Finance And Currency

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Finance And Currency

Congressman Benjamin F. Butler, Massachusetts
Address to the United States House of Representatives, Tuesday, January 12, 1869

Mr. Speaker, the currency of a highly commercial, expanding, industrious, and productive and free people, by which their values are measured and exchanged, should be uniform, sound, cheap, stable, and elastic.

Uniformity is that quality which gives the same value in every part thereof to the money of a country. This quality our present currency possesses in a sufficient degree of perfection.

Soundness may be defined as certainty that the currency is so secured that it can never fail of exchangeability for equal intrinsic values.

No American permits himself to doubt but that our legal tenders and national bank notes, secured by the pledge of public faith, guarantied by all the resources and power of the country, are to be made good to the extent of value printed on their face. Our present currency, therefore, possesses the quality of soundness for all purposes of internal business and trade.

As to cheapness, all financial writers agree that a paper currency is the cheapest of all possible mediums of circulation, whether as regards to the cost of its supply or of its wear and tear, or because of being non-producing capital while circulating from hand to hand. If gold and silver were used in its stead, or locked up as a basis for its redemption, they would be so much idle and dead capital doing duty as currency only, and the nation so using it would suffer the loss of interest on so much wasted capital. It is apparent that paper being but the sign or token of value yields no loss of interest upon itself as capital while used as currency.

While, therefore, in these particulars, our present currency is cheap enough, yet there is another sense in which that term is sometimes used in relation to money, but more properly to capital, which our present currency wholly fails to satisfy, and which it will be necessary to examine hereafter. I refer to the enormous price at which money or capital is now furnished to the consumer or user.

Stability of currency is, perhaps, the most important of all its attributes. It may be well enough defined as a quality of currency when used as a standard and measure of value which renders it unchangeable at all times as compared with itself. A measure of value should no more change than should the measure of length, quantity, or weight. It should be at all times one and the same. When all the property of a people is once adjusted to such a measure of value it is of comparatively little moment what that measure may be.

To illustrate: we have two measures of weight, the pound troy and the pound avoir-dupois. We find no special inconveniences in their use, as the classes of objects submitted to their measure have remained unchanged for many years, and are bought and sold with regard to the difference between them, which also is invariable. So as to length. It is at first the imperial yard of Britain or the metre of France as a measure of length, provided we maintain it unchanged.

In the sense in which we have defined stability our present currency is greatly deficient. This arises from the fact that instead of being an unvarying standard of value of itself it is continually measured by another standard, to wit, gold, which is itself variable. Further, our currency is still more fluctuated by empirical attempts, either of legislation or administration, on the one hand to increase its value by bringing it nearer to gold, or on the other by combinations of brokers and bankers to reduce or enhance its value for the purposes of speculation and unjust gain.

This variability in our legal tenders is yet more largely enhanced because of the law which provides that they shall not be received for the duties imposed by the Government on imports, which annually amount to forty-five hundredths of the whole currency in circulation. To buy this sum in gold, therefore, causes our lawful money to be used in fact as an article of merchandise or commodity, to be exchanged for gold, which, for this purpose, is the only legal value in the country.

If, on the contrary, the legal tender had been made revivable in payment of all public dues, whether internal or external, and the amount issued fixed by law had remained unchanged, without power in the Secretary of the Treasury by hoarding, funding, or retiring it to change its volume, it would then have become a fixed, permanent, and stable value, to which all the property of the country would have assimilated itself -- a standard not to be changed save by a law, of which change the whole country would have ample previous notice.

As its value as a standard would, in that case, have depended on the amount or value fixed by law, it is difficult to see why the currency might not be as unchangeable and unvarying a measure of the value of all property as the yard and pound the measure length and weight of all substances, are made invariable by legal enactment.

The term elasticity, as applied to currency, I will define as the power of contracting or expanding its volume, according to some known rule, to meet the necessities of its use in business, arising from its activity, its sluggishness, or from the needs of increased population.

At first thought this quality might seem opposed to the definition of stability which we have just given, but careful consideration will show that it is not so, as elasticity, as an attribute of currency, should pertain to it, not as a measure of value, but as a representative of active capital.

Stability is the fixedness of the volume of the currency as compared with property measured by it. Elasticity increases or lessens the volume determined by the necessities for its use. Elasticity is by no means synonymous with fluctuation, the latter being the increase or diminution of value of the currency at one time as compared with another; the former is the change of volume only as compared with itself.

To give an illustration from a sensible object: water is the most unstable, but the least elastic of substances.

A currency to meet this requirement of elasticity should have such capability of volume as to adapt itself to the highest needs of the internal business and commerce of the country, and at the same time such contractability as to adapt itself to the state of greatest depression without in either case affecting its soundness or stability or value. This quality of the currency is the element of its highest usefulness and safety as a circulating medium.

In nothing is our present currency more deficient. It has a limit fixed by law, beyond which it cannot go, however great the exigencies of the business of the country may be; it contains within itself no power of contraction when not needed. Its volume must then remain still the same, seeking investment and profit in speculation and adventure forced by the selfishness of bankers and capitalists.

Again, not being capable of expansion the unprincipled and adventurous capitalist can calculate exactly how much currency he must lock up at the time when it is most needed to bring about financial crisis and distress, and thus involve in ruin the unsuspecting and honest merchant and dealer, who is made the victim of unlawful combinations which he can neither foresee nor control. A deplorable example of this as a practical fact has taken place within a few weeks under our eyes, by which the managers of an insolvent railroad, in connection which certain banks, who should have been regulators instead of regraters of the currency, contrived to sequester some thirty millions, and thus to bring about a stringency in the money market, and a consequent depression in the public securities of some five per cent, in a single day, out of which the conspirators might realize large profits. This process of robbing the community may now be repeated at pleasure. A system of currency which permits its guardians, the banks which issue it, to thus sport which the public credit and oppress the merchant, depress the public funds, and unsettle the business of the country, is clearly defective, and it is the duty of Congress at once to provide the remedy for that defect.

We see, therefore, that our currency is uniform, cheap, and sound enough, but that it lacks stability from fluctuation and elasticity to accommodate itself to the changes in the demands of business. Our financial system has another great and overshadowing defect, controlling the prosperity and development of the industry and resources of the country.

When called into use as a representative of capital our money is enormously dear! Three hundred and fifty-six millions of it, not now taking into account the fractional currency issued by the Government, was at once fundable into gold-bearing bonds at six per cent., untaxable by State and municipal authorities, and as is lately claimed -- but without warrant of law -- untaxable by the Government itself; so that whoever uses it in his business must pay an equivalent of ten or eleven per cent. for its use. The remainder -- say $300,000,000 -- is issued to the banks by the Government, which pays some eighteen millions to them for the privilege of furnishing and indorsing it, cannot be obtained by a the consumer from the banks short of nine to ten per cent. interest, reckoning exchange and commissions, that he who uses it must pay. Out of the great cities, and away from the sea-board, the average rate of interest is at least twelve per cent.

In many sections of the southern States, on whose productions of the great staples, cotton and tobacco, as our chief exports to meet the balance of trade which is against us we must depend, money cannot be obtained at any price upon any security, and if got at all the average rates are twenty-four per cent. In view of this it will be seen the rate of interest became a matter of national importance as affecting our commercial relations with the other countries of the world. Cotton can be produced in Africa and India by the use of capital costing not more than four or at most five per cent. per annum, while the capital used in producing our cotton costs twenty-four per cent.; thus making a direct discrimination against our producer of twenty per cent., which of itself is to the foreigner a quite sufficient profit on the business.

The high rate of interest, which raises the value of all our productions, and the fixed limit to our currency, which is taken advantage of to produce financial panics and distress, imperatively demands the most prompt and efficient remedy. It can be neither denied nor delayed with safety or justice to our people as individuals, or to the country as a nation.

Impressed, as we are, with the necessity for some amendment of our financial system to effect these objects, still we must remember that every great or sudden change in the finances of the country has ever been, as it ever must be, the fruitful parent of panic, depression of business, paralysis of industry, and disaster. This consideration ought to circumscribe our actions within somewhat narrow limits.

The only comprehensive remedy for the infelicities of our currency and financial condition that has been proposed, so far as I know, is that we should resume specie payments at once or at some period more or less remote, or in other words, that we should return to the currency existing before the war, with the substitution only of the national for the State banks, i.e., that the Government should conduct its affairs by the receipt and payment of specie, and that the banks should have in their vaults one fourth of the amount of their circulation in gold, thus to be in condition to profess to pay specie for their bills when demanded, which should, therefore, be equal to gold. This, if it can be done, of course would bring every United States bond at once to par in gold, as well as all legal tenders, if the return to specie payment by the Government did not presuppose the substitution of gold for them. No one doubts that however soon or late such a change is effected it must cause the greatest depreciation of values in every species of property except debts held against the Government and individuals. Every bond and note would be appreciated, say thirty per cent.; all other property would be depreciated the same amount as compared with the present rate of valuation. Such an unsettling of values the world has never seen nor any nation endured. It would be equivalent to confiscation by legislative act of one third of the value of all the property in the country, excepting only that held by the creditor class.

The sole alleviation yet suggested is that such confiscation might be extended over a considerable period of time, say two years and a half, so that we might meanwhile be preparing ourselves for it; in other words, the Government ought to deprive the large majority of the middling and laboring class of its people of twelve per cent. annually of their values until one third of them are absorbed for the benefit of the small minority, who are owners of capital loaned at interest.

I will not insult the intelligence of the House by any argument upon the feasibility or practicability of these schemes. The better way to test them is to call attention to one or two of the methods by which it is proposed to accomplish so gigantic an undertaking. One says, "The way to resume specie payments is to resume." Suppose the physician should say to the sick man, "The way not to be sick is to be well," might not the patient ask his doctor how am I to get well? So, a few years ago, one may remember that the way proposed for the Union armies to get to Richmond was "On to Richmond;" and I trust I may not be considered as malicious in calling to mind that our armies found some difficulties in carrying out that suggestion, which resulted in such disaster that it was to be hoped those who blindly advocated it would never again dogmatize upon any subject the difficulties of which they neither appreciated or understood.

Another proposition, coming from a source we much respect, in some other of the branches of political science, is that we pass a law that specie payments shall be resumed on the 1st day of July next, but we are not told how the law is to be executed if passed. It was jocosely said many years ago that while an act of Parliament was omnipotent yet it could not make one's uncle his aunt. I fancy there would be an equally insuperable difficulty in compelling by act of Congress the payment at par of $700,000,000 of debts due on demand when there are but $100,000,000 capable of being used for that purpose.

Another learned, able, and intelligent gentleman, for whom we all entertain the highest regard, in a speech of great power, supports a bill embodying a plan for the relief of our financial difficulties which would be perfect were it not impossible. Stripped of the halo thrown around it by his logic and learning it proposes that the Government and banks shall return to specie payments by hoarding gold enough with which to do it. Granted; but how is the gold to be got? By borrowing simply. For although the Government may hoard the gold it receives for its duties on imports, yet that gold is in fact obtained by its merchants by borrowing it with Government notes at thirty-five per cent. discount. Whatever deficit of gold to carry out this scheme cannot be obtained by this process is to be borrowed on the Government notes for thirty years, sold at such rate of discount as foreign bankers may choose to impose. Now, specie payments, if they can be maintained, it will be admitted, will make all our public debt with its high rates of interest equal to par, if not at a premium in gold. The fault in the plan seems to be that we are not told how many greenbacks we must sell at thirty-five per cent. less on their face, and how many bonds we must negotiate at a like rate of discount on thirty years, to place ourselves in condition to pay both greenbacks and the bonds, which we thus sell at par. Differential calculus might work out the problem, but plain arithmetic is entirely inadequate to the task. Besides, as upon the best authorities there are only about fifteen hundred millions of specie currency in circulation in all the nations where our bonds have been or will be taken as an investment, or, indeed, in the civilized world, if we should succeed in locking up $350,000,000 of that, or twenty per cent. of the whole currency of the world, should we not make what in technical phrase is known as a "corner" on the rest of mankind, in comparison with which the late performance in that line of the Erie railroad and New York bankers would sink into merited insignificance?

Again, suppose by this ingenious and novel process of borrowing we were to return to a "state of solvency" -- to use the phrase of those who insist that our "legal tenders are depreciated, failed paper," because not paid on demand -- i.e., return to specie payments, to the state of currency before the war, could that condition be maintained?

It will be remembered that before the war the Government received all its dues and paid all its expenditures in gold and silver only, amounting to from sixty to seventy millions yearly received and paid out, and there were in the country, as is estimated, some two hundred to two hundred and fifty millions of specie, exclusive of what was hoarded, although in 1860 there were but $87,000,000 in the banks.

It cannot have been forgotten that such use by the Government of specie to do its business say one dollar of four caused great financial distress whenever any considerable accumulation of it lingered in the vaults of the Treasury, insomuch that the Secretary of the Treasury, on more than one occasion, was implored by the merchants to set free the gold even by buying United States bonds at thirty-two per cent. premium, which was done to avert a financial crisis. The learned gentleman upon whose scheme I am commenting, if I understand him, proposes that there shall be introduced into the country for circulation some three hundred and fifty million dollars, which we may believe to be a large estimate, exclusive of the amount hoarded, which, for obvious reasons, is and will for a long time be greater than before the war.

The receipts and expenditures of the Government must now be annually say $350,000,000, or a sum quite equal to all the gold assumed by this plan to be in the country. If before the war the use by the Government of one dollar in four, while it left the other three for banking purposes, unsettled the business of the country, what must be the effect of the use by the Government under this plan of every dollar of specie in circulation, leaving nothing for commercial purposes, if we have a currency based on specie?

Time will not permit to me further examination of this and cognate plans for the resumption of specie payments. If a return to specie values is the only remedy for our financial evils, then there is but one plan, in my judgment, by which it can be accomplished: we must wait and grow to it. By the industry and economy of our people; by the development of our resources; by the enterprise of our business; by the extension of our commerce; by the production of the precious metals; by reducing importations, the only method by which we can keep specie at home; by retrenchment of the expenses of government, both State and national; by the relinquishment of all hazardous and doubtful enterprises, we must accumulate sufficient surplus wealth to bring back the $600,000,000 of our national bonds held abroad, to which may be added an equal like amount of State and railroad bonds also held there, and thus stop the annual drain of more than seventy millions of bullion now sent abroad year by year to meet interest alone. When this is done we may with wisdom return to specie values and specie payments without serious financial disaster and commercial ruin. But this time will come only when gold and silver from the plentitude of its production will have depreciated to our values, not we appreciate them to the present value of gold and silver.

But while we wait the effect of our increase of wealth in bringing us back to specie values what shall be done to remedy the financial evils from which we suffer so much, that even now a commercial panic is upon us? The questions still return to us, what meanwhile shall be the currency of the country? what can we do by legislation to insure its stability and give it elasticity? and how can we reduce the rate of interest on the public debt and thereby lessen commercial interest, so that we can cheapen our productions to compete with those of other nations of the world?

Appreciating the magnitude of these topics, fully aware of the difficulties that bristle around the adjustment of such questions, with great diffidence as to the full comprehension of the details to be cared for, with entire deference to the matured opinions of others, and after careful thought and full examination of the subject, I have ventured to offer in the bill I have submitted to the House several propositions which I believe if adopted will mitigate the evils of our present financial system, and which I humbly hope may have at least merit enough to evoke discussion, so that the wisdom of Congress may speedily mature some legislation to meet the wants of the country, and to assure if not to heighten that degree of prosperity in business which the people have enjoyed since the passage of the legal-tender act of 1862. In attempting this I have avoided everything which shall give shock to our present finances or materially change the values of property or the relation of debtor and creditor, whether public or private.

Observing that the amount of legal-tender notes now issued by the Government -- say $350,000,000 -- are very nearly equal the amount of the taxes and duties to be necessarily collected by the Government for a series of years to meet our expenditures -- at least the variation is not material for my purpose -- I propose that, retiring the present legal tenders without shock to the business of the country in the manner hereafter to be explained, the Government shall issue an amount equal to its taxes, say $350,000,000, of certificates of value, of convenient denominations, not less than one dollar, which shall be lawful money and legal tender for all debts, public and private, which, by the law creating them are not made payable in coin, and shall be receivable for all taxes, duties, and imposts of every kind whatsoever, to be reissued at pleasure under the conditions hereafter set forth or in payment of the debts of the United States, and which shall be received for all public loans made to the United States.

It will be convenient here to explain the changes suggested in this certificate of value from the present legal tender note. I propose that the paper money of the Government shall be a "certificate," with appropriate vignettes, to prevent counterfeiting, in form like bank notes, stating its value only upon its face, with the provisions of law creating it, instead of as now a note promising to pay a certain sum at the Treasury of the United States, which is by law to be paid only in another like it, so that no stupid person hereafter, in order to depreciate the currency and have an opportunity to declare it "failed paper," shall present it for payment to the Treasurer of the United States expecting it to be redeemed in any other manner than is provided by law and stated upon its face.

In providing for the certificates to be legal tender I have avoided undertaking, by legislative action here and now, to decide the mooted question whether the principal of a portion of the public debts is payable in coin; not desiring to complicate this, which should be a measure of instant relief, with the discussions incident to that very grave legal question which may hereafter have to be decided either at this bar or in the courts or in the higher and more potent tribunal of the judgment of the whole people.

The most important and only other difference will be seen to be that this money is to be received for all taxes, whether collected from external commerce or internal revenue. It is difficult to see why the Government ever should have established two kinds of lawful money in which to do its own business, and, stranger still, enact one only for its citizens.

I assume that the change will at once bring this lawful money of the United States nearer to gold -- will very considerably diminish, if not entirely prevent, the operations of the gold room and the nefarious pursuits of the gold gamblers. Gold and silver will then take place as commodities to be exchanged abroad according to their value in weight as merchandise. Indeed, a moment's reflection will convince any man that this has always been the case when gold is used in kind for the payment of foreign debts.

One principal argument in favor of a currency based on specie has been that our currency ought to be of the same value as the currency or the world -- as the phrase is -- in order that we may be able to pay our foreign debts in our own coin. But in fact our coin is never used abroad at the value we have stamped upon it or for payment of foreign debts. It is always reduced to the value of so many ounces of gold of a certain fineness and exported as bullion, a convenient and safe form of merchandise against which bills of exchange may be drawn, and that value fluctuates very materially in different countries. As an example, take Japan, where the standard of value is silver. In 1857 our consul at Simoda, Mr. Townsend Harris, informs us that gold is only as one to three and a half in silver, while with us it holds by law, as a part of our specie standard, the rate of about fifteen and a half to one; i.e., in Japan three and a half ounces of silver would purchase an ounce of gold, while in America it took fifteen and a half ounces of silver to purchase an ounce of gold. How, then, can it be said that gold is the standard of value of the world, when in one country which absorbs large amounts of our specie it stood depreciated in comparison with silver at our standard at nearly eighty per cent., and it is not the standard of value in either of the great commercial countries save England?

The experiment of issuing money based on taxes alone as its redeemable value has been tried to a small extent at an early day in this country. Soon after the Revolution North Carolina, having no money, for the convenience of her people issued, say, $500,000 in State notes, receivable in payment of taxes. Of course, she could not make them legal tender. Although her annual taxes were only about two hundred thousand dollars, these notes at once took their place at par value, and became, in practice, convertible into gold, although no man could demand gold for them. They thus remained until they were gradually worn out or absorbed, no new issue being authorized, and the bills of the State banks took their place.

I assume that these "certificates of value" as a circulating medium will at once take their place as nearly equivalent to gold. They will be redeemed in the payment of taxes every year. I do not mean to say that each individual piece of paper would be redeemed, but an equal amount. There is an objection to them as compared with the present greenback, and that is the Government would have to procure gold to meet its interest and pay the difference between the gold and the certificate.

But let us here reflect a moment that the gold now paid for customs duty is obtained by the merchant borrowing it upon the Government's note at thirty five per cent. premium, and it is very clear that the difference between the proposed certificate of value or greenback and gold would in the future be much less. I have also endeavored to find a compensation for this loss to the Government, as will be hereafter seen.

It may further be objected that making these certificates revivable for duties insomuch as they may be below the par of gold would to that extent reduce the percentage of the tariff. This, if an evil, would soon cure itself. Any considerable increase of importation by calling for more currency to pay the duties would enhance the price of that currency, and therefore bring it quite up to gold. Besides, as the act is to go into operation at a future day, if it were supposed there would be any appreciable difference between the value of the certificate and gold, then importations would be held up until that time, when the sudden influx would materially enhance the value of the currency to pay duties.

My next proposition is to take from the national banks all power to issue notes to circulate as money, leaving them as they are now, banks of deposit, loans, and discounts, but not of issue; of course to be relieved from all taxes on circulation.

It is evident that the $350,000,000 of "certificates of value" above proposed circulating as money would not be a sufficient amount of currency for the business purposes of the country; therefore I propose to throw open the present privilege which the banks have of obtaining money from the Government to every man or association of men who can furnish precisely the same security that the banks now do for the money so received from the Government. Or, in other words, that every owner of a Government bond paying six per cent. interest in coin may go to any public depository in the United States, and, lodging it there as security, shall receive "certificates of value," i.e., greenbacks, to the amount of ninety per cent. of the par thereof, to be at his pleasure reconverted into his bond at any time after thirty days, he paying to the Treasurer for the money he receives at the rate of .0365 interest per annum in coin thereon until he returns a like amount of certificates to the Treasury, when he shall receive back his bond. Assuming $1,750,000,000 of six per cent. bonds to be outstanding, and every one should be presented to the Treasury and currency demanded, would give $1,575,000,000, being ninety per cent. thereof, as a possible amount of currency to be issued.

The first objection striking the mind is that this amount would make the currency by far too redundant. Would or could the business of the country need so much? It can safely be admitted that so much currency would not be needed and in practice no such sum would or could be taken. A large portion of these bonds are held abroad and would not return until more valuable here than there. Another large portion held for purposes of investment would not be tempted to be taken therefrom without a very large difference between the rate of commercial interest and the rate at which it was obtained from the Government; the controlling limitation in practice on the issue of this currency would be the rate of interest paid to the government for it. The owners of this species of capital will never pledge it to the Government or anybody else for money at 3 65/100 per cent. on ninety per cent of its value unless that money could be safely and profitably invested as productive capital, or, in other words, unless the business needs of the country actually required it for its profitable and successful prosecution. In that case, and for that purpose, it is difficult to say why the currency should not be extended so as to meet the necessities of the people when duly restrained by the rate of interest paid and the kind of security required for the issue of Government money. The rate of interest would act as a certain "regulator" or governor of the amount of the circulating medium.

As a currency it would be secured to the holder by the pledge of all the taxes, customs, wealth, resources, and power of the country. As capital loaned it would be secured to the Government by its own bonds at ten per cent. below their par value and 2 35/100 interest on the difference. How could it differ in value, except being better, from the bills of the national banks? It has greater ultimate security, because all customs duties are pledged for its redemption in addition to the internal taxes. It would have -- what the bank currency has not -- elasticity. Whenever it were wanted and the rate of interest rose, it would be taken from the Treasury and the interest would accrue to the Government; whenever it was not profitable for use to the holder, the rate of interest falling to 3 65/100 per cent., in gold, he would return his money and receive his bond, and the Government would have lost nothing by the transaction, but gained the intervening interest.

Assuming that over and above the $350,000,000 which it is provided the Government shall issue for its own purposes that an average of $500,000,000 should be found necessary to be used as money, then the Government would save $18,250,000 in gold interest upon that sum, or, in other words, be paying but 2 35/100 per cent. on $500,000,000 of its six per cent. indebtment; that, added to the $18,000,000 now paid to the banks as interest on the bonds they have deposited for their circulation, say $300,000,000, and six per cent. on the $100,000,000 now lying idle in the Treasury, the saving would be $42,000,000 in coin, instead of the loss by the present manner in which Government issues its money to the banks. If it be assumed that the Government, under the proposed system, would have to pay a margin between its certificates and gold to pay interest on its gold-bearing bonds, there surely in this saving would be found means to make up the difference.

If it be said that this currency will fluctuate, it is answered its only element of fluctuation in value is the fact that it may be increased or decreased by act of legislation. But we all know how difficult it is to get acts of legislation passed to alter the currency even when the country is suffering very grave evils.

It is not to be assumed that the Representatives of the people in both Houses of Congress will unite with the Executive wantonly and causelessly in legislation that shall unsettle the values and currency of the country.

I am quite willing to compare the fluctuation from legislation or the stability of this currency with the stability of a currency actually and exactly convertible into gold under the best circumstances in which such currency has ever been administered for a highly commercial and manufacturing people. I trust no one will complain if I compare this currency with the notes of the Bank of England.

By the act of 1844, known as Sir Robert Peel's act, the Bank of England was put upon an exact specie basis, i.e., no more notes could be issued than she had gold in her vaults to pay, in addition to those notes which experience had shown in no case of panic had or would come in for redemption; for beyond that amount the bank was not allowed to issue a single note without a corresponding amount of gold in the vaults of her issue department, and that amount of gold was to be kept there by altering her rate of discount, which it was claimed would, as it was raised or lowered, contract or expand the business of the kingdom.

In thirteen years and five months following that act, from September 7, 1844, to February 4, 1858, the bank altered her rate of discount fifty-six times, during which time she quintupled her rate of interest, raising it from two to ten per cent. on the best sixty-day commercial bills. Between April, 1857, and January, 1858, eleven changes in the bank rate of interest occurred; and in the year 1858 her rate of interest whiffled, like the weathercock, five times in five weeks. In addition she suspended specie payments twice, to wit, October 28, 1847, and November 9, 1857, and issued inconvertible bank paper, by order of the Government, to save all the merchants and banks of the kingdom from financial ruin, after many of them had failed; and in November, 1856, she refused all discounts at any price, even upon Government securities.

I shall hereafter trace a few of the more important fluctuations of the currency in our own country when upon a gold basis, and the memory of every business man will furnish many more. I will compare the probable, nay, the possible, fluctuations in value of the currency here proposed because of legislative influence with the fluctuations of our own currency when on a specie basis, or the changes in the value of money in England, where the bullionists must look for the most perfect exemplar of that system of convertible paper, back to the miseries which it causes they would fain force their country, and I am content, as the country will be content, to bide the comparison.

If objection is brought against the currency here proposed, either that it will encourage speculation or bring disaster upon mercantile business, or that the rate of interest paid for bank accommodation will be increased to the borrower in comparison with paper money always convertible into gold, I will not trust any argument of my own in reply, but will produce incontrovertible authority which no bullionist dare dispute.

The suspension of the Bank of England in 1847 caused a solemn parliamentary investigation of the workings of the financial system of paper convertible into gold at pleasure, which was most elaborately, impartially, and intelligently conducted; and I point to the conclusions of the report of the committee to the House of Lords as a truthful portrait of the effect upon business and the country of a currency based on and instantly convertible into specie. Hear the statement of the facts developed before that committee:

It is true that to those who may have expected that the 7 and 8 Vict., cap. 32, [Peel's act requiring the bank to keep specie to redeem her bills,] would effectually prevent a recurrence of cycles of commercial excitement and depression, the contrast between the years 1845 and 1847 must provide grievous disappointment.
To those who anticipated that the act would put a check on improvident speculation the disappointment cannot be less, if reliance is to be placed (as the committee are confident it may) on the statement of the governor of the bank and of other witnesses, that "speculations were never carried to such an enormous extent as in 1846 and the beginning of 1847."
If the act were relied on as a security against violent fluctuations in the value of money, the fallaciousness of such anticipation is conclusively proved by the fact that while the difference between the highest and lowest rate of discount was in the calamitous years of 1837 and 1839 but two and a quarter to two and three quarters per cent., the difference in 1847 rose to six and three quarters.
If it was contemplated that the number and the extent of commercial failures would have been lessened the deplorable narrative of the governor of the bank, recording the failure of thirty-three houses, comparatively in large business, in London alone, to the amount of $40,645,000, is a conclusive reply.
If the power of obtaining banking accommodation on moderate terms were considered to be promoted by the act of 1844 it cannot be said that this important object has been attained, since it appears in evidence that in 1847, in addition to an interest of nine or ten per cent., a commission was also frequently paid, raising the charge to ten, twenty, or thirty per cent., according to the time which bills had to run.

Does anybody believe that an inconvertible paper currency can do worse than that? "If so, for him have I offended."

Having given the distinctive features of the proposed system of currency I need not employ the time of the House long upon the details of its execution.

To prevent shock to business in making the change I would require the collectors of taxes on the first day of every month, beginning the 1st day of July next, to return to the public depositories all the legal-tender notes received by them in previous months, which should never be reissued, but instead, "certificates of value," as proposed, in payment of the expenses of the Government. I would also require a like return of all the bank notes collected for taxes, and they should continue to be received so long as any were offered, up to the 1st day of July next, at which time their receipt for internal taxes should cease. And upon all the amounts of bank notes so returned five per cent. interest shall be charged to the banks by the Government, and retained from the interest payable on the bonds by which the bills are secured until they are redeemed by the banks in certificates of value or in the three per cent. certificates issued in pursuance of the act of March 8, 1867, and the act of July 3, 1868, when an aliquot proportion of such securities shall be returned to the banks redeeming them.

After the 1st day of January the Comptroller of the Currency should charge to the banks five per cent. interest on all the bills heretofore issued to them not redeemed in the manner before stated, or, at the option of the bank, furnish instead thereof the certificates of value, based on bonds pledged for their redemption, the lawful money of the Government. If the national banks should not choose to receive money in lieu of their notes, then upon their return to the Treasury, the bonds lodged with the Comptroller of the Currency to secure them are to be returned.

Experience has shown that fractional currency, of which there is, say, $30,000,000 in circulation, is used only to the extent of the convenience of the people. It is now the practice of all countries wherein it is made of metal so to debase it in comparison with the standard of value as to prevent it being hoarded, exported, or used in the arts.

I would propose, therefore, for convenience of handling, that the fractional currency, instead of paper, should be in denominations of ten cents and upwards, composed of tokens in the form of silver coins heretofore used, made of silver alloyed with some of the metals to such extent as to prevent hoarding or exportation or use in the arts as metals, which should be issued in redemption of the fractional currency now in use, which paper fractional currency, after the 1st day of January next, should not be received except at the Treasury for exchange for the tokens herein described.

On and after July 1 the Government should be prepared to issue money in exchange for bonds as before set forth, and to allow the money so exchanged to be reinvested into the same bonds at the pleasure of the holder.

One, and a not inconsiderable advantage of this gradual but entire change in the currency of the country, certainly enough to pay all possible expense attending it, is the detection and extinguishment of all the forgeries of bank notes and fractional currency now in circulation. It is well known there is now, practically, no redemption of national bank bills. They are rarely or never returned to the bank that issued them for redemption, so that no test can be applied as to genuineness. Large amounts of them having been issued on the same dies and vignettes, counterfeiting has been greatly facilitated -- specially is this true of the fractional currency of the United States, which never comes back to the Treasury in any considerable quantities. But the exchange herein proposed would at once entirely extinguish the counterfeits now in circulation and render all the preparations, plates, and vignettes of the forgers useless and valueless.

It has been assumed that the reason our securities abroad do not command par is because we have not resumed specie payments here. In one sense that may be true; for if we resume specie payments, and were capable of continuing that resumption, our bonds would command par, because they would at once be sent home for sale, commanding a higher price here than abroad. But it seems to me that the defect of the reasoning which makes our bonds abroad less than par because our currency here is at a discount, is that it mistakes the effect for the cause, whereas the truth is that our currency is at a discount, because our bonds are selling at 74 in London to 78 in Frankfort. The price of the bonds abroad controls our currency here in its relation to gold, not our currency here controls the price of our bonds abroad. The mistake is in supposing that the worth of $2,000,000,000 of our interest-bearing debt is controlled by the price of $350,000,000 of non-interest-bearing notes.

That the premium on gold is wholly controlled by the price of our bonds abroad was conclusively demonstrated at the breaking out of the war between Prussia and Austria. Our bonds fell in Europe ten per cent. Mr. McCulloch, adopting the theory that the premium on gold could be kept down by increasing the supply of gold in the market here, irrespective of the fall of our bonds in Europe, sold some thirty millions of gold in the vain endeavor to prevent a rise in the premium on gold corresponding to the fall of our bonds. He did this at a loss of some three millions to the Treasury, but in vain. The premium on gold went up until it came in exact equilibrium with the price of our bonds and then stopped, wholly irrespective of the sales of the Secretary. He might as well have attempted to raise the water in the nose of a tea-kettle above that in the kettle itself, by pouring water into the nose, as to have sold his gold for the purpose he did. Again, when the war suddenly ended, and the price of our bonds went up in Europe, the premium on gold fell here in the precise ratio.

It is frequently asked why are our six per cent. bonds in Europe at 74 and 78 when the three per cent. consols of England are at 92? And the answer usually given by the bullionists is, because of the doubt as to the credit of the Government or its intention or ability to pay the national debt. I respectfully submit that is not the true answer. It would be more nearly correct to say because those who invest in our bonds are afraid they will be paid. If it were doubt of our ability to pay let me ask why are our gold certificates, which are only promises of the Government to pay gold on demand, at par or a small premium at home as well as abroad? Why does not the supposed doubt of the good faith and ability of the Government affect them? Clearly because they are wanted day by day as a convenient medium for the transportation of gold, and the supply is not in excess of the demand. Bearing on this same topic, will gentlemen tell me why the five-twenty bonds should be selling at 74 in London and at 78 in Frankfort? Is it not for the same reason that in England their three per cent. consols are at 92 while our six per cent. bonds are at 74?

It is an axiom in political economy that supply and demand always regulate price. Now, our bonds and the English consols are not taken by business men for business purposes or as a medium of exchange, but for investment by those who desire to put away a surety for their families, or as trustees of charities or associations, or in annuity offices. Now, the debt of England, although considerably exceeding our, has been contracted through a long series of years, in not very large comparative amounts, and has been absorbed for the purposes of investment gradually until the supply does not much exceed the demand for investment. We all know the natural preference an Englishman would have for the securities of his own country over a security at a distance of which he knows but little. We have seen individuals loan money on mortgage at five per cent. in our eastern cities for a series of years, when by sending their money to the West they might loan it at ten per cent. on equally substantial real estate there. This will explain why the Englishman should prefer his own securities to ours, even at a higher rate of interest, as a matter of investment, but it does not explain why our bonds should be at Frankfort 78 which are at only 74 in London. Why does not the Englishman send his bonds to Frankfort and realize the difference?

In a period of three years we threw $2,500,000,000 of securities payable at short dates, to be taken up as investments, upon the markets of the world, and although undoubtedly they were largely affected when first issued by the doubt of our success in putting down the rebellion, so that they sold for forty to fifty cents on the dollar, yet after the rebellion was fully subdued they rose nearly to their present figure, and have remained quite stationary ever since. But if I am right, that they are only wanted in Germany as in England for the purpose of investment, then it will be seen at once that we have issued for investment a supply of bonds largely in excess of the demand for that purpose. And as Germany has no national securities bearing the same relation to its people as the consols to the Englishman, they are more sought after on the Continent for investment, and therefore are higher in price, and our bonds being held in England for investment only the holders do not care to change their investments for the sake of the difference in price. I do not doubt if there were no more of our bonds to be procured at any price abroad that those already there would immediately appreciate to par if not to a premium; or, in other words, the supply and demand would regulate the price.

There is a curious illustration of this in the fact that a small amount of Massachusetts gold-bearing five per cent. bonds was subscribed for by a single house in London at 95, while the bonds of the United States, which had not only the security of Massachusetts, but all the rest of the United States behind them, at six per cent., were selling at 74. The Massachusetts bonds were all taken for a single investment, and the supply did not exceed the demand.

There is another element which very largely affects the price of our bonds, and that is the option the United States reserves to pay its bonds within five years. Length of time for an investment is a large element of value. The very theory of the British consols is that they are never to be paid, and nobody dreams that they ever will be.

The United States has once paid all her indebtment in gold to the great disgust of the holders; for at the moment when we paid it at par it was worth 120 in the market. Those investing in our securities fear this may happen again.

I assume, therefore, that any adjustment of our currency for our own convenience will not materially affect the worth of our bonds abroad. But if I knew how, consistently with honor and national faith to our creditors, to prevent every one of our bonds going abroad, and to bring all back that have gone, as I view the deplorable fact of the absorption of our exports to pay $70,000,000 of interest, I would vote at once for that proposition.

England carries her debt with ease and with prosperity as a nation, because it is almost wholly due to her own citizens, and all income derived from it remains at home, while we, by sending our debt abroad, are in a degree suffering the evils which have impoverished Ireland -- absenteeism, or the owners of her lands withdrawing all their incomes from her to be spent away. So that if any one objects to the plan of currency I propose, that it will have the tendency to keep our bonds at home, for the purpose being used as security to be pledged to the Government for currency, to him I answer, that is exactly what I hope may be done.

Let no man say that I desire to establish or perpetuate a depreciated currency. I think I have proposed a currency as valuable as gold and for all purposes of a circulating medium better than gold, every dollar of which I doubt not will soon be made equal to gold; but what I do desire is that the currency shall not be redeemable in gold and silver, so that any man, because he has a dollar of it, can call for so many grains of gold which must be paid him, and the currency canceled to that extent, but with his currency he must buy his gold as he does his wheat where it can be had in open market. In other words, the value of the currency of this country, its volume, its stability, the values of all property of the country shall no longer be at the mercy of the panics, the caprice, the speculations, or the needs of the bankers of Europe or the traders of Asia.

But I hear the bullionists exclaim, "Our money must be the same as the money of the world." "We cannot have a different standard of value from other nations." I would as soon or sooner have our Government, our laws, our institutions, the same as the institutions of the rest of the world. We have divested our Government of every trait of the despotisms, every attribute of the monarchies, and every vestige of the slaveries of the Old World save one, and that is, the all-controlling and all-absorbing power by which masses of the people of all nations of the earth have ever been enslaved -- coined money.

More than three thousand years ago the despots of the world, as the most potent method to enrich themselves and their favorites and perpetuate their tyranny, hit upon the device of impressing their "image and superscription" or other peculiar stamp upon pieces of two of the metals, not the most intrinsically useful or the most beautiful, but the most scarce and difficult of attainment by the masses of the people, thus arbitrarily making a measure of value and equivalent for which the property of their subjects must be exchanged. Because of their capabilities of being so converted into equivalents of power the so-called precious metals were eagerly sought after by all men in such degree that they came falsely to be deemed to have a special intrinsic value in themselves equal to the effigy of value stamped upon them.

In the earliest republics, when Governments were established by the people for themselves, the worth and potency of these metals were antagonized as attributes of despotism. They stamped value upon the more common and equally useful metals generally distributed among the people, to be used by them as instruments of exchange and trade.

Thus in early Greece the effigy of the ox, the most valuable of the people's possessions, was impressed upon pieces of brass or iron, intrinsically of little value, but thus made the equivalent of comparatively considerable wealth. So Rome, for more than five centuries used the effigy of the sheep, pecus, impressed upon copper for currency, by which money and wealth were afterward designated throughout the world.

engravedIt is now admitted by all political economists that finely engraved printing upon paper, fixing its value, is the best of all possible substitutes for coined money for circulation, and cheaper as a currency for a people than gold itself. It may therefore be safely assumed that had the arts and education been sufficiently advanced in the Grecian and Roman republics, the money of the people would have been such paper instead of the ponderous and inconvenient metals.

Not until the people of these free Commonwealths became deteriorated by vices and luxury, yielding their liberties to tyrants either by choice or usurpation, did gold and silver, the ever-ready adjuncts of despotic power in all its forms and degrees, obtain place and scope to do their appropriate and never-failing work, the enslavement of the labor of the masses. It will be remembered when the victorious Gaul threw his sheathed sword into the scale as the counterpoise of Rome's degradation the beam was not balanced by her money, but by the ornaments and trinkets of the richer of her citizens, for she had neither gold nor silver coins for more than a century.

Twelve centuries afterward, when the feudal system dividing Europe, just then emerging from the dark ages, into many small principalities and powers had given petty princes, dukes, barons, and bishops control of the liberties of the impoverished people, each claimed as his prerogative the right to fix his value to pieces of gold and silver, and the same to change and debase at his will, by which his serfs must measure their possessions and pay tribute to him of all they had. Coined gold and silver has ever been the handmaid of despotism; the prop of monarchical power; the supporter of thrones; the upholder of nobilities and priesthoods; the engine by which the privileges and pretensions of aristocrats have always been sustained in tramping down the rights, devouring the substance, and absorbing the unrequited labors of the masses. Through all time the possession of money hay given power to the few to enslave the labor of the many for the benefit of princes and nobles, and its use has been the badge of servitude of all peoples to some king or tyrant. To deny this at one time was treason.

When the chief priests would fain have taken hold of the words of our Lord "that so they might deliver him unto the power and authority of the governor," they asked, "Is it lawful for us to give tribute unto Caesar, or no? But he perceived their craftiness and said, why tempt ye me? Show me a penny. Whose image and superscription hath it? They answered, Ceasar's. And he said unto them, render, therefore, unto Caesar the things that are Caesar's, and unto God the things that are God's. And they marvelled at his answer."

Our patriot fathers, founding a Government for themselves on this continent, carefully eliminated from its framework every attribute of monarchy and aristocracy, the divine right of kings, patents of nobility, the succession of primogeniture, the law of entail, the fealty of one man to another -- every of the devices of kingcraft and oppression with which the people are governed by a class -- all, save on: they retained, whether for good or evil, the precious metals stamped with the king's image as the standard by which to measure the property and industry of the new Republic. "It was a grievous fault," and grievously have their children answered it. Great, wise, and good men, we marvel that they foresaw so much, "but they saw not all things."

It is easy to understand what determined them in this exceptional adoption of gold and silver, which were the monarchical standards of value. They had just emerged from a war for liberty, during which they had seen their paper substitute for that standard rendered quite valueless and useless because made convertible and redeemable in gold and silver only, where gold and silver were impossible to be had.

But the Continental currency wanted everything which could give it value; issued by an aggregation, or conglomeration rather, of States just struggling for existence, trying an experiment of government in a new world which many of their best people more than doubted would be a failure and end in anarchy, without checks and guards against overissues, coarsely engraved, easy of forgery, degraded by counterfeits by their enemies so that it was difficult to distinguish the genuine from the false, the only wonder is that such a currency was ever capable of the good service it did do in the war of independence.

An infant country without commerce or article of export, save almost only that which was drawn from the sea, without manufacture, with every necessary, not to say luxury, of life to buy from abroad, save what came from the soil; the founders of the Republic might well have been tempted to bring themselves into connection with the great family of nations by adopting as their money the precious metals by which all the commercial intercourse of the nations of the earth was then carried on, and to bear with such endurance as they might the loss, disaster, and ruin which the adoption of such standard of value at once entailed upon the country, for it is worthy of observation that its hardship was so great as to produce a serious rebellion and outbreak against the law in what was then as now the most cultivated, intelligent, and law-abiding portion of the country.

That the evils attending the inauguration of their monetary system did not cause our fathers to change their financial policy, with its probable consequences, is not a subject of surprise; for they had in almost present contemplation the action of revolutionary France in issuing the assignats and mandats as a substitute for gold and silver -- a currency which almost at once became valueless, although nominally based upon what is reckoned among men the most desirable of possessions, the lands of the nation.

Contemporaries can never weigh and determine, with such precision as those who come after them may do, the causes and effects of governmental action. They might not then see as we now see that there were two causes which made the assignats and mandats of the French revolution inevitably valueless. Both these forms of security were the evidence to the holder of a right to buy or locate upon a portion of the confiscated lands of the nobles and priests of France, called by the revolutionary Government the national domain.

Now, the value of land to him who claims the ownership is composed of two essential elements: productiveness and title. Without title the productive value of land is of little worth to the claimant, and the assurance of title was exactly what the assignat did not make to the holder.

Beside, looking back upon that time as we do, it is difficult to see why the French paper money was not then as any valuable as any other human possession in France, whether gold, silver, land, limb, or life; neither was worth an hour's purchase. The legislator of to-day was the criminal of to-morrow, the judge of to-day was the culprit of to-morrow; the knife of the guillotine, like the rain of Heaven, fell alike on the just and the unjust. He who at one moment held the assignat claiming title to the confiscated estates, at the next had his own estate confiscated with the assignats which he held.

Candidly and justly considered, can it be said that a fair argument ought to drawn to maintain that all substitutes for gold and silver as money must be worthless because the paper money of France was valueless when and where nothing was valuable?

Every student of the history of our country will remember that while at the organization of the Government the standard of value by law was gold and silver, yet in fact the currency of the United States was even at that period engraved paper, presumed to be, but not convertible at the will of the holder into coin; for one of the acts of the First Congress was to establish a Bank of the United States, to issue what was inconvertible currency, which, as the act reads, "will be productive of considerable advantages to trade and industry in general." The stock was to be paid for one fourth in gold and three fourths in the public debt of the United States, thus making at that early day the public debt a basis of three fourths, at least, of the currency of the United States.

Another provision which will claim our attention is that the notes were to be receivable in all payments to the United States, thus giving its bills one value that legal tenders now have. Another provision of the bank charter deserving attention was, that while it might issue $10,000,000 of circulation it was to go into operation when $400,000, of four per cent. only in gold and silver of its capital, had been paid in, thus establishing the principle that its notes, all which circulated as money, were never to be in fact convertible into gold and silver. But for its operations the United States were not to be liable save to the extent of one fifth of the stock to which it might become a subscriber.

Notwithstanding the prohibition of the Constitution, that no State should emit bills of credit, the necessities of the people for money to develop the resources of the country was so controlling that every State established banks to issue bills which should circulate as money, the basis of which was nominally one fourth in specie.

In the light in which we now view this establishment of State banks they would seem clearly within the inhibition of the Constitution, because it is only a patent evasion to allow the States to establish bodies corporate, in which they were sometimes part owners, to do that which the Constitution prohibited the States themselves from doing. Thus the creature might and did do what was prohibited to the creator. Nor is it surprising that this State legislation, when examined by the courts, was held within the Constitution, because the common convenience and necessity of the whole people alway have, as they always will, set aside the written provisions of constitutional law. "Salus populi suprema est lex" has ever been, as it ever should be, the interpreter and complement of the Constitution.

The United States Bank failing to be rechartered in 1811, the country remained without any uniform currency, although gold and silver were standards of value, until 1817, when another Bank of the United States went into operation, with a much enlarged capital, for a period of twenty years, and then wound up its affairs, a renewal of its charter having failed by the veto of President Jackson.

It will not be useful further to advert to the history of the financial legislation of the country save to call attention to the independent Treasury Act of July 4, 1840, among the provisions of which it was enacted that all debts due to or from the United States were to be paid and collected in gold and silver, so that the currency in which the Government transacted its business was truly specie. This practice, as is well known, obtained until the war of the rebellion and the legal-tender act of February 25, 1862. But during all this time the currency of the people was paper issued by the banks, secured by various legislative devices. The actual security for the immediate redemption of this paper was nominally one fourth gold and silver coin, supposed to be in the banks, but in fact about one sixth, and its only other worth the actual value of the notes and bills of their customers, discounted by the banks on longer or shorter time, or what is technically known as the "bank portfolio."

As all these bank notes circulated as money purporting to be redeemable in specie on demand, as well as the deposits, which much exceeded the circulation, and as the banks held in fact so small a percentage in coin, it is obvious that these promises could not be so redeemed, so that whenever the exigencies of the business of the country or of the world called for any large sum the banks either refused to pay specie or by contracting their circulation so diminished the money of the country as to bring themselves within a limit at which their circulation, being a necessity to the people, would not come in for redemption.

It will be readily seen that the fluctuations in the amount and value of the currency caused by the banks being obliged to contract to meet every considerable demand in specie were destructive to all stability in business enterprises, if not to commercial integrity itself, since once in every ten years, and a large part of the time much oftener, the banks were obliged to refuse to redeem their notes in specie, and from the necessity of the case were supported in so doing by legal enactment. No mercantile sagacity in business, no forethought or prudence in investment, no integrity of purpose, and no solidity of capital in the merchant or conductor of business enterprises, public or private, under such a financial system of pretended convertibility could or did prevent commercial failures and ruin. Every few years panics ensued, and whole classes of solvent, prudent, enterprising men were involved in ruin from causes which it was impossible for them to foresee or control.

The whole property of the country, the scanty provisions for the widow and orphan, the stocks in otherwise prosperous enterprises, the shares of public works carried on to develop the industry and wealth of the country, each and all alike, at uncertain and irregular periods, fluctuated in price quite one half.

If this condition of things had been dependent upon the habits of our people, upon the productiveness or non-productiveness of our industries, the profitableness or unprofitableness of our commerce or business enterprises, or upon the current enactment of our Legislatures, either State or national, one or all, perhaps some remedy might have been found or method of alleviation proposed. But none of these had any effect to hasten or retard these fluctuations of commercial values. The fault was inherent in our financial system, which was, and while based on money convertible into specie must continue to be, but an exaggerated offshoot of the financial systems of Europe, subject to the changes, the needs, the wars, famines, and distresses of other countries. It was in no sense an American system, nor in any of its parts adapted to the institutions of a free, enterprising, and independent people. Many and various were the expedients resorted to by the General Government to remedy this chronic vacillation of money to the destruction of the business interests of the country. But all in vain.

In the endeavor to do this the United States, as we have seen, at first chartered a bank, became a subscriber to its stock, and received and paid out its bills as money for a period of twenty years. Still the erratic but inevitable periods of commercial distress came round. Again it refused to have anything to do with a bank, and left money to the natural laws of trade for five years, from 1811 to 1817. Still financial disaster came and went in turn like the vibrations of the pendulum, but wanting their regularity. In 1816 the Government again tried the experiment of making an unfluctuating convertible currency, by chartering a bank of more than three times the capital of the old one as a regulator of the currency. Still the oscillation went on more pronounced and ruinous than ever. The years of 1827-28 will ever be memorable in the history of the country for the wholesale destruction of fortunes and commercial values. The bank charter expired in 1836 by its own limitation, and the Government again divorced itself from all connection with the finances of the country, to leave a supposed convertible paper to do its own work uncontrolled save by its own laws, but the financial distresses and convulsions of 1837 caused all previous ones for the time to be forgotten.

In the endeavor to find some relief by legislation political parties were broken up, and the election of 1840 turned upon the distresses in business of the country alone, but change of administration brought no relief. The Government established its own affairs firmly on a specie basis in 1840, holding aloof from any interference with the finances of the country, hoping to give them stability by the regularity and steadiness of its receipts and payments in coin, although sometimes issuing Treasury notes like exchequer bills, or buying in its own bonds in order to deplete its depositories of gold as a measure of relief to commerce and business. Still the periodical visitations of commercial disaster and ruin continued, and the distress and revulsions of 1847 and 1857 quite paralleled those of 1827 and 1837 as periods of financial disaster.

It will not be useful further to trace the commercial history of the country, but with the experience of seventy years of such fluctuations of value, of commercial ruin and distress, from which the country cannot be shielded either by the sagacity of its financiers and merchants, the wisdom of its legislators, or the industry and enterprise of its citizens, let me pause here and ask, the country being now, partially at least, emancipated from a financial system producing such results, is it desirable voluntarily to return to it? Specially, ought we to force ruin and distress upon the majority of the people in order so to do?

It is needless for me to add that amid all these convulsions and revulsions of the business of the country and its currency and the destruction of its values, the losses fell at last, as they ever must fall, upon the laboring masses. Bread riots were not unfrequent; productive industry was paralyzed; the work shops and mills were closed, leaving labor unemployed and unpaid; its value thus lost never is regained by a rise in prices or a return to prosperity; for it is the peculiarity of labor, says an eminent economist, "that it is the only commodity that perishes at the instant of production, and if not then put to use is lost forever."

Such are the results experience, during the lifetime of the Government, shows have always followed the attempt to conduct the business of the country upon specie payments, or, in other words, with a circulating medium supposed to be always convertible, but which never can be converted into gold and silver.

Let us now examine and see if we may know why, with our currency upon a supposed basis of convertibility, experience has shown that it is apparently beyond human power to regulate or control, or sustain the business or finances of the country. Is it not because in adopting the specie measure of value and instrument of exchange we have bound our business and finances hand and foot to the monarchs and bankers of Europe? We have adopted their standard of value, which they control at their will, for their purposes and for their prosperity and not for ours. Whenever from caprice or malignity or panic or war or attempt to unsettle or restore the balance of power among the Governments of Europe they have seen fit to lower or raise their price for gold, then our currency based thereon, but expanded as four to one, feels the shock in quadruple proportion. Nay, more, having silver and gold both as standards of value whenever the caprice of some Indian prince or Chinese merchant chooses to call for silver in payment of the commodities we or any other nation import from the East and thereby raises it to a premium in comparison with gold, then our gold and silver go out, not at the value fixed by us as coin, but at the value at which they are taken, simply as bullion.

Gold is still further depressed in value in comparison with silver, which is the sole standard of the principal commercial countries of Europe, save England; it is thus drawn very rapidly to Europe to fill the vacuum caused by the enormous exportation of silver to China, Japan, and India. The extent of this drain upon the silver of Europe and the necessary rise in price as compared with gold, and the consequent necessary flow of gold from those countries where it has a fixed value as compared with silver, like England and this country, where gold is the standard of value, may be seen from data derived from the books of the Oriental Steam Navigation Company, through whose agency alone the sum of $60,594,925 was transported to Asia from England solely in 1856; and increased in the following year to $83,976,160; to this add the sum of $16,753,445 from the rest of Europe, we have $100,729,605 as a startling efflux in silver only, from Europe to the East in a single year, or more than double the annual yield of all the silver mines that supply Europe and America.

To this must be added quite one tenth of that amount in gold, say $10,000,000. It will be observed that half of this amount of silver must be taken each year from the circulation of Europe, say $50,000,000, and its place supplied with gold; and both these exports of specie to the East are independent of that shipped directly from America, and are greater than the entire average product of the mines of California. The most careless consideration of this fact will conclusively show the reason why the Bank of England in the years 1856-57 was unable to restrain the efflux of gold from that kingdom, although she altered her rates of discount eight times during the year 1856, and nine times in 1857, quadrupling it in amount and ending in final bankruptcy and suspension in November of that year.

I have taken this period for comparison as it was before our war of rebellion and cotton dearth, which so much affected the finances of England. This great drain still goes on. Is it wise, therefore, by legislative enactment to force a return to a currency by which all our values are to be measured, our productions exchanged and transported, our wealth to be distributed, and our industries to be governed, the very basis of which is controlled and caculated not only by the interests and commerce of the Christian and civilized world, but by the trade and needs of half the civilized and barbarous nations of the East?

Instead of this money, the instrument of tyrants, which has wrought all these evils, I propose a paper currency admittedly the cheapest and most convenient, its value based not only upon the gold in the country but upon every other source and element of the national prosperity, emancipated from the control of all other nations, whether civilized or barbarous. It is the currency for a free people, strong enough to maintain every other of their institutions against the world, whose Governments they have antagonized; strong enough to sustain the measure of the business transactions with each other independent of kings, the least, or bankers, now the most potent sovereigns in the world. It is one of the blessings of the war that we are enabled for the first time to stand alone in our industries and internal commerce as we have in our institutions.

It cannot fail to have attracted attention that the only remedy for all evils brought on by a currency convertible into specie when distress is upon the merchant, ruin upon the manufacturer, and disaster upon the banker, when the banks of the United States, of England, and of France could afford no aid, has always been a suspension of specie payments, i.e., by the use in these the foremost nations of the world of an inconvertible paper currency. If such currency is so potent as a remedy for all financial diseases which beset a nation, whether in peace or war, whether arising from the over-trading, over-speculation, or over-investment, why may it not be equally beneficial as a fixed, permanent, and stable circulating medium to supply the demands of business and the necessities of the people.

The experiment of an inconvertible currency has been tried on the most extended scale and through long periods of time and under the most trying circumstances, and has never failed. In 1797, when the British empire was threatened with rebellion in Ireland, and was sustaining all Europe against the victories of Bonaparte with its subsidies of gold, the question came to her great war minister, Pitt, shall the integrity of the empire be lost? Shall France overrun all Europe and threaten great Britain in the East, or shall the currency of the empire be the inconvertible note of the Bank of England? He chose the latter. How wisely the success of England and the allied armies culminating at Waterloo attest. An inconvertible paper currency fought the battles of England and of the world from that Sunday morning, the 23rd of February, 1797, when the King himself in council ordered the suspension of specie payments, till the 18th of June, 1815.

Irredeemable paper laid the foundation of England's manufacturing and commercial prosperity, supplied her navy which, at Trafalgar, made her the mistress of the seas, and procured the gold with which all the armies of Europe were paid, and for eighteen years there was neither financial revulsion, business panic, or distress. In answer to the objection that it is necessary to have gold currency for foreign trade I quote Maclaren, one of the most philosophical as well as accurate writers of England, in his History of the Currency:

It is remarkable that no difficulty was experienced by our merchants in carrying on their trade with other nations during this period, though they no longer had a stock of bullion kept for them at the bank by means of which they might adjust their foreign payments. No inconvenience indeed, of any kind was felt from the substitution of paper for gold, and, if the bank directors had so ordered their issues as to keep the mint and market price of gold on an equality, it seems that no objection could have been urged against the paper currency, except its liability to forgery, and we should never have heard of the currency controversy.

We remember our own war of the rebellion, without the legal-tender note, must have come to an end in the beginning of 1862; the banks had suspended, and, like broken reeds, the Government could no longer lean upon them; business was paralyzed, men and supplies could hardly be obtained, the armies were unpaid, and no decisive battle had been fought when Congress passed the legal-tender act of 1862. From that time business received a new impulse, labor was employed, manufactures everywhere sprang up, supplies were abundant, and although by a great error the legal-tender note was not made the money of the Government for all purposes, as it should have been, yet, crippled as it was, it supplied and paid our soldiers, pensioned the wounded, provided for the widow and orphan, and produced a degree of prosperity theretofore unknown, which has been maintained ever since, and during this period of six years financial panics and disasters were unknown and untaught of until the insane attempt of the banker and capitalist to force a return to specie payments by a contraction of the currency.

During the year 1864 we exported more than one hundred millions of gold and silver, only $35,000,000 of which came from San Francisco, and no one knew the fact from any effect it had on the business of the country. In any other year, while our currency was upon a specie basis, the export of one tenth part of that sum beyond our production would have produced financial panics, ruin, and distress greater than that of 1837 when our total export of specie was less than six million dollars.

Point me to any other six years in the financial history of the country in which labor has been so well paid; in which production has been so varied and successful; in which there have not been more than one financial panic scattering ruin and disaster through the land. We have heard much of the patriotism of the bankers and capitalists who are said to have come forward to lend their gold to the country in its time of utmost need, but that is exactly what they did not do.

In December, 1861, the banks suspended specie payments without right, without authority of law, in violation of their own plighted faith and promises, so that neither the Government nor any one else could get a dollar of their gold from their vaults. When, in pursuance of the act of Congress of the 25th of February, 1862, $150,000,000 of legal-tender notes were issued, with which our soldiers were paid and the debt of the United States canceled, did the banks or capitalists loan these to the Government or did we make them for ourselves? On the contrary, the banks refused even to receive the Government notes on deposit. When the Government wanted more money to pay the soldier and carry on the war, did they get it from the banker and capitalist? No; they issued their own legal-tender notes as money and paid their debts. Having provided that these notes might be funded into a gold-bearing six per cent. bond, the capitalists bought them up when they fell to a discount of sixty per cent., by selling the gold at that premium which they hoarded in their vaults and had refused to loan to the Government, and funded this, which they now call failed paper, in bonds for the payment of which in gold, or, what is equivalent, a return to specie payments, they now howl at the doors of the Capitol, unmindful of the destruction of value, the starving of the laborer, and the ruin and devastation they may cause.

Although this return to specie payment has been agitated ever since the war what petition has come up to you from the people demanding it at your hands? What meetings of the people have been held to make to you petitions for relief from grievances in this behalf? Not one; not one. Only resolutions of boards of trade and bankers.

I stand here, therefore, for inconvertible paper money, the greenback, which has fought our battles and saved our country, which has been held by us as a just equivalent for the blood of our soldiers, the lives of our sons, the widowhood of our daughters, and the orphanage of their children.

I stand here for a currency by which the business transactions of forty million people are safely and successfully done, which, founded on the faith, the wealth, and property of the nation, is at once the exemplar and engine of its industries and power -- that money which saved the country in war and has given it prosperity and happiness in peace. To it four million men owe their emancipation from slavery; to it labor is indebted for elevation from that thrall of degradation in which it has been enveloped for ages. I stand for that money, therefore, which is by far the better agent and instrument of exchanged of an enlightened and free people than gold and silver the money alike of the barbarian and the despot.

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