PAPER MOJ[EY: A COI.I.ECTION OF PRINCIPAL HISTORICAL FACTS BEARING UPON THE CURRENT FINANCIAL DISCUSSION. BY II. W. EICHAEDSOK NEW YORK: D. APPLETON AND COMPANY, 549 AND 651 BROADWAY. 1879. f? COPTEIGHT BY D. APPLETON AND COMPANY, 1878. 1 wy . 9 OOl^TE^TS. I. The Eesumption Act . * II. The Geeenback: Theoey . III. The Continental Cueeenoy . lY. The Feenoh Assignats Y. Old Tenoe Bills YL The Bank of Yenioe YII. John Law’s Legal-Tendee ISTotes YIII. The Demand ITotes of 1861 IX. The National Ceedit . X. The Recent Example of Feance. XI. Cheap Money . XII. Inteeconyeetible Bonds . XIII. The Ameeioan System of Finance . 5 8 . 12 18 . 22 80 . 82 8r . 40 44 . 47 52 . 56 PAPEE MOl^ET. Tifp: sisuMPTION ACT, ) V5 ^ ^ J > V yJt ^ '■> ^ ’ ’ ' ’ ' ' Nearly ten years afte.^ llie;X*los^ of ^ the civil war, the Congress of the United States passed ‘‘an act to provide for the resumption of specie payments.” The bill was signed by President Grant on the 14th of J anuary, 1875. Specie payments had then been suspended for thirteen years, but the premium on gold had dropped from the ex- cessive war-rates to 42 in 1865, and had gradually declined to 12 in 1875. Diminishing at the same rate, it would have disappeared in four years more. The act was in three sections : 1. Congress directed the coinage of silver to replace the fractional paper cur- rency. 2. The charge of one-fifth of one per cent, for coining gold was abolished, so as to prevent the owners of gold bullion from sending it over seas to the British mint, where no such charge was made. 3. The restriction of the volume of the bank-note currency to $354,000,000 was repealed, so that anybody who chose might engage in the banking business, and all the banks might issue as many notes as should be wanted, provided only that such notes should be fully protected by securities deposited for that purpose with the treasurer of the United States. It was furthermore declared that, on and after the first of January, 1879, the secretary of the treasury shall redeem 6 PAPER MONEY. in coin tlie United States legal-tender notes tlien outstand- ing, on their presentation for redemption at the office of the assistant-treasurer of the United States in New York, in sums of not less than fifty dollars. To provide money for this purpose, the secretary of the treasury was au- thorized to use ary surplus revenue not otherwise disposed of, and to sell, at UQt/less thaii .par in coin. United States bonds bearing interest at tlie i’'afce of five, four and one- half, or four -pet pent.' ' : ' . ; ' ; Senator Sherman, now secretary of the treasury, re- ported the bill to tie Senat e as chairman of the committee on finance.^ In explaining Its provisions, he called atten- tion to the fact that the committee had followed the example of the British Parliament, which provided by the bank act of 1819 for a resumption of specie pay- ments in 1823, after an interval of four years. We de- clare the time when specie payments shall be resumed,” he said, in order to give fair notice, so that market val- ues for the future may be adjusted, and so that people will prepare themselves for resumption.” The result has been precisely what he anticipated. Market values have been adjusted to the specie standard. In January, 1878, a year before the time set for resumption, the premium on gold had declined to a fraction over one per cent. ; in March the quotations were a fraction below one per cent. In other words, the paper dollar had appreciated in three years from 89 cents to 99 and a fraction. These three years were years of severe commercial depression. After the civil war we were poor, but it is with nations as with individuals : if we have money we spend it. The vast sum of paper currency, though every dollar of it was borrowed, led us into all sorts of extrava- Congressional Record^ vol. iii., p. 186. THE KESUMPTION ACT. 7 gant expenditures and unprofitable enterprises. Secretary McCulloch, in 1865, had advised a gradual reduction of the volume of the . currency, but the small reduction which he was authorized to make occasioned -a sharp contraction of credits. Market values began to fall ; creditors began to doubt the ability of their debtors to pay in money of full value what they had promised to pay in depreciated currency. If the secretary of the treasury had continued to draw in the legal-tender notes, a general liquidation v/ould have followed, and the coun- try was much better prepared for it then than it was when the day of reckoning came in 1873. So urgent was the remonstrance, however, that Congress directed the secretary to desist, and so we went on building railroads and factories and court-houses and custom-houses, and importing foreign luxuries, until in October, 1873, there came a crash in New York. One after another the great banking houses and trust companies went down, and a panic ensued which compelled the stock exchange, for the first time during its existence, to close its doors, and the banks to suspend even currency payments. The exchange was closed for ten days ; the bank suspension lasted for forty days. When the dust cleared away, it was found that the market had broken down because it was over- loaded with evidences of debt owed by railroads, states, cities, towns, manufacturing corporations, and mining companies. We have been settling up those debts and reorganizing our industries ever since. ^ Senator Thurman remarked, while the bill for the re- sumption of specie payments was pending, that there would be no increase of bank circulation under the act, ^ A concise account of the panic of IS'ZS, by Mr. John Jay Knox, Comptroller of the Currency, will be found in the Finance Report of that year, p. 90. 8 PAPER MONEY. until after the liquidation, which had at last become in- evitable. After the panic of 1819, he said, business was stagnant for four years ; after the panic of 1837, for five years ; after the panic of 1857, until the war, in 1861, changed the face of things ; never in any case had the depression lasted less than four years ; and until there was more business there would be no need of more money. He was right. The banks, though perfectly free, have not increased them circulation ; they have reduced it from $354,000,000 in 1875 to $324,000,000 in 1878 ; and this fact shows that there has been no lack of money since the passage of the resumption act. The stagnation of business, after the crises of 1819, 1837, and 1857, proves that the recent depression would have occurred if the act of 1875 had never been passed. Finally, the panic of 1873 was a conclusive reply to the declaration of Gen- eral Butler in 1869, that the use of an inconvertible paper currency is a potent remedy for all financial diseases which beset a nation.^ II. THE GREENBACK THEORY. Until after the passage of the resumption act, there was no organized movement in favor of a permanently irredeemable currency. General Butler did indeed con- tend, in January, 1869, that a paper currency interchange- able with interest-bearing bonds might be stable in value and elastic in volume, without redemption in coin ; but the dangerous suggestion went out on the winds and no ^ Congressional Glohe^ January 12, 1869, p. 309. THE GREENBACK THEORY. 9 audible response came back. It seemed that the Ameri- can people, instructed by the experience of their ancestors and by the history of other nations, were too enlightened to entertain a project so many times tried and found wanting. Their representatives in Congress laughed at General Butler’s certificates of value,” exchangeable for other pieces of paper, which in turn were to be pay- able in the original certificates. His juggling bill, pro- posing to create value by a hocus-pocus of worthless cer- tificates and equally worthless bonds, did not receive the compliment of a vote. In March, 1869, Congress passed ^^an act to strengthen the national credit” — an act de- claring in substance the doctrine, afterward affirmed by the Supreme Court, that in the laws of the United States a dollar is not an abstract term, but means always 25.8 grains of gold, or 41 2|- grains of silver, nine-tenths fine. The bonds promising to pay dollars, the act said, must be paid in dollars of this kind, and the faith of the United States was also solemnly pledged to make provision at the earliest practicable period for the redemption of the legal-tender notes in coin.^ The next year, when the funding bill was before the House of Representatives, General Butler had so far changed his mind that he favored the payment of the new bonds in coin, declared that the taxes were dis- counted in the rate of interest and the bonds should be exempt from further taxation, and offered an amendment calling for the payment of the people’s currency, the greenbacks, in coin.” ^ The funding bill passed the Sen- ate, 33 to 10, and the House, 128 to 43. It had previous- ly appeared that a considerable number of the citizens of ^ Revised Statutes, § 3693. 2 Congressional Glohe^ June 30, 1870, pp. 6019, 5024; July 1, p. 10 PAPER MONEY. the United States favored the payment of the bonds in depreciated paper ; but this was believed to be only a temporary aberration. It was, in fact, a premonitory symptom of that fatal delusion from which no people wholly escape after any wide departure, in their daily transactions, from a just standard of values. It is the alchemist’s dream of modern times, that by some cunning trick of legislation value may be imparted to a material in itself valueless. It can never be done ; out of nothing comes nothing ; but the spectacle of a shifting standard of value always breeds confusion in men’s minds, as surely as their brains begin to v/hirl when they look down a dizzy height. When the resumption act was passed in 1875, a presi- dential contest was already impending. The election of 1872 had apparently settled the question about the pay- ment of the bonds. The new question, about the pay- ment of the notes, presently emerged. On May 18, 1876, a national mass convention was held at Indianapolis, and demanded the immediate and unconditional repeal of the resumption act. This was the beginning of the Indepen- dent Greenback movement. On June 28, 1876, the na- tional Democratic convention met at St. Louis, and de- nounced the resumption act as a hindrance to resump- tion.” General Ewing, of Ohio, objected to this phrase, and offered an amendment simply demanding the repeal of the act. The amendment failed, 219 to 550. Almost a third part of the convention was even then in sympathy with the Greenback movement. In November, 1876, the nominees of the Indianapolis convention, Peter Cooper, of New York, and Samuel F. Cary, of Ohio, received 81,737 votes in twenty-four states, the least number being 44 in California, and the greatest 17,233 in Illinois. In 1877, the new party was industriously perfecting THE GREENBACK THEORY, 11 its organization throughout the country, and on Febru- ary 22, 1878, twenty-eight states were represented in a national convention at Toledo, where a new platform was carefully elaborated, and the party was styled the l^ational party, though the name Greenback still clings to it. How rapidly the new doctrines have spread may be seen by a glance at the growing vote in a conservative New England state, where in 1875 the resumption act was welcomed with universal acquiescence. In 1876, Maine gave Peter Cooper 663 votes ; in 1877, the Greenback candidate for governor received 5,291 votes ; in 1878, the new party has elected two congressmen and polled a vote of 41,404 for governor. The Greenback theory, at first nebulous and obscure, has been gradually defined, in the process of discussion, and may now be formulated in six propositions : 1. There should have been no interest-hearing debt. The expenses of the war should have been paid in legal-tender treas- ury notes. 2. Such notes, receivable for all dues, public and private, would have circulated at par with gold and silver. The legal- tender notes which were issued went below par because they were not receivable for customs. 3. As the legal-tender notes in which the debt was expressed, when it was contracted, were depreciated, the attempt to pay the debt in a currency of full value is unjust to the tax-payers. 4. It is necessary, therefore, to give up the attempt to resume specie payments ; to make our paper currency receivable for all dues ; and to pay off the bonds in paper and stop the accumula- tion of interest. 5. This increase of the volume of currency will raise prices; but if they are raised uniformly, business will adjust itself to the new level, and no harm will be done. 6. It is the fall of prices which brings disaster. After the level 12 PAPEE MONEY. is established, fluctuations may be prevented, either by regulating the volume of currency by the census, so much jper capita ; or by the automatic action of an interconvertible bond at a low rate of interest ; or by a combination of both methods, fixing the total issue by the census, and allowing the amount in circulation to adjust itself to the wants of trade through the agency of the inter- convertible bond. The naked proposition for 1880 is the repeal of the resumption act. The opposition cannot control two-thirds of both houses of Congress, and the President’s veto will protect the act until after the 4th of March, 1881. Un- til that time, the discussion will continue ; and it is evi- dent that General Butler’s extraordinary canvass in Massa- chusetts was planned for the purpose of making him the National Greenback candidate for president. Although the resumption act is the pivot of the dis- cussion, the whole subject of paper money is involved ; and there is but one way in which any satisfactory con- clusion can be reached. Abstract speculation is unscien- tific and childish ; the experience of other times and other communities must guide us. It is the condition of prog- ress, that we shall not forget the errors and repeat the mistakes of former generations. III. THE CONTINENTAL CUERENCY. The Greenback theory asserts, first, that the expenses of the war should have been paid in treasury notes. That experiment was tried by our ancestors during the war of the Revolution, with a result to which General Butler re- ferred in a speech at New Haven, August 20, 1878. On THE CONTINENTAL CURKENCY. 13 that occasion he made three separate statements, which ought to be considered together. He said that the Conti- nental currency performed a great service for the colo- nies ; that it was wise to repudiate that currency, when it became depreciated ; and that we ought to issue more greenbacks now. This means, and can only mean, that General Butler is willing to see the greenback currency follow the Continental currency into discredit and ulti- mate repudiation. Let us see what the experience was, which he invites us to repeat. The colonies had received a severe lesson in the matter of paper money, before the Revolution. In 1749 the old tenor-paper issues in New England were — Massachusetts. . New Hampshire Rhode Island. . . Connecticut . . . . £2,466,712 450.000 550.000 281.000 In 1750, Massachusetts redeemed her whole issue at the market value in coin, which was about nine per cent., and resumed specie payments, earning thereby the desig- nation of the silver colony.” The result was that trade revived, shipbuilding increased, and the fisheries, which had been declining, began to prosper. Connecticut un- dertook to contract her currency gradually. Rhode Isl- and went on expanding, and the West India trade slipped away from Newport to Salem and Boston. In 1774 Mas- sachusetts was out of debt. In 1775 representatives of the New England colonies met to consult on the prospect of war with the mother country, and it was agreed that the Rhode Island and Connecticut paper, which was all the money they had, should be allowed to pass in Massa- chusetts. This was the condition of New England, when the 14 PAPER MONEY. representatives of all tlie colonies, in the same year, as- sembled in the Continental Congress. This Congress might invite contributions from the colonies, but had no power to require the payment of a tax. The members had been accustomed to paper issues. It is a singular proof of the plausibility of the theory of paper money, that Franklin, in spite of his strong common sense, was fully persuaded that paper issues upon the faith of the Continent would be equivalent to gold or silver. The first issue, in August, 1775, was for 300,000 Spanish dol- lars, redeemable in three years. It was contended that the colonies must consent to taxation, but this suggestion was silenced with the reply that it would be wicked to tax the people when the Congress could get money by the cartload from the printing office. It was argued too, just as the advocates of the same kind of money now argue, that the Continental currency was the safest that could be devised, because there was no danger that it would be exported. So the ^‘American system of finance” v/as inaugurated. By 1776, the Continental currency amounted to $9,- 000,000, and began to depreciate. The Congress passed harsh measures to sustain the credit of the bills, but to no purpose. Committees of safety undertook to punish tradesmen who refused to sell their goods for what was considered a fair price. All in vain. The issues con- tinued to multiply and to depreciate, until, in 1779, over $350,000,000 had been issued, and the whole amount was worth not more than $7,000,000 in coin. Coin had com- pletely disappeared. The Congress knew not how to pro- vide for the army, and began too late to call on the colo- nies for taxes. The French alliance saved the colonies from destruction, not so much by military aid as by ena- bling them to procure loans in Europe so as to continue THE CONTINENTAL CURRENCY. 15 the struggle. In the spring of 1780, the bills were worth only two cents on the dollar, and ceased to circulate. This was the darkest period of the war, the spring after the memorable winter at Valley Forge ; but it was tho dark- ness that precedes the dawn. Specie came into circulation gradually as the bills disappeared ; and in October, 1781, Cornwallis surrendered at Yorktown, and the war was over. It is evident that the Continental currency did not save the colonies, as General Butler pretends, but came near betraying them to their destruction. If it had pre- served the republic, it would have been at a cost of pri- vate wrong which nothing but the exigency of war could excuse. It is proposed now to try the same plan in a time of profound peace. Let us see first how the earlier ex- periment affected private interests. Maine, during the period from 1775 to 1780, was a part of Massachusetts, and Parson Smith’s diary, at Fal- mouth, is as good a contemporary record as can be found.' Here are some extracts : 1778. October 30 . — It is a melancholy time upon many accounts. Lawful money is reduced to be worth no more than old tenor. Creditors don’t receive an eighth part of their old debts, nor min- isters of their salaries. 1779. January 28 . — Congress have called in fifteen millions of their dollars by way of tax this year ; two million dollars is the part of our state. ^ The Rev. Thomas Smith was the first regularly ordained minister in Falmouth, afterward Portland. He graduated at Harvard College in 1720, and was pastor of the first parish at Falmouth from 1727 until he died, in 1795. His journal was begun in college, and continued until he was eighty-six years old. It was first published in 1821, and is a standard authority on all matters of local history. 16 PAPER MONEY. « April 1. — There is a grievous crj for bread in all the seaport towns, and there is but little meat and no fish yet. April 7. — Indian meal is sold at 30 dollars a bushel. April 27, — I hear wood is 52 dollars a cord in Boston, and flour at £50 per hundred, i. e., a barrel is more than my whole salary. May 8. — Corn is now sold at 35 dollars a bushel, and coffee at 3 dollars a pound. June 1, — ^Molasses is raised to 16 dollars; coffee, 4; sugar, 3. June 10 . — A man asked 74 dollars for a bushel of wheat meal. June 11, — Green peas sold at Boston at 20 dollars a peek ; lamb at 20 dollars a quarter ; board, 60 dollars a week. June 17. — We bought three pounds of halibut for a dollar. August 23. — We bought a pound of tea at 19 dollars. November 15. — Parish meeting about salary. Voted to do nothing. 22d. — Captain Sanford brought me 400 dollars, gath- ered by subscription. December 23. — Wood is 70 dollars a cord ; coffee, 8 dollars a pound. 1780. March 2 ^. — Young Mussey asks 500, i. e., above £1,100 for a hat ; laborers, 30 a day. October 2 , — The Tender act repealed lately. 1781. August 18. — Wood is at 2 dollars a cord; never so cheap. 22d. — There is only hard money passing, and little of that. Parson Smith was now nearly eighty years old, and Mr. Deane had been employed as his colleague. Mr. Deane also kept a diary, by which it appears that the price of a pound of tea in 1773 was $1. In 1779, when Parson Smith paid $19 for the same luxury, it was really much cheaper, as a dollar in silver was then worth twenty- nine dollars in currency. In May, 1781, Mr. Deane made a journey to Boston. On his way up he paid £4 16^. O. T. for his ferriage at Portsmouth ; on his return he paid a pistareen in silver at the same place. o THE CONTINENTAL CURRENCY. 17 This confusion was the golden opportunity for specu- lators. Laborers received $30 a day, but it took more than two days’ work to pay for a cord of wood or a bushel of corn meal. There are few families which have not kept some traditions of losses at that time. A lady in 1779, for example, complained through the public press, that her guardian, having invested her fortune six years before in real estate, had kept the land and paid her in legal-tender bills. Pelatiah Webster, in his political essays, published in 1791, says of the Continental cur- rency : ‘‘ If it saved the state, it has also polluted the equity of our laws, turned them into engines of oppression and wrong, cor- rupted the justice of our public administration, destroyed the fortunes of thousands who had most confidence in it, enervated the trade, husbandry, and manufactures of our country, and went far to destroy the morality of our people.” It is little v^onder that the Federal Constitution, framed in 1787, provided that no state shall emit bills of credit, or make anything but gold or silver coin a tender in payment of debts.” The men of that time had a wholesome distrust of legal-tender paper. Mr. Madison, commenting in the Federalist ^ upon this provision of the Constitution, says : “ The extension of the prohibition to bills of credit must give pleasure to every citizen in proportion to his love of justice and his knowledge of the true springs of public prosperity. The loss which America has sustained since the peace, from the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people, and on the character of republican government, constitutes an enormous debt against the I ^ The Federalist^ No. 44. 18 PAPER MONEY states chargeable with this unadvised measure, which must long remain unsatisfied ; or rather, an accumulation of guilt, which can be expiated no otherwise than by a voluntary sacrifice on the altar of justice of the power which has been the instrument of it.” Nor Y/as it tlie intention tliat Congress should usurp the dangerous power thus surrendered by the states. A proposition to give Congress authority to emit bills of credit was defeated in the Constitutional Convention by the votes of nine states to two. The Supreme Court of the United States, in 1870, declared the present legal- tender act unauthorized by the Constitution. This de- cision was afterward reversed by the questionable, not to say scandalous, method of adding two new judges to the Court, so as to make a majority of one in favor of the law. Yet even then Mr. Justice Bradley took occasion to say of this doubtful authority, that it is “ a power not to be resorted to except upon extraordinary and pressing occasions, such as war or other public exigencies of great gravity and importance ; and should he no longer exerted than all the circumsta7ices of the case demand^ IV. THE FRENCH ASSIGNATS. General Butler says of the Continental currency, that it wanted every element of value, since it was issued by a conglomeration of states struggling for existence, and many of their best people believed that the struggle would end in failure and anarchy.^ Let us, then, take another example. * Congressional Glohe^ January 12, 1869, p. 308. THE FRENCH ASSIGNATS. 19 > At the close of the year 1789 the French nation found itself seriously embarrassed ; there was a heavy public debt and a deficit in the revenue. The situation was worse than the condition of the United States in 1865 ; still it was not desperate. What was needed was only patience, integrity, and economy, public and private. The minister of finance was Necker, a banker of honor- able reputation, a patriotic citizen, and a faithful public ofiicer. He gave the French Assembly the same advice which Secretary McCulloch gave the American Congress in 1865 ; the same advice which honest men at all times have given to individuals, corporations, and nations : Live within your income, and keep your agreements.” The National Assembly and a few newspapers began then, as the American Congress and some American news- papers began in 1865, to mutter about securing resources without paying interest.” On the 19th of April, 1790, the finance committee of the Assembly reported that the people demand a new circulating medium,” and before the end of the month the first issue of assignats^ amounting to 400,000,000 francs, was decreed. The assignats were receivable for the vast real estate of the French church, which had been confiscated by the nation, and was worth about 4,000,000,000 francs. The notes also bore interest at three per cent. No currency, irredeemable in specie, was ever more carefully guarded. It was argued that the interest would cause the notes to be hoarded, and that when the currency became redun- dant, it would be invested in the public lands. The current now began to move with a force which few public men could withstand. In five months, there was a cry for more money, and even Mirabeau, who knew better, favored a new issue of 800,000,000 francs in assi- gnats, When this measure was carried, Necker resigned 20 PAPER MONEY. and retired to Switzerland, as McCallocli afterward re- tired to England. It is the first step that costs. During the next six years 45,000,000,000 francs in assignats were issued upon the se- curity valued originally at 4,000,000,000 francs. The price of the paper declined steadily as the volume increased. In February, 1796, a franc in gold was worth 288 francs in paper ; sugar was 500 francs a pound, soap 230 francs, candles 140 francs. Wages alone had not risen ; the manufactories were closed ; the people were starving ; a few speculators were rolling in luxury. When the paper began to depreciate, Prudhomme said in his newspaper : Coin will keep rising until the people have hung a bro- ker.” Another notion was that English emissaries were depreciating the paper money, as it is now pretended in this country that Ernest Seyd had a hand in the demon- etization of silver. Marat asserted that death was the proper penalty for unpatriotic Frenchmen who hoarded gold. A superstition gained ground among the people, that if only enough paper money was issued, the poor would somehow become rich. It was declared that the experience of other nations was no guide for the enlight- ened inhabitants of France in the eighteenth century. A committee of the Assembly reported that they had found the amount of the circulating medium before the Revolu- tion actually greater than the volume of assignats^ which therefore could not be redundant. Laws were passed punishing people for buying gold, forbidding foreign in- vestments, confiscating the property of Frenchmen who went abroad, regulating the prices of goods. All to no purpose. The assignats went steadily down, and when the attempt to maintain them by law was finally aban- doned, they were found to be almost exclusively in the hands of the working people and men of small means. In THE FRENCH ASSIGNATS. 21 July, 1796, it was decreed that bargains should be made in whatever currency the people chose, and straightway the whole vast issue became visibly and irremediably worthless. The contraction ” was the work of a single day. Coin, which had quite disappeared, came to light as if by magic, and in another year the industries of France had revived and prosperity was slowly returning. It is not probable that this famous chapter of financial history is about to be rewritten in the United States ; but the same sophistry, which misled the French people, is heard in Congress and repeated by a portion of the press. ^ The French demagogues inflamed the people against the shopkeepers, who were trying to sell their goods at a price corresponding to the current value of the money in which they dealt. On the 28th of February, 1793, a mob of men and v/omen plundered two hundred shops and stores in Paris. When the merchants made complaint at the City Hall, Roux replied that they were only giving back to the people what they had before robbed them of.” In the same way, our American demagogues en- deavor to inflame the popular passion against the bankers, but hitherto with little apparent success. During these seven years the French nation was pow- erful and victorious — powerful enough to depose a French king in 1792, and execute him in 1793 ; victorious over the Prussians in 1794, and the Austrians in 1795 and 1796. But the French finances, through the weakness of the Assembly, were thrown into a confusion which war, famine, and pestilence together could hardly have pro- duced. Bonaparte, like most practical men, had a strong ^ A monograph on the “ Paper-Money Inflation in France,” by Presi- dent White, of Cornell University, contains an instructive sketch of the debates in the Assembly, as reported in the Moniteur. The pamphlet was published in 1876 by D. Appleton & Co. 22 PAPER MONEY. conviction of tlie value of cash payments. Under his ad- ministration, from 1800 to 1815, French credit and indus- try were so firmly reestablished that they bore, without any severe shock, the heavy military expenses and indem- nities exacted when France became the scene of war, and the empire went down at Waterloo. V. OLD TENOR BILLS. In the majority report of the commission appointed by Congress in 1876, to inquire into the change in the relative value of gold and silver, and some cognate mat- ters, Senator Jones goes out of his way to explain the theory of the fiat money school ” of thinkers, as amend- ed after contemplating the Continental currency and the French assignats. They do not want, it appears, paper money based upon gold, silver, or any other fluctuating commodity ; nor upon lands, like the assignats ; nor of any use to the owner except when parted with ; but an absolute money, with a value conferred by the sovereign authority, and resting impregnably upon functions es- sential to civilization and progress.” ^ Our ancestors had a currency which this description precisely fits. When the Stuarts were driven out of England in 1688, the Massachusetts settlers straightway applied to King William of Orange for a renewal of their charter, which had been taken away by King James II. The charter, when it came, incorporated the colonies of Maine ^ Report of the Silver Commission,” IS^Y, vol. i., p. 45. OLD TENOR BILLS. 23 and Massacliusetts into a single province, and the first governor under the new charter, as has often been noted, was Sir William Phips, a native of Maine. From that time until 1820 the Maine counties were subdivisions of Massachusetts, and Maine representatives sat in the Gen- eral Court at Boston. The revolution in England gave a more satisfactory government to the colonies, but it cost them a long war- fare. Catholic France espoused the cause of the Stuarts against their Protestant successor, and the French and English colonies on this continent were involved in the controversy. In 1689 the French and Indians captured the fort at Pemaquid and laid waste the Sheepscot farms. In 1690 they destroyed the settlement at Falmouth, and the whole country east of Wells was abandoned by the Eng- lish. In revenge. Sir William Phips, with seven hundred men, sailed down to Acadia and ravaged Port Royal and the neighboring settlements. Then he fitted out a fleet of thirty-two ships, with two thousand men, to attack Quebec, while a little army of Massachusetts and New York men, under Fitz-John Winthrop, marched overland against Montreal. These costly expeditions failed, and until the peace of Ryswick, in 1697, Massachusetts did but little more than to guard her borders against the prowling enemy. Another French and Indian war began in 1701 and lasted until 1713, and a third in 1742, lasting until 1748. For half a century the men of Massachu- setts and Maine stood upon the defensive. In 1745 a bril- liant offensive operation was conducted by a Maine officer — the capture of Louisburg by Colonel Peperell, of Kit- tery. An expedition was again planned against Quebec, with Louisburg as a base of operations, but the English fleet which had been promised did not appear, and the colonial preparations went for nothing. Louisburg itself 24 PAPER MONEY. was surrendered in 1748, by the treaty of Aix-la-Cha- pelle, to tbe great chagrin of the brave men who, with- out aid from the mother country, had taken that strong post. Of course this warfare was expensive, and while it lasted, the taxable resources of the province were greatly diminished. It was impossible to raise, by taxation, means to equip expeditions against Port Royal, Louis- burg, and Quebec, and our ancestors issued paper money. This was an error of judgment, the more pardonable in their case, because they had been accustomed to a great variety of substitutes for coin. The coin which the first settlers brought over in 1620, and later, soon went back to England for supplies. The first trading with the In- dians was by barter, to which, to some extent, the use of wampum succeeded. Beaver-skins were used as money, and Indian corn was made a legal tender, at the market price, except in cases where there had been an express stipulation to pay in coin or beaver. Corn and other produce were received at prescribed rates, in payment of taxes. At one time, leaden bullets were made a legal tender as the equivalent of farthings." All these substitutes for coin, it will be seen, had an intrinsic value, except wampum, and that, so long as the Indians were willing to take it for furs, was good repre- sentative money. These distinctions, however, did not occur to the colonists ; they had seen shells, lead, skins, and grain performing the office of money ; and they thought, as some people who ought to be wiser now think, that the legal-tender quality was w^hat constituted money, and that this quality might be impressed upon a material wholly without value, like paper. * Palfrey’s “ History of New England,” vol. i., p. 295. OLD TENOR BILLS. 25 So they issued bills, first of all, in 1690, to meet the expense of the unfortunate expeditions against Montreal and Quebec. These bills were the ideal fiat money — without interest, without date of maturity, ^^full legal tender ” for all taxes and imposts. The form of the first issue was this : “ This Indented Bill of £1, due from the Massachusetts Colony to the Possessor, shall he in Value equal to Money; and shall be accepted accordingly by the Treasurer and the Receivers subor- dinate to him in all Public Payments and for any Stock at any time in the Treasury.^ “ Boston in NTew England, February 8d, 1690. ‘‘ By Order of the General Court.” If these bills had been strictly limited to the amount necessary to pay taxes actually levied and collected, they would no doubt have remained at par like our small issue of demand notes receivable for customs. But they were intended to meet the wants of trade ; ” and though the General Court was pleased with this easy way of raising money without taxation, and the colonists generally were glad to be relieved of their taxes, it immediately ap- peared that the bills were not in value equal to money.” The makers imagined that by some turn in the phrase- ology they might overcome this difficulty, and so after a time there came to be four kinds of bills, differing in tenor and date, and distinguished as old tenor, middle tenor, new tenor first, and new tenor second, but all de- preciated in different degrees. Silver completely disap- peared from circulation. The following table gives the ^ Prof. Sumner understands by “ Stock,” corn or other produce taken by the treasurer in payment of taxes, according to the custom then pre- vailing. 26 PAPER MONEY. price of exchange on London in the old tenor currency at - different dates : Tears. Exchange. Tears. Exchange. 1702 133 1728 340 1705 135 1730 380 1713 150 1737 600 1716 m 1741 550 1717 225 1749 1,100 1722 270 The great depreciation between 1741 and 1749 was occasioned by the large emission of already inflated paper, on account of the Louisburg expedition in 1745. In 1749 it took £1,100 in the colonial currency to buy £100 in silver. The amount of Massachusetts paper then in cir- culation was £2,466,712, worth, at this rate, about £223,- 000 . In 1748, the British Government appropriated £183,- 649 to repay the expenses of the Louisburg expedition, and the General Court, under the lead of Governor Hutch- inson, then Speaker of the House, appropriated that sum, except £16,000 which belonged to New Hampshire, to the purchase of the paper currency at its market value. A tax was levied to make up the deflciency. The act was passed in December, 1748, and was to take effect April 1, 1750. The money was landed at Long Wharf, in Boston, in the fall of 1749, in 215 chests containing over twenty tons of silver and ten tons of copper coin. At the appointed time, the bills were called in and the silver was issued, contracting the currency ninety-one per cent, in a single day, with only fifteen months’ notice. This was heroic practice, but the colonists had discovered the source of their trouble, and were determined to re- store order to their finances and to secure a currency with a stable value, from which they did not again depart un- OLD TENOR BILLS. 27 til tlie Continental currency was forced upon them by the exigencies of the Revolution of 1776. There were no daily papers in those days, but the diary of Parson Smith, already quoted, give?^ some in- structive hints concerning the distress :occJ^ioned by the depreciation of the currency. ^ In current money, was at first £100, and -adVanced £l60 in 1733, £200 in 1735, £230 in 1736,, £265 1 743;. £15t)^new tenor in 1747 in lieu of £400 ojd Whor, £600 in^7,74B,; £6^^ 1749, and £700 in 1750, though' o parishioners wanted to make it £800. The, dargef sum would have been worth only about £75 in silver, and his salary was afterward reduced to that figure. Beginning in 1737, when the rate of exchange was already 5 to 1, the diary contains the following passages bearing upon this sub- ject : 1737. January 3 , — There is no wood, little corn ; and complaints everywhere. March SO,— All the talk in Boston is about the mob that pulled down the market. June — Corn is 10^. a bushel in Boston ; hardly any to be got. Movemler 18 . — There has been a distressing time in Boston for want of bread ; but the night before Thanksgiving, 1,500 barrels of flour was brought in, which reduced the price from 65^. to 55s. a hundred. 1741. January 10 . — There has been for some time a melancholy scarcity of corn. May 4 . — Pretty many families on the Penobscot live wholly on the clam banks. May 15. — Mr. Jones sells his corn at 15s. a bushel. It is 14s. in Boston. People groan terribly at the price. 28 PAPER MONEY. 1742. November 2 , — Beef is now sold in this town at per pound, and other provisions extravagantly dear. June IJf. —Mr, Waldo came to town with an execution against Colonel Weglhro(»k, 'fov*£10,500 and charges. . ,/ " ' im January 9 . — The difficulties of living daily increase ; unright- eousness and oppression are hrbaking out like a deluge. There is no standard ^w hut^evbjy man is getting what he can. January 10 , — The prices. "of the necessaries of life do daily monstrously increase. May 20 , — Indian corn is now 30^. a bushel ; flour £10 a hun- dred. 1749. February Jf . — Major Freeman came home from the General Court, and brought with him the new act for drawing in all the paper currencies by the exchange of silver. 1750. April 2 . — This day the Province treasury is open, and silver is given out for our province bills, which now cease to pass. This is the most remarkable epoch of this Province. Its affairs are now brought to a crisis. May 25 , — Rode to Boston. It is a time of great perplexity and distress here, on account of the sinking of the paper currency. Thei^e is a terrible clamor and things are opening for the extrem- est confusion and difficulties. The merchants, shopkeepers, and others in Boston, having for some years past got money easily and plentifully by the abundance of that fraudulent and iniqui- tous currency, and abandoned themselves to the utmost extrava- gance and luxury in all their way of living, are now in a sad toss and make outrageous complaints at the stop put to it by the late act. Here is a picture in miniature of every e-xperiment in the use of irredeemable paper since that fraudulent and OLD TENOR BILLS. 29 iniquitous currency ” was invented. It was an era of speculation. The farms were neglected for the tempting but delusive profits of trade. Actual scarcity came to exaggerate the inevitable advance of prices. The market- men were believed to be taking advantage of the necessi- ties of the people, and the market house in Boston was torn down by a mob. Colonel Westbrook was ruined by land speculation, and was completely broken down by his misfortunes ; he died insolvent in February, 1744. The merchants and shopkeepers realized fabulous profits, in paper, by the steady rise of prices, and fell into extrava- gant habits of living. When the end of it all came, as come it must, since no such system of fictitious and ir- regular valuation can be permanent, the profits shrank and shriveled like the devil’s paper in which they were reck- oned. No circumstance of our recent experience was want- ing. It was even believed, by some foolish people, that the contraction was planned by the rich in order to increase the value of their hoarded silver, though the silver would buy no more goods after resumption than before. Willis ^ reports that riots took place in Boston and in other towns on this account. These fancies, he adds, “ all yielded to the steady and salutary progress of a sound currency, which, like the light and dew of heaven, diffused its blessings alike on rich and poor ; and in a few months the people came to entertain an unconquerable aversion to paper.” 1 “ History of Portland,” p. 447. 30 PAPER MONEY. VI. THE BAOTC OF VEmCE. The first and second propositions of the Greenback theory are not sustained by the examples given ; but it is alleged, in reply, that the circumstances were unfavorable to these experiments, and that the receipts of the Bank of Venice, for a perpetual loan to the government in 1157, answered all the requirements of the theory, being issued by the established government of a wealthy state, embar- rassed by no promise of payment in gold or any other merchandise, and encumbered by no reserve of coin. These receipts, it is said, circulated as absolute money, at par with gold and silver or at a premium, but never below par, for six hundred years, until Bonaparte destroyed the Venetian republic in 1797.^ To dispose of this representation, it is only necessary to turn to the encyclopasdias.^ The Bank of Venice was the first of the great public banks, like the Bank of Eng- land, the Bank of France, and the Bank of the United States. At the beginning it was not a bank at all. The state was in financial difficulties, and levied a forced loan upon the people, promising them interest at the rate of four per cent. The stock was made transferable, and a body of commissioners, called the Chamber of Loans, was appointed to manage the transfer of securities and the payment of interest. This was the first example of a per- manent national debt, funded in interest-bearing securi- ties. These securities, though transferable, were not cur- rency. They were the exact counterpart of our interest- ^ Speech of E. M. Boynton, of New York, at Portland, Maine, August 28 , 1878 . 2 See^ for example, ZelPs “Encyclopedia,’^ article “Banking.” TEE BANK OF VENICE. 31 bearing bonds. The Greenback orators do not know it^ but we have the Bank of Venice, under its original plan, in full operation. The interest upon the Venetian debt was paid regu- larly in coin, just as the interest has been paid upon the bonds of the United States. It followed that the bonds of Venice were in high credit, as are the bonds of the United States. This circumstance suggested an extension of the usefulness of the bank — if it can be called a bank at that time. Several centuries after the establishment of the Cham- ber of Loans, it happened that many foreign coins were in circulation in Venice. Venice was a centre of com- merce, and all the clipped and worn coinage of the world came pouring in there, to the great inconvenience of mer- chants. The state, in order to meet this difficulty, au- thorized the Chamber of Loans to receive on deposit, by weight, coins of all sorts, and to issue notes promising to pay an amount of bullion corresponding to the real value of the deposits. These notes promised to pay to the bear- er, on demand, a definite quantity of bullion, of the proper fineness. The notes saved the wear of coin in actual cir- culation, and, as they promised to pay a specific weight of the precious metals, they insured a uniform standard in mercantile transactions. They were, of course, at a premium in the debased currency which was used for or- dinary transactions, and they remained in good credit until the fall of the republic in 1797. This is precisely the kind of currency which we are going to have in this coun- try after the 1st of January next. Some confusion has arisen concerning the management of the Bank of Venice, on account of the different func- tions which it performed at different times. As first or- ganized, it was simply a government office for the collec- 32 PAPEK MONEY. tion of a forced loan and the payment of interest there- on. From this circumstance has risen the impression that the deposits could not be withdrawn. Long afterward, the bank issued certificates of deposit, secured by actual specie on hand, and payable on demand, and these certifi- cates passed current at a uniform value. VII. JOHN law’s legal-tender notes. It was not the Bank of Venice but the Bank of France which first issued legal-tender paper. The Bank of Ven- ice, as has been shown, did not become a bank, in the modern sense, until several centuries after the creation of the Chamber of Loans. The Bank of Genoa went into operation in 1407. The Bank of Amsterdam was estab- lished in 1609 ; the Bank of Hamburg in 1619 ; and the Bank of Stockholm in 1668. The Bank of Stockholm was the first to issue bank-notes, though the certificates of deposit issued by its predecessors answered a similar pur- pose. The difference was, that the notes represented the credit of the bank, while the certificates represented the property of the depositors. The Bank of England was founded in 1694. The Bank of Amsterdam, like the Bank of Venice, was established to receive clipped and worn coin, for the value of which, by weight, the certificates were issued. The bank professed to keep on hand every ounce of the pre- cious metals so deposited, but when the French occupied Amsterdam in 1796, it was found that five millions of dollars had been secretly lent to Holland and Friesland, and this discovery ruined the bank. JOHN LAW’S LEGAL-TENDER NOTES. 33 To Amsterdam, near the close of the seventeenth cen- tury, came an adventurous young Scotchman, who spent some time in closely observing the operations of the Dutch bank. J ohn Law of Lauriston was the sOn of an Edinburgh goldsmith, who, like most goldsmiths in that day, was also a banker, dealing not only in gold and silver ware but in coin, and receiving the precious metals on deposit. John Law, born in 1671, was an excellent math- ematician and accountant, and while still a youth was em- ployed by the Scottish government to bring the accounts of the revenue into order. After his father’s death, he lived for a time in London, and fled to Holland in conse- quence of a duel in which he killed his adversary. In 1701 he returned to his native country and published his Proposals and Reasons for establishing a Council of Trade in Scotland.” The result of his observations of the sources of public revenue and of the new plan of is- suing notes on credit, was a conviction that wealth con- sists of ready cash, and that paper money is as good as any. He proposed, therefore, to establish a land bank,” and issue notes representing the value of all the lands in the kingdom. In 1705 he published a treatise on “ Money and Trade,” setting forth the same opinions with great ingenuity ; but the cautious Scotch Parliament refused to entertain his scheme, and he drifted away again to the Continent, where he led a roving life, and is said to have acquired a fortune in gambling. Meanwhile, in 1711, the South Sea Company was formed in London, for the purpose of funding the float- ing debt of the government, then amounting to about £10,000,000. The government agreed to pay six per cent, for the money, and furthermore granted to the com- pany a monopoly of the South American trade, concern- ing which fabulous stories were told. No attempt was 34 PAPER MONEY. I made to develop this trade. The South Sea stock was what is now called a fancy stock, to the end of the chap- ter. The company were so-successful in placing the <£10,- 000,000 that in 1720 they undertook to assume the en- tire national debt of £31,000,000 at five per cent., and the consent of Parliament was granted in April. A period of wild speculation followed. In August the shares were quoted at ten times their nominal value, and then came reaction, investigation, the discovery of an over-issue of £1,260,000 of stock, which had been corruptly used to secure the passage of the bill through Parliament, and finally an adjustment and winding-up of the affairs of the company. While all this was going on in London, John Law was managing a similar scheme in Paris. He had opened a private bank at the French capital in 1716. The Bank of Stockholm, the Bank of Hamburg, and the Bank of England were then the only banks issuing notes. Law established a bank of issue, and was so prosperous that in 1718 it was declared a royal bank, by a special edict from the regent, the Duke of Orleans. The public debt of France was then about 800,000,- 000 francs. As soon as the bank became a public insti- tution, the regent ordered notes to be printed to the amount of 1,000,000,000 francs. The project was formed of paying off the debt in bank-bills. So long as the volume of currency was increasing, business was greatly stimula- ted, prices advanced fourfold, wages increased, the looms were busy, a delusive prosperity appeared, but gold and silver disappeared from circulation. In the course of sixteen months bills amounting to more than 2,000,000,- 000 francs were issued. All taxes were collected in paper, which was made a legal tender for payments of every kind, and bills as low as ten francs were printed. JOHN LAW’S LEGAL-TENDER NOTES. 35 # In imitation of the South Sea bubble, Law had al- ready devised the Mississippi scheme. His Company of the West was formed in 1717, and had secured the exclu- sive privileges of farming the taxes, coining money, and trading to the Mississippi. In 1719 Law was made comp- troller-general of the finances, and secured for his com- pany the monopoly of trading to the South Seas, the East Indies, and China. The name was changed to the Com- pany of the Indies, and 50,000 new shares were issued, for which there were at least 300,000 applicants. Law was noAV at the height of his brief glory. His house was daily besieged by visitors of all ranks and both sexes, who waited patiently for hours for an interview with the magician. The city went mad with greed. The exchange opened in the morning with beat of drum and peal of bell, and closed at night upon reluctant throngs of stock- gamblers. The shares rose to incredible prices, but the reserve of coin in the bank steadily slipped away, and none of it ever came back. The crash came in 1720. In February the Company of the Indies and the bank were amalgamated, and Law announced that the bank issues were secured upon shares, the value of which was certain ; but there was a lamen- table scarcity of specie. The bank-notes were made cur- rent through the kingdom, having previously circulated only in Paris and the cities where there were branch banks. An edict forbade the removal of specie from cities where there were mints. Permission was given to the company to search private houses for specie which had not been taken to the mint for recoinage. No person was allowed to keep more than 500 francs in specie or bullion, or to make a payment of more than 100 francs in the precious metals. The penalty for these offenses was confiscation of the treasure, one half to go to the informer, with fines I 36 PAPER MONEY. besides. Citizens were forbidden to leave France with- out a passport, on pain of death, and a passport could only be obtained by showing that no considerable sum of gold or silver was to be taken away. It was the paper currency which was driving out the coin, but between February 1st and the end of May 1,500,000,000 more of paper francs were printed. On May 21st, the regent, in spite of Law’s protesta- tions, published an edict reducing the value of the notes and providing for a new issue into which the outstanding bills should be converted. The coin had previously been treated in the same way ; the value of the livre had been changed fifty times in four years, and the metallic cur- rency had as often been called in for recoinage. The bills instantly stopped circulating ; business ceased ; the bank stopped payment in July ; the Mississippi shares ran down to 24 ; and Law fled from the country which he had ruined. He died at Venice in 1729, firmly per- suaded that his system was sound, and that its complete success had been prevented by the foolish interference of the regent. An edition of his works was published in Paris in 1790, and his idea of a land bank was then car- ried into effect by the French Assembly which created the assignats. It was then demonstrated by a second ex- periment, upon a gigantic scale, that wealth is not in- creased by increasing the volume of money ; and that paper money will not maintain itself at par with coin, unless it is convertible into coin at the will of the holder. Law’s theory is briefly stated by the French historian, Henri Martin, in these words : Law thought the state should generalize systematically what, is done instinctively among private individuals, and should do what private individuals cannot do ; that is, create money by im- printing the hill of exchange with the stamp of public authority. THE DEMAND NOTES OF 1861. 37 “ Money is the basis of commerce. To multiply money is to multiply commerce. The precious metals cannot he multiplied at pleasure; it is necessary to buy them of the owners of the mines. Paper can be multiplied at pleasure by the state in pro- portion to its needs, and the quantity of money can thus always be made equally approximate to the demand. Every emission of paper, by increasing the money of the nation, will increase its commerce, wealth, and power. “ The consequences of this innovation will be not only the increase of the general wealth of the country, but an internal revolution in society ; the high interest of money proceeding from its scarcity, the multiplication of money will lessen usury and secure the state and private individuals from the impositions of monopolizers of specie. “ The financial organization of the state is false. The state takes, and does not restore ; borrows, and does not lend ; con- sumes, and does not produce. The state should assume an en- tirely new form. It should give credit, and not receive it — it should become a banker.” After a hundred and fifty years, these crude fancies, twice dissipated by actual experiment in France, have again risen, like a fog, upon our American horizon. VIII. THE DEMAND NOTES OF 1861. From time to time the Greenback speakers and wri- ters have mentioned somewhat vaguely, as is their cus- tom, certain treasury notes, issued during the civil war, which, being a full legal tender,” were and remained as good as gold. The phrase, a full legal tender,” means that the notes were receivable for customs, as well as for other dues to and from the Government, and for private debts, and it is contended that, under like conditions. 38 PAPER MONEY. other notes would remain at par, although not payable on demand in coin. The logical assumption is here involved that these notes were irredeemable ; that they were a legal tender for the payment of private debts ; and that there were enough of them to supply the circulation needed by the business of the country. If the parallel fails in any of these particulars, it fails to support the conclusion that such notes as the Greenback party now wishes to issue would remain at par with gold. The parallel does fail at every point. The notes were demand notes, payable in coin ; they were not a legal ten- der ; and there were only $60,000,000 of them altogether. These notes were issued under the act of July 17, 1861, authorizing the secretary of the treasury to bor- row ” for the immediate necessities of the Government $250,000,000, for which he was to issue bonds or treas- ury notes. As a part of the above loan,” the secretary was permitted to issue in exchange for coin, or to pay for salaries or other dues, not over $60,000,000 in treasury notes “ not bearing interest but payable on demand ” by the assistant-treasurers of the United States at Phila- delphia, New York, Boston, St. Louis, or Cincinnati. The act provided that such notes might be reissued until December 31, 1862, when the power to reissue them was to cease and determine. This temporary provision for the urgent needs of the Government was made in July, 1861, at the extra session of Congress. On the 30th of December, 1861, the banks suspended specie payments, and the treasury was forced to follow their example. Up to that time, the demand notes of the Government had been as good as gold. Af- ter the suspension, they became discredited, and the banks refused to take them on deposit. TEE DEMAND NOTES OF 1861. 39 In February, 1862, Congress adopted a financial sys- tem recommended by Secretary Chase. It was decided to issue $150,000,000 of United States notes not bearing in- terest, of which $60,000,000 AYere to be in lieu of the demand notes previously issued, which were to be taken up as rapidly as possible.” The new notes were the legal tenders which have now been in circulation for sixteen years. The six per cent, bonds were authorized at the same time. To give them some stable value, the interest was made payable in coin. To provide a market for them, the national banking act was subsequently passed. To provide for the interest payments, the customs dues were required to be paid in coin. The demand notes of 1861 were receivable for all dues to the Government, and continued to be received for customs. The depreciation of the legal tenders began at once. In October, 1862, they were worth only seventy-two cents on the dollar. If they had been receivable for customs, they would still have depreciated. But, as the customs Avere payable in coin, and the small issue of demand notes was also receivable for customs, it followed, of course, that the demand notes, for this purpose, were as good as gold. If there had been more than enough to pay the duties, they would have gone down with the mass of irre- deemable paper. It was only the two facts that the duties were payable, with this exception, in coin, and that the issue of demand notes was small, that kept them at par. They disappeared rapidly. Here are the treasury re- ports at different dates : Demand Notes outstanding. July 1, 1862 $63,040,000 Sept. 30, 1863 2,022,1'73 June 30, 1864 '780,999 June 30, 1865 4'72,603 June 30, 1878 62,297 40 PAPER MONEY. 4 They were mostly paid in for customs duties in 1862, it appears, and the authority to reissue them would have ceased with the close of that year, even if the secretary had not been directed to take them up as rapidly as possible. What this example proves is — 1. That Government notes redeemable on demand in coin are as good as coin. The demand notes were as good as gold until after the suspension, in December, 1861, and were then temporarily discredited. 2. That if taxes and imposts are generally payable in coin, a small amount of Government notes, receivable for dues to the Government, will remain at par, although not redeemable on demand in coin. This is, in fact, an indi- rect way of redeeming them. It is as if the Government should pay the tax-payer coin for his notes, and then col- lect the coin for his taxes. 3. That the legal-tender quality of a paper currency has no effect upon its value in the marhet. The demand notes, which remained at par, because they were indirect- ly redeemable, were not originally a legal tender. The legal-tender notes were the very ones which depreciated. It was a mistake to declare our paper currency a legal tender, and a mistake which we shall not repeat in time of peace. IX. THE ]SrATIO:N^AL CKEDIT. The third proposition of the Greenback party is ex- pressed by Mr. Wendell Phillips in the aphorism, Re- sumption changes, by statute, the relations between cred- itor and debtor.” * Unlike the first and second proposi- ^ North American Review^ July-August, 1878, p. 104. THE NATIONAL CREDIT. 41 tions, this is partly true. The purchasing power of our currency was greatly diminished by the enormous issues of paper during the war. Property has not shrunken since 1865, but the dollar has grown — that is to* say, it has returned to its normal value. This was inconvenient for debtors, no doubt ; but it was better for the country. Mr. Phillips appears to think that we might have kept the 70-cent dollar forever ; that by some contrivance, which he does not describe, v,^e might have prevented that dollar from changing, and so might have avoided all the incon- venience of coming back to the dollar defined by the laws, worth 25.8 grains of standard gold. The whole controversy turns upon this point. Those of us who believe that a resumption of specie payments is essential to the prosperity of the nation, hold that opinion because, in the history of civilization, we find no example of an irredeemable paper currency which had any stable, permanent value. Assignats^ old tenor bills. Continental bills, they have all alike gone down, down to public bank- ruptcy, and have drawn down private fortunes with them in general ruin. The alternative was not whether we should retain an arbitrary and fictitious measure of value, or strive to restore it to the original standard ; it was whether we would bring our currency back to its nominal value, or suffer it to go out in utter worthlessness. If we had made, or should now make, the latter choice, it would be followed by public and private distress, such as, in this generation, has not been seen. But there are compensations for the inevitable losses attending a restoration of the normal standard of value. It is true that the debt was contracted in a depreciated currency. The war had shaken our national credit, and we were only able to borrow depreciated dollars by promising to pay good ones. We did so promise ; we are 42 PAPER MONEY. abundantly able to keep the promise ; and we don’t mean to go into national bankruptcy in order to save money by a rascally failure. If the payment of the principal of the debt in good money is a hardship, it is alleviated by a great reduction of the burden of interest, and that reduc- tion is due wholly to the improvement of our national credit by an honest endeavor to meet our obligations fairly. The public debt reached its maximum in 1865, and the statement of Secretary McCulloch, for October 31, 1865, is the starting-point for all statistics concerning the ad- ministration of the finances since the war. To that state- ment, the annual interest calculated at the rates then paid is here added : Principal. $ 830,000,000 @ 1,173, 105, 733 849,861,746 $2,352,957,479 455,591,958 bearing » 7.3 per cent. 6 6.3 no interest. $2,808,549,437 67,158,515 cash in Treasury. $2,741,390,9^ Interest. $ 60,590,000 70,386,344 17,492,687 $148,468,931 The statement published September 1, 1878, by Secre- tary Sherman, with the annual interest at the rates now paid, stands as follows : Principal. Interest. $ 723,553,850 @ 6 per cent. 703,266,650 6 250,000,000 4i 141,850,000 4 14,000,000 8 $1,832,670,500 6.2 468,546,484 bearing no interest. $2,301,216,984 300,002,881 cash in Treasury. $2,001,214,103 $43,413,231 35,163,332 11,250,000 6,674,000 420,000 $95,920,663 THE NATIONAL CREDIT. 43 'Now, comparing these two official statements, it ap- pears — 1. That $520,000,000 of the interest-bearing debt have been paid. 2. That the annual interest account has been reduced from $148,000,000 to $96,000,000 — more than a third. 3. That the average rate of interest has been reduced from 6.3 to 5.2 per cent. 4. That the amount of the debt on which we pay no interest is $13,000,000 more than in 1865. 5. That the amount of cash on hand has been increased from $67,000,000 to $300,000,000. 6. That the net debt, after deducting cash in the Treasury, is $740,000,000 less than in 1865. In other words, we have either paid or have cash on hand to pay one-fourth of the entire debt of 1865. This is not all. The population and wealth of the country have been increasing, while the debt has been di- minishing. The debt was $78.25 per capita in 1865, and $41.67 in 1878 ; the annual interest was $4.29 capita in 1865, and $1.97 in 1878.^ And meanwhile our paper dollars, worth seventy cents in 1865, have advanced to par. The Government, at the close of the war, was in the condition of a wealthy corporation which has met with great and sudden losses, and has been compelled to use its credit to the utmost to procure ready money. The rules which have guided the financial policy of the last thirteen years have been the ordinary rules of business prudence : 1. Meet all engagements punctually and fairly. 2. Improve the credit so earned and maintained, to make better terms. It is because we have paid off $520,000,000 of our maturing obligations, as agreed, that we have been ^ Treasury Statement, September 13, ISYS. 44 PAPER MONEY. able to reduce our average interest rate from 6.3 to 5.2 per cent., and that our demand notes have advanced from 70 to par. The tax-payers have received the full benefit of the saving in interest and of other economies. In his speech at Minneapolis, on the 5th of September, 1878, President Hayes called attention to the fact that the national taxes this year are $247,000,000 less than in 1866, when they amounted to $488,000,000. Nothing like this achievement has ever been known before. In sixty-three years, England has not paid so much of the principal of the English debt as has been paid by the United States in thirteen. Financial jugglers and miracle-workers may promise better results, but the world’s history is full of warnings against their schemes, and they have given us hitherto nothing but the 85-cent silver dollar, which is now the only obstacle preventing the funding of our entire debt at 4 per cent. X. THE RECENT EXAMPLE OF FRANCE. Mr. Kelley, of Pennsylvania, thinks that the manage- ment of the French finances, since the war with Prussia in 1870, has been admirable, which is true ; and that it has been greatly superior to the administration of the American finances, just described, which is not true. In his seat in Congress, and in contributions to the press, Mr. Kelley has asserted that the French method of ap- proaching specie payments has been by pouring out a great volume of paper money, stimulating production, THE RECENT EXAMPLE OE FRANCE. 45 and so securing a revenue and accumulating a reserve of coin without distressing the tax-payers. He does not say that the French debt has been paid, but he speaks of the payment of the Prussian indemnity in such a way, that some of his echoes have affirmed that the public debt of France has been paid off in paper, and this alleged example the American people are invited to imitate. There is but one system of sound finance, and the French system, which Mr. Kelley admires, is precisely like our own. The French Government has borrowed money to meet its maturing obligations, has paid them, principal and interest, in coin, has meanwhile contracted the volume of its paper currency, accumulated a large reserve of coin, and resumed specie payments in January last as we shall resume in January next. The French declaration of war with Germany was made on the 15th of June, 1870. The armistice was signed on the 28th of January, 1871, and was followed by the preliminary treaty of peace a month later. Dur- ing the six months of active hostilities the national debt of France was doubled. By the terms of the treaty an indemnity of $1,000,000,000 was to be paid to Germany v/ithin four years. The French Government had already borrowed, during the war, $573,000,000. The national loan of 1871 brought in $445,000,000 more ; the loan of 1872, $700,000,000. These are net figures. The five per cents of the national loan amount to $1,640,000,000, but they were sold at 83, and other expenses brought the net receipts down to $1,145,000,000. This is the way in which the $1,000,000,000 were raised for Germany. The French Government owes every dollar of the indemnity to-day, and is paying interest Upon it. Furthermore, the debt has been steadily increasing ; the revenue of France is less than the annual expenses ; the debt of France was 46 PAPEK MONEY. ♦ $3,750,000,000 in 1875, and is now $4,696,000,000/ The burden of interest in 1875 was $150,000,000, which is more than the United States had to pay in 1865, and we have since reduced the interest account in this country to $96,- 000,000, while the French have increased theirs. The management of the French currency is also in- structive. The volume of paper in July, 1870, was $251,000,000, backed by a specie reserve of $229,000,000. In August specie payments were suspended and the paper v/as made a legal tender. The volume of paper increased to $442,000,000 in June, 1871, and reached the maximum of $602,000,000 in November, 1873, the specie reserve having meanwhile dwindled to $146,000,000. Then be- gan the process of recuperation. The date January 1, 1878, was fixed for resumption. By November, 1877, the volume of paper was reduced to $491,000,000, and the re- serve had increased to $442,000,000, of which $277,000,- 000 were gold and $165,000,000 silver. The paper rose to par long before the date fixed, and only $20,000,000 of coin were called for when specie payments were resumed. When silver bullion began to depreciate, the French Government ceased to coin silver. The gold standard is practically established, and the French notes are at par with gold. The situation of the United States is in every way better than that of France. France had a heavy debt at the beginning of her war ; we had none. The French debt is twice as large as ours to-day, and it is increasing. The government of a country produces nothing ; it has only two ways to procure money — by taxation, and by ^ “American Almanac” for 1878, p. 406. On p. 801 of this useful manual, prepared by Mr. Spolford, the librarian of Congress, will be found a full account of the manner in which the Prussian indemnity was paid. # CHEAP MONEY. 47 borrowing. The French borrow ; we fax ; it is only by taxation that a debt can be paid. The French Govern- ment last year reported a deficiency of $5,000,000 ; the United States had a magnificent surplus of $31,000,000. Year by year their debt has been increasing ; since 1865 we have paid off $520,000,000 of ours. And yet the* French Government can borrow to-day at three per cent., while we pay four. Why ? Because in France there is no organized movement to damage the credit of the Government, such as we have had here during the last three or four years. Because France, though poor, in- tends to pay and does pay her debts honestly and prompt- ly, while the talk in the American Congress and in some American newspapers leads to the opinion that we, though rich, do not mean to pay our debts honestly, and there is no way to collect a national debt except by the costly and uncertain process of war. XI. CHEAP MOl^^^EY. In the report already mentioned,^ Senator Jones in- timates that, when industry has been checked, commerce paralyzed, and enterprise crushed by a protracted shrink- • age in the volume of money, with falling prices, the stim- ulus of rising prices may be a necessary temporary treat- ment. The demand for cheap money is, in effect, a de- mand for higher prices. The advocates of a depreciated currency are perfectly correct in their opinion that an abundant currency means long prices, and a contracted * “ Report of the Silver Commission,” p. 49. 48 PAPER MONEY. m currency means short prices. The relative value of all the goods to be exchanged must be expressed in terms of the medium of exchange. It is as if all the property of the nation were put into a joint-stock company, the shares being represented by the currency. If it should be agreed to increase the number of shares twofold, in other words, to double the currency, the property remaining the same, then two shares would stand for no more property than one share represented before. In other words, prices would advance 100 per cent. The advocates of cheap money fully comprehend this principle ; they are acting upon it ; and they justify their action by the argument that the money-lenders are striv- ing to produce an unnatural scarcity of cash, in order to increase the value of their own commodity and depreciate all other goods. To establish this position they point to the semi-annual dividends of the national banks on the one hand, and the weekly list of mercantile failures on the other. The list of failures is undoubtedly the result of a falling market. Merchants who buy on time when goods are falling find it hard to meet their maturing notes. It is true, too, that the pressure upon the banks for loans increases at such times, and that they are rarely losers. There is nothing to be gained by misrepresentation. Whatever is true in the cheap-money theory must be con- ceded. It is true that an abundant currency tends to in- crease the prices of all kinds of goods and of labor. It is true that a contraction of the currency tends to reduce prices and wages. It is true that, while this process of reduction is going on, prudent banking is safer and more profitable than most other kinds of business. All these l^remises may and must be granted, but there is still a fatal defect in the argument. Granting that a contraction of the currency is an evil. CHEAP MONEY. 49 it may be nevertheless a necessary evil. The loss of a limb is a misfortune, but an amputation is sometimes the only way to save life. If the currency could go on ex- panding forever, with prices and wages continually rising, trade would no doubt be brisk, though it is certain that the substantial reward of labor, the margin of saving, would not be increased. But there is a limit to the co- hesive force of an expanding currency ; the bubble bursts ; the lying paper which calls itself a dollar when it is only worth fifty cents, or less, is at last seen to be worthless. When that time comes, it is always found that the wealthy, though they lose much, have saved something ; but the poor, whose subsistence depends upon the recompense of their daily toil, have lost everything. 'No law of Congress can make a paper dollar worth a dollar in gold except by decreeing that somewhere and by somebody a dollar in gold shall be paid for it on de- mand. But the paper dollar is the poor man’s dollar. The current dollar, whether eighty-five cents in silver or seventy cents in paper, is the dollar that is paid for wages, paid on insurance policies and savings-bank books. That dollar ought to be as good as the dollar paid to the holders of the Government bonds. The only way to make it as good is by contraction. In January, 1877, the paper dollar was worth ninety-four cents, and Western spring-wheat flour was worth $5.70 to $5.95 in New York. In January, 1878, the paper dollar was worth ninety- eight cents, and the quotation for the same brands of flour was $5.25 to $5.50. This difference of forty-five cents goes into the pocket of the consumer, and that is what contraction means to him. It is contended that the farmers ought to want our paper currency depreciated again, so as to get the nom- inally higher prices of 1865 for their produce ; and by 3 50 PAPER MONEY. the same rule they ought to pray for short crops, which would have the same effect. The farmers of this country do not need to be told that it is not for their advantage to get a higher price for corn and potatoes, and pay a pro- portionally higher price for sugar and molasses, and be burdened besides with the taxes of 1865. The farmers who were getting in debt in 1865 are now getting out, and have no desire to be ground in that mill again for the benefit of the speculators in the gold market. But the farmers are not the only people who are inter- ested in this matter. The industrious population of the United States, the people whose labor supports the whole community, were grouped by the last census as follows : Engaged in agriculture 6,922,471 Manufactures and trades 2,707,421 Traffic and transportation 1,191,238 Personal and professional service 2,684,793 Total 12,505,923 Now the farmers would be helped by a rise in the price of farm-products if other goods did not rise at the same time. The traders would be helped by a rise in the goods in which they deal if farm-products did not rise at the same time. A simultaneous rise of farm-products and other goods to the figures of 1865 would benefit neither of these classes, and would injure all the others, who are engaged in professional pursuits, in manufact- ures and mechanical trades, in transportation and in per- sonal service for wages. A general inflation of prices — and that is what cheap money means — is a direct injury to more than half of the busy community, and brings no real advantage to the rest. The only men who profit by the general misfortune in such times are the men with # CHEAP MONEY. 51 ready money to take advantage of the necessities of their neighbors. There is no such arbitrary classification in real life as is made by the cheap-money theorists. Their theory con- siders society as composed of two great classes — sellers holding all the goods and real property, and buyers hold- ing all the money. There are no such classes. We are all buyers and all sellers. The farmer sells wheat and corn, but he buys tea and coffee. The manufacturer sells cloth, but he buys wool and cotton. The laborer sells his day’s work, and buys food and clothing. There is no class absorbing all the money. The great money-lenders are the savings-banks and insurance companies holding large sums in trust for many persons of small means. The interest on money, in ordinary times, is too small to satisfy enterprising men ; it has shrunken already from seven and three-tenths or eight per cent., which were common rates a few years ago, to five or six per cent., and this shrinkage is a direct invitation and encouragement to enterprise. What we all need, as the essential condition of settled prosperity, is a currency of permanent value. The wis- dom of man has failed to discover any value so free from sudden fluctuations as the value of the precious metals. Paper we must have, for convenience, but, to keep it steady, it must be exchangeable at will for something of real worth. 52 PAPER MONEY. 4 XII. INTERCONVEETIBLE BONDS. Every one of the propositions of the Greenback the- ory, except the last, has now been considered. To the first, the reply was made that the American colonies undertook to pay the expenses of the Revolu- tionary War in legal-tender notes, and their currency, to use General Butler’s striking figure, “ went out,” like a candle in a storm. The objection, that the colonies had no national government to guarantee the Continental cur- rency, was met by the example of France in 1789, a nation consolidated a thousand years before by Charlemagne. The advocates of the new theory — which after all is only an old one, tried and proved worthless — took refuge in their second proposition, that a full legal-tender note, containing no promise to pay in something else, would not depreciate. The French assignats^ they said, promised payment in land. The Continental currency promised to pay Spanish dollars. Our notes should be pay in them- selves, like the notes of the Bank of Venice, which were not redeemable but remained at par for centuries. This means that, if the wording on the bits of paper should be cunningly changed, the currency might become more val- uable. The reply was, first, that the old tenor bills, issued during the French and Indian wars, promised nothing, but were receivable for all dues and were declared to be ‘Gn value equal to money;” and secondly, that the so- called notes of the Bank of Venice were partly interest- bearing securities like the British consols, and partly cer- tificates of deposit payable in gold or silver on demand. The old tenor bills were exactly what the new theory calls for, and they depreciated 91 per cent. ; the Bank of Venice INTERCONVERTIBLE BONDS. 53 bills were payable in specie on demand, and our currency will be equally good, when it is paid in the same way. The argument from the demand notes of 1861, to show that a ‘^full legal-tender” note, though in(5onverti- ble, would not depreciate, was met by showing that the demand notes were originally, and have always been prac- tically, payable in coin. It is true, as stated in the third proposition, that the debt was contracted in a depreciated currency ; but we promised to pay it in good money, and it has been shown that we are abundantly able to keep the promise. It is also true that we have much to lose and nothing to gain by breaking it. The example of France has been cited to support the fourth proposition. France, we have been told, issued paper enough to float all her liabilities, including the Prus- sian indemnity, and the paper, being a ^^full legal tender,” only depreciated about two and one-half per cent, and soon recovered, so that it was at par with coin. On ex- amination, it is found that France borrowed the money to pay the Prussian indemnity at flve per cent., issuing there- for bonds payable, principal and interest, in coin, and then, instead of paying any part of the interest-bearing debt, contracted the paper currency, collected a strong metallic reserve, and resumed specie payments. In short, France has done, not what the Greenback theorists want us to do, but precisely what the United States are doing. As to the fifth proposition, the history of the world, the warnings of statesmen in every age, and our own re- cent experience, have shown that, when prices are raised by an inflation of the currency, they do not advance uni- formly. In such times, speculation thrives and legitimate industry suffers. Wages increase slowly, while the cost of living advances rapidly. The great body of the peo- 54 PAPER MONEY. pie are robbed, they know not bow ; their money multi- plies, but its purchasing power evaporates ; and the few who are shrewd or lucky amass great fortunes. Further- more, such inflation of prices is necessarily unstable, and sooner or later the shrinkage of nominal values comes with all its train of disasters. This brings us to the last proposition. Nothing else is left of the theory. The facts contradict it at every point but this. But is it not, after all, possible to create a paper currency, which will be stable, without making it redeemable in specie? A token currency, kept within bounds, circulates at a nominal value much larger than its real value. Why may not a token currency be printed on paper, and made to answer for all domestic exchanges ? There would be no great advantage in it, since the same result may certainly be secured by redemption on demand in coin ; but is it not abstractly possible ? and might not some small saving be made by releasing the coin reserves and making interconvertible bonds do duty instead ? Well, that too has been tried. In 1812 we had a war with England. Specie payments were suspended, except in New England, August 31, 1814. Peace was restored, February 11, 1815. Specie payments were resumed in 1817. Here was a period of three years of inflation. The bank circulation ran from $29,000,000 in 1811 up to $99,000,000 in 1815. The United States Treasury issued $36,000,000 of notes before February 24, 1815, and on that day Congress authorized $25,000,000 more. The treasury notes were a full legal tender,” receivable for all duties and taxes, but — they were depreciated from eight to ten per cent, below the notes of the private banks in New England, which paid specie on demand. The act of February 24, 1815, authorized the secretary of the treasury to issue notes without any specified date ^ INTERCONVERTIBLE BONDS. 65 of payment but receivable in all payments to the United States. The scheme might have been planned by some advocate of the modern ‘^American system of finance.” The notes of a less denomination than $100 bore no in- terest, and were to be exchanged, on demand, in sums of not less than $100, for “ certificates of funded stock bear- ing interest at seven per cent.” Of course, this arrange- ment gave stability to the whole circulation, and brought the treasury notes to par ! Not at all. Secretary Dallas says, in the Treasury report for 1815 : It was soon ascertained that the small treasury notes, fundable at an interest of seven per cent., though of a convenient de- nomination for common use, would be converted into stock almost as soon as they were issued.” ^ This was the first experiment with interconvertible bonds in the United States. It simply served to increase the interest-bearing debt, and the amount might as well have been borrowed at seven per cent, in the outset, without the formality of issuing the money” which, though of a convenient denomination for common use, would not stay out but was converted into stock as fast as it could be printed. There is no incantation by which paper can be invested with real value. It can bear a promise, and if the promise is good the paper will be good ; but there is no formula which will make the paper worth more than the promise, or worth anything at all without a promise. See “Finance Report,” 1875, pp. 191, 205. 56 PAPER MONEY. XIII. THE AMERICAN STSTEM OF FINANCE. In his speech in Congress on the 12th of January, 1869, General Butler first spoke of an American system of finance, differing totally from the financial systems of Europe, and better adapted to the institutions of a free, enterprising, and independent people.” In April, 18T8, this contribution to the glory and dignity of the Republic , was supplemented by the promulgation of an American system of astronomy. The Rev. John Jasper, of Rich- mond, Virginia, is a colored preacher, of an original turn of mind, like some of our senators and representatives in Congress. So he has been investigating the motions of the heavenly bodies for himself, just as they have been investigating the laws of finance, and beginning with a mind quite free from antiquated prejudices, he has suc- ceeded, like them, in reaching some quite surprising con- clusions. Brother J asper, using his own eyes, perceived that the sun moves round the earth, just as Brother Butler per- ceives that the government stamp upon any material — gold, silver, copper, or paper — creates money. For Jas- per, no further demonstration was needed ; but, to help the feebler minds of his congregation, obscured by the traditions of the schools, he turned to the sacred writ- ings, just as Brother Butler turned to Ecclesiastes to show that he that loveth silver shall not be satisfied with sil- ver,” since we want the greenback for our currency and mean to have it. Brother Jasper found in Genesis that the sun was set in the firmament ; and in Psalms, that his going forth is from the end of the heaven, and his circuit unto the ends of it ; and in Ecclesiastes, which seems to THE AMERICAN SYSTEM OF FINANCE. 57 be an extremely useful book to the brethren, that the sun ariseth, and the sun goeth down and hasteth to his place where he arose ; and in'Job, that the earth hangeth upon nothing. The promulgation of this theory stirred up a fierce controversy, and Brother Jasper was compelled to repeat his sermon. The whole city turned out to hear him. Floor and gallery were crowded, as the two chambers of Congress were crowded, from time to time, during the silver debate. State ofiicials and the cream of white so- ciety in Richmond sat shining among the black faces of the congregation, as the brilliant uniforms of the diplo- matic corps and the gay bonnets of the Washington belles shone in contrast to the black coats of the honorable sen- ators and representatives. Brother Jasper enjoyed a triumph almost as complete as if the question had been put to vote. If there was not the solid, numerical satisfaction of 196 yeas to 73 nays, as in the House, or 46 yeas to 19 nays, as in the Senate, there was more applause than the rules of Con- gress permit. Brother Bland, to be sure, got a round of cheers when he said, “ If we cannot get free coinage of silver, I am in favor of issuing paper money enough to stuff down the bondholders until they are sick,” but this was exceptional ; the Senate listened in decorous silence, when Brother Jones, of Nevada, said that the greenbacks are sufficiently redeemed by the services of Congress, of the courts, and of the other departments of the Govern- ment, and that he hoped no other redemption would be had ; Brother Steele, of North Carolina, received no re- sponse, except the vote of the House, when he expressed the opinion that, if Congress could make ninety cents’ worth of silver a dollar, it was the duty of Congress to do it ; and Brother Merrimon, of the same state, won no 58 PAPER MONEY. i applause by the declaration that, if it suits us to make fourteen ounces a pound, we will do it. Brother J asper, on the other hand, was encouraged at every step of his argument by sympathetic utterances. As he cited one convincing passage after another, the re- sponses came from every part of the house, Dat’s so,” He’s got de Bible on dem,” “ Now I knows de sun is movin’,” Yes, Lord,” Honey, you’s tellin’ de truth,” and Give it to dem. Brother Jasper.” What are the cold demonstrations of doctrinaires to the warm approval of a popular demonstration like this ? Brother Thurman thought it would require great courage for any man to say to two-thirds of the Senate and two- thirds of the House of Representatives, “ This is a swin- dling bill, and you are a set of swindlers.” What super- human audacity, then, would he display who should say to Brother Jasper and his congregation, ^^This is a fool- ish proposition, and you are a set of fools ? ” Brother Maxey, of Texas, observed, during a remark- able night session of the Senate, that every nation, which has any independence of character about it, has its own standard of weights and measures, and its own stand- ard of coin.” Brother Jasper supplements this observa- tion by tendering to us also a national system of astrono- my. The ancient Europeans believed that the earth was supported upon the shoulders of Atlas ; the Asiatics, that it rested upon the back of an elephant, and he upon a tor- toise ; the modern Europeans will have the earth bound to the sun by the force of gravitation ; why should we have a continent to ourselves if we are to be restricted to these poor conceptions ? Consider our resources, the mag- nitude of our country, the grandeur of our institutions ! We must have an astronomy of our own, and in that astronomy the earth must be the central body, and on the THE AMERICAN SYSTEM OF FINANCE. 59 earth the United States must figure as they do in the school geographies, with a map for each state, and one apiece for Europe, Asia, Africa, South America, and Aus- tralia. It is true that Brother Jasper’s theory is not new : it is the Ptolemaic theory revived. So, also, the theory of absolute money is not new : it is Proudhon’s theory re- vived ; it is “ the bill of exchange stripped of the cir- cumstantial qualities of date, place, person, object, and term of maturity,” as described by that philosopher. But nothing is strictly new, and both theories have this com- mon recommendation — that they are held by no other nation now inhabiting the face of the earth. They are distinctively American systems, and should be regarded with equal complacency by all true Americans. 3 0112 061700370