■..-:
 
 From the HON. HORACE GREELEY. 
 
 New York, Ma)- 5, 1870. 
 Dear Sir: 
 
 I have jours. of the 27th ult. 
 
 I think you have struck upon a great truth — 
 
 or at least a corner of it. I am not sure that 
 
 your plan has all the elements of success — am 
 
 quite confident it has some of them. Let us study 
 
 and ponder until the whole truth shall be clearly 
 
 manifest. 
 
 Yours, 
 
 HORACE GREELEY. 
 W. B. Partee, Esq.
 
 THE 
 
 SCIENCE OF MONEY 
 
 A GEEAT TRUTH. 
 
 GOLD LEGAL TENDER, BILLS OF EXCHANGE, EXPORTS 
 AND IMPORTS, BALANCE OF TRADE, FAVOR- 
 ABLE OR UNFAVORABLE BALANCE 
 OF EXCHANGE. 
 
 ALL SIMPLIFIED AND MADE CLEARLY MANIFEST. 
 
 BY 
 
 •NOMISTAKE. 
 
 > i > . . . 
 
 PHILADELPHIA: 
 
 J. B. LIPPINCOTT & CO. 
 
 1871.
 
 Entered according to Act of Congress, in the year 1870, by 
 
 J. B. LIPPINCOTT & CO., 
 In the Office of the Librarian of Congress at Washington. 
 
 • ■ . ■ ■ . < 
 
 ■ . , 

 
 i5 4 
 
 
 TO 
 THE MEMORY OF THE LATE 
 
 JAMES DICK, 
 
 THE PRINCE OF NEW ORLEANS MERCHANTS, 
 
 WHOSE HONOR AND INTEGRITY 
 
 GAVE HIM FRIENDS IN THE HOUR OF NEED, 
 
 ENABLING HIM TO SAVE FROM THE DISASTERS OF 1837 
 
 AN HONORABLE NAME, 
 
 AND THE MEANS OF DOING MUCH GOOD 
 
 TO FRIENDS AND RELATIONS, 
 
 if 
 
 his humble iNork, 
 
 4 
 
 OF ONE WHO SHARED HIS GAINS 
 
 AND ENDEAVORED TO PROFIT BY HIS COUNSELS, 
 
 18 RESPECTFULLY DEDICATED 
 
 BY 
 
 THE AUTHOR. 
 
 389260
 
 IE"TEODUOTIOE". 
 
 In offering the following reflections deduced from 
 observations on the circulating medium and ex- 
 changes of our country, together with the central 
 idea of a divorcement of money of account from 
 all articles of merchandise, I am well aware of the 
 opposition I will have to encounter from the long- 
 standing prejudices in favor of gold as a legal tender 
 and circulating medium. I only ask a patient and 
 thoughtful perusal of my arguments, assuring the 
 reader that in pointing out a sure road to the liqui- 
 dation of our large and onerous debt, I do not offer 
 it as a clap-trap to gain advocates. The whole is 
 only secondary to the inauguration of a permanent 
 leo-al tender which will not be an article of merchan- 
 dise. 
 
 I did not undertake this investigation with any 
 reference to our national debt, but solely with the 
 hope of giving to the country a cheaper medium in 
 effecting her internal exchanges. The subject is so 
 fruitful of thought, leading one, as it were, through 
 all the field of political economy, that I deem it ad- 
 visable, in the present agitated state of our finances, 
 to pursue it in connection with the liquidation of 
 our debt, especially as no opportunity could be 
 
 (vii)
 
 v iii INTR OD UCTION. 
 
 more favorable for the demonstration of the prin- 
 ciple I have undertaken to set up. 
 
 To insure the establishment of a great principle, 
 it must be brought forward at the proper time, when 
 the thoughts and feelings as well as interest of all 
 parties can be called into play. 
 
 This is at present the situation of the United 
 States. She has a legal tender and circulating 
 medium of her own, but still lives in_adultery with 
 gold; and I advocate a divorce, that the future off- 
 spring may be legitimate. 
 
 In advocating so great a change I am fully aware 
 "that there surely must be some foundation for opin- 
 ions so generally embraced by mankind, and that 
 we ourselves ought rather to call in question the ob- 
 servations and reasonings which overturn what has 
 been hitherto so uniformly maintained and acqui- 
 esced in by so many individuals, distinguished alike 
 by their wisdom and benevolence." 
 
 The profound investigations of Lardner retarded, 
 but did not arrest, ocean steam navigation ; skepti- 
 cism did not deter Morse from giving to the world 
 the telegraph; nor did Washington falter to give us 
 a republic, when all past history condemned the 
 experiment. It is the hope that co-operation will 
 brine success to this divorcement that leads me 
 now to lay it before the country. As I do not 
 promise to put money in any man's pocket, other- 
 wise than by industry and economy, I trust I shall 
 not be condemned as selfish or visionary, but shall 
 be regarded as making an honest effort to accom- 
 plish good.
 
 INTR OD UCTION. \ x 
 
 The following are the points I have endeavored 
 to establish : 
 
 If the legal tender and circulating medium of a 
 country be at times desirable for export, it will 
 become a curse to the people instead of a blessing. 
 
 Production in excess of consumption will alone 
 enable a people to pay taxes. 
 
 ISTo country can have credit long without surplus 
 productions, this being the basis of all national 
 credit. 
 
 No country has ever offered her capital stock in 
 payment of debt. To do so, if it were held by a 
 foreign power, would be to surrender nationality. 
 
 Money has no other use than to buy with or to 
 liquidate debt. 
 
 Between countries money loses its value as money 
 from its peculiar character, and is only received as 
 a commodity in exchange. 
 
 It is not the export or import of any one article 
 that impoverishes a nation or replenishes its wealth. 
 It is the difference in gain or loss by the exchange. 
 
 Productions command productions ; the medium 
 to effect the exchange is conventional, and may have 
 no other value. 
 
 The merchant creates the demand, without which 
 production for sale must cease. 
 
 The incentive to production is consumption or to 
 sell, the object of which is to buy and gratify desires. 
 
 There would be no selling if it did not give ability 
 to buy. Selling enables you to buy, and stimulates 
 production. 
 
 Digestion limits the desire for food ; luxuries have
 
 x INTR OD UCTION. 
 
 no bounds. Capital cannot be used in the former 
 bevoud gratification ; in the latter it has no limits. 
 
 If all men were misers, there would be no pro- 
 duction. 
 
 All produce gravitates to the point where it is 
 most in demand, and that point is where there is 
 greatest ability to buy. 
 
 Merchants cannot become opulent if production 
 is but little over consumption. 
 
 Gold is not the circulating medium between coun- 
 tries, — it is bills of exchange; and gold becomes 
 merchandise. 
 
 A full investigation of this subject is invited, and 
 I beg that all strictures and criticisms be forwarded 
 to me at Vicksburg, Mississippi. 
 
 NOMISTAKE.
 
 CONTENTS. 
 
 PAGE 
 
 Gold Legal Tender 13 
 
 Fluctuations — their Effect ....... 43 
 
 Bills of Exchange — Modern Use 57 
 
 Balance of Trade 64 
 
 Application 66 
 
 Consolation .......... 70 
 
 Legal Tender . . . 71 
 
 Who pays the Expense and Charges of a Medium . . .74 
 Instinct ........... 82 
 
 Gold Legal Tender and Circulating Medium . . . .85 
 
 Legal Tender 97 
 
 Divorcement of Gold from Circulating Medium . . . 100 
 Production and Consumption . . ... . . . 104 
 
 Credit through Circulating Notes 114 
 
 Medium should be Legal Tender 117 
 
 Legal Tender only to be issued for Bonds . . . .129 
 Trial and Summary ........ 134 
 
 Production and its Drawbacks 145 
 
 Circulating Medium and Legal Tender ..... 149 
 
 Production and Circulating Medium 155 
 
 Circulating Medium a Necessity 157 
 
 Legal Tender, Balance of Trade, Cotton Crop, etc. . . 160 
 "Favorable or Unfavorable Balance of Exchange" — What 
 
 it means .......... 171 
 
 Legal-Tender Circulating Notes not made Legal Tender, a 
 
 Curse to Production . . . . . . . .176 
 
 Debt, Interest, and Legal Tender 181 
 
 Medium of Exchange ........ 187 
 
 Exchange and Medium ........ 198 
 
 True Basis of all Mediums 202 
 
 Deductions . . .212 
 
 (x\)
 
 SCIENCE OF MONEY. 
 
 GOLD LEGAL TENDEK. 
 
 The currency of a country, based on land or prop- 
 erty as a measure of value, will depreciate the 
 moment the income or annual rent falls short of the 
 average of production. But if income be its basis, 
 and likewise be the measure of value, the depreci- 
 ation can never be so great as to absorb all value; 
 it is this error in the issue of an inconvertible cur- 
 rency or medium of exchange that produces all the 
 losses and troubles to individuals or a government. 
 Consequently it is quite different if the income be 
 fixed and certain; but allow any other standard to 
 measure the value of property or its availability, 
 and you subject it to the whims of the speculators 
 or the demands of the fortunate holders of the 
 standard or measure of value. This error in esti- 
 mates or foundation of value cannot but be tem- 
 porary if based on annual income, this being a 
 reserve over immediate consumption ; if we confine 
 our estimates to income or production alone, many 
 fluctuations will be avoided. 
 
 The medium of exchange, or the circulating me- 
 dium, of a country, has no effect or value in the 
 exchange between countries ; the supply, of wbat- 
 
 2 (13)
 
 14 SCIENCE OF MONEY. 
 
 ever it may be, adjusts itself to the demand, and 
 leaves the trade or exchanges of the two countries 
 precisely in the same condition as if they were bar- 
 tering one commodity for the other. An increase 
 or diminution of the medium of exchange in any 
 one of the countries affects only itself, and not the 
 exchangeable value of the commodities the one 
 country desires to barter with the other : hence the 
 conclusion which cannot be altered by the quantity 
 of the medium. The result, after all, is but the ex- 
 change or barter of the one surplus for the other. 
 He who has the power to buy or a surplus to ex- 
 change is in a better condition than the party who has 
 no surplus ; the former can supply all his wants, the 
 latter must be pinched and restricted, and may com- 
 plain of hard times. The one who has not the 
 wherewithal to supply his wants will forever re- 
 main in the same condition and be complaining. 
 The depreciation of a currency does not affect the 
 foreign trade or have any influence over the demand 
 and supply, each retaining its relative value in ex- 
 change. 
 
 The change of a circulating medium affects value 
 only at the beginning and the end. The United 
 States has destroyed all the values in her power by 
 the change, and it now remains to be seen in what 
 way she may continue the existence of legal tenders. 
 If the government be prudent, wise, and economical 
 in the future, and shall never at any time allow issu- 
 ance, or force others on the market, except in ex- 
 change for bonds, the legal tenders must continue to 
 carry the same value of a four per cent, gold-bearing
 
 GOLD LEGAL TENDER. 15 
 
 bond. The fluctuations from this center can only be 
 such as are incident to supply and demand, the excess 
 or shortness being only to the extent of a temptation 
 being offered in rates of interest to cause the conver- 
 sion of bonds into legal tenders, and vice versa. 
 
 We will suppose a case or position of trade where 
 the legal tender, as a circulating medium, is not 
 equal to its wants, and no one in the country has 
 bonds to convert and supply the deficiency. Imme- 
 diately the price of bonds would rise in the market, 
 and cause their importation, like any other com- 
 modity or value in exchange for an}- surplus pro- 
 duction we may have. This will continue until an 
 equilibrium or equation of supply and demand is 
 established. Even should the premium paid seem 
 excessive, the circulating medium must and will be 
 supplied so long as there remains in the country a 
 surplus of value from which speculators can hope to 
 gain a profit from their exchange ; and when this 
 state of the market does occur, — and sooner or later 
 it will, — then legal tenders may claim a premium 
 over gold or at par. This, in commercial parlance, 
 is a resumption of specie payment. When it does 
 come thus, it is more likely to continue than when 
 brought about by financial arrangement or tempo- 
 rary expedient. 
 
 There need be no fears in regard to a supply of 
 gold, as all commodities tend to the most profitable 
 market, and that market will be found where there 
 is the greatest abundance of produce to sell or ex- 
 change. Those who have the ability to buy can 
 always supply their wants.
 
 16 SCIENCE OF MONEY. 
 
 It is certainly an object with any country having 
 a specie circulating medium to desire as large a sum 
 as possible for her exports to be returned in coin ; 
 hence the general anxiety of all parties to see a con- 
 stant stream of bullion flowing into their country. 
 This is natural, as the tendency is to cheapen money 
 and advance the price or value of all other commo- 
 dities. They do not consider that they have gained 
 nothing in wealth, but have only changed the relative 
 value or exchangeable value of commodities. It 
 may be they have exchanged an article much needed 
 for reproduction for one that is of no value until ex- 
 changed for something else. It is but the hoarding 
 of a value that could have been made profitable ; con- 
 sequently, so long as it remains idle, the income, to 
 the full extent of the average profits of the coun- 
 try, is lost, not only to the individual, but to the 
 country, and the inference is that the country ex- 
 changing the gold has realized the profit due to the 
 producer. 
 
 The prosperity of a country depends more on 
 moderate profits and uniform prices than on the 
 extreme fluctuations incident to speculation. The 
 latter tend to discourage production and industry — 
 the majority of producers favoring the occupation 
 least fluctuating. The prudent, plodding class desire 
 that the money rate of interest should indicate the 
 rate of profit, instead of the embarrassment growing 
 out of extreme speculation, when the current inter- 
 est demanded for the use of capital in productive 
 enterprise is the measure of profit realized. No 
 great losses can flow from the lending or borrowing
 
 GOLD LEGAL TENDER. 17 
 
 of it, if limited to time in the permanency of the 
 investment. It is the sudden fluctuations either in 
 interest or of production that tend to discourage 
 reproduction from the annual accumulation of en- 
 ergy and economy. 
 
 In the divorcement of the circulating medium of 
 a country from all articles of merchandise in which 
 foreign trade can participate, you have at once con- 
 fined the fluctuations to the home demand, and it is 
 but reasonable to credit the producer with ability to 
 measure his own wants, and to assume that he will, 
 in parting with his surplus, demand in exchange 
 just such goods, wares, and gold as may be most 
 suitable to his future desires. The agriculturists of 
 a country are not so conversant with the supplies of 
 other markets as are the merchants and traders, — 
 hence the farmer will advise with the trader as to 
 the time and place for effecting the exchange, but 
 not as to the particular articles needed by him in 
 the future. ISTo one can tell what quantity of legal 
 tenders, mess-pork, flour, or clothing is needed so 
 well as the one whose surplus is to be exchanged for 
 them. 
 
 However you may arrange, or even multiply and 
 mix up, money with produce, after all, the former 
 is but the medium by which the exchange is effected; 
 the latter is the purchase, and the result is pro- 
 duce for produce. Now, this being universally the 
 modus operandi, and considered as the end and pur- 
 pose of production, why should I be required to 
 value my property in comparison with a commodity 
 
 influenced by all the speculations and complications 
 
 2*
 
 18 SCIENCE OF MONEY. 
 
 of the world ? And, after all, the result is only an 
 exchange of mess-pork for flour, — the demand for 
 gold to purchase tea in China, or for silver to be given 
 for wines and silks of France. It matters not how 
 much of the precious metal may be demanded for 
 the speculation, the interior exchange of the country 
 should not, and need not, be involved in the pertur- 
 bations of so uncertain an agency. 
 
 When I go to market with my pork, I do not wish 
 to be compelled to sell it for a commodity or medium 
 that may be in France or China, but for one that is 
 local, and which, I know, will be received for flour. 
 This is what I call common sense and honesty, and 
 the holding out to industry and enterprise the great- 
 est inducements to increased production, for which 
 they may hope for an equitable exchange. 
 
 The merchant finds me a market for my produce, 
 and brings in exchange the surplus of others which 
 I need. Neither of us can prosper without influ- 
 encing the future of the other. The gambling spec- 
 ulator adds nothing to society in morals or wealth, 
 but is ever plunging the producers and traders into 
 misery and distress. 
 
 I do not claim for this local currency a complete 
 immunity from fluctuations and occasional periods of 
 embarrassment. ~No human institution is free from 
 change or from foreign complications in effecting our 
 internal exchanges with our local medium ; that never 
 can be secured if we continue the same measure of 
 value in use as a circulating medium. Measure of 
 value should be unchangeable, not arbitrary; we can 
 fix measure of time and space, but not of value.
 
 GOLD LEGAL TENDER. 19 
 
 Alan's nature will affix values to his own property 
 in accordance with fancy or interest, — whether he will 
 exchange his dog, estimated at one hundred dollars, 
 for two fifty-dollar puppies, or for one; and if he 
 should give his obligation on time for a gun, it is rea- 
 sonable to suppose he will be as desirous afterwards 
 to confine to the country the legal tenders for the one 
 as that there will be game to hunt with his dog and 
 gun. From his industry he expects to produce the 
 flour or pork which will command on the spot the 
 legal tenders to make good his maturing obligations. 
 To sum up all in a word, I am in favor of all men 
 issuing their obligations to be paid in any com- 
 modity they may select, even in puppies, if this obli- 
 gation should be a legal tender, and the measure of 
 them should be the payment of four per cent, in- 
 terest per annum in gold. The fluctuations cannot 
 long exceed the current rate of interest. And as 
 these fluctuations in value only remotely influence 
 the comparative value of produce, the sacrifice 
 which may become necessary in meeting maturing 
 obligations will be measured not by the present, 
 but by the remote period of the maturing bond, 
 which is the basis of the legal tender. If this legal 
 tender were gold and not in the country, or near at 
 hand, the loss would fall entirely on the present and 
 not on the future. 
 
 However much others may desire the produce to 
 be exchanged for the legal tender, it is but present- 
 ing two problems for solution, in the elucidation of 
 one principle. 
 
 You might as well attempt to establish bylaw two
 
 20 SCIENCE OF MONEY. 
 
 legal tenders, to remain, and at all times have equal 
 value, as to presume to inaugurate a measure of 
 value and a circulating medium to be one and the 
 same. The two, from their nature and object, are 
 incompatible. When one goes up, the other must 
 go down. Both are intended to occupy the same 
 bed, — but the one at night, the other during the day. 
 Our own country for a long time endeavored to en- 
 force two standards of value, gold and silver, but 
 found the laws of trade such that no edict could 
 force men to pay obligations otherwise than in the 
 cheaper commodity, this remaining the legal tender, 
 while the other became an article of traffic and ex- 
 port. The same result will, some day, be deemed 
 not only practicable but advisable, in regard to fix- 
 ing one legal tender and one measure of value. It 
 is impossible to make the two one and the same, 
 and still be just to those who desire only a medium 
 of exchange, and to those also who wish to measure 
 values. It is a well-known fact, that the transfer of 
 the precious metals from one country to another 
 will cause what is called cheap money in the one, 
 and dear in the other, and that precisely in the ratio 
 of that obstruction, in the one, more of an article 
 of production must be given in exchange for the 
 standard of value than formerly, in the other less will 
 be demanded. This must go on until an equitable 
 exchange of commodities and the precious metals 
 is established, however disastrous it may be to the 
 country in the mean time. 
 
 We can have no better illustration of the effect of 
 a standard of value of gold or of legal tenders for
 
 GOLD LEGAL TENDER. 21 
 
 the circulating medium than our own present imper- 
 fect standard as demonstrated a few weeks ago. The 
 universal measure of value, gold, appreciated twenty- 
 five per cent, when compared with legal tenders, 
 and again depreciated twenty-five per cent., between 
 breakfast and dinner. 
 
 Suppose you had had an obligation maturing on the 
 day of this great gold bubble, and the measure of its 
 value had been gold. Had you delayed payment until 
 near the close of banking-hours, it would have cost 
 you one-fourth of your estate to liquidate it. 3NTow, 
 is it not clear that this decline and advance had 
 no relation to the value of the commodity which 
 you received when the obligation was entered into, 
 or to its present exchangeable value ? It was the 
 speculative influence so often brought to bear on 
 an article of merchandise, and its disasters ended 
 where they should end, — in the gold rooms. The 
 only effect on the producer of the country was 
 sympathetic, and it is to rid the country of this 
 influence that I am laboring. 
 
 Take the reverse of this gold obligation, say that 
 your maturing obligation was payable in legal ten- 
 ders, for which you were called on that day, the 
 enhanced value of these legal tenders could only 
 have been the fluctuation in the market value of the 
 bond on which thev were raised, and this could be 
 estimated only by the difference of interest on the 
 advance or decline in the standard or measure of 
 value, and not on the whole amount. In the former 
 case you would have become bankrupt, — in the lat- 
 ter you could have honorably discharged your obli-
 
 22 SCIENCE OF MONEY. 
 
 gation with slight loss to yourself and none to your 
 country. 
 
 Many will contend that if the circulating medium 
 be other than the precious metals, it will sooner or 
 later drive all the gold out of the country. The very 
 admission of this is but an argument in favor of a 
 cheaper medium, it being unreasonable to suppose 
 that individuals will send oft' or exchange their gold 
 for trifles. So far from this, more often than other- 
 wise it is exchanged for something for reproduction 
 which can be turned to profitable account in the 
 future. 
 
 From a predilection in favor of gold, men often 
 part with values they should retain, but yield to the 
 temptation and the hope of replacing those values 
 on more favorable terms. A party sending off his 
 gold to procure something to be placed in the line 
 of reproduction, furnishes an evidence not only of 
 thrift, but that he has substituted a cheaper medium 
 by which to effect his internal exchanges. And if 
 ever again he is in want of gold, the productions 
 which he has in hand will command all he may 
 desire. There can be no greater fallacy than the 
 exploded idea that the exportation of gold is any 
 more impoverishing to a country than the exchange 
 of other commodities, many of which are deemed 
 more valuable and absolutely essential to repro- 
 duction, such as food, clothing, etc. These cannot 
 be dispensed with, and these alone can be relied 
 on to command labor and forward the simplest 
 enterprises. 
 
 To suppose that the people of a country will part
 
 GOLD LEGAL TENDER. 23 
 
 with their gold and not receive in return a substan- 
 tial value, is to argue that they need a guardian, and 
 the party desiring to direct them must have no 
 interest in the exchange. There can be no safety 
 in the counsels of one claiming the omnipotent 
 power of a general administration of the private 
 affairs of his country. One of the greatest difficul- 
 ties attending a circulating medium not convertible 
 into gold in times of depression and panic, is to 
 know what to do with it in case of suspension. 
 And it is this uncertainty that quickens the desire 
 to convert, or, as it is now called, to realize. This 
 state of uncertainty cannot attend United States 
 legal tenders, as the privilege of conversion at will 
 into a four per cent, annuity, or bond, payable in 
 gold, gives to the holder this sure outlet. 
 
 So long as the government maintains good faith 
 with her people and the holders of her funded and 
 circulating debt, no sudden or great derangement 
 or fluctuation can be entailed on the country gener- 
 ally. At most, such derangement can be but tem- 
 porary, aud as the entire country will have an 
 interest in the recovery, united effort will cause the 
 loss to be small. 
 
 The general confidence and disposition to uphold 
 the standard are quite different from any local au- 
 thority to issue circulating notes. The spirit of 
 rivalry often does more than extreme want to em- 
 barrass and depress the operations of individuals. 
 
 Confidence and credit in commercial affairs, but 
 more especially in banking, cover more than three- 
 fourths of the transactions connected with the
 
 24 SCIENCE OF MONEY. 
 
 exchange of commodities ; as an evidence, capital 
 itself will disappear whenever confidence is with- 
 drawn. 
 
 At this time, the two hemispheres are mourning 
 the loss of one whose credit was equaled only by his 
 charities while living. But a few years ago, this 
 great philanthropist had to ask the Bank of Eng- 
 land for the promise of temporary aid. No sooner 
 was it promised than confidence was inspired, not 
 only in his immense assets but also in the credits of 
 all others in like situation. In banking or exchange- 
 dealing, confidence is far more profitable than capi- 
 tal. Any exchange-dealer will tell you that with 
 five hundred thousand dollars he will safely conduct 
 a business of twenty million dollars, or forty to one. 
 By confining the business to the capital, not more 
 than one-tenth could be effected. This difference is 
 due to the cheapening influence of credit ; and to 
 the full extent of this saving is the country furnished 
 with the means of reproduction and extended profit. 
 In all other commercial affairs, a business of only 
 three, four, or five to one cau be entered into and 
 safely relied on. 
 
 For nearly ten years the country has effected its 
 internal exchanges with an irredeemable, incon- 
 vertible legal-tender currency. No other ten years 
 will show less fluctuation in production, or greater 
 immunity from periodical embarrassment. The in- 
 flux and efflux of gold have been constant, and equal 
 to the wants of commerce. At no time has there 
 been a dearth. During all this time the internal 
 and external exchanges have been unprecedentedly
 
 GOLD LEGAL TENDER. 25 
 
 large, — sustaining a tax-list equal to the entire ex- 
 ports of the country before the war. The harmony 
 of all this is due to the partial divorcement of the 
 internal exchanges from gold. Perfect this system, 
 — make it perpetual and certain, — freeing the 
 country from man-traps and spring-guns, in the 
 shape of resumption and repudiation, and a degree 
 of unexampled prosperity will crown our country's 
 efforts, — efforts far surpassing the gigantic struggles 
 of the past. To illustrate the effects of a medium 
 of gold and one of legal tenders, suppose one dollar 
 of gold to represent the measure of a day's work, — 
 the equivalent of a certain amount of mess-pork, 
 flour, etc. In order to carry on reproduction, I go 
 to the capitalist, Mr. Gold, and borrow one hundred 
 dollars, and use it in the production of cotton. In 
 order to simplify, I leave out rates of interest, profit, 
 etc. It is reasonable to suppose that the one hun- 
 dred days' work will produce sufficient to relieve 
 Mr. Gold from his advances. But when I go to the 
 merchant with my cotton to be exchanged for gold, 
 I am told by him that it is all in China, but that he 
 has a friend, " an unconscionable dog," who will give 
 him eight}'- dollars for the one hundred dollars in 
 China. Being compelled to make my promise good, 
 having no other alternative, I accept the offer. I 
 return to Mr. Gold, and find myself twenty dollars 
 short* Rather than sacrifice me by taking my mule 
 and plow, he advises me to take one hundred and 
 thirty dollars in legal tenders, which will command 
 one hundred days' labor. I gladly accept the offer, 
 and go into cotton again. When it is again ready 
 
 3
 
 26 SCIENCE OF MONEY. 
 
 for market, I return to the same merchant, and am 
 informed that all the world has been sending gold 
 to exchange for bills drawn against cotton, and that 
 he will give me one hundred and thirty dollars in 
 legal tenders and twenty dollars in gold for my 
 cotton. This will enable me to make good my old 
 and my new promise, and determine me in the 
 future to make no promises of produce except such 
 as I know can be raised in the country. 
 
 It is the accumulation of capital from past savings 
 in a country which must be looked to for its develop- 
 ment. This is contrary to the idea of many who 
 oppose concentration, if in the hands of a few indi- 
 viduals ; the reverse of which is true and the only 
 safety. If capital were in the hands of the majority, 
 or divided on the agrarian principle, all would be 
 shavers. The large capitalist wants a certain interest, 
 which he can and will diminish with the security. 
 The shaver must have his pound of flesh, even if 
 nearest the heart. 
 
 The capitalist may give tone to the market in 
 quiet times, and furnish the Gazette with quotations, 
 but in times of sharp competition, and derangement 
 of supply and demand, the middle-men are always on 
 the market, dictate terms, and furnish quotations. 
 The capitalist who is accumulating, or, in every-day 
 language, growing rich, is investing his earnings of 
 rents and interest, silent and smooth in his course, 
 like a deep stream. He is interested only in pro- 
 curing a safe and profitable investment for his annual 
 or semi-annual accumulation. 
 
 However small the rate of interest may be, he can
 
 GOLD LEGAL TENDER. 27 
 
 live and prosper, and is not influenced by anything 
 but security. It is not so with the middle-man. He 
 has borrowed at a rate and must lend at an advance, 
 in order to realize a profit from which to draw his 
 living. And thus it is as you descend in the scale 
 of dealers in money — each drawing from it a living 
 — the discount or premium widens, until you reach 
 the shaver, who speculates on the necessities of 
 mankind. The capitalist is aiding reproduction, — 
 the shaver endeavoring to draw its fruits into his 
 own pocket. 
 
 To illustrate : Mr. Snyder went to an eminent 
 Virginia politician and shaver with a note having 
 fourteen months to run. He inquired the rate of 
 discount, and was told that it was so much per 
 month. After the calculation was made, he was in- 
 formed that the note did not hold out — in other words, 
 the note did not equal the discount. This should be 
 a warning to all young men, in their estimate of 
 small losses. Give those small losses time and dis- 
 count them at once, and presently will come the day 
 of bankruptcy, or when the note will not hold out. 
 
 It is certainly the interest of the government and 
 of its people that as large an amount as possible of 
 its bonds and indebtedness be retained in the hands 
 of its citizens. 
 
 Nothing will hold out a stronger inducement than 
 to declare them representative of a legal tender. 
 This will make all parties desirous of having at 
 hand bonds, even if in small amount, in order that 
 they may at any time convert them into legal ten- 
 ders. If a horse or an ox be required, they know
 
 28 SCIENCE OF MONEY. 
 
 that payment can be promised without experiencing 
 the doubts and uncertainties of converting any other 
 portion of their stock into legal tenders. 
 
 I cannot illustrate better than by reference to the 
 game of faro, in which } t ou must have counters, in 
 order to avoid the inconvenience of a subdivision of 
 the money. Now, to get these counters you must go 
 to the bank with something acceptable to the keeper. 
 The substance required you may not have, and in 
 order to obtain it you must sacrifice perhaps one or 
 two assets. Now, if you knew the precise article 
 that would procure these counters, it is but reason- 
 able to suppose that you would keep some portion of 
 your surplus invested in it. You know that it may 
 be needed daily, or, at least, periodically. 
 
 The time will come when every prudent dealer or 
 producer will have by his side a reasonable reserve 
 fund of bonds with which he can at any time pro- 
 cure legal tenders by the abatement of interest for 
 a certain time. Not so, however, if he must resort 
 to an ordinary banking establishment. It may be 
 that one or two days of his time is lost in dancing 
 attendance on a board of directors. Even should 
 he have the bonds to offer as security, he may 
 fail to procure the accommodation or discount if 
 the parties to whom he applies are engaged in the 
 same line of speculation. They may promise fair, 
 talk favorably up to the last moment, and then in- 
 form him that it can't be "did." 
 
 If he has the United States bonds in his pocket, 
 he can act like an independent man, without cring- 
 ing to any clique, command the legal tenders and at
 
 GOLD LEGAL TENDER. 29 
 
 once consummate his business. Now I beg leave 
 to return to the other dealer of faro, who keeps the 
 counters. "When the producer returns to the market 
 again, desiring some more counters to enable him to 
 make a little operation, he finds that the faro-dealer 
 left on the last steamer for Baden-Baden, having 
 been advised by telegraph that a good thing could 
 be made out of his counters there, on account of the 
 small competition and large accumulation of values 
 in that market. Many think that because gold is 
 the circulating medium of the world, it is all the 
 time used in that capacity. They do not remem- 
 ber that it ceases to be a medium or measure of 
 value whenever it is in demand for export, and 
 goes into the hands of those whose specialty is 
 dealing in this commodity. A commodity it cer- 
 tainly has become, aud is nothing more than so 
 many barrels of mess-pork or bales of cotton col- 
 lected at the point of export by the dealer. 
 
 The circulating medium between exports and im- 
 ports being now bills of exchange, and no longer 
 gold, or any other device to be used as counters or 
 the medium of internal exchange, at this point I 
 would call attention to one or two facts. You have 
 seen the gold circulating medium collected by the 
 dealer and exporter. "What must be done for a me- 
 dium to be used in return ? 
 
 There are still productions to be bartered and ex- 
 changed in order that further production may go on 
 and obligations be liquidated. "Will you have the 
 machinery of commerce stand still until the gold 
 
 3*
 
 30 SCIENCE OE MONEY. 
 
 can be attracted by some great sacrifice of values ? 
 When it does come, as it will do if you have goods 
 to offer at a bargain, it can answer no other pur- 
 pose than to liquidate a debt between John Doe and 
 Richard Roe, or to effect the exchange of mess-pork 
 for flour. 
 
 Any other counter or legal tender would not have 
 subjected consumption and production to all this 
 delay. But how answer the same purpose ? We 
 could have awaited the return of the gold as mer- 
 chandise in exchange for our cotton, provided we 
 did not need calico instead. At any rate, the great 
 end of production and consumption has been 
 effected. 
 
 To demand of gold to act two distinct parts at the 
 same time — as a medium of exchange and as mer- 
 chandise in trade — is to attempt to endow it with 
 omnipresence. 
 
 If two substances cannot be made to occupy the 
 same space at the same time, two spaces cannot be 
 filled at the same time by one and the same sub- 
 stance. 
 
 The honorable merchant must have the gold here 
 the <lav his obligation matures, no matter what 
 amount of other goods must be sacrificed. Those 
 unworthy of credit will hold for to-morrow, however 
 much they may sacrifice their neighbors. Bill Arp 
 was tin! in the war himself, but he was willing to 
 Bacnfice all his relations in the cause. 
 
 The United States has now an independent circu- 
 lating medium in her legal tenders, and as much 
 gold as is equal to the wants of commerce, with a
 
 GOLD LEGAL TENDER. 31 
 
 large reserve to meet her own maturing obliga- 
 tions. 
 
 The onlv incubus resting; on trade and the circu- 
 lating medium is the apprehension of a return to 
 gold as a circulating medium. We have all we 
 want as a measure of value, — productions measure 
 productions. When gold w T as our circulating me- 
 dium and measure of value, a few millions accumu- 
 lated in the treasury caused such derangement that 
 the government was compelled to divide it out 
 among the States, in order to restore harmony. 
 But now, with one hundred millions in the treasury, 
 productions still command productions, however 
 much our circulating medium may be appreciated 
 or depreciated by comparison with gold. 
 
 In specie-paying times, to have hoarded up this 
 amount of gold would have bankrupted the circula- 
 tion of our country and deranged the equilibrium 
 of trade in all parts of the commercial world. 
 
 We are using a circulating medium independent 
 of all the world. From this channel gold has been 
 withdrawn, and now occupies the same position as 
 cotton, pork, and flour. So long as we have other 
 articles of value to export, no one will call for gold. 
 On the other hand, so long as we have a surplus to 
 exchange for it, we will never be without that uni- 
 versal commodity. A country which has not bread, 
 nor anything to exchange for it, must perish. Gold 
 it can do without. Nor will a people trouble itself 
 much about it so long as their productions can be 
 turned into the productions of others which they 
 require for consumption or reproduction. It is the
 
 32 SCIENCE OF MONEY. 
 
 increase in production which calls for an increase in 
 the circulating medium. All sums above this de- 
 mand are, to a certain extent, not needed, — thrown 
 on the market, and, to that extent, worthless. 
 
 The use of a circulating medium, or the consent 
 to have one, creates the measure for it. Hence the 
 difference between commodities and the medium of 
 exchange. Commodities demand a medium of ex- 
 change, but the medium demands nothing, and, if 
 redundant, becomes worthless to that extent. A 
 circulating medium is not used because of any in- 
 trinsic value, but it has been made the medium. 
 
 It has been recommended as being equal to the 
 cure of this disease, and should not be looked upon 
 as a universal panacea, and called a measure of value 
 as well as a medium of exchange. 
 
 Steamboats are in their element when on navi- 
 gable streams, locomotives when on the iron track; 
 neither can assume the position of the other with 
 safety or profit. Where is, or can be, the con- 
 troversy in regard to the utility or necessity of a 
 circulating medium to effect the exchanges of the 
 country ? Can there be any as to the gain of interest 
 to the party having power to issue them? This 
 point being conceded, no one certainly can be so 
 selfish as to wish to deprive the people of what 
 belongs to them by right and risk. If there is any 
 prospect of loss, by all construction of law and jus- 
 tice, the party risking it should participate in the 
 profits. 
 
 I am well aware Unit many will contend that if 
 the assuming power of circulating notes should be
 
 GOLD LEGAL TENDER. 33 
 
 solely in the hands of the government, the effect 
 would be to close up all the private banking establish- 
 ments against making discount. To a certain extent 
 this may be the case, but it will only apply to the wild- 
 cat concerns that attempt to speculate on the credulity 
 of the people, and at no time had any other capital 
 than what the people deposited with them, whilst 
 giving them credit and circulating a note, and pay- 
 ing, in the majority of cases, a shaving rate of dis- 
 count, when the note is not as solvent as the one 
 discounted, these notes frequently being redis- 
 counted to create a fund for the speculative direc- 
 tors to gamble on, and when the collapse does come 
 the solvent note of the producer must be paid in 
 some other currency or medium. In answer to this 
 objection, we may adduce the general disposition 
 manifested on the part of all the best-regulated pri- 
 vate banking houses, not only of this country, but 
 of Europe, to use in their daily business, from 
 which they grant loans and discount, circulating 
 notes other than their own. This is especially the 
 case in England, where the circulating notes are 
 issued by the Bank of England. 
 
 The effect of this is to concentrate the reserve, 
 giving greater security, and relieving all the other 
 parties from the periodical discredits growing out 
 of a drain of the precious metals. Previous to the 
 war, the great bulk of the circulating medium used 
 by the banks of New York City in the discounts 
 and loans was not issued by them, but by other 
 interior establishments, — the free use of certified 
 checks effecting all the exchange of the city, their
 
 34 SCIENCE OF MONEY. 
 
 discounts and loans being made from capital and 
 deposit. 
 
 The tendency of a circulation, if the issuing power 
 is in the hands of the government, will be to induce 
 capitalists and banking establishments to keep their 
 reserve in bonds, knowing they can convert them into 
 legal tenders at the moment of need. This is vir- 
 tually discounting your notes in order to place them 
 in some other channel. The specie reserve that is 
 now kept on hand can all be used in loans and dis- 
 counts. Now, when I speak of capitalists, I include 
 the small balances over immediate consumption in 
 the hands of all classes. All of their reserve will be 
 invested in bonds, from the fact that they can wait 
 until the day of need before conversion, and will 
 not be forced to dance attendance on some director 
 of a bank for a discount, which in time of need is 
 not a certainty. By the inauguration of this cir- 
 tainty new life will be given to trade, enabling the 
 whole country to sail close to the wind, and have 
 but little, it any, reserve fund, — idle or useless to 
 the country. 
 
 I hold that if a man desiring a discount, and in 
 possession of a security to warrant a discount at 
 bank, could go to a neighbor and borrow a bond on 
 the same terms, the tendency of this would be to 
 turn the attention of the country to the National 
 Deli! and renew the spirit of protection, and finally 
 place bonde on a par with gold or any other four per 
 • •.■lit. investment. Tin- time may come when these 
 investments may command a premium over any 
 other government, from the fact that it is not only
 
 GOLD LEGAL TENDER. ' 35 
 
 an investment, but one that will command a circu- 
 lating medium and legal tender, both of which have 
 their value in the market. There are times when 
 secure investments are at a premium, or a low rate 
 of interest, and times when a medium of exchange 
 will command a premium. Wow, if there be a con- 
 junction of these favorable influences, it certainly 
 will return a larger profit than either one can pro- 
 duce singly. Will not this consideration be taken 
 into account by capitalists ? It is their trade and 
 business to note each item in the account of profit 
 and loss, growing out of production and reproduc- 
 tion. When they cease to do this, investments will 
 be at a discount, and accumulations a farce. The 
 business of banking is distinct and independent of 
 production when not speculative, but safely con- 
 ducted. After all, whatever the medium may be 
 by which the exchanges are effected, it is only the 
 reproduction of capital or counters. The real cap- 
 ital of the country is the raw materjal, food, ma- 
 chineiw, vessels, etc., and these absorb the entire 
 business the community can carry on. After the 
 recognition of a well-regulated currency is estab- 
 lished, the facility of procuring discounts from a 
 bank cannot increase or diminish their quantity. 
 The same amount of values remain in the country 
 and stimulate a corresponding trade, and can only 
 affect the rate of interest, the result of which will 
 be measured hy the competition between lender 
 and borrower. 
 
 It is only necessary that the government declaro 
 that legal tenders are equal to, or will be converted
 
 36 SCIENCE OF MONEY. 
 
 into, a gold-bearing bond of four per cent, interest, 
 semi-annual, to give them a fixed value to that ex- 
 tent, — income being the measure of value. The 
 fluctuations from this can only be to the extent of 
 the current rate of interest, demanded by the course 
 of trade and tendency to speculation. If this be the 
 basis of their value, all will understand their worth, 
 and so long as we give evidence of ability to pay 
 four per cent., which can only be from an annual 
 surplus, all investments will be based on this prom- 
 ise, and no great fluctuations can take place from 
 ignorance of their value or how they are to be paid. 
 This is all the government can do : no power can 
 fix and keep unchangeable any legal tender or other 
 commodity. They regulate themselves; if redun- 
 dant on the market, the price or exchangeable value 
 must sink. The converse of this holds equally good, 
 and will bring appreciation, while the former gives 
 depreciation. In order to have no fluctuations, from 
 want of confidence, the government must make a 
 promise she can keep, and then show a disposition 
 to maintain it. 
 
 All I claim for this divorcement of the circulating 
 medium from merchandise is, to free it from those 
 periodical fluctuations incident to a foreign demand 
 for the same medium. And as we are compelled to 
 have in the exchanges of our internal commerce a 
 medium, let us have the one most advantageous to 
 the country. I claim, as equally economical, the 
 vast saving to the country in the annual wear and 
 tear in keeping up a medium so expensive as gold. 
 This is no more than has been claimed by all modern
 
 GOLD LEGAL TENDER. 37 
 
 political economists, from Adam Smith to Ricardo. 
 They contended for a convertible medium, of paper, 
 or something of less value than gold. And their 
 views were engrafted upon the Bank of England, so 
 far as to effect a separation of the issue from the bul- 
 lion department. Under this system the greatest 
 uniformity has been inaugurated, and full confidence 
 in her notes for circulation. 
 
 The extreme wants of trade and pressure in two 
 instances induced Parliament to remove, temporarily, 
 the restrictions of the "Peel Act;" the necessity 
 which called for this, each time, can be traced to 
 causes other than those growing out of a paper cir- 
 culating medium. Many causes, besides inflation 
 or contraction, conspire to derange the affairs of 
 commerce, especially where the circulating medium 
 is convertible into gold on demand. A deficient 
 grain crop in England, in the absence of a brisk 
 demand for her manufactured goods, will cause a 
 quick, sharp demand for the precious metals for 
 export, gold being the only commodity left to offer 
 foreigners, without a sacrifice, in exchange for food. 
 And this must continue until the prices of other 
 commodities, which they have for sale, fall to a 
 point tempting speculation at home and abroad. 
 During this interval the demand for gold must con- 
 tinue. Before this last resort comes, bankers and 
 capitalists will call in from distant correspondents 
 the last available dollar, and then only can relief be 
 had. 
 
 Countries, like individuals, in times of diminished 
 supplies may have to part with every available value 
 
 4
 
 38 SCIENCE OF MONEY. 
 
 to procure the means of existence, which must be 
 had though the accumulations of years be exhausted 
 in the purchase. Contingencies so unfortunate ad- 
 mit of no delay ; and whatever exists of any other 
 surplus must be parted with at the instant of want, 
 however much the market may be depressed. Con- 
 tingencies like this, with England so intimately con- 
 nected with the great export article of this country, 
 cotton, impose upon those looking to her for a 
 market a large share of her misfortunes; conse- 
 quently, prices may sink even below the cost of pro- 
 duction, while her wants are being supplied with 
 bread. 
 
 It is a well-established fact that when, from large 
 crops and favorable seasons, the produce of a coun- 
 try is doubled, it will only sell for one-half of what 
 it would provided the circulating medium were in- ' 
 creased in the same ratio. It is in the inverse ratio 
 to the supply, and can only circulate so much pro- 
 duce, and no more. Many will contend that, if this 
 proposition hold good, half crops only should be 
 made. They might as well insist on one-half a loaf 
 being as good as a whole one. I admit that half a 
 loaf is better than no bread, but it is not equal to a 
 whole one. What I am contending for is that every 
 one should be allowed the largest liberty in eifect- 
 ing exchanges, and not be confined to a particular 
 measure of value; in a word, if I attend a fair at 
 Newcastle, I may not be forced to take coals, but 
 may have the liberty of inking my surplus to be 
 exchanged for that of others. Many difficulties 
 will suggesl themselves to the minds of those who
 
 GOLD LEGAL TENDER. 39 
 
 have never thought of a divorcement of money of 
 account from an exportable article of merchandise 
 like gold, and they will hastily condemn the scheme 
 as wild and visionary. The defense and reasoning 
 in behalf of the former will go far to quiet all fears 
 and dissipate the anticipated evils which surround 
 the dissolution. 
 
 For twenty-five years during the suspension of 
 specie payments by the Bank of England, commerce 
 and production grooved out their own channels, and 
 felt but little if any inconvenience from the neces- 
 sity which forced a recognition of a circulating 
 medium whose value was only formed by the 
 amount of commodities for which it could be ex- 
 changed, and not by the remote prospect of con- 
 version into gold. 
 
 To have estimated their value on the contingency 
 of the resumption of specie payment by the bank, 
 the long delay being foreseen and fixed, would have 
 given but a few cents value to her circulating notes. 
 It was not the ultimate prospect of payment in gold 
 which gave value to her notes, but the necessity of 
 a circulating medium, and the consent of the pro- 
 ducer to receive them in exchange for commodities 
 and as legal tenders, thereby establishing a circuit 
 in the exchange of commodities. This caused the 
 barometer of trade to indicate the position of Eng- 
 land's great surplus with certainty as unerring as 
 though the circulating medium had been gold, 
 without being subjected to the many charges of 
 transfer from country to country. For three years 
 after the suspension of the Bank of England, and
 
 40 SCIENCE OF 310NEY. 
 
 so long as she was prudent in the issue of her notes, 
 these notes were not only at par, but at times bore 
 a premium of three per cent, over gold ; and it was 
 not until she, like others, entered into wild specula- 
 tions that her notes fell below par. So soon as she 
 reduced her amount of notes to the wants of a cir- 
 culating medium, they again rose to par. By this 
 reduction she apparently made less monej', but in 
 the aggregate, from a prudent circulation, realized 
 more, without the same risk of impairing her 
 capital. Tins demonstrates that paper money, if 
 properly restricted, and recognized as legal tender, 
 will answer all the purposes of gold for a circu- 
 lating medium, without entailing on the country 
 the wear and tear and loss by shipwreck in trans- 
 portation from country to country. 
 
 It is now in the power of the government to effect 
 this divorcement, without any change of policy ex- 
 cept as regards the extension of it; and this exten- 
 sion will be subject only to the demands of trade. 
 Nothing will be forced, but all for the interest of 
 the people in lessening their taxes. If it is to the 
 interest of the people to keep up the circulation of 
 legal tenders to the fall wants of the country, which 
 it certainly is, as it lessens taxes, it is not to be pre- 
 sumed that the government will inaugurate a dif- 
 ferent plan, which instead of encouraging would 
 defeat her efforts to produce a uniform currency, 
 driving it in, and bringing on all the calamities of 
 repudiation. 
 
 To estimate or look upon a national currency as 
 suspicious or worthless, is not only national repudia-
 
 GOLD LEGAL TENDER. 41 
 
 tion, but an evidence of individual disposition to 
 discourage an honorable support of whatever the 
 load of debt might be. 
 
 When the amount of issue is regulated by the 
 supply and demand, and is uninfluenced by the 
 prospect of individual gain, no overissue is likely to 
 take place. "With, a free conversion of bonds into 
 legal tenders, and vice versa, and a maintenance of 
 ability on the part of the government to pay the 
 interest with a prompt and honorable adjustment of 
 the same, success will be guaranteed. 
 
 The foreign commerce of the country is now so 
 large, requiring sums so immense at times for the 
 liquidation of balances, that it becomes the duty 
 of the government to divorce the internal com- 
 merce of the country from an article so variable in 
 value as gold. If we continue it longer as the only 
 legal tender and measure of value, and use it as a 
 circulating medium, the periods of revulsion will 
 soon be as fixed as the rising and setting of the sun, 
 — up with large production, and down with years 
 of scarcity. To say nothing of the legitimate de- 
 mand incident to our foreign commerce, the growth 
 of the spirit of speculation and gambling in the 
 gold market, and the continual bear and ball influ- 
 ence brought to buoy up or depress the price, should 
 be sufficient warning to the government that there 
 can be no longer any safety in it as a measure of 
 value or circulating medium. It will be ruinous to 
 the best interest of the producing class to subject it 
 to the daily fluctuations of an article which can be 
 
 forced to vary from five to twenty-five per cent, in 
 
 4*
 
 42 SCIENCE OF MONEY. 
 
 one day, — not in value nor from any legitimate de- 
 mand, but wholly by the influence of the reckless 
 spirit of a gambler. It certainly cannot be safe or 
 secure to the commerce of a country to make it a 
 measure of value when the speculative influences 
 and gambling of a few capitalists can buy and sell 
 four hundred millions in one day, — a sum almost 
 equal to the entire exports of the country for one year, 
 the legitimate demand of which would be only the 
 difference between imports and exports, which or- 
 dinarily could not exceed five per cent, of this im- 
 mense sum, or twenty million dollars. 
 
 The value of all articles being measured by the 
 intensity of demand, the natural inference from a 
 transaction so enormous would be that the whole 
 world was short of gold, and was compelled to have 
 it immediately, if the acquisition cost the last dollar 
 of all other values. JSTo one in his senses can be 
 induced to think that this sum could or would be 
 needed in the transfer of produce for consumption 
 or reproduction. The idea is preposterous! The 
 tenth part of this sum would bankrupt the Bank of 
 England and the Bank of France, or cause their sus- 
 pension. It now becomes the government, if itcannot 
 remove the nuisance or incubus on production, to 
 mitigate it, and not allow its baneful influences any 
 longer to affeel its legitimate collection of taxes and 
 the paymenl of debts. A steady fixed purpose to 
 liquidate to the lasl dollar, with the use of the great- 
 est economy in all things, is its only financial duty. 
 When, or where, or how much gold it shall sell 
 in comparison with the gold clique, is not the ques-
 
 FLUCTUATIONS— THEIR EFFECT. 43 
 
 tion for consideration. The only influences which 
 can honorably be brought to bear on all commodities 
 should be such as are incident to its own wants, 
 ways, and means. Then, under the rule of attend- 
 ing to its own business, the government will not be 
 subjected to the fluctuations arising from the com- 
 plications of others. 
 
 The attempt to apply a remedy to the wants of 
 speculation is only inflicting a new wound to be 
 healed. Let speculation adjust itself to its own 
 wants. 
 
 FLUOTUATIONS-THEIK EFFECT. 
 
 The fewer fluctuations in the internal commerce 
 of a country, the greater the security in the trans- 
 actions and exchange of commodities based on 
 present or future delivery. 
 
 When this is the case, the exports and imports will 
 have to abide the fluctuations connected with their 
 own transaction, each looking for their own safety 
 and profit. This is precisely as it should be, and 
 what I am now endeavoring to demonstrate. 
 
 The foreign trader deals with all countries on this 
 basis of value or circulating medium, which is, 
 after all, but bills of exchange, or in a transfer of 
 credits. Hence the fluctuations that may attend 
 them after the producer has parted with his property 
 should not, by a reflex action on the circulating
 
 44 SCIENCE OF MONEY. 
 
 medium of the producer, cause him to share in the 
 attendant losses. 
 
 If the original producer has his own independent 
 circulating medium, he will not be involved in the 
 fluctuations of other countries; nor will he have to 
 share their losses, and can only be called upon to 
 adjust and conform his surplus productions to the 
 surplus of those with whom he wishes to. effect an 
 exchange. In a word, producers will measure values 
 with values, neither of which will be affected by 
 the medium used in effecting the exchange. Each 
 party will profit or lose only by the over- or under- 
 supply of their own circulating medium or standard 
 of value. * 
 
 If in this I have made myself clear, you can 
 readily perceive the point or line of separation be- 
 tween values or commodities, and the circulating 
 medium used in their transfer. The country having 
 its independent medium of exchange will not be in- 
 volved in the losses incident to a circulating medium 
 common to all countries; nor can she be called on 
 to participate in their speculations, even should it 
 be their standard of value. We have seen that this 
 can, without any assignable cause, be made to fluc- 
 tuate twenty-five per cent, in one day, or involve 
 one-quarter of a man's estate, should he be so un- 
 fortunate as to full on that day in the footing-up of 
 a maturing obligation. 
 
 Now, should any article of merchandise become 
 superabundant by some wonderful process of pro- 
 duction, or should a sudden calamity, as a great con- 
 flagration, cut short the supply in one day, then this
 
 FLUCTUATIONS— THEIR EFFECT. 45 
 
 great fluctuation would seem natural. In all candor, 
 does it seem reasonable or just to retain a commodity 
 like this as a standard of value, and call into the ring 
 the honest producer with his hard-earned values, 
 and force him to participate in its loss ? — have his 
 values measured by such a yard-stick, which, if not 
 dishonestly clipped, has been immensely shortened? 
 
 For many years under what was called the mer- 
 cantile system, which advocated and held that all 
 wealth consisted of the precious metals, the idea 
 was almost universal. The influence still exists over 
 many minds; but the more enlightened portion of 
 mankind have long since abandoned the fallacy, and 
 estimate gold at its intrinsic value only, like any other 
 commodity. So far as its purchasing power is con- 
 cerned, it is owing to the influence exerted on the mer- 
 chant or trader from the facility of a ready exchange 
 for all other commodities that it is more sought after 
 than other productions; and the fact that it is a 
 legal tender, as well as a circulating medium, makes 
 all men feel more at ease under maturing obliga- 
 tions, with the legal tender in sight, than they would 
 with the possession of any other merchandise; hence 
 the double desire to possess it, and also from the 
 fear that it may be doubly important in time of 
 need. This feeling is natural and instigated by the 
 soul of honor and punctuality. 
 
 It is this indefinite influence which gives gold its 
 principal value in exchange. There is no law beyond 
 common consent to compel men to take it for their 
 goods. If this be the case, it is precisely at this 
 point its greatest value is fixed and given to it.
 
 46 SCIENCE OF MONEY. 
 
 Strip it of this, and it settles down on its own merit, 
 as a legal tender by law, to liquidate with, and not 
 by common consent as a medium. In all other 
 respects it is treated as a commodity, but with rev- 
 erence. This arises from the fact that the majority 
 of men and governments are debtors. Beyond 
 this point all legal tender or measure of value is 
 surplusage. 
 
 Man feels content under mere promises with this 
 commodity in possession. When you sum up all, it 
 is, as a legal tender, only applicable to the debtor, 
 and cannot force the possessions or values of any 
 man to change hands. 
 
 The purchase of bonds by the government at a 
 premium is calculated to deceive, whilst it is urged 
 as economy or cheapening the rate of interest, or 
 that it will work a diminution of our taxes; so far 
 from this, it is the purchasing of a new obligation, 
 and the payment of the full interest for all the time 
 the debt has to run to maturity. The case is not 
 altered if the government should make a new loan 
 at a less rate of interest. The burden of taxes 
 will not be lessened from the fact that the full rate 
 o!" the larger interest has been anticipated. The 
 government is left in the position it would have 
 occupied at the maturity of the bond and the ac- 
 ceptance then of the lower rate of interest. Pre- 
 cisely the same effect is produced by the collection 
 and sale of gold, whatever may be the pressure. In 
 
 ither of these is there either saving or economy 
 to the country, but, instead, an absolute loss by 
 the continual excitement and feverishness in all
 
 FLUCTUATIONS— THEIR EFFECT. 47 
 
 branches of trade, arising from the sale and pur- 
 chase. All this may answer a purpose politically, 
 and give men place and power for the moment. The 
 least that can be said of its influence and effect is 
 that it encourages and stimulates the most baneful 
 species of gambling in every branch of trade — de- 
 moralizing to the best forms of societv. None have 
 power to condemn, as it is indorsed by the highest 
 authority. 
 
 I admit that many difficulties surround this en- 
 tire question which require time and a determined 
 course to overcome. In order the more fully to under- 
 stand and appreciate these difficulties we must look 
 at our debt from a different stand-point, so that we 
 may find means of extinction. Our debt is now a 
 fixed fact, both principal and interest. It was created 
 under circumstances the necessity of which no one 
 will question. There was no time to higgle about 
 rates of interest. The borrower was at the mercy 
 of the lender. The money was to be had at all 
 hazards, under all the disadvantageous circum- 
 stances surrounding the possible disintegration of 
 the country. The rate of our principal debt could 
 not reasonably have been reduced below six per 
 cent, per annum. The promise of interest, however 
 onerous, is now as much a part of the debt as the 
 principal, and requires the same process of liquida- 
 tion. This can be done only by a payment of both. 
 The earlier it is done, the greater the economy. If 
 we can, as we are entitled to do, borrow money at a 
 less rate, say four per cent., this process will pro- 
 duce an absolute saving to the country of fifty per
 
 48 SCIENCE OF MONEY. 
 
 cent., interest being the measure of debt as well as 
 of the value of incomes. 
 
 To effect this desirable end at an early day, and 
 insure its easy accomplishment, we must show 
 ability to pay not only the interest, but also the 
 principal. There would be no difficulty in effecting 
 a loan at four per cent, if the government, instead 
 of sellinggold, at once applied every dollar to taking 
 up her bonds, which she now has the opportunity of 
 doing, in accordance with the original contract; and 
 open a loan at four per cent, gold, I feel confident 
 that it would soon be taken up, especially if the 
 promise to pay principal and interest in gold should 
 be coupled with the engagement to convert them 
 into legal tenders when demanded. Their fixed value, 
 the entire closing up of the contingency of how and 
 when they are to be paid, with the certainty of a 
 conversion into a circulating medium whenever the 
 demands of commerce require it, will give to the 
 loan a double value to the full extent of the circula- 
 ting medium. 
 
 I cannot but take this view of their worth when 
 I cast my eye over this immense country, so prolific 
 in all the commodities indispensable to man's wants, 
 — unlike the productions ministering to luxury and 
 e, but such as will command the values of all 
 nations and peoples. 
 
 When the capitalist looks upon this bond, yielding 
 a fair and sure interest, and upon these great and 
 increasing provisions for man's wants and necessi- 
 ties, and reflects that he can at any moment command 
 them by simply converting the bond into legal ten-
 
 
 FLUCTUATIONS— THE [R EFFECT. 49 
 
 ders, he will tell you that it is the cheapest reserve 
 fund he could keep by him, to command the fluctu- 
 ations in rates of interest incident to commerce, 
 springing from a deficiency in the food-crops of other 
 countries. If a great famine should again stalk 
 over the fair Emerald Isle, we would not then be 
 compelled to pay freight, insurance, interest, and 
 other heavy charges on gold to be sent here to pur- 
 chase our bread. These items alone often amount 
 to more than ten per cent., all of which would have 
 to be paid or abated before we could send them our 
 surplus in exchange for their surplus gold. This 
 ten per cent, would be not only a loss to us in the 
 price and value, but so much deducted from their 
 bread, on account of the expensive medium which 
 the merchant would be compelled to use in the pur- 
 chase. Now, would it not be better that this sum 
 should be divided between all the parties interested, 
 realizing more to us for our produce, and giving to \ 
 
 Ireland more bread ? If the laws of legal tenders °\ 
 did not call on them for gold, which would derange *\ 
 the circulating medium, and perhaps bring on a 
 panic, prostrating credit, a few of our bonds, if they 
 had them, could be sent here and converted into 
 legal tenders, and the proceeds sent to them in bread. 
 Otherwise, the derangement of credit might so inter- 
 fere with commercial affairs as to deprive the Irish 
 people of the relief we were so willing to extend 
 them. To effect this great saving not only to them 
 but to us, however, a change in our legal tender or 
 circulating medium is required. Another immense 
 advantage to the country from this prompt payment 
 
 5 
 
 
 fr
 
 50 SCIENCE OF MONEY. 
 
 of gold for bonds, not so readily seen, but surely to 
 be felt, is the cheapening influence on gold. 
 
 The moment we abandon gold as a medium of 
 value or a circulating medium, and throw it all on 
 the market in the payment of bonds, its market 
 rate will decline in all commercial centers, in the 
 exact ratio of the extent of our currency and circu- 
 lating medium as compared with those of all other 
 countries which recog-nize the same standard of 
 value. When we disburse one hundred millions of 
 gold, the effect will be the same as if that sum had 
 been vomited up from the mines without any of 
 the expense attendant on the ordinary process of 
 mining. And so long as we continue this process 
 of collecting gold as revenue, and using it in pay- 
 ment of debt, so long will the credit and value of 
 bonds appreciate in the market. In a word, it is 
 not only the creation of a new value, but the use of 
 it in the payment of debt, — giving evidence to the 
 world that not merely can we command gold, but 
 that we have the good faith to apply it at once to 
 the liquidation of obligations in accordance with the 
 stipulation in the bond. This system, honestly acted 
 upon for a few years, will give to the country such 
 credit that we may be able to negotiate a loan in 
 gold at three per cent. Ability to pay, and the appli- 
 cation of the means, will give to our national debt 
 all the credit that can be claimed for the engage- 
 ments of the most favored countries. Let us aban- 
 don this temporizing policy, this galvanizing of 
 credit, this daily appreciation and depreciation of 
 bonds and gold, and allow them to vibrate and lluc-
 
 FLUCTUATIONS— THEIR EFFECT. 51 
 
 tuate on their own merits, and to indicate their own 
 worth by a steady stream flowing in the natural 
 channel. The practice of throwing on the market 
 large amounts of any commodity, and retiring secu- 
 rities, can have no other effect than to deter capital 
 from seeking investment in either, whether perma- 
 nently or temporarily, in a legitimate way of trade. 
 
 All operations now in gold or bonds are as hazard- 
 ous as are the chances in a lottery or the gambling- 
 room. Men will supply only their pressing wants, 
 and will not be driven into the whirlpool of specula- 
 tion, if they are seeking a sure and permanent in- 
 vestment. 
 
 Although they may neither desire nor be com- 
 pelled to sell, they are unwilling to be forced daily 
 to change the valuation of their investments. When 
 prices are down temporarily, they must estimate 
 their value at the market quotations. The timid 
 man is inclined to part with his investment, and the 
 bold one is not disposed to increase his; conse- 
 quently a decline ensues, and for the moment the 
 gambler comes in, on the principle of " make a spoon 
 or spoil a horn." 
 
 I am well aware that no amount of argument or 
 evidence can stay or influence a panic. Panics are 
 controlled by no law, and must be left to exhaust 
 themselves. 
 
 Let us return to the beginning, — the effort to 
 economize in all directions, — which, after all, is the 
 point of accumulation. Many things united con- 
 spire to this. The cheapening of a product by the 
 introduction of new machinery not only redounds
 
 52 SCIENCE OF MONEY. 
 
 to the interest of the inventor or of the one using it, 
 but is also a substantial blessing to all who are in 
 any way connected with its products. To throw oft' 
 this expensive medium — gold — and substitute a 
 cheaper one, is to give to production a new capital, 
 and also to cheapen the process of accumulation. 
 
 A country will become rich by diminishing its 
 expenses on articles of luxury, and converting the 
 savings into reproduction ; it can never do so by 
 dissipation and extravagance. 
 
 The use of labor-saving machinery to increase 
 production is the ultimate end of all effort. It is 
 an addition to enjoyment without a new expendi- 
 ture, — an increase of wealth, and not of value. I 
 prefer an increase of wealth from production, to 
 accumulation from parsimony. The one adds to our 
 enjoyments, the other deprives us of them. 
 
 The basis of all credit is confidence. This can 
 spring only from ability, as I have already said. 
 Capitalists are not likely to lend money to a coun- 
 try whose productions exceed but little, if at all, its 
 consumption, whatever its past accumulations may 
 have been. Without an annual accumulation and 
 surplus above the supply necessary to a continuance 
 of existence, no bolstering-up of public or private 
 credit can or will last long. These devices and 
 schemes of the financier will soon become thread- 
 bare, and leave the nation in a worse condition. In 
 the history of a nation it sometimes becomes neces- 
 sary to make use of an expedient for self-preserva- 
 tion. When the time for its use has passed away, 
 it is equally incumbent to spare no effort of economy
 
 FLUCTUATIONS— THEIR EFFECT. 53 
 
 and stimulus to industry and enterprise, in order to 
 resuscitate the income and bring it up to the annual 
 expenditures. And if, after making an inventory 
 of the ways and means, it is found that the accounts 
 will not balance, still greater economy and energy 
 must be used. 
 
 When individuals are staggering under a load of 
 debt, they are willing to make an effort at throwing 
 off their burden and arriving at better fortune, if the 
 way be pointed out. Nations are not unlike them, 
 and stand doubting, as if there were no energy in 
 the land, — waiting for the word, — as did the United 
 States when Kossuth appealed to it for men and 
 money. Awhile all was doubt, until the orator, 
 Henry Clay, spoke the word non-intervention. Not a 
 man nor a dollar could then be had. Give to the 
 people wise and just laws for the security of prop- 
 erty and the protection of their rights, and produc- 
 tion will soon build up the nation's capital and credit. 
 After all, money, or the circulating medium of a 
 country, is not so necessary to its welfare as is the 
 abundance of the articles it will buy. Increase the 
 food, clothing, etc. of the laborer, and reproduction 
 will go on, even though there be no measure of value 
 or medium of exchange. 
 
 The circulating medium being of no use except 
 as a meaus for the exchange of productions, it be- 
 comes valueless when there are none to barter. Its 
 office is then suspended, and along with other values 
 it will be depreciated. This will continue as long as 
 there is a dearth of commodities or capital. Whilst 
 man has any wish unsupplied, there will be a de- 
 
 5*
 
 54 SCIENCE OF MONEY. 
 
 mancl for more commodities. So long as he has 
 other values to exchange for them, the demand will 
 be legitimate and effectual. Then, and not before, 
 will he call to his aid the circulating medium or 
 legal tender. It is auxiliary to man's wants, but 
 otherwise incapable of supplying them. Production 
 exchanges for production, but requires a medium 
 for subdivision and distribution. Money in use is 
 but the discoverer of the surplus of others. It is 
 the pointer that finds the game ; success or failure 
 in securing the object depends upon the marksman. 
 It ministers to the wants of speculation and produc- 
 tion, in looking up articles necessary to their wants, 
 and can serve no other end. It facilitates the ex- 
 change of all products ; and if transportation has 
 been cheapened and expedited, less money will be 
 required, or a cheaper rate of interest will be sub- 
 mitted to. 
 
 On the other hand, if discounts or loans are 
 needed, is it not far better that the government should 
 effect them, by anticipating the maturity of a bond, 
 receiving the proceeds in a uniform legal tender, 
 than to be subjected to the uncertainty of obtaining 
 them from a private bank, to the depreciation of 
 their notes and the productions at the same time? 
 The legal tender can never fall so low in value as 
 any other promise or commodity. It is the desire 
 to liquidate which causes an extraordinary demand 
 for the legal tender as a circulating medium. Ca- 
 lamines flow from this want of a certain provision 
 for the canceling of an obligation at maturity. But 
 for this waiting for a settling-up of transactions,
 
 FLUCTUATIONS— THEIR EFFECT. 55 
 
 productions could be exchanged for productions, or 
 be used in the liquidation of debt. 
 
 It is not customary in commerce to draw the true 
 line between the legal tender of a country and the 
 circulating medium. The difference is as great as 
 that between pork and flour ; one may be used in 
 the absence of the other, and sustain life. The cir- 
 culating medium is useful only in the exchange of 
 commodities, the legal tender in the liquidation of 
 debt or balances due on account. Withdraw the legal 
 tenders, and the circulation of values will cease, ex- 
 cept at a sacrifice in liquidation of obligation. So 
 soon as they are canceled, a system of barter on the 
 basis of supply and demand will be inaugurated; 
 life will still be sustained, but it will be by the use 
 of a very coarse bread. It is not the rude state of 
 savage life, that knows nothing but barter, that I 
 wish to see inaugurated ; it is the adoption of a legal 
 tender and medium of exchange indigenous to the 
 country, — one that shall remain and be as constant 
 as our capital stock and fixtures in trade, firm as the 
 land we till, as fixed as the promises of the govern- 
 ment to pay a four per cent, semi-annual annuity. 
 The leo;al tender will then be consistent with the 
 life of production, and will liquidate at all times pre- 
 cisely the amount of debt that it can command of 
 commodities. When brought down to this point, 
 all men's chances of profit will be alike ; and when 
 there is a depreciation in values below the cost of 
 production or natural price, the legal tenders will 
 depreciate to the same extent. The losses incident 
 to all investments will then rest on the same foun-
 
 56 SCIENCE GF MONEY. 
 
 dation. One species of value will not have to pay a 
 premium iu order to create a sinking-fund to repair 
 the losses incident to another. If capital seeks an 
 investment in legal tenders, or the promise of them, 
 in exchange for machinery or implements of produc- 
 tion, and they should fail in giving a natural 
 increase, from the want of which depreciation 
 must follow, why should not a due share of these 
 misfortunes attend the legal tenders? or why should 
 they be called on, in addition to their own wants, to 
 guarantee a never-changing legal tender, if it is of 
 gold? Production never shares the profit, but is 
 always required to make good the losses incident to 
 its absence, when called for to liquidate. The chances 
 are decidedly in favor of uniformity in the legal 
 tenders of a country if used only as a circulating 
 medium as demanded by the producers. This can- 
 not be the case if gold, an article of merchandise, 
 be used in the same capacity. The production and 
 consumption of a country demand and create the 
 one at the instant of want; the other is subject to 
 all the delays and losses incident to its use by all other 
 countries as a medium and le^al tender. To com- 
 mand it at all times, even after submitting to the 
 delays, you must offer an inducement, or sacrifice 
 your values in exchange, if for no other reason than 
 that of the sacrifice of their values by its withdrawal. 
 It would never be parted with if what we offered in 
 exchange was not of more value to the buyer than 
 the gold. Now, if we should happen to be greatly 
 in want of gold, and the countries with which we 
 are offering exchanges of surplus should be equally
 
 BILLS OF EXCHANGE— MODERN USE. 57 
 
 in need, we would have to make an immense sacrifice 
 to obtain it. Not so in case of a legal tender such 
 as I have indicated, other than gold. The wants of 
 all other countries for a circulating medium will 
 not complicate our own misfortune. Our yard-stick 
 will be at all times three feet long, and at hand to 
 measure values or liquidate debt. 
 
 BILLS OP EXCHANGE-MODERN USE. 
 
 The purpose and aid to commerce of bills of ex- 
 change have been fully discussed by political econ- 
 omists, so far as concerns their application to the 
 transfer of balances between distant points, thereby 
 saving transportation and loss of time in effecting 
 payments. I shall endeavor to explain the modern 
 uses of them, and how far they exceed in magnitude 
 all that has ever been claimed for them. 
 
 They are now the great motive power in effecting 
 a circulation of all the values of distant and round- 
 about commerce. In fact, they play the same part 
 in the distribution of the surplus of nations that the 
 locomotive performs to its train of cars ; their track 
 is over mountains and deserts, thev run all grades, 
 make all curves, stop at all way-stations, and run 
 through lightning expresses without change of cars ; 
 and, to make the comparison still more complete, 
 they have their times of accident and disaster. A 
 few illustrations from every-day life will, I hope,
 
 58 SCIENCE OF MONEY. 
 
 give to the uninitiated a clear view of the important 
 part performed by bills of exchange in all the ram- 
 ifications of production and consumption. Were 
 they withdrawn from the commerce of the world, 
 and all the transactions in commodities footed up in 
 gold, one-fifth of all its shipping and transportation 
 would be occupied in effecting the exchange and 
 adjusting the differences. 
 
 Many without thought, and others even after re- 
 flecting upon the matter, are of the opinion that 
 money is used in the purchase of our produce, that 
 it is sent here by the buyer to pay for it on delivery. 
 A greater mistake was never made. Not one dollar 
 in one hundred thousand in gold is sent with the 
 orders for our produce. All this will more fully 
 appear as I advance in the elucidation of my sub- 
 ject. 
 
 "When the spinner at Manchester wants or thinks 
 he will need our cotton, he usually obtains a bank- 
 er's credit, which he remits to his correspondent at 
 New Orleans, with instructions to purchase for him, 
 say five thousand bales of cotton if middling grade 
 can be delivered in Liverpool at thirty cents per 
 pound, gold, directing him at the same time to make 
 his bills on the letter of credit at sixty days after 
 sight and sell the same to any banker having the 
 money. Before this order can be executed, the 
 buyer must ascertain the rate of discount for his 
 sixty-day bills, the rate of freight to Liverpool, local 
 expenses, such as drayage, etc., his own commis- 
 sions, classing, marking, and shipping, and then the 
 price of cotton in the home market. All these items
 
 BILLS OF EXCHANGE— MODERN USE. 59 
 
 together will tell him whether he can fill the order. 
 If not, he must await a decline either in the cotton 
 or in some of the charges. 
 
 All the charges enumerated above come off the 
 producer. And yet he has no farther interest in 
 the matter. It is nothing to him whether the cotton 
 be paid for in gold or calico. He has received from 
 his factor what he wants, something with which to 
 pay taxes and debts, or to reinvest. I started this 
 explanation with a letter of credit by means of which 
 the cotton was purchased at sixty days. You will ask 
 whence the banker got the money to pay for the 
 sterling bill which was given on the letter of credit. 
 He at once remits it to New York or London to his 
 credit. The planter pays his debt to his country 
 merchant, the country merchant pays his to the im- 
 porter of the goods, and the importer or wholesale 
 merchant in New Orleans goes to the banking-house 
 and buys a bill of exchange on London or New York, 
 which he sends to the manufacturer in payment of 
 his debt or for the purchase of goods. Perhaps by 
 the time this last bill on London is paid by the agent 
 he has collected not only the sterling bill drawn 
 against the cotton, but has purchased of the Man- 
 chester manufacturer a bill drawn on the New Or- 
 leans importer for payment of calicoes manufactured 
 from this very five thousand bales of cotton. All of 
 these transactions were effected without the inter- 
 vention of gold. 
 
 Now, often this letter of credit and the authority 
 to purchase produce are sent with what are called 
 discretionary orders, and are frequently coupled with
 
 60 SCIENCE OF MONEY. 
 
 the injunction that the agent or buyer in New Or- 
 leans must take one-fourth or one-eighth interest in 
 the profit or loss of the cotton when sold in Liver- 
 pool. This is done to secure caution in filling the 
 order. Or it may be from a joint speculator in 
 Liverpool, whose intention is to sell again to the 
 spinner in Manchester. 
 
 I will °;ive one more illustration of a roundabout 
 bill of exchange. 
 
 A New Orleans speculator or importer of coffee 
 obtains a letter of credit from a London banker, 
 and sends it to Rio, on which bills at sixty days' 
 sight are sold and the proceeds are invested in a 
 cargo of coffee. When landed at New Orleans, the 
 coffee is sold, and the proceeds are invested in a 
 banker's bill and remitted to London to cover the 
 sixty-day bill drawn at Rio. Or this New Orleans 
 coffee operator may invest the money in cotton for 
 account of the banker who gave the credit on Rio. 
 In this way all parties are endeavoring to make a 
 profit or commission from London via Rio and New 
 Orleans. 
 
 Now, it is frequently the case, where parties have 
 not the highest credit, that none of the above credits 
 can be used except the cotton or coffee is consigned 
 to the order of the banker or parties purchasing the 
 bill of exchange. In the latter case they are called 
 bills of lading exchange, and never sell at so high a 
 rate, on account of the extra trouble of watching the 
 transformations of the produce on which they are 
 based. There is one observation I wish to make 
 here, bearing particularly on the present course or
 
 BILLS OF EXCHANGE— MODERN USE. Q\ 
 
 system of exchanges. It is onerous to all growers 
 of raw produce, and not so to the manufacturer, 
 because all raw produce is taxed with the ruling 
 rate of discount for sixty-day bills at the time of 
 sale; in a word, all is sold on time, or, what is 
 equivalent to it, as much less is paid for the produce 
 before it can be sold as amounts to 'the discount on 
 a sixty-day bill. The producer is forced not only 
 to pay this discount, but he has to pay all charges 
 of extra discount or premium for the discredit that 
 may attend the sale of time bills, which is sometimes 
 produced by a tendency to overtrade, or feverishness, 
 that may influence capitalists. 
 
 It would seem as if there should be some compen- 
 sation arising from this loss in some way; but such 
 is not the case. If our importing merchants were 
 allowed a corresponding credit on the manufactured 
 goods, it would be some set-oft'; but instead of this 
 they are required to deposit funds in advance, or a 
 banker's credit, which amounts to the same, before 
 the manufacturer will agree to execute their order. 
 This, and the credit given them on the raw produce, 
 frequently give ample time to work it up and fill 
 the order. 
 
 From the above explanations in regard to bills of 
 exchange and how they are used, and the immense 
 part they play in the commercial affairs of the world, 
 the natural inference is, that the speculator in pro- 
 duce and the dealer in bills of exchange are not one 
 and the same individual. The buyers of produce on 
 credits, or otherwise, are nothing more than drawers 
 and sellers of bills based on the produce bought. 
 
 6
 
 62 SCIENCE OF MONEY. 
 
 To this there are a few exceptions. The business 
 has now grown to such magnitude that it is found 
 most profitable to confine the dealing in bills to the 
 banker and capitalist, — this being their business, 
 they are better informed as to the degree of credit 
 to be given to the parties drawing bills against pro- 
 duce. It is to them that all countries are indebted 
 for the supply of gold and its general distribution 
 over the world. They endeavor to keep all their 
 money employed and paying interest, with the 
 exception of that portion held in reserve. 
 
 If the current rate of interest in London be three 
 per cent, per annum, and these large banking-houses 
 find, from a want of money in New York or New 
 Orleans, that they can purchase sixty-day sterling 
 bills at a discount of three, four, or six per cent., 
 they will not send the means to buy, thereby real- 
 izing in sixty or ninety days from nine to twelve 
 months' interest. I have seen buyers of bills in New 
 Orleans so short of money that eighty-two dollars 
 would purchase one hundred and nine dollars in 
 Liverpool; and I have seen checks on New York, 
 drawn by dealers of the highest credit, sold in New 
 Orleans at ninety-four dollars for one hundred dollars, 
 and sixty-day bills at from ninety to ninety-two dol- 
 lars. The parties drawing them stood so high in the 
 New York markets that the notes were discounted at 
 the rate of six per cent, per annum, — ample evidence 
 that the low rate was not from want of confidence, 
 but from the great scarcity of money, — and in a few 
 weeks, so soon as gold could be had from Europe, 
 the same bills commanded a premium.
 
 BILLS OF EXCHANGE— MODERN USE. 63 
 
 In speaking of this sale of raw produce on time, and 
 the purchase of manufactured articles for cash, I am 
 reminded forcibly of a letter which an old-time mer- 
 chant of N"ew Orleans received from a new corre- 
 spondent on the Mississippi River, requesting an 
 invoice of sugar, coffee, and supplies, and stating that 
 cotton would be forwarded by return of boat to pay 
 him. He replied, — 
 
 "My dear Sir: — You begin at the wrong end of 
 the line. Send forward the cotton, and the supplies 
 will go by return boat." 
 
 Now, could the raw produce and the manufac- 
 tured articles meet in mid-ocean, it would be only 
 fair. Each party would have its own fluctuations to 
 pay for. The only remedy — and that is but partial 
 — is a cash business all around, or as near it as the 
 transactions can be brought. In the language of 
 Father Jones, when Simon Suggs gave in his expe- 
 rience, and spoke of wrestling with the serpent, 
 I've been all along thar.
 
 64 SCIENCE OF MONEY. 
 
 BALANCE OP TKADE. 
 
 In this connection I will notice a prevalent fallacy 
 not only influencing the majority of individuals, but 
 our national counsels. It is the much-talked-of influ- 
 ence of the balance of trade, — that it is favorable 
 when it indicates more exports than imports, when 
 nine times out of ten the reverse is what indicates 
 prosperity and thrift. If A purchases in New Orleans 
 one hundred thousand dollars' worth of cotton, 
 and exports it to England, the entry on our custom- 
 house books will be no more than this sum. "When 
 it arrives at Liverpool, many charges, such as freight, 
 insurance, commission, etc., have been added, and, 
 it is to be presumed, the usual profit ; if this did not 
 appear, A could not live and prosper. Suppose all 
 these charges amount to ten per cent., which is 
 hardly the average ; now this credit represents in 
 Liverpool one hundred and ten thousand dollars, 
 and will be invested in a return cargo of calico, 
 etc., which, at the invoice cost, will appear as an 
 import at our custom-house for a like sum, and in 
 the estimates of exports and imports will indicate 
 a balance of ten thousand dollars against us, when, 
 in fact, it is so much gain by our merchant, the 
 true measure of which, the exchange or price of 
 bills, will show no variation, and often, when the 
 exchanges are favorable or unfavorable, the indica- 
 tion is only a desire on the part of one country to
 
 BALANCE OF TRADE. 65 
 
 speculate in the other's goods. This will induce 
 greater fluctuations and sharper competition than 
 ever attend the liquidation of balances. The losses 
 on the speculation, being often confined to parties 
 unable to foot them, can cause no demand for ex- 
 change to cover the same, but must lie over to a 
 more favorable season of speculation. The real 
 capitalist in the trade asks but little credit; the 
 speculator cannot get it. The prudent capitalist 
 will not import long if there is not a demand for his 
 goods, and this is generally the case when his cus- 
 tomers have nothing to export; if they have nothing 
 to sell, they cannot buy. There is no greater fallacy 
 than the prevalent idea that there is an unlimited 
 credit between the exporter and the importer. 
 Should this to a certain extent be the case with a 
 small portion of those engaged in the trade, it is to 
 be presumed that if they know how to get into debt 
 they will find a way to get out. And why the coun- 
 try that never pays one dollar of the losses should 
 trouble herself continually as to the balance of trade 
 when unfavorable, — when, in fact, it only indicates 
 consumption beyond production, and will check it- 
 self and allow production to show an excess over 
 consumption, — is difficult to comprehend. The true 
 policy, and the only effective one, is to encourage 
 industry and economy; the balance of trade will 
 take care of itself. Individual speculators may 
 have an unfavorable balance. To charge the col- 
 lective commerce of a country with it is derogatory 
 to the character of its mercantile intelligence. If 
 a man exchanges one hundred dollars' worth of 
 
 6*
 
 QQ SCIENCE OF MONEY. 
 
 gold for one hundred and ten dollars' worth of flour, 
 the balance of trade is certainly not against him, 
 while he is in the enjoyment of the difference in 
 the exchange. 
 
 APPLICATION. 
 
 I shall now proceed to sum up the foregoing 
 arguments and reasons for a divorcement of gold 
 from the circulating medium of our country, on the 
 score of its fluctuations and unreliableness as a 
 measure of value, from the fact that we are attempt- 
 ing to make it perform two offices, when the demand 
 for it as a circulating medium by those who have it 
 not, will or may be so intense as to incapacitate it 
 for the moment as a correct measure of value for 
 all other merchandise, or the liquidation of debt 
 incurred with a view to its unchangeableness. 
 
 The greatest difficulty in its use as a medium or 
 as legal tenders, is its absence when we want it, from 
 the fact that other countries are using it in the 
 same capacity at the same moment, and in order to 
 attract it we must make sacrifices by forced sale of 
 our substance in order to cover pressing wants. 
 
 Now, on the other hand, if we discard it as a 
 legal tender in our own internal exchanges, and per- 
 petuate the use of our present legal tenders, we will 
 be at all times able to command them when we have 
 arge productions or values to offer, without the de-
 
 APPLICA TION. 07 
 
 preciation of our property while waiting for the 
 measure of value to be sent us from abroad. Our 
 productions will still be the same, the medium or 
 money of account can neither add to nor diminish 
 quantity, — the producer will be left in the precise 
 position he would have been in the liquidation of 
 debts predicated on the future, that he would be 
 if the promise had been to pay one bale of cotton 
 or a barrel of mess -pork, and not be taxed with 
 the rise and fall of any commodity other than the 
 one he undertook to produce, — the proceeds of 
 which were intended to cancel his obligation, to 
 work out this relief; and to rid the producer of all 
 risks not incident to his business by making his 
 legal tenders such as will not be in demand by the 
 Chinese, and beyond his reach when in demand, is 
 certainly a great step to reproduction and incentive 
 to renewed energies. He will not fail to produce 
 when the depressing influence of exchanging one 
 commodity for another — in order to make good a 
 maturing obligation — has been removed. 
 
 This is the individual saving and view of* the 
 subject. The public gain is still greater, not only 
 from their enhanced ability to pay taxes, but from 
 the speedy lessening of the country's obligations, 
 which of itself is adding to reproduction by the re- 
 duction of taxes. 
 
 Now, if there is a steady application of the avail- 
 able gold of the country, together with all that must 
 be taken up on a four per cent, loan, to the payment 
 of the onerous six per cent, debt, the credit of the 
 new loan must appreciate, even should nothing more
 
 68 SCIENCE OF MONEY. 
 
 than the four per cent, loan be applied. The reduc- 
 tion of the debt will be fifty per cent. If one hun- 
 dred and fifty millions be now required to pay the 
 interest on a six per cent, loan, one hundred millions 
 will pay it on a four per cent. debt. This certainly 
 will be a great step in advance towards the liquida- 
 tion of our large debt, and will place it on a par with 
 sold, on the basis of the most favorable nations. 
 Favorable as this view may be, it does not express 
 one-half of the saving or absolute benefit derived by 
 the government and people. Should the reduction 
 steadily continue, by the payment of bonds, it will 
 not be a great while — less than twenty years, indeed 
 — before the immense and growing productions and 
 commerce of the great centers of our country will 
 demand and require a legal -tender circulating 
 medium equal to the balance of our debt. There 
 is a point where the two processes must meet. Ab- 
 sorption of the bonds by the requirements of a cir- 
 culating medium, and actual payment on the other 
 hand, are sure to come together. Suppose the point 
 to be fifteen hundred millions of dollars. This 
 country will then be out of debt and free from the 
 assessment of taxes to pay interest; for how can the 
 legal-tender circulation of the country be converted 
 into interest-paying bonds when the absolute wants 
 of production and commerce demand a circulating 
 medium equal to fifteen hundred millions of dollars? 
 No power is likely to deprive them of it. The de- 
 mands of production and commerce are much more 
 quickening than the slow accumulation of parsimony. 
 Interest being the measure of debt, and the fifteen
 
 APPLICATION. 69 
 
 hundred millions of dollars paying no interest, it 
 will be no longer necessary to levy taxes annually 
 to meet it. So far as the government is concerned, 
 the debt will be paid, as it will all be in the hands 
 of its people. Every one of them using the circu- 
 lating legal-tender medium will carry his own share 
 of interest. The circulating: medium will then be 
 truly a great mutual benefit association for the pro- 
 tection of all. The fortunate holders will bear the 
 losses of those who are so unfortunate as to have 
 nothing: to offer in exchang;e. The accumulated 
 premiums are the lessening of taxes, all of which 
 will be annually divided out in legal tenders, and 
 not in scrip of indebtedness or bonds. 
 
 The conclusion I make from the foregoing is, the 
 practicability of the payment and liquidation of 
 the entire debt — twenty-five hundred millions of 
 dollars — before its maturity, with the payment of 
 only six per cent, interest per annum, or one hun- 
 dred and fifty millions of dollars. The reduction this 
 will make on the one hand, and the absorption into 
 legal tenders on the other, will soon create a credit 
 equal to a four per cent, annuity or loan, and all 
 combined will bring the extinguishment in less than 
 twenty-five years, and give to the country a uniform 
 currency and legal tenders. The plans to secure this 
 desirable end can easily be given.
 
 70 SCIENCE OF MONEY. 
 
 CONSOLATION. 
 
 Amidst all the disasters and sacrifices which the 
 late war involved, almost the entire amount of the 
 immense capital required to carry it on was produced 
 by the country. The amount loaned or furnished by 
 other countries would not have defrayed the expenses 
 of one campaign. This large sum loaned to the gov- 
 ernment by its people was produced by them under 
 all the disadvantageous circumstances of the with- 
 drawal from the legitimate labor of production of 
 over one million of men. If we could sustain this 
 large consumption during the four years of the con- 
 flict, aud come out of it with ample means to prose- 
 cute other and more profitable, but quite as gigantic 
 enterprises, coupled with increased production, it 
 certainly should console us under the burden of debt, 
 especially when it represents so small a portion 
 of the values consumed, the balance having been 
 contributed each year in the shape of taxes. Now, 
 if energy and enterprise can create and spare, with- 
 out impairing production, five thousand millions in 
 four years, how long a time will it require the same 
 people, under increased facilities, to cancel one-half 
 the sum by the savings from their surplus ? It cer- 
 tainly will be but a very small percentage if gathered 
 from twenty years. "When we think of these immense 
 sums, and of the Shortness of the time which was 
 allowed for their creation, we cannot be otherwise 
 than thankful to the Giver of all good for so prolific
 
 LEGAL TENDER. 71 
 
 a country. It is a fortunate producing country that 
 can add to its capital stock ten per cent, per annum 
 over consumption, but how much more fortunate is 
 the land that can not only lay up this percentage, 
 but can loan and contribute to its government one 
 thousand millions annually, and a million of soldiers 
 to fight her battles ! 
 
 LEGAL TENDEK. 
 
 To give paper money currency at par with gold, 
 is to limit the supply to the wants of a circulating 
 medium. To effect this, the power to issue only in 
 exchange for bonds will not inflate the market. It 
 is not reasonable to suppose that the holder of bonds 
 will go out of them into any money or other com- 
 modity the tendency of which is toward deprecia- 
 tion. If, on the other hand, he feels impressed that 
 there is a redundancy of money, so far from convert- 
 ing bonds into legal tenders, he will convert his legal 
 tenders into bonds. In this way the equilibrium will 
 be preserved without the continual influences sur- 
 rounding the issue of paper money generally. The 
 government, issuing legal tenders only for the benefit 
 of its people, will have ho inducement to increase the 
 issue, knowing that all beyond the amount neces- 
 sary to form a circulating medium will return to be 
 invested in bonds. This will b^the national ba- 
 rometer, indicating the rise and fall in the circulating 
 medium of the country with as much certainty as
 
 72 SCIENCE OF MONEY. 
 
 the rise and fall in exchange show the state of the 
 debits and credits of one country with another. 
 
 The loss to the individual holder of legal tenders 
 when the market is overstocked with them will be 
 to the extent to which they would have accumulated 
 while in his possession with no commodity for which 
 to exchange them indicating a future profit. 
 
 It is to be presumed that the holders of legal 
 teuders will fully understand the difference between 
 them and government notes bearing interest, and 
 that, in looking round for an investment when the 
 circulating medium is no longer profitable, they will 
 naturally turn to bonds. This facility of earning 
 an interest on the small individual surplus of the 
 country will induce habits of economy in all classes, 
 not only in the consuming but in the producing. 
 
 Nothing tends so greatly to the growth and in- 
 ternal prosperity of a country as the formation of 
 such habits; the very savings will induce further 
 production, in order to, as it were, compound 
 them. 
 
 It is unjust and illiberal toward the producing por- 
 tion of the country to tax it with the whims of the 
 miser or the wild schemes of the speculator, in order 
 to make the circulating medium of a country not 
 only secure but unchangeable in itself when com- 
 pared with all other productions of value. 
 
 If the miser wishes to hoard his savings and lock 
 them up from the use of commerce or reproduction, 
 it is not to the great productive interest of the 
 country to pay him a bounty in the shape of extra 
 security of unchangeableness, in order to retard the
 
 LEGAL TENDER. 73 
 
 general progress of society in the accumulation of 
 something further for consumption. 
 
 It is not the miser who builds up a country. He 
 hoards his earnings, and whilst so withdrawn from 
 the world they are as dead and unproductive as if 
 cast into the sea. The prosperity of a country con- 
 sists in its production and consumption, and not in 
 a destruction of values by hoarding them up after 
 the manner of Captain Kidd. 
 
 The accumulation of values not used in liquida- 
 tion and not liable to decay is well enough in its 
 way, but is admissible only when the productive 
 energies of a country have been pushed to their 
 utmost capacity. Opulence, dissipation, and decay 
 will follow, — in a word, a country then begins to 
 live on its seed-corn. 
 
 To stimulate the merchant and the man of com- 
 merce by fair laws and wise and just regulations, is 
 the duty of eveiy country which has increasing 
 desires and wants to be supplied ; but to insist that 
 production should guarantee that any one com- 
 modity should remain invariable, and be at all times 
 exchangeable for a like quantity of other products 
 of value, is unreasonable. It would be more honor- 
 able to guarantee to the producer a uniform price or 
 exchange for his surplus. It is not to be supposed 
 that he is thoroughly conversant with values and 
 the many changes continually affecting commodities. 
 He is not on the watch-tower, and must rely on the 
 honesty not less than on the wisdom of the trader 
 for his knowledge of the condition of markets, — 
 where there is a glut, and where a scarcity can be 
 
 7
 
 74 SCIENCE OF MONEY. 
 
 found for his surplus. The circulating medium of 
 a country, if legal tenders, measures the value of 
 all commodities; from this comes its use as money, 
 and as a security it is a tacit mortgage not only on 
 production but on all the capital-stock, lands, and 
 tenements of its people. It is unlike the bonds of 
 the nation, which are payable at a distant period, 
 and bear only on surplus production. When this 
 fails, not only does the interest cease, but the bond 
 has no security and becomes worthless ; for how can 
 unproductive property, or such as produces only 
 maintenance of its occupants, be considered secu- 
 rity? All property is measured in value by the 
 annual income. 
 
 WHO PAYS THE EXPENSE AND CHARGES OP A 
 
 MEDIUM. 
 
 It is well known that gold, like all other com- 
 modities, is continually seeking the country that is 
 willing to pay the highest price for it. No country 
 in want of it can command it without valuable 
 commodities, and not even then without offering: 
 to a certain extent to sacrifice them; when it has 
 been obtained, at whatever cost, the gold is only, 
 after all, a legal tender in the payment of debt, 
 and will not afterwards command any of the con. 
 veniences and necessaries of life, any more than it 
 would have done had this sacrifice not been made 
 to procure it as a legal tender, which might serve
 
 WHO PAYS THE EXPENSE AND CHARGES. 75 
 
 as a medium of exchange, to effect the sale and trans- 
 fer of domestic products, many devices could have 
 "been resorted to before submitting to this loss, inci- 
 dent to the providing of a legal tender. Any kind 
 of counters would have been used, such as checks, 
 bank-notes, or open credits, and the transfer of val- 
 uables. Every market-town would be a clearing- 
 house for the surrounding country, and cause the 
 debits and credits of each producer to be liquidated. 
 After all that can be said or done, the histoiy of 
 production and consumption is but book-keeping 
 by double entry : whenever a credit is given a debit 
 must be made; whatever comes in is debtor to that 
 which goes out; when you compare the debit side 
 with the credit, and find them equal, you feel con- 
 fident the postings have been made correctly. Now, 
 if you will examine the balance-sheet carefully as 
 you close up the accounts by profit and loss, you will 
 find the heaviest charge is for legal tender, and that 
 the export articles of the country are charged with 
 the entire amount. Although the largest item in 
 the great ledger, you are convinced it is correct, 
 from the fact that exports pay for imports, with all 
 the charges incident to the trade. 
 
 Now, if the exports of a country have to pay all 
 the charges and expenses of a legal-tender medium, 
 is it not all-important to this interest to have them 
 cheapened in every possible way with a due regard 
 to safety ? This is not all. If exports lose five per 
 cent., or five dollars on each one hundred dollars, 
 and the exports of the country should sum up five 
 hundred million dollars, twenty-five millions less
 
 76 SCIENCE OF MONEY. 
 
 of imports can be commanded, or, in other words, 
 the producer of export articles will be deprived of 
 consuming domestic good's to the amount of twenty- 
 five millions, or of the turning of it into reproduc- 
 tion ; in whichever way you view it, it is a loss to 
 the country, besides lessening the demand for home- 
 made commodities. 
 
 I have met with no work on political economy 
 urging this fact, connected with the exports of a 
 country. Iustead of this, you will find the producers 
 of exportable articles claiming all the credit for en- 
 abling their country to resume specie payment, and 
 even that they will force this legal tender to be used, 
 and set up for themselves until others do the same. 
 All I can say is, they have not examined the account^ 
 and picked out the important item of twenty mil- 
 lions of dollars, or one-twentieth of their gross in- 
 come. The country that can stand this charge and 
 prosper must be peculiarly favored, but is blind to 
 its own interest in not forcing all productions to pay 
 pro rata for a legal tender. If the exports of a country 
 support the charges incident to a legal tender, the 
 producer should use all honorable means to lessen 
 those charges. To do this it is unnecessary to make 
 war on any interests, since all productions are alike 
 interested, the exports directly and the imports 
 indirectly. 
 
 In conclusion, I can only give the advice of Joe 
 Nash, the bar-keeper on the steamer Natchez, who, 
 when he found a " big-fisted fellow" stealing apples 
 from his barrel on the guard of the boat, at once 
 pitched into him, but stated afterwards that he could
 
 WHO PAYS THE EXPENSE AND CHARGES. 77 
 
 have whipped him much more easily if both arms 
 had been in the barrel. When you want satisfac- 
 tion, be certain both arms are in the barrel. 
 
 If yon cannot import without having something 
 to export, how can the legal tender be bought or 
 brought into the country ? Confine the circuit of 
 the medium and legal tender to our own country, 
 then all parties desiring it will have to pay in the 
 proportion which their products bear to the volume 
 of the medium and the supply of all other com- 
 modities. 
 
 In order to make this position clear to all, let 
 us take the case of a producer of cotton, — a con- 
 stant commodity of export. We will suppose his 
 profits to be a fair average of production over con- 
 sumption, say ten per cent., and the production one 
 nundred thousand dollars. In order to realize from 
 this the market rate in the le^al tender or circu- 
 lating medium, the exporter must be able to nego- 
 tiate his bill of exchange through a banker against 
 the anticipated proceeds of this cotton in the foreign 
 market. To do this (as I have previously shown) 
 he must submit to an average discount of five per 
 cent., or five thousand dollars. Who are benefited 
 by this loss to the producer? It is not the spinner ; 
 for he has to pay the same price, or else the ex- 
 porter would not have been able to pay the five 
 per cent, discount. The benefit is shared by the 
 entire country, from the banker down to the hum- 
 blest recipient of the legal tender or medium of 
 exchange. It matters nothing to the producer or to 
 the country whether the proceeds come back in gold 
 
 1*
 
 78 SCIENCE OF MONEY. 
 
 or in calico, there is no difference if the demand 
 require it, — one is a legal tender, the other a liqui- 
 dator, either closes up debt and liabilities. Not one 
 dollar may have been needed for a legal tender — 
 gold. Still, as the business of the country was con- 
 ducted on that basis, for fear it might be called for, 
 the charge was made. 
 
 If you register your name and take a room at a 
 hotel, you have to pay ; whether you eat and sleep 
 there or not, it is the business of the hotel-keeper 
 to have meals and a bed in readiness for you. So 
 the dealer and banker will tell you he must be ready 
 to pay the legal tender or a simple transfer of 
 credits ; however you turn the export, the producer 
 has lost five thousand dollars, and all the other pro- 
 ducing interests of the country for domestic con- 
 sumption have been furnished with a legal-tender 
 horse to ride all the year free of charge. There is 
 no remedy, on a gold basis, to save the producer of 
 export commodities this heavy loss ; he is precisely 
 in the condition of the speculating bank issuing 
 notes as a medium convertible into coin on demand, 
 — he must at any sacrifice be ready to pay, whether 
 called on or not. If the imports balance the exports, 
 no gold will be required. Still, the five thousand 
 dollars must be paid, as a premium or tax for the 
 privilege of acting as a financial agent of the 
 country. ]STo benefit can arise even should the 
 producer's ten per cent, profit come back in gold; 
 if wise, he will lay it out in pork or flour, to extend 
 and aid reproduction. The proceeding, so far as the 
 large discounts have been submitted to in order to
 
 WHO PAYS THE EXPENSE AND CHARGES. 79 
 
 procure a gold medium, is applicable to the time 
 previous to the inauguration of the legal-tender act 
 of 1862, or when gold was the measure of value 
 and legal tender, and, in my humble opinion, is 
 conclusive against gold ; but, in order to make the 
 proof clear, and at the same time do justice to our 
 present medium and to the wisdom of the legal-ten- 
 der act, I have only to refer to the New Orleans and 
 New York quotations for rates of exchange drawn 
 against exports. At the former point bills are made 
 against cotton exports, and at the latter they are 
 consumed by imports. Can you point to a single week 
 of discount for sixty-day bills exceeding three per 
 cent. ? In no eight years in the history of this country 
 can there be found so few fluctuations from the gold 
 measure. This fact is due alone to gold being no 
 longer a legal-tender medium. I have not the data 
 at my command, but will venture the assertion that 
 there has not in any siugle instance been a variation 
 exceeding two per cent., and even that has been but 
 for a very short period ; this, too, in the midst of a 
 dearth of gold, growing out of the extreme wants 
 of the country in the absence of its leading export 
 article, cotton. The quotations in New York a few 
 days ago (March, 1870) fell to eight per cent, for 
 good bankers' bills in London. This was stated to 
 be in consequence of heavy shipments of cotton from 
 the South to Europe, and a pressure of bills drawn 
 against this cotton in the New York market, in con- 
 sequence of which the rates fell from eight and one- 
 half and eight and three-quarters, being about the 
 season average. Only a limited amount of the ster-
 
 80 SCIENCE OF MONEY. 
 
 ling bills sold in the New Orleans market against 
 cotton are remitted to London and drawn against 
 direct. The great bulk is forwarded to New York 
 for sale, and sight checks are drawn against proceeds 
 from New Orleans. New York, beino- the larsre 
 importing point, attracts all the bills against exports 
 for consumption by importers. In the New Or- 
 leans quotations for sight checks on New York, 
 the fluctuations rarely ever exceed one per cent., 
 the ruling rates being near par, or an amount 
 barely sufficient to cover the express charges on 
 legal tender, and the usual bankers' commission. 
 Previous to the war, when gold was the medium 
 and legal tender, bank-checks on New York were 
 frequently sold in New Orleans at from six to eight 
 per cent, discount, — at times could not be sold at all. 
 Can better evidence be offered in favor of a con- 
 tinuance of our present legal tender, and a perma- 
 nent divorcement from gold as an internal measure 
 and medium of exchange? If referred to at all, let 
 it be as a remote measure, in order that the balance 
 between our imports and exports may be adjusted 
 in conformity with the legal tender of the countries 
 with which we are in correspondence. Allow all 
 parties who may so desire, or who are required to 
 do so by the wants of their particular trade, to issue 
 gold, pork, or flour notes, but at the same time allow 
 the people of the interior to use their own legal 
 tender in the exchange of their productions. If in 
 possession of value, they will at all times be able to 
 find it, without being forced to pay a tax to some 
 one to import it from China. Let the measure be
 
 WHO PAYS THE EXPENSE AND CHARGES. 81 
 
 at all times alongside of their commodities. Quick 
 sales, without unnecessary reductions consequent 
 upon the use of a false and variable medium, will 
 enable the producer to return all the sooner to his 
 work and commence reproduction again. 
 
 During the prevalence of the mercantile system, 
 among many other errors in production, consump- 
 tion, and distribution of wealth, laws and restrictions 
 of all kinds were enacted to prohibit the exportation 
 of the precious metals. The statute-books of Eng- 
 land, France, and nearly all other commercial na- 
 tions are filled with prohibitory laws; so that one 
 not better informed might imagine that gold and 
 silver constituted the meat and bread of the people, 
 and that without an abundance of these commodities 
 all would soon be brought to starvation. This policy 
 has long since become extinct with all commercial 
 nations. Still, I regret to say, a large majority of 
 the great mass forming those nationalities cling to 
 the idea that all wealth consists of gold, and that no 
 great prosperity can be expected by a people that 
 has not the bulk of its valuables invested in this 
 metal. Even enlightened law-makers in our legis- 
 lative halls are now urging the government to devise 
 some plan to prevent the gold products of California 
 from being sent off. From the enthusiasm with 
 which this measure is urged, one might be led to 
 believe we were giving gold away, or that we were 
 at least receiving nothing of value in exchange. In 
 my opinion the producer has the best right to judge 
 of his own wants and interests ; and if he is pros- 
 pering in the mining, the machinery and imple-
 
 82 SCIENCE OF MONEY. 
 
 ments to increase production will find a place in 
 his orders. Production stimulates and provides for 
 consumption. Good example and moral teachings 
 will direct it in the best channels for the govern- 
 ment of society. The prohibitory law to preveut 
 the one will extinguish the other. If you give to 
 society the command of luxuries and amusements, 
 teach them that it is a sin to abuse the gift. The 
 moment you attempt arbitrarily to restrain, you 
 awaken the turbulent and unruly passions of man's 
 nature. 
 
 INSTINCT. 
 
 It is wonderful how faithfully Nature prompts us 
 to the truth, and how persistent she is in urging us 
 on to the correction of error; from this I am led to 
 believe that man's nature is not wholly evil, but 
 that, if led astray for a time by selfishness and temp- 
 tations, it will finally right itself, although, it may 
 be, not until the mischief is glaring and great. 
 
 I have been led to this train of thought and reflec- 
 tion by looking back no farther than the seventeenth 
 century. Up to its close the edicts of the mercantile 
 system, with all its errors, shaped the legislation of 
 all Europe, and influenced the commercial relations 
 of the most astute minds. One of the prevailing fal- 
 lacies (to sustain which the statute-books are filled 
 with laws) was that all wealth consisted of gold; and
 
 INSTINCT. 83 
 
 to retain it or cause its import into a country was 
 the chief end of the legislation and wisdom of man. 
 In the year 1663, however, England gave this great 
 error the death-blow by rendering the export and 
 import of gold as free as those of all other goods, 
 thus overthrowing the dogma and asserting that 
 wealth consists in abundance. 
 
 If you will take into account the outside influences 
 controlling all this legislation, you will see the spark 
 of truth, the beacon-light still directing our course. 
 Gold had been by law and convention made the cir- 
 culating medium, legal tender, and measure of value 
 for all property and productions; to allow its ex- 
 port was to place all interests at the mercy of its 
 return, — or to establish between the measure and 
 the production an unnatural proportion, subjecting 
 all values, whether in exchange or in the payment 
 of debt, to ruinous sacrifices. It was this grain of 
 truth that occasioned the struggle for prohibitory 
 laws to restrain the export, under the belief that no 
 more would be brought into the country than was 
 necessary to circulate its products and liquidate 
 debt. To have retained in the country an adequate 
 sum would have mitigated and lessened all the evils 
 of a contrary course. The true principle was not 
 seen,— error had to correct error. I am forced to 
 side with instinct, and favor the legislation that will 
 retain in the country a uniform sum of the legal- 
 tender medium, and not unnecessarily permit its 
 exportation in the face of a home promise that it 
 should be present on demand, or should be at all
 
 84 SCIENCE OF MONEY. 
 
 times equal to the commodities offered in exchange, 
 or debts based on the same to be canceled. 
 
 "We have only to look to our own legislation, no 
 farther back than 1862, the date of our present legal- 
 tender act, all the credit of which has been ascribed 
 to necessity and the perils then surrounding our 
 country. If the truth could have been perceived, — 
 what nature was endeavoring to work out and de- 
 monstrate in regard to a medium of exchange, — the 
 prohibitory law of 1864 against gold would never 
 have been enacted. Now that we have laid hold of 
 the truth, let us adhere to it. 
 
 If gold is to be the medium and measure of value, 
 let us imitate the wisdom and magnanimity of the 
 legislator from Maury county, Tennessee, who, when 
 importuned by the member from the adjoining 
 county, Hickman, to pass a law prohibiting the 
 people of Maury from grazing their cattle in his county, 
 moved an appropriation of funds sufficient to fence 
 in the county of Hickman. Nothing more was ever 
 heard of this subject or of the grievances of the people 
 of Hickman. If we are to go back to gold, then let 
 us fence it in, and regulate the amount of stock to 
 the pasturage.
 
 GOLD— LEGAL TEXDEK, ETC. 85 
 
 GOLD-LEGAL TEITDES A1TD OIROULiTING MEDIUM. 
 
 There are two agencies constantly at work whose 
 tendency it is to destroy the relation "between the 
 value of gold and that of all other commodities, 
 thus impairing its efficiency as a measure of value 
 or legal tender. One is the natural increase from 
 mining; the other, the expansion of production. 
 The former cannot be stimulated to any great ex- 
 tent by the influence of the demand, even should 
 it be an extraordinary one. New mines cannot be 
 found at will. New fields can be opened and cul- 
 tivated in grain at the moment of the effective 
 demand for consumption. There is an annual in- 
 dicator, which prompts men to increase or decrease 
 production. Not so with gold, which can be con- 
 sumed only as a medium of exchange. The arti- 
 cles exchanged cannot be dispensed with, but the 
 "'medium can. The ablest statisticians and political 
 economists have differed widely as to the supply of 
 gold now in the world; even as to the amount in 
 France there is a difference of twenty-five per cent. 
 in estimates. How, then, can capital know when 
 to increase production, the indication of supply being 
 so vague? Speculation cannot prompt capital to 
 the increased production of gold. The only sure 
 guide is the finding of large nuggets in new fields. 
 Then there is a rust not only of capital, but of 
 poverty. We read of a bird that swallows its food 
 without mastication, and digests the same without 
 nutrition. The benefit is not apparent, as there is 
 no increase in bulk. The effect of gold is precisely
 
 86 SCIENCE OF MONEY. 
 
 the same. With all the wear or loss and the orna- 
 mental uses to which it is put, the consumption is 
 thought to be not over five per cent. All other 
 commodities, especially food, are consumed within 
 the year. How, then, can gold, an unknown 
 quantity, be a constant measure of a decreasing 
 commodity? 
 
 If the amount of gold in any country could be 
 confined to the wants of a circulating medium, 
 without increase or diminution, except so far as the 
 exchanges required it for increased production, it 
 would be a reliable legal tender and measure of 
 value. But to allow it, as is now the case, to be all 
 attracted to one country whilst the productions of 
 the country are being harvested and exchanged, is 
 to enhance its value in the country deprived of it, — 
 which has maturing obligations incident to former 
 prosperity. The effect would not be so disastrous 
 if the gold were only wanted as a medium to effect" 
 exchanges; other substitutes and devices can be 
 used to facilitate circulation, but as a liquidation 
 the pound of flesh will be insisted on. Cannot the 
 labor of man, and the industry and enterprise of a 
 great country like this, be guaranteed from the 
 ever-recurring loss? 
 
 The vicissitudes of life brine in their train enough 
 of want and misery, without compelling men to in- 
 sure capital against any portion of the losses incident 
 to reproduction. When men put their merchandise 
 on a frail bark at sea, if unable to stand a loss, they 
 insure against the perils incident to the voyage. 
 Why should not the capitalist, when he loans to
 
 GOLD— LEGAL TENDER, ETC. 87 
 
 labor the reproduction of one barrel of pork, be 
 forced to pay a premium to some one willing to 
 cover his risk, or stipulate with the borrower that 
 if, on his return of the tender or representative 
 loaned him, it will not command one barrel of pork, 
 lie will look to him for the difference, — while, if it 
 commands more, he will share the excess with him? 
 This is what I call "an eye for an eye, and a tooth 
 for a tooth." 
 
 I do not wish to be understood as being unwill- 
 ing to give to capital every guarantee, both of law 
 and equity, of a full return of all the value loaned, 
 together with such profit as will fully cover all risk 
 and insure a fair increase : I simply desire to pro- 
 tect labor against the disastrous effects of the legal 
 tender, gold, being out of the country at the ma- 
 turity of the obligation; and this can be done in no 
 better way than b} r substituting something that is 
 not more likely to leave the countiy, than a man 
 would be to part with his bread and meat to-day 
 when he is sure to need them to-morrow. 
 
 In my judgment, it w T ould be far more conducive 
 to production to have no law which should compel 
 the payment of any legal tender, than it would be to 
 force a man to procure gold at the sacrifice, it may 
 be, of all his earthly possessions. It certainly would 
 be more just to the laborer to allow him to return 
 to the capitalist such values as he borrowed. The 
 gold lent was only an order, or the purchasing 
 power of so much food and raiment, on the mer- 
 chant. And if this is returned with the ordinary 
 profit or interest for its use, it seems but just and
 
 88 SCIENCE OF MONEY. 
 
 fair, and frees the laborers of the country from sub- 
 jection, in the language of the stock exchange, to a 
 corner that may be made in gold by capitalists. If 
 gold could be relied on in its production to indicate 
 the value of a day's work as a legal tender or medium 
 of exchange, more reliance could be placed on its 
 unchangeableness as compared with other commo- 
 dities. This is far from being the case if gold is 
 not where it is needed: values not alongside of each 
 other cannot measure values accurately, since they 
 are different in different countries. As a medium 
 of exchange, how can it be prudent or just to 
 measure value by it or call it a legal tender? So 
 far from its being a constant indicator of the value 
 of labor, it is so generally worshiped that the most 
 insane projects are set on foot to obtain it. A 
 short time ago, there was a bill before Congress 
 asking the loan of a large sum to aid a great mining 
 company, stating that the mine had heretofore 
 yielded sixteen millions of dollars, but that now, 
 with forty-two engines constantly pumping water, 
 and other expenses, the annual cost of producing 
 this sum amounted to seventeen millions of dollars. 
 I should call this throwing one million dollars into 
 the sea, to say nothing of the increased production 
 that would result from the employment of such a 
 sura in any other pursuit. If seventeen millions of 
 dollars wore expended to secure sixteen millions of 
 dollars' worth of provisions to obtain subsistence 
 for human beings, the propriety of the outlay would 
 be sufficiently evident; but to prosecute the milling 
 of gold at the cost of so large a sum, — expended
 
 GOLD— LEGAL TENDER, ETC. 89 
 
 not in food for the poor, but in food for an engine, 
 — when so many human beings are willing to toil 
 for subsistence, seems to me an indication either of 
 lunacy or of the grossest selfishness: it is not the 
 increase of capital, but accumulation in the hands 
 of the few at the expense of the many. An enlight- 
 ened philanthropy would prompt the employment 
 of capital where it would minister to the largest 
 number of human beings dependent on it for a 
 supply of the comforts of existence, rather than use 
 it in such wasteful enterprises and in undertaking 
 to set up such golden gods. Such a system of in- 
 vestment would, in sixteen years, extinguish the 
 entire capital, that might have been used in repro- 
 duction and in the continuance of our species. Far 
 better would it be to forego the toil and losses of 
 the mine and roam the forest in search of the 
 precarious subsistence from its game. 
 
 It is not from its increase that gold derives its 
 interest: it is the increase of commodities to be ex- 
 changed by it that regulates the charge of interest. 
 If with one thousand dollars I can command the 
 subsistence for the reproduction of eleven hundred 
 dollars, I certainly can afford to pay more for its use 
 than if ten hundred and fifty dollars were the ex- 
 pectancy of yield. The borrower or middle man 
 must have some margin for a profit; if not, he had 
 better fall back on his own labor for the means of 
 a continuance of existence. It matters not what 
 direction be given to capital, the employment must 
 yield more than the interest promised, or it will 
 cease to be used, and will become valueless. Hence 
 
 8*
 
 90 SCIENCE OF MONEY. 
 
 the iutimate connection between capital and labor 
 — the decrease of the former will impoverish the 
 latter, and the prosperity of the latter will give 
 security and increase to the former. 
 
 If the government, which has the power to regu- 
 late the currency and money of the country, would 
 look as closely to the regulation of the supply as 
 the wants of trade require, the value and its measure 
 would regulate themselves, and the debtor class — 
 almost the only one affected by legal tenders — 
 would be saved numberless losses and sacrifices in 
 retiring their maturing obligations. 
 
 The medium of exchange, or circulating medium, 
 adjusts itself to the values presented in exchange. 
 No one is compelled to part with his production 
 for it, if he does not consider it an equivalent. Not 
 so, however, if obligations have to be met : it mat- 
 ters not how great the sacrifice, the legal tender 
 must be procured. Every one is aware of the fact 
 in the exchange of commodities, that if both parties 
 are not in want in the same degree, concessions 
 must be made by one in order to induce the other 
 to change his investment. 
 
 Why the government, that undertakes to regulate 
 the medium and legal tender of a country, and en- 
 acts the laws necessary to enforce the performance 
 of contracts, however inconvenient it may be to the 
 debtor, should not, at the same time, place a legal 
 tender within the debtor's reach, one that he can 
 command when he has values to exchange, I am at 
 a loss to perceive. The commerce of a country 
 would go on the same, and quite as many enter-
 
 GOLD— LEGAL TEXDER, ETC. 91 
 
 prises of production would be entered into, since it 
 is not the legal tender loaned or borrowed on time 
 that sustains labor, but the loan is really the produc- 
 tion that it will exchange for. It will probably be 
 said, in answer to this, that foreign countries will 
 not take our legal tenders for their engines, steam- 
 plows, etc.; but if we have commercial values, such 
 as cotton, flour, pork, etc., we shall be able to com- 
 mand all we need, or are entitled to, just as cer- 
 tainly as if we had the gold. Furthermore, how 
 can we obtain the gold if we have no valuable 
 production to offer in exchange? When produce 
 is purchased with gold, the one is as much a pur- 
 chasing power as the other : the only difference 
 between the two arises from the law having given 
 to the one the power of a legal tender in the 
 discharge of debts. 
 
 If this plan of a local legal tender be adopted by 
 the government, the time will soon come when 
 other countries will have something else than gold 
 as a medium acceptable to us in exchange for our 
 breadstuff's, cotton, etc., from the fact that we will 
 give preference over gold to commodities suitable 
 for reproduction. When we give a bill of exchange 
 against our values, it commands the legal tenders of 
 the country upon which it is drawn. What more 
 can we ask? Their legal tender will command their 
 production, the relative value of which was fixed and 
 entered in the cost of the production given for the 
 bill of exchange. 
 
 The adoption of two legal tenders, in a great 
 country like ours, will not be a difficult matter, —
 
 92 SCIENCE OF MONEY. 
 
 the one for the circulation of commodities and pay- 
 ment of debt in regard to all our internal transac- 
 tions, the other to meet foreign wants. If the mer- 
 chant who deals with a foreign country, as well as 
 with our own people, should have to procure a legal 
 tender acceptable to that country, it is his business 
 to inquire into the nature of the particular commo- 
 dity promised. If the legal tender of our country 
 will not cancel his obligation, he must exchange it 
 for one that will. If there is no such value in the 
 country, all that can be said for him is that he has 
 not exercised the forethought which makes sure of 
 a buyer's ability to pay, before delivering goods to 
 him. 
 
 Prudent merchants will not give credit if pro- 
 duction is not going on and the debtor is not likely 
 to have the means of payment. To encourage debt 
 in a non-producing people is a crime, and the sooner 
 the traders are brought to bankruptcy the better for 
 the country. The greatest losses incidental to trade 
 grow out of temporary speculation in one or two 
 commodities in the expectation of a rise : if the ex- 
 pectation prove fallacious, losses and bankruptcy 
 will follow. If the reverse be the case, the fortunate 
 bull will be the gainer of the bear's portion. After 
 the combat is over, there will be the same amount 
 of productions in the land as before, and they will 
 settle down to their natural price when exchanged 
 the one for the other. Speculation, or the infla- 
 tion of the medium of exchange, does not diminish 
 or increase the relative value of commodities gen- 
 erality : seldom are more than one or two excited
 
 GOLD— LEGAL TENDER, ETC. 93 
 
 at the same time. When the epidemic has run its 
 course, the relative value of pork and flour, or of 
 cotton and gold, will be found the same. There 
 may be many wrecks by the wayside, but the same 
 capital, the same sustaining power of production, 
 will be in existence, and will be applied to repro- 
 duction, when the storm is over. The inflation of 
 values may have brought sore distress on many, 
 but one year's supply will be left to stimulate in- 
 creased prod uetion. 
 
 In calmer times, when speculation has not usurped 
 the place of production, the values of all commo- 
 dities are measured in exchange with each other by 
 the amount of labor required to bring them into 
 existence. Beyond this all is speculation, bringing 
 profit to the fortunate holder, or entailing- countless 
 loss on the many who are the dupes of men who 
 live by their wits rather than by their labor. Capital 
 does not often open out these speculative channels, or 
 look to them for a return for its use; but it is fre- 
 quently drawn into the whirlpool, and at times its 
 owner is involved with it. The earnings of the 
 poor, to a large extent, will be absorbed. I can 
 suggest no remedy for this state of things but a cash 
 business. Then the honest earnings of one man 
 would not be sacrificed to pay the losses of an- 
 other. 
 
 There is, in times of panic, a sort of instinctive 
 impulse in the mind of man to heard up gold. This 
 disposition is increased precisely in the ratio of the 
 intensity of the panic. All this happens at a time 
 when debtors are least able to bear the burden of the
 
 94 SCIENCE OF MONEY. 
 
 enhanced value of the legal tender To withdraw 
 gold from circulation, even temporarily, is to in- 
 crease its exchangeable value. Whatever this may 
 be, the entire burden is thrown on the debtor por- 
 tion of society, and seldom results in any substantial 
 gain to the creditor or lender of capital generally. 
 It is the speculator that takes advantage of the occa- 
 sion to buy in the bargains, either to hold them or 
 to profit by the necessities of the laborer. Produc- 
 tion is retarded by the stagnation of articles of con- 
 sumption, and this state of things must continue 
 until an equilibrium is established between the 
 legal tender and production. The effect is to make 
 the hiborer poorer and the capitalist richer by the 
 periodical withdrawal of the medium, or legal ten- 
 der, from the market, and the absorption that must 
 follow this depression of commodities and the en- 
 hancement of the medium while liquidation is being 
 effected. 
 
 All this is continually passing in review, and yet 
 we continue, with a blind idolatry, the worship of 
 gold, when every one knows that it is absorbing 
 productive capital in its mining, being itself unpro- 
 ductive. The measure of its value is the labor con- 
 sumed in its production : why not direct this labor 
 to the accumulation of wealth, — " the necessaries, 
 conveniences, and enjoyments of human life," as so 
 aptly defined by Adam Smith? 
 
 One circumstance in connection with gold should 
 always bo kept in mind. When it is adopted by a 
 country as a legal tender or a circulating medium, 
 it is not sent, to that country, by the banker or
 
 GOLD— LEGAL TENDER, ETC. 95 
 
 trader in it, until exportable values have fallen to a 
 price sufficiently low to attract it. The first indi- 
 cation of this is the discount on bills of exchange 
 drawn on the great points of export; it is not 
 alone this discount on the bills which tempts the 
 dealer in gold to supply the demand for the sake of 
 profit, but further concessions must be made, to 
 allow the trader or exporter a reasonable chance 
 for profit. The margin in these times must be 
 wider than in the ordinary course of trade, to cover 
 the enhanced risk incident to the excitability of 
 the market. When cotton was selling at eight or 
 nine cents per pound, the buyer or seller would 
 haggle over one-eighth or one-thirty-second of a cent 
 in price; now that it is selling at twenty-five cents, 
 we seldom see a quotation of an eighth, one quarter, 
 or one-half: one cent is looked upon as but a 
 slight concession. And so it is with all commo- 
 dities: as prices become excited and enhanced, the 
 selvedge must be widened. 
 
 The estimated loss to England per annum in the 
 maintenance of a metallic circulating medium 
 amounts to no less than $20,000,000, and that to 
 France amounts to $30, 000,000, estimating the rate 
 of interest at five per cent, and the wear and tear at 
 one per cent. These are large sums with which to 
 tax the commerce of a countiw, especially when 
 there is added to them the further sum that could 
 be realized from a prudent investment in reproduc- 
 tion. It is impossible to estimate what the tax 
 would have been had it not been for the continuous 
 exertions of commerce to supply a cheaper circula-
 
 96 SCIENCE OF MONEY. 
 
 ting medium by calling to its aid banks of deposit, 
 banks of circulation, checks and bills of exchange 
 (the latter being now used almost exclusively as the 
 purchasing power between countries). After all 
 these devices and improvements to facilitate the ex- 
 change of commodities, we find the two most en- 
 lightened commercial nations laboring under this 
 heavy subsidy, — a sum which would provide for 
 the comfortable maintenance of their entire poor. 
 In the face of this great outlay, who will advocate 
 a continuance of this wasteful idol-worship, when a 
 substitute answering all the purposes and in a more 
 expeditious manner can be found without bringing 
 in its train this heavy loss to productions ? All bank- 
 ing and commercial history teaches us the nature of 
 the struggle that has been going on in all countries to 
 effect economy in the circulating mediums, and the 
 many devices employed, in the then existing state 
 of production and enterprise, to simplify and adapt 
 them to the necessities and wants of trade. Without 
 many of the improvements engrafted on the mediums 
 of the past, production and consumption could never 
 have reached their present elevated position, the ne- 
 cessaries now enjoyed by the poor would still be 
 luxuries far beyond their reach, the rude cabin would 
 still occup}' the place of the stately mansion, the 
 opulence of many would never have been dreamed 
 of, nor could we have had those noble merchant 
 princes whose charities fill all hearts with gratitude 
 -and thankfulness to the Bestower of all good, who 
 enabled them, out of the surplus of production over 
 man's consumption, to supply the deficiencies of
 
 LEGAL TENDER. ' 97 
 
 years of want, and to make cheerful the firesides of 
 many who, though equally deserving, were less for- 
 tunate. 
 
 LEGAL TENDER. 
 
 In my investigations with an eye to the cheapen- 
 ing of the legal tender or circulating medium to the 
 country, it is my duty to examine both sides of the 
 question, in order to arrive at just conclusions, being 
 well aware of the intricate and subtle nature of a 
 subject which has occupied the attention of the pro- 
 foundest thinkers of our race; more especially as 
 a large percentage of the savings from industry and 
 economy depends on the direction of their invest- 
 ment. 
 
 One of the strongest objections that will be urged 
 to a legal tender circulating medium convertible 
 only into a four per cent, gold-bearing bond having 
 twenty years to run, is that it will not command 
 gold at the face on demand. The gold-bearing con- 
 sols of England have no fixed value in the market, 
 but are governed entirely by the ruling rate of in- 
 terest and the demand for capital to be used in the 
 enterorises of commerce. 
 
 If you wish to change your investment, you 
 must submit to the inexorable law governing all 
 other values. If you sell at 99, 100, or 101, it is only 
 an evidence that you have been ottered an invest- 
 ment yielding more than four per cent, per annum. 
 
 9
 
 98 SCIENCE OF MONET. 
 
 This is the capitalist's view of the sale and conver- 
 sion. But if you are a bull or a bear, the profit or loss 
 will be indicated when it is known which side of the 
 fence you are on, the results of which should have 
 no more effect on the value of a United States bond 
 than the moon has on a Western cheese-factory. 
 After all, it is but the comparison of the income 
 and security of what you are going out of with 
 those of what you are going into. If the secu- 
 rities be equal, the indication is only a change in 
 the rates of interest. So long as the government 
 pays promptly the stipulated rate of interest, and 
 shows ability to retire the loan in full at maturity, 
 no more can be asked : this is all that was promised. 
 The daily fluctuations should give her less concern 
 than the amount of production, and the prosperity 
 of trade, to whose surplus alone can she look for 
 the means of making good her promise. 
 
 The next objection is, that our legal tender is not 
 the same as that recognized by the countries in- 
 timately connected with us in the exchange of com- 
 modities. We have now no circulating medium in 
 common with any other country. Nevertheless, 
 commerce feels not the want. The country was 
 never more prosperous, never accumulated wealth 
 with greater rapidity : all are now merchant princes, 
 and there is no want or destitution throughout the 
 land that a neighbor has not the ability and the 
 disposition to mitigate. What more can be desired ? 
 Our annual productions command, the world over, 
 all we want of necessaries and of luxuries, and have 
 filled our national treasury to overflowing.
 
 LEGAL TENDER 99 
 
 If England owes her security to a national debt, 
 why should not our national debt become in like 
 manner a security, and at the same time supply a 
 medium that is as necessary to the exchange of 
 commodities as those commodities themselves are 
 to the prosperity of our people ? The daily fluctua- 
 tions in the prices of our bonds need give the gov- 
 ernment no concern, if she is fally prepared to make 
 good her engagements : the fluctuations can but 
 indicate a change in rates of interest incident to 
 investments springing up at the moment. The con- 
 version of bonds into legal tender will but indicate 
 an increase of productions, or a greater disposition 
 to trade and to liquidate past transactions, — which 
 certainly cannot be objected to, as it is indicative of 
 financial prosperity. 
 
 Should the bonds be returned to us from Europe 
 to be converted into gold, the circulating medium 
 of the country would be affected by it no more than 
 it would be by their conversion into mess-pork or 
 any other surplus commodity in the land. With 
 provisions left, we can still command labor, the pro- 
 ducts of which will bring back all the gold we may 
 desire. It will not be returned until we offer in- 
 ducements in trade greater than the demand that 
 prompted the conversion of the bonds. The indi- 
 cation would be that gold was more valuable in 
 Europe than with us, and that the people there 
 were short of commodities they could not do with- 
 out, and were forced to convert their securities into 
 something that might command them from others. 
 The reaction would come in good time, and our pro-
 
 100 SCIENCE OF MONEY. 
 
 ductions would force the return, at our price, of all 
 we should want, even were it gold. 
 
 If we would but rid ourselves of this infatuation 
 for gold, and dispense with it as a circulating me- 
 dium, it would not be long before the export of 
 provisions in a time of scarcity would bring great 
 tribulation in the land. The interdiction of such 
 export on the part of government, would indicate 
 much more good sense and consideration for its 
 people than were manifested by the European gov- 
 ernments during the past century in their edicts 
 against the trade and exportation of the precious 
 metal. This fallacy in regard to gold has happily 
 exploded, and we may hope that the contingency 
 will never rise in which we cannot spare provisions 
 to the needy. 
 
 DIVORCEMENT OF GOLD PEOM CIRCULATING 
 
 MEDIUM. 
 
 If the circulating medium of a country be a de- 
 sirable article for export in the purchase of imports, 
 there will necessarily be sudden and ruinous fluc- 
 tuations in the interior exchanges of the country. 
 The greater the export demand becomes, the more 
 intense will be the monetary pressure and the higher 
 the rate of interest at all the great commercial cen- 
 ters. Depressing and ruinous fluctuations in the 
 prices of all export articles will follow, resulting 
 in losses not only to the producer, but to all specu-
 
 DIVORCEMENT OF GOLD, ETC. 101 
 
 lators. Of all things it is most desirable that the 
 volume of the circulating medium to be used in the 
 transfer of the products of a country should remain 
 as near as possible the same, with liberty to rise 
 and fall with increased production. The rate of 
 interest will be the principal difficult} 7 with which 
 the trader will have to contend in the transfer of the 
 surplus products to market. The rate of interest 
 will be low when'the exchange has been effected, or 
 in case of short production, and will rise with abun- 
 dant production. When the latter is the case we 
 can the better afford to pay usurious rates of in- 
 terest. Not so, however, if the precious metals 
 form the circulating medium. Beino- in demand bv 
 all nations for their surplus, the exportation of them 
 will soon act in an accelerating ratio, producing in 
 a short time contractions in all departments, result- 
 ing in ruinous losses to the producer and trader, and 
 seldom realizing for the capitalist an average rate of 
 interest. All are familiar with the periodical trials 
 of the commercial world. If possible, let them be 
 confined to the trader ; he has but little to contend 
 with that is beyond his control. Not so with the 
 producer: his risks are not insurable, and cannot be 
 guarded against by any foresight. 
 
 To work this desirable change and protect the cir- 
 culating medium from the discouraging effects of 
 periodical and speculative influences, and at the 
 same time to bring the surplus of the interior into 
 competition with gold and silver for exportation, let 
 the government, which has the power to regulate 
 the currency and values, give the country a circu- 
 
 9*
 
 102 SCIENCE OF MONEY. 
 
 lating medium equal to the wants of commerce, — 
 say legal tenders, not, as at present, payable in gold 
 and silver, but based on the promise that she will, on 
 the funding of her circulating notes, give a bond 
 bearing a certain interest, due at a fixed time, — 
 twenty or thirty years ; or let her give a perpetual 
 annuity to the holder, and convert these bonds into 
 legal tenders when called on, — the promise made 
 in the bond for principal and interest to be that 
 of their payment in gold and silver. 
 
 This system, with facility of conversion and re- 
 conversion at all the commercial centers, would 
 profit not only the government but the capitalist, — 
 the former, in the relief from interest on circulating 
 notes ; the latter, whenever he had a surplus of circu- 
 lating notes, — a certain and easy rate of interest and 
 an easy mode of investment, one, too, which he could 
 easily go out of if the increased productions of the 
 country demanded a larger volume of circulating 
 notes. Rid us of the national bank system and let 
 the entire circulation be legal tenders, and one-half 
 of my proposition will have been carried out. 
 Many advantages will grow out- of this divorce- 
 ment of money of account from an article of mer- 
 chandise, — each will ebb and flow with supply and 
 demand. All circulating mediums are a tax on a 
 country equal to the average rate of interest. If 
 $700,000,000 be necessary to effect the transfer of 
 produce and the financial exchange of the country, 
 the interest on this sum will be gained by the gov- 
 ernment. This of itself will be equal to a reduction 
 of one-fourth of the interest on our entire debt, and
 
 DIVORCEMENT OF GOLD, ETC. 103 
 
 will withdraw a like sum of bonds from market, 
 
 "j 
 
 effecting an improvement in all credits. There will 
 be a double demand for bonds; — on the one hand, 
 from their drawing a certain interest ; on the other, 
 from increase in the circulation. In order to have 
 nothing compulsory in this arrangement, the con- 
 version of bonds into legal tenders, and vice versa, 
 should be at the market rate. This will be influ- 
 enced principally by the ruling rate of interest grow- 
 ing out of supply and demand. Our indebtedness 
 and promises would then differ very little from those 
 of England. All that is promised to the holder is 
 interest at five per cent, per annum. The conver- 
 sion and reconversion on the part of the government 
 and of her people is a daily business. The fluctua- 
 tions in the price of gold or of produce do not give 
 the government much concern, except when she has 
 to buy or sell as an individual. The Bank of Eng- 
 land looks to the supply of gold to meet the wants 
 of commerce, and gives the country the circulating 
 medium to effect the internal exchanges. The gov- 
 ernment has only to provide what she promises the 
 holder of her obligations — gold for interest; and 
 when her income is larger than her payments, the 
 surplus is invested in her consols at the market 
 rate.
 
 104 SCIENCE OF MONEY. 
 
 PKODUCTION AND CONSUMPTION. 
 
 Production in excess of consumption will bring 
 into the country a surplus. This can only be in- 
 creased by stimulus to the former and economy in 
 the latter. The larger the accumulation, the greater 
 will be the ability and the greater the willingness 
 on the part of the people to respond to a tax equal 
 to an honorable maintenance of credit. "Without 
 the ability or surplus to draw from, it is idle to talk 
 of payment, either of principal or interest. If there 
 be not an annual balance of profit throughout the 
 land, apathy and indifference will soon be followed 
 by repudiation, rather than allow the springs that 
 give life to enterprise to dry up. Men will fold their 
 arms and look with stoic indifference on a tottering 
 public credit when their fortunes are gradually melt- 
 ing away under the influence of an overburdening 
 tax, not only on the homestead but on the energies 
 of the people. 
 
 Schemes and palliatives are but temporary expe- 
 dients to gain time, and in the end will bring ruin 
 on all interested. Far better is it to make an honest 
 showing and pay what you can, in case an extension 
 will bring no improvement of fortune. 
 
 It is not the financier or the man of expedients 
 who is needed at the helm: their day passed away 
 with the rebellion. We now have to come down to 
 matter-of-fact actual payment. The man who will 
 remove restrictions upon commerce, stimulate pro-
 
 PRODUCTION AND CONSUMPTION. 105 
 
 duction, and inaugurate a steady system of liquida- 
 tion, is the man we want now. Give us less polit- 
 ical jobbing, and let rigid economy be exercised in 
 the collection and disbursement of our immense re- 
 sources. The happy influence will soon reach the 
 producer, and ere long he, too, will find his annual 
 surplus increasing; from which he will the more 
 cheerfully meet the demands of the tax-gatherer. 
 
 It is worse than useless to consume our time in 
 seeking palliatives and in tinkering to keep up the 
 public credit. Strike deep at the root; show ability 
 to pay; let the annual surplus in the country be 
 large and increasing, and ere long the balance of 
 trade — the great commercial barometer — will bring 
 the wished-for credit. We ma} 7 legislate and re- 
 legislate, may resort to one expedient after another, 
 but in the end all will prove worthless if we are 
 destitute of thrift and economy ; give to the country 
 this leverage power and the security of a continu- 
 ance, and in a few years the obligations of the gov- 
 ernment will be at par with gold. The promise of 
 the government, bearing three or four per cent, in- 
 terest, will bring into the country any commodity 
 we want, and, with a universal surplus, a sufficiency 
 of the great bugbear, gold. 
 
 When I undertook this investigation, it was in 
 the hope that in time I might be able to demon- 
 strate a great truth underlying production, consump- 
 tion, and the laws governing exchange by and 
 through a medium. No part of the investigation 
 will be found to favor the accpuisition of wealth ex- 
 cept through industry and economy. I have not
 
 106 SCIENCE OF MONEY. 
 
 been at war with any party, sect, or system, nor 
 have I been working for any other end than the 
 development of truth. If the establishment of the 
 principle should overthrow other views or s} T stems, 
 all I can say is, let truth prevail, and let error be dis- 
 carded as far as lies in the power of weak, erring 
 mortals. 
 
 I believed there was an elementary principle 
 which, if by analysis it could be made manifest in 
 the exchange of products, would insure to labor the 
 just reward of honest toil and place in each field of 
 enterprise an unalterable and just medium to be 
 used in the exchange of its products. Finding all 
 mediums to be conventional, I could see no justice 
 in delegating to any production or article of mer- 
 chandise the arbitrary power of fixing the value of 
 all others, and especially to the one so pre-eminently 
 migratory in its habits and artful in its concealments, 
 that at the words "presto, change," it vanishes' 
 from human sight. It is the little "joker" and 
 three thimbles ; when you see it placed under one, 
 and bet on it, you find it is not there. 
 
 As produce measures and buys produce, all com- 
 modities should have a fair chance, and no monopoly 
 should be given to one product over another. If I 
 desire your surplus more than you do mine, give 
 me an inducement in quantity ; but do not tell me 
 that yours is worth more than mine because yours 
 can be used as a legal tender. If you did not give 
 it additional value, how can you honestly lay claim 
 to the difference ? If government and law have given 
 you this power over me, is it not unneighborly to use
 
 PRODUCTION AND CONSUMPTION. JOT 
 
 it to the ruin of myself and family, when I exercise 
 industry and economy? And these I must have 
 exercised, or else I should not have the necessaries 
 and conveniences of life and a house for shelter. 
 But, because I have had the misfortune to promise 
 it you as a legal tender, you will force me to obtain 
 it, at whatever sacrifice to myself. 
 
 The conclusion is that productions should have a 
 fair field and be the measure of each other. When 
 I give an order or bill of exchange for a value, how- 
 ever large the amount may be, the paper on which 
 it is written has no value in itself, but it caused the 
 delivery of the goods. A circulating medium can 
 do no more ; but it can do all this, even though it 
 be as worthless as the paper on which the bill of ex- 
 change was written. 
 
 To clothe a medium of paper with this power, the 
 issue must be controlled by the necessity that called 
 it into being. No party can be so competent to 
 judge of the supply as those who have the sole in- 
 terest, and that is the people of this country. If 
 they go to the government and say, " We have your 
 bonds bearing four per cent, per annum interest in 
 gold," and offer to rid it of the tax, preferring, as 
 they may do, mess-pork to gold, and ask for legal- 
 tender notes, it is the dutv and the interest of the 
 government to issue them. It is the people desiring 
 to use their own notes in the transfer and circula- 
 tion of their property. The fact that they have been 
 able to give a valuable consideration (a gold bond) 
 is conclusive, and should be evidence to all inter- 
 ested parties that they are able to make good this
 
 108 SCIENCE OF MONEY. 
 
 promise at their convenience; and if misfortune 
 should ever overtake them collectively, their losses 
 will be confined to themselves and not visited on 
 parties having no direct, interest in the matter. 
 The losses, if any, will be distributed as equitably 
 as any system of bankruptcy could devise. We 
 will still have our couutry and the assets that may 
 be left. 
 
 Now, you will naturally inquire, What will be the 
 effect if all Europe should throw its bonds on the 
 market and take up the circulating legal-tender notes 
 and hold them from circulation ? For a moment it 
 will depress the prices of all commodities, inducing 
 the purchasers of bonds and the banking institu- 
 tions at once to turn them and their reserve into 
 a medium in order to bu} r up the values in the 
 country: in this state of the market, if the Euro- 
 pean holders of the notes should wish to realize 
 and throw on the market the additional quantity of 
 circulating medium, the country will have gained, 
 from the enhanced prices of their products and 
 property, all that it had previously lost, — enabling 
 many citizens to reinvest in bonds (or fund the 
 notes). One great security against such violent 
 changes will be that our banking institutions will 
 have made discounts and loans from the accumu- 
 lation of deposits, and will be compelled to furnish 
 legal tenders to their customers and depositors. 
 This will cause them to keep at all times their re- 
 serve in bonds, in order that they can at any moment 
 meet the demand for circulating notes. At this 
 point (in order to meet the next inquiry), it may be
 
 PRODUCTION AND CONSUMPTION. 100 
 
 stated that a system of banking on values without 
 circulating notes will be inaugurated, realizing for 
 them and all parties interested larger and surer 
 profits than have ever been realized by any or all 
 the banking schemes ever inaugurated in this coun- 
 try — not excepting the present national banks, with 
 all the monopoly and prestige of government in- 
 dorsements and double interest. 
 
 It is only necessary to refer to the banking estab- 
 lishments in London, and the enormous profits 
 realized, to see at a glance the effect of banking 
 when freed from the uncertain contingencies of the 
 issue of circulating notes that so often drive them 
 and the country to bankruptcy. These banks trans- 
 act all their business by the use of Bank of England 
 notes, checks, bills of exchange, etc. The baiiks 
 referred to are the following : 
 
 Capital. Deposits. 
 
 London and Westminster $5,000,000 $75,000,000 
 
 Union 3,500,000 80,000,000 
 
 London Joint Stock 3,000,000 70,000,000 
 
 Aggregate $11,500,000 $225,000,000 
 
 Their average annual dividends are thirty per cent, 
 per annum, or fifteen per cent, every six months. 
 Now, compare this with the Bank of England, — 
 the great regulator of the measure of exchange, 
 provider of the legal tender, and fiscal agent of the 
 government, whose notes are received and disbursed 
 for all public dues, — which, with a capital of some 
 $70,000,000, has a deposit, both public and private, 
 of only an average of about $100,000,000, and a 
 
 10
 
 HO SCIENCE OF MONEY. 
 
 circulation of. about $100,000,000, from all which 
 she earns and declares dividends of not more than 
 six and a half per cent, per annum. "What makes 
 this great difference in the sum of profits? The 
 Bank of England has the bag to hold for all parties, 
 and her circulating notes subject her to all the 
 vibrations and vagaries of gold seeking more profit- 
 able and distant markets, forcing her, whenever 
 in peril and trouble, to call on the government 
 for aid and protection from pressure within and 
 without. 
 
 Now, I would have all parties to hold their own 
 bags and take their grists to none but Uncle Sam's 
 mill, where they can toll it, and, if they make a mis- 
 take, will have no one to blame but themselves, and 
 will have the satisfaction of knowing, when return- 
 ing home, that the overplus is in the great govern- 
 ment bin, laid up for the day of need. 
 
 If the produce of a country will not buy commo- 
 dities, then it should not receive or give credit. 
 
 If a country needs a legal tender more than 
 goods, it is doing the producers a service not to 
 place "their wants with the wants of those seeking 
 a legal tender. 
 
 If you want a legal tender to the full value of your 
 produce, you do not want calico. You must do 
 without one or the other; and if you have nothing 
 to exchange you must do without both, and go to 
 work to get something to gratify your wants, if you 
 have any. Honest labor will always find capital 
 willing to furnish the necessaries to sustain it while 
 at work.
 
 PRODUCTION AND CONSUMPTION. \\\ 
 
 A circulating medium being necessary in the 
 disposal of commodities, and a convenience worth 
 some price, which can be measured only by the 
 value in use, the power that issues it should be paid 
 a reasonable consideration. If the rate of interest 
 the issuing power is willing to pay be four per cent, 
 per annum for the use of a legal tender or money of 
 account, it is but reasonable that the government 
 (being the people) should be paid this sum for the 
 use. Now, if you desire this medium to such a de- 
 gree that you are willing to pay more than four per 
 cent., and will surrender to the government her obli- 
 gation calling for this rate, four per cent., in exchange 
 for the legal tender, then you will have paid the 
 price or worth of the medium or convenience. 
 
 It is the duty of the government to establish 
 light-houses and to undergo many other charges 
 for the protection of the lives and property of her 
 citizens ; it is not less her duty to furnish, in financial 
 matters, the headlight and guide to all her citizens 
 who are willing and able to pay for it, and not ex- 
 pose them to the liability of being deceived by the 
 false lights of others in so delicate a matter as the 
 disposal of the products of their labor. 
 
 As the design is to protect all rights without 
 undue bias in favor of any, in giving to the people 
 this legal tender and measure of value, there should 
 be a universal standard by which it could be meas- 
 ured, and this currency or medium should be ob- 
 tainable only in one way, — in exchange for four 
 per cent, bonds having thirty years to run to ma- 
 turity. I would have the rule so rigid that gold,
 
 112 SCIENCE OF MONEY. 
 
 the ultimate measure, could not command these 
 circulating notes and measure of value. A party 
 having gold or mess-pork, and desiring to convert 
 them into legal tender, should be compelled to con- 
 vert them into four per cent, bonds, and these alone 
 should be able to command them. A firm adher- 
 ence to this would give all parties an equitable 
 chance in a free market to supply their wants at 
 market prices. With four per cent, bonds for cir- 
 culating medium and legal tender, all commodities 
 and evidences of debt would compete for bonds or 
 legal tender, — the demand adjusting the supply, 
 and the supply fixing the demand. Bonds would 
 then be rated by the value of legal tender, and the 
 circulating medium would be regulated by the 
 amount of productions it would command. All 
 commodities would then measure each other, — and 
 the medium used in exchanging them, having no 
 intrinsic value while so used, would be estimated 
 by its use and convenience in facilitating the sale 
 and purchase of production and the liquidation of 
 debt. 
 
 The capitalist, or lender of the legal tender or 
 medium, only gives the command in the market of 
 legal-tender value, or so much of production; and 
 if he receives back at the stipulated time a similar 
 order for commodities, and his four, six, or ten per 
 cent, for the use, there can be no injustice; for I 
 hold that a legal tender of to-day that is fixed to 
 remain and be the same forever, is no more likely 
 to depreciate than the productions it was originally 
 exchanged for. An order for gold itself is no more
 
 PRODUCTION AND CONSUMPTION. \\2> 
 
 likely to purchase a greater quantity of mess-pork 
 than the mess-pork is to buy a greater quantity of 
 gold. The value of one is found by what it will 
 exchange for ; the other may have an indispensable 
 value in sustaining human labor during the produc- 
 tion of articles in greater demand. 
 
 It is the fear of depreciation in the legal tender 
 that deters governments from a change from gold as 
 a standard. It is in their power to render the one as 
 unchangeable as the other, if they will but be honest 
 and limit the procurement of the medium in ex- 
 change only for a fixed value, and let it be the 
 limiting power of the value of the medium. If 
 there should for a time be more on the market 
 than the wants of trade demand, the excess will 
 soon find its way back to bonds ; and if there should 
 be more bonds on the market than there is capital 
 to bear, then it is the misfortune of the holders. 
 In this state of the market it would be the duty 
 of the government to provide for the redemption 
 of the portion in excess of the demand, at the 
 fixed rate of interest. This, however, can never 
 take place so long as there are articles of value to 
 exchange. In this case holders of bonds can readily 
 part with them and go into investments paying 
 higher rates of interest. It is impossible for any 
 securities or commodities to escape the great law 
 of trade, of being measured by each other, and 
 not by any one standard. The standard or legal 
 tender is only the limiting power of debt; and to 
 find out the value of the debt, you must compare 
 the legal tender with the necessaries, conveniences, 
 
 10*
 
 114 SCIENCE OF MONEY. 
 
 and amusements it will command. The circulating 
 medium of a country must be viewed in the light 
 of a great highway to market, that can be used 
 and traveled over by thousands who own none of 
 the stock, but who must finally pay such toll as will 
 eventually give a dividend to the owners, or else 
 the road will not be renewed and kept in good 
 order. This being the case, it is no part of the 
 business of the government to undertake at the end 
 of the line to deliver any other commodities to the 
 consignee than the particular goods shipped. If 
 parties demand gold instead of mess-pork, or flour 
 in place of gold, it will be her duty to turn to the 
 bill of lading and discharge the cargo in the order 
 and condition in which it was received. 
 
 CREDIT THKOUGH CIRCULATING NOTES. 
 
 I doubt much whether credit, through a circu- 
 lating medium or bank-notes not legal tender, 
 ever conferred any real substantial benefit on the 
 productions of any country, from the fact that it 
 does not create or call into being any of the neces- 
 saries or conveniences of labor. Gold can be sent 
 off to distant countries and there command the 
 tools and implements of reproduction ; but bank- 
 notes, even if convertible into gold, and of high 
 credit, will not circulate as money in other countries. 
 Now, we all know that the moment conversion is
 
 CREDIT THROUGH CIRCULATING NOTES. H5 
 
 demanded in order to get a commodity for export, 
 the loan will be denied. Banks of circulation de- 
 siring credit do not lend gold; but for a percentage 
 they will undertake to lend credit, or indorse you 
 up to the country, Ivy involving your friends, in the 
 shape of notes payable on demand, to be exchanged 
 for your neighbor's produce and supplies. If you 
 are industrious and economical, in nine cases out 
 of ten you can procure the supplies from your 
 neighbor direct, and need not complicate the entire 
 industry of the country by giving to a numerous 
 horde of wild speculators a fiction with which they 
 can buy up the commodities needed so much by the 
 labor of the country. The instances of prudence, 
 or of the use of economy, in the issuing of these 
 credits, have been so rare, that I am firmly convinced 
 a greater degree of prosperity would have been de- 
 veloped throughout the country, by confining all 
 credit direct to values, and their use to the prudent 
 and industrious: the revulsions then would not 
 only have been few, but would have been confined 
 to the adventurer. There is already too much 
 credit given in the sale of the products of labor. 
 If the holders of values would demand values in 
 exchange, losses would not be a wipe-out, but would 
 be only for the percentage of depreciation. Con- 
 fine all time sales and purchases to bulls and bears, 
 and let them settle their own differences, if able. The 
 country will then have something better than prom- 
 ises in return for the products of human labor. If 
 there remain a surplus in the country, industry will 
 be able to command it in exchange for an honest
 
 116 SCIENCE OF MONEY. 
 
 day's work. Should there still be left commodities 
 over consumption, they will command the surplus 
 of others without this continual speculation on 
 credit, and its abuse. Traders will spring up, with 
 the requisite facilities to seek new and increasing 
 markets. "Without this annual surplus, the food of 
 commerce, those engaged in the exchange cannot 
 prosper or become opulent. 
 
 If properly considered, there can be no loan of 
 capital in the exchange of products, they being them- 
 selves the capital. Confine the speculator to values 
 in exchange for values, and you will have less use 
 for a bankrupt court. Give to labor a fair advance 
 on the prospective products, and they in their turn 
 will command the necessaries, conveniences, and 
 amusements of life. The supply is much more 
 likely to continue equal to the demand than if 
 allowed to be dissipated by the reckless speculator 
 devoid of capital other than his wits. 
 
 I am not at war with credit, nor do I wish to 
 lessen its beneficial influences ; but as it can be, and 
 continues to be, abused, my desire is to lessen or 
 mitigate its evils. I am well aware that my limited 
 ability has caused many of my statements and ar- 
 guments to be somewhat difficult of comprehension; 
 but, at the same time, I do not underrate my efforts so 
 far as not to feel sure of the enlightenment of a ma- 
 jority of those who will take the trouble to think of 
 what I have undertaken to demonstrate. 
 
 But few are fond of investigations so intricate as 
 the foregoing, and lean only urge on this class the ob- 
 ligation due to themselves and their co.untry to make
 
 MEDIUM SHOULD BE LEGAL TENDER. 117 
 
 themselves better informed in regard to many of the 
 mysteries and truths involved in the ever-widening 
 and extended commerce growing out of the industry 
 and economy of a go-ahead people such as we are, 
 whose annual production and consumption have 
 never been equaled by the most favored nation. 
 
 To the aged and the man of leisure, I trust I have 
 rendered needless the intense thought which it is 
 absolutely necessary to bring to bear in all such 
 investigations, and have enabled them to pursue 
 the subject to a more enlightened conclusion. 
 
 Many passages will be found to be a seeming 
 repetition ; but the subject is so subtle that I was 
 compelled to approach the underlying principles 
 from different stand-points, in order to shed more 
 light on the main question. Hence the many ex- 
 pressions and verifications of the same truths; and 
 I trust the unfamiliar reader will pardon the seem- 
 ing tautology, especially if it has given him a clear 
 understandiug of the unchangeable truths of polit- 
 ical economy. 
 
 MEDIUM SHOULD BE LEGAL TENDER. 
 
 If labor be the first cost of all value, then an 
 abundance or large production will cheapen prices 
 when compared with all other commodities not so 
 found ; in other words, more of the increased pro- 
 duction, in the absence of an increased demand, 
 must be given for values that have not changed in
 
 118 SCIENCE OF MONEY. 
 
 quantity or for which the demand has not increased. 
 Now, should the position of the markets to-day be 
 three barrels of flour for one of mess-pork, the same 
 proportions will exist in the future, provided the 
 supply and demand continue unchanged; this rule 
 will be found ^equally applicable to all productions 
 of present necessity, but cannot be applied so in- 
 variably to articles of luxury; they must continue 
 to fluctuate with the ability or surplus of those who 
 have heretofore indulged in them. Disastrous ven- 
 tures in trade, from whatever cause, will cut short 
 the power to indulge, especially of that class which 
 was accustomed to take the largest amount of luxu- 
 ries: the labor producing these luxuries may, from 
 want of demand, be thrown on that class producing 
 the necessaries of life, or that portion of labor which 
 sustains the labor of all other occupations. The 
 effect will be an increase of products of prime neces- 
 sity, a cheapening of the money price of labor, and 
 an abridgment of the consumption of luxuries by 
 the parties consuming most largely, cheapening 
 them for a time, and then extension to those who 
 previously shared but sparingly, but in the end 
 (from the enhanced price consequent upon the with- 
 drawal of labor) a total depreciation. Undue spec- 
 ulations and unguarded ventures bring trouble and 
 disaster on all parties. Production may be ill assisted 
 and cause great embarrassment and want for a time, 
 but no degree of general prosperity can bringan over- 
 supply or glut. An increase in productions gives 
 greater ability to buy; and the buyer's ability to con- 
 sume enables the party making the exchange with
 
 MEDIUM SHOULD BE LEGAL TENDER. H9 
 
 him to dispose of his wares and increase his con- 
 sumption, satisfying the great law of production, 
 the stimulus of which is the desire to consume. So 
 long as there is a general surplus there will be no 
 impediment to the consumption. In this connection 
 arises the great necessity of discouraging all wild 
 speculations by forbidding the use of any device 
 that will either decoy or deceive labor, the result of 
 which is to estrange capital from labor, and cause the 
 one to be shy of the other. It is the products of last 
 year that put labor in motion ; but without the co- 
 operation of capital — the tools and labor-saving ma- 
 chines of the present day — the needful conveniences 
 of an economical existence could with difficulty be 
 procured. No human labor could compete with the 
 mowing machinery in haymaking, or with the 
 reaper in furnishing cheap grain ; while the rail- 
 splitter, with his old-fashioned axe, would be far be- 
 hind the one using the improved Collins. All this 
 goes to prove that there is a continuous copartner- 
 ship between capital and labor; each is working 
 for a share of the crop. In agriculture, frequently, 
 both share alike ; but where the preponderance of 
 capital in machinery, etc. is great, labor must be con- 
 tented with a smaller percentage. There must be 
 harmony, liberality, and fair dealing; the one must 
 not stipulate for the lion's share, nor must the other 
 be wanting in an honest effort to fulfill the contract. 
 No extended commerce or trade can spring into 
 existence without these requisites, — each interest 
 should be shielded from the disasters of the reckless 
 speculator and gambler in values.
 
 120 SCIENCE OF MONET. 
 
 Capital is the great benefactor of labor, saving up 
 by economy its surplus, and sharing its fruits with 
 industry and reproduction. It makes no difference 
 in the relationship of capital to labor, whether 
 the owner of it puts labor in motion, or whether 
 the retired capitalist lends it to an intermediate 
 agent. Still, labor, if honestly dealt with, must have 
 the accustomed reward for its toil, leaving the re- 
 mainder of the products to be apportioned between 
 capital and the agent. The intermediate man is the 
 speculator on credit, working for the difference: he 
 may be overreached and bring disaster. Capital 
 may survive the loss with but little inconvenience, 
 as its eggs are not generally all put in one bas- 
 ket; but let there be no device in all these 'ex- 
 changes and complications to deprive labor of it3 
 full share, for the Good Book says, " the laborer is 
 worthy of his hire." The customary devices us^d 
 by this intermediate agent to force success against 
 an advanced demand, are circulating notes, or orders 
 for capital carrying the promise of legal tender: 
 when these are dishonored, the loss falls entirely on 
 capital and labor. The latter may not survive the 
 loss, no portion of which can fall on the speculator. 
 He may be inconvenienced and embarrassed by 
 being thrown out of the ring, but the only capital 
 he put into the business was capacity; while in, he 
 received his grub, and he retires without profit. 
 
 Still, this intermediate agent is not only useful but 
 absolutely necessary in the extension of the inter- 
 course between capital and labor, and, if he had 
 not been enabled to borrow, in addition to capital,
 
 MEDIUM SHOULD BE LEGAL TENDER. 121 
 
 these false orders, or bank-notes, so called, he might 
 have been induced, in due time, to discontinue 
 the venture and save all parties from loss. Both 
 capital and labor would have had no other inconve- 
 nience or loss than the looking up of a more profitable 
 employment. Do not give to the middle man, or 
 agent, the power to consume capital, or to rob the 
 laborer ; if you do, capital may charge all the losses 
 on labor, which may have been honest in effect, but 
 badly directed. The less intervention of credit 
 there is between capital and labor, the better for 
 both : the one is endeavoring to encourage indus- 
 try, the other to give an honest increase, while 
 credit is a two-edged sword going between. Cap- 
 ital must not be allowed to become enervated and 
 indolent; it must learn the importance of infusing 
 into its offspring the economy that gave it birth, by 
 a proper training in youth ; and a familiarity in the 
 handling of the tools used by labor will guard 
 against many cuts. It is the want of this early 
 training that brings industry and economy into bad 
 repute, and which in time will dissipate the accumu- 
 lations of thrift and economy. 
 
 I would cause to be studied by all the youths of 
 the land, as their first lesson in political economy, 
 the unchangeable law, first promulgated by Adam 
 Smith, that "Labor was the first price, the original 
 purchase-money, paid for all things. It was not by 
 gold or silver, but by labor, that all the wealth of 
 the world was originally purchased, and its value to 
 those who possess it, and to those who want to ex- 
 change it for some new production, is precisely 
 
 11
 
 122 SCIENCE OF MONEY. 
 
 equal to the quantity of labor which it enables them 
 to purchase." 
 
 Low money prices are generally interpreted to 
 mean hard times and a want of prosperity; but the 
 reverse is oftener the truth. Large productions 
 are the sure indications of thrifty and favorable 
 harvest, and invariably bring low money values. 
 There can be no better evidence of industry and the 
 reward of the husbandman than abundance; the 
 cry of hard times and inadequate reward of labor 
 can be traced to the too free use of credit, which 
 unfortunately remains the same, however low the 
 prices may rule for large productions. If the 
 money-price or legal tender required be also an 
 article of merchandise, and be not present with the 
 abundance of commodities, its value will be en- 
 hanced, while the surplus of other productions seek- 
 ing a market must sink to a speculative point in 
 order to induce the importation of this commodity 
 (legal tender) ; then labor, that has promised a por- 
 tion of its earnings, or their value, in another or 
 defunct commodity, cannot liquidate with a com- 
 parative show of equity; the tendency is to discour- 
 age industry and cripple commerce and increase in 
 a twofold manner, first by discouragement, and then 
 by a want of the usual surplus, to perpetuate the 
 business of exchange and trade. 
 
 From the best data that have been obtained, the 
 circulating medium of a country is equal in value 
 to about one-fifth of the annual productions. Then 
 three thousand millions of productions will require 
 six hundred millions to effect the exchanges and
 
 MEDIUM SHOULD BE LEGAL TENDER. 123 
 
 liquidate debt, costing the citizens thirty-six mil- 
 lions annually, or six per cent, interest, this being 
 the lowest estimate that can be placed on it. Now, 
 this is one and one-fifth per cent, on the entire annual 
 productions of the interior country. A portion of 
 this tax must be paid by every man, woman, and child 
 that enters the market with goods for sale or debt 
 contracted for o-oods exchanged. If one-half of the 
 products are consumed by the producer, the tax on 
 the remainder will be, say two and a half per cent., 
 or equal to the usual commission for the sale of raw 
 products; that is, equal to fifty cents per barrel on 
 pork and twenty cents on flour. As all this tax is 
 on that portion of commodities to be exchanged 
 before consumption, it is peculiarly onerous on those 
 who make nothing for home consumption: that 
 portion of commodities consumed at the place of 
 production pays no part of the charge for a medium, 
 but only that portion convertible by the medium. 
 
 The above charge for a medium is confined to 
 the internal affairs of the country, and is to be 
 borne by its exchangeable products. That portion 
 of commodities for export, to be used in the pur- 
 chase of imports, has, in addition to its quota of the 
 domestic charges, a new set of its own, growing out 
 of its circulating medium, bills of exchange, and that 
 portion of the tax required to keep up a reserve of 
 gold to be used when called on to liquidate balances, 
 custom-house dues, and other charges incident to 
 the sale and conversion into other commodities, 
 or goods for home consumption : all these, when 
 summed up, amount to no inconsiderable sum, — at
 
 124 SCIENCE OF MONEY. 
 
 times so large that the entire value of the venture is 
 consumed, to the discouragement of further pro- 
 duction. 
 
 The reserve of gold necessary to insure an unin- 
 terrupted export and import trade cannot well be 
 estimated at less than one-fourth the exports, say 
 $100,000,000. The interest at six per cent, on this 
 sum, or $6,000,000, is equal to one and a half per 
 cent, on $400,000,000. In the case of a gold circu- 
 lating medium, to be used in the interior of a coun- 
 try as its only legal tender, you force these export 
 commodities to keep up the circuit of the entire 
 medium of the country, when it really amounts to 
 only a portion of the products to be exchanged; while 
 a well-regulated internal legal-tender circulating me- 
 dium, such as I have been advocating, would save to 
 the exports of the country all charges except its own, 
 freeing them from the additional charge of not less 
 than five per cent, for hunting up a gold medium 
 when it is not in sight, but absent at some distant 
 point, where, in all probability, it is profitably em- 
 ployed, and, to cause its withdrawal, we must offer 
 large inducements and sacrifices on our exportable 
 commodities. 
 
 I will now endeavor to show that ^production is 
 still worse off. With a bank-note medium con- 
 vertible into a legal tender gold, we will still 
 place the needs at $600,000,000 for a circulating 
 medium, and allow the banks, as usual, to issue 
 three to one, or hold in reserve $200,000,000. Now, 
 1 contend that the people are paying six per cent. 
 at least on this $600,000,000, and losing the use of
 
 MEDIUM SHOULD BE LEGAL TENDER. 125 
 
 $200,000,000 of gold in sustaining the bank-note 
 medium; all this is to keep them from suspension, 
 which, nevertheless, we all know will periodically 
 occur, and the losses from which cannot be estimated 
 at less than thirty-three and one-third per cent, every 
 ten years, two and a half per cent, per annum on 
 the entire paper circulation. 
 
 Let us make a summary of the charges and 
 losses incident to a gold circulating medium and 
 legal tender for interior and foreign commerce: 
 $600,000,000 at six per cent, interest is $36,000,000 ; 
 $200,000,000 for foreign trade, $12,000,000 ; five per 
 cent, on $500,000,000, $25,000,000; $73,000,000; 
 two and a half per cent, per annum, loss on a 
 convertible bank-note medium, $15,000,000; an- 
 nual loss incident to internal and external trade, 
 $88,000,000. Now, I contend that with a legal- 
 tender medium, such as we have indicated in the 
 foregoing, $100,000,000 in a gold reserve will be 
 amply sufficient to take care of all the charges 
 incident to the exports of $400,000,000 and imports 
 of $400,000,000. This is only a running, constant 
 charge, and would give a credit of $6,000,000 on 
 the $88,000,000, leaving a net charge saved to the 
 industry of the country of $82,000,000, nearly equal 
 to twenty per cent, on the entire export trade, or 
 ■five per cent, on the internal and external exchanges 
 of all the commodities of the country seeking a 
 market. 
 
 In searching for the great truth underlying the pros- 
 perity of our country, and the adoption of it on the 
 exchanges necessary to bring an abundance for con- 
 
 11*
 
 126 SCIENCE OF MONET. 
 
 sumption out of a reinvigorated production, I have 
 been compelled to weigh and verify the charges 
 surrounding the entire subject, and can the more 
 readily give the foregoing as at least a near approxi- 
 mation to the loss incident to the labor and industry 
 of man. This large sum will be found equal to the 
 charges on one-half of our bonded debt, and might 
 serve as the nucleus of a sinking fund that in a 
 reasonable time, with demands of a legal-tender me- 
 dium, would " wipe out the whole" and leave the 
 country prosperous and its internal trade uninter- 
 rupted by the disturbing influences incident to all 
 circulating mediums, if of merchandise, realizing to 
 the country the value of the great truth which I 
 asserted at the beginning of this book, and freeing 
 itself from the curse that must follow in the track 
 of error. 
 
 One fruitful source of all our troubles and want 
 of thrift from the use of bank-notes as a circulating 
 medium, grows out of the periodical pressure on the 
 issues for payment, causing the owners and holders 
 of values to withdraw them from use, for fear of 
 loss if trusted to the varying fortunes of the specu- 
 lator on credits. So long as these values, whether of 
 gold, pork, or flour, are withheld from circulation or 
 reproduction, all the natural increase to the country 
 has been lost. Give to capital the necessaries and 
 conveniences of labor, confidence through a uni- 
 form and unchangeable system of security, and all 
 will be made available in reproduction. No loss will 
 be incident to hoarding or hiding. If there be those 
 fearful to credit themselves, let us not quarrel with
 
 MEDIUM SHOULD BE LEGAL TENDER. 127 
 
 them, — they are the storekeepers of misfortunes 
 and universal want by the hoarding up of the sur- 
 plus products of the imprudent, — they are a portion 
 of the great machinery of life, without which there 
 would be times when there would be no oil to 
 grease the parts. Let us be charitable and mag- 
 nanimous, and concede them their day ; it is to be 
 hoped their reign may be short, but let it have 
 all the eclat due to this long obscurity and want of 
 consideration by the mass. 
 
 There has been and continues to be much specu- 
 lation as to how our large debt can be paid. Many 
 think, or say without thinking, that it can, if we have 
 ability, be done at once or immediately. I admit we 
 could cancel the debt if some unseen power, such as 
 Aladdin's wonderful lamp, would place us in posses- 
 sion of the legal tender gold to this large amount ; but 
 the very application of the money to this purpose 
 would bring about such a revulsion in the value of 
 gold that, from its redundancy, thousands would 
 become bankrupt, and many of the holders of the 
 bonds would be brought to the verge of starvation. 
 
 Gold may be by law a legal tender for debt, but 
 cannot be made to command other values if, from 
 abundance, it should lose its value. Now we will 
 take the reverse of the picture. Suppose this won- 
 derful lamp, or unseen power, should place us in 
 possession of the requisite amount of pork, flour, 
 and other commodities to discharge this debt at the 
 present gold prices for the same; do you suppose 
 it would command the gold to an amount which 
 would pay even the interest for one or two years ?
 
 128 SCIENCE OF MONEY. 
 
 Both these positions are strictly in accord with 
 the laws of value; in the first case of gold, the in- 
 justice would be unpardonable, and in the second, 
 the pork, flour, etc. would become so worthless, for 
 want of a legitimate demand, that but little of the 
 debt would be discharged. 
 
 Now, as nature has not placed it in our power- to 
 make a coup d'etat, we will conform to her laws and 
 have a due regard to consumption and the wants of 
 mankind, — not undertake to force sales on the one 
 hand or be unjust on the other; but there is one 
 thing we can do, without fear of censure from 
 the creditors, in favor of the debtor, and that is, do 
 nothing that will appreciate gold; do not use it 
 as a circulating medium and legal tender, nor hoard 
 it up from use ; when you have it, throw it on the 
 market and let it seek investments,— it will then 
 have a chance to be returned to us probably at a 
 lower comparative value in exchange for our com- 
 modities. 
 
 If one or two other large competitors for gold as 
 a medium should discard it as such, it may bring 
 about such a state of things that the same amount 
 of mess-pork, flour, etc. received for the bonds will 
 call them in and cancel the debt. This state of the 
 market will satisfy that portion of our citizens who 
 contend that we did not receive value for the bonds 
 when they werecissued. I am not of that class, and 
 think that, when all the circumstances surrounding- 
 them are weighed, a different opinion will prevail. 
 
 In 186_\ when the legal-tender act was passed, the 
 creditor portion of the country had to receive their
 
 LEGAL TENDER TO BE ISSUED FOR BONDS. 129 
 
 collections in the redundant depreciated medium. 
 It was from this class alone, holding the floating cap- 
 ital, that purchasers for the bonds could be expected, 
 and, as they paid par for them, they were compelled 
 to return the value fixed on them for debts due them 
 in gold. 
 
 There was nothing wrong in all this on either side, 
 — the necessity of the government was paramount 
 to all considerations of propriety or justice, and the 
 capitalist had to protect himself in the best way he 
 could, which was by the exchange of a due debt 
 paid in legal tender for a bond bearing on the future 
 good fortunes of the country ; they are now coming 
 around to value received and an adjustment of the 
 account on the square. It is but the verification of 
 the old adage : u What goes over the devil's back 
 will come under his belly." 
 
 LEGAL TENDEE ONLY TO BE ISSUED FOE BONDS. 
 
 If the position I have taken became the policy 
 of the government in giving to the interior an in- 
 dependent circulating medium and legal tender in 
 exchange for four per cent, bonds, as I stated pre- 
 viously, no power should be delegated to the issu- 
 ing department to go beyond this, nor give to the 
 country one dollar in exchange for anything else, 
 not even gold. Why should this article of mer- 
 chandise be dignified with the power of specu-
 
 130 SCIENCE OF MONEY. 
 
 lation, and mess-pork, flour, or any other com- 
 modity in universal demand, not be admitted to the 
 same privilege? If this standard of value or medium 
 of exchange is intended to measure all values and 
 credit, and be a legal tender, no commodity can 
 take its place and be a reliable measure. The 
 moment you allow this medium to be issued in ex- 
 change for any production, you have completed the 
 exchanges, and the tendency is to debase the legal 
 standard by instituting a rivalry between com- 
 modities. The principle I am contending for ex- 
 cludes any commodity from becoming a legal tender 
 or measure. 
 
 It certainly looks very flattering and tempting to 
 have gold offered in exchange for the medium or 
 legal tender, from the fact of its easy conversion 
 into all other productions of all countries and 
 nations. With me this is one of the very reasons 
 that would cause me to exclude it. If you connect 
 it by deposit with the issuing power, you at once 
 lock it up and deprive reproduction of all the profits 
 and benefits that mio-ht have been derived from its 
 conversion into valuable implements for the exten- 
 sion of production, or deprive consumption of one 
 of its stimulants to renewed exertion. I readily 
 admit there would be no deterioration in bulk, such 
 as would be the case if the exchange had been for 
 mess-pork, from the fact of its liability to decay ; 
 but it would be less liable to the designs of thieves 
 and rogues. 
 
 You may now ask, What is to be done with the 
 excess of gold when it has ceased to be used
 
 LEGAL TENDER TO BE ISSUED FOR BONDS. 131 
 
 as a medium of exchange? I answer, Convert 
 it, like all other commodities, and if you have a 
 surplus over, unemployed, buy our bonds, which 
 will help to cheapen the rate of interest. It is the 
 unlocking of values, and bringing them into use, 
 that cheapens them in the market. Hoarding or 
 holding, by withdrawal from sale, tends above all 
 other devices of man to heighten comparative 
 prices and give them an undue influence in the 
 hands of those monopolizing the market. 
 
 There is one other serious objection to allowing 
 gold to be exchanged for the circulating medium, 
 and that is the constant comparison of it with the 
 legal tender, and the impossibility of the govern- 
 ment getting clear of it without a violation of one 
 of the fundamental principles underlying this entire 
 policy, to wit, the exchange of this gold for her 
 notes. This would be the conversion into gold of 
 all notes on demand, and would bring about the an- 
 tagonism of principles from which I am laboring to 
 free the country. She certainly could not pay it 
 out to bondholders without doing; great injustice to 
 those who had invested in her funded debt, using 
 that which did not belong to her, and contracting 
 a new debt, which would recoil on the holders of the 
 old, from the undue complication with the holders 
 of the circulating medium, by depreciation of the 
 sum previously held, when compared with the 
 amount actually needed to effect the changes of the 
 interior. The true principle is to allow every tub to 
 stand on its own bottom. If any monopolies are 
 permitted, let the government retain them in her own
 
 132 SCIENCE OF MONEY. 
 
 hands for the benefit and use of the people. The con- 
 sumption or investment of gold, like that of all other 
 commodities, will stimulate production, giving to 
 man all the instruments and devices of labor to aid 
 him in effecting a surplus, from which alone can 
 come ability to pay taxes, and will keep up her 
 revenue to a point that will insure credit and a 
 high degree of prosperity. 
 
 No one will deny that if you take away from 
 the factory the motive power, or from the farm the 
 implements of husbandry, you have inflicted on 
 the country and its labor a loss in land and ma- 
 chinery, to the extent of the destruction of all 
 income. Now, I hold that if a government has an 
 article of value which, by a simple exchange, will 
 infuse new life into this machinery and restore 
 to the land its wonted increase, she has inflicted a 
 great wrong on labor — especially if that value is 
 a value only when in use — by locking it up in the 
 vaults of a bank, instead of sending it to the coun- 
 try, where the implements can be purchased to sus- 
 tain industry, and where that value is in demand. 
 
 The government has to make good her promises 
 of srold to the holders of her bonds for interest. 
 Let her go on collecting from customs that por- 
 tion needed in the liquidation of debt in accordance 
 with the contract; let commerce and trade hunt 
 up such commodities as they desire to deal in and 
 have promised in the payment of balances ; let us 
 have no undue influence in the way of the prompt 
 and honorable fulfillment of engagements by all 
 parties in the basis of the original contract, and
 
 LEGAL TENDER TO BE ISSUED FOR BONDS. 133 
 
 never legalize any illegitimate competition. Allow 
 the dealers in gold, like those in other commodities, 
 to consult their own interest and convenience in trade 
 and the division of the profits in any values in which 
 they may desire to invest their surplus. If the gov- 
 ernment undertakes to furnish its people with a me- 
 dium of exchange and liquidation of balances, we 
 have no claim on her further than the commodities 
 to be exchanged by it. If she has promised us 
 flour, we have no right to demand mess-pork or 
 gold. Before we can have a clear insight into 
 this position, we must separate the medium from the 
 values to be exchanged by it, — the railway and the 
 rolling-stock from the commodities to be trans- 
 ported over the road. There can be no objection 
 to the government receiving gold on deposit and 
 issuing, as at present, certificates. This will give 
 a safe, place to those interested in the trade to keep 
 it until commerce may demand its withdrawal, and 
 will save to the import and export trade a large sum 
 in transportation. It certainly would be rendering to 
 the trader a great service and facility in the payment 
 of duties, subjecting him to no other expense than 
 that of a cancellation of certificates. 
 
 12
 
 134 SCIENCE OF MONEY. 
 
 TRIAL AND SUMMAEY. 
 
 After a careful review of the foregoing investi- 
 gations, calling for a change, as I have attempted to 
 show, from error to truth, I deem it just to call a 
 general council of the interests involved, in order that 
 a statement may be made of the defense and argu- 
 ment leading to a final disposition by the highest 
 tribunal. 
 
 The government of the United States having 
 called on the following to make their defense, they 
 will be heard in their order: 
 
 The People. 
 
 Gold. 
 
 Domestic Commerce. 
 
 Foreign Commerce. 
 
 Balance of Trade. 
 
 Cotton. 
 
 Mess-Pork. 
 
 Flour. 
 
 General Productions. 
 
 Consumption. 
 
 Fixed Capital. 
 
 Banking. 
 
 Legal Tender. 
 
 Circulating Medium. 
 
 Uncle Sam. — Having been called upon by my 
 people to arbitrate in regard to a final dissolution 
 of the relations hitherto existing between certain 
 productions, and in order to a better understanding, 
 I will first call upon the people to state their case.
 
 TRIAL AND SUMMARY. 135 
 
 The People. — We have lately been pondering 
 over the deductions made by one of our number 
 from what he claims to be a great truth, or an 
 original element underlying all our prosperity. He 
 asserts that " if the circulating medium and legal 
 tender of a country be an article of merchandise 
 desirable for export, you have inflicted a curse in- 
 stead of a blessing on us," and asks for the disuse 
 of gold as a medium in our domestic transactions, 
 for the reason that productions buy and exchange 
 for productions, the medium being conventional, 
 and having no other value than what we give it by 
 the exchange of our products for it; that our mess- 
 pork will purchase as much flour through a medium 
 having no intrinsic value, without the relations of 
 the two being disturbed by the intervention of a 
 third commodity like gold, arbitrarily fixing the 
 difference when absent or present, and which is 
 well known to be liable to the most violent fluctua- 
 tions, which often bring wide-spread disaster in 
 their train. 
 
 If this be true, and the medium should have no 
 intrinsic value, but merely a relative one, all esti- 
 mates would begin at zero. The measure would not 
 only be fair, but unchangeable, — from pork and 
 pork remains, flour from and remains ; all 
 values would then have free orbits confined to sup- 
 ply and demand, and all excesses would gravitate to- 
 ward the center in comparative value, and would 
 be estimated by their utility. In view of all these 
 facts, and the large amount of mess-pork, flour, and 
 other products we will have to force on foreign coun-
 
 136 SCIENCE OF MONEY. 
 
 tries to purchase the large sum of gold required, say 
 five hundred millions, we will not only be embar- 
 rassed, but our ability to make good the maturing 
 obligations you have indorsed for us, which also call 
 for gold, will be lessened. To bring into competi- 
 tion with these engagements so disturbing and ener- 
 vating a medium as gold, will only give rise to com- 
 plications, and, as we believe, inflict upon us a curse. 
 To enable us to overcome the many difficulties 
 besetting our path in carrying the large debt now 
 upon our shoulders, we come forward in our sov- 
 ereign capacity and pledge ourselves jointly and 
 severally to the extinguishment of the last remain- 
 ing vestige of debt, in the commodity stipulated to be 
 paid, out of our surplus. But in order to do this, 
 we must husband and economize our reserve for 
 reproduction. The medium of exchange being a 
 luxury, and a legal tender a necessity, we ask that you 
 indorse our joint notes to the amount of our gold- 
 bearing bonds, promising that you will exchange 
 these notes for bonds only, and, when desired, will 
 fund them again into a four per cent, gold promise 
 having thirty years to run to maturity ; and we pledge 
 ourselves to use them, and no other notes, as a me- 
 dium in the exchange of our productions, and to 
 receive them as a lee;al tender for all debts due us. 
 As we now need our five hundred millions for a 
 medium, it will relieve you from the collection of 
 the thirty millions of dollars required to pay the 
 annual tax on the bonds that must be canceled in 
 order to get the legal tender and circulating medium. 
 The rapid development of this great country and the
 
 TRIAL AND SUMMARY. 137 
 
 annual increase of oar productions will cause a simi- 
 lar and continuous call for these notes. Finally, 
 we enjoin that the only basis for these notes shall 
 be bonds, and that bonds can be issued only on the 
 return of the circulating notes. If you should col- 
 lect in any one year more gold than is necessary to 
 pay maturing obligations in the shape of interest 
 promises, apply the balance to the extinguishment 
 of the most onerous debt that you have the privilege 
 of canceling. 
 
 Gold. — I have listened, without interrupting, to 
 the remarks of the people, and "am astonished at 
 their ingratitude and their disposition to rob me of 
 regal power, especially on the part of those who 
 have subjected so much territory to my use and have 
 worshiped me so devotedly. It is but a short time 
 since they set me up as a god and ran me up from 
 a man to fifteen men in buckram suits, because I 
 happened to slay all the bulls and bears in my 
 room, except the small portion that escaped by the 
 side-doors and windows ; even some of these were 
 not able to find their way home, and had to be 
 placed in the mad-house. In the morning, all parties 
 agreed that I was worth one hundred and thirty 
 of your dear people, but they declared before three 
 o'clock that I was equal to one hundred and sixty- 
 five, and if it had not been for your untimely inter- 
 ference in tripping me up I do not know what would 
 have been the consequences, nor how near I might 
 have brought your dear people to starvation. I can 
 readily see your drift: you wish to rob me of tem- 
 poral power, and declare that I am not infallible. 
 
 12*
 
 138 SCIENCE OF MONEY. 
 
 Well, have this as you will, there will be many who 
 will still hoard me up and continue their worship. 
 Though I shall publicly retire from your confidence, 
 no longer to be used by the dirty hands of labor in 
 its daily toil, I shall continue to pass through the 
 hands of the silk-glove gentry, and, before you get 
 to the end of the engagements you have for my use 
 in the future, many hard days' work will have to be 
 performed, and still, as heretofore, 'many a voyage 
 around the world in search of me may enable me 
 to lead you a wild-goose chase through many a bog 
 and bramble path. 
 
 Domestic Trade. — Give us a medium for our 
 wares that will command the productions of the 
 country, and we will find you a market and bring 
 back calico or any other commodity you desire, even 
 should it be gold. We are disposed to think, after 
 all that has been said by the people, that if they 
 have found a substitute for five hundred millions 
 of dollars, and shall succeed in lessening the annual 
 wants some thirty millions of dollars more, it will 
 deduct a large percentage from the conventional 
 value of gold. Less of their productions will be 
 required to purchase the amount they may need 
 from time to time for any purpose. 
 
 Foreign Trade. — We are not alarmed at what 
 your people ask. It will not lessen our profits ; but 
 if the change adds to their productions, as it cer- 
 tainly will do, we can sell them more goods and en- 
 hance our profits to that extent. There is another 
 feature which appears very favorable, and that is, 
 when we ship your products, we are compelled to go
 
 TRIAL AND SUMMARY. 139 
 
 to a banker and dealer in bills of exchange and offer 
 him a draft against the value, and to purchase legal 
 tenders or mediums for the people. We have fre- 
 quently been greatly inconvenienced and embar- 
 rassed, owing to the migratory disposition of gold, 
 in finding the legal tender, and have had to make 
 heavy sacrifices of the productions, to induce the 
 banker to part with the medium ; not only this, but 
 we have frequently had our operations limited, when 
 more extended shipments would have paid far better. 
 These difficulties in the sale of exchange are not 
 only a loss to the producer, but aifect the home 
 market, from its influence on the foreign, bringing 
 about those sudden fluctuations in prices that are 
 so disastrous to our interest. 
 
 Cotton. — One great complaint made by the pro- 
 ducers of export articles is, that when the legal tender 
 or gold is absent from the country they are com- 
 pelled to price all their commodities, or compare 
 them with legal tender, in order to get it, when in 
 fact they only require a small percentage with which 
 to liquidate debt, and might have the balance to ex- 
 change for other merchandise, such as pork, flour, 
 etc., which are not influenced to the same extqnt by 
 the short supply of gold in the country, from the 
 fact that they are consumed in and about home, 
 while I have sutfered all the depression from my 
 being an exportable article. If this was all, it 
 might be borne by me, as I have at the present 
 time a sort of monopoly from location, climate, 
 etc. We know the spinners reap no direct advan- 
 tages from this great loss of ours, but at the same
 
 140 SCIENCE OF MONEY. 
 
 time it is used as a discrimination against our home 
 manufactories, by the cheapening of the exchange 
 used in the purchase of foreign imports. The profit 
 to the dealer in exchange is all that is realized by 
 the country, except where he is also a foreigner; 
 in that case I am paying all the losses, and my 
 people are receiving none of the profits. You may 
 think this difference in exchange that I have paid 
 for a legal tender is a small affair, but the average 
 before the late war was fully five per cent. This on 
 a crop of two hundred millions of dollars is no less 
 than ten millions of dollars which I have been 
 contributing to this despot gold, all of which was 
 used as a discriminating duty against my home fac- 
 tories. Give me my own notes in exchange; they 
 will cancel my debts, pay taxes to you, and realize 
 for me us much mess-pork as they will exchange for, 
 and no questions will be asked as to the value of 
 gold in the purchase of home productions. There 
 are only two questions involved : What is the cost 
 in human labor? and, What is the excess of supply 
 over consumption? 
 
 Legal Tender. — During the trying times of the 
 late war I was honored with the position of umpire, 
 liquidator of balances, and medium between you 
 and the products of your people; I was hailed by 
 your soldiers in the field, however disastrous and 
 dangerous the position, as the messenger of good 
 tidings: there was not a commodity in all the land 
 that I could not command. I am well aware that 
 a greater power was delegated to me than justice 
 would have sanctioned, and that I could not hon-
 
 TRIAL AND SUMMARY. 141 
 
 orably undertake to adjust the difference that had 
 been delegated to Q-old. I made no invidious com- 
 parisons with my rival in the settlement of old 
 balances, but passed along as quietly as I could. 
 Although I knew I was growing in appreciation, 
 I made no complaint against the late decision con- 
 fining me to the times of 1862, or the day of my 
 birth ; in this I cheerfully acquiesce, believing it a 
 just decision. The relations between myself and 
 gold are every day becoming more amicable; never- 
 theless, it will take me some time to forgive and 
 forget that last brick she threw at my head, on the 
 black Friday of September, 1869, although it missed 
 its mark, and dealt some heavy blows among her 
 best friends. 
 
 If the power is continued to me as heretofore, I 
 will endeavor not to abuse it nor claim anything 
 more than the people have delegated to me, which 
 i s nothing, or zero. I will continue to award as many 
 barrels of flour for one of pork as the state of the 
 market and of supply and demand will permit, and 
 will make no unjust discriminations against gold in 
 any case when it is offered in exchange, especially as 
 we are in need of a considerable quantity of that arti- 
 cle to make good our old promises; so long as my 
 people give their surplus productions in exchange 
 for me, I will be to them a faithful medium, and will 
 take no umbrage at their exchanging ten of me for 
 one of flour, or thirty for one of pork. The only in- 
 dication in that case will be that there has been a 
 failure in the customary yield of grain, and that the 
 cholera has been among the hogs. But should only
 
 142 SCIENCE OF MONEY. 
 
 five dollars be demanded as the value of flour, and 
 fifteen dollars as that of pork, it will be the highest 
 evidence of the smiles of the Giver of all good on 
 industry and labor; and should the bounteous pro- 
 ductions ever become as free as air and water, then 
 my measure (zero) will have been reached, and all 
 will hail the millennium. There will no longer be 
 any necessity for my friendly intervention as a me- 
 dium in the awards to labor or capital, and my 
 career will have ended in triumph. 
 
 Balance of Trade. — So much has already been 
 said and promised that I deem it unnecessary to 
 go further into details. I will only add, keep good 
 faith, and render to me the surplus of productions 
 over consumption which I know industry and econ- 
 omy can call into being. I will undertake to settle all 
 balances, and furnish to your people all the neces- 
 saries that may be desired, together with all the 
 gold you may need in the discharge of obligations 
 you have entered into on their behalf. 
 
 Banks. — We rejoice to find that the change is 
 likely to be inaugurated, for we will no longer be 
 called on by the needy, the idle, the dissipated, and 
 the reckless speculator for our notes, to be used in 
 hunting up the surplus products of labor and in risks 
 incident to the clamorous demand for new loans. 
 They have been the source of all our troubles, and 
 caused us to inflict on labor all the heavy burdens 
 incident to the exchange of its products. And 
 when we have been unable to meet all their 
 demands for legal tender, we have been unreason- 
 ably set upon and deprived of the provisions we
 
 TRIAL AND SUMMARY. 143 
 
 had laid up for the maintenance of our own fami- 
 lies. Now that legal tender has undertaken to look 
 up all the surpluses of the country and deposit 
 them with us, to be loaned to and used by in- 
 dustry, and by any others who may give securities 
 for their return, when these values are placed on 
 deposit with us to be used in the development of 
 the country's best interest, we will feel sure not only 
 that they are here, but that they belong to the people. 
 Heretofore, when we gave our orders on the country 
 for its commodities, and they were not in existence, 
 they were immediately returned for gold (a com- 
 modity we were generally short of), in order that 
 it might be sent to some other country to insure 
 compliance with the terms of the order. All this, 
 in times of a greater desire to speculate than to pro- 
 duce, coupled with short productions, caused us great 
 uneasiness, and disposed us to think hard of your 
 people. But now, being relieved of this burden 
 of importing and hunting up gold, we feel se- 
 cure, and for the future will find our interest in 
 the loan of capital to industry. When we look at 
 the small dividends of the Bank of England, some 
 six or eight per cent, per annum, and the large 
 returns (thirty per cent, or more) realized by the 
 banks not called on to issue notes or orders on the 
 country, we feel compelled by self-interest and se- 
 curity to exert our utmost influence in carrying out 
 the wishes of the people. From the above we would 
 by no means have you think we have not made a 
 good thing out of getting interest on your bonds, 
 and your indorsement of our notes free of charge,
 
 144 SCIENCE OF MONET. 
 
 all of which commanded the values in the country 
 equal with your own notes. But, as we will no 
 longer have to provide this little joker gold, we prefer 
 to make our bow and retain our gains. 
 
 Uncle Sam. — I see some disorder and commotion 
 in this hall, occasioned by the unceremonious depart- 
 ure of the idle, the dissipated, the reckless speculator 
 and gambler, and can distinguish such mutterings 
 as, " If there are to be no more wild-cat banks, if 
 all the prizes are to be drawn by industry and econ- 
 omy, and if nothing is promised to those who look 
 to other men's labor and to their own wits for a 
 living, it is time for us to be off, avoiding such un- 
 holy combinations against those who by nature have 
 no inclination for work." So soon as order is re- 
 stored, I will endeavor to sum up the facts and evi- 
 dence in the case, and give you my opinion and 
 views. 
 
 All power is derived from the people ; it is to their 
 industry and economy that we are indebted for a sur- 
 plus of productions over consumption. Without this 
 surplus of the necessaries, conveniences, luxuries, 
 and amusements of life, the bondholders would be 
 unable to fulfill their promises, I would be unable 
 to fulfill mine ; and national ruin would ensue. 
 
 When the people call into existence this surplus 
 and use it as a legal tender for the extinguishment 
 of contracts, it is the highest evidence that can be 
 given of their honor and integrity. Nor can I see 
 why they should not be suffered to go on and pros- 
 per in their own way; no one has any right to heap 
 upon their shoulders unnecessary burdens. If they
 
 PRODUCTION AND ITS DRAWBACKS. 145 
 
 desire domestic institutions instead of imported ones, 
 they have a right to their preferences, especially if 
 they think the importation of the foreign would in- 
 troduce a pest, and a continual wrangling. " Let us 
 have peace," whose victories, as the poet says, are 
 no less renowned than those of war. If there be any 
 so wedded to Mammon as to desire gold promises 
 only, there will be no objection. 
 
 Foreign exchange has now her own medium (bills 
 of exchange, etc.), which is used not only as a me- 
 dium but as a legal tender and purchasing power, 
 and she declines having anything to do with the 
 changes contemplated in our internal affairs. Her 
 desire is that surplus commodities shall be exchanged 
 for productions, giving a profit on the inward as well 
 as the outward venture/by which process her gains 
 will be doubled and still greater security given to 
 her operations. 
 
 PRODUCTION AND ITS DRAWBACKS. 
 
 The leading interest of all countries is production. 
 To increase this, due stimulus must be given to in- 
 dustry, and economy must be infused into every 
 avenue of consumption, that there may be annually 
 an increase of commodities for sale or exchange. 
 Stationary production will soon be overtaken by 
 population, and in years of adversity want and 
 misery will ensue. 
 
 Retrograding production tends to force on the 
 
 13
 
 146 SCIENCE OF MONEY. 
 
 poor decreasing quantities and qualities of food, till 
 at last death comes to their relief. Wot so with 
 increasing production : the daily wants of the masses 
 annually expand, and the luxuries of one year be- 
 come the necessaries of the next, banishing misery 
 from the land and elevating the people to greater 
 heights of prosperity and security against the day of 
 adversity. 
 
 When that day does come, they have a reserve to 
 look to with which they can bridge over the unpro- 
 pitious season. It is only in agricultural countries 
 that complete immunity can be found from extreme 
 want. The manufacturing interests cannot hold out 
 a certain promise against the day of shortness in the 
 general supply of food. People can wear old clothes, 
 but they cannot eat yesterday's dinner. Agricul- 
 ture, manufactures, and commerce go well together 
 in times of prosperity, but when adversity comes 
 there is a pot but nothing to boil in it. Hunger can- 
 not admit of the delay incident to trade, — cannot 
 wait for the purchase of food with the wares of the 
 factory; hence the great necessity, which should 
 never be lost sight of by any government, of allow- 
 ing nothing to retard the agricultural interest, — that 
 being the only secure harbor when the storm is 
 raging without. I would by no means have it under- 
 stood from the above that the younger members of 
 the family should not be favored and encouraged; 
 but they can only be pensioned off when the accu- 
 mulations from the entailed estate bring a surplus; 
 economy in the one will bring independence and 
 equality in the other. In pointing out some of the
 
 PRODUCTION AND ITS DRAWBACKS. 147 
 
 losses besetting the path of agriculture, I do not 
 wish to heap loads on the backs of either of the 
 other two great interests, — manufactures and com- 
 merce, — but simply to defend production against 
 carrying the entire burden of the circulating me - 
 dium of the country, — to protest against its being 
 made to pay all the losses incident to the fluctua- 
 tions and perils of that medium, — and to insist that 
 the other great interests should be made to con- 
 tribute in a general average. On this equitable and 
 mutual plan I hope to demonstrate that the circu- 
 lating medium of an agricultural country, of what- 
 ever nature or quality, is peculiarly the property of 
 the producer, and that all the losses, except momen- 
 tary ones, are finally to be paid by those who made 
 it a necessity, without any hope of participating in 
 the profits, if any. It is as if A, for the honor of 
 being in a firm, should agree to pay all the losses 
 of the bad years, and let B and C divide the profits 
 of the good ones. 
 
 Commerce, with its head-light, looks far out to 
 sea, and when going into port she can, if necessary, 
 take on board a pilot. Her facilities are such, from 
 her position and intercourse with nations, that she 
 has invented a peculiar alphabet, by which she can 
 interpret the wants of others and supply her own. 
 Her circulating medium, bills of exchange, checks, 
 credit, etc. are manufactured to suit her conve- 
 nience. If the trader gets possession of a portion 
 of the circulating medium of a country, he only 
 receives it at its comparative exchangeable value 
 with the products of that country; he instantly parts
 
 148 SCIENCE OF MONEY. 
 
 with it in payment of former purchases, or invests it 
 in new ones. His chance of loss by depreciation is 
 about equal to that of being struck by lightning. 
 Not so with the- confiding producer with no debts 
 to pay ; he has no resource, but must pocket the 
 loss, whatever it may be. In this way nine-tenths 
 of the losses incident to a circulating medium are 
 distributed over the agricultural portion of the 
 country; while the banker or dealer in money, in 
 times of fear and peril, invests his reserve in bills 
 of exchange, calling for some other medium pre- 
 dicated upon the produce of the country. In this 
 manner all is worked back on the productive in- 
 terests of the country — on the gross produce — the 
 manufacturer participating sparingly in the depre- 
 ciation, from the fact that the trader, like the rail- 
 road train, carries a front and back light, warning 
 those nearest to him to look out. 
 
 If this position as to the true tendency of the 
 money of account be correct, is it not the duty of 
 the government that has the power to regulate the 
 currency and medium of value to furnish, to those 
 who have the losses to pay, such a standard and legal 
 tender as they can at all times have in sight — one 
 that always carries its own light and fog signals? If 
 the loss or depreciation does come, it will be in 
 such a medium as they have a common interest in, 
 and, though inconvenient at the moment to foot up 
 in bulk, the consolation that they have finally to 
 work it out will be some set-off to the summary 
 process of payment. When it finally goes down 
 and becomes worthless, they can still fall back on
 
 CIRCULATING MEDIUM AND LEGAL TENDER. 149 
 
 first principles, — the products of the field, — without 
 which manufacture and commerce cannot exist for 
 one moment. With it, to an amount sufficient for 
 one year's support of labor, prosperity will again 
 come to the aid of its handmaids and copartners in 
 production. 
 
 OIKCULATLTC MEDIUM AND LEGAL TENDEE. 
 
 It being conceded that a circulating medium and 
 legal tender is a necessity, in a country which has 
 commodities to exchange, you have but to limit 
 this to the actual requirements of production and 
 consumption to invest it with all the values belong- 
 ing to the commodities to be exchanged. From this 
 moment it has a new and, it might be said, an 
 intrinsic value coequal with the exchange it can 
 effect, and all nations desiring those particular com- 
 modities will associate in their estimates the values 
 not of the medium, but of the goods it will pur- 
 chase. If a country wills that its productions 
 have no more value than the medium, or that so 
 much will be given in exchange, from that moment 
 the medium or standard becomes of equal value 
 with the commodities it will exchange for. Values 
 measure the medium, and the medium measures 
 values. Necessity, after all, is the governing law, 
 and without a desire this necessity would not be 
 produced. The moment you clothe the medium 
 with a purchasing power, it will have the same 
 value as the goods that will purchase it, and it will 
 
 13*
 
 150 SCIENCE OF MONEY. 
 
 be so invested with value by all countries connected 
 with the purchase, sale, and consumption of the 
 commodities that can be had in exchange for it. 
 From this moment it has, and with all the world, 
 the values that are given to the particular commo- 
 dities of that country. 
 
 In addition to the foregoing values credited to a 
 particular medium, when it has performed this office 
 andibeen invested with the power of a legal tender, 
 all creditors become its friends and advocates, which 
 is calculated still further to enhance the value. 
 When the creditor parted with his goods for the 
 promise of this particular legal tender, he affixed 
 to it the values of the commodities for which it 
 would exchange ; and, as the recipient of the me- 
 dium is not likely to undervalue it, it may be taken 
 for granted that he who is compelled to receive it 
 as a legal tender will not lend himself to its depre- 
 ciation. All legal tenders and mediums are con- 
 ventional, and no law can invest them with a greater 
 value than the commodities that can be had in 
 exchange for them. 
 
 Bonds and time obligations have not this present 
 value of the medium, but are measured by the 
 future promise of return. The medium of exchange 
 is provision stored up for daily consumption; time 
 obligations are promises of the future, and are 
 valued by the certainty of a return. The value 
 of time obligations is measured by their present 
 worth; if discounted, the rate of discount will be 
 fixed in accordance with the security given and 
 the certainty of return of the legal tender. If this
 
 CIRCULATING MEDIUM AND LEGAL TENDER. 151 
 
 obligation be gold, you instantly turn over in your 
 mind the amount of commodities it will purchase 
 to aid reproduction. Should it happen that this 
 commodity, gold, will not command the necessa- 
 ries and conveniences for sustaining labor, it loses 
 its value, and its mining must cease. After all, 
 you must go back to the universal standard for a 
 measure of values as well as of legal tender, and 
 that is the sustaining power of human labor, and 
 that labor, again, must be measured by the surplus 
 it can produce over consumption. Now, as all 
 values are comparative, the same process of reason- 
 ing will be gone through to get at the value of a 
 circulating medium and legal tender. How much 
 of the surplus of others will it command? How 
 much pork, flour, etc.? If this amount be in quan- 
 tity equal to what gold will purchase, then the 
 values are the same. 
 
 If gold be the legal tender and circulating medium 
 of a country, it may become redundant, and be 
 compelled to seek markets offering greater induce- 
 ments. When this is the case, the speculations 
 of the home market, and orders of foreigners for 
 their balances, may so narrow down the circulating 
 medium that those who desire a legal tender will be 
 so inconvenienced that they may have to sacrifice 
 their commodities or property. This overstocking 
 the market with circulating medium, followed by 
 its sudden withdrawal, from whatever cause, is one 
 fruitful source of all our troubles and misfortunes. 
 Now, if you add to this a depreciation of the circu- 
 lating medium of credits that are not legal tenders,
 
 152 SCIENCE OF MONEY. 
 
 you have doubled the distress, from the fact that 
 you have destroyed by failure a percentage of the 
 circulating medium at one time relied on to per- 
 form the office of a legal tender, while the balance 
 is seeking speculations in other countries. Can 
 this state of things be desirable ? Can anything but 
 periodical bankruptcy and universal distress follow ? 
 Let the circulating medium and legal tender of our 
 country be, as we desire our government to be, "one 
 and indivisible:" the greatest good will then have 
 been conferred on the greatest number. 
 
 It will be readily seen from the foregoing that a 
 depreciation of the circulating medium is not unlike 
 a failure of all the sources of production. All have 
 been sacrificed at the same time (by the receipt of a 
 worthless medium) ; but if this medium had been 
 fixed to remain a legal tender in the liquidation 
 of debt, the distress from all causes could only be 
 equal to the failure of one commodity, confined 
 to the unfortunates who were engaged in its pro- 
 duction. Is not this state of things preferable to 
 universal stagnation and loss from the worthlessness 
 of a medium that had forced all values from the 
 country during its period of prosperity? 
 
 No currency or circulating medium, whether of 
 gold or paper, can be kept uniform or stable when 
 used in common by all countries, if the values of 
 the productions of one country differ from those of 
 the same productions in another country. It is what 
 the medium will buy that gives it value. Then why 
 seek for an intrinsic value in a medium that must 
 in its turn be measured by all other values?
 
 CIRCULATING MEDIUM AND LEGAL TENDER. 153 
 
 The scales by which standards are tested and 
 produce is weighed have no value in themselves, as 
 compared with the commodities gauged. It is not 
 necessary for them to be made of gold: all that 
 is wanted is accuracy. If I place on one side pro- 
 ductions, and you place on the other circulating me- 
 dium to balance, then, when debt takes the place of 
 produce, I wish to see no vibration. If more of the 
 medium be required, let more of debt be canceled. 
 To illustrate further, suppose the grain crops to 
 fail in a country whose circulating medium and 
 legal tender is gold; those who are in want of bread 
 must have it, at whatever sacrifice. Nothing but 
 gold for the moment will purchase it from a foreign 
 country. No sooner do you begin to send oif gold 
 than all credit begins to contract. The people are 
 being deprived of a circulating medium and legal 
 tender at the same time, the absence of either of 
 which must derange all trade; and the pressure 
 is intensified by the universal disposition to hoard 
 up the legal tender for a period of greater profit or 
 for additional security in meeting maturing obli- 
 gations. All this inconvenience and distress can 
 be bridged over, and production will, sooner or 
 later, unlock the hoards of legal tender and cir- 
 culating medium ; but it is very different if the 
 circulating medium be bank-notes, not legal tender, 
 but convertible into gold on demand. This privi- 
 lege will not give security from an undue quantity 
 being placed in the market. When the reaction 
 begins, all are sensible of the fact, but it is too 
 late to save all the paraphernalia of trade. The
 
 154 SCIENCE OF MONET. 
 
 greatest losses and calamities ever inflicted on this 
 country have been from the issue of spurious and 
 worthless paper money, forced for a time, through 
 public opinion, to usurp the place of commodities 
 and a legal tender, and when stripped of this sus- 
 taining power, not worth, in the liquidation of debt, 
 the paper it was printed on. It is the desire to put 
 a stop to this evil in the future, by the suppression 
 of all local issues to be called money, that prompts 
 the foregoing investigations, and not, as I have 
 already stated, a wish to put property in any man's 
 possession in any other way than by honest industry 
 and for value received. This can be accomplished 
 only through a well-established currency, and this 
 can be attained only by confining the issue to one 
 source, and that must be the government, the power 
 that has the regulating of the legal tender and stand- 
 ard of value. I can see no other reason for the in- 
 fatuation for a universal gold medium than the 
 indisposition of nations to learn and their reluctance 
 to change. Slow and sure maybe the safest rule of 
 conduct in a general way, but when an artery is to 
 be taken up, let us have skill and dispatch, that the 
 patient may not bleed to death.
 
 PRODUCTION AND CIRCULATING MEDIUM. 155 
 
 PRODUCTION AND CIRCULATING- MEDIUM. 
 
 Advocating, as I have been, the great producing 
 interest of the country, and claiming for it a fair 
 share of legal protection, I only ask that it be ex- 
 empted from all complications other than its own, 
 by the establishment of a legal-tender medium inde- 
 pendent of the complications growing out of the 
 daily speculations in gold, heretofore the universal 
 standard of value. If it be conceded that produc- 
 tion is the source of all prosperity, without which no 
 taxes can be collected, and uo credit be permanent, 
 it must be acknowledged that it is the duty of the 
 government to throw no stumbling-blocks in its way. 
 
 It is argued by many that if we are to have a cir- 
 culating legal-tender medium not convertible on 
 demand, the fluctuations will be the same as those 
 attending gold. Suppose this should be the case, 
 who will be the sufferer ? Will it be the producer, 
 or the consumer? 
 
 If speculation conspires to give to the medium 
 more than its true relative value, the productions of 
 those who are not in debt need not be exchanged, 
 and the market cau thus be left entirely to those 
 who are in want of a legal tender to meet their 
 maturing obligations. Those who desire a medium 
 of exchange, and are not in want of legal tenders, 
 can wait until a legitimate demand arises for the 
 exchange of their products. 
 
 Let us now suppose the reverse of this state of 
 the markets. When combinations of capital have
 
 156 SCIENCE OF MONEY. 
 
 depressed or, for the moment, destroyed the true 
 relative value of the circulating medium, — when 
 but few are in absolute need of a legal tender, and 
 desire only a medium of exchange on new credit 
 to realize the visions of inordinate gain, — specula- 
 tion will act as a stimulus to increased production, 
 giving to those in want of a legal tender relief from 
 maturing obligations; operating, in fact, as a sort 
 of bankrupt law, since, by a surrender of assets 
 at the enhanced price, they can pay out to the 
 producer not in want of a legal tender, but of the 
 medium of exchange, as he has only to wait for the 
 reaction, and the full relative value of the medium 
 will be realized. 
 
 Let it be understood, all this is on the supposi- 
 tion that the issuing power of the legal tender is 
 unchangeable, and that no inflation has occurred 
 to give a different relative value to the medium 
 and the production. The reaction will certainly 
 come when the fever of speculation has run its 
 course and past credits begin to mature. However 
 or whenever the circulating medium, if a legal 
 tender, may lend itself to credit and speculation, 
 production will still go on accumulating and laying 
 up for the day of adversity. The howling of the 
 wolves is but evidence that the sheep are close at 
 hand; the prudent owner will take measures to 
 gather his flock into a place of security.
 
 CIRCULATING MEDIUM A NECESSITY. 157 
 
 CIRCULATING- MEDIUM A NECESSITY. 
 
 I do not think there can be any controversy as to 
 the necessity of a circulating medium and measure 
 of value, or legal tender, for those who have incurred 
 debt and desire to discharge it. The capitalist must 
 be aware that no measure of value can be found which 
 will at all times give him the same amount or bulk 
 of production. Gold will not do it; in one country 
 alone the value of annuities fell from one hundred 
 dollars to twenty-five dollars, owing to the great 
 increase in the production of the standard. All are 
 alike deeply interested in the question of finding the 
 standard or medium least liable to fluctuation, or 
 which, after fluctuation, shall have the power to 
 command the largest amount of human productions 
 that are necessary to command labor. 
 
 If this be the true position of productive labor 
 and commerce to the currency and legal tender, it 
 is all-important that this medium should be protected 
 from fluctuations by the government as far as that 
 can be done. The daily fluctuation incident to every 
 medium of exchange should have no weight or in- 
 fluence. A promise by the government of so much 
 gold semi-annually may, at the end of twenty years, 
 command as many days' labor as when first issued ; 
 the difference between the present value of gold and 
 its value twenty years hence is only a matter of 
 speculation on the part of the capitalist. 
 
 Gold, like all other commodities, is liable to rise 
 or fall in value. The tendency, for more than one 
 
 14
 
 158 SCIENCE OF MONEY. 
 
 hundred years, has been to drop it as a circulating 
 medium in the exchange of products. Now, should 
 fashion, which is as changeable as the wind, also 
 discard it, in famine times, mess-pork or flour may 
 be looked upon as having much more permanent 
 value. The losses resulting from these fluctuations 
 should not be visited upon production, the great 
 builder-up of human existence and repairer of the 
 natural decay of time. However prosperity or ad- 
 versity may mingle together, in the absence of pro- 
 duction the one cannot last, nor can the pangs of 
 the other be mitigated, — it is the alpha and omega 
 with a great controlling interest like this, the foun- 
 dation of all others, without which there would be 
 no need of a circulating medium. How can the 
 government be content to see inflicted upon it all 
 the ills of a vitiated system of currency for the cir- 
 culation of its products, whose very existence and 
 earnings depend on the contributions from its sur- 
 plus, whose mistakes and losses are but a forced 
 levy on its enterprise, and which, when prosperity 
 crowns the effort, divides none of the profits with 
 those who paid the losses in times of adversity? 
 
 It is now in the power of the government to con- 
 sult her own interest, and furnish the producer 
 with a legal tender that will be uniform in all parts 
 of the country, that will circulate without discount, 
 and command the fruits of industry wherever found. 
 All will understand, when reading the quotations of 
 pork, flour, etc. in Chicago or New Orleans, that 
 one and the same value is meant, in comparison 
 with the medium ; there is now no hesitancy or
 
 CIRCULATING MEDIUM A NECESSITY. 159 
 
 scruple in regard to the medium we have: all the 
 producers ask is a continuance. The profits and 
 security will all be on their side; and if repudiation 
 from inability should ever come, which no one con- 
 versant with the great prosperity and increasing 
 productions of the country can suspect for a moment, 
 the loss will fall on those who reaped the benefit of 
 the profit. 
 
 I can imagine but one influence that can possibly 
 cause the government to adopt principles antago- 
 nistic to the interest of its people, — an overweening 
 regard for what Mrs. Grundy will say ; this may 
 drive her into some wild scheme and repudiation of 
 what she has already inaugurated. The holders of 
 our bonds, if they will consult their own immediate 
 and future interests, cannot but sanction a policy 
 that will give to them a fixed and secure invest- 
 ment in strict accordance with the original contract. 
 What more can they ask than their principal and 
 interest in gold at the stipulated terms ? All the dif- 
 ficulties attending the time of payment, or as to the 
 kind of commodity it may be in, will be removed; 
 it is true it will be deprived of the quality favored 
 by the speculator and gambler in value, but it will 
 possess all the requisites of security that are neces- 
 sary to bring it into favor with capital ; it is to this 
 great interest we should appeal, it is from it we 
 receive real value in exchange for our promises, and 
 by its means we hope to rebuild our wasted fortunes 
 and cause each way-spot to be clothed in verdure.
 
 160 SCIENCE OF MONEY. 
 
 LEGAL TENDEK, BALANCE OF TEADE, COTTON 
 
 CKOP, ETC. 
 
 In order to a full and perfect understanding of 
 our subject, it is incumbent on us to go back to 
 the beginning and demonstrate the difference be- 
 tween cause and effect. If there was no credit there 
 would be no need for a legal tender. By the disposi- 
 tion to gain and to use all your surplus in reproduc- 
 tion, you are influenced to lend it to those who have 
 not this surplus. From this springs the law of legal 
 tender, in order to enforce a full liquidation of the 
 credit. 
 
 If it is gold we have promised as the legal tender, 
 in order to obtain it we are compelled to submit to 
 the universal and unchangeable law of trade, to 
 wit, offer our goods at such prices to those that have 
 gold as will induce them to part with it. When I 
 speak of offering our goods to a country desiring 
 them more than gold, I wish to be understood as 
 including the trader with that particular country. 
 In fact he is, for the time being, the representative 
 of that particular country, so far as trade is con- 
 cerned. It is this desire for gold on our part, and 
 the commodity on the spot at the moment of our 
 want, that I am endeavoring to obviate, and thus 
 save to the producer the loss attending the delay of 
 importation, which loss is never measured by real 
 value or utility, but by the inexorable law of present 
 necessity. 
 
 There is not one transaction in oue thousand of our
 
 LEGAL TENDER, BALANCE OF TRADE, ETC. \Q\ 
 
 internal affairs calling for legal tender in liquidation 
 that has the remotest connection with our foreign 
 exchanges; it is to save to the country the losses 
 incident to the nine hundred and ninety-nine trans- 
 actions that I am now laboring. The internal com- 
 merce of a country adjusts itself to its own wants if 
 allowed free intercourse with the foreign, but if fet- 
 tered with derangements or complications of the 
 merchant or trader, it so mixes up the one with the 
 other that the original producer is always made the 
 scapegoat, or sufferer. It is independence I ask for, 
 and that foreign commerce shall make good its own 
 promises in its own way, and not hold the circulating 
 medium of the producers in the interior responsible 
 for the losses of the trader. If he is so imprudent 
 as to promise a commodity not in the country, it is 
 no reason why the producers of all other commodi- 
 ties should be forced to promise the same. It is as 
 much to the interest of the party having capital to 
 lend it, as it is to that of the borrower to receive it ; 
 both are for a consideration. Why, then, legislate for 
 a liquidator in favor of the one and not the other ? 
 
 AIT countries and all states have enacted laws to 
 stave off or complicate the collection of debt; in 
 some states no property can be sold for cash, or the 
 legal tender, if two-thirds of the value is not bid. 
 This apprized value is made from the comparison of 
 its incomes with the income of other values, and is 
 certainly a great relief to the unfortunate debtor that 
 promised a legal-tender commodity which at that 
 time was not in the country; if it had been here it 
 would have been the true measure of the value of 
 
 14*
 
 162 SCIENCE OF MONET. 
 
 the property, for values measure income, and in- 
 come measures values. It is not this unfortunate 
 class that I have been laboring to serve, but rather 
 the more numerous and not less deserving; class of 
 enterprising traders or adventurers, whose all is 
 staked on their good name and punctuality in 
 footing up the ever-recurring obligations incident to 
 their transactions, that they may not be forced 
 to resort to the technicalities of the law to free 
 them from the promises of a legal tender that could 
 not be commanded until it had been attracted from 
 some distant point. 
 
 The great object and effort of the government is 
 to induce the people to produce commodities of 
 value. Then why not give to them a measure that 
 can at all times be found in the country? If it is 
 not unchangeable, it will have the virtue of being 
 always at hand. If the people will play at a game of 
 hazard, let them know the percentage of loss against 
 them ; the prudent will be enabled to calculate how 
 long they can hold out against the banker or dealer 
 of the game, and may withdraw in time to save 
 themselves and their families from irretrievable 
 bankruptcy and ruin. 
 
 It is not the production of commodities and the 
 large amount of yield in any one year that bring on 
 the country the monetary disasters which periodi- 
 cally exert such baneful influence ; it is the want of 
 the average yield, or the shortness in the supply, that 
 brings stagnation and retards for a time the general 
 progress. Complaints of the scarcity of the medium 
 or legal tender may be made when there is or is
 
 LEGAL TENDER, BALANCE OF TRADE, ETC. 163 
 
 not an abundance of productions in the country inci- 
 dent to, and caused by, the maturity of obligations 
 based on others and at different times ; difficulties 
 such as this are but temporary in their influence and 
 soon right themselves. But when these recovering 
 obligations and legal tenders have to be adjusted 
 from short productions, generally the entire indus- 
 trial interest becomes involved, and the country is 
 left in a prostrate condition a longer time, not only 
 with more universal distress to the poor, but with 
 the infliction of a permanent injury on all classes, 
 that can be adjusted only by time and compromises. 
 All this internal commotion has but little to do with 
 our foreign exchanges and the balance, so called, of 
 trade, against the country. The government or 
 legislation of the country cannot alter the balance ; 
 it can be liquidated only by the parties and indi- 
 viduals interested. If, as a country, we owe a bal- 
 ance on imports over production and have lost 
 money in the transactions, those who enter into 
 the speculation or give the credits must bear the 
 loss, and adjust their differences as best they may. 
 The internal exchanges and debts of a country 
 should not be forced to do more than sympathize 
 with them in the distress of liquidation. Our im- 
 porters or traders may be unfortunate and honest, 
 and the exporters who gave them credit beyond their 
 means maybe classed in the same category of unfor- 
 tunates, and may deserve the sympathy of their 
 friends and country, but let there be no interven- 
 tion, except in guarding their rights; further than 
 this the government has nothing to do with the
 
 164 SCIENCE OF MONEY. 
 
 balance of trade. After all, the most reliable reports 
 from the exports and imports are only apparent, and 
 not real, — the real balance is only a matter of con- 
 cern to individuals, and the adjustment of it is their 
 affair, not that of the country. The balance of trade 
 between one section of our country and some other 
 point of the same is of much more importance than 
 any foreign balance, from the fact that we give and 
 take large credits. The balance due New York, the 
 great clearing-house of the interior, has its influence 
 on millions in the country; while that between New 
 York and other countries does not affect even thou- 
 sands. It is true, the first influence of short produc- 
 tion is felt at this great center, but that influence 
 is only paralyzing to trade; with the interior its 
 influence is much greater and far more serious, re- 
 sulting in the complete stagnation of reproduction. 
 There are two agencies, one or the other of which 
 is all the time influencing the market of export 
 and import, calculated to destroy the even tenor of 
 trade and otherwise derange the financial affairs 
 of a country. The merchant may have overesti- 
 mated the market and imported too much, and 
 without sales he will be forced into extensions and 
 compromises; or he may have given more credit 
 than production can return in time; in this case the 
 distress is universal, and destructive alike to trade 
 and reproduction. 
 
 Between the importer and exporter, compromises 
 and equitable adjustments can be made and trade 
 go on ; but not so between the retail dealer and the 
 consumer: the "pound of flesh" must come, and if
 
 LEGAL TENDER, BALANCE OF TRADE, ETC. 155 
 
 the creditor be debarred from taking it at once, he 
 will generally sit down for chickens to hatch or the 
 corn to grow. In extreme cases like this, the only 
 sure relief to the productive energies of the interior 
 is through a universal flxed system of bankruptcy, 
 which will allow industry and enterprise to work 
 out a new fortune ; the result of which may be a 
 surplus of capital for industry to work upon, and 
 the country will still live and prosper. 
 
 The circulating medium of a country measures 
 the value or price of all commodities in the hands 
 of the debtor portion that desire a legal tender to 
 cancel maturing obligations ; its influence on that 
 portion not so circumstanced arises only from sym- 
 pathy and the fear of lower money prices. The 
 result of these influences is to bring down values, in 
 comparison with the measure or legal tender, to a 
 point below the cost of production, until this me- 
 dium can be attracted from a distant point or some 
 other country ; that is to say, when we offer our 
 productions below the natural value or cost price 
 Ave can get this legal-tender money. 
 
 If the prosperous holders that have immediate 
 need of a legal tender to cancel debts would ship 
 their goods or products without drawing a bill, 
 which, if drawn, would be subject to the same sac- 
 rifice as the goods, they would avoid the loss inci- 
 dent to a sale in market where others are competing 
 for a legal tender to make good maturing obligations. 
 
 From this view of the subject, and its connection 
 with the production and legal tender, it will be seen 
 that the latter measures only that portion of the
 
 IQQ SCIENCE OF MONEY. 
 
 former which is offered in exchange, and it is only 
 when timidity or fear induces others to follow up 
 the sacrifice that the whole values of the country 
 become involved in the loss incident to the deter- 
 mination to exchange all products for the legal 
 tender. It is at this point light will begin to break 
 in, from the general disposition of the holders or 
 owners of the medium to part with it in exchange 
 for the productions that are offered by wholesale 
 below cost. ]STow, is it not clear that if the holder of 
 productions who is free from debt and therefore is 
 not forced to sell, would hold over his values, a 
 larger amount of the medium could soon be realized 
 in exchange ? The sum total of all is, that our prin- 
 cipal sacrifices are mainly due to the debtor class. 
 It is their effort to procure the legal tender that 
 brings on all this train of disasters, the ramifications 
 of which are so great, and exert such a wonderful 
 influence, at times, as to deter many from renewing 
 their efforts to produce articles in universal demaud, 
 giving to the more fortunate few a complete mo- 
 nopoly for years. This influence is precisely the 
 same as that of over-production, which, for a time, 
 will send down prices below cost. When the price 
 for cotton ruled so low, in consequence of large 
 production combined with immense indebtedness, to 
 meet which forced sales had to be made, thousands 
 abandoned the culture and invested all their capital 
 in the production of sugar, which in a few years 
 changed the relative prices to such an extent as to 
 bankrupt the latter and enrich the former. When 
 this change did come, those who had embarked in
 
 LEGAL TENDER, BALANCE OF TRADE, ETC. \Q1 
 
 sugar could uot go back iuto cotton, on account of 
 so large an amount of their capital being in sugar- 
 houses, fixtures, etc. Now, all these purgatives are 
 very well, and answer a useful purpose ; but it is 
 not necessary to throw the patient into fits in order 
 to rid him of a fever. Supply and demand will 
 regulate themselves in the natural way, without 
 complications with the struggles of individual debt- 
 ors for legal tender. 
 
 I am well aware that much can be said on all sides 
 of this question. At present, however, I deem it 
 best to make but few digressions, as they would 
 complicate a subject that is sufficiently difficult to 
 pursue when holding on to the main thread. No 
 subject has a greater influence on the complications 
 of political economy than this of debt. From it 
 spring most of the intricacies of the law; human 
 passions are fanned into flame, whilst one party 
 is trying to collect, and the other is endeavoring to 
 pay ; governments are made and unmade by its 
 creation or extinguishment. Hence I am compelled 
 to ask the reader to be patient and bear with me to 
 the end. 
 
 A paper currency not legal tender may be com- 
 pared to a windmill, whose sails are spread to 
 every breeze, with no governing power, and are 
 swept away by the first gale ; but if the currency 
 be made legal tender and limited to the require- 
 ments of trade it becomes not unlike the steam- 
 engine, with its governor ready to open or close the 
 valves and accommodate the engine to the re- 
 sistance offered. This allows human industry to
 
 168 SCIENCE OF MONEY. 
 
 feed up human productions under a well-regulated 
 system of economy in steam. In order that the 
 boiler may not he blown up, the same governing 
 power can be made to close down the dampers, and 
 avoid all waste of fuel, when there is little or no 
 work to be done; in a word, making the -government 
 the great fly-wheel to collect and husband the 
 power in order to overcome the greater resistance. 
 
 It is a fraud on industry, and a robbery of produc- 
 tion, to authorize a circulating medium in a country 
 that is not at the time, and will not be for all time to 
 come, a legal tender. If by common consent it has 
 been exchanged for values, the producer of those 
 values should not be deprived of the power to 
 cancel his maturing obligations with it; for how can 
 he pay when he has parted with the very production 
 he was expected to create when he incurred the lia- 
 bilities ? When this circulating medium was loaned 
 to him, with the view to aid him in production, 
 the lender knew to what extent it would purchase 
 commodities from which reproduction was* antici- 
 pated ; and if the recipient of the loan parts with 
 this new produce for the same medium, there can 
 be no injustice in his tendering it back, together 
 with the stipulated rate of interest, to the original 
 lender. The lender of the medium will then be 
 in the position in which he originally was, to 
 either lend it out or invest it in commodities. He 
 may be able to command more or less of produc- 
 tions than when he first had possession of this 
 medium. This is a risk incident to all exchanges. 
 The producer who borrowed the medium had the
 
 LEGAL TENDER, BALANCE OF TRADE, ETC. 169 
 
 same perils to encounter when he sought a market, 
 in order to obtain the means of repayment. It is 
 nothing more than justice to let the profit or loss 
 fall on each adventurer. ISTo man should be expected 
 or required to insure the values of others without 
 an adequate premium. If men will not insure, they 
 must foot up their own losses. Commodities meas- 
 ure commodities. The value of the circulating me- 
 dium is fixed by the amount it will command of 
 them, and the same process must be gone through 
 to arrive at the intrinsic value of the legal tender. 
 This being the case, is it not unnatural to separate 
 the two and force the seller of productions into 
 bankruptcy for want of a legal tender, when he has 
 just parted with his only asset for a circulating me- 
 dium that became worthless in the use? 
 
 The rapid increase of production and consump- 
 tion, and the consequent expanse of commerce, 
 with its thousands of miles of railroad and tele- 
 graph, demand greater elasticity in the circula- 
 ting medium, virtually ignoring the old cumbrous 
 road-wagon, gold, except as a remote measure of 
 value. Whilst all these changes are being made, 
 and an elasticity is being given to the circulating 
 medium in the exchange of commodities, let us not 
 force upon the productive industry of the country 
 a speculative medium that cannot, at the moment 
 of need, be converted into a legal tender. Do not 
 let labor be duped an} T longer with the specious 
 promises of credit, which in the past have proved 
 worthless in the hour of greatest want, and which 
 will always prove so in future. If you give to produc- 
 
 15
 
 170 SCIENCE OF MONEY. 
 
 tion a medium of exchange, let it be value received 
 and a liquidator of debt. If we are to run light- 
 ning express, let us be sure the company is able and 
 willing to foot up all losses. Should there be any 
 unwilling to enter into the general disposition to 
 receive as a legal tender the circulating medium of 
 the country, they can readily find borrowers who 
 will stipulate to return the same commodity lent; 
 should it be gold, the holder of provisions can call 
 it into being as readily as any other value. Both 
 may fluctuate when compared with each other; 
 one cannot be dispensed with, the other can. The 
 capitalist or lender has the right to stipulate for a 
 return that will satisfy his wants ; but the govern- 
 ment has no right to permit the infliction of a gen- 
 eral circulating medium on a country, to be ex- 
 changed for its productions, and not to be used at 
 the same time to liquidate debt. 
 
 A circulating medium that is also a legal tender 
 can never suddenly become worthless, or of much 
 less value than when it was originally put into circu- 
 lation, provided limitation has been such that the 
 amount cannot be increased. Until the last dollar be 
 liquidated, it will still carry a value, and property will 
 be exchanged for it even should production fail to give 
 a surplus; universal and unmitigated distress cannot 
 follow over-trading and wild speculation. Should 
 production fail, wholly or partially, property or fixed 
 capital will only have to retrace its steps and find 
 its original owners. Liquidation will go on, and the 
 result will be only partial bankruptcy, with capital 
 and labor free to rebuild broken fortune.
 
 BALANCE OF EXCHANGE. yj\ 
 
 "FAVORABLE OR UNFAVORABLE BALANCE OP EX- 
 OHANGE"-¥HAT IT MEANS. 
 
 In a previous article I endeavored to explain the 
 nature and effect of the "balance of trade," showing 
 that it was not a national affair, but an individual 
 balance of debt, to be liquidated by the individual. 
 I now propose to pursue the same subject in connec- 
 tion with the balance of exchange for and against a 
 country, in order that much of the mystery attached 
 to it may be cleared away. 
 
 If a dealer or banker in New York can o-et for 
 his draft on London an amount of gold coin more 
 than sufficient to pay the freight, insurance, and 
 transit, the market is quoted at a premium, and 
 the exchange is said to be against us, or unfav or- 
 able ; in other words, if four dollars and eight} 7 - 
 six cents in New York will not purchase a bill on 
 London for one pound sterling, or one sovereign, 
 then exchange is against New York. Now, what 
 does all this signify ? Simply that there is in London 
 more gold than in New York, or that gold is worth 
 more in New York than in London ; the indi- 
 cation is not at all times, as is generally believed, 
 that of an excess of importations over exports, or 
 merchandise, or produce. In order that the reader 
 may follow me in the further investigation of this 
 most intricate subject, he must realize the fact that 
 there are two influences constantly at work, and two 
 distinct trades all the time going on ; which, how- 
 ever, run into each other occasionally, just as the cir-
 
 172 SCIENCE OF MONET. 
 
 dilating medium and legal tender become mixed up 
 at times, — a sharp demand for the one operating 
 disadvantageous^ on the party desiring the use of 
 the other. 
 
 We have dealers in every conceivable commodity 
 as well as in gold : the former are constantly calling 
 for a medium of exchange ; the latter, for a liquida- 
 tive or legal tender. The office of the dealer in gold 
 and exchange is double : he undertakes to furnish 
 the dealer in. produce with the purchasing power, 
 and the indebted with a legal tender or liquidative ; 
 in each case, of course, with a view to profit. 
 
 As there is a clear line of separation between the 
 dealer in produce and merchandise, and the dealer 
 in gold circulating medium and legal tender, we 
 must not confound the operations of the one with 
 the other. With this digression we will come back 
 to the bill in New York or London, worth a pre- 
 mium, and said to be unfavorable and indicative 
 of something, generally understood to be debt, or 
 an excess of imports over exports. Now, I con- 
 tend that it is more frequently an evidence of large 
 production and a desire to export than of poverty 
 or debt. A large amount of commodities pressing 
 on the market of New York for export to London, 
 in the shape of bills of exchange, ofl'ering to all 
 the banks and dealers for a medium of interior ex- 
 change, they must, of necessity, be short of it at 
 times, especially if there are not as many buyers of 
 their bills drawn against the proceeds of this ex- 
 change. This shortness of the medium maybe, and 
 generally is, such as to cause them to import gold
 
 BALANCE OF EXCHANGE. 173 
 
 or the legal tender, which tends to force down the 
 price of produce through the discount on the ex- 
 change, until the equilibrium has been restored. It 
 is simply an excess of commodities over gold, and, 
 so far from being indicative either of debt or pov- 
 erty, evinces great prosperity and a large yield of 
 productions, pressing for export in advance of im- 
 ports. This is one view of the subject. A desire to 
 import in advance of available commodities indi- 
 cates precisely the reverse, and, in the case of a 
 deficient harvest, causes the excessive exportation 
 of gold, or of the legal tender of the country whose 
 productions are desired, leading those who are in 
 debt, as well as those who desire to speculate, to 
 hold on to as much legal tender as they can com- 
 mand, knowing that it will soon be the most valu- 
 able commodity in the country, from the fact that it 
 is in demand for export. The long and short of 
 all this is, the party desiring food, or something he 
 fancied he might stand in need of, paid for it with 
 gold, leaving the debtor portion of the community 
 without the means of liquidation, rendering neces- 
 sary on their part, it may be, even greater sacrifices 
 in the exchange of their products or assets for it, 
 than were made by the party in want of food. In 
 the one case the deprivation is of a luxury — a cir- 
 culating medium ; in the other, of a necessity — a 
 legal tender. 
 
 The foregoing will serve to pave the way to a 
 proper appreciation of the concluding portion of 
 this subject, more particularly in its bearing on the 
 general commerce of the country, and on parties 
 
 15*
 
 174 SCIENCE OF MONEY. 
 
 interested in this demand for legal tender or gold. 
 We have seen that a medium for the exchange of 
 products is a luxury, and that a liquidator of deht 
 is a necessity : one party is the speculator or cred- 
 itor, the other the producer. "Which of the two 
 deserves encouragement or sympathy? To illus- 
 trate, allow me to cite the case of the Bank of Eng- 
 land, with her millions borrowed from the country. 
 It is true she has lent to her merchants and traders 
 largely — but not greatly in excess of what they have 
 lent to her in the shape of deposits. Her circu- 
 lating notes have been given to the country in ex- 
 change for its products, and it is to be presumed 
 that a valuable consideration was given at all times. 
 The produce was lent and the notes were borrowed. 
 Let us now suppose that a deficient harvest makes 
 it necessary for the producer to call on the bank for 
 gold, so as to have a legal tender, with which to 
 command food from those who are at the moment 
 supplied with all other commodities. The moment 
 this demand springs up there is great commotion 
 in the debtor class, including the bank, she too being 
 called on for a legal tender in exchange for her 
 notes ; the rate of interest is advanced, the export 
 of gold is discouraged, and the cry of " exchange 
 is unfavorable" is raised — all of which means that 
 she is being called on to pay her debts. Suppose she 
 does pay them, as any honest merchant would do, 
 will the country be any worse off, or have fewer 
 commodities to sell or exchange for gold? lean 
 see no reason whatever for special legislation to give 
 her authority not to pay her debts. If capital or
 
 BALANCE OF EXCHANGE. 175 
 
 credit be allowed to sink the producer, both will 
 find a watery grave ; the former must bridge over 
 the stream, in order that productions may safely 
 arrive at a market. If the bank is allowed to issue 
 a medium of exchange for the legal tender, or, in 
 other words, to borrow it, she should pay her debt, 
 wheu it is demanded, with a good grace ; if unable 
 to redeem it in full, she should do as thousands of 
 individuals have been compelled to do, — give up 
 her assets in liquidation, and not try, by a parade of 
 the eternal "balance of exchange," to induce others 
 to think her debt is any more than that of an indi- 
 vidual. After having given up all her legal tender 
 and property, still having notes in existence, it may 
 be an inconvenience to the country to lose the 
 amount, but she will still have all the values and 
 products she had before. 
 
 The moral is, no notes should be allowed as a cir- 
 culating medium that are not a legal tender. The 
 loss will then be equitably divided among those who 
 have them to pay and those who receive them. One 
 fruitful source of loss and ruin will be removed. 
 Speculators may inflate prices, and finally fail from 
 a want of ability to make good the deficiencies be- 
 tween the buying and the selling price ; it will be 
 for them to fight it out. The producer will have 
 something left in exchange for his assets by which 
 he can cancel debt. The law calls for a valuable 
 consideration to make a binding contract. Give it 
 to production, and you will have conferred on it a 
 priceless boon. The incubus of doubt and uncer- 
 tainty will be lifted from industry, and honest labor
 
 176 SCIENCE OF MONEY. 
 
 will be defended from fraud and the allurements of 
 the gambling speculations of those who endeavor 
 to live by their wits alone. The storm may howl 
 without and fill every harbor with the wrecks of 
 commerce, but the interests of production are se- 
 cure : they are under their country's protection, and 
 in this hour of need can lend a helping hand to man 
 the "life-boat," in order to succor perishing friends. 
 
 LEGAL-TENDER CIRCULATING NOTES NOT MADE 
 LEGAL TENDER, A CURSE TO PRODUCTION. 
 
 A thorough investigation of the entire subject in 
 relation to its bearings on commerce and indi- 
 vidual interests involved — the necessity of a circu- 
 lating medium to effect the exchanges of the country 
 — forces me to a conclusion considerably at variance 
 with the majority of those most deeply interested in 
 its details, especially in regard to the benefits claimed 
 to arise from a circulating medium and legal tender. 
 All will admit the impossibility of effecting the ex- 
 changes of a country without a circulating medium. 
 It is my purpose now to show who should be the re- 
 cipient of the profits or tax on production. I take 
 it for granted that no one will differ with me as to 
 the distribution of the gain from the use of the me- 
 dium, or as to who should bear the loss incident to 
 the maintenance of a circulating medium, when I 
 show the value of the services rendered to com- 
 merce and the real benefit conferred upou trade.
 
 NON-LEGAL TENDER A CURSE, ETC. 177 
 
 At the outset I take the position that a circu- 
 lating medium for the exchange of productions is 
 a curse to a country if that country does not make 
 it a legal tender; it inflicts on its industry all the 
 losses incident to its use, leaving the interior trade 
 of the country, in times of doubt and peril, without 
 compass or rudder, to say nothing of the wild ven- 
 tures placed on unseaworthy crafts fitted out by 
 reckless speculators. To shield the unsuspecting 
 from losses in no wise connected with their business 
 or interest, I now labor to draw the line between 
 capital and credit : the one is sure to build up a 
 country ; the other may dissipate its wealth by im- 
 prudent risks. 
 
 I am in favor of all due encouragement to both, 
 but desire to see them in the hands of industry and 
 prudence : hence my opposition to banks of circula- 
 tion, which issue notes that cannot be made legal 
 tender at the moment of necessity, when they have 
 absorbed the productions of industry. The most 
 serious objection to this position, and, in fact, the 
 only one of any importance, is, how can we produce 
 discounts and loans to prosecute works of enterprise 
 in the absence of capital? 
 
 Allow me to answer by asking a few questions : 
 When you borrow the notes of a bank, the best that 
 can be devised, — say the Bank of England, — what 
 do you get for your notes and the promised rate of 
 interest for time? Notes payable on demand, or 
 convertible into the gold or products of the country; 
 otherwise they would be worthless to you. 
 
 After you have the notes they are not capital, nor
 
 178 SCIENCE OF MONEY. 
 
 the means of reproduction ; nor are they thejbod of 
 industry or labor. After you have converted them 
 into commodities to aid production, you have added 
 nothing to what was already in existence in the coun- 
 try. In this case you have borrowed no capital, but 
 a credit. If you attempt to draw gold to export in 
 exchange for something to aid industry, the loan 
 will be refused, or usurious rates of interest will be 
 demanded. 
 
 This is virtually a prohibition to production. You 
 are generally forced to retire these credits when 
 the bank iinds she is not being credited as usual. 
 After all, you have only borrowed a credit or pur- 
 chasing power for the time being, for which you 
 have paid interest, and, whatever depreciation may 
 occur, the individual holders must lose, as it is not 
 a legal tender. If this is all, why may not the gov- 
 ernment furnish this circulating medium to the 
 country, saving it the tax for interest, and let its 
 people know when they part with their productions 
 that they have instituted a legal tender with which 
 they can, without further sacrifice or loss, discharge 
 their debts? When you wipe out all circulating notes 
 from the medium of exchange, other than the legal 
 tenders of the government, you have left in the 
 country the same materials to support labor as you 
 would have if there were a bank at every cross-road. 
 Let us have banks, but let them be bank? of dis- 
 count for collecting together the scattered and idle 
 capital of the country, and lending it to its people. 
 
 Prudence will characterize their loan of capital ; 
 while ruin and inflation will grow out of the loan
 
 NON-LEGAL TENDER A CURSE, ETC. 179 
 
 of credit, or circulating notes, — which is the same 
 thing, in a more objectionable form, as the losses fall 
 most heavily on the poor in times of disaster and 
 trouble. 
 
 If the means of putting labor in motion be still 
 in the country, it will be husbanded and concen- 
 trated in these banks of discount when exchanged 
 for legal tenders. Then the greatest amount of loans 
 can be made that prudence and reproduction will 
 require, all of which will be based on real capital ; 
 otherwise, the loan of credit may engulf both lender 
 and borrower. 
 
 I do not claim the same benefit to production from 
 an extended system of credits that many do, — real 
 value. Such commodities as are the loss and return 
 of the producer receive no more credit than usage 
 has fixed, — to wit, a sixty days' sight bill, which fol- 
 lows the produce, no loser intervening, and foots 
 itself up independent of a legal tender, as its con- 
 version, after all, is into other commodities. 
 
 The credits are sought and obtained to bring the 
 goods and wares of the merchant and trader to the 
 door of the consumer. 
 
 The temptation, in nine cases out of ten, for the 
 sake of gain on the one part, and from the desire to 
 consume on the other, is such that the flattering but 
 delusive prospects of the future will bring distress 
 and ruin to both. 
 
 There is no country possessing the necessaries 
 and conveniences of reproduction that will not 
 lend them to its industrious and economical people. 
 Prosperous production rarely fails to find capital
 
 130 SCIENCE OF MONEY. 
 
 and friends. It may be said that prosperous pro- 
 duction sustains and gives all credit that has a 
 favorable end. Then why force it on the unsus- 
 pecting consumer, when it may bring ruin to him- 
 self and his principal? 
 
 Credit will inflate, but capital will build up and 
 bridge over its mistakes, if in the hands of industry, 
 economy, and enterprise. 
 
 Banks of circulation lend credit, but often borrow 
 capital to a much larger extent, and rarely use it in 
 a lasting or profitable manner, — in reproduction in 
 the country. How can the dealers in credit know 
 the food of production ? Inflation and chance are 
 the only words in their vocabulary. Their allure- 
 ments may have enabled speculation to send to the 
 remotest ends of commerce the only true liquidator 
 of debt in exchange for their worthless promises. 
 This may have been gold or mess-pork, it matters 
 not which to the producer. The legal tender has 
 been lost to him, and he is now required to sacri- 
 fice his reserve, in order honorably to discharge an 
 obligation. A failure to do this may completely 
 stagnate future energy, so as to complicate fraternal 
 feeling with vulgar lucre, or to allow dissipation 
 and indolence to usurp the place of honest toil.
 
 DEBT, INTEREST, AND LEGAL TENDER. 181 
 
 DEBT, INTEEEST, AND LEGAL TENDEE. 
 
 In summing up all the arguments in defense of 
 the position I have taken for the divorcement of 
 the legal tender of the country from go]d or any 
 other article of merchandise, and, finally, through 
 the saving to the country of the annual interest or 
 profits from a capital so large as its circulating me- 
 dium, by the substitution of legal tender based on 
 the public debt, I come to the consideration of the 
 influence of those who may happen to own or be the 
 recipients of the annual interest on this debt. And, 
 as the position I am about to take is somewhat at 
 variance with that of the majority of those who pro- 
 fess to have opinions on political economy, and of 
 those who take their thoughts at second-hand, it is 
 necessary for me to go back to the foundation of 
 the debt and the causes of its creation, in order that 
 the whole subject may come up in review for con- 
 sideration on its merits. 
 
 However men may differ as to the policy which 
 led to the creation of our indebtedness, none can 
 deny that it is an established fact, amounting to at 
 least $2,500,000,000, and that it is our duty as a na- 
 tion to see that it be honorably paid. An ordinary 
 debt, contracted to meet a deficiency of annual re- 
 ceipts, calls for an effort on the part of the govern- 
 ment to pay it promptly ; but where the sum has 
 been lent for the purpose of maintaining the na- 
 tional existence, patriotism — the highest incentive to 
 
 16
 
 182 SCTENCE OF MONEY. 
 
 moral action — compels us to renewed exertion, in 
 order that final restitution may be made and no loss 
 accrue to those who came forward to our relief in 
 time of doubt and peril. 
 
 It being admitted that we owe the money, it 
 must likewise be admitted that we cannot at present 
 pay it, but must give a consideration to those who 
 will lend us the means to discharge the same ; and 
 here begins my divergence from the usually received 
 ideas as to whom it should be owing to, or who 
 should be the recipients of the annual interest. 
 
 The capital of this debt has been sunk forever, 
 so far as this government is concerned; and other 
 capital must be called into being from which the 
 principal and annual interest are to be paid, pro- 
 vided we are not able to advance it. If we were 
 able to do without this large sum in production, 
 there could be no further argument as to the course 
 proper to be pursued; honor and prudence would 
 say, Pay the debt at once ; but, as we are not able 
 to do so, we must endeavor to find who will let us 
 have the means of liquidation for the smallest rate 
 of interest or annuity. 
 
 The security for repayment which the govern- 
 ment can offer to its creditors, it must be conceded, 
 will enable it to negotiate its loans at much lower 
 rates of interest than would be granted to private 
 individuals. It is true there are a few capitalists in 
 the country who could negotiate a loan on as favor- 
 able terms as the government. They will be the first 
 to come forward and invest their savings at the mar- 
 ket rate of such credits. Now, the question narrows
 
 DEBT, INTEREST, AND LEGAL TENDER. 183 
 
 itself down to this: If the abstraction of so large a 
 sum from the enterprise of the country should have 
 an unfavorable or destructive effect on its produc- 
 tive power, and if we can realize a larger profit from 
 the use of this sum in the development of resources, 
 and finally lessen the burden in the liquidation of 
 our own debt by the creation of other and larger 
 means to abstract it from, it certainly will be to our 
 interest to insist on the government's borrowing; 
 if she can command capital at four per cent, per 
 annum, it is better than for individuals to take the 
 same from production and have to borrow at eight 
 per cent, to fill the vacuum. Hence it is to our in- 
 terest to negotiate with those who offer the best 
 terms. In this we must know no country, but look 
 only to the rate per annum, and adopt the lowest. 
 If this loan should be offered by our own people, it 
 will be evidence of past economy, and will redound 
 to the credit of our country. If other countries 
 offer better terms than our own citizens can afford 
 to take the loan at, it will be evidence that they too 
 have been economical, but are without channels of 
 income still open to us, and yielding larger profits; 
 hence the inducement they will have to invest in our 
 securities ; it is capital cheaper than any we have to 
 offer; it is simply borrowing at four per cent, and 
 using the capital at eight per cent. We cannot but 
 profit by the difference. If I can get the use of one 
 hundred bushels of corn for a promised increase of 
 four, and it should, when used in production, yield 
 me one hundred and twenty, I will have left sixteen 
 to be used in consumption or production ; while the
 
 184 SCIENCE OF MONEY. 
 
 lender gets four bushels for my use of the hundred, 
 I will be the gainer of sixteen. It is this very in- 
 fluence that prompts us to trade with any country. 
 Can we better our condition ? There is no differ- 
 ence-between profits in interest and profits on pro- 
 ductions. The question is, simply, Will the inter- 
 course better my condition? It matters little to me 
 who gets the four bushels of corn, since I have six- 
 teen left for m.j own use. There can be no contro- 
 versy as to the effect of the public debt being owned 
 by its citizens, and letting the interest abstract 
 nothing from the country. It is like taking money 
 out of one pocket and putting it into the other. 
 Now, I contend that it is equally true that it would 
 be more profitable to take ten dollars out of one 
 pocket- and put eleven dollars in the other. 
 
 An effort has been made to induce Congress to 
 place on the market a loan of $1,200,000,000 at an 
 interest of not over four and a half per cent, per 
 annum. This will save to the country thirty-three 
 and one-third per cent, of the annual charge. If 
 the loan be taken at four per cent., the saving and 
 reduction will be fifty per cent. Now, would it not 
 be the course of wisdom to call in a competitor 
 who will, if allowed, take one-half the sum free of 
 charge, and make the loan perpetual, instead of for 
 twenty years, or, what amounts to the same thing, 
 \>dy off the debt and rid the country of its ever-re- 
 curring semi-annual tax? This competitor is found 
 in the citizens of the country, who, as they have 
 both debt and interest to pay, should certainly be 
 consulted. They not only offer to take up now one-
 
 DEBT, IXTEREST, AND LEGAL TENDER. 185 
 
 half of this loan, or $000,000,000, but will engage to 
 cancel in the same way, annually, no less a sum 
 than $50,000,000. They contend that this formi- 
 dable competition, at the time the loan is being 
 negotiated, will be such an evidence of goodfaith 
 that the balance will be taken up at lower rates of 
 interest; and that if they maintain their promise 
 for a few years in the prompt payment of interest 
 and the annual reduction of the debt by $50,000,000, 
 the rate will fall, in about fifteen years, to three 
 per cent., especially by the maturity of the ten-forty 
 bonds. 
 
 If the people of a great producing country like 
 this say they are satisfied to exchange their annual 
 productions for a legal-tender circulating medium, 
 which the government has the power to furnish 
 them, what better security can be offered than such 
 values as the world cannot dispense with ? Can a 
 country give stronger evidence of good faith than a 
 permanent and continuous investment to so large 
 an amount? No constitution or law can be half so 
 binding; either may be repealed or become suscep- 
 tible of misconstruction, but when a people invests 
 in a security that promises only an annual benefit 
 or convenience, in the language of Sj 7 duey Smith 
 when speaking of Pennsylvania bonds, "it is a per- 
 manent investment; there can be no withdrawal." 
 The effect on the finances of the country of giving 
 to the people what they demand, to wit, a uniform 
 measure of value and circulating medium, one that 
 cannot consume productions by supporting idle 
 adventurers, and which cannot be influenced by 
 
 16*
 
 186 SCIENCE OF MONET. 
 
 fluctuations resulting from speculation inside and 
 outside of the "ring," — since the same amount of 
 values will be in the country, — cannot be other than 
 beneficial. No one can deny that there will be a 
 saving to the people of six per cent, per annum on 
 $600,000,000, or $36,000,000. Not only so: the 
 amount is double, as I can demonstrate without re- 
 sorting to Dr. Franklin's " Penny Saved." If the 
 circulating medium of a country is as necessary to 
 its commerce as to production, it is worth precisely 
 the same rate of interest per annum whether used 
 in the one or the other. This being the case, 
 $600,000,000 at six per cent, will cost $36,000,000. 
 Now, suppose that by the use of my own paper in the 
 same channel I save the payment of the $36,000,000, 
 the total amount would be $72,000,000. To make 
 this a little clearer, let us suppose England should 
 offer to lend the United States $600,000,000 for the 
 sum of $36,000,000, and then, to accommodate us 
 further, should lend us a like sum of Bank of Eng- 
 land notes, to be used as a circulating medium, for 
 a like annuity of $36,000,000, would she not an- 
 nually abstract from us $72,000,000? If we could 
 do no better, this would be a very favorable offer, 
 and we should by all means accept it, rather than 
 resort to the most favored banking institution ever 
 established in this country. None of them ever 
 lent us their circulating notes long at a time for 
 less than double this rate of interest, as is proved 
 by the amount of their annual dividends over all 
 the losses and expenses' incident to trade. If to this 
 $72,000,000 be added the annual promised reduc-
 
 MEDIUM OF EXCHANGE. 187 
 
 tion of $50,000,000, and the consequent saving in 
 interest, and its rate at compound interest for a few 
 years be calculated, the vast benefit to production 
 resulting from the economy and security of a uni- 
 form medium will become apparent. Manufactures 
 and commerce cannot languish long under increas- 
 ing productions, but will in their turn stimulate 
 new and grander efforts. 
 
 MEDIUM OF EXCHANGE. 
 
 The circulating medium should have no other 
 value than as a medium. By limiting it to the de- 
 mand, it will remain uniform and will have no dis- 
 turbing influence on commodities, as is the case if 
 it has intrinsic value. 
 
 Exports buy and pay for imports, whether of 
 goods or gold. Imports banish gold from the 
 country. 
 
 When gold was the leg-al tender and medium of 
 exchange, the exports had to purchase it at an ex- 
 pense of five per cent, per annum on an average, 
 through the discount on bills drawn against export 
 articles or produce. All this was needed to keep up 
 the supply required as a medium and legal tender in 
 the interior of the country. All shipments had to 
 pay this charge, when but a small portion, if any, 
 was needed by the producer as a legal tender. 
 Even the banks exacted this, in order to be protected 
 against the results of an imprudent issue of their
 
 188 SCIENCE OF MONEY. 
 
 notes; when the market became panicky, they 
 doubled the charges, so that if the gold did not re- 
 turn in time through the accustomed channels, it 
 might be forced through express messengers 
 
 Exports paid annually $25,000,000 to keep up the 
 supply of gold medium. This sum was largely used 
 by importers as a discrimination against domestic 
 manufactures, — the cheap exchange enabling them 
 to bring in goods at a profit that otherwise could 
 not have been imported. The exchange is as much 
 an item in the cost as freight or any other charge. 
 The price reacts with the reaction in exchange, pre- 
 cisely as it does now with gold. This large sum is 
 a dead loss to the producer, and is nothing more 
 thau a bounty to the foreign manufacturer. 
 
 To keep up a medium costs the country the aver- 
 age rate of interest for money on both securities. If 
 we use $600,000,000, the cost at six per cent, is 
 $36,000,000. Who should be the recipients of this 
 sum ? It certainly should be the people who adopt 
 it as a medium and make it a legal tender. 
 
 Lessening the demand or increasing the supply 
 of commodities tends to cheapen them in price. 
 If we discard gold as a medium, we lessen the de- 
 mand to some extent, and consequently cheapen it. 
 This influence will be felt by all countries holding 
 gold. More of it will be given for our exports. 
 This being one of the laws of trade, the converse 
 holds good. With our substituted legal tenders, in- 
 ternal exchange will go on with increased regularity, 
 and the export' or import of gold will have no more 
 influence than the sending oft' of so much cotton and
 
 MEDIUM OF EXCHANGE. 189 
 
 the return of wines and silks. "We produce to con- 
 sume. It is the amount of production that enables 
 us to buy or sell. 
 
 Government credit is measured solely by the sur- 
 plus of production over consumption. jS"o country 
 ever surrendered its stock in trade in payment of 
 debt: to do so would be a change of nationality; 
 hence the debt is a bond on income over consump- 
 tion. 
 
 Bills of exchange, as now used, are the purchasing 
 power and medium between exports and imports, 
 especially between the raw produce of the country 
 and a great part of the imports. In the absence of 
 undue fluctuations, value commands the legal tender 
 on which the bills are drawn, and their legal tender 
 commands the commodities we desire to import. 
 From a mutual exchange both countries derive their 
 profit to the extent of the gratification of these de- 
 sires. The medium of exchange adds no value to 
 the commodities, nor does it give a country new 
 products. Its office is to find the surplus of one 
 party to be used by the other. 
 
 Abundance depresses prices, and scarcity elevates 
 them. Values are in the inverse ratios. One is 
 wealth, the other is poverty ; one is sleek and fat, 
 the other is lean and gaunt. 
 
 On the next page I place a diagram to illustrate 
 and simplify the position I have taken in regard to 
 the comparison of values based upon a medium 
 having no intrinsic value bevond the commodities 
 it will exchange for or command. "With this scale 
 and a price-current before you, the relative exchange
 
 190 
 
 SCIENCE OF MONET. 
 
 value can easily be found. Suppose the scale to 
 represent the supply at the prices affixed in accord- 
 ance with a legitimate demand, and with the prin- 
 
 Outfit for Labor .... 
 
 1000 
 
 Thousands. 
 
 
 100 
 
 Hundreds. 
 
 Outfit of Clothing .... 
 
 50 
 
 
 
 40 
 30 
 
 
 1 bbl. Pork 
 
 20 
 
 Double Eagle. 
 
 
 10 
 
 Tens. Eagle. 
 
 
 9 
 
 
 50 lbs. Coffee 
 
 8 
 
 
 
 7 
 
 
 
 6 
 
 
 1 bbl. Flour 
 
 5 
 
 i Eagle. 
 
 $100 at Interest .... 
 
 4 
 
 
 
 3 
 
 
 
 2 
 
 
 100 lbs. Salt 
 
 1 
 
 Units. Dollar. 
 
 
 
 
 
 ciple of giving to labor and capital the same return 
 from the production of the one article as the other,
 
 MEDIUM OF EXCHANGE. 191 
 
 in the open market one bale of cotton will exchange 
 for— 
 
 An Outfit of Clothing 50 
 
 1 bbl. Pork 20 
 
 2 " Flour 10 
 
 100 lbs. Sugar -10 
 
 50 lbs. Coffee 8 
 
 1 bbl. Potatoes 2 
 
 $100 
 
 If the medium can be exchanged for all the above 
 commodities, it will buy the bale of cotton. Then 
 the grower of four bales of cotton will be able with 
 one to clothe and feed the laborer; with another he 
 can pay rent, or ten per cent, on $1000, and with the 
 remainder he can support and educate a family of 
 five ; or, in other words, the laborer that can save up 
 this $1000 can accomplish all this when too infirm 
 to work. 
 
 Endless combinations and compromises can be 
 made. If one barrel of pork sells for $20 in gold, then 
 five barrels of pork will command one bond of $100, 
 or one bale of cotton, or twenty barrels of flour. 
 Again, suppose a failure of production in any one 
 article of prime necessity; the decrease of the supply 
 will enhance the prices of the scale. The owner of 
 the bale of cotton will now be forced to dispense 
 with some of the luxuries, and so on with all pro- 
 ducers to mankind. This is a positive loss. Human 
 labor does not receive or enjoy its accustomed re- 
 ward. 
 
 Now, take the most favorable view of human labor 
 and its returns from a greater intimacy with capital.
 
 192 SCIENCE OF MONEY 
 
 Let all products be doubled, wealth will be doubled, 
 human enjoyments will be in the same ratio, and 
 the relative value of products will remain the same. 
 If the volume of the medium remains unchanged, 
 its value will be enhanced. If it be also doubled, 
 relative prices will be the same, interest remaining 
 the same; but if it be not doubled in the same pro- 
 portion, interest will be doubled, as there will be 
 a greater demand for capital in the building up of 
 new labor to gratify human wants and desires. As 
 you increase quantities you decrease prices. Popu- 
 lation remaining the same, you increase wealth or 
 the power to enjoy the necessaries, conveniences, 
 and luxuries of life. The general lessening of prices 
 increases the abundance of enjoyments. With in- 
 creased production new wants spring up. This 
 is the great stimulus to incessant production, and 
 from which all communal prosperity springs. If 
 these new desires cannot be gratified at home, for- 
 eign trade supplies them with the conveniences and 
 luxuries of other countries. Here a local legal- 
 tender medium displays its greatest powers in the 
 distribution and economy of the surplus fruits of 
 human labor, and demands no sacrifice in the hunting 
 up of a medium further than a change in the rates 
 of interest sufficient to induce the holder of four per 
 cent, bonds to convert them into a medium equal to 
 the increased products of the country, thus giving 
 back to the fortunate laborer nearly a full return ot 
 other men's surplus in exchange for his excess. 
 
 The commodity whose supply is increased should 
 not have its exchangeable value destroyed by being
 
 MEDIUM OF EXCHANGE 193 
 
 forced to hunt up a legal-tender medium that has 
 no elasticity ; it should only contribute to the pay- 
 ment of the enhanced price of the goods desired in 
 return, resulting from the new or increased demand. 
 This in many instances cannot be great, from the 
 fact that nearly all men hold a surplus of some one 
 thing which they would be willing to exchange for 
 the increased production. This will give an oppor- 
 tunity to effect the exchange not before offered. 
 Whatever the increase in the value of other com- 
 modities, it will be equally distributed ; no one will 
 be the loser, and the fortunate holder of the in- 
 creased product will have the chance to enjoy the 
 full benefit of his good fortune. 
 
 If foreign luxuries are desired, there must be a 
 surplus of home products to give in exchange for 
 them. If there are cheap facilities for export, and 
 no unnecessary restrictions imposed by the impor- 
 tation of a legal-tender medium, we may hope for 
 an equitable exchange of surplus commodities ; it 
 is absolutely necessary that there be a clear under- 
 standing of the relative position of products, one 
 to the other, before any change of policy can be 
 hoped for. 
 
 There may be in Europe a glut of many articles 
 much desired by the growers of grain in America, 
 of which we may have a glut. The one will relieve 
 the other, and do all that human labor can accom- 
 plish, in adding to the enjoyments of life, or con- 
 tributing to reproduction. Commodities may be 
 ill distributed, but there can be no general glut. 
 
 Industry under ordinarily favorable circumstances 
 
 It
 
 194 SCIENCE OF MONET. 
 
 will produce a surplus of commodities. It should 
 then be the effort of capital and commerce to cheapen 
 charges and facilitate transportation ; then a larger 
 amount of goods can be brought back in return, 
 with increased power to consumers, — since the pro- 
 ducer would rather pay ten per cent, on his profits 
 than the regular commissions of two and a half per 
 cent, on gross sales. The power of the consumer to 
 purchase enables the merchant to sell and accumu- 
 late. 
 
 A more than average increase of productions re- 
 sulting from a favorable season — there being a le- 
 gitimate desire for them, aud a surplus to buy them 
 with — should not lower the exchangeable value of 
 the increased products ; it may raise the value of 
 those to be exchanged for them. 
 
 There is a point around which exchangeable 
 values vibrate. This is found by the worth of 
 capital and sum of human labor in the produc- 
 tion. A permanent deviation from this point will 
 attract or repel the efforts to produce; and this is 
 self-regulating, and should not be interfered with 
 by any artificial regulations in effecting the ex- 
 changes. To make the position more apparent, 
 underwriters make good the losses of bad seasons 
 from the accumulations of the good ; to lower the 
 rate of premium in prosperity would bankrupt them 
 in adversity. A profitable scale of mortality in the 
 expectancy and insurance of life will not do to use 
 in the granting of annuities. 
 
 There is an oft-repeated saying that half a crop 
 will fetch as much money as a whole one. This will
 
 MEDIUM OF EXCHANGE. 195 
 
 be the case where the medium has no elasticity and 
 cannot expand with the production, compelling the 
 laborer to lose its enjoyments in the same ratio, 
 depriving him of the abundance which nature gave 
 him and intended he should enjoy. If a man hap- 
 pens on a streak of good luck, allow him to treasure 
 it up to aid him when the day of misfortune comes. 
 I am well aware that the cost of productions is 
 measured by labor, below which point it cannot 
 remain for any length of time ; nor can it rise 
 permanently above it. It is the profits from the 
 accidental streak of good luck that I wish to econo- 
 mize for use when a reverse shall come. If life and 
 human exertion were one constant even flow of 
 power to enjoy and consume, there would be no 
 need of a great fly-wheel to accumulate force, in 
 order to overcome the terrible resistance of ad- 
 versity, which the ordinary momentum may not be 
 able to accomplish. Let us lay up a reserve from 
 times of prosperity, in order that, when the great 
 tilt-hammer has to be raised, no perceptible dimi- 
 nution of motion can be seen in the machinery. 
 Let us no longer run this great machine of produc- 
 tion and consumption without a fly-wheel. Do not 
 force us to compare all products by one ; if so, you 
 will at one time have to conform to the standard or 
 measure. If you make one bushel of wheat, it is 
 called a bushel; if two, let it not be called one; if 
 a half bushel, it is only a half bushel. Let us have 
 a rule that will work both ways. If one bushel of 
 wheat be the equivalent of ten yards of calico, then 
 I claim twenty yards for two bushels, and will not
 
 196 SCIENCE OF MONET. 
 
 complain at receiving five yards for half a bushel. 
 I am willing that my misfortunes shall abridge my 
 enjoyments; but when the good fortune comes, let 
 me have the full benefit of it; do not force me to 
 make a voyage around the Horn when I can make 
 the journey by rail and save time and expense. 
 When I offer my increased product, and you have 
 nothing from the average to exchange for my sur- 
 plus, do not undervalue mine by comparing it with 
 gold, but allow me to make the best exchange I 
 can, though I may have to go to a foreign country 
 to effect it. 
 
 Values buy and exchange for values, whatever the 
 medium may be. If of intrinsic value, its original 
 cost, together with its added value as a legal tender, 
 must be estimated ; if conventional, it will be meas- 
 ured by the commodities for which it will exchange, 
 leaving all commodities free to exchange for each 
 other. Then, if I have pork and desire flour, I 
 will not have to ask the price of gold or cotton in 
 effecting an equitable exchange. N"o extraneous 
 elements will have to be called in to disturb the har- 
 mon}' of our values. If I want gold at any time, I 
 will measure my values by the cost or value of gold, 
 and will not be forced to pay the extra price conse- 
 quent upon its having been made by law alegal tender. 
 If I do not like the terms offered in exchange, I will 
 consult my next greatest need, which may be a milch- 
 cow. If as plenty as pork, there will be no difficulty 
 in effecting an exchange; if not, the option will be 
 left to call on cotton to import me the gold. This 
 is the simple history and great truth, and forces the
 
 MEDIUM OF EXCHANGE. 197 
 
 conclusion that the medium should have no intrinsic 
 value, and should be at all times a legal tender, like 
 our greenbacks, and, to give it elasticity, should be 
 made interchangeable with four and a half per cent, 
 bonds : then the rise or fall of the medium will 
 conform to large or small productions, freeing us 
 from the financial complications of other countries. 
 If the producer part with his goods for a medium 
 not legal tender, and then be informed by his cred- 
 itor that the bank or insurer has exploded, how can 
 he pay his debts, having parted with his assets ? 
 
 A medium and leo;al tender interchangeable with 
 four per cent, bonds will have the ultimate value of 
 a four per cent, annuity. When no greater value 
 presents itself in exchange, it cannot remain long 
 below this point ; while it is being exchanged for 
 other values and used as a medium, the government 
 will be benefited to the amount of the interest saved. 
 
 Secure to industry and economy their honest dues, 
 and increased productions will be the result. There 
 can be no greater incentive held out to labor than 
 uninterrupted possession in all the transformations 
 and exchanges of its products. Nothing tends sooner 
 to dampen the ardor of man than insecurity ; his 
 disasters are not confined to himself, — the blight- 
 ing effects are soon felt by trade and commerce. 
 
 The large demand on this country for cotton by 
 England tends to cramp their market for discounts, 
 from the fear that the amount may not be covered 
 by their exports, causing a heavy demand on the 
 banks for gold, or unfavorable balance of exchange. 
 This is especially the case when the bills against 
 
 17*
 
 198 SCIENCE OF 310 NET. 
 
 this cotton begin to mature, causing speculators 
 and spinners to ask for large discounts to aid them 
 in carrying stock, resulting often in the prostra- 
 tion of the market, and reacting on the balance 
 of our crop of cotton to go forward. Now, if we 
 had no calls for gold as a legal-tender medium, their 
 fears would be dissipated to a considerable extent, 
 and our exports would be paid for, as usual, by our 
 imports of their surplus, each party realizing a 
 steady market, and, at least, exemption from the 
 ruinous disasters incident to so large a trade, — more 
 especially when European complications tend to 
 war, forcing capital to the great centers for protec- 
 tion against any unfavorable balance of trade. 
 
 EXCHANGE AND MEDIUM. 
 
 I feel confident that no one well acquainted 
 with the course of the exchange market will con- 
 tend that the business of a large crop of any or all 
 exportable commodities can be effected so cheaply, 
 and with so little friction or derangement to trade 
 and liquidation of debt, as it is now done with our 
 inconvertible legal-tender medium. If you will look 
 fairly and squarely at the object and purpose of a 
 medium on productions, which is but consumption 
 and reproduction, you will find that the effort of all 
 those who have a surplus is to exchange it for the 
 largest amount of other people's goods. When this 
 is the case, a greater impetus is given to produc-
 
 EXCHANGE AND MEDIUM. 199 
 
 tions; and without being thus stimulated, con- 
 sumption cannot go on to the extent that will bring 
 the greatest benefit to the largest number. 
 
 If it be, as I have stated, a positive benefit tc 
 productions to make use of a local legal-tender 
 medium in the sale and exchange of man's sur- 
 plus, then it is a curse to inflict on them a medium 
 without elasticity, that cannot be used freely with- 
 out exerting a disturbing influence in the buying 
 and selling exchange, the discount on which must 
 be a loss to the producer, as well as to the trader, 
 who can import with safety only to the extent of 
 the exports, and consequently must lose the profits 
 on the increased trade now thrown away. 
 
 These losses are greatest in times of prosperity, 
 when large exports are pressing on the market, 
 and dealers in exchange are compelled to advance 
 the rate of discount to cover the delay and expense 
 incident to getting returns per express, or when im- 
 ports are coming in freely, requiring the exchange 
 to pay for them. Many large importers, whose 
 capital is larger than their ordinary business will 
 absorb, avail themselves of these favorable oppor- 
 tunities to co»ver not only their past imports, but to 
 provide in advance for new ones, frequently realizing 
 larger profits by the discount than the ordinary 
 charge for importing. Still, after all, the losses fall 
 entirely on the producer of the exports. 
 
 I cannot adduce better proof of the correctness 
 of this position than the workings of our present 
 exchanges for the past few years, under the influ- 
 ence of the legal-tender act ; the variations at no
 
 200 SCIENCE OF MONET. 
 
 time having exceeded the charges necessary to 
 cover bills by shipment of coin. ISTow I contend 
 that a further saving on this will be effected so 
 soon as a four per cent, bond can be converted into 
 legal-tender medium, from the fact that all large 
 dealers in foreign bills will keep by them, as a 
 reserve, bonds to fall back on, in case currency 
 should grow scarce from a large pressure of bills 
 on the market against the producer of the interior 
 for export. This position of the market is sure to 
 occur annually at the South, on account of her 
 large export of cotton, a small amount of which 
 produces a large sum of exchange. The discount 
 of one-half to one per cent, on a bond bill will 
 tempt the holder of the four per cent, bond to con- 
 vert it into the medium, in order to realize this 
 extra interest. 
 
 The great incentive to deal in exchange is the 
 rapid movement in buying and selling the capital. 
 Being turned over many times, even at one-eighth 
 to one-quarter per cent., it realizes in the aggregate 
 a large interest per annum; a running liability of 
 $10,000,000 will give for the year over $100,000,000 
 of business and a profit of over $100,000 from a cap- 
 ital of not more than $500,000, which must be kept 
 well in hand, with no dead weight or extra-hazard- 
 ous risks. In insurance it is the small premiums 
 for good risks that pay best. 
 
 The above profits will also inure to the benefit of 
 the interior dealer in checks and bills; he too will 
 keep his reserve in bonds, in order to command the 
 medium on the spot, so as not to be forced to send
 
 EXCHANGE AND MEDIUM. 201 
 
 off his bills for discount, to be sent back in currency, 
 witb express charges and loss of interest. 
 
 Take the position of the buyer of a sterling bill 
 against cotton. Suppose, before the consignment 
 arrives in Europe, a large demand resulting from 
 war complications is made on the Bank of England 
 for coin ; immediately up goes the rate of interest 
 and down goes cotton, as it must be sold to pay the 
 bill. This decline may be so great that the bill will 
 be dishonored and fall back on the dealer or banker. 
 It is these sharp turns in the market that bring on 
 the trade nearly all the losses, sweeping from the 
 stage both the drawer and the buyer of the exchange. 
 At this point panics generally set in, and react on 
 the producer, not only lowering the price of what 
 he may have for sale, but involving him in ruin, if 
 the medium he receives for his cotton proves not to 
 be a legal tender, which is likely to be the case if it 
 be bank-notes. 
 
 You may answer that if the medium be national 
 bank-notes the government will take care of them. 
 She may at that very time, however, be in such a 
 position that it will be impossible for her to do so. 
 
 If we divorce ourselves from gold at once, few 
 sharp angles will have to be turned. With this 
 disturbing element out of the way, all parties will 
 be better able to calculate the chances, as they will 
 be conformed generally to the estimate of stocks 
 in the different markets and the probable demand. 
 Statistics and price-currents will give very accu- 
 rately this information as to supply and stock. 
 
 In regard to gold, we have been without reliable
 
 202 SCIENCE OF MONEY. 
 
 data, and must continue so, from the fact that its 
 course is so erratic. A speck of war, no bigger than 
 a man's hand, may upset the best-laid plaus of men 
 and governments. ISTo one can foresee when the 
 timid will begin to hoard gold, nor how long they 
 will withhold it from the channels of trade. It is 
 not so with cotton or food. Hunger will force sales 
 of the latter, and general as well as individual in- 
 terest will force consumption of the former, in order 
 to buy the food and keep the millions from idleness 
 and want. 
 
 TEUE BASIS 01 ALL MEDIUMS. 
 
 Whatever the medium may be, it neither adds 
 to nor diminishes the quantity of commodities on 
 sale. Then why should it be an exportable article, 
 with the power, when short in supply, of disturbing 
 the relative exchangeable values of all other pro- 
 ductions? 
 
 The interior banking companies frequently run 
 short of currency and lose the opportunity to take 
 all the bills against produce seeking export points, 
 and are compelled to forward these bills to the great 
 commercial centers for discount, and to have cur- 
 rency sent back to them by express in return. If the 
 conversion of four per cent, bonds into the medium 
 were admissible, a large portion of this expense 
 would be saved to the stockholders and immediate 
 neighborhood, causing them to invest a large por- 
 tion of their capital in these bonds, in order to be
 
 TRUE BASIS OF ALL MEDIUMS. 203 
 
 prepared to buy all the bills against the crop, know- 
 ing that the season's imports will consume the ex- 
 change, and realizing two profits instead of one. 
 
 The circuit of the medium must be made. The 
 producer pays it to the retail dealer for goods and 
 for debt, he to the banker for bills on the country 
 from which he desires to import goods, and the 
 banker passes it back to the buyer of the country 
 produce against his bill. Prosperous productions 
 throughout the country call for an increased sup- 
 ply of the medium. When this extra demand no 
 longer exists, that portion of the medium at last 
 will seek a four per cent, bond, from the fact that 
 it can be sent for at any moment to engage in 
 hunting up surplus commodities for sale. 
 
 Civilization and the multiplication of commodi- 
 ties create new desires, that cannot be gratified 
 by the productions of one man's labor ; hence the 
 necessity of exchange for the surplus of others, in 
 order that the wants of each may be supplied ; and 
 this necessity gives rise to the employment of a 
 medium. 
 
 If you take into consideration the importance of 
 a medium, and then weigh the use and find out 
 the object, you will be better able to judge of the 
 kind that is needed, and will know the greatest 
 number of wants. 
 
 In the first place, you are compelled to have a 
 medium in order that commodities may be ex- 
 changed in the supply of man's innumerable wants. 
 
 As many supply these wants by purchases of goods 
 on time, they can only safely sell when they are get-
 
 204 SCIENCE OF MONET. 
 
 ting in exchange something that will liquidate debt. 
 This is why I have made the point that all mediums 
 should be a legal tender; if the process of liquida- 
 tion be not all the time going on, sales of commodi- 
 ties will to a large extent cease to be made ; certainly 
 credits will cease to be given. I know of no greater 
 stimulus to exertion than the desire to sustain 
 credit. The wish to acquire property is not greater 
 than the wish to liquidate debt promptly ; many 
 traders have little other capital than honor and 
 promptness, and hence their extraordinary exer- 
 tions to compass the means of payment. These 
 parties buy on time and sell for the difference over 
 cost. 
 
 This position of the seller of commodities for a 
 liquidator will be rendered more apparent by taking 
 into consideration the double office of the medium, 
 — the exchange of produce, and the liquidation of 
 debt. 
 
 The gross produce of the country is over $3,000,000, 
 and the running debt nearly $8,000,000; at least 
 one-third of the gross products are consumed at 
 home by the producer, and for this, of course, no 
 medium or liquidator is required; then the$2, 000, 000 
 must be exchanged for other goods: if for cash, the 
 medium must be used; if on time, and the residue, 
 with all the multiplied transactions of a trading 
 country, calls for a liquidator or means of payment, 
 a large portion of these credits will be liquidated by 
 adverse credits and set-offs through the banks of 
 the large cities and centers of trade. The running 
 balance of debt must be paid bv the medium until
 
 TRUE BASIS OF ALL MEDIUMS. 
 
 2or> 
 
 the real credit that was to have canceled it has been 
 found. 
 
 To elucidate this position and the mode of can- 
 celing debts b}^ the use of credits, I have made the 
 following clearing-house statement of debits and 
 credits, showiug how they finally balance each other ; 
 a daily repetition of this goes on when trade is brisk. 
 
 To receive. 
 
 Creditor. 
 
 
 Dubtor. 
 
 To pay. 
 
 
 $500,000 
 390,000 
 210,000 
 110,000 
 90,000 
 100,000 
 
 United States 
 
 Europe 
 
 South 
 
 West 
 
 North 
 
 Other countries 
 
 $500,000 
 400,000 
 200,000 
 100,000 
 100,000 
 100,000 
 
 
 
 10,000 
 
 10,000 
 10,000 
 
 
 10,000 
 
 
 
 
 $20,000 
 
 $1,400,000 ■ 
 
 
 $1,400,000 
 
 $20,000 
 
 In fact, each city, town, and county clears its 
 own neighborhood and customers. Valuing on the 
 debtors in favor of the creditors to close up, the 
 last debtor will be found to have more goods than 
 he can hold or carry, and must convert in order to 
 get the credits with which to liquidate. I beg a 
 careful study of this table of clearing debts ; by its 
 means many intricate positions may be clearly un- 
 derstood, — among others, how fourteen millions of 
 credits will pay fourteen millions of debits, and, 
 above all, how little of money, gold or bank-note me- 
 diums, enters into the dail}- transactions of great 
 
 18
 
 206 SCIENCE OF MONEY. 
 
 countries, so thoroughly versed in the hunting up of 
 commodities are Europe and the United States. In 
 fact, the amount of gold handled in payment really 
 plays so insignificant a part in the canceling of debt 
 or the purchase of commodities that we are forced 
 to the conclusion that produce alone buys produce 
 and liquidates debt, and that when gold is called 
 for there is no produce, and some one is unable to 
 pay his debt, from a failure chargeable to some ac- 
 count, but not to the circulating account or legal 
 tender. The truth is, this delinquent debtor has 
 nothing to pay for the liquidation and no credit to 
 borrow ; he has overtraded or mistaken the market 
 and sold at a loss. The trouble that he is in is not 
 chargeable to the medium or to derangement of its 
 circulation. If legal tenders were as cheap as bank- 
 rupt notes, he could not command them. He must 
 stand back and let those come forward who have 
 commodities for exchange; they are able and will- 
 ing to redeem the medium, — in fact, pay it or con- 
 vert it into gold or its equivalent. 
 
 From the foregoing all unbiased parties can draw 
 the following deduction, which I call a fundamental 
 truth : 
 
 If a country require $500,000,000 of a medium 
 and legal tender, and no more than that sum is 
 given them, all surplus of produce and goods and 
 all debts are the basis of the fund in the great bank- 
 ing-house for the redemption on demand which will 
 cause its instant convertibility into gold or any other 
 commodity. No basis of convertibility ever offered 
 by banks of circulation can be as effectual as the
 
 TRUE BASIS OF ALL MEDIUMS. 207 
 
 conversion in full at all points. I hold, further, that 
 a country giving circulation to its medium, and de- 
 claring it a legal tender, will not ask for immediate 
 convertibility into gold, but will trust something to 
 the fortunes of another crop, and to some extent will 
 rely on Providence; but if the promise of converti- 
 bility be once found wanting in a mixed currency, all 
 faith is lost, and the determination springs up to 
 realize at once. 
 
 This position in regard to the fund held for the 
 redemption and immediate conversion of our incon- 
 vertible medium, paradoxical as it may seem, ought 
 to be clearly understood; and, as I claim originality 
 for it (no work I have met with urging this point), 
 I deem it my dut} 7 to explain fully the surroundings. 
 In order to do this, I will go to the root of con- 
 vertibility, and what is to be relied on in the hour 
 of need. 
 
 Take the Bank of England. What is the basis of 
 her notes? When issued with fifty percent, of gold 
 as a basis, all parties know, favorable though this 
 basis may be, that immediate conversion would be 
 an impossibility. It needs no great amount of 
 arithmetical knowledge to see that the half is not 
 equal to the whole. The bank's great reliance is 
 on the ability of the people who are compelled to 
 use a medium. Every man in the kingdom, while 
 the bank is not called on for one dollar of her gold, 
 is converting these notes, daily paying his assets 
 and commodities for them. So long as this is the 
 case, the bank need not fear being called upon for 
 immediate conversion. iSTow, I hold that the United
 
 208 SCIENCE OF MONEY. 
 
 States, with her wide-spread territory, offers greater 
 security for tne immediate conversion of her notes 
 than can he offered by any other country. The 
 mass of her people have not only a direct interest in 
 upholding these notes, but are compelled to use 
 them in the exchange of her large productions 
 seeking a market. They cannot be much below 
 82,000,000, which is offered for the redemption of 
 $500,000. If, as the result of a short crop, a suffi- 
 cient amount is not placed on sale to cover the 
 demands of those who desire immediate conversion, 
 and the tendency should be a decline in value or 
 purchasing power, still the necessity for the liqui- 
 dation of debt and their use as a legal tender will 
 sustain them until increased production can come 
 to their aid. 
 
 Can there be any more effective conversion than 
 the products which man is compelled to have for 
 the supply of his daily wants, coupled with the 
 power and certainty of liquidating debt? Fluctua- 
 tions and depreciation may occur for a time, but, 
 in the face of the large tax-list, cannot last long. 
 The people will be poor indeed when they have 
 no goods to offer in redemption. If gold be desired 
 by the timid and fhe speculator, it will still have to 
 be converted into goods to be made useful or pro- 
 ductive; if used in the liquidation of debt, it has 
 accomplished nothing more than mess-pork or flour 
 can do. 
 
 In a word, all the cotton, mess-pork, and flour in 
 the country is held as the reserve fund to bring 
 immediate conversion, and can be relied on in the
 
 TRUE BASIS OF ALL MEDIUMS. 209 
 
 payment of any foreign balance ; they will do all 
 that gold can do in sustaining credit, besides giving 
 employment to the enterprising trader and building 
 up a virtuous population. Commodities that will 
 bring gold into a country are the equal of gold. 
 After all that can be said in favor of gold, it cannot 
 be commanded if the products offered for it are not 
 more desirable. 
 
 There is nothing unnatural in a people under- 
 taking to protect the credit of their country by the 
 redemption or conversion of her notes. It is often 
 done from motives of friendship, where there is no 
 direct interest, even in times of panics. If the cor- 
 respondent of a well-known house should be forced 
 to the wall, friends will step forward and protest 
 the bills on account of the drawer, often preventing 
 wide-spread disaster. Now that all large commer- 
 cial cities are connected by telegraph, immediate 
 provision can be made that will be as effectual in 
 payment as if the original payer had honored the 
 drafts. 
 
 The same principle would lead the people of this 
 country to come forward and redeem the notes of 
 the government with their commodities and use 
 them in the liquidation of debt. The necessity 
 that compels them to use these notes to-day will, in 
 all likelihood, continue at least while they are pros- 
 perous and have commodities to be exchanged. 
 
 The disorganizer and speculator for a rise can 
 make a corner in any one commodity, especially 
 gold, if a legal tender, greatly to the detriment of 
 the debtor class, disturbing the relations between 
 
 IS*"
 
 210 SCIENCE OF MONEY. 
 
 all other productions, as well those in second hands 
 as the balance in the hands of the producer. This 
 cannot be the case to any ruinous extent if we have 
 a medium such as has been indicated, with the elas- 
 ticity to stretch, and which, when redundant, will 
 shrink back into four per cent, bonds, until new 
 products again calf it into use. There need be no 
 fear of a protracted redundance of circulation; the 
 exchange of bonds, and vice versa, will generally be 
 made in view of a profit. Interest always prompts 
 man to seek the most profitable and safe invest- 
 ments; for this reason, above all others, the me- 
 dium should be regulated by the parties using it 
 and giving it currency. 
 
 A correct appreciation of this principle will ex- 
 plain why any medium has currency. After all, the 
 proportion of gold as a basis, the quick circulator and 
 universal credit, springs from the daily redemption 
 and conversion by the people ; they are satisfied with 
 this, and understand its complications. Market re- 
 ports and quotations of the gold market are not half 
 so tempting as the redemption with pork and flour 
 and the payment of debts. Those who redeem in 
 commodities are not the only ones that show a dis- 
 position to sustain the medium. The professional 
 man, the doctor, the lawyer, and the minister, are 
 equally the advocates of a daily conversion. 
 
 The indebtedness of a country also gives credit 
 by daily use ; but it is the products alone from which 
 final redemption can be hoped for. The two pro- 
 cesses, combined, may be likened to Peleg Bissel's 
 churn, which was composed of one big wheel and
 
 TRUE BASIS OF ALL MEDIUMS. 211 
 
 a smasher. Debt is the big wheel, and commodi- 
 ties are the smasher; one stirs up the fire, the 
 Other extinguishes it. Without the big wheel and 
 smasher the Bank of England notes would cease to 
 circulate; there would be no use for a medium if 
 there was no produce to redeem them instantly. 
 
 When banks undertake to issue their orders on 
 the people for commodities, their desire to make 
 interest and speculate on credit is carried to such an 
 excess that the people cannot respond. Then they 
 are returned to the owners for payment; and panics 
 ensue, bringing ruin on all traders who may have 
 obligations to pay outside of the banks. 
 
 If the people of a country desire gold, the mer- 
 chant will bring it in return for the exports. It is 
 rarely that the trader neglects the wants of his cus- 
 tomers ; to do so would be to neglect his own in- 
 terest. He will bring the gold as willingly as the 
 bread or the calico, if they are able to pay for it. 
 When gold was needed as a medium, money inter- 
 ests were involved, and a great number of parties 
 had to be consulted. From a reduction of the usual 
 bank-note medium and heavy discounts on bills 
 against the exports, the market was frequently over- 
 traded, and then suddenly ran off in the same way. 
 Allow the producer to order in return for his ex- 
 ports such goods and wares as he may desire, and the 
 market will be as regularly supplied as it is now with 
 calico, tin pana, and pots. If the banker wants gold, 
 let him buy commodities, or bills against them, and 
 import it. Do not force the producer to pay all the 
 charges of bringing it into the country when he
 
 212 SCIENCE OF MONEY. 
 
 may want none of it ; his wants may be satisfied 
 with pork, flour, and calico. When the necessaries 
 and conveniences of life are needed, man will ex- 
 port the luxuries and superfluities in exchange for 
 them. Gold being the least useful of all luxuries, 
 it is but natural to send it off first in exchange 
 for the necessaries of existence and reproduction. 
 If the people do not desire gold, and we have our 
 legal tender, they can prevent its import by ad- 
 vancing prices for their productions. This process 
 will establish an equilibrium the world over. 
 
 DEDUCTIONS. 
 
 1. If the medium and legal tender of a country 
 be merchandise, like gold, desirable for export, it is 
 a curse, in place of a blessing, to the people. 
 
 2. All mediums are conventional, and have the 
 value of the goods they will exchange for; legal 
 tenders are made so by law. 
 
 3. The true basis of all mediums for conversion 
 is commodities. No proportion of gold to the 
 amount in use is equal to the instant and universal 
 conversion by the people in productions. Couple 
 this with the power of a legal tender, and you have 
 a medium which, if restricted to the wants of a 
 people, will be at all times equal to gold. Bank 
 of England notes, with dollar for dollar as a basis 
 in gold, would not be a reliable or useful medium, 
 if it were not for the tacit promise on the part of
 
 DEDUCTIONS. 213 
 
 the people to redeem them with the necessaries and 
 conveniences of life. If yon convert the medium 
 into gold, these commodities must still be had, — 
 one is as effectual as the other. Commodities, after 
 all, buy each other and liquidate debt. 
 
 4. !STo circulating medium that is not a legal 
 tender should ever be permitted ; otherwise, when 
 discredited, it deprives man of the ability to pay 
 debts. How can he pay without products or value ? 
 
 5. Imports take gold out of the country. 
 
 6. If gold is the legal tender, the export articles 
 have all the burden to bear in bringing it back. 
 
 7. The amount of tax paid by the exports to keep 
 up a legal tender and sustain bank credits is five per 
 cent, per annum, or $25,000,000. 
 
 8. This $25,000,000 is a bounty to foreign manu- 
 factories and a discrimination against the home pro- 
 ductions by the cheapening of the exchange, and 
 is so much loss to the producer. 
 
 9. Commodities not alongside of each other can- 
 not measure value accurately ; they differ in differ- 
 ent countries. 
 
 10. Gold is not reliable as a comparative measure 
 of value. Its own cost fluctuates ; but-not so often 
 or so disastrously as the supply at any particular 
 place, causing its value, as a medium or legal 
 tender, to rise or fall. 
 
 11. All mediums cost the country the average rate 
 of interest. The lowest estimate on $600,000,000 
 at six per cent, is $36,000,000. 
 
 12. The people that redeem and give currency to 
 the medium should be the recipients of this sum.
 
 214 SCIENCE OF MONEY. 
 
 13. Bills of exchange, as now used, are the pur- 
 chasing power and medium between exports and 
 imports. 
 
 14. Exports buy and pay for imports, including 
 gold. 
 
 15. Balance of trade is the difference between 
 individual speculations, and is a private affair, to 
 be adjusted by the speculators as best they can. 
 
 16. Favorable or unfavorable balance of exchange 
 indicates that the banks issuing notes as a medium 
 are being called on for payment. When they pay, 
 the balance will change. 
 
 17. Large discounts on bills at an export point are 
 oftener an evidence of prosperity than of poverty; 
 they are an indication of the effort to realize for 
 productions. When gold has to be forwarded to 
 meet the bills, it is an evidence of a scarcity of 
 commodities. 
 
 18. The Bank of England remained suspended 
 for nearly twenty-five years; and yet during a por- 
 tion of that time her notes bore a premium over 
 gold as high as three per cent. 
 
 19. Russia issued, forty millions of irredeemable 
 notes; they*circulated at par with gold for seven- 
 teen years, and did not decline until the issues 
 exceeded the demand as a medium. 
 
 20. The notes of the Bank of Venice, based on a 
 loan to the government without any promise to pay 
 in gold, commanded a premium over gold of thirty 
 percent, during nearly five hundred years, and the 
 premium had finally to be restricted by law to 
 twenty per cent.
 
 DEDUCTIONS 215 
 
 21. Our present legal -tender medium, if per- 
 petuated and made interchangeable with four per 
 cent, bonds, will adjust itself to the volume of pro- 
 ductions with but slight fluctuations from a gold 
 standard. 
 
 22. Public debt is based entirely on the surplus 
 productions of the country. No country ever gave 
 its lands and capital stock in payment of debt; to 
 do so would be a surrender of nationality. The 
 principal and interest, therefore, must be drawn 
 from surplus income. 
 
 23. When wealth was thought to consist in gold, 
 Europe legislated up to 1663 to prohibit the export 
 and encourage the import. It was instinct endeav- 
 oring to keep in the country the requisite sum as a 
 medium, in order to prevent undue fluctuations in 
 property that was to be measured by it. 
 
 24. The best writers on political economy urge 
 the great expense of gold as a good reason for the 
 many substitutes and devices which man has been 
 compelled to use in the exchange of commodities 
 and the liquidation of debt.
 
 AA 000 590 448