PAPER
MONETARY SYSTEM

CHAPTER VIII.
THE RESUMPTION OF SPECIE PAYMENTS.

A PREMIUM was placed on gold by the first legal tender act, passed February 25, 1862, which declared that interest, on United States bonds and duties on imports should be paid in coin.  This was not only unnecessary, but was in violation of the plainest principles of public policy.  The people were obliged to respond to the requirements of the government, and a medium of exchange was absolutely necessary to enable them to render their resources available to the government.  It was manifest that this medium of exchange had to be supplied by the government, and it could be done only by issuing public notes, made a full legal tender.  In no other way than by making the public note a full legal tender was it possible to place the people all on the same platform with respect to the government and to each other, and compel each individual in the nation to bear his proportionate share of the public burden.  These principles were fully embodied in the original legal tender act as it passed the House of Representatives, but the sharks of Wall street and the money power generally perceived that if it became a law they would be deprived of all power to shave either the government or the people.  The passage of the bill, therefore, met with a desperate opposition in the Senate.  In the conference between the committees of the Senate and the House which followed, the Senate committee was stubborn and the House committee was obliged to yield.  The Hon Thaddeus Stevens declared, whilst shedding bitter tears over the result, that the House committee did not yield until it found that either the banks must be gratified or the country be lost.

The only plea or justification offered for making the interest on the bonds payable in gold was that it would induce capitalists to invest in them.  Subsequent events have wholly disproved the necessity of any such step.  As a matter of fact the war was carried on for over a year with partial legal tender paper money (greenbacks), and the $500,000,000 of bonds authorized by Congress were in the end taken at par by the people (not capitalists or bankers) out of a spirit of patriotism.  If further proof is required it is to be found in the fact that the currency bonds of the government to-day command a higher premium than the gold bonds, simply because they have a longer time to run.  Having made the interest on the bonds payable in gold, duties on imports were made payable in gold in order to obtain the gold to pay the interest on the bonds.  This was also entirely unnecessary.  No bonds, as we have mentioned, were issued for over a year, and as the interest would not fall due until six months after they were issued, the government would then have had ample time to devise a way to obtain the necessary gold.

The effect of making the interest on government bonds and duties on imports payable in gold was to impose a tax on all foreign commodities for the benefit of the bankers, bullionists and bondholders, and to greatly disarrange the monetary affairs of the country.  A great many people are partially reconciled to the payment of this tax under the mistaken belief that it inures in some way to the advantage of the government.  Such is not the fact.  Commodities are purchased abroad with American products ;  and the price of American products abroad is regulated solely by the laws of supply and demand.  The total imports and exports of the United States for the years 1873 and 1874 were as follows :

It appears, therefore, that the imports and exports of the United States during the two years (1873 and 1874) balanced each other to within less than one million of dollars.  The exchange of commodities between different nations is effected principally by means of bills of exchange.  The manner in which this is done is thus referred to by Colwell :  “ If the United States and Great Britain have mutually exported to each other commodities to the value of $100,000,000, the amount is adjusted by the familiar process of bills of exchange.  He who has exported commodities to the value of $10,000 is paid when he sells a bill for the amount.  The adjustment proceeds afterwards without any further trouble on his part.  The bills are concentrated in a few hands in each country.  If a house in London purchases in each week a million of dollars of American paper, and a house in New York with which it is in business relations purchases a million of dollars each week in bills on London, it is easy to see that it requires no money to pay to each other the two millions.  As business is generally conducted, the bills are forwarded from this country, and the respective claims are balanced and extinguished on the books of the London house.”  After as adjustment is thus effected the balance is paid in bullion.  As this process is going on constantly, bullion (gold and silver) will flow into the country when the exports exceed the imports, and out of the country when the imports exceed the exports.  In order to cause gold to flow into and remain in the country, it is manifest, therefore, that the thing to do is to develop the producing forces of the country to such an extent as will enable it to export more than it imports.  This fact was fully recognized and endorsed by President Grant in his annual message in 1873.  He said :  “ My own judgment is * * that a specie basis cannot be reached and maintained until our exports, exclusive of gold, pay for our imports, interest due abroad, and other specie obligations, or so nearly so as to leave an appreciable accumulation of the precious metals in the country from the products of our mines.”

When foreign commodities are received in the United States the merchant to whom they are consigned is obliged to pay the custom duties, established by law, in gold.  Bankers and brokers deal in gold, and sell it at the highest price that they can get.  During the war it will be remembered that the bullionists succeeded in running up the premium on gold to as high as $1.85½ over the lawful money of the country, while the volume of the currency and the price of domestic products remained unchanged.  This of course added greatly to the cost of all imported articles.  The premium on gold, which was paid by the merchant, in the first place and by the people in the end, was a clear profit to the bullionists.  Until 1864 no gold was required by the government to pay interest on bonds, consequently the burden thus imposed on the people was entirely unnecessary, and inured to the advantage of no one except the dealers in gold.  If the war had terminated in the early part of 1863, there would have been no necessity for issuing any gold interest bonds at all.  The total funded and unfunded debt of the government then was only $783,804,252, consisting chiefly of legal tender notes, 7-30 Treasury notes and certificates of indebtedness, all of which could have been called in, or provided for, by taxation in two years, if desired.  But the bullionists had their plans well laid.  The Treasury notes bearing interest were purposely made payable in one, two and three years, in order that, as soon as the gold interest bonds were issued, they could be advantageously converted into money and the proceeds invested in bonds.  With the gold of the country and the bonds both in their possession, the business of selling gold was wonderfully simplified.  The bankers and bullionists, sold their gold to the merchant to pay the government, and the government immediately returned it in the shape of interest on bonds to the banker and bullionist.  Under this arrangement it was not even necessary to transfer the gold from the vaults of the banks.  The whole matter could be adjusted by means of gold certificates and checks.

The amount of gold held by the National Banks, at any one time during the past ten years, would scarcely have sufficed to pay the duties on imports at New York City alone for two weeks.  On the 1st of October, 1875, the gold held by the National Banks of New York City was $4,955,624, of which sum $4,201,720 was in U.S. gold certificates and only $753,904 in coin.  The amount received by the government for duties on imports during the past ten years has averaged $180,000,000 a year, or in all $1,800,000,000 ;  the interest on the public debt for the same period has been about $100,000,000 a year, or in all $1,000,000,000.  It is manifest, therefore, that if the payment of duties on imports and interest on bonds in gold was not a pure fiction, the government could have accumulated $800,000,000 of gold in the past ten years.

Since specie resumption became desirable to the bullionists and bankers, it is common to hear it asserted that the difference between paper money and gold compels the people of the United States to trade with the rest of the world at a disadvantage.  This would imply that foreigners are enabled to reap some advantage on account of the premium on gold in the United States.  A moment’s consideration will satisfy any one that this is not true.  Foreign commodities, as we have seen, are purchased with American products.  The premium paid by Americans on gold and for bills of exchange is not an essential part of the transaction.  The products of America are sold in foreign markets at the ruling price there, and with the proceeds commodities are purchased in turn.  To say that American products sell for any more or less in foreign markets because of the premium on gold in the United States is simply absurd.  As has already been suggested, not even the interest on the bonds held abroad is paid in gold.  It is paid in products, against which bills of exchange are drawn.  When the exports of the United States fall short the balance is paid in bullion, the product of our mines ;  and this would be done just the same whether there were any bonds held abroad or not.  The same is true of the bonds held at home.  Interest on them is paid in current money at gold rates.  The conclusion, then, is unavoidable that the only persons who are benefited by the premium on gold, established by the legal tender act, are the bullionists and bondholders of the United States.

The bankers and bullionists having secured possession of the bonds, their convertibility with greenbacks was then taken away, and they were also exempted from taxation.  The original loan of $500,000,000 of 5-20 bonds has been retired or converted into gold bonds.  By the act of March 18, 1869, the Secretary of the Treasury is forbidden to redeem any of the 5-20 bonds, payable in lawful money, still outstanding (some several hundred millions) until greenbacks are on a par with gold.  The bonds of the United States now command a high premium.  The following is a list of the quotations of United States bonds on the 26th of April, 1876 :

U.S. 6 per cent. bonds of 1881.................... 122
U.S. 5-20 bonds of 1865, Nov..................... 118
U.S. 5-20 bonds of 1865, July.....................119
U.S. 5-20 bonds of 1867, July.....................121½
U.S. 5-20 bonds of 1868, July..................... 122½
U.S. 5 per cent. 10-40 bonds...................... 118¾
U.S. 5 per cent. funded loan bonds..............117½
U.S. 6 per cent. currency bonds..................126¹/₈

The money power having thus succeeded in robbing the people to the utmost extent in this direction, it is now proposed to continue the process by means of specie resumption.  The action of the bullionists and bankers, in this particular, was hastened, as we have seen, by the result of the elections in 1874.

SPECIE RESUMPTION.

Soon after Congress convened in December, 1874, a specie resumption act was hurried through that body and was approved by the President, January 14, 1875.  The act provides as follows :

The first section requires the Secretary of the Treasury, as rapidly as practicable, to cause to be coined, silver coins of the denominations of ten, twenty-five and fifty cents, of standard value, and to issue them in redemption of an equal number and amount of fractional currency, until the whole amount of such fractional currency outstanding shall be redeemed.

The second section repeals the authority to charge a per centage for coining bullion.

The third section repeals so much of the National Banking law as limits the aggregate circulation of the banks to $354,000,000, and makes banking free to bondholders.  It also provides that “on and after the 1st day of January, 1879, the Secretary of the Treasury shall redeem in coin the United States legal tender notes then outstanding, on their presentation for redemption in sums of not less than fifty dollars.”

The greenback, although issued in a mutilated form, (not payable for interest on bonds and duties on imports) was made a legal tender for private debts.  It was not, therefore, simply an evidence of indebtedness of the government—a mere promise to pay money ;  it was something more than that.  It became the measure of all values, the basis of all money contracts, and the standard of all payments among the people.  For fourteen years it has constituted the lawful money of the country.  All exchanges of property, during this period, have been made and all existing debts have been contracted on the basis of greenback money.  If the standard of payment is changed, all existing indebtedness will change with it.  For example if A. owes B. $10,000 and he is compelled to pay the amount in gold, which rules at say $1.12, he is obliged to pay $11,200 instead of $10,000.  When the entire indebtedness of the country, individual, corporate and municipal, is taken into consideration, it will be seen that the amount thus added by changing the standard of payment is enormous.  Estimating the aggregate indebtedness of the country, of individuals, towns, cities, townships, counties, states, railroads and other corporations, at $10,000,000,000, the amount would be increased $1,200,000,000.

The alteration of the coinage of a nation is universally regarded as a matter of the greatest delicacy, only to be attempted when absolutely required by the highest considerations of public policy.  When the legal tender act was pending the only plausible argument offered by the money power against its passage, was that it would work injustice to the creditor class, by enabling debtors to pay their debts in a depreciated money.  The specie resumption law, however, compels the debtor class to pay one-eighth more than it contracted to pay, and the debtor class, owing to the workings of contraction and the National Banking system, now embraces all the industrial classes of the country.  No alteration of the coinage was ever, attempted by any nation that would at all compare with this.

(The bondholders have provided against any alteration of the coinage so far as they are concerned.  The act of Congress of July 14, 1870, for refunding the public debt provides that the bonds shall be redeemed “in coin of the present standard value.”)

The amount of gold in the country, in view of the resumption of specie payments, has become a matter of serious importance, because the circulation of the country, whether the gold is actually used as a medium of exchange, or made the basis of a bank note currency, as in times prior to the war will necessarily be limited by the amount of gold on hand.  On the 27th of February, 1876, the Secretary of the Treasury, in response to a resolution passed by the House of Representatives calling for a statement of the gold coin in the possession of the government, submitted the following report :

By the terms of the specie resumption act the government will be required to redeem the legal tender notes outstanding on the first of January, 1879, ($300,000,000) in coin.  This will take nearly $290,000,000 more coin than there is avail able gold in the Treasury.  Where and how is this immense amount of gold to be obtained ?  The estimated product of the mines of the United States for the past three years has been about $50,000,000 a year.  The annual interest on the public debt, one-half of which, it is estimated, is held abroad, is about $100,000,000.  As long as the imports of the country exceed the exports, the difference will have to be made up in specie.  The imports of the United States as a rule have exceeded the exports for many years past, and to such an extent, that notwithstanding the enormous yield of American mines, there is not at the present time $100,000,000 of specie in the country.  And now that the productive ability of the nation has been greatly diminished, and is still diminishing under the operations of contraction and of the National Banking system, the excess of imports over exports must naturally increase, and thus augment the necessity for sending the product of American mines to foreign countries.  It is clear, therefore, that until the producing forces of the nation are sufficiently developed to enable it to export more than it imports, there can be no accumulation of gold obtained from the mines of the country.  The amount required to resume specie payments then, if obtained at all, must come from other nations.  The demand for gold at the present time abroad is unusually great on account of the demonetization of silver in Germany and other countries.  The government of the United States has already had some experience in trying to obtain gold in Europe.  When the gold bonds of the United States were put on the market in Europe, $21,000,000, resulting from their sale, accumulated in the Bank of England.  The Bank of England objected to the transfer of this sum to the United States, and the government was forced to turn round and invest it in other bonds, which had been purchased probably at less than 60 cents on the dollar.  Senator Boutwell detailed the facts in this case, in a speech in the United States Senate, January 22, 1874, as follows :  “ When the negotiations were going on in London for the sale of the largest amount of United States bonds that have ever been sold there at one time, it was foreseen by the Bank of England that a quantity of coin would accumulate as the proceeds of these bonds to the credit of the government of the United States.  As a matter of fact, there was an accumulation of about $21,000,000.  The Bank of England, foreseeing that there would be an accumulation of coin to the credit of the United States which might be taken away bodily in specie, gave notice to the officers of the Treasury Department of the United States that the power of that institution would be arrayed against the whole proceeding unless we gave a pledge that the coin should not be removed, and that we would reinvest it in the bonds of the United States as they were offered in the markets of London.  We were compelled to do it.”  Mr. Boutwell also mentioned another case in point, which is equally significant, as follows :  “ There, is another fact, known to all.  We recovered at Geneva an award against Great Britain of $15,500,000.  When this claim was maturing, the banking and commercial classes of Great Britain induced the government to interpose, and by diplomatic arrangements through the State Department here, operating upon the Treasury Department, secured the transfer of securities and thus avoided the transfer of coin.  In the presence of these facts, is it to be assumed for a moment that we can go into the markets of the world and purchase coin with which we can redeem one, two, three or four hundred millions of outstanding legal tender notes.”

If any further argument is required to show that it is not only utterly impossible for the government of the United States to obtain the requisite amount of gold to resume specie payment at a fixed time, but that it is also undesirable, even if it were possible, because it would disturb all the industrial and social relations of the world, it will be found in the following extract from an able speech delivered on the 26th of April, 1876, by Senator Jones in the Senate of the United States, in favor of placing silver on an equality with gold as a medium of exchange.  He said :

“ The world’s stock of coin is $5,700,000,000, of which nearly one-half is silver.  Of this sum Europe, America, and the rest of the Occidental world employ about $3,600,000,000.  Previous to the late demonetizations of silver in the Latin union, and in Germany and the United States, these $3,600,000,000 consisted of, let us say, $2,000,000,000 of gold and $1,600,000,000 of silver.  They now consist of about $2,600,000,000 gold and $1,000,000,000 silver.  By continuing to exclude silver from equal participation with gold in the currency of the United States and attempting to resume specie payments, we occasion a demand for say $350,000,000 of gold wherewith to pay off the greenbacks and furnish bank reserves, and $50,000,000 of silver in lieu of the fractional notes.  If we could obtain these $400,000,000 of metal without drawing it from other countries in Europe or America, they would add so much to the stock of coin in the Occidental world, which would then be $2,950,000,000 of gold and $1,050,000,000 of silver.  This is the answer to the question so far as the Occidental world is concerned.  The quantity of the precious metals needed for money and the basis of credit in the Occidental world—that is to say, the quantity needed to maintain prices at their present level—is at least $4,000,000,000.  Of this sum the United States, if it succeeds in resuming specie payments, will hold about $400,000,000, of which $350,000,000 must be in gold.  Where is it to come from ?

“ Anticipating the argument that no such sum is necessary to specie resumption, because prior to suspension in 1862 our entire stock of coin included not more than $225,000,000 of gold, he reminded the Senate that population since then had increased per 50 cent., and that in 1861 our whole circulating medium consisted of $300,000,000 in coin and $200,000,000 in bank notes, which circulated within limited areas at nearly par ;  whereas now it consists of not more than $100,000,000 of coin and some $850,000,000 of government and bank paper, the latter circulating (throughout nearly the whole country) at about 87½ cents on the dollar ;  say total circulation at par equal to $850,000,000.  This is 70 per cent. more than the par circulation of 1861, an incontestible proof that the exchanges have increased in volume at least 70 per cent.  It cannot be doubted that the bulk of to-day’s exchanges in this country is at least double that of a corresponding day in 1862.  Put it at only 70 per cent. higher ;  then, in order to resume specie payments upon at least as firm a footing as specie payments in 1861, we shall require at least 70 per cent. more specie than we employed in 1861.  Add 70 per cent. to $300,000,000 and you have $510,000,000.  Allow $100,000,000 for specie already in the country, in the banks, in private hands, and in the vaults of the Treasury, and you will need $410,000,000 in order to resume, say, for round figures, $400,000,000 of specie, of which, under the operation of the act of 1873, about $350,000,000 must be gold.

“ I warn gentlemen to beware of making a mistake in respect to this matter, for a mistake will set us back many years.  The British government tried to resume in 1817, after a suspension of 20 years, but it failed, and suspension was deferred until 1823.  If we try to resume in 1879 with $100,000,000 and fail, we may be set back a quarter of a century.  Moreover, if we fail, some clique of stock gamblers will make 15 or 20 per cent. out of the operation.  Knowing that $100,000,000 was the limit of the government’s ability to pay, they could easily make arrangements with the banks and depositories throughout the country to withdraw $100,000,000 of greenbacks on the eve of the day of resumption, and present them for payment at the Treasury.  After having drawn the last dollar of specie out of the latter, they could, by presenting an additional note, compel it to suspend again.  Then gold would go up once more, perhaps to the full extent of the figure from which it would have fallen, and the clique could sell their specie in the market and realize their profit.  We cannot resume with $100,000,000 nor with $200,000,000.  We have had $200,000,000 in specie in the Treasury on several occasions during the past ten years.  If it is practicable to resume now with $100,000,000, why was it not practicable on those occasions with $200, 000,000 ?  It was certainly not for lack of desire on the part of the Secretary of the Treasury, but simply that both the Secretary and Congress saw that the thing could not be done.  Where are the needed $350,000,000 in gold to come from ?  The annual gold product of the world is $97,000,000.  More than half of this is needed in the arts.  One and a half per cent. on $2,600,000,000, the present Occidental stock, is needed for the maintenance of money to replace abrasion and loss.  This is $39,000,000.  Deduct these sums and there remains a surplus of $10,000,000 a year, out of which our needed $350,000,000 must come, unless it comes out of the existing stock in other countries.  It would take 35 years to accomplish the result upon the most favorable hypothesis.

“ But the increased population of the Occidental world will make increased demand for gold exchanges and for its use in arts equal to at least $6,000,000 annually, and the annual product of gold is diminishing instead of increasing.  When these elements of the circulation are all moderately provided for, there will remain perhaps $500,000 per annum of surplus, taking 700 years to get our $350,000,000.  And even this cannot be done unless Austria, Italy and Russia shall leave us to monopolize all the gold we need before they reform their own debased currency.  I tell you, gentlemen, the thing cannot be done.  Redemption in gold is out of the question.  It is not practical financially, metallurgically, internationally, or politically ;  in short, it is not practical at all.

“ The stock of coin which forms the substratum of the world’s prices is the accumulation of 50 centuries, and bargains are being made every day which cover long periods of time.  To disturb these prices and contracts by forcing the exchanges of the country to be measured by a sum of specie so vastly less than its usual measure, as $100,000,000, or even $200,000,000, would be tantamount to the violent destruction of vast interests and a wrenching of all the relations of industrial and social life.

“ The Senator proceeded to argue that we cannot get the gold from Europe, with which to resume, because its whole supply is only $2,600,000,000, and on every one of these dollars stands a vast and almost toppling superstructure of credit in every conceivable form.  Try to buy one sixth or seventh of that amount, and the rate of interest would go up in Europe in order to check the outflow of gold ;  and so the price of gold would rise until, in order to secure the amount required, we would be obliged to sell all our movables at prices that would bankrupt every interest in the country.  We might get $50,000,000 or $100,000,000 possibly, but it would be at the expense of a tremendous financial convulsion abroad, reacting with equally alarming disaster to ourselves.  Recollect that the problem is that of taking $350,000,000 in gold out of a fully occupied and heavily overtopped basis of only $2,600,000,000 in the Occidental world.  It is not the whole stock of metal, both in silver, and gold, that we can now call upon.  Silver has been demonetized in several countries in Europe, and here we have so thoughtlessly worded our laws that, until we alter them, we can only pay in gold.”

By the act of April 12, 1873, the silver coins of the United States were declared to be a legal tender at their nominal value for any amount not exceeding five dollars in any one payment.  Silver as a commodity fluctuates in value agreeably to the laws of supply and demand.  The effect of the law above mentioned was to partially demonetize silver, and hence silver coins are now (May, 1876) quoted at about 3 per cent. less than legal tender Treasury notes.

There is no good end to be attained by specie resumption ;  that could not be attained by simply making the greenback a full legal tender, as should have been done in the first instance.  By making the greenback a full legal tender, the products of the country would be placed upon the same footing with foreign commodities, and that is all that is proposed to be accomplished by specie resumption.  The public would then be relieved of the onerous tax imposed on gold to pay duties on imports, which redounds solely to the advantage of the bullionists and bondholders of the United States.  If this method were adopted, no disturbance of the industrial or social relations of the country could possibly occur.  Forced specie resumption can be accomplished only through a complete revolution of all the business and social relations of the country.  This will appear from a brief consideration of the steps that will necessarily precede resumption.  The circulation of the country on the 1st of April, 1876, was as follows :

1st of April, 1876, was as follows :
Legal tender Treasury notes ........... $370,755,248
Fractional currency...............................42,604,893
National Bank notes............................330,378,904
Total...............................................$743,739,045

The lawful money reserve of the National Banks on the 1st day of October, 1875, was as follows :

Legal tender Treasury notes.........................$76,366,921
United States certificates of deposit...............48,810,000
Due from reserve agents................................85,644,964
Redemption fund with Treasurer...................16,233,193
..................................................................$227,055,078
Specie..............................................................8,050,328
Total.......................................................... $235,105,406

It will be seen that the lawful money reserve of the National Banks, exclusive of specie, now amounts to over two-thirds of the entire greenback circulation.  The banks have still two years and a half to gather in the remainder of the outstanding greenbacks—all that are not locked up in private hoards.  To call in their own circulation is an easy matter.  If the banks cease discounting paper for six months there will scarcely be a bank note left in circulation.  That they will do so is not to be doubted.  The notes of the banks are simply evidences of their own indebtedness, and it is not to be supposed that they will voluntarily add twelve per cent. or more to their own indebtedness when they can easily avoid it.  Long before the first day of January, 1879, the banks will have possession of the entire circulation of the country, both greenbacks and bank notes, and the nation will be completely stripped of a medium of exchange.  The public will be helpless.  The people will not possess even the poor privilege of issuing and using shinplasters and scrip, because it will be impossible to raise money enough to pay the ten per cent. tax imposed upon all notes not issued by National Banks.  Forced resumption, therefore, means something more than adding 12 per cent. to the amount of every debt owed in the United States.  Without a medium of exchange people will be unable to pay their debts at all ;  industry and trade will be completely paralyzed, and bankruptcy, distress, starvation and riot will ensue.

SPECIE RESUMPTION IN ENGLAND.

The experience of the people of Great Britain from 1819 to 1825, under similar circumstances, is full of instruction to the people of the United States.  In 1797 the Bank of England was obliged to suspend specie payments.  Great Britain at the time was engaged in war with France.  In 1797 large sums of gold were required abroad, and the price of gold began to rise.  In September, 1799, the standard price of gold was £3, 17s., 6d. per ounce, and in June, 1800, it was £4, 5s. per ounce.  The war with France ended in 1815.  During this period and for several years after the war the people of Great Britain were obliged to use an irredeemable paper currency for their medium of exchange.  Prior to the suspension of specie payments the condition of affairs in Great Britain was gloomy indeed.  Sir Archibald Alison, the historian, in speaking of the period immediately preceding suspension says :  “ Nor was the internal suffering of this ill-omened period inferior to its external disaster.  It began with the severe commercial distress of 1793, unprecedented at that period in intensity and duration, and which was only relieved by an extensive loan to the trading classes by government ;  and it terminated in the dreadful monetary crisis and run upon the bank and mutiny in the fleet, in the spring of 1797, which brought the nation to the brink of ruin, and forced upon the government the necessity of suspending cash payments.”  The British Government and people had been vainly trying to carry on great operations with an inadequate medium of exchange.  The suspension of the Bank of England led to the use of irredeemable paper money to an enormous amount, or, to use an expression now greatly ridiculed by the bullionists, “to an amount equal to the wants of trade.”  The result was magical.  We will again quote from Sir Archibald Alison.  He says :  “ The next eighteen years of the war, from 1797 to 1815, were, as all the world knows, the most glorious, and, taken as a whole, the most prosperous, which Great Britain had ever known.  Ushered in by a combination of circumstances the most calamitous, both with reference to external security and internal industry, it terminated in a blaze of glory and a flood of prosperity which have never, since the beginning of the world, descended upon any nation.  Hardly had the run upon the bank shaken to its center the whole fabric of our commercial prosperity, and the mutinies of the Nore, Plymouth and of Cadiz paralyzed the arm of our naval defenders, when the victories of St. Vincent and Camperdown again restored to us the dominion of the sea ;  and ere long the thunderbolts of the Nile and Trafalgar prostrated the naval strength of the enemy, and the victories of Wellington first arrested, and at length broke his military power.  Prosperity, universal and unheard of, pervaded every department of the empire.  Our colonial possessions encircled the earth—the whole West India Islands had fallen into our hands ;  an empire of sixty millions of men in Hindostan acknowledged our rule ;  Java was added to our eastern possessions ;  and the flag of France had disappeared from every station beyond the sea.  Agriculture, commerce and manufactures at home had increased in an unparalleled ratio ;  the landed proprietors were in affluence ;  wealth to an unheard of extent had been created among the farmers ;  the soil daily increasing in fertility and breadth of cultivated land, had become almost adequate to the maintenance of a rapidly increasing population ;  our exports, imports and tonnage had more than doubled since the war began ;  and though distress, especially during 1810 and 1811, had at times been severely experienced among the manufacturing operatives (occasioned by Bonaparte’s decrees against British goods), yet, upon the whole, and in average years, their condition was one of extraordinary prosperity.  The revenue raised by taxation within the year had risen to £72,000,000 in 1815 from £21,000,000 in 1796 ;  the total expenditure from taxes and loans had reached in 1814 and 1815, the enormous amount of £117,000,000 each year.  In the years 1813 and 1814, being the twentieth and twenty-first of the war, Great Britain had above a million of men in arms in Europe, and Asia, and remitted £11,000,000 yearly in subsidies to the continental powers.  Yet was this prodigious and unheard of expenditure so far from exhausting either the capital or resources of the country, that the loan in 1814 was obtained at the rate of £4, 11s., 1d. per cent., being a lower rate than that paid at the commencement of the war ;  although the annual loan at its close was above £35,000,000, and the population of the empire at that period was only eighteen millions.”

All this was accomplished in Great Britain during the early part of the present century by irredeemable paper money.  The bullionists try to blunt the force of this argument by attributing the prosperity of England during this period to the vast outlays of the government, but if this was the cause, why did it not produce the same effect during the period prior to the suspension, when the government was making similar outlays ?  The simple truth is that the people of Great Britain possessed patriotism and faith in the stability of their government and institutions, and when furnished with industry’s most essential tool, an abundant and cheap medium of exchange, they were enabled to develop the producing forces of the nation to their utmost extent, with the marvelous results above given.  And the logic of the whole matter is, that if paper money will perform such marvels in time of war, danger and uncertainty, it can be made to perform the same or greater marvels in time of peace, when no uncertainty need attend its use.

When the several acts of Parliament were passed continuing Pitts’ “bank restriction” (continuing the suspension of specie payments), one clause was always retained, and that was that the bank was “to resume cash payments” within a few months after peace should be established.  Doubleday, in his Financial, Monetary and Statistical History of England, says that “it has been asserted that Pitt never meant this clause to be enforced, at least as far as regarded the fundholders (bondholders);  and that he intimated as much in Parliament on one occasion.”  However, it was adhered to.  The bullionists immediately began to clamor for a return to specie payments.  The bank of England, which had “bales of paper money” in circulation, was obliged to contract to an extent that would enable it to redeem the remainder in coin.  This began to occasion distress amongst the merchants and manufacturers.  In speaking of this period Doubleday says :  “ During former revulsions, such as that of 1810, caused by the decrees of Bonaparte against the admission of British goods, the bank had come promptly forward with loans and discounts to relieve the pressure.  Now, however, the directors scarcely dared to move an inch.  They knew that the political economists were strong in the House, and that they were bent upon cash payments at all risks.  They knew that the Jews of Change Alley would secretly abet the same doctrine.  Against a combination of usurers and theorists, one set all selfishness, the other all crotchets, there was no defense to be made.  The country gentlemen, who were the dupes of the economists, were led to believe that cash payments were necessary for both the interest and security of themselves.  Those who had the power were resolved, and nothing was left to the bank but to narrow its issues, and look about for gold and silver wherewith to meet the storm.  This was altogether a difficult business.  In the year 1816 alone thirty-seven country banks had become bankrupt.  The commercial world required additional propping.  But the government (the bank) was in the same dilemma ;  and to it the merchants were sacrificed.  Between February and April, 1816, the directors lessened their discounts from £23,000,000 to £11,000,000 ;  and before February, 1817, to £8,000,000 ;  and before August of the same year to £7,000,000 ;  whilst up to nearly the same period they held of Exchequer bills, etc., £25,000,000. * * This reduction of the bank issues, and destruction and crippling of the country banks, had another and still more important effect, inasmuch as by causing the price of gold to fall to nearly the mint price, it encouraged the political economists to press forward, and at last, in 1819, to pass an act, the most important in its consequences, and extraordinary in its circumstances, that ever was decided upon by any legislature, in any age or country. * * The Currency bill of (May) 1819 was passed at the instance of a committee, amongst the members of whom were included all the parliamentary dabblers in political economy of any name or talent, and of whom Peel was chairman.  Horner, the chairman of the bullion committee of 1810, was dead ;  but in his stead, they had Ricardo, a rich Jew stock-jobber, who having made an immense fortune by this worst species of gambling, had also contrived to obtain a reputation by the publication of some books on political economy. * * Backed by the authority of this rich and arrogant man, the economists obtained on this occasion an almost entire command of the House of Commons. * * The House made the plunge with one accord.  There was hardly the semblance of an opposition.  Ricardo had the enormous folly to tell the House that the bill was ‘ not worthy of half an hour of even their consideration;’  and assured them that the whole question was one of ‘ three per cent;’  this being the extent of the fall of prices, which this man calculated would take place, after all the one and two pound notes in the kingdom were burned, and the remainder, of five pound notes and upwards, made ‘ payable on demand in gold sovereigns worth £3, 17s., 10½d. the ounce.’  In short there was only one man in the Commons who really understood and opposed the measure, and this man was Mr. Matthias Attwood, * * and Mr. Attwood was prevailed upon to quit the House that the vote might be unanimous.  In the House of Lords, Lord Grey alone ventured to dissent from the measure; * * The Houses, however, for once ‘were all in one accord.’ * * As a bit of legislation, this ever-memorable act is remarkably brief and to the point ;  consisting only of thirteen not very long nor wordy clauses.  It repeals, in the first place, all the acts for restraining the bank from paying its creditors, which had been passed from 1797 up to that time, the repeal going into effect ‘ from and after the first day of May, 1823.’  This was a repeal of all bank notes on demand for sums less than five pounds.  It then provides for a gradual return, in the meantime, by the bank to cash payments ;  beginning with an issue of gold at four pounds one shilling the ounce, in 1820, and ending with the standard mint price of £3, 17s., 10½d.”

The premium on gold during this period fluctuated as follows :

1814........... 30 per cent.
1815...........18¾
1816...........2½
1816, Oct. to Dec. 1
1817.......... 2½ per cent.
1818..........5
1819..........6
1820.......... par.

Although the Currency bill passed Parliament unanimously, it did not fail to excite great alarm and opposition among the industrial and business classes of the kingdom.  The Directors of the Bank of England protested against its passage, declaring that “ they could not venture to advise an unrelenting continuance of pecuniary pressure upon the commercial world, the consequences of which it was impossible for them to foresee or estimate,” or countenance a measure in which “the whole community was so deeply involved, and which would possibly compromise the universal interests of the empire in all the relations of agriculture, manufactures, commerce and revenue.”  The bankers and merchants of London joined in a petition against it, in which they predicted the most disastrous results.

The contraction of the currency, which was augmented by the passage of the bill, soon produced the most alarming results.  We again quote from Alison’s History of Europe.  He says :  “ The effects of this extraordinary piece of legislation were soon apparent.  The industry of the nation was speedily congealed, as a flowing stream is by the severity of an Arctic winter.  The alarm became as universal and widespread as confidence and activity had recently been.  The country bankers, who had advanced largely on the stocks of goods imported, refused to continue their support to their customers, and they were forced to bring their stocks into the market.  Prices in consequence fell rapidly ;  that of cotton, in particular, sank in three months to half its former level.  The country bankers’ association was contracted by no less than five millions sterling ($24,000,000);  and the entire circulation of England fell from $235,545,000¹ in 1818 to $174,385,000 in 1820, and in the succeeding year it sank as low as $142,757,000. * * The effects of this sudden and prodigious contraction of the currency were soon apparent, and they rendered the next three years a period of ceaseless distress and suffering in the British Islands.  The accommodation granted by bankers diminished so much in consequence of the obligation laid upon them to pay in specie, which was not to be got, that the paper under discount at the Bank of England, which in 1810 had been $115,000,000, and in 1815 not less than $103,000,000, sank in 1820 to $23,360,000, and in 1821 to $13,610,000.  The effect upon prices was not less immediate or appalling.  They declined in general, within six months, to half their former amount, and remained at that low level for the next three years.  Distress was universal in the latter months of 1819, and that distrust and discouragement were felt in all branches of industry which are at once the forerunner and cause of disaster.”  From Mr. Doubleday’s history we also quote as follows :  “ We have already seen the fall in prices produced by the immense narrowing of the paper circulation.  The distress, ruin and bankruptcy which now took place were universal, affecting the great interests both of land and trade ;  but especially among land owners, whose estates were burthened by mortgages, settlements, legacies, etc., the effects were most marked and out of the ordinary course.  In hundreds of cases, from the tremendous reduction which now took place, the estates barely sold for as much as would pay off the mortgages ;  and hence the owners were stripped of all and made beggars.”  Before the close of the year 1819 the distress became insufferable.  Great meetings were held throughout England and Scotland during the summer.  In August 60,000 people, men, women and children, assembled near Manchester.  A collision occurred between the people and the troops, in which a number were killed and many wounded.  This created intense excitement, and the meetings of the people held in Liverpool, York, Leeds, and various other cities, were attended by vast multitudes of suffering people, demanding vengeance.  Serious riots occurred, which were only quelled by military force.  In 1820 a conspiracy was discovered, which had for its object the murder of all the King’s Minister, and which was only frustrated through the cowardice of one of the conspirators, who betrayed his associates.  Military training went on amongst the people, and the government was obliged to provide a large military force to prevent an outbreak.  “On Sunday morning, the 2d of April,” says Alison, “a treasonable proclamation was found placarded all over the streets of Glasgow, Paisley, Stirling, and the neighboring towns and villages, in the name of a provisional government, calling on the people to desist from labor ;  on all manufacturers to close their workshops ;  and on all the friends of their country to come forward and effect a revolution by force, with a view to the establishment of an entire equality of civil rights.  Strange to say, this proclamation, unsigned and proceeding from an unknown authority, was widely obeyed.  Work immediately ceased ;  the manufactories were closed, from the desertion of workmen ;  the streets were filled with anxious crowds eagerly expecting news from the south ;  the sounds of industry were no longer heard, and two hundred thousand persons in the busiest districts of the country, were thrown into a state of compulsory idleness by the mandates of an unseen and unknown power.”  Five thousand troops were immediately assembled at Glasgow, and the insurgents were overawed.  Before the end of the year the government had increased its volunteer force to 33,000 men.  “Without doubt,” says Alison, “this powerful volunteer force, organized especially in the manufacturing districts at this period, and the decisive demonstration it afforded of moral and physical strength on the part of the government, was the chief cause through which Great Britain escaped an alarming convulsion.”

Thus were the masses of Great Britain, whose valor and labor had carried the nation to the acme of glory and prosperity, ruthlessly and wantonly sacrificed on the altar of so called “honest money,” only to further enrich the moneyed class of the kingdom.  But after all forced specie resumption proved a failure.  Parliament was obliged to retrace its steps.  In 1822 an act was passed authorizing the issue of one and two pound notes for a period of ten years longer, and the one pound notes were made a legal tender everywhere except at the bank of England.  “This act,” says Alison, “coupled with the grant of 4,000,000 Exchequer bills, which the government was authorized to issue in aid of the agricultural interest, had a surprising effect in restoring confidence and raising prices ;  and by doing so, it repealed, so long as it continued, the most injurious parts of the act of 1819.”  But the ruin, suffering and misery which had attended the attempt to force specie payments could not be undone, nor could the broken fortunes be restored.  By a return to specie payments finally, the, specie basis banking and credit system, the whole tendency of which is to concentrate wealth in the hands of the few, was re-established ;  and the industrial classes, especially the agricultural class, have never since been able to recover from the blow then received.

“Princes and lords may flourish, or may fade,—
A breath can make them, as a breath has made :
But a bold peasantry, their country’s pride,
When once destroyed, can never be supplied.”

In 1822 the land owners of England numbered, 165,000.  According to the census of 1861 the number was about 30,000, and one-half of the whole kingdom is now owned by not more than twelve persons.

From this mere outline of the disastrous events, which attended specie resumption in Great Britain, revolutionizing the whole structure of British society, and shaking to the center the foundations of the government itself, some idea may be formed of what the American people will be obliged to suffer during the next few years.  Great Britain then possessed many advantages which are not possessed by the United States at the present time.  Her industries were in full operation ;  the balance of trade was largely in her favor ;  she had a large supply of specie to begin with ;  the premium on gold was only about five per cent.;  and, as the country was limited in extent and densely populated, money circulated with great rapidity.  On the other hand, the industries of the United States are already prostrate ;  the balance of trade is against the country ;  the specie in the country is inconsiderable in amount ;  the premium on gold is over twice as high as it was in England ;  and the immense extent of the country precludes any possibility of money circulating with rapidity.  In addition to this, British thought and habit had been educated under the specie basis and credit system of money ;  whilst, in the United States, experience has fully demonstrated that the system is inconsistent with the genius of American institutions and repugnant to American habits and ideas.

There is every reason, therefore, to believe that the disaster and distress which will attend an attempt to force specie payments in the United States will exceed in intensity that which marked the experience of Great Britain an hundred fold.  The contraction which took place just after the war was carried on wholly by the government.  The evil consequences of this contraction were partially averted by the emission of over $350,000,000 of bank currency.  But now a different kind of contraction is going on.  The National Banking system has already enabled the banks to acquire possession of over two-thirds of the greenback circulation, and it is a question of but a short time until they will hold almost the entire amount.  Their own notes are encumbered with interest, and are not subject to the natural laws of trade, but to the will of the banks.  It will take but a short time, therefore, to call them all in.  The organs of the banks are constantly repeating the statement that there is plenty of money in the banks, and that any one can get it who has anything to get it with, and the statement is echoed and re-echoed by all the demagogues and weak minded tools of the money power in the country.  Properly considered, we submit that this fact alone confirms all the objections which we have urged against the system of banks of issue.  Why is money plenty in the banks, and why is it not occupying the channels of trade and honestly performing the functions for which money is designed ?  For the simple reason that a medium of exchange consisting, even in part, of bank currency will not obey the natural laws of trade, because it is burdened with interest which robs the industry of the nation of more than its average profit.  In ordinary times, after industry had been driven to the wall and a commercial crash had brought about an adjustment, the banks began to expand their circulation, and the banks and the people would enter upon another era of inflation, only to end in the same manner.  But now the specie resumption act not only prevents any such expansion, but compels both the banks and the people to contract in every way possible to prepare for the impending crash.  True enough, money is plenty in the banks, and it will grow plentier there before the nation is a year older.  In fact the contraction of the banks has scarcely more than begun.  But as failures multiply, as they are now doing with startling rapidity, loans and discounts will grow less common, until finally the country is entirely deprived of a circulating medium.  This can end only in the complete destruction of all values.  It will be as difficult to pay small debt as a large one, for money will be everything and property nothing.  Taxes cannot be paid, for there will be no money to pay them with.  Not only will individual bankruptcy be general, but the decline in the public revenues, which must follow, will render it impossible for the Federal or State Governments to meet their obligations.  This is the only kind of repudiation that need ever be feared in America.  The people are being rapidly deprived by the policy of the money power, not only of the ability to sustain the government, but of the ability to provide for themselves and families.  That a nation possessing the wonderful advantages and the skill and energy possessed by the American people should be brought to even its present distressed condition in the pursuit of a phantom, is simply monstrous.  And when the crisis is reached, what will have been attained ?  “Honest money?”  No.  Nothing but a circulating medium consisting of bank currency, only nominally redeemable in coin.  Assuming that the government will be able to redeem the greenback circulation and that the amount is paid to the banks, it is not difficult to foretell the result.  The banks will issue bank currency, redeemable in coin.  Whenever a demand for specie arises abroad, American securities will be thrown upon the market, and the gold in the country will disappear in a day.  The banks will be obliged to suspend specie payments, precisely as the old State banks of issue were obliged to do, time and again, under similar circumstances.  Under the old State banking system the people were compelled to use bank currency even when they knew it was a fraud and a lie, because they had nothing else to use.  But under the National Banking arrangement the notes of the banks will be taken without hesitation, not because they are convertible into coin, but because they are guaranteed by the Federal Government—based upon the faith and wealth of the nation.  In the end, therefore, so far as specie circulation is concerned it will prove, as in the days before the war, a fraud and a delusion.  The National Banks, however, will have accomplished their end.  They will have obtained absolute control of over the monetary and political affairs of the nation.  The whole affair is in fact but a grand scheme to accomplish that purpose, and it is marvelous that intelligent people can be decieved in believing otherwise.  In 1791, when Hamilton sought to establish his funding and banking scheme, the great Pitt said :  “ Let the Americans adopt their funding system and go into their banking institutions, and their independence will be a mere phantom.”  What Hamilton, with all his genius and great ability and influence was unable to accomplish in the infancy of the republic, a pack of venal demagogues have well nigh accomplished nearly a century later.  People are wont to say, and apparently seem to think that it is an evidence of their good sense, “ that they don’t know nor care anything about this financial question.”  It is high time that everybody should seek to understand this question, because until the National Banks are destroyed and a system of money is founded upon sound principles, there can be no enduring prosperity in the country, and the “independence of the people will be a mere phantom.”  The demoralization which is now going on throughout the country in consequence of the enforced idleness and poverty of millions of people, is a matter of serious import, and one which should awaken to a sense of duty and action every christian man and woman in the land, and especially ministers of the Gospel, who profess to follow Him whose tenderest care was ever manifested for the weak, the lowly and the oppressed.

There is another fact which may convey a warning to those who are lending themselves to the ignoble cause of enriching the money power at the expense of ruin, poverty and distress to the masses.  When the American people are driven to the extremity that the English and Scotch people were, by an attempt to force resumption, and gather in vast multitudes, as the English did at Peterloo and the Scotch at Glasgow, to demand redress, matters will assume a very different shape in the United States from what they did in Great Britain.  It is true that an organ of a notorious Wall street operator, the New York Tribune, has intimated that any such demonstrations would promptly be met with “shot and slaughter;”  but in the United States that is more easily said than done.  The day has not yet arrived when Americans can be intimidated by such threats.  As yet they “their duties know, but know their RIGHTS, and knowing dare maintain them.”  While the American people undoubtedly possess too much patriotism and intelligence to jeopardize the stability of their institutions, they nevertheless may possibly forget, in the hour of their distress, that the Lord hath said, “vengeance is mine.”  In that day the Shermans and McCullochs had better never have been born.

¹ Amounts are given in dollars instead of pounds.