear that we shall be forced to a silver basis, where the intrinsic value of the silver in a silver dollar will be the unit of value. If this time comes about, the banks will be forced to demand the money which they lave loaned to farmers, in order that they may hoard their crops for higher prices. When the local banks are forced to this action all over the west, they will not be in a condition to lend any money. No person in his right mind will lend money now. Where will the farmer get his money to pay the bank? He must sell the crops he has been hoarding, with a view of oppressing those who must buy of him. He is trying to increase the price of the food which the poor must buy, and which they have not been able to buy in such quan- tity as formerly. They have been thrown out of employ- ment in immense numbers, because those who could employ them were afraid to put their mone}" into business. What will be the effect on prices of farm produce, if The Results of Free Coinage. 5 farmers all over the west who are hoarding their crops, are all simultaneously forced to sell? What will be the condition of business when banks are being raided by frightened depositors, and every man who has money is afraid to trust it out of his possession? What becomes of the laborer who depends upon his daily earnings for the money to buy what the farmer wishes to sell? There is no lack of money. The trouble is that it does not circu- late. It is being hoarded. When the wind does not blow, we sometimes say there is no air. When a railroad is paralyzed by a strike, we say there are not enough cars to do the business of the country. That is exactly the trouble with the business world today. Our sound- producers have hurled their defiance upon the air from convention halls. They have voiced a sentiment which has been growing for several 3 ^ears. Men who have money are afraid. People seem to have discovered that it is harder to pay debts than it is to borrow money. What have they done ^vith the mone}" they borrowed? They are supposed to have used to their own permanent benefit. Whose fault is it if they have not? Why do they think it wrong for an insurance compan}^ to demand that it be paid back when due? Are not the rights of the widow and the orphan as sacred as the rights of a borrower of their money? Who are the depositors in a bank? Are they not the neighbors of those to whom the bank has lent the money. I'his money a bank or a trust compaii}^ lends is very largely the mone\" of thrifty people of moderate means. Nobod}" compels the borrower to borrow. If people find the money-lender greedy and think it best to declare independence, why does it not occur to them to stop borrowing? That way of being independent can be carried out without any fuss and feathers or outbursts of youthful oratory. Under a free silver system, the men who now have the gold will export it and buy silver. Gold always goes where it is most valued. For each dollar of gold they will get two dollars of silver. The men who now have 6 The Ethics of Free Coinage, the gold will then have the silver. Is there any proba- bility that they will be less greedy then than now? There would be more wealth then than now. We will simply be measuring values in a smaller unit. If congress were to declare the foot to be the poor man’s yard, would there be any more calico in the country than now? If the square rod were to be called the poor man’s acre, would the farmer be richer in land? Would the tramps who may sigh for free land thereby become possessed of land without the formality of exchanging an equivalent? It appears from recent developments, that it is sinful to lend money, but that it is virtuous to borrow money, and make the deserts blossom as the rose, and then defraud the lender on the ground that he has interfered with the business of the people of Nebraska. THE ETHICS OF FREE COINAGE. T T is claimed that the fall in the prices of most of the ^ articles that people buy and sell, and the fall in the price of silver, all measured in a gold standard, is proof that gold has been steadily increasing in value. This does not seem to me to be in any sense a proof. We have done a great deal to coddle the silver producers, even to have the government buy 4,500,000 ounces of their wares each month, storing it away in the vaults of the treasury. Instead of increasing the price of silver, which is what the silver men claimed it would do, it seems to have stimulated production, and caused a fall in price. There has been an enormous increase in the production and it seems to me after a careful study, that it fully accounts for the fall in the price of silver. There has not been much increase in the production of American gold until very recently. It is now closely approaching the production in the years following the discovery of gold in California. The natural laws of supply and demand are The Ethics of Free Coinage, 7 bringing about a compensationj and improved methods of treating low grade ores, only lately possible and now being used, will gradually make enormous changes in the rela- tive value of gold and silver. At the present time the production of gold is being^stimulated, and of silver is not. This will tend to bring the metals together, and make a large use of silver possible, without the dreadful consequences^'which must result from the sudden and immense changes in our monetary system which are now proposed by the radical party. The gradual fall in the prices of other things prior to the last panic seems to me attributable to the very great improvements made in methods of production. I do not regard it as an unmixed evil, that the articles which the poor must buy were never cheaper than now. We should remember that we live in a part of the country only fifty ^y ears removed from the wilderness of frontier life. Our farmers have more of the comforts and luxuries of life than can be found among the tillers of the soil in any other nation on the earth. Let us however suppose that the gold dollar is increasing in value, that it is becoming harder to pay debts and that borrowing money is becoming less and less profitable on this account, and this notwithstanding the fact that the rate of interest .has been steadily falling during the last 30 years. Isn’t a man supposed to know the condition of the markets when he goes into them? Suppose a man borrows an elevator full of wheat hoping to make some money “hoarding” it for higher prices. Is not not every man supposed to know that in such a transaction disap- pointment and loss are possible? Is the country to be asked to elect some paternally inclined person, president of the United States because people do not behave them- selves wisel}^? If a man persist in doing something which experience shows to be unprofitable, must we have a Populist presi- dent to tell that man when to quit? As surely as you begin to legislate to help people out of their business troubles, so surely will 3"ou wrong those 8 The Ethics of Free Coinage. who have had sense enough to keep out of trouble. It is asking the country to put a premium on stupidity. It is asking the country to so legislate that contracts now in force under an established order of things shall be suddenly and greatly changed in the interests of those who claim they have the worst end of the bargain. Would that be fair in a horse trade? If a man go into any business hoping to pocket gains ought he not to be ready to pay losses? If borrowing money be an unsatisfactory business, with the rate of interest steadily falling, does it not appear probable that men have found it too easy to borrow and that they have borrowed too much? Even if it be true that the value of 23.22 grains of gold is becoming greater, when measured in terms of the average commodity, congress has had nothing to do with it. The value of gold, like the value of wheat is deter- mined by competitive bidding in the open market of those who wish to get it. You might as well ask congress to declare a half bushel to be a bushel, in the interests of the men who have borrowed too much wheat on a falling market, as to declare in the interests of any interested class of people, that 50 cents worth of silver shall be the unit of value. Congress has enacted that 23.22 grains of gold is to be the unit, but to ask congress to fix the value of this unit in terms of the average commodity, is simply to ask it to fix the market price of the average commodity, in gold. Every good citizen should be ready to take his chances in the uncertainties of business. It is the manly thing to do. But when any party or class of men proposes to use the machinery of the government to suddenly and arbi- trarily change by fifty per cent the standard of value that has been duly authorized and used for half a century and in which all the business of the country is being transacted, an emergency about as serious as that of 1861 is created in which all persons should lose sight of the petty obliga- tions of party. In my opinion the welfare of the entire country is at stake. It is not a remote danger that The Ethics of Free Coinage. 9 threatens, but its effects will be immediate. No man can predict how great the disaster will be. No nation has ever before dared to venture upon so tremendous an experiment. When silver was formally demonetized in 1873, congress simply legalized a condition that had been in existence for years, and was brought about slowly by the ordinary operations of trade. The silver in the silver dollar, when uncoined, was then worth 102 to 103 cents in gold. No person would pay a debt in silver dollars, since he could melt those silver dollars and with every silver dollar he could buy 103 cents in gold coin. Silver simply would not circulate. English kings have done their utmost to make the more valuable money circulate, even to making the melting or exporting of such coin a capital offense, punishable with death. No government has ever succeeded in such attempt except by treating the cheaper coin as an obligation to be redeemed in the dearer one of the same denomination. Men may be robbed by a legal change in the unit applying to previous contracts, but they do not readily submit to make new contracts on the same basis. It is claimed that English money was used in securing the act of demonetization. There is absolutely no proof of this, and nothing shows more clearly the character of thinking which has brought about the present silver craze. We are seriously asked to believe that English and American money lenders were willing to pay for an act demonetizing silver, for fear their loans would be repaid in silver dollars, which were not in circulation, because they had been hoarded, exported or melted for the silver in them, and which would have been intrinsically worth 102 to 103 cents in the current gold coin. There are now many people who seem to think that if 52 cents worth of silver can be made to circulate in an unlimited free coinage and pay a debt of one dollar, that 100 cents worth of gold will condescend to do the same thing. lO Chea^ Dollm's and Dear Goods. CHEAP DOLLARS AND DEAR GOODS, SHORT] MILES AND LONG DISTANCES. TT is sometimes claimed by the advocates of cheap ^ money that it has always increased the business of a country. This is another fallacy. There is something about the free silver idea which seems to promote ora- tory and the growth of hair rather than reason and care- ful thinking. There is another fact that might be cited before taking up the merits of this matter, that in all countries where the rod has been adopted as the tired man’s mile, it has always increased the walking ability of the people. Those who had been in the habit of taking a walk of a mile or two before breakfast, developed such an astonishing bodily vigor, that they were not satisfied with a shorter morning walk than 320 and they might extend it to 640 miles. It is in such fashion that a cheap- er money increases business. If we were now to change to a 50-cent dollar, the Saturday reports of bank clear- ings to be found in all the daily papers of large cities, would apparently show that the country is doing twice as much business as now, for there would be twice as many cheap dollars required to do the same business that we are doing now. We are now doing business with the gold dollar as the unit. The silver dollar and the paper dollar, will now buy as much as a gold dollar, because the government in response to the platforms and policy of the republican and democratic parties, has maintained the equality of every dollar issued by the government. The paper in the paper dollar is in itself worth nothing. The silver in the silver dollar is worth about 53 cents. The government has treated both the paper note and the silver dollar, as obligations which it will undertake to re- deem in gold dollars. In the absence of needed legis- lation by congress this was the only practical way of carrying out the repeatedly announced policy of both of the great parties, and of congress as expressed in the act of Nov. I, 1893. If the democratic party should hold a convention this year, it will undoubtedly reaffirm the policy of its platform of 1892. Cheaf Dollars and Dear Goods, ii In order to relieve the government of the task of main- taining gold and silver at a parity when they have differ- ent intrinsic values it has been suggested that the amount of silver in the silver dollar should be increased so as to make it equal in value to the gold dollar. There are three fatal objections to this plan. 1. The silver dollar would be too large. It is now so large that it will only circulate in the payment of small sums although a legal tender to any amount. 2. It would take years to recoin the silver now in cir- culation, and the government would be compelled to buy an amount of silver nearly equal to that now in circula- tion in order to make its silver dollars good for their face value. 3. Before this coinage could take place the relative values of the silver and gold in the two dollars would have changed. It would be just as absurd for the government to make the oat bushel large enough so that it should be equal in value to the value of the present bushel of wheat, at their respective prices today, and then expect an act of congress to make them stay equal. It has also been suggested that the gold in the gold dollar should be diminished, so that its value should be equal to that of the present silver dollar. The second and third objections apply to this plan also. There is in addition a moral question involved in this plan. To change the silver dollar so as to make it intrinsically equal to what people have been passing and accepting it for, would defraud no one. The government would simply be making its silver obligations good, by actually putting into the coin the value for which it has under- taken to be responsible. But for the government to debase its gold coinage so as to make it equal in value to its silver token money of the same denomination, would be a monstrous fraud. Why stop at silver.^ Why not debase it until we reach the level of our copper coinage, or our paper money? That operation would be the same as if a milk dealer were to debase his milk until the quart of water with a 12 The Present Cheaf Prices, coloring of milk should be equal in value to the brass | checks he has issued, which call for a quart of milk. A youth named Coin, who wrote an account of an imaginary school of finance, gave great prominence to this scheme of debasing the gold coinage, which he call- ed the money of the rich, by making the gold dollar half as large as it is now. It may be that he knew so little about the matter that he was unable to see what this plan would really accomplish. He represented himself as be- ing young, and he may have been immature. It may be that he is really a gold bug in disguise and that he has somewhere a hoard of gold coin which he is seeking to have the government coin into twice as many dollars as he now has. In that way the gold bug would be able to pay twice as much of debt as he can now with his pre- sent dollars. How a person who hates gold bugs as this youth claims to hate them can approve a scheme to give them two gold dollars for every one they have now, is a question for study which seems to lie outside of the domain of nation- al finance. I may remark, however, that this part of Mr. Coin’s book is of about the same calibre as the rest of it. THE PRESENT CHEAP PRICES. 'T^HERE is without question great reason for farmers ^ to be dissatisfied with the present prices of their produce. Let us examine into the recent conditions which have led to them. We have been passing through a panic, and it has been a prolonged one. Business has been at its lowest ebb. Thousands and thousands of men have been thrown out of employment, and a great body of our people has been compelled to very severe economy. Men who ate meat every day have been compelled to go without it. People have been unable to buy even the necessaries, to say no- The Present Cheaf Prices, 13 thing of the comforts of life. They wished to buy the produce which the farmer wished to sell, but they were unable to do so. A financial panic is not a new thing. There have been about eighteen of them in the last two hundred years. They have come so regularly, at intervals of about eleven years, that learned men have sought to connect them with sun-spots, and magnetic cycles and other astronom- ical periods. These panics all have the same general features. In later years the relations of all civilized nations have become so intimate, that the calamity of one brings suffering to all. We are no sooner over with one panic than we begin to lay the foundations for the next one. Men again plunge into business. They start am- bitious plans for making money. Money has long been unemployed, and may be more easily borrowed as con- fidence returns. The number of borrowers, and the num- ber who have overstrained their credit gradually increases. Finally something hapens which causes apprehension in the mind of some old fox who has been caught in a panic before. He sells some of his securities to straighten his affairs. Prices drop a little, and others are pinched and are forced to sell. The alarm developes here and there among the heavily loaded. They begin to sell freely. The alarm becomes general. Everybody with obli- gations soon to become due, begins to need money. Some hesitate to sell at such sacrifice and try to borrow. Banks refuse the securities as collateral which were perfectly good a few days before. They also begin to demand payment on maturing obligations. The panic begins. Depositors withdraw their deposits from banks. Every- body of whom settlement can be demanded is pressed for settlement, and they cannot settle. They know that they cannot pay all, and they resolve to collect as much as possible, and pay as little as possible. They pay slowly and in part ^as the pressure increases, in order to avoid suits. Everybody fights for time and for the chances time may bring. Business begins to suffer severely. Men ;are idle, and hunger and suffering appear. 14 The Present Cheaf Prices. People clamor at the doors of banks that have failed. Hungry mein with hungry children at home begin to think mischief. Business firms which have not shut down are obliged to run on half time with a part of their old force, and at reduced wages. It is choice between this policy and failure. But the men are dependent on their wages and they feel that they cannot submit. They all strike. The whole country becomes anxious. The din of inflam- ed mobs of men with frenzied faces and angry voices, the glare of burning buildings and the crack of rifles in ’the streets fill the souls of thinking men with solemn awe and pity. But the violence is soon crushed with the mighty agencies which the people have established, and the poor, in mute despair, begin to wonder if there is a just God who rules the destinies of man. The grizzly head of the anarchist, the smooth-tongued demagogue and cranks of every description appear as the crisis passes its climax. Every quack financial medicine that has ever been produced by a disordered imagination, is brought forward as a cure for all the evils which afflict society. These remedies always take the form of cheap money, of some kind or another. The poor sufferers appear to think that they must devise some form of money so worthless that it will not be sought by the avaricious. These things, so familiar to us, were all familiar to men a century aso. All of the nostrums, now proposed, have been tried and they have all failed. No system of finance will remove the love of gain from the human heart and replace the courage and confidence of youth with the caution and wisdom of age. If men \yould cease borrow- ing money, there would be no financial panics, and so long as they borrow unwisely we shall have them. They can borrow silver money as easily as any other kind. And it is not the poor who borrow and bring all this distress and sorrow to men, it is the rich man of af- fairs with a large pay roll of employees, who is seeking to build up great industries, who precipitates the trouble and his fall drags down thousands whose well laid plans would have succeeded but for the unforseen calamity. The Present Cheaf Prices, 15 It matters not how much money there may be in a a country, or what kind of money it is, the man who has made his plan too large for his cash, the man who has borrowed money and used it, and then finds himself caught in a panic, will complain of a scarcity of money. Somebody else will have the money and his soul will al- ways long for a large quantity of cheap money with which to pay his expensive debts. The ideal cheap money in such an emergency, is a money so worthless that one is not obliged to give anything for it, and which the creditor is by Jaw compelled to accept as payment for the more expensive money — the money of the rich — which he lent. The great trouble with any ordinary kind of money is that it is not cheap in a panic. The country needs rest. It cannot yet consume the immense accumulations of farm produce now being held for higher prices, for business is not yet established on its old lines. Men hesitate to invest their money when they are threatened with losses which must appal the most courageous. We should cease this angry and idle defiance of those who have always been our best custom- ers and help the East to put its men to work. A great deal more of co-operation and less of throat-cutting would simplify the present situation in a very wonderful way. Can we prosper when the East is in distress? Do we not all remember that our recent panic started with the fail- ure of the English house of Baring Bros, in its invest- ments in the Argentine Republic? There followed soon after a similar trouble in English investments in Austra- lia. In order to save themselves London investors began to sell American stocks and bonds, and American hold- ers were obliged to buy them and ship our gold for them, or suffer the ruin of their own enterprises. The trouble gradually spread, and we in Iowa are now suffering more severe pressure than we have felt before since the trou- ble began. Many of our respected, but I think mistaken, fellow-citizens have reached a point where the advice of an eastern banker that it is considered dangerous to leap over Niagara, would at once determine their resolve to Money in Business. i6 do this very thing. If free and unlimited coinage is a mistake it will be a dreadful mistake, and it will take years to recover our lost ground. No one can tell where it will all end, but there is grave reason to fear the worst is yet to come, unless we repudiate the agitators and cranks who are now seeking their own profit at the ex- pense of the poor. MONEY IN BUSINESS. XT is constantly urged that gold has appreciated in val- ue for many years, and that this is due to an effort of those who possess money to lend. It this be true, and the money lender has such powers, why is it that the rate of interest decreases? We do not usually associate an increase in the value of farms and houses with a fall in rent. During the last thirty years, the rate of interest in Iowa has diminished by 30 per cent, of its value at the beginning of that period. This may be claimed to be due in part to the fact that the farmer has grown rich and can give better security. This is not in itself a sign that the farmer is so badly off as he is sometimes represented to be. The average rate of interest at the bank of England during 1863 4 was between 7 and 8 per cent. In 1865 it declined to 4 per cent. By 1873 it had declined to 3 per cent. During the panic of that year it rose for a short time to 9 per cent, but declined to 4^^ per cent by the close of the year. There was a similar rise during the last panic, but the rate has now fallen to i to 2 per cent, although I doubt if Americans could now get English money at that rate. Is the whole world which borrows of London also able to give so much better security as is represented by these changes? Just before the present agitation of the silver question, eastern investors were about to reduce the interest on Money tn Bttstness, n Iowa real estate loans to 6 per cent, and they even ex- pected to be compelled to reduce to 5 per cent at a very early day. A large part of such loans made during the past five years, are made with a provision which permits the payment of any number of even hundreds of dollars on such loan at any time, or in some cases at any date when interest is due. This would enable any borrower to borrow at a lower rate and pay his old loan. I cannot see what there is about such a situation to arouse the wrath of anybody. But the ugly spirit mani- fested by the few w^ho have done the talking of late, and the uncertainty concerning the position of the large class of people who do not talk, has caused a large class of in- vestors to decline to loan at any price, until the attitude of the country can be determined. There will be an abundance of money as soon as it is settled by an over- whelming vote that those who part with it in business of their own, or lend it to others, will not suddenly find their dollars worth only 50 cents in gold. There are comparatively few people who realize how small a portion of the business of the country is done with actual money. For instance, I may pay my physi- cian with a check on the First National Bank. When my check returns to me I find from the endorsements on it, that my physician used it in paying his grocer, that the grocer used it in paying a debt to a wholesale house, and that the latter endorsed it and deposited it in the Merchants’ Bank, The latter bank does not send the check to my bank for the money, but my check with hundreds of others on various other banks, is taken by a clerk of the bank to the clearing house. The clearing house is the agency for the daily exchange of these checks, receiving from the agent of each bank the checks he pre- sents against all others, and returning to him the checks which all others present against him. If the balance is against him, his bank pays cash to balance, and if it is in his favor, his bank receives cash to balance. When the clerk of my bank returns from the clearing house, the amount of my check is charged to my account and credit- i8 Money in Business, ed to that of the bank. A depositor with a salary of $3 000 a year, will in ten years deposit $30,000 in his bank, without ever having deposited a dollar in actual money. Most of this money will be paid out by him on checks. Of this $30,000, he may never have seen $1,000 in cash. It is more convenient to pay checks than to carry money in his pocket and make change, and in a large city nearly all of the business is done in this way. A depositor simply wishes to know that if he chooses he may at any time draw his check for the whole amount standing to his credit, and receive that amount at once from the pay- ing teller. If he thinks there is any doubt about the mat- ter he is likely to make that experiment at once. If the distrust becomes general there is certain to be trouble which will more or less seriously involve every- body in the country. In any Saturday morning paper, printed in a large city, may be found the bank clearings for the week for the larger cities of the country. This gives the aggregate value of clearing house paper. The report for July 31 shows the bank clearings for New York city to have been $449,630,352, a decrease of 9.8 per cent, as compared with the corresponding week of last year. In the eighty-four cities represented in the re- port the total bank clearings were $811,433,203, a de- crease of 1 1.6 per cent as compared with the correspond- ing week of last year. In all of those transactions none of the persons paying the debt and none of the persons to whom the debt is paid have handled any money, al- though anyone of them might have done so had he so de- sired. This business is all a cash business, done without cash. It would simply be impossible to do this business by the actual payment of money and it would be very wasteful and expensive to attempt to do it. This system of doing business is not the source of trouble in a panic. It is the unwise borrowing and unwise investments of too many people that make trouble, not the use of checks and drafts for doing a cash business. The decrease from last year of from 10 to 18 per cent in the aggregate busi- ness passing through the clearing houses which the weekly Money in Business, 19 reports have shown during the last two months, is well 'calculated to make thinking people think. The objection frequently made to a definite amount of gold as a measure of value is that there is not enough gold to do the business of the country. As we have seen the great business of the country is not not only not done with gold, but it is not done with any kind of money. It would be just as reasonable to object to the quart as a measure of volume, because there are not enough quart measures to hold all of the molasses produced. A SPECIMEN SILVER ARGUMENT. Dr. John C. Ridpath has recently published an inter- view in which he says: According to my way of thinking our government has been steadily drifting away from the people and getting into the power of special interests. The circle of govern- ment has narrowed and narrowed till it appears to me the height of absurdity to call it any longer a government ‘of the people, for the people and by the people.’ I want to see this process completely reversed. I want to see the government restored to the people. I believe precisely what W ebster and Theodore Parker and Lincoln declared, viz: That our republic is, or ought to be, a government of the people, for the people and by the people.” These are my sentiments also, but this program is not now up for consideration. It is the free and unlimited coinage of silver at a ratio of 16 to i without waiting, etc., that is now before the people. If some way can be found to tax inheritances, so that the dangers resulting from immense fortunes in the hands of a few man can be avoided by making it impossible for such fortunes to persist, then something would be accomplished. It is, however, hard to see how we are going to accomplish any reform by doing the Sampson act, and pulling our own house down about our ow^n ears. Dr. Ridpath continues: “We want our currency S3^stem put back precisely 20 Money in Business. where it was under the statute and constitution for the first eighty-one years of our existence as a nation. Our statutory bimetallic system of currency was taken from us in 1873 by a process which I do not care to charac- terize in fitting terms.” The trouble with this loose kind of talk is that in 1873 the silver in a silver dollar was worth 103 cents in gold, while it is now only worth 53 cents. We can not exactly tell what effect free coinage will have on the price of silver. Some reckless writers who address political audiences and write political editorials say that it will become exactly equal in value to one-sixteenth of its weight in gold or that the gold dollar and the silver dollar will have equal intrinsic value. The silver advo- cates in the senate claimed that the purchase by the government of 4,500,000 ounces of silver monthly would also raise silver to par. The annual production of Amer- ican silver was then only 54,500,000 ounces a year, of which the government was to take practically all. Our experience with these prophets then causes me to suspect their prophetic ability. It seems to me more than likely that it will cheapen silver, by stimulation of production. At best such wild legislation will be a leap in the dark. It is a tremendous experiment. It is full of the most threatening danger. No business can prosper when such reckless changes are seriously threatened. It would be no more of an absurdity for the countiy to decide by popular vote whether or not anti-toxin should be used in the treatment of diphtheria. We should send our best men to Washington and tell them to do what is right for us in such matters as the financial S3"stem of the country. What better can we do? Such questions are not for you and me. We can not give them such stud}" as the}" should have in order to settle them rightly. The last part of Dr. Ridpath’s statement quoted above is unworthy of a man of his standing. It is shown by the records that this law of 1873 under discussion three years, and that it was printed thirteen times. It was passed as openly as any law is ever passed. I confess, # liai‘ Money in Bnsmess. 21 lard for the truth to overtake a falsehood. A MORAL QUESTION. It may be claimed by the voter that there cannot be anything very calamitous about the proposed free silver legislation when so many senators of the United States are in favor of the policy. This would have more force if the people had not so largely settled on the details of what is to be done. They leave nothing for the discre- tion of their representatives and the senators are trying to represent the people. They are not doing what they think should be done. I have personally heard a senator denounce the free and unlimited coinage of silver as a fraud and a mistake of the worst kind. He however said at the same time that he would support it officially, because his. constituents were in favor of it. In making this statement he seemed to be trying to defend his intel- ligence rather than exhibit moral sense. He has been publicly accused of such perfidy in the Washington and New York papers, and he has indignantly denied that he was personally opposed to free coinage. He was a prominent figure at the late Chicago convention. I have heard people in his state say that they did not understand the matter, but they were influenced greatly by this senator, and thought there could be nothing very bad about free coinage. I have reliable information which I fully believe about another free silver senator, who stated that he would resign his office rather than vote for free silver, if his vote were the deciding one. I also have information which I believe, to the effect that a majority of the senators who voted for free silver are personally opposed to it as a gigantic folly, and that they would not have voted for it if they had not known that the president would veto any measure of the kind which might reach him. There are men in Washington who know personally about these matters, and whose word would be believed by the country, even if no names 22 Money in Business, were given. It would seem that such men owe it to thdl country to speak out. I have talked with many whojl are in a smaller way supporting free coinage officially as|| partisans, because it is a party measure, who have signifi- j cantly remarked that there was a secret ballot in Iowa,j and they could not afford to go against the candidates in * the campaign. It is astonishing how many people there are who are opposed to this measure, and who privately denounce it as a fraud, who publicly talk for it. Whether they will privately vote for it is somewhat uncertain. GOOD TIMES DURING THE WAR. During the war labor was in demand because we were supporting armies of men, not simply in industrial idleness but in wasteful activity. The government was an active buyer in every market. It paid greenbacks and bonds. These greenbacks were a forced loan without interest. They were accepted by us as patriotic citizens, not as bargain hunters. In so far as these notes are in the hands of the public, this forced loan exacted by the gov- ernment is yet unpaid. The government could now make such “ good tin es ” for us if it, with the cooperation of the states, would, during the next four years, pile up another war debt of two thousand million dollars, and send a million of men on a grand picnic, leaving it to the next generation to pay for our frolic. The situation which now presents itself is very differ- ent from this. The government will not support armies of men. It will be necessary for them to support them- selves, and compete with each other. The government will not be a buyer of the food which anybody will eat. They must buy for themselves such food as they can. Their ability to buy will depend upon what they can earn. During the war, our money slowly depreciated and men had time to prepare themselves for its changes. We were all struggling in a great contest, and were held steadfast in the struggle by patriotic resolve. It was a great strain upon us all. Everything that the laborer and farmer had to buy became enormously high, and wages Money in Business, 23 /ere not proportionately high. I know that in 1863 I v^as doing, the work of a man on a farm for eight dollars month, and I was paid in greenbacks. I have never et been able to see that the times were good during the /ar. My experience is that there never was a time be- ore since I can remember when a days labor would buy ore of the necessaries and comforts of life than now. f we can relieve the business world of the hysterical on- laught that is now being made upon it, and start the heels of industry again, if men who wish to embark in business and employ their money usefully can be made to see that they will not be asked to give it away to those who are failures in the management of their own affairs, we shall have vastly better times than we had during the war. Men who give careful attention to their own affairs are much more likely to succeed than those who without any preliminary study or training, spend their energies in devising financial plans for the government. 1 can see that the farmers who succeed, are the ones who do not neglect their own affairs in order to talk politics. You will see their machinery housed from the weather. You will see their stock well cared for. It requires head-work to make money in any calling of life. We are all alike interested in having the present issues settled rightly. We are all honestly striving to do our duty. But let us not act rashly. We cannot afford to do so. It will injure us if a mistake is made. The poli- ticians are not safe guides. Too many of them seek only to be elected, and will vote for anything that will keep them in office. It is so in all parties. Do your own thinking, and vote as you think. Iowa City, August, i8g6.