PAPER
MONETARY SYSTEM
APPENDIX.
THE 3.65 INTER-CONVERTIBLE BOND SYSTEM.
BELOW we give an able article from the pen of Horace Greeley, on the subject of the inter-convertible bond, which appeared in the New York Tribune of November 9, 1871. It will be observed that Mr. Greeley suggested that the bonds should bear a moderate gold interest. This is unnecessary, and would be taken advantage of by the gold gamblers. The currency bonds of the United States Government to-day bear a large premium over the gold bonds, simply because they possess a slight advantage in point of the time they have to run. It may be, however, that, if the public note was properly instituted (made a full legal tender and sustained by a bond), it would practically make no difference whether the bonds of the government were payable both principal and interest in gold or legal tender notes. This view is held by many eminent persons. The Hon. Francis W. Hughes, of Pennsylvania, a distinguished leader in the democratic party, as well as one of the most profound lawyers in the country, in a speech at Scranton, Pa., in October, 1875, in discussing this point, said :
“ What better system could be devised and what better guarantee could be afforded, that our paper legal tenders will always remain equal to par with gold, than that whenever there shall be an excess of currency it can and will go into government bonds payable in gold. I say gold, because I regard it as immaterial whether under such a system the bonds be payable in gold or not—either way they can be made, as now, better than gold. Our government bonds sell at 20 and 24 per cent. above par in our partial legal tender currency, and from three to eight per cent. above par in gold. Did our government not discredit our greenbacks by refusing to take them for duties on imports, and did it not thereby make a market for gold, the paper legal tenders would have always remained at par with gold. The $60,000,000 of full legal tenders first issued remained at par with gold, when the latter was as to partial legal tenders at a premium of 285. Let the bonds be payable in gold, and what then ? Why, whenever the issue of legal tenders is in excess of the wants of business, by a law of its own nature as fixed as the law of gravity, such excess of currency will go back into such gold bonds. Can such legal tenders ever get below par in gold ? Never, so long as government bonds shall be at a given rate of interest. Let experience determine this. I believe that under such a system the government credit would be so assured that 3.65 bonds, as have been proposed, would go above par in gold. In such case the interest should be less. Let results determine the proper rate of interest, or, if need be, perhaps some functionaries under careful guards, might be authorized to lessen or increase the rate of interest. This is a subject for legislation, and from the many suggestions that have been made a proper method can readily be adopted.” * * *
“ It is not proposed to abolish gold as a legal tender. Whether as an article of merchandise or as a coin, let us have the benefit of it to the extent we may. But let us also have a NATIONAL CURRENCY. One that will not keep us involved in European money complications, but secure to us perfect independence therefrom.”
The following is Mr. Greeley’s editorial :
HOW TO REDUCE THE INTEREST OF THE NATIONAL DEBT.
“ Mr. Boutwell’s plan of funding the national debt has had a pretty fair trial. True, the times have been adverse, but we have generally found them so when we needed to borrow money.
The sum and substance of the Secretary’s success is the funding of $200,000,000 at 5 per cent. on the payment of the bonus of 1½ per cent. to the syndicate of foreign bankers who have agreed to take the loan. We would not disparage this achievement, for we regard it as decidedly better than nothing. Add to the interest ($3,000,000) $1,000,000 more for the aggregate cost of printing the new bonds, advertising, explaining and commending the loan, and the entire cost of funding the $200,000,000 at 5 per cent. for ten years is $4,000,000. It seems to me that this does not justify a hope that our $1,500,000,000 of instantly or presently redeemable sixes can be promptly funded even at 5 per cent.
Having given to the Secretary’s efforts a hearty support throughout, we urge that a radically different plan may next have a fair trial. Before we send another bond abroad to be hawked from banking house to banking house throughout Europe, we ask the government to try—just earnestly to try—to fund the bulk of our debt at home. We could not have sold our bonds during the dark hours of our civil war to Europe at any price, no matter how ruinous, if we had not first shown our faith in them by taking hundreds of millions of them ourselves. So now, having seen how reluctantly they take our reissues at 5 per cent., with a discount, let us show them that we stand ready to take a larger amount at a lower rate of interest at par. Here is the gist of our proposition.
Let Congress make our greenbacks fundable, at the pleasure of the holder, in bonds of $100, $1,000 and $10,000, drawing interest at the rate of one cent per day on each $100 (or 3.65 per annum), and exchangeable in greenbacks at the pleasure of the holder. Now authorize the Treasury to purchase and extinguish our outstanding bonds so fast as it is supplied with the means of so doing by receipts of customs or otherwise, and to issue new greenbacks whenever larger amounts shall be required, every one being fundable in sums of $100, 1,000 or $10,000, as aforesaid, at the pleasure of the holder, in bonds drawing an annual interest of 3.65 in coin per annum, and these bonds exchangeable into greenbacks whenever a holder shall desire it.
The benefits of this system would be these :
1. Our greenbacks, which are now virtual falsehoods, would be truths. The government would pay them on demand in bonds as aforesaid, which is in substantial accordance with the plan on which the greenbacks were first authorized.
2. Every person having greenbacks for which he had no present need would present them at some Sub-Treasury and exchange them at par for these bonds. Suppose he had $10,000 which he expected to use a month hence, he can make them earn him $30 meantime, without incurring the smallest danger of loss by bank failures or otherwise, and, with a positive certainty that the money would be ready for him whenever he chose to take it.
3. A merchant leaves New York with a million of dollars which he proposes to invest in wheat at the West or in cotton at the South. He calls at our Sub-Treasury, exchanges his greenbacks for these bonds, and takes or sends these to Chicago, Saint Paul, New Orleans, or Galveston, to be exchanged for use when needed. After looking about for a month, he buys half the produce he originally intended ; converts half his bonds into greenbacks, receives $50 per day or $1,500 in all, as interest, and makes his payments. After traveling and looking for another month, he invests the remainder of his capital, receives $3,000 as interest thereon for the two months he has held the last half million of bonds, and lays his course homeward. His bonds may have lain nearly all the time he owned them in the vaults of some bank ; but they were earning money, not for that bank but for him.
4. Our greenbacks, no longer false, but convertible at pleasure into bonds bearing a moderate gold interest, and exchangeable as aforesaid, could not fail to appreciate steadily until they nearly reached the level of gold. Indeed, they would, unless issued too profusely, be really better than gold. Drawing a higher rate of interest than British consuls, and convertible at pleasure, as these are not, they would in time obtain currency even in the Old World.
5. The trouble so inveterately borrowed by thousands with respect to over-issues, redundant currency, etc., would (or at least should) be hereby dispelled. If there were at any time an excess of currency, it would tend to precipitate itself into the bonds aforesaid. If there should ever be a scarcity of currency, bonds would be exchanged at the Treasury for greenbacks till the want was fully supplied. Black Fridays and the locking up of greenbacks would soon be numbered with lost arts and hobgoblin terrors.
6. Though the demand for these bonds might for months be moderate, their convenience and manifest utility would soon diffuse their popularity and stimulate an ever widening demand for them. They would be a favorite investment with guardians and trustees who would expect to be required to pay over the funds held by them at an early day, whether fixed or uncertain. They would say, though I might invest or deposit these funds where they would command a higher interest, I choose to place them where I know they will be safe and at hand when called for.
7. Ultimately, we believe they would become so popular that hundreds of millions of them would be absorbed at or very near the par of specie, and that with the proceeds an equal amount of our outstanding sixes might be redeemed and cancelled, without advertising for loans or paying bankers to shin for us throughout Europe. The interest thus saved to our country would be an important item.
Such are the rude outlines of a plan which we did not originate, but which we heartily endorse. Why not give it a trial ? We should dearly like to inform Europe that, since she seems not to want any more of our bonds at 5 per cent., we have concluded to take the balance ourselves at 3.65.”
THE LEGAL TENDER BILL AS IT PASSED THE HOUSE OF REPRESENTATIVES.
The following is a copy of the principal sections of the first legal tender bill as it passed the House of Representatives, February 6, 1862 :
“ An Act to authorize the issue of United States notes, and for the redemption funding thereof, and for funding the floating debt of the United States.
SECTION 1. Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled : That to meet the necessities of the Treasury of the United States, and to provide a currency receivable for the public dues, the Secretary of the Treasury is hereby authorized to issue, on the credit of the United States, $150,000,000 of United States notes, not bearing interest, payable to bearer at the Treasury of the United States, at Washington or New York, and of such denominations as he may deem expedient, not less than five dollars each. Provided, however, that $50,000,000 of said notes shall be in lieu of the demand Treasury notes authorized to be issued by the Act of July 17, 1861 ; which said demand notes shall be taken up as rapidly as practicable, and the notes herein provided for substituted for them : And provided, further, that the amount of the two kinds of notes together, shall, at no time, exceed the sum of $150,000,000. And such notes, herein authorized, shall be receivable in payment of all taxes, duties, imports, excise, debts and demands of every kind due to the United States, and for all salaries, debts and demands owing by the United States to individuals, corporations and associations within the United States, and shall also be lawful money and a legal tender, in payment of all debts, public and private, within the United States. And any holders of said United States notes, depositing any sum not less than $50, or some multiple of $50, with the Treasurer of the United States, or either of the Assistant Treasurers, shall receive in exchange therefor duplicate certificates of deposit, one of which may be transmitted to the Secretary of the Treasury, who shall thereupon issue to the holder an equal amount of bonds of the United States, coupon or registered, as may by said holder be desired, bearing interest at the rate of six per centum per annum, payable semi-annually, at the Treasury or Sub-Treasury of the United States, and redeemable at the pleasure of the United States, after twenty years from the date thereof. Provided, that the Secretary of the Treasury shall, upon presentation of said certificates of deposit, issue to the holder thereof, at his option, and instead of the bonds already described, an equal amount of bonds of the United States, coupon or registered, as may by said holder be desired, bearing interest at the rate of seven per cent. per annum, payable semi-annually, and redeemable at the pleasure of the United States, after five years from the date thereof. And such United States notes shall be received the same as coin, at their par value, in payments for any loans that may be hereafter sold or negotiated by the Secretary of the Treasury, and may be re-issued from time to time, as the exigencies of the public interests shall require. There shall be printed on the back of the United States notes, which may be issued under the provisions of this act, the following words : ‘ The within is a legal tender in payment of all debts, public and private, and is exchangeable for bonds of the United States, bearing six per centum interest at twenty years, or in seven per cent. bonds at five years.’
§ 2. And be it further enacted, That to enable the Secretary of the Treasury to fund the Treasury notes and floating debt of the United States, he is hereby authorized to issue, on the credit of the United States, coupon bonds, or registered bonds, to an amount not exceeding $500,000,000, and redeemable at the pleasure of the Government, after twenty years from date, and bearing interest at the rate of six per centum per annum, payable semi-annually ; and the bonds herein authorized shall be of such denominations, not less than fifty dollars, as may be determined upon by the Secretary of the Treasury ; and the Secretary of the Treasury may dispose of such bonds at any time for lawful money of the United States, or for any of the Treasury notes that have been, or may hereafter be, issued under any former act of Congress, or for United States notes that may be issued under the provisions of this act ; and all stocks, bonds, and other securities of the United States, held by individuals, corporations, or associations, within the United States, shall be exempt from taxation by any State or county.
§ 3. And be it further enacted, That the United States notes and the coupon or registered bonds, authorized by this act, shall be in such form as the Secretary of the Treasury may direct, and shall bear the written or engraved signatures of the Treasurer of the United States, and the Registry of the Treasury, and also as evidence of lawful issue, the imprint of copy of the seal of the Treasury Department, which imprint shall be made under the direction of the Secretary, after the said notes or bonds shall be received from the engravers, and before they are issued ; or the said notes and bonds shall be signed by the Treasurer of the United States, or for the Treasurer by such persons as may be especially appointed by the Secretary of the Treasury for that purpose, and shall be counter-signed by the Register of the Treasury, or for the Register by such persons as the Secretary of the Treasury may especially appoint for that purpose ; and all the provisions of the act entitled “ An act to authorize the issue of Treasury notes,” approved the 23d day of December, 1857, so far as they can be applied to this act, and not inconsistent therewith, are hereby revived and re-enacted ; and the sum of $300,000 is hereby appropriated out of any money in the Treasury not otherwise appropriated, to enable the Secretary of the Treasury to carry this act into effect.”
Two penal sections (§ 4 and § 5) were adopted as part of this bill, to guard against counterfeiting, but it is not important to insert them here, as they do not affect the principles of the bill.
THE LEGAL TENDER ACT AS IT FINALLY PASSED BOTH HOUSES AND BECAME A LAW.
“ An Act to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States.”
Be it enacted by the Senate and House of Representatives of the United States in Congress assembled, That the Secretary of the Treasury is hereby authorized to issue on the credit of the United States one hundred and fifty millions of dollars of United States notes, not bearing interest, payable to bearer, at the Treasury of the United States, and of such denominations as he may deem expedient, not less than five dollars each.
Provided, however, that fifty millions of said notes shall be in lieu of the demand Treasury notes authorized to be issued by the act of July 17th, 1861, which said demand notes shall be taken up as rapidly as practicable, and the notes herein provided far substituted for them ; and
Provided further, That the amount of the two kinds of notes together shall at no time exceed the sum of one hundred and fifty millions of dollars ; and such notes herein authorized shall be receivable in payment of all taxes, internal duties, excises, debts and demands of every kind due to the United States, except duties on imports, and of all claims and demands against the United States of every kind whatsoever, except for interest upon bonds and notes, which shall be paid in coin ; and shall also be lawful money and a legal tender in payment of all debts, public and private, within the United States, except duties on imports and interest as aforesaid ; and any holder of said United States notes depositing any sum not less than fifty dollars, or some multiple of fifty dollars, with the Treasurer of the United States, or either of the Assistant Treasurers, shall receive in exchange therefor duplicate certificates of deposit, one of which may be transmitted to the Secretary of the Treasury, who shall thereupon issue to the holder an equal amount of bonds of the United States, coupon or registered, as may by said holder be desired, bearing interest at the rate of six per centum per annum, payable semi-annually, and redeemable at the pleasure of the United States after five years, and payable twenty years from the date thereof ; and such United States notes shall be received the same as coin, at their par value, in payment for any loans that may be hereafter sold or negotiated by the Secretary of the Treasury, and may be re-issued from time to time as the exigencies of the public interests shall require.
§ 2. And be it further enacted, That to enable the Secretary of the Treasury to fund the Treasury notes and floating debt of the United States, he is hereby authorized to issue on the credit of the United States coupon bonds or registered bonds, to an amount not exceeding five hundred million dollars, and redeemable at the pleasure of the United States after five years, and payable twenty years from date, and bearing interest at the rate of six per centum per annum, payable semi-annually ; and the bonds herein authorized shall be of such denomination, not less than fifty dollars, as may be determined upon by the Secretary of the Treasury ; and the Secretary of the Treasury may dispose of such bonds at any time at the market value thereof, for lawful money, the coin of the United States, or for any of the Treasury notes that have been, or may hereafter be, issued under any former act of Congress, or for the United States notes that may be issued under the provisions of this act ; and all stocks, bonds, and other securities of the United States held by individuals, corporations or associations within the United States, shall be exempt from taxation by or under State authority.
§ 3. And be it further enacted, That the United States notes and the coupon or registered bonds authorized by this act shall be in such form as the Secretary of the Treasury may direct, and shall bear the written or engraved signatures of the Treasurer of the United States and the Register of the Treasury, and also, as evidence of lawful issue, the imprint of a copy of the seal of the Treasury Department, which imprint shall be made under the direction of the Secretary, after the said notes or bonds shall be received from the engravers, and before they are issued ; or the said notes and bonds shall be signed by the Treasurer of the United States, or for the Treasurer, by such persons as may be specially appointed by the Secretary of the Treasury for that purpose, and shall be countersigned by the Register of the Treasury, or for the Register, by such persons as the Secretary of the Treasury may appoint for that purpose ; and all the provisions of the act entitled ‘An act to authorize the issue of Treasury notes, approved the twenty-third day of December, eighteen hundred and fifty-seven, so far as they can be applied to this act, and not inconsistent therewith, are hereby revived and re-enacted ; and the sum of three hundred thousand dollars is hereby appropriated, out of any money in the Treasury not otherwise appropriated, to enable the Secretary of the Treasury to carry this act into effect.
§ 4. And be it further enacted, That the Secretary of the Treasury may receive from any person or persons, or any corporation, United State notes on deposit for not less than thirty days, in sums of not less than one hundred dollars, with any of the assistant treasurers or designates depositaries of the United States authorized by the Secretary of the Treasury to receive them, who shall issue therefor certificates of deposit, made in such form as the Secretary of the Treasury shall prescribe, and said certificates of deposit shall bear interest at the rate of five per centum per annum ; and any amount of United States notes so deposited may be withdrawn from deposit at anytime after ten days’ notice on the return of said certificates ; Provided, that the interest on all such deposits shall cease and determine at the pleasure of the Secretary of the Treasury ; and Provided further, that the aggregate of such deposits shall at no time exceed the amount of twenty-five million dollars.
§ 5. And be it further enacted, That all duties on imported goods which shall be paid in coin, or in notes payable on demand, heretofor authorized, to be received and by law receivable in payment of public dues, and the coin so paid shall be set apart as a special fund, and applies as follows :—
First—To the payment in coin of the interest on the bonds and notes of the United States.
Second—To the purchase or payment of one per centum of the entire debt of the United States, to be made within each fiscal year after the firs day of July, 1862 ; which is to be set apart as a sinking fund ; and this interest of which shall in like manner be applied to the purchase or payment of the public debt, as the Secretary of the Treasury shall from time to time direct.
Third—The residue thereof to be paid into the Treasury of the Unite States.
The penal sections (§ 6 and § 7), in relation to counterfeiting, etc., of no importance here, are omitted.
SPEECH OF HON. THADDEUS STEVENS IN THE HOUSE OF REPRESENTATIVES, DECEMBER 18, 1862.
WHEN Congress convened in December, 1862, the Hon. Thaddeus Stevens, Chairman of the Committee of Ways and Means, offered a bill similar to the original legal tender bill, which passed the House of Representatives, February 6,1862. This bill was intended to remedy the evils which had resulted from the partial legal tender act, but the money power raised a great hue and cry, and Mr. Stevens, finding that it was impossible to carry the measure, was forced to abandon it. His remarks upon the occasion were as follows :
Mr. STEVENS. I ask the gentleman from Maryland, (Mr. Crisfield,) who is entitled to the floor, to permit me to make a statement in reference to the national finances.
Mr. CRISFIELD. I yield to the gentleman for that purpose.
Mr. STEVENS. The bill which I introduced some days since, to provide means to defray the expenses of the government, produced a howl among the money-changers as hideous as that sent forth by their Jewish cousins when they were kicked out of the temple. It produced, what seemed to me, an unaccountable excitement in financial circles. This was caused, I suppose, by wrong information as to its origin, and a misunderstanding as to its object. This was partly the fault of letter writers, and partly the fault of stock-jobbing money editors. I perceive the money article of the Philadelphia Press, of Monday of this week, represents the bill as reported by the Committee of Ways and Means, notwithstanding the papers of last week stated its true origin. I suppose these money-article editors are some dishonest brokers who make gain by their misrepresentations. The bill, as all knew who wished to know, was introduced by me on my individual responsibility, on the call of the States, with the sole object, as I then stated, of referring it to the Committee of Ways and Means. Neither the Secretary of the Treasury nor the Committee of Ways and Means had ever been consulted with regard to it ; nor, although referred to them on motion of the mover, has it ever been considered by the committee.
So much for the origin of the bill.
Its contents and objects seem to be equally misunderstood or misrepresented.
It is known to this House that I do not approve of the present financial system of the government. When this Congress assembled a year ago, all the banks of the Union, as well as the government, had suspended specie payments. The last $50,000,000 of loan, which had been taken by the banks at a discount of $5,500,000, payable in coin, was no longer paid in anything but the currency of suspended banks. The immense expenses of the government, (from $2,000,000 to $3,000,000 daily,) were to be provided for. It was impossible to negotiate loans, except at a ruinous discount. The Committee of Ways and Means were expected to provide the means, without any suggestions from any quarter to aid them. After careful deliberation, the committee, or rather as it turned out, the one-half of them, determined to inaugurate a system of national currency consisting of legal tender notes, receivable in all transactions between individuals, and between individuals and the government, and convertible into bonds of the United States, bearing six per cent. interest, payable semi-annually in lawful money, and redeemable in twenty years in gold or silver coin. The issue of $150,000,000 of such notes was authorized, and of $500,000,000 of twenty years bonds.
The system was simple in its machinery, and easily understood. It formed a uniform currency, sustained by the faith of the government, and furnishing but one currency for all classes of people. It was believed that as the legal tender notes accumulated in the hands of bankers and capitalists they would invest them in six per cent. bonds, so as to realize a profit from their capital. The instinct of avarice and gain would never allow them to remain long idle. This conversion and reconversion would have absorbed the $500,000,000 within the fiscal year, and supplied all the wants of government. So long as the legal tender notes remained unconverted the government would have had the benefit of the circulation without interest. This was the plan of the committee. The currency has proved the most acceptable ever offered to the people. This was the condition of the bills as presented originally, and as they passed the House.
But the simplicity and harmony of this system were doomed to be mangled and destroyed as it passed through the Senate. They began by making two kinds of currency for the same community—a fatal mistake wherever it occurs. They provided that bonds issued as above stated should receive the interest in gold, while the interest of all other bonds should be payable in legal tender notes, thus producing at the outset a depreciation of the United States notes, and creating a demand for gold to be taken advantage of semi-annually by bullion mongers. Without such provision there would have been no demand for a single dollar of gold to be used in this country. If merchants wished to import goods beyond our exports, and that required gold, I should feel but little sympathy for them, whatever premium they were obliged to pay. Being unable to defeat this provision, I procured to be inserted a provision making the duties on imports payable in gold. This was to enable the government to meet the payment of interest in coin. That had one good and one bad effect. It increased our tariff some thirty per cent., but it compelled our merchants to go among the Shylocks to purchase coin to pay their duties. These combined provisions form a mine of wealth for brokers and bankers. The duties and interest will require $60,000,000 of gold annually, and soon double that amount. Now, our banks and brokers have scarcely that amount on hand. They may put the price as high as they please, it must be paid. Suppose the banks in our three great commercial cities to have just that amount. If half-yearly they sell the half of it to the government and merchants at thirty per cent., using the other half to the end of the year and then selling it, they would clear by this single operation thirty per cent. on their capital, and have all the profits of loans, on deposits, and currency circulation besides. The gold would return to their vaults, possibly, by the payment, of interest on the very bonds they held themselves, and so to be ready for the same operation at the next semi-annual payment, doubling their capital in three years. If a financial system which produces such results be wise, then I am laboring under a great mistake.
The next error was to change the twenty-year bonds into bonds redeemable at the option of the government in five years, and payable in twenty years. We all know these long loans sell much higher than short ones. But the most unsalable kind of bond is that payable in a short time if the obligor choose, or at any intermediate time up to a distant day at his option. Every man wishes to know when his investment will fall due, so as to know how to arrange for business for re-investment. The very uncertainty of the day of payment is a great fault ; hence our bonds sell some five per cent. lower than an absolute twenty-year loan would ; yet no one believes that we shall be able to redeem them short of that time. The only justification for this change would be the expectation of being able to pay in five years. He must be a very hopeful man who can indulge that idea.
Another change, which seems to me equally injudicious, was the allowing the holders of legal tender notes to deposit them with the government agent at interest not exceeding five per cent., and payable on call after ten days. This effectually destroyed the hope of any very speedy conversion of them into bonds. A holder of them would much prefer lending them on short call at a smaller interest, and wait for emergencies to speculate, than to fund them in government stock. The consequence is, that while $80,000,0.00 have been deposited on short loan, only about $20,000,000 have been invested in bonds. One singular feature of this provision is, that when $50,000,000 or more of these notes are thus borrowed by government, the Secretary of the Treasury shall keep on hand $50,000,000 of legal tender notes to meet the call, either by not issuing the amount authorized, or holding others. It is, in effect, the same as if the government agreed to take a loan of $50,000,000 at four per cent., and keep it in their vaults without use until the lender called for it ; in other words, paying four per cent. interest for the privilege of holding unused a special deposit. How these short loans and the pressing demands for other claims are to be paid, at least after all the greenbacks are once issued, I do not well see. Had they twenty years to run, I should feel easy. These are the objections which I have to the present system.
I will now briefly state the provisions of the bill which I introduced. It was intended to restore the law just to the condition in which it left the House of Representatives, and nothing more.
The first section provides that the Secretary of the Treasury shall pay off and cancel all the five-twenty bonds and all others whose interest is payable in gold, and to exchange new bonds for them on such terms as shall be agreed on, or pay them in legal tenders.
Certain money editors have professed to see in this a violation of public faith, which promised the payment in gold. Nothing is more false. It proposed to lift these bonds, by negotiating with the holders, at such rates as could be agreed on. If the holder declined to sell, he would be entitled to receive his interest in gold, according to the original contract. I suppose no man could be found in this House base enough to propose repudiation. None but a very stupid man could so misread the bill. True, it proposed to issue no more bonds of that kind, and repealed the law authorizing it. And yet it has been thought of sufficient importance gravely to introduce the resolution here declaring in advance that we intended to make no change in the law. What business has anybody to inquire whether in our future issue of bonds we intend to pay the interest in coin or legal tender ? It is enough for them to know that in contracts already executed the government will keep its faith.
It further proposed to pay off the legal tender interest-bearing deposits, and to repeal the law authorizing such loan. It has turned out just as the committee predicted ; that such demand loan has prevented the conversion to any considerable amount. While $80,000,000 of legal tender are deposited on call, but about $20,000,000 have been invested in bonds. It is obvious that at that rate the sale of bonds will aid but little in carrying on the war.
It proposes to repeal the law requiring the payment of duties in coin, as well as the interest on future issues of bonds, except one-fifth of the amount of duties. This is retained so as to furnish the government with coin to defray the foreign diplomatic and consular expenses, and the charges of our courts in foreign ports, and the costs of destitute seamen. Thus the whole currency needed in this country would be legal tender United States notes. The bullion mongers would lose ; the merchants and government would gain.
Having restored the law to its original shape, it proposes to raise money to pay the pressing debts due to depositors and gold-bearing bonds, the pay due soldiers, and other expenses, by issuing legal tender notes, not exceeding $200,000,000 beyond those already authorized, and to issue $1,000,000,000 of bonds, bearing six per cent. interest, payable semi-annually in lawful money, and redeemable in twenty years in coin. With $500,00,000 of legal tender notes in circulation, they would accumulate so fast with capitalists and banks that the holders would be glad to turn them to profit by purchasing the loans ; and I doubt not before the year would expire the whole $1,000,000,000 of bonds would be called for at par. In my opinion, with the present law this amount can never be sold except at ruinous discount. I believe that this disposes of the provisions of this bill, which were intended to restore the committee’s project, and which was sanctioned by a large majority of the House.
The balance of the bill refers to State banks, and imposes tax of fifty per cent. on all their circulation beyond one-half of their capital. This tax is obviously intended for prohibition, and not for revenue. I incline to think it should have taxed all above three-fourths, instead of one-half of the capital. The object of this provision was two-fold : first, to give a wider circulation to United States notes, and thus induce their conversion ; secondly, to prevent the undue inflation of the currency. I suppose that such a law would drive at least $100,000,000 of bank notes out of circulation, leaving about the same amount afloat. These, together with the United States notes, would give a circulation of $600,000,000. I believe the business of this country requires that amount. Before the rebellion the paper issues were over $200,000,000, and the coin was at least $300,000,000. I suppose what may properly be called the present circulation amounts to more than that sum. The checks which pass as currency in our large cities are as much a paper circulation as bank notes. They amount to some $200,000,000, I imagine, and almost entirely supersede bank notes in New York and Boston. When it was said that the currency necessary to do the business of Great Britain was near two billion dollars, the bank note circulation was less than four hundred millions. The rest was supplied by bills of exchange.
But in times of suspension of specie payments, banks will expand to an unlimited amount unless restrained by some national law. I can account for the present high price of everything in no other way than by such expansion or the expectation of it. I fear the true amount of present circulation is not ascertained. Take, as an example, a very sound, well-managed bank in my own district ; it has a capital of $320,000 ; it holds about $150,000 of United States six and seven-thirty per cent. bonds ; it has on short loan $250,000 legal tender ; it has $80,000 in coin ; and its circulation is $800,000. In an adjoining district a bank with $400,000 capital has more than its whole capital invested in United States loans, and has a circulation of $1,000,000. Such issues must inflate the currency. The people will run mad with speculation, and in a few years a general crash will follow. My proposition would not reduce bank profits below a fair gain. While suspension continues they might hold, as they now have, their whole capital in government stocks, bearing at least six per cent. per annum. They could have the profits of a circulation equal to three-fourth of their capital, and bank on whatever deposits they have. This would give them at least ten per cent. interest to pay their expenses ; and dividends to stockholders. This is enough.
But I ought perhaps to say, before I close, to my country banking friends that they need not be alarmed. There is no great prospect that we shall return to the system I have indicated, nor do much to protect the people from their own eager speculations. When, a few years hence, the people shall have been brought to general bankruptcy by their unregulated enterprise, I shall have the satisfaction to know that I attempted to prevent it.
Mr. Stevens’ views in regard to the defects of the partial legal tender system have been fully confirmed by fourteen years’ experience, and his predictions have been verified in a remarkable manner. Notwithstanding the defects of the system, however, and in spite of hostile legislation and the existence of the National Banks, it has proved immensely superior to the specie basis or bank currency system, which cursed the country for over half a century prior to the Rebellion, and which the bullionists and bankers are now seeking to re-establish. The people have been brought to the verge of bankruptcy by the machinations of the money power, and the interests of the nation demand that a full legal tender money system be now given a fair trial. This end can only be accomplished at the polls. The bullionists and bankers, and their tools, are already in the field, manipulating party conventions and caucuses all over the country, to carry out their designs. The masses must organize against them, throw party prejudice aside, and vote for no man for any official position, from the lowest to the highest, who is not known to be honestly in sympathy with the people’s cause, and in favor of full legal tender money.
Monthly Range of the Gold Premium for Fourteen Years.
The following table shows the lowest and highest prices of gold at New York, for each month in the last fourteen years. The left-hand column of each year shows the lowest price, and the right-hand column the highest.
FRENCH ASSIGNATS.
FRENCH Assignats and Continental money are ghosts, which have been conjured up to frighten the public by the bullionists and bankers, who wish to monopolize the right to furnish the circulating medium of the nation. The subject of Continental money was fully disposed of in the chapter, on Banks of the United States ; and a word of explanation in regard to French Assignats seems to be necessary. Thiers, in his life of the celebrated John Law, tells what Assignats were as follows :
“ Assignat was a name given to a peculiar species of paper money, issued during the first French revolution. * * The first issue of assignats was made on the security of the forfeited [confiscated Ecclesiastical] property ; and was adopted as a preferable alternative to throwing the forfeited lands on the market ; which, * * so large an amount of property would glut. The holder of the assignats might use them as money or claim the land which they represented.
“ The French revolutionary government wished to pay the debt of the monarchy and the expense of a universal war with the national property [confiscated church property], this property not being disposable, on account of the quantity and want of confidence, it anticipated the sale, and represented the results by papers called assignats. * * But as the success of the revolution began to be distrusted, and doubts arose as to the maintenance of the national sale, they declined, and, as they declined, the government, to supply the deficiency, in value, was obliged to double the issue, and the repletion contributed, with distrust, to depreciate them.”
Upon the overthrow of the revolutionary government and the formation of a responsible government, under Napoleon, the church property was restored to its lawful owners, and the assignats became worthless.
To compare the legal tender money of the United States to assignats, is simply an insult to the intelligence of the American people.
EXTRACTS FROM KELLOGG.
“ THE most fundamental and important truths in relation to the nature of money, have always been so covered up by the technicalities of law as completely to deceive the people respecting its true character, although they have always known and felt that there was something wrong in its power. Writers upon political economy, as well as the public in general, have taken it for granted that the laws of nations were right in founding the value of money in the innate value of the gold and silver metals out of which it was coined : hence the conclusions at which they must all arrive are just as false as the premises upon which they start. And political economists may continue to write and the public may continue to argue upon these premises for centuries to come, and be just as far from the truth as when money was instituted upon this basis. Notwithstanding this mystification about money, its true character and power are very simple, and need only to be clearly and fairly stated to meet the approval of the common mind ; and then the public must know that the present centralizing power of money is as gross an imposition upon the common sense of man, as it is upon the common rights of labor and property. For if the material of neither gold, silver nor paper money can in itself be used as food, clothing or shelter, then certainly the scarcity or abundance of money, or the scarcity or abundance of the materials of money, ought never in the least to interfere with a general and full supply of all the necessaries of life. For these necessaries of life are evidently the product of labor, and not the product of money. Yet the present power of money is such that the people are compelled first to work for money, and then to depend upon the power of money to supply the necessaries of life. Thus the power of money is first, and the power of labor is second. The money commands the labor instead of labor commanding the money. This is exactly reversing the true order of things, for it is making a dead centralizing power to rule and tyrannize over the living, productive power, whereas the productive ought always to command the unproductive power. If any writers upon political economy, or any financiers, have discovered the true nature, power and use of money, they have not made such discovery manifest to the understanding of the public. For the laws of nations, as well as the newspapers and other publications of the day, are still carrying forward and enforcing the idea that money is a productive, living power. Yet the power of money is entirely a dead power, and totally unproductive, notwithstanding its legal, accumulative powers.”
“ THE avarice that pervades the civilized world has been ingrafted upon society by the too great power of money. In most countries it has made production by labor degrading to the child whose necessity compels him to perform it. The skill to gain by lending money, and by taking advantage of others in bargaining, has been, and is taken as evidence of superior talent, until, by example and precept, avarice has been instilled into the minds of children. It has grown with their growth and strengthened with their strength until it has corrupted the very foundations of society. The per centage incomes on bank, railroad, State, and other stocks, and the rates at which money can be borrowed and lent, are the great leading topics of a business community. The topics are not, How shall we contrive to produce by our labor the greatest supply of all the necessaries of life for the general good ? but, on the contrary, How shall we contrive to get the largest possible per centage income with the least possible production on our part ? This state of society is directly at variance with such a one as a just monetary system would naturally induce. It is as much opposed to the natural rights of society as falsehood is to truth ; and no continuance of competition in production or distribution, under the present monetary laws, will be any more likely to remedy the evils of this debasing system, than competition in falsehood would be likely to produce and sustain truth. We must begin improvement by doing away the great gain by unrighteous per centage interest on money ; and then the wealth will naturally be widely distributed among those who do the most for the good of man, instead of being gathered in by a few, who thus become the great oppressors of the human family.”