“We find that in every kingdom into which money begins to flow in greater abundance than formerly, everything takes a new face; labor and industry gain new life, the merchants become more enterprising, the manufacturers more diligent and skillful, and the farmer follows his plow with greater attention and alacrity. The good policy of the government consists of keeping it, if possible, still increasing as long as there is an undeveloped resource or room for a new immigrant, because by that means there is kept alive a spirit of industry in the nation which increases the stock of labor, in which consists all real power and riches. A nation whose money decreases is actually weaker and more miserable than other nations which possess less money but are on the increasing hand.”—Essays and Treatises, vol. I, p. 283.
Henri Cernuschi, an ex-banker of Paris, and recognized as, perhaps, the most eminent of the French writers on finance, says:
“The value of money depends upon its quantity. It is the same with gold as with greenbacks. If the stock in circulation is augmented the purchasing power of every greenback is diminished; and so with gold and silver. The purchasing power is always in relation to the quantity of the money.”—Nomisma, p. 15.
“That commodities would rise and fall in price in proportion to the increase or diminution of money I assume as a fact that is incontrovertible. That such would be the case the most celebrated writers on political economy are agreed.”—Ricardo, Political Economy.
“If the whole money in circulation was doubled prices would double. If it was only increased one-fourth, prices would rise one-fourth. The very same effect would be produced on prices if we suppose the goods (the uses for money) diminished instead of the money increased; and the contrary effect if the goods were increased or the money diminished. So that the value of money, all other things remaining the same, varies inversely as its quantity; every increase in quantity lowering its value and every diminution raising it in a ratio exactly equivalent.”—J. S. Mill, Principles of Political Economy.
Wm. H. Crawford, Secretary of the Treasury, in his report, February, 1820, says:
“All intelligent writers on currency agree that when it [money] is decreasing in amount poverty and misery must prevail.”
By joint resolution of the United States Congress, August 15th, 1876, a “United States Monetary Commission” was appointed to inquire into the prevailing “hard times.” It consisted of Senators John P. Jones, Lewis V. Bogy and George S. Boutwell, and Congressmen Randall L. Gibson, George Willard and Richard P. Bland; to whom were added Hon. Wm. S. Groesbeck of Ohio, Prof. Francis Bowen of Massachusetts, and Geo. M. Weston of Maine, the three latter acting as secretaries of the commission. On March 2, 1877, the commission reported. The following extracts are taken from the report:
“While the volume of money is decreasing, though very slowly, the value of each unit of money is increasing in a corresponding ratio, and property and wages are decreasing. Those who have contracted to pay money find that it is constantly becoming more difficult to meet their engagements. The margins of securities melt rapidly, and their confiscation by the creditor becomes only a question of time. All productive enterprises are discouraged and stagnate because the cost of producing commodities to-day will not be covered by the price obtainable for them to-morrow. Exchanges become sluggish, because those who have money will not part with it for either property or service, for the obvious reason that money alone is increasing in value while everything else is decreasing in price. This results in the withdrawal of money from the channels of circulation and its deposit in great hordes where it can exert no influence on prices. Money in shrinking volume becomes the paramount object of commerce instead of the beneficent instrument. Instead of mobilizing industry, it poisons and dries up its life currents. It is the fruitful source of political and social disturbance. It foments strife between labor and other forms of capital, while itself, hidden away, gorges on both. It rewards close-fisted lenders and filches from and bankrupts enterprising producers. An increasing value of money and falling prices have been and are more fruitful of human misery than war, pestilence or famine; they have wrought more injustice than all the bad laws ever enacted.”—Report of United States Monetary Commission, vol. I, p. 10 et seq.
Pointing out how a contraction of the money volume increases the debt obligations of the past, R. H. Patterson, especially commended by Gladstone as one of the ablest of English writers on finance, says:
“And what is such a dearth of money and rise in the measure of value but an injustice to the many to the gain of the few—an unfair exaltation of the power of the past over the present, an unfair and undesirable aggravation of the poverty of the poor and the wealth of the rich—a stereotyping of classes according to wealth, until they tend to become permanent? We have seen how powerful and beneficial was the influx of the precious metals from the New World four centuries ago in breaking the social bondage which had settled over Europe during the long night of the Dark Ages, enabling that generation to escape from the heritage of the past and bound forward upon the new career then opening to mankind. Such times come from the hand of Providence, and with an exceeding rarity even in the long career of civilized mankind. But at least let us avoid the opposite and never allow successive generations to be unfairly—nay, most unjustly, though it may not be so meant—handicapped, each in its own race, owing to a growing dearth and dearness of money.”—The New Golden Age, vol. II, p. 500.
President Grant said:
“To increase our exports sufficient money is required to keep all the industries of the country employed. Without this, national as well as individual bankruptcy must ensue.”—Message, December 1, 1873.
Hon. John Sherman, in a speech in the Senate, January 27, 1869, said, in opposition to a bill to contract the currency by retiring the greenbacks:
“It is not possible to take this voyage without the sorest distress. To every person except a capitalist out of debt, or a salaried officer, or annuitant, it is a period of loss, danger, lassitude of trade, fall of wages, suspension of enterprise, bankruptcy and disaster.... It means the ruin of all dealers whose debts are twice their business capital, though one-third less than their actual property. It means the fall of all agricultural productions without any great reduction of taxes. When that day comes every man, as the sailor says, will be close-reefed; all enterprise will be suspended, every bank will have contracted its currency to the lowest limit; and the debtor, compelled to meet in coin a debt contracted in currency, will find the coin hoarded in the treasury, no representative of coin in circulation, his property shrunk not only to the extent of the depreciation of the currency, but still more by the artificial scarcity made by the holders of gold. To attempt this task by a surprise upon our people, by arresting them in the midst of their lawful business and applying a new standard of value to their property without any reduction of their debts, or giving them an opportunity to compound with their creditors, or to distribute their losses, would be an act of folly without an example in evil in modern times.”—Congressional Globe, 1869, p. 629.
In a speech in the United States Senate, March 17, 1874, General John A. Logan pointed out the cause of the panic of 1873 as follows:
“But, sir, that the panic was not due to the character of the currency is proved by the history of the panic itself.... No, sir, the panic was not attributable to the character of the currency, but to a money famine, and to nothing else. In the very midst of the panic we saw the leading bankers and business men of New York pressing and urging the President and the Secretary of the Treasury to let loose twenty or twenty-five millions more of the same paper for their relief—the very same men who to-day denounce it as a disgrace to our government. It was good enough for them when they were in trouble.
“Why is it that representatives forget the interests of their own section and stand up here as the advocates of the gold-brokers and money-lenders and sharks, the same class of men whose tables Christ turned over, and whom he lashed out of the temple at Jerusalem?... Carry out the theory of the contractionists, and what must be the inevitable result? Every enterprise and industry must be dwarfed in like proportion. The busy hum of the spindle will cease its sound in many a mill which now gives employment to hundreds of active hands and supplies the comforts of life to many a happy home. The bright blaze of many an iron foundry which gives life and cheerfulness to the grand scenery along the streams of Pennsylvania will cease to gild the night with its rays. And the same industry in my own State, and that of the Senator from Missouri, which has been so rapidly increasing of late, will be crippled, and hundreds who now find employment there will be compelled to seek a home elsewhere for want of work. The undeveloped resources of the South and West, which we have just begun to appreciate, will rest in abeyance until a wiser policy shall bring them into use.... Why, sir, the people were never freer from debt in proportion to the business done than in 1865, at the close of the war, when Mr. McCulloch began his system of contraction, and at the very time when eleven million more people were to be supplied. Was it to be supposed that the activity and energy which the adequate supply of money had put in operation, and which was giving prosperity and happiness to the country, would suddenly dwarf itself to suit financial notions without a struggle? The inevitable result was an expedient to meet the consequent want, and credit was expanded. At the very moment above all others when adequate supply was needed, the opposite course was adopted; and right here lies the true cause of the late panic, which resulted from a money famine and not from an excessive supply.... Sir, turn this matter as we will, and look at it from any side whatever, and it does present the appearance of being a stupendous scheme of the money-holders to seize the opportunity of placing under their control the vast industries of the nation. Therefore I warn Senators against pushing too far the great conflict now going on between capital and labor.... Capital rests upon labor; but when it attempts to press too heavily on that which supports it in a free republic, the slumbering volcano, whose mutterings are beginning already to be heard, will burst forth with a fury that no legislation will quell.”
From the foregoing, which is but a small fragment of the immense literature in harmony with the opinions cited, the following conclusions may be digested:
1. A diminished volume of money always causes a proportional diminution in the price of labor and commodities—or, to express it otherwise, money becomes dear and everything else cheap.
2. This redounds to the advantage of the capitalistic class, who are thereby enabled to exact more for their money in services and commodities, to purchase all kinds of stocks and properties at diminished rates, and to foreclose mortgages and collect other forms of debts under such conditions as to make “hard times” a harvest for the creditor class.
3. The debtor class is compelled not only to yield more services and commodities for the money which it receives or has previously received, but suffers the further hardship of languishing business and enforced idleness or diminished wages; and it should be remembered that every producer is a debtor, even though he has no specific obligations outstanding; for he will have to aid those who have such obligations by receiving less prices and wages and by paying relatively increased taxes, salaries, rents and profits to those members of the debtor class who are immediately above him in the social scale, and who will seek to save themselves by shifting the burden of their obligations onto those who are below.
“I am astonished at nothing in our business life so much as the absence of an earnest, determined endeavor on the part of our men of brains to find the cause of these chronic crises and hard times and then set upon the track of some remedy therefor.”—Rev. Heber Newton.
WHAT may well be called the American system of money has been gradually evolved, during three hundred years, from the bitter experiences of the most practical people that ever trod this globe. Franklin, Jefferson, Jackson, Calhoun, Clay, Gallatin and Benton were its prophets. But it first began to take definite shape during our civil war under such men as Edward Kellogg, Thaddeus Stevens, Henry C. Carey, Stephen Colwell, Pliny Freeman, Ben Wade, Oliver P. Morton, Henry Wilson and John Thompson; and later, Warwick Martin, Peter Cooper, Thomas Ewing, Wendell Phillips, John E. Williams, George Opdyke, John G. Drew, John P. Jones, William D. Kelley, B. F. Butler and others.
What first strikes the observer in a bird’s-eye view is that the whole modern movement toward a rational money system was started by that much-maligned genius, John Law, in France, in 1715. His system was one of the first recent revolts against the tyranny of metal money. He was the real founder of the Bank of France and the present French system. The Encyclopedia Britannica calls him an “unequaled financier.” His great thought was plenty of government paper money, and France has kept that thought. Law was finally beaten by politicians and the King’s mistresses when he tried to improve his system.
Turning homeward, we find the first American coin money, succeeding the wonderfully useful wampum, came very curiously—coin usually does. In 1652 a mint was set up in Boston to coin silver into “pine tree” money. The silver came mostly from the West Indian trade. Our rulers in England then, as now, only busied themselves in stealing from us any good money we could get hold of. Singularly enough we depended largely then upon another class of pirates—the buccaneers of the Spanish main, who spent most of their plunder on our shores, where were the nearest civilized ports. This was a great blessing—“a blessed providence”—to our Puritan ancestors and the coin money economists of those days.
In 1745 we had another blessed influx of silver. Governor Shirley, of Massachusetts, and his pious Puritans, went over and captured Louisburg, Cape Breton, from the French, with fire and sword, and made a big loot. This so tickled Mother Britain that, for once, she sent us a lot of silver to “ransom” Louisburg. This enabled Massachusetts to steal away the trade of Rhode Island.
In 1690 the first issue of paper money was made in Massachusetts. This was before the establishment of the Bank of England. It was for £7,000. In 1703 £15,000 was issued, which was made a legal tender for private debts. In 1716 another issue to the amount of £150,000 was authorized. Mark the style of it, as compared with the wild-cat projects of the present Congress, and see which is the most reasonable and conservative, and then inquire if the Farmers’ Alliance plan is so foolish: “The bills were to be distributed among the different counties of the province, and to be put into the hands of five trustees in each county, to be appointed by the legislature, to be let out on real estate security in the county, in specific sums, for the space of ten years, at five per cent. per annum.” Another act for £50,000 in bills was passed in 1720, “which resulted in clearing MassachusettsMassachusetts of debt in 1773.”
In 1723 Pennsylvania led a number of States in issuing paper money. In this year a great crisis occurred in England and the Bank was suspended. The coin of the American colonies was required, and drawn over, in England’s selfish and peremptory way, to prepare the bank for resumption. All coin left Pennsylvania, though the State possessed laws raising its value. Then the State issued treasury notes, and kept them in use until 1773, when English jealousy caused Parliament to make all such issues void. Some of the money was issued, says Adam Smith, on land security of double the value, and redeemed in fifteen years. It was made legal tender and remained at par with coin for forty years. The necessary notes were redeemed, by their payment for taxes, without loss to any one. This is the familiar history of Pennsylvania and the statement of Franklin. The cutting off of this money was the chief cause of the Revolution. The tea-party in Boston harbor was only a side-show.
Continental money was issued by Congress when we had no government—no power to tax. Yet if made full legal tender, with no mad promise of coin, fifty million dollars might have been enough. Gallatin says: “It saved the country.” Jefferson: “It expired without a groan.” Calhoun: “It is the ghost conjured up by all who wish to give private banks control of government credit.” It was used in place of a war tax, and the people so regarded it.
French assignats broke the spell of royal tyranny in Europe. Such is the power of a live nation to use and absorb money that nine billion dollars’ worth of it was issued before it broke down. Even then the cause of the tumble was that it had no suitable foundation. It was founded on land taken from the priests, and naturally fell when that land was returned to the churches.
We come now to the coin money of the last half of the eighteenth and the first half of the nineteenth century. Through ignorance of it, some silver advocates are dismayed by the fact that so little silver was coined here before 1878. The great point to be shown is that we had no need to coin, because so much came from abroad. The way metal money flowed here during the wars between England and Spain reads like a fairy story. The treasures of Mexico and South America passed through here and gave many temporary and flitting coin deposits. Then from the opening of the Napoleonic wars until 1820 the most of Europe, including England, was using paper money. So coin came and stayed here. In fact, coin stayed back in our Western wilds often when it was scarce in Eastern sections and large cities. Through all smashes and wild-cat times, Western banks paid coin until 1820. Those were good times for planters on new soil. The old Virginia planter, in his blue swallow-tail coat with brass buttons, and his ruffled shirt, always had a pile of doubloons in his desk. He did not know that European war and paper money put them there.
The banks, warned by wild-cat experiences, grasped at all coin as they do now at gold. One bank sucked all there was in North Carolina and owned the State. It was so plenty in the twenties, in New England, that they shipped it to Europe.
A point never to be forgotten by silver men, in answer to the gold man’s statement about small coinage of silver, is that from the foundation of the United States money laws were passed giving legal value to foreign coins. Our mistaken ratio of 16 to 1, instead of 15½ to 1, made it generally useless for us to coin silver, when we could have plenty from abroad that was legal tender. One fact alone shows how immensely we were using our own silver and foreign silver and gold—viz.: the panic of 1857 was largely due to the demonetization of our small silver and those foreign coins. In 1853 Congress demonetized all silver halves, quarters and dimes in sums of over $5.00. Much of the reserves of the banks was in these fractional silver coins, which had been full legal tender, and in larger gold and silver coins of the United States and other countries. The silver dollars of Spain, Mexico, South America and the United States were worth a premium over gold, and were bought by the Rothschilds and sent out of the country, though they did big service while they stayed here. But the banks did not hold them as reserves. So the demonetization of our small silver deprived the banks of a large portion of their reserves and of paying their circulation therein.
Up to February, 1857, all foreign gold coins and the silver coins of most nations were, in the United States, full legal tender with our coins at the values fixed by our laws; and gold being, since 1834, overvalued in the United States, immense quantities of these gold coins came here and remained. Another reason why we did not coin silver dollars is found in this fact: gold was superabundant. These gold coins were also held by the banks as reserves in large quantities.
But on February 21, 1857, Congress demonetized all foreign coins. This took them out of the banks. They went abroad never to return. And this was one chief cause of the panic of 1857. The facts above given, properly circulated, should forever silence the quibbles of the gold men about the non-use and non-coinage of silver up to 1878. From 1861 to 1878 we used but little coin.
The gold men sneeringly ask if we want to go on a 50-cent dollar like Mexico. It is true they have worked their diabolical will on some of those weak nations, where the currency is thrown into horrible confusion thereby, and foreign business is made almost impossible by the rise in the gold dollar to a $2.00 dollar. They have come near Mexicanizing us in this respect, but have failed as yet. Their plea for the deposits of workingmen in savings banks is like the howl the mortgage people are always raising about the poor widows and orphans of the East, to whom the Western farmer should willingly pay high interest. Wise nations legislate for producers, rather than for interest-suckers—male or female.
Ever since the Revolution there has been war between Jefferson’s treasury notes and the sharp fellows who wish to collect interest on their debts. In the lush wild-cat times bankers did not care whether they made their scoop by shoving out bank notes so far that they would hardly ever come back, or lending interest-bearing credit to their neighbors. Now the telegraph, railroad and redemption banks would make hard sledding for State wild-cats.
The United States banks (private) were so mixed with the wild-cats for fifty years—1791 to 1841—that they need describing. The first, in 1791, was got up by Federals who hated treasury notes. But fortunately there was much honesty then, and it was so managed that its notes were like full legal-tender greenbacks. Those were halcyon days. The wild-cats were around, but got little game. They made their first big inflation in New England. The Yankees thought they could swing out to any degree when the Anglo-Spanish and the Napoleon wars made coin so plentiful?’plentiful?’ here.
There was a great rush of banks between 1811 and 1816, when the second United States Bank came in. It was a fraud from the start, violated its charter and was founded mostly on personal notes. But it swung its twenty years. The great plan of the wild-catters was to get its treasury notes, good as gold, and drawing interest, for their red dogs. Right here let us affirm that, for short, all State bank money may be called wild-cats, red dogs and shinplasters. For such it always proves in panic times. The Chicago Tribune says that the Democrats are “committed upon both principle and tradition against a Federal currency—committed also to State banking.” Not so. Jefferson was strong for Federal money, i. e., treasury notes. The Whigs were always as much given to wild-cats as the Democrats. Again the Tribune tells of 34,000 who took the benefit of the bankruptcy act in 1841-2-3, but says nothing of the hundreds of thousands who failed between 1873 and 1890, under the crush of Republican gold resumption, without any such release. Intelligent Democrats could show billions of loss from Republican financiering against hundreds of millions under Democracy. Give the poor devil Democrat his due. He makes a clumsy attempt now to cover his rascality in voting against silver bills by all his talk of returning to wild-cats. The cheeky Republicans offer no shadow of a real remedy for our financial ills.
To return to the time of the twenties. The new, hopeful country kept having booms in spite of bad money. After the close of the war of 1812-15, “blessed peace,” said Matthew Carey, “came and brought two thousand merchant buyers to Philadelphia.” Fortunes were made. It was funny as a circus. The brokers stuffed the United States treasury full of shinplasters, not good thirty miles from home. Congress said “resume” in 1817. Banks said, “Go to the devil.” With twenty-two millions “on hand,” Congress had to borrow half a million to keep house on. The big bank was given over to favorites, bribery and corruption, but ruled the land. There was a whirligig between the branches of the big bank and the little banks. The latter bought, with their red dogs, from the branches, drafts on Eastern cities. The drafts bought European goods. Meanwhile the branches socked it to the wild-catters up to five and ten per cent. a month, till they redeemed their red dogs with the proceeds of another crop.
In 1818 the president of the big bank resigned when it was near ruin. A new president, Cheves, saved the bank, in the Bank of England fashion, by ruining a lot of small banks and merchants. In 1820 came “stay laws” and a “relief system.” Men could redeem their lands and negroes in two years by paying ten per cent. down. North Carolina had an awful time. Robber bankers of Newbern became the practical owners of the State and sucked its blood. Were ruling still in 1833.
In 1825 the great Nick Biddle took the presidency of the bank, and ran the whole country, till knocked out by Jackson. Biddle was the biggest boss yet; moved crops; lent ten millions at a time to the government. Some thought he gave the rising sun a boost. When there was a run, he only allowed his branches to cash their own drafts. In 1832 was high water time for this fine old Philadelphia gent. President Jackson, who hated all undemocratic high kicking, made him pay the government debt from his government deposits. Jackson stopped the abnormal boom in wild lands by his “specie circular,” ordering only specie to be taken for United States lands. Then, to check the torrents of extravagance, he ordered the useless thirty-seven millions that he had foolishly put in State banks distributed back to the people of the States. The wild-catters paid eighteen millions, and then all broke, beginning in New York in May, 1837. That was a grand smash. Jackson had a glimpse of the greenback remedy in his muddled head. Jefferson and Calhoun always had it.
Parallel with all this was the Mississippi tomfoolery of 1830 to 1840. That State borrowed thirty millions on the old personal note plan from Holland, and fooled it away in ten years. Slaves were then the only good assets. These were run off to Texas, and “Gone to Texas” (G. T. T.) was a familiar inscription.
Prof. Laughlin of Chicago University said in his recent speech before the Sunset Club and the Bankers’ Association:
“It seems to me that one of the greatest misfortunes that this country ever suffered was that temporary, and to the present time lasting, intoxication connected with the issue of United States notes or greenbacks. From the foundation of our government, in 1789, to February, 1862, the United States government never issued any paper money.”
The Chicago Herald of December 10 voiced the same falsity thus:
“In fact, the government never did anything of the kind until 1862, when Congress authorized an issue of legal-tender notes.”
Are these men simply reckless liars, or are they ignorant of the facts? Here are the facts: From 1812 to 1860 U. S. treasury notes were issued at least twenty times; that is, in every time of emergency, when the bankers’ wild-cat money could not possibly keep business going. These notes were receivable for all debts due the government, including interest on the public debt and custom-house dues; and that fact made them universally acceptable by the people—better than gold. In these respects they were better than the greenbacks; for never until the infernal exception was put upon them, in 1862, did the government refuse to receive its own treasury notes.
Here are most of the dates and amounts of those issues—all by acts of Congress readily traced: June 3, 1812, $5,000,000; February 25, 1813, $10,000,000; March 4, 1814, $10,000,000; December 26, 1814, $25,000,000; February 14, 1815, $25,000,000; October 12, 1837, $10,000,000; March 21, 1838, $10,000,000; May 31, 1840, $5,000,000; June 30, 1842, $5,000,000; August 31, 1842, $6,000,000; July 22, 1846, $10,000,000; June 28, 1847, $23,000,000; December 23, 1857, $20,000,000; December 17, 1860, $10,000,000.
Is that lie nailed? The above treasury notes were hampered in various ways. The money-lenders persuaded Congress that it would be “contrary to the laws of the Medes and Persians” if the notes drew no interest. So they were generally heavily handicapped in that way. Sometimes they only drew one mill per annum, sometimes nothing. When they drew none the Shylocks at once cried that the country was ruined. They liked them well enough plus interest, because they were sharp enough to get hold of them and pull in the interest, while they managed to cram the United States treasury full of their wild-cat stuff.
To thoroughly verify these serious statements, let us look at the statutes under which these issues were made and the particulars of their issue:
Act of June 3, 1812 (Statutes 2, p. 366).—This law authorized the issue of $5,000,000 treasury notes, to run one year, bearing five and two-fifths per cent. interest. They were made receivable for all debts due the government, and were to be paid to such public creditors and other persons as were willing to receive them. They might also be used to procure loans, or might be placed to the credit of the treasury in banks at par and accrued interest.
Act of February 25, 1813 (Statutes 2, p. 801).—This law authorized the issue of $10,000,000 treasury notes to mature in one year, bearing five and two-fifths per cent. interest per annum. Terms same as act of June 3, 1812.
Act of March 4, 1814 (Statutes 3, p. 100).—Authorized an issue of $10,000,000 on same terms as above. No charge to the government was to be made by the banks which credited the notes.
Act of December 26, 1814 (Statutes 3, p. 161).—Authorized the issue of $25,000,000 treasury notes in place of a loan of $25,000,000 previously authorized. Ten millions of these notes were to be applied to the payment of $10,000,000 previously borrowed. Otherwise they were like the above.
Act of February 14, 1815 (Statutes 3, p. 213).—This law authorized the issue of $25,000,000 treasury notes in addition to other issues. Up to this time the Secretaries of the Treasury, Mr. Gallatin and Mr. Crawford, had complained that the treasury notes so far issued were made too large for common circulation, though their standing among the people was good and the people were desirous of having them. They said treasury notes had taken the place of coin and equalized the exchange throughout the country. To meet the wishes of these secretaries and of Jefferson and Madison, as well as the people, these $25,000,000 treasury notes for circulation were authorized and issued. The most of them were required to be less than $100 in denomination, and to be payable to bearer, while those of $100 and over were to be made payable to order and to pay by indorsement, and were to bear five and two-fifths per cent. interest. The smaller ones were to bear no interest. They were also, for the first time, made receivable for six per cent. bonds. They were made to circulate as money, and to have the characteristics of coin, but they were not redeemable therein. They were legal tender to the United States. These notes, after being paid into the treasury, were to be reissued.
When these $25,000,000 treasury notes of small denominations were made to circulate as money, and to bear no interest, the indignation of all the banks in the country was aroused. They saw that if those notes went out among the people, and became the money of the country, there would be an end to the circulation of bank notes. Such was the truth. There was, therefore, a general combination in New England, New York, Delaware and Pennsylvania to kill them off. The old Bank of the United States, chartered in 1791, the charter of which expired and which was not renewed in 1811, was then, as the law allowed, closing up its affairs. The debts of the people to this bank were very large. The bank was pressing for payment. The people presented these treasury notes, which did not bear interest, in payment. The bank, to destroy the credit of the notes, and to force the recharter of a national bank, refused to receive the notes of the government in payment to the bank. As the bank would not receive the notes from the merchants, the merchants were reluctantly compelled to refuse to receive them for debts due and for goods sold. The New England banks, and those of Delaware, were also deeply involved in this conspiracy to destroy the credit of these treasury notes, as all such are now. The embargo and non-intercourse laws of Jefferson and Madison had destroyed the carrying trade of New England, and had caused a suspension of the New England banks in 1809 and 1810. The people of New England were, therefore, greatly opposed to the war with England. They did all they could to cripple the government in carrying it on. They refused all loans, even of bank notes, and were very hostile to all treasury notes, especially to those intended to take the place of bank notes, as were those of 1815.
By a general combination between State banks, the old national bank bondholders and bullion brokers, these notes of the United States were forced to a discount for a short time. One of the strongest arguments in favor of having all treasury notes made full legal tender is here presented. Had they been legal tender to the people, as well as to the government, all the efforts of the banks and brokers to reject them and reduce their value would have been fruitless. If the legal tender character were removed from the greenbacks the national banks would at once discredit them to-day.
Immediately after these efforts of the banks to discredit treasury notes, an application was made to Congress for a charter for another United States bank, which proposed to take from the government, as part of its capital, $15,000,000 of these same treasury notes, to withdraw them from competition with bank notes. (Just as the rascally conspirators at Washington are now trying to do with three hundred and forty-six million greenbacks.)
Mr. Madison vetoed the bill, principally on account of this provision. But $28,000,000 of bonds were substituted for treasury notes, as capital of the bank; and by a combination of the Federal party and a few Democrats it was chartered. The charter provided that no other such bank should be chartered by Congress for twenty years. This implied, also, that all treasury notes intended to circulate as money should be withdrawn, and that this bank should furnish all the national paper circulation for twenty years.
For this privilege the bank paid $1,500,000. The contract on the part of the government was disgraceful, but, having been made, it had to be carried out; and it was carried out, as the following acts of Congress show:
The Act of March 3, 1817 (Statutes 3, p. 377).—The second Bank of the United States had just gone into operation. Congress was compelled to comply with its part of the contract. It, therefore, passed this law, which repealed all laws authorizing the reissue of the “treasury notes of 1815.” But the people had these government notes, and they preferred them to bank notes or coin. They knew that the repeal of the law authorizing their reissue could not affect the value of those then in their hands, for a valuable consideration paid the government. They, therefore, held on to the notes (as our people should now, in spite of Sherman, Gage & Co.) Instead of paying them into the treasury, where the law required them to be destroyed, the people held on to them, and used them in business, greatly to the annoyance of the bank and of the Secretary of the Treasury, then a bank man (Mr. Dallas). This officer ordered the collector of revenue to refuse to receive these notes for duties on imports, supposingsupposing that by this means he could injure their credit and force their presentation at the treasury for payment in coin or national bank notes, that they might be canceled. This gave rise to a suit in Boston. A firm presented treasury notes in payment of duties on imports, for which the law creating them provided that they should be received. The government refused to receive them, and brought suit for the duties. The defendants pleaded a tender of treasury notes. The government answered that they were not legal tender. Judge Story, in 1819, heard the case, and decided for the defendants. The decision is that “Treasury notes are legal tender for everything for which the government makes them receivable.” This decision is in 2 Mason, pages 1 to 18. This decision, though against the government, was never appealed to the Supreme Court. It, therefore, stood as the law of the land.
The Act of May 3, 1822 (Statutes 3, p. 675).—Treasury notes still remained out among the people, to the annoyance of the bank and the Secretary. The decision of Judge Story raised instead of depreciating them in the estimation of the people, and increased the anxiety of the bank and the Secretary respecting them. The notes did not come to the treasury for destruction. (Just so the people acted when John Sherman tried to make them take 5-20 bonds and give up the greenbacks.) They remained among the people until May 3, 1822, when Congress again came to the rescue of the bank and passed the law of that date, which provided that these treasury notes should not be received by any collector of revenue in the United States, and that they should be received and paid at the treasury only. All that came into the treasury were to be destroyed. The people wished to retain these notes; but the bank forced Congress to act against them; and Congress, by destroying their receivability, compelled their surrender by the people. We hear no more of treasury notes thereafter until 1837, when, as usual, the necessities of the government again called them into being.
The Act of October 12, 1837 (Statutes 5, p. 201).—The banks had all suspended, with nearly $40,000,000 government bonds. Not one year before the law had made these banks public depositories, with their promise that they would always pay coin for all liabilities. The government had, in 1835, paid off the last dollar of the national debt. The surplus then in the treasury was nearly $40,000,000. This was in the banks. The government had no money to pay ordinary expenses, unless the treasury used suspended bank notes. This Mr. Van Buren, the President, refused to do. He called Congress together to meet the emergency. Its remedy for the emergency was treasury notes (as it should now be), which Jefferson says are the only reliance of a nation. This act of October 12, 1837, provided for the issue of $10,000,000 treasury notes, in denominations not less than $50, running one year. The law left the interest which they were to bear discretional with the President and the Secretary of the Treasury; but in no case was it to exceed six per cent. Congress appeared too timid to make these notes money bearing no interest. The Secretary, knowing that the people needed them as money, complied with the law by making many of them bear one mill interest per annum. As such they circulated freely as money, and the people were delighted to get and use them. They answered all the purposes of coin, and equalized the exchanges throughout the country. The banks did not, at that time, possess sufficient power to injure them. Men now living remember them and their usefulness, although, imitating the foolishness of the Bank of England, they were never paid out of the treasury but once.
The Act of May 21, 1838 (Statutes 5, p. 228).—This act authorized the reissue of the $10,000,000 treasury notes issued under the act of 1837, which had been canceled. They should have been used till worn out, and then replaced ad infinitum. It has taken time and a great war to open the eyes of the people and Congress to see what Jefferson saw in 1813. And now, again, many are forgetting the facts.
The Act of May 31, 1840 (Statutes 5, p. 370).—This law renews the act of 1837, relating to the issue of treasury notes, and makes the following modifications: 1. That they were to be issued in place of those redeemed; not to exceed in this issue $5,000,000. 2. They were to be redeemed in less than a year, if the treasury was in a condition to redeem them. 3. When ready to redeem them, the Secretary of the Treasury was to give notice. 4. After due notice, these notes should cease to bear interest, if they remained out. This act was to continue only one year. It is evident that Congress supposed the necessity for issuing treasury notes would soon cease. But it was mistaken. Treasury notes continued to be issued up to 1848.
The Act of July 4, 1840 (Statutes 5, p. 385).—This was the first independent treasury act of the days of Van Buren. It had good features, but was badly bungled. The money of the government was to be kept by the government (instead of the banks), in the mints, custom-houses, post-offices and treasury building. The fool part of it was that after January 3, 1843, no payment should be made to the government in anything but gold and silver coin. The banks were suspended. The government was being sustained by treasury notes. But still this law provided that after January 3, 1843, treasury notes should be excluded from the treasury as well as bank notes. An appeal was made to the people, in that year’s election, upon this law, and Van Buren and his coin payments were knocked out by Harrison with wiser plans.
The Act of July 21, 1841 (Statutes 5, p. 438).—This was among the first Whig acts, and they in turn made fools of themselves. They favored a national bank, but opposed treasury notes. The law provided for the issue of $12,000,000 six per cent. bonds. The principal purpose was to redeem the good treasury notes of the Democrats. A Pittsburg man was sent to England to sell the bonds. Though the United States had paid its national debt in 1835, the bonds were no go. The Whigs, having failed to found a bank and sell these bonds, were compelled to rely upon the much-despised treasury notes of the Democrats.
The Act of April 15, 1842 (Statutes 5, p. 473), was a final effort to shove the bonds. They were increased to $17,000,000, the time extended indefinitely up to twenty years. They could be sold at less than par. The rich, strong young nation could not do it, though taxes and duties were pledged for payment. The war was going on between the Whig Congress and sensible President Tyler. The latter advocated the issuing of all the paper money as well as metallic money by the government; but Congress wished the money issued by a national bank. The President vetoed the bank bill. Congress, by way of heading him off, passed the act to make treasury notes bear six per cent. interest, to hinder their being used as money.
The Act of June 30, 1842 (Statutes 5, p. 766).—This provided for $5,000,000 treasury notes to run one year. Interest five per cent. Otherwise like most of the others, as to legal tender, payment to public creditors and placing them in banks.
The Act of August 31, 1842 (Statutes 5, p. 581), shows a lingering hope of selling the bonds. If not successful, the government was to issue $6,000,000 more of treasury notes (trotting out the despised pack-mule again), which might even be reissued. What a let-up! Br’er Fox Shylock, he lie low!
The Act of March 3, 1843 (Statutes 5, p. 614), authorizes the issue of new treasury notes to supply the place of those redeemed.
The Act of July 22, 1846 (Statutes 5, p. 39).—The DemocratsDemocrats resumed power in 1845. This act authorizes $10,000,000 treasury notes in place of those destroyed.
The Act of August 6, 1846 (Statutes 9, p. 59), finally established the independent treasury on a sensible basis. It made all treasury notes and gold and silver coins equal in payment of all debts to the government. This held till 1861, and many of the provisions are still law, but badly enforced, as when our recent Presidents deposited many millions in banks.
The Act of January 28, 1847 (Statutes 9, p. 118), authorized $23,000,000 (more than $500,000,000 now) to fight the Mexican war. No interest was fixed. They mostly drew one mill, and the people gladly used them as money.
The Act of December 23, 1857 (Statutes 11, p. 237), provided for $20,000,000 treasury notes to take the place of coin, the banks having suspended with the coin in their vaults. (Heaven, or something, generally saves the banks.) These were, like most of the previous issues, with nominal interest. The plain people took them gladly.
The Act of December 17, 1860 (Statutes 12Statutes 12, p. 121), provides for $10,000,000 treasury notes, running one year, at six per cent. The interest was to run and the notes remain out until sixty days after notice of readiness to redeem. Otherwise they had the old provisions.
The Act of February 8, 1861, authorized the issue of treasury notes, or a loan of $25,000,000 to take up treasury notes.
The Act of March 2, 1861 (Statutes 12, p. 178), provides for a loan of $10,000,000 to take up treasury notes and for government expenses. Same old story. If bonds not sold, then more notes.
This brings us to the act of July 17, 1861, when the gigantic $250,000,000 of loans and notes came up. The further history is well known. That just given will surprise those who thought treasury notes began with the rebellion.