-
 
 MONEY IN POLITICS 
 
 BY 
 
 J. K. UPTON 
 
 Late Assistant Secretary of the United States Treasury 
 
 W&itfj an Introduction 
 
 BY 
 
 EDWARD ATKINSON 
 
 BOSTON 
 D. LOTHROP AND COMPANY 
 
 FRANKLIN AND HAWLEY STREETS
 
 Copyright, 
 By D. Lothrop & Co. 
 
 ELECTROTYPED 
 BY C. J. TETERS & SON, BOSTON.
 
 50 
 
 PEEFACE. 
 
 yC^ He who said the love of money was the root of 
 all evil spoke not with accuracy of the properties 
 and functions of this commodity. Evils may grow 
 from a love to accumulate wealth in excess, but the 
 love of money is in itself as harmless a diversion 
 as an ill-conceived passion for a steam plough. 
 True money is but one form of wealth, and should 
 not be confounded with wealth as if it were the 
 only form. 
 
 He who possesses commodities in excess of his 
 needs for them, and can exchange them for other 
 commodities which he needs, possesses wealth to 
 that extent. In no other way can wealth exist. 
 Money facilitates the exchange of commodities, 
 and, by saving labor and time in the exchange, may 
 give to the commodities a greater value than they 
 would otherwise possess, — only this and nothing 
 more. Wealth can exist without money, and if 
 there were no money in the world, wealth would 
 still remain as before, though perhaps incapable 
 of bringing to its possessor an equal degree of 
 comfort. 
 
 iii
 
 IV MONEY IN POLITICS. 
 
 The railroad king Vanderbilt may not, and prob- 
 ably does not, handle as much money in a given 
 time as does his grocer, and yet his wealth is 
 reckoned by scores of millions. 
 
 In countries where money is not employed, 
 trade is carried on by exchanging direct one com- 
 modity for another, of which the following is a 
 simple illustration. A farmer has grain which he 
 does not need, but he needs a pair of shoes, which 
 he has not. To obtain the shoes he is willing to 
 part with a portion of the grain, and if he can find 
 a shoemaker who has the shoes and is willing to 
 part with them for the grain, the exchange can 
 readily be effected. But if, when found, the shoe- 
 maker, although he has the shoes, does not want 
 the grain, the farmer will be compelled to find 
 another person who has a commodity which he is 
 willing to part with for the grain, and which the 
 shoemaker will accept in exchange for his shoes. 
 By making this double exchange the farmer obtains 
 the shoes. The grain, however, was in fact 
 exchanged for them, not the interposed commodity. 
 That was used only to facilitate the exchange. 
 
 This method of exchanging commodities is called 
 " barter," and to a considerable extent exists in all 
 communities to-da}^ Prof. Jevons relates that 
 not long since Mademoiselle Zelie, a singer of the 
 Theatre Lyrique, at Paris, made a professional 
 tour around the world, and gave a concert at the
 
 PREFACE. V 
 
 Society Islands. In exchange for an air from 
 Norma and a few other songs, she was to receive a 
 third part of the receipts. When counted* her 
 share was found to consist of three pigs, twenty- 
 three turkeys, forty-four chickens, five thousand 
 cocoanuts, besides considerable quantities of ban- 
 anas, lemons and oranges. As the islands con- 
 tained no commodities which Mademoiselle needed, 
 and for which these products could be exchanged, 
 she must have suffered an embarrassment of riches. 
 These contributions of the animal and vegetable 
 kingdom, transferred to the markets of Paris, 
 would, however, have realized for her handsome 
 returns ; but meanwhile the turkeys must be fed 
 and the fruit will decay. 
 
 Inconvenience and useless labor have ever at- 
 tended barter trade, and to avoid them commodi- 
 ties have been sought out and interposed, which, 
 on account of the universal demand for them, will 
 be accepted by any person in exchange for any 
 commodity he possesses and is willing to part 
 with, knowing that in turn he can again in like 
 manner exchange them for any commodity he may 
 need. 
 
 Gold and silver have for a long time been em- 
 ployed by civilized communities as such interposed 
 commodities. Neither of these metals, in itself, 
 has any mysterious power. Like grain or a pair 
 of shoes, each is the product of labor, and has a
 
 VI MONEY IN TOLITICS. 
 
 value in exchange for other commodities depend- 
 ing upon the relation to it of demand and supply. 
 This relation, in case of these metals, is believed 
 to be exceptionally uniform and well understood, 
 and therefore either metal can be exchanged for 
 other commodities at well-known rates. Neither 
 metal suffers much, if any, loss from exposure to 
 the elements. Equal weights of either, without 
 regard to form, have precisely equal values, and 
 the relation of value to that of weight in either is 
 such that the amount needed is neither inconveni- 
 ently heavy nor minute ; and the demand for both 
 is universal. For these reasons the two metals 
 named are naturally used in effecting exchanges 
 of commodities, and Avhile performing this duty 
 they are called money. An exchange of a com- 
 modity for money, however, but half completes 
 the transaction ; to complete it, the money must be 
 again exchanged for the commodity needed. 
 
 Bringing money into use, however, the farmer 
 exchanges his grain for money, and then exchanges 
 the money for shoes or any other commodity which 
 he may need. And when the exchanges are fully 
 completed he will have no money left. His wealth 
 will remain, however, represented by the newly- 
 acquired commodities which have taken the plnce 
 of the grain. The money has gone to do like duty 
 for some one else. 
 
 Viewing money, therefore, as operating within
 
 PREFACE. Vll 
 
 its proper functions, we arrive at certain deduc- 
 tions, which should ever be borne in mind, viz. : — 
 
 1. The value of gold or silver, like that of 
 wheat or any other commodity, will depend upon 
 the relation of demand and supply to the metal in 
 question. The miner who takes the metal from the 
 earth exchanges it for other commodities at the 
 best rate he can obtain. If the outlay and labor 
 expended in obtaining the metal will not yield an 
 amount of other commodities equal to, or greater 
 than, an equivalent amount of outlay and labor 
 would yield in other industries, mining operations 
 will be abandoned for other pursuits, until the 
 demand for the metal with the diminished produc- 
 tion will increase its exchange rate, so as to render 
 mining operations as profitable as other industries. 
 On the other hand, should the product of mining 
 operations on the whole prove more remunerative 
 than that of other industries, less remunerative 
 industries will be abandoned for mining, until the 
 increased yield of metal will lower the exchange 
 value of it to a point where other industries will 
 be as profitable as mining. In this way the prod- 
 ucts of our mines arc governed by natural forces, 
 and money can have no artificial value. 
 
 2. There can be no such thing as "cheap 
 money." In performing its functions, money will 
 be exchanged for other commodities at just such 
 rate as the owner of the other commodities is will-
 
 Vlll MONEY IN POLITICS. 
 
 ing to part with them for it. He can be depended 
 upon not to exchange them at a lower rate than he 
 is obliged to. A decrease in the exchange value 
 of money means a corresponding increase in the 
 value of the commodities for which it is exchanged ; 
 otherwise silver would be cheaper money than 
 gold, and copper cheaper than silver, a relation 
 which never has existed and never will. Conse- 
 quently, in itself, one metal is just as cheap as 
 another for money, and we need select for that 
 purpose only the one which best suits our con- 
 venience. 
 
 3. Money not being wealth, the amount of it 
 in circulation will naturally be just the amount 
 needed to effect the exchanges of products for 
 which it is employed, and no more. It can be 
 used for no other purpose, and everybody will get 
 rid of any excess of it as soon as possible. If by 
 any artificial restraint an excess of it is kept in any 
 community, the owners of commodities therein 
 will not part with them for it except at rates which 
 will compensate them for holding a commodity 
 which, being no longer of use as money, becomes 
 unproductive wealth. Consequently prices of 
 commodities, in such an event, will be higher until 
 the restraint is removed and the surplus money 
 allowed to flow where it is needed. 
 
 4. Money will be plenty in localities where 
 commodities are cheapest. A purchaser of grain
 
 PREFACE. IX 
 
 in New York notes that for the same amount of 
 money he can procure in exchange therefor more 
 wheat in Milwaukee than in Chicago. He there- 
 fore buys in the former market, and sends his 
 money there in exchange for his purchases. Other 
 dealers will do the same, and money will be plenty 
 in Milwaukee and scarce in Chicago, until, on 
 account of the increasing demand, holders will 
 raise the price in Milwaukee until grain can 
 be purchased elsewhere as cheap, or cheaper, than 
 in that market, when the money will flow else- 
 where, and prices will again be lower. Money 
 may, therefore, be trusted to flow towards the 
 cheapest market, or where prices are lowest, and 
 to shun the dearest markets, or where prices are 
 highest. 
 
 5. A " tight " money market results from too 
 high prices of commodities compared with prices 
 ruling in other localities, and does not result from 
 any lack of money. When prices are lowered, 
 money will flow in. Increasing the amount of 
 money to relieve a market only aggravates the evil 
 it is intended to cure. There being no use for 
 more money, the excess must lie idle as unpro- 
 ductive capital, or at considerable expense be 
 shipped away as bullion like any other commodity. 
 
 There is another use for money which has not 
 yet been considered — its use as a standard of 
 value. Gold and silver, possessing a desirable
 
 X MONEY IN POLITICS. 
 
 uniformity of value in exchange for other com- 
 modities, have long been employed throughout the 
 civilized world as standards by which the exchange 
 value of all other commodities is expressed. The 
 two metals, however, vary from time to time in 
 their respective exchange value as to each other, 
 and consequently but one metal at a time can be 
 considered as a standard of value, without causing 
 confusion. Thus, at a certain date one ounce of 
 gold or sixteen ounces of silver can be exchanged 
 for twenty bushels of wheat ; but at another date 
 one ounce of gold may purchase twenty-one 
 bushels of wheat, while sixteen ounces of silver 
 will still purchase but twenty bushels. Whatever 
 causes operate to cause this disparity, it is evident 
 that only confusion of terms can result in attempt- 
 ing to express values at the same time in two 
 standards, having no fixed relations to each other. 
 Money used simply as an interposed commodity 
 to facilitate exchanges is man's best friend. With 
 noiseless action it takes from man the products of 
 his labor, and in exchange returns to him the 
 products of all lands and climes, and when its work 
 is accomplished modestly withdraws. It asks for 
 no aid in doing its work ; no subsidy, no legisla- 
 tion or monetary conferences to regulate its action. 
 All it ever asks is to be let alone. But man will 
 not let it alone ! He needs must attempt to regu- 
 late it, and so it gets within the domain of legisla
 
 PREFACE. XI 
 
 tion, where it does not belong, find brings no end 
 of troubles. Without an}' excuse, legislation has 
 debased it, substituted inferior commodities for it, 
 interposed artificial barriers to its circulation for 
 the alleged benefit of commerce, and by solemn 
 proclamation declared it to possess a value which 
 it had not. 
 
 In no country has there been more interference 
 with the operations of money than in the United 
 States of America. The colonists debauched it, and 
 then drove it from them to make room for unhappy 
 substitutes. Since the adoption of the Constitution, 
 changes in the weight and fineness have twice been 
 made, and one metal has been maintained for years 
 at a fictitious valuation to encourage mining in- 
 dustries, and paper promises to pay have, by law, 
 been declared the equal of the highest rated metal. 
 In consequence of such and other legislation there 
 is afloat a large assortment of money of various 
 values and effect. 
 
 Were Mademoiselle Z61ie to give a concert to- 
 day in the capital city of this country, its receipts 
 would rival in picturesque confusion those of her 
 concert in the Society Islands. When counted, there 
 would be found gold coin, silver coin, with its three 
 kinds of dollars; nickel coin, bronze coin, copper 
 coins, United States notes, silver certificates, gold 
 certificates, bank notes of two kinds, and perhaps 
 fractional notes, — and all these kinds having a
 
 Xll MONEY IN POLITICS. 
 
 common unit, the dollar, but bearing to each other 
 no necessary relation of value, but all in effect 
 redeemable by the government in gold coin at 
 their face values. Transferred to the Bourse of 
 Paris these several kinds of moneys would also 
 have a value, but it could hardly be computed 
 even by a member of the French Ac-ademy. The 
 explanations offered for the existence of these 
 motley issues have been so varied, that few people 
 know or appear to care to know, what the issues 
 are for, or what powers they possess ; and so be- 
 fogged has become the whole subject, that even 
 the Justices of the Supreme Court do not appear 
 to know a dollar when they see it. 
 
 The diverse properties which have been given 
 money in this country, the unnatural power with 
 which some of it is legally endowed, and the false 
 position in which other portions of it have been 
 placed, can but bring disturbances sooner or later. 
 Already in the financial horizon appear threatened 
 clouds, and to the practised ear comes the prelude 
 muttering of the brewing storm. As legislation 
 has brought about the threatened disaster, to legis- 
 lation we must turn for relief. What shall the 
 relief be?
 
 CONTENTS. 
 
 Introduction by Edward Atkinson xv 
 
 I. Early Colonial Money . 1 
 
 II. Colonial Mints 8 
 
 III. The Original Silver Dollar 11 
 
 IV. Paper Issues 14 
 
 V. Revolutionary Issues 23 
 
 VI. Cui Bono ? 28 
 
 VII. Money of the Confederation 33 
 
 VIII. The Money of the Constitution .... 37 
 
 IX. Wild-Cat Currency 42 
 
 X. The Treasury Cornered 53 
 
 XI. The Second United States Bank .... 60 
 
 XII. United States Notes 67 
 
 XIII. Additional Issues 00 
 
 XIV. Fallacy of Legislation 99 
 
 XV. National Bank Issues Ill 
 
 XVI. Contraction 127 
 
 XVII. Resumption 146 
 
 XVIII. The Supreme Court 157 
 
 XIX. Gold Coin and Certificates 171 
 
 XX. The Silver Dollar 197 
 
 XXI. Circulation of the Silver Dollar . . . 221 
 
 XXII. Monetary Conferences 227 
 
 XXIII. The Trade Dollar 247 
 
 XXIV. Other Moneys 258 
 
 XXV. The Par of Exchange 205 
 
 xiii
 
 INTRODUCTION". 
 
 Having been requested to write an introduction 
 to the following treatise on " Money in Politics," 
 by J. K. Upton, late Assistant Secretary of the 
 Treasury of the United States, I cheerfully do so 
 because I have found the work to be very tho- 
 rough and complete, and of the utmost value, both 
 with respect to the history of the past and to the 
 policy of the future. 
 
 It gives, in my judgment, the best record of 
 legislation in the United States yet presented in 
 regard to coinage, to legal tender acts, and other 
 matters connected with our financial history. 
 
 It shows in the most conclusive manner the 
 futility of all attempts to cause two substances to 
 become, and to remain of the same value or esti- 
 mation, by acts of legislation. 
 
 It gives a true picture of the vast injury to the 
 welfare and to the moral integrity of the people of 
 this country, which ensued from the enactment
 
 XVI MONEY IN POLITICS. 
 
 of the acts of legal tender during the late war, 
 whereby the promise of a dollar was made equal 
 in the discharge of a contract to the dollar itself. 
 
 It shows that this mode of collecting a forced 
 loan was the most costly and injurious method of 
 taxation which could have been devised. 
 
 It proves in the most conclusive way, the injury 
 which will surely come when by present acts of 
 coinage and of legal tender, our gold coin has 
 been driven from the country, and our standard 
 of value becomes a silver dollar of light weight 
 and of uncertain value. 
 
 The reason given for this dangerous interference 
 with the natural laws which control value, and for 
 subjecting the whole business of the country to 
 uncertainty and depression is, that " the silver pro- 
 duction of the country must be sustained." 
 
 The annual value of the silver product is about 
 $40,000,000 — in gold. 
 
 The production of the hen 5~ards of the United 
 States, according to the census statistics, was, in 
 1879, 456,910,916 dozen eggs, and, if hens have 
 increased in the ratio of population, it is now 
 500,000,000 dozen, which, at only ten cents a 
 dozen, would exceed the value of the product of 
 the silver mines. 
 
 It would be vastly more reasonable for Congress 
 to order the compulsory purchase of two million 
 dollars' worth of eggs per month, "in order to
 
 INTRODUCTION. XV11 
 
 sustain the hen products of the United States," 
 than it is to bay two million dollars' worth of sil- 
 ver; because the esr2rs could be used, or else 
 
 ' CO 7 
 
 •would rot, while the silver cannot be used, and is 
 expensive to store and to watch. 
 
 This book will prove to the mind of every think- 
 ing man that, if we persist much longer in sustain- 
 ing the acts of coinage and legal tender which now 
 encumber the statute book, our national credit will 
 be impaired and all our working people, whose 
 wages arc paid in money, will be subjected to the 
 most injurious form of special taxation which 
 could be devised ; it proves that a considerable 
 portion of their wages will be taken from them 
 under due process of law without power of redress 
 on their part, while the rich and astute advocates 
 of the present system will reap wealth which they 
 have not earned by taking from the laborer a part 
 of that which is his rightful due. 
 
 It may be said now of the legal tender currency 
 which was issued during the late war, as it was 
 written of the Continental currency of the Revolu- 
 tion. "If it saved the State, it impaired the 
 morality of the people ; it polluted the equity 
 of our laws; it injured the fortunes of those who 
 had the most confidence in it ; it destroyed respect 
 for the courts ; " and although it did not in this 
 most recent case inflict the maximum of injury, as 
 it did in the Revolution, it may yet be said that
 
 XV111 MONEY IN POLITICS. 
 
 it did more injury to the material prosperity of the 
 country than all the arms and arts of the enemy 
 combined enabled them to compass. While it 
 destroyed the fortunes of many, it made the few 
 rich richer and the many poor much poorer. 
 Except for its malignant influence the nation 
 would to-day have been substantially free from 
 the burthen of any national debt whatever. 
 
 The money cost of the war was a little over 
 four thousand million dollars, measured partly in 
 coin and partly in paper, and it could easily be 
 proved that at least one third part of that cost, or 
 a sum equal to the present national debt, was im- 
 posed upon the country by the depreciation of the 
 legal tender notes. 
 
 This book, written by one whose official posi- 
 tion gave him the clearest insight in respect to the 
 working of the acts of coinage and of legal tender, 
 and also of the banking system of the United 
 States, may be of inestimable value because the 
 chief dangers to which the country is now sub- 
 jected are the present dangerous statutes still 
 unrepealed, construed under the decision of the 
 Supreme Court of the United States in the last 
 legal tender case, — a decision rendered by judges 
 whose opinions could be predicated upon the po- 
 litical party to which the majority of the court 
 are assumed to belong. It may not, perhaps, be 
 called a partisan decision ; but, with hardly an ex-
 
 INTRODUCTION. XIX 
 
 ception, the opinions of the judges in these legal 
 tender cases have been made on party lines. 
 
 It is singular that the attention of very few per- 
 sons is ever drawn to the fact that in international 
 commerce there is no statute of legal tender, and 
 cannot be ; hence that all international transac- 
 tions are settled by the weight of the various 
 metals, chiefly in the pound sterling, which is 
 simply a name for a given number of grains 
 of gold. 
 
 It would be very interesting and instructive if 
 some one learned in the law would investigate and 
 explain the first conception of an act of legal tender. 
 
 Its modern purpose is twofold. First, to per- 
 petuate the evidence that one party to a contract 
 has made an effort to comply with its terms ac- 
 cording to his understanding of it. This could bo 
 accomplished in many different ways. The second 
 function of a legal tender act is the one which has 
 been perverted by legislation and by the recent 
 decision of the Supreme Court, even to the full ex- 
 tent of a declaration of the court that it is within 
 the power of a legislative body to coin paper into 
 money and to make the promise of a dollar, carry- 
 ing no obligation for its performance, equal to the 
 coin itself in the discharge of a contract. 
 
 This is perhaps the logical outcome of a series 
 of acts of legislation which must have originally 
 been born in fraud and bred in corruption.
 
 XX MONEY IX POLITICS. 
 
 This function of an act of legal tender must, in 
 the nature of things, have originated in the act of a 
 despotic power, conceived for the purpose of forcing 
 the acceptance of a debased coinage in the liqui- 
 dation of debts, in order to steal the property of 
 the people without their knowledge. 
 
 I commend this book to the careful study of 
 everyone who takes an interest in honest finance. 
 
 Edward Atkinson. 
 
 Boston, Sept. 25, 1884. 
 
 L 
 
 / *> 
 
 
 5^
 
 MONEY IN POLITICS. 
 
 CHAPTER I. 
 
 EARLY COLONIAL MONEY. 
 
 The early settlers of this country brought with 
 them from England a considerable amount of silver 
 coin, and, following the practice of the mother 
 country, expressed the values of commodities and 
 kept their accounts in pounds, shillings, pence, 
 and farthings. 
 
 It is well known that the standard pound in 
 England was originally a certain bar of silver kept 
 in the Tower, representing a pound in value, as 
 well as a pound in weight. As a pound in value, 
 it was divided into twenty parts, called shillings, 
 the shilling being divided into twelve parts, called 
 pence. As a pound in weight, it was divided into 
 twelve parts, called ounces, each ounce being di- 
 vided into twenty parts, called pennyweights. A 
 pennyweight was therefore, both in value and 
 weight, 2!^ part of a pound. 
 
 King Edward III., however, being pressed for 
 means to pay his royal debts, directed that a 
 
 1
 
 Z MONEY IN POLITICS. 
 
 pound of silver should be coined into twenty-two 
 pieces, .and declared by royal proclamation that 
 each one of these pieces should be called a shilling, 
 and should be accepted as such in payment of the 
 debts of the crown as well as in payment of pri- 
 vate debts. In this way there accrued to the royal 
 revenue two shillings on every pound thus minted ; 
 and the royal counsellors imagined that they had 
 discovered a very ingenious method by which a 
 revenue could be obtained without taxation, and 
 without defrauding any one. But as silver, like 
 other commodities, had a certain value of its own, 
 the reduction of the weight of the shilling caused 
 a corresponding increase of prices ; and the sub- 
 jects of the king, finding that through some mys- 
 terious agency their property had apparently 
 increased in value, made no complaint of the 
 debasement of their coins. 
 
 The successors of Edward III. repeated this 
 robbery again and again, until Queen Elizabeth 
 directed that fifty-eight pieces be coined from the 
 pound sterling, or sixty-two pieces from a pound 
 troy. By this time royalty had reduced the shil- 
 ling to about one-third of its original value, and 
 yet by edicts and proclamations had made each 
 one of the same power in the payment of debts as 
 the original piece. The shilling had now, how- 
 ever, become so small that the subjects of the 
 queen saw there was cheating somewhere about
 
 EARLY COLONIAL MONEY. 6 
 
 the board, and they put a stop to any further 
 reduction of the coin. 
 
 These shilling pieces were the coins which the 
 early settlers brought to this country. 
 
 The history of our currency is little else than 
 a repeated story of the interference of the State 
 with the functions of money, and of abortive 
 efforts to counteract natural monetary laws. 
 
 Peag. 
 
 New England began the interference. Explor- 
 ing parties of the Massachusetts colony found 
 living on the shores of Long Island a partially 
 civilized community of Indians. There was among 
 the natives a division of labor: some of them cul- 
 tivated maize, others fished, others hunted, and a 
 considerable number living along the sea shore 
 were engaged in polishing the shell of the clam 
 and of the periwinkle, which they traded for the 
 products of the field and the chase. The shells 
 were used as ornaments, and had a well-known 
 exchange value for other commodities. One black 
 shell was about equal to two white ones. They 
 were called "Peag," and they answered for money 
 among the simple natives, as did gold and silver 
 among their civilized invaders. There was no limit 
 to the number of these shells which might be pro- 
 duced ; their possessors traded them for furs and 
 other artieles upon the best terms that could be
 
 4 MONEY IN POLITICS. 
 
 obtained ; and they circulated for several hundred 
 miles inland. Anions* these Indians, ignorant of 
 the laws governing circulating medium and rates 
 of exchange, the black and white Peag circulated 
 together without the aid of compulsory legislation 
 or monetary conferences. If an Indian sold furs 
 for two fathoms of black Peag no law compelled 
 him to accept in satisfaction of his contract four 
 fathoms of white. 
 
 But the white man came, and by statute made 
 Peag a legal tender for twelve pence in payment 
 of debt — and then counterfeited it. Upon thus 
 being made a legal tender these shells became pos- 
 sessed of a new value, and subject to new laws. 
 Lustreless and half-polished shells being worth as 
 much as any for paying debts, a deterioration of 
 Peag at once commenced. In 1648 the Massa- 
 chusetts colony found it necessary to pass a law 
 which provided that only such Peag as was un- 
 broken and of a good color should pass as 
 money. Peag became so bad, however, notwith- 
 standing the reformatory law, that the following 
 year the colony treasurer was forbidden to take 
 it, and even the inhabitants began to reject it. 
 Again the law came to the rescue and ordered 
 that Peag should be a legal tender for forty shil- 
 lings — the white at eight, and the black at six for 
 a penny. In this way Peag became clothed with 
 all the legal finery which has ever adorned the
 
 EARLY COLONIAL MONEY. D 
 
 currency of civilization. Not only was it a legal 
 tender in payment of debt, but there was a " fixity 
 of value " between the black and the white. Here- 
 after, if it would not work satisfactorily, the law 
 was not in fault. But Peag was perverse, and, just 
 as great results were expected from it, it wholly 
 disappeared from circulation, leaving the law- 
 makers to look elsewhere for a circulating medium. 
 They did not look long. 
 
 Barter. 
 
 In 1641 the General Court of Massachusetts made 
 corn a legal tender in payment for all debts which 
 should arise after a time prefixed. The exchange 
 rate of corn varied so much that it brought an end 
 to credit transactions — no man being willing to 
 risk future values thereon — and trade was in con- 
 sequence hampered or broken up. Exchanges, 
 however, necessarily continued to be made, and 
 so a barter currency was established, driving the 
 legally-clothed corn from the circulation. 
 
 In 1049, disputes arising about the payment 
 of taxes in this currency, three appraisers were 
 appointed to regulate the values of commodities. 
 Of course if a cow was equivalent to so many shil- 
 lings of taxes, the lankest of the herd would be 
 proffered for their payment ; and consequently the 
 collections of the tax-gatherer comprised an assort- 
 ment of lean and lank kine, compared with which
 
 6 MONEY IN POLITICS. 
 
 those in the famous vision of Pharaoh would have 
 been a goodly sight for a county fair. The col- 
 onial government was obliged to keep these cows 
 until they could be disposed of in the ordinary 
 course of business. It would be curious, says 
 one writer, to know how much, without giving 
 milk or increasing in weight, a cow thus received 
 for taxes could consume of government rations. 
 To prevent evasion of this sort, in 1658, it was 
 ordered that no man should pay taxes in lank 
 cattle. 
 
 The Massachusetts Puritan was not alone in 
 such questionable transactions. As early as 1618, 
 two years before the Puritans arrived in New 
 England, Governor Argale, of the Virginia colony, 
 had ordered that all goods should be sold at an 
 advance of 25 per cent, and tobacco taken in pay- 
 ment at three shillings per pound and no more nor 
 less, on a penalty of three years' servitude to the 
 colony. Notwithstanding this law, in 1623, arti- 
 cles were rated in both corn and tobacco, thus : 
 loaf sugar at Is. 8d. in corn, or 2s. 6d. in tobacco ; 
 and other articles in like manner — excepting the 
 young women shipped from England to become 
 wives to the planters. These last commodities 
 appear to have been invariably rated in tobacco — 
 the price of a wife at first being 100 pounds of 
 tobacco ; but the lucky investors must have cornered 
 the market, for the price soon after advanced to
 
 EARLY COLONIAL MONEY. 7 
 
 150 pounds — but possibly the increased price was 
 paid in tobacco of damaged quality. 
 
 A distinguished writer of that period intimates 
 that it did a man's heart £Ood to see the gallant 
 young Virginians hastening to the water-side when 
 a ship arrived from London, each carrying a bun- 
 dle of the best tobacco under his arm, and taking 
 back with him a beautiful young wife. But, as 
 even a gallant young Virginian could hardly 
 " hasten " with a hundred and fifty pounds under 
 his arm, it is probable he took along only a small 
 portion of the consideration as an earnest, — thus, 
 in fact, buying his wife upon a margin. 
 
 All the colonists were anxious to retain silver 
 as a circulating medium, and their trade with the 
 West Indies brought in considerable silver coin ; 
 and the buccaneers spent a good portion of their 
 booty among them. Had no law been enacted 
 making inferior commodities a legal tender, silver 
 would have circulated, being vastly superior in 
 every respect for money. 
 
 <J^
 
 CHAPTER H. 
 
 COLONIAL MINTS. 
 
 As another expedient, in 1652, Massachusetts 
 established a mint at Boston and proceeded to 
 coin shillings, sixpences, and threepences ; and 
 the law forbade their exportation on penalty of 
 forfeiting all visible estate. On one side of the 
 coin was a tree surrounded by the word " Massa- 
 chusetts ; " and on the other " New England " 
 and the year of our Lord, and the figures XII, 
 VI, or III to denote the denomination. As the 
 right to coin money was a doubtful prerogative of 
 the colonies, the date of 1652 was not changed, 
 though the pieces continued to be coined for thirty 
 years. 
 
 The English shilling at that time contained by 
 law twelve pence — it being of such weight that 
 sixty-two of them, \± fine, would make just one 
 ounce, or 420 grains troy. The Massachusetts 
 law enacted that the shilling to be coined should 
 contain ten instead of twelve pence, a difference 
 in value of twenty per cent to start with. But as 
 the mint master kept fifteen pence out of every 
 
 8
 
 COLONIAL MINTS. *J 
 
 twenty shillings, as a coinage charge, the value of 
 the new shilling was so reduced that Gs. 7d. of this 
 currency was worth but 5s. 2d. of English sterling, 
 or 22 per cent less, admitting it to be of the 
 weight and fineness required by law.* The Eng- 
 lish mint, moreover, declared the coin was not 
 of even weight and fineness, and for this reason, in 
 its exchange for sterling, it suffered a reduction 
 of 3 per cent more, thus making it 25 per cent 
 less than sterling. All this was done by the govern- 
 ment that the coins might remain in circulation. 
 But they were exported, nevertheless, because 
 there was in existence at that time a cheaper way 
 of paying debts than with even the silver ten 
 pence made by law equal to twelve, and the 
 New England Puritan has an unearned reputation 
 for sagacity if he can be wheedled by any sub- 
 terfuge into paying more for an article than is 
 necessary. 
 
 Nobody was benefited in the least by the 
 coinage of this money. In proportion as the 
 value of the coin was reduced, the merchants 
 raised the coin price of their goods. Confusion 
 in trade and accounts were, however, introduced, 
 and injustice done to many individuals. Then, as 
 now, many believed that a shilling was a shilling 
 so long as it bore the government stamp to that 
 effect, regardless of the amount of silver it con- 
 
 * Sumner's History of Currency.
 
 10 MONEY IN POLITICS. 
 
 tained ; and nobody could understand why the 
 coins did not circulate. 
 
 Not to be outdone by the New England Puritan, 
 the Catholic Assembly of Maryland, in 1662, 
 besought the Proprietaries "to take orders for 
 setting up a mint ; " and a law was passed for that 
 purpose. The lack of money was assigned as a 
 reason. It was enacted that every shilling should 
 weigh ninepence of English sterling, and that it 
 should be accepted in payment of rent and other 
 debts at its face valuation — thus cheating the 
 creditor out of 25 per cent of his dues. Fraudu- 
 lent as was this coin, it could not compete in circu- 
 lation with mouldy tobacco and heated corn, which 
 were running against it as a legal tender ; and so 
 it abandoned the struggle and went abroad. 
 
 These Catholic legislators, individually, would 
 have scorned to acquire three shillings by stealing 
 or by highway robbery, but they could freely join 
 hands with the Massachusetts Puritans in passing 
 a law to swindle creditors out of their just de- 
 mands. 
 
 These were the only laws for coining money 
 that occur in our history previous to the Revolu- 
 tion ; but there was no end to the efforts of the 
 colonics to regulate the value of foreign coin.
 
 CHAPTER m. 
 
 THE ORIGINAL SILVER DOLLAR. 
 
 Virginia, in 1645, finding that tobacco currency 
 hardly met the convenience of trade, prohibited 
 dealings by barter, and established a Spanish 
 silver piece as the standard currency of that 
 colony, at a valuation of six shillings. This piece, 
 known as the " Spanish pillar dollar," was well re- 
 ceived, and, with its halves, quarters, and eighths, 
 became an important coin in the subsequent cur- 
 rency of all the colonies. 
 
 This dollar contained at that time 386| grains 
 of pure silver, and was equal in weight to the pure 
 silver in fifty-four pence sterling. As a sterling 
 pound of twenty shillings contained 240 pence, 
 it was equal to 2 ^, or 4.44|, of these Spanish 
 dollars ; and no legislation could change this ratio 
 without changing the weight or fineness of the coin. 
 But Virginia declared there was six shillings in this 
 dollar, and consequently the Virginia pound of 
 twenty shillings could be but $3.33-^. 
 
 This valuation of the shilling seemed to be suf- 
 ficiently erroneous and excessive to meet the 
 
 11
 
 12 MONEY IN POLITICS. 
 
 wants of the New England colonies ; and in 1672 
 they adopted the coin at a like valuation in those 
 colonies. 
 
 South Carolina also adopted it, but solemnly 
 declared that a dollar was worth 4s. 8d. — making 
 a pound worth 4| dollars. 
 
 Pennsylvania, New Jersey, and Maryland fell 
 into line, and declared that in this dollar there 
 were 7s. 6d., — making their pound 2| dollars. 
 New York and North Carolina said this dollar 
 contained eight shillings — making the pound of 
 those colonies 2i dollars. 
 
 And now imagine to what condition the circu- 
 lation of the colonies had come, under the various 
 laws enacted to keep coin in circulation, and 
 help the debtor classes avoid paying their just 
 dues. Throughout the colonies the unit of ac- 
 count was the pound sterling, and in pounds, shil- 
 lings, and pence all values were reckoned. The 
 only money of this kind was the sterling currency 
 of England, and from that country the colonies 
 brought the names of their coins and the unit of 
 account. Had no law interposed, the value of 
 these pieces, as well as their names, would have 
 been retained ; and throughout the colonies and 
 the mother country a common currency would 
 have existed. 
 
 But the laws stepped in, and, taking a Spanish 
 coin having no possible relation to English money,
 
 THE ORIGINAL SILVER DOLLAR. 13 
 
 declared that it contained a certain number of Eng- 
 lish shillings, which it did not at all, as the law 
 makers well knew. The laws did not even agree 
 as to how many shillings it contained : the shilling 
 in Pennsylvania was larger than that in New York 
 and smaller than that in Virginia. The pound 
 itself had four different values, and none of them 
 that of the English pound, from which it was 
 named. And all this confusion brought about 
 by legislative enactments to force into circulation 
 the Spanish dollar, and to make it do duty as so 
 many shillings. 
 
 Notwithstanding these efforts to keep coin at 
 home, Governor Winthrop tells how " traders 
 came to Massachusetts and drained the colonists 
 of their coin." 
 
 " The impossibility of a metallic currency in a 
 state of colonial dependence," says the historian 
 Bancroft, " was assumed as undeniable." 
 
 The Assembly of Rhode Island subsequently 
 enunciated the following proposition as the basis 
 of the colony's action respecting money : 
 
 " This will always be the case with infant colo- 
 nics that do not raise so much as they consume, 
 cither to have no money, or, if they have it, it 
 must be worse than that of their richer neighbors 
 to compel it to stay with them." And this seemed 
 elsewhere to be accepted as a satisfactory expla- 
 nation of the absence of coin.
 
 CHAPTER IV. 
 
 PAPER ISSUES. 
 
 The colonies, having exhausted the products of 
 the earth and the shells of the ocean in their 
 efforts to secure a currency without avail, now 
 looked around for other materials. Again they 
 / did not look long. 
 Q/ Massachusetts took the initiative. In 1690 an 
 expedition was fitted out against Canada — the 
 spoils to pay the expenses. The soldiers engaged 
 in it returned without any booty, and so the colo- 
 nies had to foot the bill, as they deserved to. It 
 cost them fifty thousand pounds, Massachusetts 
 currency, of which seven thousand pounds were 
 issued in notes made receivable for taxes. The 
 soldiers disposed of them at one-third discount — 
 according to Sumner — and the next year it was 
 ordered that the bills be received for taxes at 
 an advance of five per cent over coin, with the 
 promise that they should all be redeemed within 
 a year. This kept the paper at par for twenty 
 years, when at last it was redeemed. This was 
 the first issue of paper money by the colonics. It 
 was followed by other issues, keeping the colo- 
 14
 
 PAPER ISSUES. 15 
 
 nists busy as bees regulating the values and trying 
 to counteract the laws of nature. 
 
 In Rhode Island issues of paper money were 
 made, not under any pretext that the exigencies of 
 the government required them, but "to advance 
 trade and promote manufactures" ; as we hear to- 
 day of the necessity of coining silver to encourage 
 mining industry. The issues, while made in con- 
 venient form for circulation, were in the nature of 
 a loan, bore interest at five per cent, and were 
 based upon mortgages of real estate belonging to 
 those to whom the money was advanced. 
 
 In 1710, seven thousand pounds were issued, 
 and five years later forty thousand more. In 1721 
 another issue was made of forty thousand pounds ; 
 the interest of which was made payable in flax and 
 hemp, the reason for the issue being the alleged 
 scarcity of specie; and interest was made payable 
 in flax and hemp in order to encourage the growth 
 of those staples. 
 
 Here indeed was a shower of wealth, and all 
 w T ho had received the loans clamored for new 
 issues — every new issue depreciating those out- 
 standing, and making payment easier ; and out- 
 siders clamored vociferously to get in, on the 
 ground of justice and fair play. But few pay- 
 ments of these loans, however, were made. The- 
 legislators themselves were largely interested in 
 the scheme, and consequently the payment of the
 
 
 16 MONEY IN POLITICS. 
 
 loans was not urged with vigor. Many of the 
 recipients got as largely in arrears as possible, and 
 then decamped ; and the few foreclosures that 
 were made hardly paid for the expenses of the 
 sale. 
 
 In 1728, the time of payment for previous loans 
 was extended as a favor to the debtor class ; and 
 forty thousand more was issued " on account 
 of the decay of trade and commerce." Other 
 issues rapidly followed, making in all three 
 hundred and twenty thousand four hundred and 
 forty-four pounds. Still flax and hemp were not 
 raised in undue amounts, and trade and commerce 
 were not revived. 
 
 In 1751, twenty-live thousand more was issued, 
 the bills "to be printed on new plates." Whether 
 the government thought that impressions from 
 new plates would give additional value to the 
 bills when they came to be used as wall paper, or 
 whether the old plates were worn out, does not 
 appear. All these bills were declared by law to 
 be equivalent to a certain amount of silver, but 
 they passed in circulation at entirely different 
 rates. For some reason these bills came to be 
 called " old tenor " and " new tenor " ; and the last 
 named was declared to be equal to silver at 6s. 9d. 
 sterling per ounce, and this was to be equal to 
 13s. 6d. new tenor, or 54s. old tenor. 
 
 In 1763, Parliament prohibited the colonial
 
 PAPER ISSUES. 17 
 
 issue of legal tender paper, and the courts arbi^j 
 trarily fixed the scale of depreciation for settlement 1'"^ 
 of debts. One Spanish dollar was to be equivalent/ 
 to seven pounds old tenor notes. 
 
 In 1764 the rate of old tenor bills was fixed at 
 one to twenty-three and a third; in 17G9 six 
 shillings lawful money was to be reckoned equal 
 to eight pounds old tenor. In 1770 old tenor 
 notes were no longer allowed to circulate, and 
 these with the new tenor soon disappeared entirely. 
 Thus did the vision of wealth dissipate. 
 
 Iihode Island had enjoyed more than any other 
 colony a prosperous trade with the West Indies, 
 which had brought much wealth, especially to the 
 merchants of Newport. In her sister colony, 
 however, paper money had been superseded by 
 silver coin, and the foreign trade, which bounties 
 could not revive or retain, left Newport for Boston, 
 never to return. **"%. 
 
 In 1709, New Hampshire, Rhode Island, Con- 
 necticut, New York, and New Jersey joined in an 
 expedition against Canada, and issued bills of 
 credit to meet the expenses, making them a legal 
 tender in payment of debt. After considerable 
 depreciation these notes were redeemed at differ- 
 ent rates. 
 
 Pennsylvania, in 1723, issued bills of credit, but 
 on such terms as was thought would prevent their 
 depreciation. Imitating the policy of Ithodo
 
 18 MONEY IN POLITICS. 
 
 Island, it loaned the bills upon land security, but 
 in addition thereto also loaned upon plate de- 
 posited in the Loan Office, obliging borrowers to 
 pay live per cent interest. The loan was for 
 sixteen years, payable one-sixteenth annually. 
 
 Franklin heartily approved the scheme, and 
 printed a pamphlet in favor of it. In his autobiog- 
 raphy he hints at his reason for his interest in 
 the emission: tr My friends there, who thought I 
 had been of some service, thought fit to reward me 
 by employing me in printing the money — a very 
 profitable job, and a great help to me." Later on, 
 he still argued the emission to be a good thing, 
 but thought probably they had enough of it. 
 
 These bills were perhaps better than those 
 issued by other colonies ; but notwithstanding the 
 security on which they were issued, soon depre- 
 ciated to one hundred and ninety of bills to one 
 hundred of sterling. 
 
 Connecticut also issued legal tender bills for 
 the expenses of the government, but not as a loan. 
 For a time the issue was prudently managed, but 
 the voluminous circulation of the other colonies 
 overcame the restraint, and depreciation followed. 
 Between 1744 and 174G the enormous amount of 
 one hundred and thirty-one thousand pounds was 
 issued, and one ounce of silver became worth sixty 
 shillings in paper. 
 
 The historian Bronson says : " This last emis-
 
 PAPER ISSUES. 19 
 
 sion broke the camel's back Trade was 
 
 embarrassed, and the utmost confusion prevailed. 
 No safe estimate could be made as to the future, 
 and credit was almost at an end. No man could 
 safely enter into a contract which Avas to be dis- 
 charged in money at a subsequent date. Prudence 
 and sagacity in the management of business were 
 without their customary reward." 
 
 In 1751 Parliament prohibited the colonies of 
 Rhode Island, Connecticut, Massachusetts, and New 
 Hampshire from issuing any more bills of credit, 
 or to reissue those already out. But the prohibi- 
 tion was not to operate in cases of extraordinary 
 emergencies, or in case of invasion, but in no case 
 were the bills to be a legal tender. 
 
 Subsequently, however, between October, 1771, 
 and October, 1774, Connecticut issued thirty-nine 
 thousand pounds in bills of credit, bearing no 
 interest, but reasonable and sufficient taxes to 
 meet their redemption were levied, and they did 
 not depreciate. 
 
 In the emission of paper all the other colonies 
 took part, and with substantially like results. 
 
 One after another the paper issues disappeared 
 from circulation, and the colonics were generally 
 free from irredeemable currency before the out- 
 break of the war of the Revolution. 
 
 So disastrous to business and so repulsive to 
 the consciences of all men of probity were these
 
 20 MONEY IN POLITICS. 
 
 issues that all parties became loud in their con- 
 demnation. A fervent hut observant French 
 author, writing at the time, gives a clear impres- 
 sion of the condition of society at that period : 
 "This State is ravaged by a political scourge, more 
 terrible than either mosquitoes or fever ; it is 
 
 called paper money It gives birth to an 
 
 infamous kind of traffic — that of buying and sell- 
 ing it by deceiving the ignorant ; a commerce 
 which discourages industry, corrupts the morals, 
 and is a great detriment to the public Pa- 
 triotism is consequently at an end, cultivation 
 languishes, and commerce declines." 
 
 Massachusetts had led the colonies into this 
 financial bog ; and also led the way out of it. 
 
 rThe depreciation of the paper of this colony had 
 decreased in 1741 to five hundred and fifty to one. 
 About that time, the governor of that colon}^ took 
 it into his head to capture Louisburg from the 
 French. There seems to have been no provoca- 
 tion at all for this action. It was purely a free- 
 booting expedition — but popular with the masses, 
 and it was successful. To pay expenses addi- 
 tional issues of paper money were made, and so 
 rapidly did they depreciate that in 1749 they were 
 i quoted at eleven hundred to one. 
 
 The Parliament of the mother country, how- 
 ever, was greatly annoyed at the action of Massa- 
 chusetts in capturing Louisburg, and voted to
 
 PAPER ISSUES. 21 
 
 redeem it from the colonies by paying a handsome 
 sum. Of this amount Massachusetts received one 
 hundred and thirty-eight thousand six hundred 
 and forty-nine pounds sterling ; and with it re- 
 deemed all her paper issues at eleven to one, and 
 still had a goodly sum left. 
 
 Double Standard. 
 
 The paper issues of the Massachusetts colony 
 being out of the way, silver coin appeared to take 
 their place. As the issues of the other colonies 
 disappeared, the circulation of this coin became 
 more and more general. Even some gold was 
 found daringly attempting to circulate among 
 these financial robbers. It could not escape the 
 vigilant eye of the General Court of Massachu- 
 setts, a Court which has ever been on the alert to 
 provide a law to regulate all human actions. 
 
 With the declared purpose to facilitate trade, 
 this Court, in 17 02, made gold a legal tender at 
 2^d. per grain, reducing the existing standard 
 about live per cent. At this rating, debts could 
 be paid cheaper in gold than in silver, and so the 
 silver coins went out of the country, leaving gold 
 to circulate alone. The silver, however, did not 
 leave without returns in exchange therefor. These 
 returns consisted mainly of manufactured goods, 
 and needlessly expensive wares. 
 
 The disappearance of silver could not be uc- 
 
 \\
 
 22 MONEY IN POLITICS. 
 
 counted for ; but was believed by the Court to be 
 due to the extravagance of the people, as shown 
 by their excessive importation of foreign goods. 
 It was therefore resolved by a large class of people 
 that, until times were better and money less scarce, 
 they would wear no article of foreign manufac- 
 ture — a panacea for evils of this kind, which has 
 not been restricted to the last century, or to the 
 colony of Massachusetts Bay. 
 
 This was the first effort in America to establish 
 a double standard of values. It resulted, as have 
 all such efforts, in retaining the metal overrated 
 in value, and driving the other from circulation. 
 The scarcity of silver led to the agitation of the 
 issue of more paper money, but without immediate 
 success.
 
 CHAPTER V. 
 
 REVOLUTIONARY ISSUES. 
 
 Meaxwiiile events were shaping for a radical 
 change in the political organization of the colonies. 
 The mother country, owing to her incessant wars 
 with France, was pressed for means, and as con- 
 siderable expense had been incurred from time to 
 time in protecting her American possessions from 
 the invasion of the French and Indians, her Par- 
 liament levied a tax on the colonies to obtain the 
 repayment in part of such expenditures. Against 
 this policy there was a stout resistance on the part 
 of the colonies, which had not before been subjected 
 to a direct tax of the kind, in view of which Par- 
 liament receded from all its purposes, except to 
 impose a tax of twopence a pound on tea ; and as an 
 export duty of considerably more than that amount 
 on the articles shipped from England to the colonies 
 had just been taken off, the colonics could have no 
 especial cause of complaint as to the amount of the 
 tax. They appeared to be willing to recognize the 
 right of England to impose an export duty upon 
 any articles shipped to them and also to forbid
 
 24 MONEY IN POLITICS. 
 
 » their trading directly with other nations. Such 
 restrictions were considered as necessary to regu- 
 late trade, but to impose a direct tax was an in- 
 dignity which they would not tolerate. A cry was 
 therefore raised of" no taxation without representa- 
 tion" — a principle in political economy which did 
 not exist in the colonies themselves, did not exist 
 in the mother country, in fact never did and 
 probably never will in reality exist in any politi- 
 cal community. But it proved a powerful rallying 
 cry, and Dec. 16, 1773, three cargoes of tea from 
 England, ready to be landed in Boston, were 
 thrown overboard in the harbor; and war was 
 inevitable. Delegates from the several colonics 
 united promptly in forming what was called the 
 " Continental Congress." 
 
 On the 19th of April, 1775, a conflict of arms 
 occurred at Lexington, Massachusetts ; and so 
 prompt was this Congress, not only in organizing 
 its armies to meet the invading foe, but also in 
 providing means for carrying on the war, that be- 
 fore the end of that month it had issued two mil- 
 lion dollars of Continental bills, in effect lesral 
 tender in the payment of debt. 
 
 If ever the issue of paper money can be justified, 
 the action of Congress in this matter should not 
 be censured. A large portion — probably a ma- 
 jority — of the people of the several colonies had 
 inaugurated the war, to which they subsequently
 
 REVOLUTIONARY ISSUES. 25 
 
 pledged their lives, fortune, and sacred honor," 
 and were earnest in its prosecution. Unfortunately 
 they had not given to Congress the power to levy 
 tuxes to meet expenses. Congress therefore could 
 not, and the colonies would not, levy a tax to sup- 
 port the war ; and there was no other alternative 
 for Congress but to issue these bills or to abandon 
 the contest. 
 
 For a time the bills floated at par with coin, and 
 to the colonics the first instalment of paper was as 
 if some one had given them two million silver 
 dollars. The urgent necessity for means was thus 
 temporarily bridged over ; and the plan of issuing 
 bills seemed so easy a method of obtaining reve- 
 nue, that all propositions for taxation were aban- 
 doned ; and other issues of bills rapidly followed. 
 By the end of the year they amounted to 
 $19,000,000. Before that time, however, the coin 
 had left the country, and the bills were depre- 
 ciated considerably below par in specie. 
 
 Congress implored the colonies in the most fer- 
 vent manner to impose a tax to carry on the war ; 
 but the colonies, familiar with the issue of notes, 
 and having before them the apparently successful 
 policy of Congress in issuing I hem, took no steps 
 towards taxation ; but, instead, commenced issuing 
 bills of their own — amounting in 1775 to nearly 
 $3,000,000, of which Virginia issued $875,000. 
 
 The policy of no taxation, and of issuing bills
 
 26 MONEY IN POLITICS. 
 
 of credit, was now thoroughly established ; and 
 each colony, fearing some other one might secure 
 an advantage, hastened to put in circulation the 
 greatest possible amount of bills in the least pos- 
 sible time. Congress also kept its presses running 
 with such rapidity that bills were issued consider- 
 ably in excess of the amount authorized, before the 
 machine could be stopped, putting into circulation 
 in the course of five years about $241,000,000. 
 The several colonies found, when counted, that 
 they had issued meanwhile, of their own bills, an 
 additional amount of over $210,000,000. 
 
 The Continental currency continued to depre- 
 ciate, as the issues continued to be made, but the 
 emissions authorized during 1778 amounted to 
 about $63,500,000. In December of that year 
 Congress published an address to the people, in 
 which it said : " We should pay an ill compliment 
 to the understanding and honor of every true 
 American, were we to adduce many arguments to 
 show the baseness or bad policy of violating our 
 national faith, or omitting to pursue the measures 
 necessary to preserve it. A bankrupt, faithless 
 republic would be an invalid in the political world. 
 . . . Apprised of this consequence, knowing the 
 value of national character, and impressed with a 
 due sense of the immutable laws of justice and 
 honor, it is impossible that Americans should think 
 without horror of such an execrable deed."
 
 REVOLUTIONARY ISSUES. 27 
 
 The emissions of 1779, however, amounted to 
 $140,000,000, having a coin value, according to 
 Mr. Jefferson, of nearly $7,329,278. 
 
 In March, 1780, this same Congress authorized 
 silver to be received for paper at the rate of one 
 to 140, forgetful of all its brave words ; and also 
 provided for the redemption of the money in cer- 
 tificates which seemed to be equally worthless. 
 This action did not check the depreciation of the 
 currency, but notwithstanding the depreciation it 
 continued to circulate north of the Potomac until 
 the end of 1780. "In Virginia and North Caro- 
 lina," says Mr. Jefferson, " it continued a year 
 longer, and then expired without a groan ; " or as 
 Dr. Bronson says, with a pathos very touching, 
 "it gently fell asleep in the hands of its last 
 possessor."
 
 CHAPTER VI. 
 
 cm BONO? 
 
 TnE country being now practically without a 
 circulating medium, Congress was at its wits' end to 
 provide one. But, while Congress hesitated, silver 
 coin came into circulation as if by magic. This 
 might have been expected ; in fact there never was 
 any good reason for its disappearance from the 
 country. The privateers fitted out by the colonies 
 brought into our ports valuable prizes, adding great 
 wealth to the merchants in our cities. The farmers 
 in the country found in the British army a ready 
 purchaser for all surplus products of their farms 
 at enhanced prices, for which they received coin, 
 and as soon as the channels of trade were relieved 
 of paper money, specie naturally and readily took 
 its place, although Cornwallis had not surrendered, 
 and independence was far from being achieved. 
 
 The expenses of the war from that time onward 
 were met by the proceeds of loans obtained in 
 France and Holland, which were successfully 
 negotiated and honorably paid at maturity. 
 
 r. Throughout all the struggle there is evidence of 
 but little, if any, revenue having been raised by 
 28
 
 CUI BONO? 29 
 
 direct taxation. Paper money and other forms of 
 indebtedness, together with the $10,000,000 of coin 
 received from foreign loans, constituted the entire 
 resources of the colonies with which they con- 
 ducted the War of Independence to a successful 
 termination. 
 
 But the issue of the paper money, and its sub- 
 sequent practical repudiation, was in effect a tax- 
 levied upon the people equal to its value in specie 
 at the time of its emission. This value has been 
 estimated by Jefferson at about $74,000,000. And 
 who paid this sum? . As the notes gradually be- 
 came of less and less value, each holder of them 
 suffered a tax equivalent to the amount of their 
 depreciation while in his hands. Thus, if a person 
 received $1,000 of notes equivalent at the time to 
 $ ( J00 in specie, and, retaining them in his hands 
 in the meantime, afterwards paid them out when 
 worth but $800 in specie, he paid a tax to the 
 government in the transaction of $100. 
 
 This method of imposing a tax could hardly be 
 outdone in the injustice of its operation. The pa- 
 triotic men who sympathized with the little band 
 struggling for independence, and the soldiers who 
 fought the battles, took the money as a patriotic 
 duty, trying as best they knew to maintain its value. 
 It was in their hands mainly that the depreciation 
 occurred, and by them that the loss was suffered. 
 The speculator, the camp follower, and the tory,
 
 30 MONEY IN POLITICS. 
 
 either refused it altogether, or took it and disposed 
 of it at such a rate as to secure a profit. 
 
 If, instead of issuing this money, a tax had been 
 levied by the colonies mainly upon the property of 
 the country, the exaction would have fallen where 
 it could have been easily borne. 
 
 In truth, the wealth of the country had but 
 little sympathy with the men who projected or 
 were carrying on the war of the rebellion. The 
 Hon. Charles Biddle, one of the foremost men of 
 the time, a friend of Franklin, and thoroughly in 
 sympathy with the war, who says, in his recently 
 published autobiograplry, that as a young man he 
 was present at the State House in Philadelphia on 
 the fourth of July, 177(3, when the Declaration of 
 Independence was read, relates that a large share 
 of the intelligence and nearly all the wealth of 
 Philadelphia was enlisted on the side of the mother 
 country, and that nearly half of the people and 
 nearly all the wealthy citizens of New York city 
 were in like sympathy. 
 
 Their objection to the war was based upon what 
 they believed to be patriotic feeling. Even in case 
 of success they feared the colonies would not be 
 able to unite in one nation ; but would be broken 
 into thirteen States, without any standing among 
 the nations of the earth, and without ability to 
 maintain their own independence. 
 
 Recognizing, as we must, their sincerity of pur-
 
 CUI BONO? 31 
 
 pose and the strong reasons they gave for sympa- 
 thizing with the mother country, there still remains 
 the fact that a majority of the colonists were strug- 
 gling for independence, and that they had the right 
 to tax the wealth of the land to aid them in their 
 cause, even if they could not command personal 
 aid and sympathy from its owners. 
 
 Had it not been for the adoption of paper money, 
 there would have been no recourse for the colonists 
 but taxation, and with a tax levy judiciously 
 planned, and courageously enforced, the war could 
 not have lasted long, and the horrors of Valley 
 For^e would have been unknown. 
 
 As it was, the patriotic men, drawn largely from 
 the lower walks of life, not only achieved for us 
 our independence, but, through their unnecessary 
 deprivation, met by far the larger part of the ex- 
 penses of the conflict borne Irv that generation. 
 So far as the necessity of providing a circulation 
 was concerned, this policy was certainly uncalled 
 for. The fact that, long before the war was over, 
 there was an abundance of silver in circulation 
 clearly indicates that at no time, with a proper 
 financial policy, would the colonists have been 
 embarrassed for the want of a sound circulating 
 medium. 
 
 Of the ability of the colonies to have met by 
 taxation the expenses of the war, there can be 
 little doubt. Mr. Jefferson estimates I hat the
 
 32 MONEY IN POLITICS. 
 
 entire cost of the eight years of war was $140,- 
 000.000 in specie. Deducting therefrom $10,- 
 000,000 obtained through foreign loans, and we 
 find that to have met the annual expense of 
 the war by taxation would have required but 
 about $16,000,000. The population of the col- 
 onics at that time was not less than 3,000,000, 
 and consequently a tax each year equivalent to 
 the rate of $5.25 per capita, levied upon prop- 
 erty and rigorously collected, would have met 
 the entire payment of the war expenses ; and 
 any hardships attending its payment would have 
 been thrown upon the wealth of the country, 
 which so largely failed to lend a helping hand. 
 This rate of taxation cannot be considered ex- 
 cessive. The country has been subjected since 
 to a greater rate of taxation. During the four 
 years following our late civil war, the govern- 
 ment collected an equivalent of about $300,000,- 
 000 per annum in specie ; equivalent to a per 
 capita tax of about $8.25, and yet no especial 
 hardships resulted. 
 
 But the colonists, with a mistaken financial 
 policy, no more hesitated to challenge the law of 
 nature than to meet the forces of George III. 
 Victorious as they were over the forces of his most 
 powerful Majesty, they were unable to resist the 
 silent but ever present force which ultimately sent 
 their paper dollars to the waste basket.
 
 CHAPTER VII. 
 
 MOXEY OF THE CONFEDERATION. 
 
 Tiie Continental Congress continued its session 
 after the close of the war, but indulged in few ex- 
 periments with paper money, though propositions 
 for further emissions were agitated in several of* 
 the colonies. 
 
 In 1781 Congress instructed the Superintendent 
 of Finance, Robert Morris, to report to it a table 
 of rates at which the different foreign coins should 
 be received at the public treasury. This informa- 
 tion was important and necessary, as the country 
 had yet no coinage of its own, and the relations of 
 the several foreign coins were not well understood, 
 except among dealers in bullion. 
 
 Morris promptly replied to the resolution, but 
 gave none of the information asked for, stating, 
 however, that the resolution suggested to him 
 something else: and that was, the various stan- 
 dards of values existing throughout the colonies; 
 and after discussing at length the lamentable con- 
 fusion resulting therefrom, he recommended that a 
 mint be established for a new and uniform coinage, 
 
 33
 
 34 MONEY IN TOLITICS. 
 
 expressed in the terms of a unit of value, which 
 should be fixed by law. 
 
 Several months later he further replied to Con- 
 gress, again recommending the establishment of a 
 mint; meanwhile all foreign coins to be received 
 according to their weight and fineness, their values 
 to be expressed in the terms of dollars, of which 
 values he submitted an estimate. "I take," he 
 says, " the liberty to observe that this estimation 
 of coins is founded upon the quantity of alloy 
 which they respectively contain." 
 
 On Feb. 21, 1782, Congress approved of his 
 suggestion to establish a mint; and directed him 
 to report a plan for conducting the institution. 
 
 In compliance therewith, he recommended the 
 adoption of the Spanish dollar, containing, as he 
 believed, three hundred and seventy-three grains 
 of pure silver, as a standard ; and thought it would 
 be necessary to divide it into one thousand four 
 hundred and forty parts, so that the pennies of the 
 several States might find therein an exact expres- 
 sion of their respective values. He proposed two 
 copper coins, one containing eight and the other 
 live of these units. The silver value of the unit 
 would be one-fourth of a grain. Proceeding 
 decimally, one hundred would be twenty-live 
 grains, which was to be the lowest of the silver 
 coins; "and this might be," he says, "called a 
 cent;" but he gives no reason for this possible
 
 MONEY OF THE CONFEDERATION. 35 
 
 nomenclature. Probably from these crude and 
 impracticable suggestions was evolved our decimal 
 currency, based upon the standard proposed — the 
 Spanish silver dollar, though this coin was subse- 
 quently reduced in weight. 
 
 In 1785, the Congress of the confederation 
 adopted this coin as the ideal unit of value ; and 
 the following year decided that it contained 375.64 
 grains of pure silver. The amount of silver con- 
 tained in this piece had before been subjected to 
 reductions. In 1707 this dollar was declared by 
 the English mint to contain 386| grains ; and in 
 1772 the amount of pure silver in it had been 
 fixed by law at 377] grains. Probably the coins 
 upon which Morris based his estimate had been 
 some time in circulation and were somewhat worn 
 by use. 
 
 The same act which fixed the value of the dollar 
 provided for a decimal subdivision in coins, and 
 for the coinage of the dime (10c), double-dime 
 (20c.) and half dollar (50c.) containing proper 
 proportions of silver. The policy of establish- 
 ing a decimal currency in this country was by this 
 act authoritatively determined upon. 
 
 The same enactment authorized the coinage of 
 the gold eagle, containing 246. 2G8 grains of fino 
 gold, and a half eagle of proportionate weight of 
 the same fineness, and also of the copper cent and 
 half-cent. These subdivisions of the dollar were
 
 36 MONEY IN POLITICS. 
 
 probably due to suggestions of Mr. Jefferson, 
 whose memorandum, without date, contains recom- 
 mendations to that effect. The ratio of gold and 
 silver in these coins, it will be seen, was 1 to 
 15.253, while the market valuation of the two 
 metals was 1 to 14.89. The reason for thus 
 undervaluing silver coin cannot at this day be 
 ascertained. Silver had always been relied upon 
 for currency throughout the colonies ; but under- 
 valued, as provided in this enactment, it would 
 soon have disappeared from circulation. 
 
 The same Congress also authorized a mint, and 
 the accounts of Mr. Morris show that he expended 
 about $2,000 thereon, and prepared a few dies for 
 the copper coins ; but no coins were issued. The 
 confederation, however, was making way for the 
 establishment of the present form of government, 
 and the coinage act was of no effect.
 
 CHAPTER VIII. 
 
 THE MONEY OF THE CONSTITUTION. 
 
 In 1787 the new constitution was framed. It 
 provided that no State should coin money, emit 
 bills of credit, or make anything but gold or silver 
 coin a tender in payment of debt ; also that Con- 
 gress should have power to coin money and regu- 
 late the value thereof. In framing: this document 
 a proposition was made to give Congress power to 
 emit bills of credit, but it received only two votes. 
 Evidently the delegates had too fresh a recollec- 
 tion of the appalling results which had followed the 
 issue of bills under the confederation ; and stand- 
 ing on the wreck of more than four hundred mil- 
 lions of paper money they had little sympathy 
 with any proposition for further experiments of 
 the same kind. There can be no doubt that the 
 framers of the constitution contemplated only a 
 hard money currency for the future of this country. 
 
 The constitution was adopted in 1789, and Con- 
 gress, in its firsl session thereunder, declared that 
 the treasury should receive only coin in payment 
 of public dues, and iixed the rates at which such 
 coin should be received. 
 
 37
 
 38 MONEY IN POLITICS. 
 
 Mr. Hamilton was made Secretary of the Treas- 
 ury, and in response to a resolution of the House 
 of Representatives, in May, 1791, he transmitted 
 to that body his plan for the establishment of a 
 mint, submitting therewith an exhaustive discus- 
 sion of the policy to be pursued in future coinage 
 operations. 
 
 The pound was still the unit of account, though 
 of different values in the several States, but it was 
 not easy to say what was the unit of coins. In 
 adjusting foreign exchanges, preference appears to 
 have been given the silver dollar, but even this 
 piece had no well-determined weight or fineness. 
 Changes in it, as before stated, had been made 
 from time to time, and the value of any one piece 
 depended, therefore, somewhat on the date of its 
 coinage. There was also in circulation the Seville 
 dollar of 386 grains, in which many contracts per- 
 taining to land were understood to have been made. 
 A reform of the currency seemed absolutely neces- ^ 
 sary, and, after much discussion, Hamilton con- \ 
 eluded that the unit in the coins of the United 
 States ought to correspond with 24| grains of pure 
 gold, and 371£ grains of pure silver, each answer- 
 ing to a dollar in the money of accounts. 
 
 As the principal difficulty in the existing coinage 
 was, he admitted, the presence of three or four 
 coins each bearing the name of a dollar, but of 
 a different weight and fineness, it seems strange
 
 THE MONEY OF THE CONSTITUTION. 39 
 
 that he should have attempted to cure this evil 
 by proposing the issue of two more dollars, the 
 silver one in weight unlike that of any already 
 existing, and the gold one bearing a relation in 
 weight of 1 to 15 to that of silver ; thus giving 
 the country two more dollars to select from in 
 computing their exchanges and keeping their 
 accounts. 
 
 Congress, however, acted upon his suggestion 
 and authorized a mint, and the coinage of gold and 
 silver pieces with the relation recommended. This 
 act was approved April 2, 1792, and few acts more 
 far-reaching in effect have ever found place upon 
 our statute books. Upon it, thereafter, were to 
 depend the relation of debtor and creditor, the 
 expressed values of property, and all the intricate 
 relations of prices and labor which were to be 
 thereby influenced, beneficially or otherwise. 
 
 He admitted that if the ratio between the metals 
 should not prove to be the commercial one, there 
 was hope of retaining only the overvalued metal 
 in circulation.. He asserted his belief, however, 
 that 1 to 15 would prove to be the commereial 
 ratio. Yet England, with the two metals legally 
 valued at 1 to 15.21, had not been able for fifty 
 years to bring out any gold, and in no market 
 of the world did the ratio proposed by Hamilton 
 exist.
 
 40 MONEY IN POLITICS. 
 
 Gold was overvalued, and consequently the 
 silver dollar, being of less value in the commercial 
 world than any of the other dollars then existing, 
 became the standard of value and the unit of 
 account, which place it held until 1834. 
 
 It seems almost a discredit to the genius of 
 Hamilton to believe that he thought gold would 
 circulate while thus erroneously valued. History 
 was full of precedents to the contrary, and the 
 selfishness of man, which leads him to seek the 
 cheaper of two commodities with which to pay his 
 debts, can be relied upon as a constant factor in 
 problems of this kind. 
 
 In the absence of gold from our circulation, 
 silver could not be expected to meet the require- 
 ments of commercial transactions in a rapidly 
 growing country. Some method of making ex- 
 changes involving large amounts was necessary, 
 and, whatever may have been the mistakes of 
 Hamilton in computing the metallic ratio, he cer- 
 tainly did not lack foresight in anticipating the 
 difficulties likely to arise from the need of a less 
 cumbersome medium than silver coin. In Decem- 
 ber, 1790, he had recommended to Congress the 
 establishment of a national bank, with a capital 
 of $10,000,000, with authority to issue notes 
 which should be receivable in payment of all dues 
 to the United States, and his recommendations
 
 THE MONEY OF THE CONSTITUTION. 41 
 
 were transferred to the statute book, as they 
 usually were, without material change. The 
 notes were therefore issued and made receivable 
 in payment of public dues. So soon did the 
 good ship of state drift from her moorings into 
 the tempestuous ocean of paper money.
 
 CHAPTER IX. 
 
 WILD-CAT CURRENCY. 
 
 The several States, being prohibited by the 
 Constitution from emitting bills of credit, soon 
 devised a scheme by which money might be made 
 "cheap," and everybody have some of it. New 
 England took the initiative. 
 
 Massachusetts, in 1784, had granted a charter 
 to a bank, with power to issue bills without re- 
 straint. Soon after the adoption of the Consti- 
 tution other banks sprang into existence in that 
 section, and, either under the authorit} r of their 
 charters, or in disregard of them, flooded the 
 country with bills which came to be as worthless 
 as those of the Continental Congress. Silver dis- 
 appearing from circulation, bills as low in denomi- 
 nation as twenty-live cents were issued, on account 
 of the scarcity of coin for change. 
 
 Rhode Island, whose colonial history was redo- 
 lent of bounties, export duties, and industrial 
 loans, outdid her own record in explosive financial 
 contrivances. 
 42
 
 WILD-CAT CUEEENCY. 43 
 
 In 1784 the Farmers' Exchange Bank of 
 Gloucester, in that State, was incorporated, the 
 capital stock to consist of 2,000 shares of $50 
 each, payable in seven instalments in gold or 
 silver. Some of the stockholders paid in a part 
 for their shares, and gave their notes for the re- 
 mainder. The directors paid in no money what- 
 ever, giving their individual notes for the stock ; 
 and the bank commenced operations with only 661 
 shares issued, on which there had been received 
 any specie, and the total amount of specie re- 
 ceived was $11,806.61, most of which was at 
 once drawn out on loans made to the directors. 
 The bank continued to do business for four years, 
 when the stockholders transferred to one Andrew 
 Dexter, Jr., of JBoston, a majority of the stock, 
 he borrowing from the bank, on his personal note, 
 the amount necessary to pay for it. This loan he 
 never repaid. 
 
 Dexter now having control of the bank, issued 
 at divers times in the course of the year its bills 
 in the amount of $7(50,285. The only restraint he 
 suffered in the issue of the hills was the physical 
 inability of the cashier to sign them; but to facili- 
 tate the issue, this officer went into the country, 
 where he would be undisturbed, and spent his 
 entire time in signing his name to the bills. 
 
 For the enormous sum issued, Dexter gave his 
 receipt to the hank, stating that as agent for the
 
 44 MONEY IN POLITICS. 
 
 bank be would invest it advantageously. Subse- 
 quently be took up bis receipt, and gave bis note 
 for tbe whole amount, in form as follows : " I, 
 Andrew Dexter, Jr., do promise tbe President, 
 Directors, and Company of tbe Farmers' Exchange 
 
 Bank, to pay them, or order, $ , in two years 
 
 from date, with interest at two per cent per annum ; 
 it being, however, understood that said Dexter 
 shall not be called upon to make payment until be 
 thinks proper, he being the principal stockholder, 
 and best knowing when it will be proper to pay 
 the same." It is unnecessary to add that he has 
 not yet thought proper to pay the amount. 
 
 In 1809 the crash came. Such was the confu- 
 sion in the accounts of the bank, that the precise 
 amount of bills outstanding could not be .ascer- 
 tained ; but the committee appointed by the legis- 
 lature to investigate its affairs estimated the amount 
 to be $580,000. The specie on hand at that time 
 amounted to $86.46. 
 
 In the same year other banks in New England 
 went to the wall, revealing that they had been en- 
 gaged in transactions as disreputable as those of 
 the Gloucester bank. One bank in Massachusetts 
 was found to have in its vaults only $40 in specie ; 
 and another not any. One bank in New Hamp- 
 shire was in nearly the same situation, with several 
 thousands of bills outstanding. Widespread dis- 
 aster followed.
 
 WILD-CAT CURRENCY. 45 
 
 The legislature of Massachusetts, to avoid like 
 evils in the future in that State, on January 1, 
 1810, fixed a penalty of two per cent a month, 
 payable by the bank to bill-holders, for failure or 
 refusal thereafter on its part to redeem its bills on 
 presentation. This proved a salutary restriction. 
 
 South of New York, banks were fewer, and 
 there was less disturbance. The issues of the 
 National Bank appeared to have been well sus- 
 tained, and they kept in check undue issues by 
 other and weaker banks. Its charter expired, 
 however, in 1811 ; and though the affairs of the 
 bank appeared to have been judiciously managed, 
 Congress refused to renew its charter. The power 
 the bank had exercised in restraining the issues of 
 smaller banks had made it unpopular in many 
 localities, and the advisability of maintaining an 
 institution of such character had become an irritat- 
 ing question in national politics. The same in- 
 fluences which defeated its charter before Congress 
 operated successfully in the State legislature, to 
 which it had made application for a new charter, 
 and the bank was therefore obliged to wind up its 
 affairs. 
 
 The field being now cleared, symptoms of mania 
 for bank issues began to develop in the Middle and 
 Western States. In 1814 the legislature of Penn- 
 sylvania granted forty-one charters for banks (over 
 the veto of the governor) , with an aggregate capi-
 
 46 MONEY IN POLITICS. 
 
 tal of $17,000,000, of which only one fifth part 
 was required to be paid in. Of the number 
 authorized thirty-seven went into operation, the 
 stockholders in many instances giving their notes 
 for the amount due on their shares. These banks 
 had but a fitful and ephemeral existence, fifteen of 
 them expiring within four years of their organiza- 
 tion, hopelessly insolvent. 
 
 In 1814 all the banks of the country outside of 
 New England suspended paying specie for their 
 bills. No particular cause can be assigned for 
 the suspension, except the war, and as the war 
 was unpopular in New England the people of that 
 section would accept no excuse of that kind. 
 
 In the Middle and Western States a rapid de- 
 preciation in the volume of currency took place, 
 and the periodicals of that time are loud in com- 
 plaints of high prices in those sections, and the 
 greed of the blue-light federalists of New England, 
 which had drawn from them all their specie. 
 
 With the return of peace came additional issues 
 of depreciated bank paper, and the abundance of 
 money seemed very gratifying to a great mass of 
 the people. Never before had there been in the 
 countiy such an appearance of prosperity. The 
 unequal value of the notes in the different localities 
 seemed the only embarrassment ; but wealth was 
 accumulating so rapidly that this annoyance was 
 not considered serious, and it was thought that,
 
 WILD-CAT CURRENCY. 47 
 
 once accustomed to it, the difficulties would 
 vanish. 
 
 In 1815, valuable cargoes of imported goods 
 arrived in Philadelphia, and were eagerly sought 
 for and rapidly sold. Carey called it the " golden 
 age " of Philadelphia, and sneered at the opinion 
 of the superficial reasoner who thought the banks 
 were overtrading. 
 
 About this time the mania for paper money had 
 extended to the western frontier. The State of 
 Kentucky incorporated forty new banks, with an 
 aggregate capital of $10,000,000, and no provision 
 for the payment of their notes, of which an enor- 
 mous amount was issued. Most of these banks 
 failed within a year; still by many writers the 
 period was regarded as the golden age of the 
 West. 
 
 In August, 1818, twenty thousand persons in 
 Philadelphia were begging employment, and the 
 question on Market Street was, not who had broken 
 the day before, but who yet stood. In Baltimore 
 and other cities the distress was still greater. 
 Business was virtually at a standstill, and property 
 unsalable at any price. The papers of the day 
 were filled with notices of sheriffs' sales. After 
 all, the golden age had proved a paper one, and 
 not even gilt-edged at that. The evils resulting 
 might have been postponed, but they could not 
 long have been avoided ; and the postponement
 
 48 MONEY IN POLITICS. 
 
 of the evil day would probably have intensified 
 rather than diminished the resulting distress. 
 
 Meanwhile the over-issues of the bills of the 
 bank had driven all the eoin into New England, 
 where, being in excess of the amount needed 
 for circulation, it had been shipped out of the 
 country, leaving the south and west almost wholly 
 destitute of a circulating medium ; and trade by 
 barter was resorted to for want of a better 
 medium. In those days of slow-sailing ships, and 
 of stage-coaches, a readjustment of such a financial 
 disturbance could not at best have been quickly 
 accomplished. Such was the demand for money 
 that a barrel of flour would be given for one dollar 
 of specie, and in Kentucky a gallon of whiskey 
 was willingly exchanged for fifteen cents. The 
 courts refused to Grant relief on contracts calling 
 for dollars, and the obligors were consequently 
 ruined. 
 
 About this time specie resumption is said to 
 have taken place. But a large majority of the 
 banks issuing notes were out of existence, and 
 if those remaining can be said to have redeemed 
 their notes in coin, it would seem that there are as 
 many degrees of redeemability in a bank as of 
 conscientiousness in man. 
 
 The Bank of Darien, Georgia, among others, 
 asserted that it had resumed specie payments, but 
 any person making demands on it for payment of
 
 WILD-CAT CURRENCY. 49 
 
 its notes was required, in the presence of the 
 cashier and at least five directors, to make an oath 
 that each and every bill presented was his own, 
 and that he was not an agent for any other person ; 
 and to pay on the spot, $1.37£ in specie as a fee 
 on every bill presented, and unless he could find 
 the cashier and five directors together he could not 
 make the oath at all. The newspapers quoted the 
 bills of this period at a discount ranging from five 
 to twenty-five per cent, except in the immediate 
 location of the bank issuing them. Yet all the 
 1 tanks were said to have resumed specie payment. 
 The rapid rise in the value of the rich lands in the 
 valleys of the Ohio and Mississippi, which were 
 being rapidly settled, furnished such margins of 
 profit that the evils of the depreciated and ever- 
 changing currency could be endured. While in the 
 east some restraint in the issue of bank bills was 
 maintained, in the west and south there was an issue 
 of these lulls, known as " wild-cat currency." 
 Many of the banks issuing them had but a nominal 
 capital, consisting mainly of notes given by the 
 stockholders in payment of their shares. In other 
 cases charters of banks authorized by the New 
 England and Southern Slates were disposed of to 
 non-residents, who organized banks of little or no 
 capital, and the citizens of remote cities suffered 
 "Teat loss from the utter worthlessness of the issues. 
 The various ebbs and Hoods of currency which alter-
 
 50 MONEY IN POLITICS. 
 
 nately stimulated and depressed business until 
 1836 need not be recounted here. The country 
 prospered, however, despite the monetary evils. 
 
 In 1836 the President ordered that only specie 
 should be received in payment for land. This 
 checked the delirium somewhat. Congress, in the 
 following session, passed a bill annulling the pro- 
 visions of this specie order. The President, how- 
 ever, did not sign it, and as he received it only 
 two days before the close of the session, it failed 
 to become a law. This specie order remained in 
 force until 1862, and was fruitful of naught but 
 good results. 
 
 The expansion of the bank issues and loans of 
 1836 and of the few preceding years could have but 
 one result, and in 1837 the crash came. The State 
 1 tanks suspended, many of them hopelessly in- 
 volved. The explosion was inevitable, and came 
 none too soon. Several Boston banks even be- 
 came insolvent, and the Massachusetts country 
 banks were but little better, their issues amount- 
 ing in some cases to twenty-live to one of specie. 
 The New York banks put forth vigorous efforts to 
 resume, and were generally seconded in their 
 efforts by the banks of the Western and Middle 
 States; and by the end of 1838 resumption was 
 effected by most of the flanks in the country, and 
 business was again in its natural channels. 
 
 After the reaction of 1839, the country passed
 
 WILD-CAT CURRENCY. 51 
 
 through two years of calm existence. Trade lan- 
 guished, prices were low, and few enterprises 
 proved remunerative ; yet the balance of trade 
 with foreign nations was largely in its favor, and 
 the importation of specie had largely increased. 
 The country was not dead, but only taking a needed 
 rest to recuperate its energies after a monetary 
 debauch of half a century. Congress, however, 
 could not let the patient alone, but gave it a tonic 
 in the shape of a protective tariff. The patient 
 recovered, and the political doctors have not failed, 
 in all the subsequent advertisements of their nos- 
 trum, to mention the wonderful cure. 
 
 During the fourteen years following, the country 
 passed through alternate periods of gloom and 
 hope. The w T ar with Mexico brought about a 
 financial "squeeze," but caused no special monetary 
 disturbance. Again immigration began to flow 
 
 O O o 
 
 largely into the Western States, and new enter- 
 prises were pushed much beyond the need of the 
 settlers. In the summer of 1857 the Ohio Life 
 and Trust Company, the credit of which had been 
 very high, failed for several millions of liabilities. 
 This failure gave a shock to the exchange in New 
 York, and stocks fell off from thirty to fifty per 
 cent. The banks were caught with a large amount 
 of issues and loans outstanding, against a very 
 small reserve of spceie. The banks of the New 
 England States held a reserve against deposits and
 
 52 MONEY IN POLITICS. 
 
 issues of only about eight per cent ; and the banks 
 throughout the country held on an average only 
 about sixteen per cent. With so small a reserve 
 there can be no surprise that the banks were unable 
 to meet at once the demands which were made 
 upon them, although in the end most of them 
 proved to be solvent. 
 
 The State of New York had especially guarded 
 against the suspension of specie payments by its 
 banks. The issues of their notes were required to 
 be secured by deposits of State stocks in the hands 
 of a o-overnment officer, and the constitution of 
 the State itself provided that no law should be 
 passed authorizing the banks, under any circum- 
 stances, to suspend specie payments. Yet the 
 banks did suspend, and the judges of the court 
 agreed not to issue any injunctions to prevent such 
 action, unless there was some evidence that ihe 
 banks were acting fraudulently. 
 
 The panic which ensued created considerable 
 distress in the money centres, but the country was 
 generally prosperous, and early in the next year 
 the banks throughout the country had resumed 
 payments of their bills in specie, not to suspend 
 again until the great events of the coming civil 
 war pressed heavily upon them. With the civil 
 war came a radical change in the monetary system 
 of the country.
 
 CHAPTER X. 
 
 THE TREASURY CORNERED. 
 
 In 1814 the country was at war with Great 
 Britain. Anticipating the revenues for 1813, Con- 
 gress, the preceding year, authorized the issue of 
 interest-bearing Treasury notes, which should be 
 received in payment of all dues to the govern- 
 ment, the interest to be computed at 1\ cents per 
 day on $100. The notes were not a legal tender, 
 but might be paid to any one willing to take 
 them. These were the first notes intended to 
 circulate as money which were issued under the 
 present Constitution. Fifty millions were issued. 
 The advocates of their issue claimed that the 
 scheme was only a method of discounting the 
 revenue, and so, in fact, was only another form 
 for a loan ; but the notes had a considerable cir- 
 culation as money. 
 
 The government, hesitating to levy a tax, bor- 
 rowed what it could from the banks outside of 
 New England. The revenues were further antici- 
 pated by additional issues of Treasury notes, all 
 of which bore interest except that portion of the
 
 54 MONEY IN POLITICS. 
 
 loan issued in 1815 of less denomination than 
 $100. These small notes were evidently designed 
 to supplant the depreciated bank-notes in circula- 
 tion. No one was compelled to take them, but 
 they circulated as money, and were, like the 
 interest-bearing notes, receivable in payment of 
 dues to the government. 
 
 The whole country was now embarrassed by 
 the different values of the currency afloat. The 
 Treasury Department was perplexed in con- 
 ducting the fiscal affairs of the government. It 
 was compelled to accept payment of duties and 
 taxes in the legal currency of the place of pay- 
 ment. It attempted to accept only notes which 
 were accepted at par in the locality where re- 
 ceived, but the depository banks in which the 
 accounts were kept took advantage of this re- 
 striction and credited the Treasury with only 
 their own notes, at par. They received, however, 
 the notes of other banks, but held them as special 
 deposits, constituting a discredited fund upon 
 which the Treasury drew, only to provoke the 
 wrath of the payee of the check, to whom the 
 government owed a just debt. With every bank 
 the Treasury was obliged to keep four accounts, 
 to wit : — 
 
 1st. An account of cash, meaning, in the ab- 
 sence of coin, legal currency. 
 
 2d. An account of special deposits of bank-
 
 THE TREASURY CORNERED. 55 
 
 notes, being notes issued by banks other than the 
 depository. 
 
 3d. An account of special deposit of Treasury 
 notes bearing interest. 
 
 4th. An account of deposits of small Treasury 
 notes not bearing interest. 
 
 The Secretary of the Treasury naively remarked 
 that, in selecting the funds from which the govern- 
 ment obligations were to be paid, he considered 
 the character of the debt, and the person to whom 
 payment was to be made. 
 
 In such a condition of affairs, Mr. Dallas, Sec- 
 retary of the Treasury, recommended to Congress 
 the re-establishment of a national bank, with a 
 capital of $50,000,000, of which the government 
 should subscribe $20,000,000, in six per cent 
 stock ; the remainder to be subscribed by individ- 
 uals, $0,000,000 to be paid in specie, $6,000,000 
 in Treasury notes, and $18,000,000 in six per 
 cent stock. The bank was to be bound to loan 
 $30,000,000 to the government, and was author- 
 ized to suspend specie payments whenever the 
 President of the United States should deem such 
 suspension advisable. Its establishment was urged 
 mainly upon the ground that its notes, even if 
 depreciated, would furnish a, uniform currency, in 
 which exchanges might be paid, and the fiscal 
 operations of the government conducted. 
 
 A bill embodying the recommendations of the
 
 56 MONEY IN POLITICS. 
 
 Secretary was introduced in Congress, but the 
 House struck out the clause authorizing- the bank 
 to suspend specie payments, and modified several 
 other provisions of the bill. After considerable 
 delay and compromising between the two houses, 
 the bill passed ; but the President vetoed it, giv- 
 ing, as one reason, that the bank would be unable 
 to maintain specie payments. Fortunately the 
 war ended, and no further action was taken in the 
 matter. 
 
 The Treasury balance, though in amount much 
 in excess of any apparent necessity, consisted 
 mainly of unavailable bank-notes, and to meet 
 the payment of interest tailing due a loan had to 
 be issued. The Secretary, in his annual report 
 for 1815, thus portrays his troubles : — 
 
 "At the close of the last session of Congress, 
 the demands on the Treasury were interesting in 
 their nature, as well as great in their amount. 
 . . . The efficiency of the means which were 
 possessed for the liquidation of these demands 
 depended upon circumstances beyond the control 
 of the government. The balance of money in the 
 Treasury consisted of bank credits, lying chiefly 
 in the southern and western sections of the Union. 
 
 " The suspension of specie payments through- 
 out the greater portion of the United States, and 
 the consequent cessation of the interchange of 
 bank-notes and bank credits between the institu-
 
 THE TREASURY CORNERED. 57 
 
 tions of the different States, had deprived the 
 Treasury of all the facilities of transferring its 
 funds from place to place ; and a proposition 
 which was made, at an early period, to the prin- 
 cipal banks of the commercial cities on the line of 
 the Atlantic, with a view in some degree to restore 
 those facilities, could not be effected for the want 
 of a concurrence in the requisite number of banks. 
 Hence it has happened (and the duration of the 
 evil is without any positive limitation) that, how- 
 ever adequate the public revenue may be, in its 
 general product, to discharge the public engage- 
 ments, it becomes totally inadequate in the process 
 of its application, since the possession of public 
 funds in one part no longer affords the evidence of 
 a fiscal capacity to discharge a public debt in any 
 other part of the Union. 
 
 "From the suspension of specie payments, and 
 from various other causes, real or imaginary, dif- 
 ferences in the rate of exchange arose between 
 the several States, and even between the several 
 districts in the same State ; and the embarrass- 
 ments of the Treasury were more and more in- 
 creased, since Congress had not sanctioned any 
 allowance on account of the rate of exchange, and 
 the amount of the legislative appropriations was 
 the same wherever the legislative objects were to 
 be effected. But the Treasury notes partook of 
 the inequalities of the exchange in the transactions
 
 58 MONEY IN POLITICS. 
 
 of individuals, although the Treasury could only 
 issue them at their par value. The public stock, 
 created in consideration of a loan, also partook of 
 the inequalities of the exchange, although, to the 
 government, the value of the stock created, and 
 the obligation of the debt to be discharged were 
 the same, wherever the subscription to the. loan 
 might be made. 
 
 " Thus, notwithstanding the ample revenue pro- 
 vided and permanently pledged for the payment 
 of the public creditor, and notwithstanding the 
 auspicious influence of peace upon the resources 
 of the nation, the market price of the Treasury 
 notes and of the public stock was everywhere 
 far below its par or true value for a considerable 
 period after the adjournment of Congress, vibrat- 
 ing, however, with a change of place, from the 
 rate of seventy-five to the rate of ninety per cent. 
 Payments in bank paper were universally pre- 
 ferred, during that period, to payments in the 
 paper of the government ; and it was a natural 
 consequence that, wherever the Treasury failed in 
 procuring a local currency, it failed also in mak- 
 ing a stipulated payment. 
 
 "Under these extraordinary and perplexing 
 circumstances the great effort of the Treasury 
 was, 1st, to provide promptly and effectually for 
 all urgent demands, at the proper place of pay- 
 ment, and for the requisite amount of funds ; 2d,
 
 TIIE TREASURY CORNERED. 59 
 
 to overcome the difficulties of the circulating me- 
 dium, so far as it was practicable, so that no cred- 
 itor should receive more, and no debtor pay less, 
 in effective value, on the same account, than every 
 other creditor or every other debtor ; and, 3d, to 
 avoid any unreasonable sacrifice of the public 
 property, particularly when it must also be at- 
 tended with a sacrifice of the public credit. It 
 was not expected that this effort would everywhere 
 produce the same satisfaction and the same results ; 
 but the belief is entertained that it has been suc- 
 cessful in the attainment of its objects, to the ex- 
 tent of a just anticipation."
 
 CHAPTER XI. 
 
 THE SECOND UNITED STATES BANK. 
 
 Congress on the 10th of April, 1816, author- 
 ized a United States Bank at Philadelphia. The 
 charter was limited to twenty years, and the capi- 
 tal fixed at $35,000,000, $7,000,000 of which was 
 to be subscribed by the government, payable in 
 coin or in United States stocks ; the remainder by 
 individuals, one-fourth payable in coin, and three- 
 fourths in coin or United States stock. Branches 
 of this bank were authorized at several places, 
 and the notes of the bank payable on demand 
 were made receivable in all payments to the 
 United States. The moneys of the government 
 were to be deposited in the bank or its branches, 
 and the penalty imposed upon the bank for refus- 
 ing to pay its notes or deposits in coin, on de- 
 mand, was fixed at twelve per cent per annum, 
 until the amount due was paid. In consideration 
 of the privileges conferred by Congress, the bank 
 was to pay to the United States $1,500,000. It 
 went into operation in January, 1817, at perhaps 
 60
 
 THE SECOND UNITED STATES BANK. 61 
 
 the worst stage of the monetary troubles of that 
 period. From the outset it was surrounded by 
 difficulties. 
 
 In April, 1818, the amount of its discounts and 
 exchange balance had swollen to $13,000,000, but 
 it had been able to put into circulation less than 
 the amount of $10,000,000 ; not on account of any 
 disinclination of parties to receive the notes, but 
 because the president and cashier could not sign 
 as many as were wanted. Application was there- 
 fore made to Congress for authority for like 
 officers in the branch banks to sign notes, but 
 Congress refused, allesino; that such action would 
 prevent that uniformity of notes for which the 
 bank had been specially created. The bank, to 
 sustain itself, imported specie in exchange for the 
 funded debt it held, but, there being no demand 
 for it for circulation, it was exported by individu- 
 als as rapidly as imported by the bank, and at no 
 time was there an amount of over $3,000,000 in 
 its vaults. 
 
 In July, 1818, the bank began to curtail its 
 discounts and demand payment of all obligations 
 due from other banks, alleging that such action 
 was necessary on account of the premium on 
 specie. In three months and ten days a reduction 
 in discount was made amounting to $4,500,000, 
 mainly in the four principal cities. This sudden 
 contraction had a disastrous effect upon the mer-
 
 62 MONEY IN POLITICS. 
 
 chants, and through them upon the rest of the com- 
 munity. The bank also ordered that the mother 
 bank at Philadelphia should thereafter receive no 
 notes except its own ; and each one of the branches 
 no notes except those of that one branch. The 
 mother bank called upon the branch banks for the 
 payment of their respective obligations, and they 
 in turn had to call in their own loans sharply, 
 bringing great distress and many failures in busi- 
 ness. 
 
 About this time whisperings were heard that 
 Congress was coming to the relief of the country 
 in some mysterious way. Niles, in his Register of 
 October 3, intimated that a grand scheme was on 
 foot to keep the paper-mill going — nothing less 
 than the substitution of a paper currency as a 
 legal tender instead of coin. In his Register of 
 November 7 he says, — 
 
 " We have several times darkly hinted at a 
 great intrigue which was going on to relieve the 
 banking system, generally, and especially to sub- 
 serve the grand views of the Bank of the United 
 States. I am just now informed of what this in- 
 trigue is ; but private honor will not permit me to 
 mention it at present. The object is, by bits of 
 paper to prevent the banks from being compelled 
 to pay their debts. This is the long and short of 
 the whole affair. Aye, and the pretence is most 
 specious, the appearance most seducing, but the
 
 THE SECOND UNITED STATES BANK. 63 
 
 instantaneous effect will be to banish money, and 
 bring about those happy times when lordly banks 
 issued notes for six and a quarter cents, and a 
 copper coin was a rarity. . . . Upon my con- 
 science I would rather agree to have a hereditary 
 President and a Senate for life than that this tiring 
 should happen. In the latter case our President 
 and Senators might be influenced to good actions 
 by a sense of individual shame or a love of true 
 glory, and the choice of representatives would be 
 left free to us ; but in the other, an unknown and 
 irresistible aristocracy would be raised up, secret 
 as the Council of Ten and remorseless as the Holy 
 Inquisition. Give me to live under any despotism 
 but that which springs from the command of 
 money ; for it is the most base and unprincipled 
 of all. 
 
 "But Congress will not, cannot, dare not, pass 
 the law proposed to pamper speculation. They 
 may prohibit the exportation of coin if they 
 please ; still they cannot substitute a paper me- 
 dium for it, and compel me to take it in payment 
 of debts justly due me. And this it is which Is 
 fondly designed to be attempted — for the benefit 
 of the rag-barons." 
 
 No relief came, however, and on the 9lh of 
 April, 1819, at a meeting of the directors of the 
 bank, means of relief were agreed to as follows : 
 " To continue the curtailment of discount, to tor-
 
 04 MONEY IN POLITICS. 
 
 bid the branch offices south and west to issue their 
 notes when exchanges were against them ; to 
 collect balances due by local banks to the offices ; 
 to ask of the government time to transfer mon- 
 eys from one office to another, as they might 
 be needed for disbursement, and to obtain a loan 
 in Europe for $2,500,000." These measures were 
 actively carried into effect, and they lifted the bank 
 from extreme prostration to a state of safety and 
 some power, but at tlje expense of the local banks 
 and the business community. " The bank saved 
 itself, but the people were ruined," says one writer. 
 In 1832 the bank applied to Congress for a 
 renewal of its charter, which would expire in 
 1836. Congress passed a bill for its re-charter, 
 but it was vetoed by the President July 10, 1832. 
 The bank had specie enough to pay all its obliga- 
 tions to the government, but it kept up the strin- 
 gency for political effect, and used its power and 
 influence to embarrass and defeat the administra- 
 tion. Probably the affairs of the bank had not 
 at all times been administered with wisdom and 
 discretion ; but in 1830 the finance committee of 
 the Senate had said : " They are satisfied that the 
 country is in the enjoyment of a uniform national 
 currency, not only sound and uniform in itself, but 
 perfectly adapted to the purposes of the govern- 
 ment and the community, and more sound and 
 uniform than that possessed by any other nation."
 
 THE SECOND UNITED STATES BANK. 65 
 
 On the 23d of September, 1833, announcement 
 was made that on the first of the next month the 
 public deposits would be removed to the State 
 banks. The transfer was made, and it created a 
 political turmoil of unprecedented bitterness. The 
 State banks receiving the public deposits, being 
 favored by large importations of specie, expanded 
 their loans and circulation, and another wave of 
 speculation rolled over the country. Money being 
 plenty, and dividends easily obtained, immense 
 purchases of public land was made by speculators, 
 for which the government was paid largely in 
 notes of State banks, of questionable values. With 
 the largely increased receipts the government paid 
 off its entire indebtedness, and still had nearly 
 fifty millions, for which it had no use, lying idle 
 in the banks. This idle capital stimulated the 
 fever of speculation already fiercely raging. 
 
 The bank did not wind up its affairs in anticipa- 
 tion of the expiration of its charter in 1836, but 
 obtained another charter from the legislature of 
 Pennsylvania. The act granting it was entitled 
 "An act to repeal the State taxes on real and per- 
 sonal property, and to continue and extend the 
 improvement of the State by railroads and canals ; 
 and to charter a State bank to be called a United 
 States bank." The obligations imposed upon the 
 bank in consideration of the issue of this charter 
 could not have fallen short of $5,000,000, if it had
 
 6Q MONEY IN POLITICS. 
 
 lived long enough to meet the charges imposed. 
 The bank suspended specie payments with the 
 State banks, and soon after organizing under its 
 new charter succumbed to trials which perhaps 
 more prudent management might have averted. 
 
 A financial giant, however, such as was this 
 institution, did not expire without a struggle. In 
 1839 it got the New York banks in its toils, and 
 brought them to the verge of ruin. Two years 
 later, Sampson-like, it laid hold of the pillars 
 of the financial temple, and signalized its death by 
 a general crash. The circulating notes and depos- 
 its of this soulless corporation were eventually 
 paid in full, but no dividends were paid to the 
 stockholders. The whole $28,000,000 subscribed 
 was a loss to them. The government, in the end, 
 lost nothing by the bank ; but the action of the 
 President in severing from it all fiscal operations 
 of the government appears at this day to have 
 been justifiable and fortunate.
 
 CHAPTEE XII. 
 
 UNITED STATES NOTES. 
 
 From 1857 to 1861 the country enjoyed abun- 
 dant prosperity. The value of its exports to for- 
 eign countries during these three years exceeded 
 that of its imports by $100,000,000. The banks 
 held a strong reserve of specie, and their circula- 
 tion "was not deemed excessive. In 1860 their 
 circulation was $207,000,000 and their deposits 
 $254,000,000, against which amounts was held a 
 reserve of $103,000,000, of which $80,000,000 
 was specie. 
 
 Notwithstanding the general prosperity of the 
 country, the public expenditures had since 1857 
 been greater than the receipts to the amount of 
 about $90,000,000, which deficit had been pro- 
 vided for by public loans. 
 
 Congress met in December, 1860. The gov- 
 ernment was threatened with disruption by civil 
 war. The public offices at Washington were 
 filled mainly by the conspirators themselves, or 
 those in sympathy with them. The public trea- 
 sury was empty, and the public credit impaired. 
 
 67
 
 68 MONEY IN POLITICS. 
 
 How to meet the current expenses of the govern- 
 ment was the problem which confronted this Con- 
 gress. 
 
 Measures for issuing another loan were imme- 
 diately taken, and on December 17 an act was 
 approved authorizing the issue of $10,000,000 of 
 Treasury notes, payable in one year, to bear the 
 lowest rate of interest at which the notes could be 
 sold at par. The rates ranged from six to twelve 
 per cent per annum. In the month of February, 
 following, the necessities of the government com- 
 pelled the issuing of another loan. This was not 
 to exceed $25,000,000, was to run twenty years, 
 and bear interest at six per cent. About $18,000,- 
 000 were issued at the rate of $100 of loan for 
 $89.03 in specie. 
 
 On March 22, 18G1 another loan was author- 
 ized — this time Treasury notes to bear six per 
 cent interest, and to run two years. They were 
 made receivable in all payments to the government, 
 and consequently were disposed of at a slight 
 premium. 
 
 Before the issue of these notes was authorized 
 many of the Southern members had left Congress 
 to participate in the Rebellion. Two days after 
 the approval of the act Mr. Lincoln was inaugu- 
 rated as President, and a few days later Mr. 
 Salmon P. Chase was confirmed as Secretary of 
 the Treasury.
 
 UNITED STATES NOTES. 69 
 
 On July 4 Congress convened by special 
 proclamation of the President. Eleven States were 
 in actual rebellion. Seventy-five thousand volun- 
 teers had been called into the field, and the capi- 
 tal city was a military camp. The Secretary of 
 the Treasury called upon Congress for means to 
 meet the extraordinary expenses. He estimated 
 the expenditures for the year ending June 30, 
 1862, at $318,000,000. Vast and unprecedented 
 as was this sum, it proved $240,000,000 less than 
 the amount expended. 
 
 Congress, in answer to the call, on July 17 
 authorized a loan of $200,000,000, and provided 
 that $50,000,000 thereof might be in Treasury 
 notes in denominations of not less than $5, payable 
 on demand, not bearing interest, and reissuable 
 until December 31, 1862. They were known as 
 demand notes. 
 
 The first instalment of these notes was issued 
 in August following, and was paid to the clerks in 
 the departments for salaries, and to other creditors 
 of the government. Although redeemable at sight 
 in coin, the notes were received with reluctance ; 
 and to give them credit the principal officers of 
 the Treasury Department signed a paper agreeing 
 to accept them in payment of their salaries. Many 
 of the hanks refused to take them at par, but as 
 the government accepted them in payment of dues 
 they soon came to be preferred to the notes of the 
 State banks.
 
 70 MONEY IN POLITICS. 
 
 At this time the banks had increased their specie 
 reserve to $87,000,000, their circulation and de- 
 posits remaining substantially unchanged. 
 
 To the banks the Secretary applied for an ad- 
 vance of $50,000,000, in the form of a loan for 
 seven-thirty three-year bonds ; the amount to be 
 reimbursed to the banks, as far as practicable, 
 from the proceeds of similar bonds to be sold 
 throughout the country direct to the people, 
 through loan agencies which had been established. 
 
 On August 19 representatives of the leading 
 banks in New York, Boston, and Philadelphia 
 met the Secretary in the first named city, and a 
 full and unreserved conference was held. The 
 banks demanded better terms than the Secretary 
 offered, but this official was firm, and expressed 
 a hope that they would take the loan on the terms 
 he offered. " If not," he said, " I will go back to 
 Washington and issue notes for circulation, for it 
 is certain the war must go on until the rebellion is 
 put down, if we have to put out paper until it 
 takes a thousand dollars to buy a breakfast." 
 
 The banks advanced the $50,000,000 needed, 
 in specie, of which about $45,000,000 was re- 
 turned to them from the proceeds of public sub- 
 scriptions, and for the remainder seven-thirty 
 three-year bonds were issued as provided ; and 
 the alternative presented by Mr. Chase was avoid- 
 ed. The reimbursements to the banks enabled
 
 UNITED STATES NOTES. 71 
 
 them to make another loan in like manner upon 
 the same terms, and through these means the Sec- 
 retary obtained at par $100,000,000 in specie for 
 three years at 7j s D - per cent interest per annum. 
 
 This showed a marked improvement in the con- 
 dition of the public credit. Three months before, 
 when there was a strong probability that the war 
 might be averted, the government paid as high 
 as twelve per cent for a portion of a loan of 
 $10,000,000. But now the government, although 
 smarting; from the humiliating wounds of Bull 
 Run, obtained ten times the amount at a rate of 
 interest much more favorable. Confidence in the 
 measures and the men of the new administration, 
 as compared with those of the former one, was 
 the main instrument in bringing about this favor- 
 able change. Patriotism, perhaps, went for some- 
 thing. 
 
 Abroad, however, especially in England, the 
 credit of the country was at a very low ebb. On^ 
 Sunday, after the defeat at Bull Run, the British 
 agent at Washington for the London bankers 
 through whom our government business was trans- 
 acted, called upon Mr. Harrington, Assistant Sec- 
 retary of the Treasury, to give security for the 
 balance due of about $40,000. Mr. Harrington 
 directed him to call on Monday, as the govern- 
 ment would not probably break up before business 
 hours next day.
 
 72 MONEY EST POLITICS. 
 
 The London Times concluded an article about 
 these operations by exclaiming : " What strength, 
 what resources, what vitality, what energy there 
 must be in a nation that is able to ruin itself on a 
 scale so transcendent and magnificent." 
 
 The pressure for providing means for carrying 
 on the war still continued, however, and the Secre- 
 tary applied to the banks for a third loan. They 
 were unwilling to take any more of the seven- 
 thirty bonds, as little market could be found for 
 them among their customers. The Secretary there- 
 fore offered, and the banks accepted, $50,000,000 
 of the twenty-year loan, authorized by act of July 
 17, 1861, a sufficient discount being allowed to 
 make the loan equivalent to one bearing interest 
 at seven per cent, a less rate than that of the 
 notes. 
 
 Meanwhile the banks had persistently and con- 
 stantly urged the Secretary to forego the issue of 
 Treasury notes, which were circulating as money, 
 and to draw upon them for coin in payment of 
 their subscriptions. 
 
 To a question of the Secretary the New York 
 banks replied : " In New York we are entirely 
 willing to pay in coin ; in any other cities in what- 
 ever funds the check holders may demand, in coin 
 if the creditors insist upon coin and the bank is 
 willing and able to pay in coin, but otherwise in 
 bank-notes."
 
 UNITED STATES NOTES. 73 
 
 To this the Secretary would not consent, al- 
 though at that time no payment to public creditors 
 in coin, when demanded, had been refused by any 
 of the banks. He said : " If you can lend me all 
 the coin required to conduct the operations of the 
 war, or show me where I can borrow it elsewhere 
 at fair rates, I will withdraw every note already 
 issued, and pledge myself never to issue another ; 
 but if you cannot, you must let me stick to United 
 States notes, and increase their issue just so far as 
 the deficiency of coin may make necessary." This 
 was the reply of Secretary Chase on November 
 16, 1861, to the bankers with whom he had just 
 negotiated the $50,000,000 loan. 
 
 The policy therein avowed was the first step 
 taken towards that inflation of the currency which 
 subsequently played so important a part in all the 
 affairs of the country, and from whose unhappy 
 effect we are not yet free. 
 
 The necessity of taking such a step is far from 
 evident. The government during that year had 
 negotiated $250,000,000 of loans, of which less 
 than $30,000,000 was in Treasury notes. These 
 notes, however, had come into competition with the 
 paper issues of the banks, and were rapidly driving 
 them from the channels of circulation which they 
 had previously occupied. The bank-notes, not 
 being needed for circulation, were returned to the 
 banks for redemption. As the banks were putting
 
 74 MONEY IN 1'OLITICS. 
 
 forth their best energies to place the loans they 
 had taken of the government, they naturally did 
 not want their notes to come in at that time for 
 redemption, as they inevitably must if the issue of 
 Treasury notes continued, and the urgent demand 
 of the banks upon the Secretary to put no more 
 Treasury notes in circulation seems natural and 
 proper. 
 
 Had the Secretary yielded to the request of the 
 banks, and the government accepted the bank 
 issues in payment of dues, the demand for such 
 issues would have increased rather than dimin- 
 ished ; the banks would have been relieved from 
 any necessity of redeeming them in coin, and 
 could easily have paid specie to the government 
 for the loan which they had just taken. But the 
 resolution of the Secretary was unalterable, and 
 the evil which he was trying to prevent became 
 inevitable. The banks being obliged to take care 
 of their notes, and at the same time to pay specie 
 to the government, were unable to meet the de- 
 mands upon them, or at least thought they were, 
 and on December 27, 1861, they yielded to the 
 pressure and suspended specie payment. 
 
 For this action the Secretary appears to be 
 mainly responsible. The amount of outstanding 
 circulation of the banks had at that time been 
 reduced $183,000,000, and the specie reserve 
 increased to $102,000,000 ; and during the fiscal
 
 UNITED STATES NOTES. 75 
 
 year of 1861 the excess of imports ot specie over 
 exports amounted to more than $16,000,000, a 
 balance more favorable than that of any year since 
 1847. Careful estimates since made have fixed 
 the amount of specie in circulation at the time of 
 the suspension at about $250,000,000. The large 
 expenditures of the government for 1861 had been 
 made in specie, but this specie, when paid out, 
 soon found its way back to the banks where it 
 was needed, and there had been at no time during 
 the year the slightest embarrassment arising from 
 any lack of specie as a circulating medium. In 
 the action taken by the Secretary there was noth- 
 ing to be gained, and experience has shown that 
 the integrity of the country was to be lost. 
 
 Consequent upon the action of the banks there 
 was but one thins; for the government to do, and 
 it did it. On January 1, 1862, it dishonored its 
 own promises — it ceased paying coin. Gold was 
 immediately at a premium, in paper, of two per 
 cent, and the Secretary, who would not in Novem- 
 ber employ banknotes circulating at par, was 
 compelled to make payments to creditors in the 
 government's oavii depreciated paper. In fleeing 
 from an imaginary Scylla he had struck a real 
 Chfrr^bdis. 
 
 Congress, meanwhile, was actively preparing 
 measures for raising more money. Mr. Spauld- 
 ing, a member of the House from New York, and
 
 76 MONEY IN POLITICS. 
 
 chairman of a sub-committee of the Ways and 
 Means Committee, prepared and reported a bill 
 which attracted much attention. For the first 
 time in the history of the country it was seriously 
 proposed to issue bills made a legal tender in pay- 
 ment of all debts public and private. 
 
 Much opposition to the legal-tender clause was 
 expressed by leading papers throughout the coun- 
 try. Delegates from some of the banks in New 
 York, Boston, and Philadelphia appeared in Wash- 
 ington to oppose the bill. They invited the 
 Finance Committee of the Senate, and the Commit- 
 tee of Ways and Means of the House, to meet 
 them at the office of the Secretary of the Treasury 
 on January 11, 1862. The invitation was accepted, 
 and the convention assembled accordingly at the 
 Treasury Department. The whole scheme was 
 thoroughly discussed, and the New York "Trib- 
 une " reported the discussion as follows : — 
 
 'The sub-committee of Ways and Means, through 
 Mr. Spaulding, objected to any and every form of 
 ' shinning ' by Government through Wall or State 
 streets to begin with ; objected to the knocking 
 down of government stocks to seventy-five or 
 sixty cents on the dollar, the inevitable result of 
 throwing a new and large loan on the market 
 without limitation as to price ; claimed for Treas- 
 ury notes as much virtue of par value as the notes 
 of banks which have suspended specie payment,
 
 UNITED STATES NOTES. 77 
 
 but which yet circulate in the trade of the north ; 
 and finished with firmly refusing to assent to any 
 scheme which should promote a speculation by 
 brokers, bankers, and others in the government 
 securities, and particularly any scheme which 
 should double the public debt of the country, and 
 double the expenses of the war by damaging the 
 credit of the government to the extent of sending 
 it to f shin ' through the shaving shops of New 
 York, Boston, and Philadelphia. He affirmed his 
 conviction, as a banker and legislator, that it was 
 the lawful policy, as well as the manifest duty of 
 the government in the present exigency to legal- 
 ize as tender its fifty millions issue of demand 
 Treasury notes, authorized at the extra session in 
 July last, and to add to this stock of legal tender, 
 immediately, one hundred millions more. He 
 thought that this financial measure would carry the 
 country through the war, and save its credit and 
 its dignity ; at the same time we should insist 
 upon taxation abundantly ample to pay the expen- 
 ses of the government on a peace footing, and 
 interest on every dollar of the public obligations, 
 and to give this generation a clear show of a 
 speedy liquidation of the public debt." 
 
 It docs not appear, however, that the views of 
 the several delegates and those of the public offi- 
 cials were brought into harmony. 
 
 On January 22, 1862, a bill was introduced in
 
 ^oi 
 
 78 MONEY IN POLITICS. 
 
 the House authorizing the issue of $500,000,000 
 six per cent bonds, and $100,000,000 of Treasury 
 notes. The framers of the bill had concluded to 
 make the notes authorized a legal tender, and the 
 bill therefore provided that there should be printed 
 on the back of the notes the following words : 
 " The within note is a legal tender in payment of 
 all debts, public and private, and is exchangeable 
 for bonds of the United States bearing six per 
 cent interest." 
 
 This legal tender provision w T as ably and thor- 
 oughly discussed in the House. The Secretary 
 urged the passage of the bill, though expressing a 
 strong dislike to making anything but coin a legal 
 tender in payment of debt. He hoped that the 
 notes would be speedily converted into bonds, and 
 the bonds made a basis for the circulation of the 
 banks ; and with this hope he became reconciled to 
 the enactment of a measure which as Chief Justice 
 he afterwards declared to be unconstitutional. 
 
 The measure was opposed by all the Democratic 
 members of the House, and by many of the promi- 
 nent Republicans ; and even the friends of the 
 measure gave it only a reluctant support, regret- 
 ting the necessity which seemed to call for a meas- 
 ure fraught with so many possible evils. 
 
 A prominent Democratic member urged that the 
 policy of forcing a paper currency upon the coun- 
 try w r as a dangerous experiment ; that it would
 
 UNITED STATES NOTES. 70 
 
 lead to other issues ; that gold and silver would be 
 banished from circulation, and an immense infla- 
 tion would take place. " Cheap in materials, easy - ** 
 of issue, worked by steam, signed by machinery, 
 there will be no end to the legion of paper 
 devils which shall issue forth from the loins of the 
 Secretary." */ 
 
 In after years, and when his vision proved a 
 reality, he and most of his party friends defended 
 the " paper devils," declaring that the machine- 
 made currency was the best the world ever saw, so 
 good, in fact, that nobody would take it from us. 
 The opinions of such men need not therefore be 
 further considered at present. 
 
 Mr. Morrill, of Vermont, at present a senator 
 from that State, opposed with much ability the 
 provisions of the bill making notes a legal tender, 
 declaring that if so made they would, to the extent 
 that they were tendered as public dues, be a forced 
 loan, and that, to the extent of the difference 
 between their current value and that of standard 
 coin, they would bo a breach of public faith ; that 
 upon their issue the cost of carrying on the war 
 would be vastly increased ; that prices would go 
 up ; and that the addition we should pile upon our 
 national debt would prove that it might have been 
 wiser to have burned our paper dollars before they 
 were issued. 
 
 Mr. Roscoe Conkling, of New York, opposed
 
 80 MONEY IN POLITICS. 
 
 the measure with his characteristic vehemence. He 
 declared that the country was full of wealth ; that 
 the harvests had been abundant ; that nearly every 
 loyal State teemed with the elements of material 
 prosperity ; that the passage of the act would pro- 
 claim throughout the country a saturnalia of fraud, 
 a carnival for rogues ; that every person who 
 had received for others money would release him- 
 self from liability by paying back in the spurious 
 money which we should put afloat ; that every- 
 body would do it except those who are more honest 
 than the American Congress advised them to be. 
 He declared that the whole scheme presupposed 
 that the notes to be emitted would be lepers in the 
 commercial world from the hour they were brought 
 into it ; that they would be shunned and con- 
 demned by the laws of trade and value. If that 
 was not to be their fate, there was no sense in 
 attempting to legislate upon their value. He be- 
 lieved that all the money needed could be provided 
 in season by means of unquestionable legality and 
 safety. 
 
 Mr. Lovejoy, of Illinois, also opposed the bill. 
 He did not believe it was in the power of any 
 legislative bodv to make something out of nothing ; 
 that a piece of paper stamped as five dollars, un- 
 less it was convertible at sight into a five-dollar 
 gold piece, was not five dollars, but a delusion and 
 a fallacy.
 
 UNITED STATES NOTES. 81 
 
 Pie proposed the following, which would seem 
 to have been a vigorous outline of the policy which 
 would be commended by the opponents of the bill : 
 
 "1st. Adequate taxation, if need be, to the ex- 
 tent of $200,000,000. 
 
 M 2d. Adopt legislation that shall compel all 
 banking institutions to do a business on a specie 
 basis. Every piece of paper that claimed to be 
 money, but was not, I would chase back to the 
 man or corporation that forged it, and visit upon 
 them the penalties of the law. I would not allow 
 a bank-note to circulate that was not constantly, 
 conveniently, and certainly convertible into specie. 
 
 " 3d. I would issue interest-bearing bonds of 
 the United States, and go into market and borrow 
 money and pay the obligations of the government. 
 This would be honest, business-like, and, in the 
 end, economical. This could be done. Other 
 channels of investment are blocked up, and capi- 
 tal would seek the bonds for investment." 
 
 And he added: "This is, in substance, what I 
 propose. This would bring us through the war 
 poor indeed, for half the nation has to support the 
 other half, but with the health and vigor of the 
 athlete, and not with the bloated flesh of the beer 
 guzzler. Did I not know that the passage of this 
 bill was a foregone conclusion, I would move to 
 recommit, with instructions to that effect." 
 
 Mr. Spaulding, the putative father of the bill,
 
 82 MONEY IN. POLITICS. 
 
 summed up his ideas by stating, in effect, that if 
 the notes were given a legal-tender quality they 
 would become a standard of value, and, compared 
 with themselves, they would not depreciate. The 
 statement suggests Mr. Bunsby. 
 
 Mr. Stevens, chairman of the Ways and Means 
 Committee, closed the debate, speaking urgently 
 in favor of the bill. He argued at length upon the 
 constitutionality of the measure, taking the ground 
 that Congress alone could decide whether the 
 measure was necessary and proper to raise and 
 support armies, this discretion having been con- 
 fided to it by the Constitution ; and once decided 
 by that department no other department of the 
 government could re-judge it. The Supreme Court 
 might think the judgment of Congress erroneous, 
 but they could not review it. Concluding that 
 the measure was constitutional, he inquired as to 
 its expediency. 
 
 "All admit the necessity of the issue, but some 
 object to their being made money. It is not easy 
 to see how notes issued without being made imme- 
 diately payable in specie can be made any worse 
 by making them a legal tender, and yet that is the 
 whole argument so far as expediency is concerned. 
 Other gentlemen argue this would impair con- 
 tracts by making the debt payable in other money 
 than that which existed at the time of the contract, 
 and would so be unconstitutional. Where do
 
 UNITED STATES NOTES. 83 
 
 gentlemen find an} T prohibition on Congress against 
 passing laws impairing contracts? There is none, 
 though it Avould be unjust to do it ; but this im- 
 pairs no contract. All contracts are made not 
 only with a view to present laws, but subject to 
 the future legislation of the country." 
 
 Later he stated : " Our project proposes United 
 States notes secured at the end of twenty years, 
 to be paid in coin, and the interest raised by taxa- 
 tion semi-annually ; such notes to be money, and 
 of uniform value throughout the Union." 
 
 From this it would appear that the policy of 
 paying the bonds at maturity in depreciated notes, 
 as afterwards advocated by him, was an after- 
 thought on his part. 
 
 The bill passed the House by a vote of ninety- 
 three to fifty-nine. It increased the amount of 
 the proposed issue to $150,000,000, of which 
 $50,000,000 were to be issued in lieu of the 
 same amount of notes authorized by act of July 
 17, 1861. 
 
 The bill was immediately sent to the Senate, 
 and there referred to the committee on finance, 
 of which Mr. Fessenden was chairman. 
 
 Meanwhile the Secretary, fearing that the Treas- 
 ury might be embarrassed by the probable delay 
 in procuring the passage of the bill, asked author- 
 ity to issue $10,000,000 of Treasury notes in 
 addition to the $50,000,000 already authorized.
 
 84 MONEY IN POLITICS. 
 
 A bill to that effect was promptly passed, and be- 
 came a law February 12, 1862. 
 
 Mr. Fessenden reported the House bill to the 
 Senate with certain amendments, of which the 
 most important ones were : 
 
 That the notes should be receivable in all claims 
 against the United States, of whatever kind, ex- 
 cept for interest on bonds and notes, which should 
 be paid in coin ; and another section was added 
 providing that all duties on imported goods and 
 proceeds of the sale of lands should be set apart 
 to pay coin interest on the debt, and, of the re- 
 mainder, a certain portion for a sinking-fund. 
 
 The bill did not yet provide that the duties on 
 imports should be paid in coin. 
 
 Mr. Fessenden opposed the bill in a lengthy 
 speech. 
 
 He saw no reason for a loss of credit by the 
 conduct of the war. He alleged that a measure 
 of this kind could not increase confidence in the 
 ability or integrity of the country ; that it was, in 
 fact, a confession of bankruptcy ; that we began 
 with a declaration that we were unable to pay or 
 to borrow, and that such a declaration was not 
 calculated to increase our credit ; that it would 
 inflict a stain upon the national honor ; that it 
 would change the value of all property ; that there 
 would follow inflation, subsequent depression, and 
 all the evils which flow from an inflated currency ;
 
 UNITED STATES NOTES. 85 
 
 and that the loss would fall most heavily upon 
 the poor by reason of the inflation. 
 
 Mr. Collanier, of Vermont, claimed that the bill 
 was unconstitutional, and even if it was a necessity 
 he could not vote for it ; that there were two 
 modes of replenishing the Treasury, one by tax- 
 ation, and the other by borrowing money ; that 
 to borrow money there must be a lender and a 
 borrower, and both should act voluntarily, and 
 that the borrower should not compel the lender to 
 part with his money without an inducement ; and 
 that the operation of the bill w r as not as honor- 
 able or honest as a forced loan. He had no doubt 
 the country was able to sustain itself pecuniarily 
 as well as physically. He, for one, desired that 
 it should ; he did not want it done by saying that 
 now, because the necessity requires money, he 
 would go and steal it or authorize anybody else to 
 steal it. 
 
 Mr. Sherman made an elaborate speech in favor 
 of the bill, grounding his argument upon the 
 necessities of the hour. 
 
 He stated that $100,000,000 was then due the 
 army, and that $250,000,000 more would be 
 due by July 1 ; that the banks had already ex- 
 hausted their capital in making loans to the gov- 
 ernment ; that bonds could not be sold except at 
 great sacrilicc, because there was no money to buy 
 them ; that bonds could not be sold for gold and
 
 86 MONEY IN POLITICS. 
 
 silver, which was then the only money which could 
 be received under the sub-treasury law, and that 
 it was necessary to make the currency a legal 
 tender to aid in making further loans. The only 
 objection he had to the measure was, that too many 
 notes might be issued. He did not believe the 
 issue of $150,000,000 would do any harm ; it was 
 only a temporary expedient, however, and should 
 not be repeated. 
 
 Mr. Sumner also favored the bill in an elaborate 
 and able speech. He recognized that in the exi- 
 gency money must be had ; and he argued that the 
 Constitution gave ample powers to Congress to 
 clothe the notes proposed to be issued with legal 
 tender power. Still he thought it was hard, very 
 hard, to think that a country so powerful, so rich, 
 and so beloved should be compelled to adopt a 
 policy of even questionable propriety. He argued 
 that we must of necessity maintain the integrity of 
 the government, and must all set our faces against 
 any proposition like the present, except as a 
 temporary expedient rendered imperative by the 
 exigencies of the hour. "Others may doubt if the 
 exigency is sufficiently imperative ; but the Secre- 
 tary of the Treasury, whose duty it is to . under- 
 stand the occasion, does not doubt. In his opinion 
 the war requires the sacrifice. Uncontrollable pas- 
 sions have been let loose to overturn tranquil con- 
 ditions of peace. Meanwhile your soldiers in the
 
 UNITED STATES NOTES. 87 
 
 field must be paid and fed. Here, then, can be no 
 failure or postponement. A remedy which at an- 
 other moment you would reject is now proposed. 
 Whatever may be the national resources, they are 
 not now within reach, except by summary pro- 
 cess. Reluctantly, painfully, I consent that the 
 process should issue. And yet I cannot give such 
 a vote without warning the government against the 
 dangers from such an experiment. The medicine 
 of the Constitution must not become its daily 
 bread. Nor can I disguise the conviction that 
 better than any legal tender will be vigorous, 
 earnest efforts for the suppression of the rebellion, 
 and for the establishment of the Constitution in its 
 true principles over the territory which the rebel- 
 lion has usurped." 
 
 Mr. Doolittle moved to limit the legal tender 
 clause to " debts thereafter contracted ; " but the 
 amendment was not adopted. 
 
 The bill passed the Senate by a vote of thirty 
 to seven, Mr. Fessenden finally waiving his 
 scruples and voting for it. 
 
 In the House the Senate amendments met with 
 determined opposition. It was alleged that they 
 created two kinds of money, one for the bond- 
 holder, and one for the other creditors of the 
 country ; that in providing coin to be paid for 
 interest the government had tied its hands, as no- 
 body could tell where the coin was to come from.
 
 88 MONEY EST POLITICS. 
 
 Mr. Stevens especially opposed the amendments, 
 declaring that we were discriminating against the 
 notes and thus depreciating their value at the out- 
 set. He said it was his expectation that no more 
 of the notes would ever be issued, and that by 
 using them for all purposes as money they could 
 be easily maintained at par with coin ; and he 
 hoped and expected they would be. 
 
 Most of the Senate amendments were, however, 
 concurred in. A final conference between the two 
 houses added a clause providing, that duties on 
 imported goods should be paid in coin. 
 
 The bill became a law on the February 25, 
 1862. It authorized the issue of $150,000,000 
 United States notes, not bearing interest, payable 
 to bearer, of such denominations as the Secretary 
 of the Treasury might deem expedient, not less 
 than five dollars each ; that $50,000,000 of this 
 issue should be used in taking up the notes issued 
 under the act of July 17, 1861 ; that the notes 
 should be receivable in payment of all taxes, in- 
 ternal duties, excises, debts, and demands of every 
 kind due to the United States except duties on im- 
 ports, and all claims and demands against the 
 United States of every kind whatsoever, except, 
 however, interest upon bonds and notes, which 
 should be paid in coin ; and that the notes should 
 also be lawful money and legal tender in payment 
 of all debts public and private within the United
 
 UNITED STATES NOTES. 89 
 
 States, except duties on imports and interest as 
 before stated. It also provided that the notes 
 might be converted into the six per cent bonds 
 authorized by the act, and that the notes might be 
 reissued from time to time as the exigencies of 
 the public service should require. 
 
 It is noticeable that throughout all the debate 
 only reluctant support was given to the measure ; 
 that its friends believed that the evils appre- 
 hended would be counteracted by the authority to 
 convert the notes into interest-bearing bonds ; and 
 that the notes themselves, taking the place of 
 the issues of the State banks, would furnish a cir- 
 culating medium, the demand for which would be 
 such as to keep them substantially at par with 
 specie.
 
 CHAPTER XIII. 
 
 ADDITIONAL ISSUES. 
 
 The act authorizing the issue of United States 
 notes contained no pledge against additional is- 
 sues, hut it was generally understood that no 
 more of the notes were to be put into circulation. 
 But $150,000,000 was not enough, and, upon 
 the recommendation of Secretary Chase, Congress 
 passed a bill, which the President approved 
 March 17, 1862, making the $60,000,000 of out- 
 standing demand notes a le^al tender for the same 
 purpose and to a like extent as the United States 
 notes, the reason being that, as the demand notes 
 were payable on demand in coin, they ought to 
 circulate at par, but being slightly depreciated, 
 some of the banks had refused to accept them as 
 money from their customers. With a legal ten- 
 der quality, these notes, it was thought, Avould 
 pass " without loss to the holders." These were 
 the notes which the Secretary, in the previous 
 November, had insisted upon putting in circula- 
 tion, that public creditors might not, in a possible 
 contingency, be required to accept bank-notes, 
 
 90
 
 ADDITIONAL ISSUES. 91 
 
 although bank-notes, at that time, were circulating 
 at par with gold. 
 
 The newly authorized notes were speedily put 
 into circulation, and were received throughout the 
 country with great favor. When the entire 
 amount authorized had been put into circulation, 
 gold was quoted at only 1041, and the friends of 
 the scheme congratulated each other that they had 
 done no worse. The expenses of the war were, 
 however, largely exceeding expectations, and on 
 June 17, 1862, Secretary Chase applied to Con- 
 gress for authority to issue $150,000,000 more 
 of such notes, of which sum $35,000,000 was to 
 be in denominations of less than five dollars. He 
 asserted that, in making payments to the army, 
 great inconvenience had been occasioned in satis- 
 fying demands of less than that amount ; that 
 where coin reached the creditor, it was not held, 
 but passed immediately to sutlers and others, 
 and disappeared from circulation, a result which 
 would have required no prophet to foresee. He 
 added, " It may properly be further observed, 
 that since the United States notes are made a 
 legal tender, and maintained nearly at the par of 
 gold, by the provision for their conversion into 
 bonds bearing six per cent interest, payable in 
 coin, it is not easy to see why small notes may 
 not be issued as widely as large ones." He fur- 
 ther stated that the daily receipts from customs
 
 92 MONEY IN POLITICS. 
 
 were about $230,000, and that the daily conver- 
 sion of the United States notes into bonds did not 
 exceed $150,000, while the daily expenditures 
 could not be estimated at less than $1,000,000, 
 and that he had already exhausted the issue 
 of the notes authorized by the act of February 
 25, 1862. 
 
 The application of the Secretary was promptly 
 granted. Congress now seemed willing to in- 
 crease the supply of notes, if, by that method of 
 raising money, recourse to taxation, a plan al- 
 ways unpopular, could be avoided. And so the 
 additional issue asked for was authorized July 
 11, 1862. 
 
 The second section of this act authorized the 
 Secretary to cause the notes to be engraved and 
 printed under his direction at the Treasury De- 
 partment in Washington. The organization of a 
 force for this purpose was prompt. From the 
 employment of one male and four female opera- 
 tives, this force grew into a bureau employing, at 
 times, as many as eighteen hundred persons. 
 Hardly had the organization taken shape when 
 scandal began to attach to it, and in consequence 
 there was no lack of investigation by Congress 
 and the Secretary. For many years it was hardly 
 ever free from an investigation of some kind. Ex- 
 travagant appropriations were made by Congress 
 for its maintenance, and, to keep the unnecessary
 
 ADDITIONAL ISSUES. 93 
 
 employees busy the officers of the bureau estab- 
 lished an elaborate and unnecessary system of 
 checks and balances. The bureau opened wide 
 its doors to the patronage of any person supposed 
 to have influence in securing appropriations for 
 its benefit ; consequently it soon partook somewhat 
 of the character of a parish alms-house, and a 
 general retreat for dependents of politicians, and 
 continued so until Secretary Sherman, in 1877, 
 with a strong arm cleaned up the establishment, 
 returned to the Treasury an unnecessary appropri- 
 ation for it of nearly half a million, secured for 
 it a proper building, organized its force for 
 business only, and took it out of the domain of 
 the caucus and the church, the powers which had 
 before controlled it. 
 
 The policy of employing women in the public 
 departments originated in this bureau, being 
 another innovation in the conduct of public busi- 
 ness resulting from the use of United States notes. 
 The notes were printed in New York, and came 
 in sheets from the printer, and women were em- 
 ployed to cut them apart and to trim them for 
 circulation. Subsequently this work came to be 
 done by machinery, and the women were trans- 
 ferred elsewhere to copy letters, to count notes and 
 stamps, and to fill other positions. 
 
 Congress assembled in December, 18G2, to 
 legislate for a country wounded almost unto death
 
 94 MONEY IX POLITICS. 
 
 in the house of those who had been its friends. 
 To re-fill the armies at the front, decimated by 
 unsuccessful struggles in the field and by the 
 fevers of the camp, the government, as a last 
 resort, had applied a relentless draft. The public 
 treasury was empty, and the pay of the soldiers 
 in arrears. The public credit was at a lower ebb 
 than ever before in the history of the country. 
 The six per cent twenty-year bonds of the gov- 
 ernment were freely offered in the market at the 
 rate of $100 in bonds for $65 in gold ; and of the 
 legal-tender notes $100 could be exchanged for 
 $68 of gold. 
 
 Secretary Chase pressed upon Congress, with 
 much zeal and great ability, his scheme for organ- 
 izing the national banking system, but admitted 
 at the same time that at best not much, if any, 
 relief from that source could be expected within a 
 year ; and again recommended, among other pro- 
 jects to meet temporary emergencies, the issue of 
 additional United States notes. The notes at that 
 time being w T orth more than an equal amount of 
 six per cent bonds, the holders would not present 
 them for conversion at par, and to make the notes 
 less valuable, so that their conversion into bonds 
 would surely follow, he recommended that the 
 authority to thus convert them be taken away. 
 In this wa}' he could, with additional issues, de- 
 press their value to almost any extent he desired.
 
 ADDITIONAL ISSUES. 95 
 
 He argued that, if paper money was in exces3 
 of the notes of the country, such excess was not 
 due to the issue of United States notes, but to 
 the issue of notes by the State banks, which, 
 without restriction, had flooded the country. 
 That the advance in the price of gold was 
 not due to over-issues of United States notes, 
 but that gold, being practically demonetized by 
 the suspension of the banks, had become a 
 mere article of merchandise, subject to fluctu- 
 ations such as might occur in other commodi- 
 ties. He thought, however, that these notes were 
 not in excess, because as much of the great staples 
 of life could be bought with them as with an 
 equivalent of gold, before that metal disappeared 
 from circulation. 
 
 The banks, it is true, had increased somewhat 
 their circulation, as they had a right to do, but they 
 compelled no one to take their notes, which could 
 not be said of the government, whose printing- 
 presses were in competition with those of the 
 banks. Reference to the price-list for commodi- 
 ties of that period clearly shows that the notes 
 possessed no such purchasing power as he as- 
 serted. 
 
 Congress acted promptly. On the 8th of De- 
 cember Mr. Stevens introduced in the House a 
 bill to provide ways and means to support the 
 government. Subsequently he said the bill had
 
 96 MONEY IN POLITICS. 
 
 " produced a howl among the money-changers as 
 hideous as that sent forth by their Jewish cousins 
 when they were kicked out of the temple." Well 
 it might. The bill proposed to issue $200,000,000 
 of legal tenders, $1,000,000,000 of six per cent 
 bonds, and to tax the State banks out of exist- 
 ence. With some modification it became a law 
 March 3, 1863. 
 
 This act authorized the issue, as the exigencies 
 of the service might require, of $150,000,000 
 more of United States notes, in every way of like 
 character to those already issued. Also an amount, 
 not to exceed $400,000,000 of notes payable at 
 the pleasure of the government, as might be found 
 most beneficial to public interest, not to exceed 
 three years, and to bear interest not to exceed six 
 per cent in lawful money, and to be issued in 
 denominations of not less than ten dollars, and to 
 be a les;al tender for their face value to the same 
 extent as the United States notes. 
 
 In addition to the amount of United States 
 notes issued under the authority of this act, there 
 was issued of one-year notes, bearing interest at 
 five per cent, $44,520,000, and of two-year notes, 
 bearing interest at six per cent, $166,480,000. 
 
 By another provision of this act, the time when 
 any of the United States notes could be converted 
 at par into six per cent bonds was limited to the 
 July 1, 1863, and a duty of two per cent a
 
 ADDITIONAL ISSUES. 97 
 
 year was levied upon the circulation of the State 
 banks. 
 
 No legal tender notes have ever been issued by 
 the government under any other acts. By the 
 provisions of an act approved June 30, 1864, 
 however, authority was given for the issue of 
 Treasury notes, bearing interest, payable at matu- 
 rity or at the discretion of the Secretary, and of 
 the amount issued those made payable, principal 
 and interest, at maturity, if any, should be a legal 
 tender, but the interest on the notes thus issued 
 was in every case made payable semi-annually, 
 and consequently none ©f the notes were by law a 
 legal tender. Nor did they purport to be, by any 
 legend printed upon them, although the contrary 
 has been frequently stated by persons high in 
 authority, and who had ample opportunities to 
 know better. 
 
 Authority being given by law to reissue indefi- 
 nitely any of the United States notes, no care has 
 been taken, in reissuing them, to maintain any 
 distinction in the character of the notes issued, 
 and no one can tell to-day under which of the 
 three acts authorizing such notes any one of them 
 has been issued. The amount outstanding at one 
 time has, however, never exceeded the aggregate 
 amount authorized to be issued by the three acts, 
 its highest amount having been January 30, 18G4, 
 when it reached $449,338,002. The total amount
 
 98 MONEY IN POLITICS. 
 
 of legal tender paper issued by the government, 
 exclusive of fractional currency, having a limited 
 legal tender quality, may be thus stated : 
 
 United States notes, $449,338,902 
 
 One-year five per cent notes, . . . 44.520,000 
 
 Two-year six per cent notes, . . . 166,480,000 
 
 Total $660,338,902
 
 CHAPTER XTV. 
 
 FALLACY OF LEGISLATION. 
 
 Mr. Chase, because of disagreements growing 
 out of the appointment of assistant treasurer at 
 New York, left the treasury June 7, 1864. The 
 dollar was then worth thirty-five cents in coin, 
 and the loans, nominally selling at par in paper, 
 were in fact being put on the market at sixty-five 
 per cent discount. The Secretary, although not 
 required by law to dispose of the loans at par in 
 paper, evidently believed it bad policy to sell 
 them at a discount, otherwise impertinent inquiries 
 mi^ht be made concerning; the boasted value of 
 the notes. The loans, however, were worth only 
 what purchasers would give for them in other 
 commodities, no more and no less. Congress 
 might, by the exercise of a doubtful power, com- 
 pel a creditor to accept less in satisfaction of a debt 
 than the contract called for, or it might, under its 
 constitutional prerogative to regulate the value of 
 money, force upon the country a medium whose 
 exchange value for other commodities fluctuated 
 violently from day to day ; but to the owner of 
 
 99
 
 100 MONEY IN POLITICS. 
 
 commodities it could not say at what rate he 
 should part with them. 
 
 These commodities, which through many pros- 
 perous years had been accumulating throughout 
 the country, were estimated to have an exchange 
 value equivalent to $16,000,000,000 of coin, and 
 the owners of these vast accumulations were in 
 fact the government itself, and it was their own 
 representatives who were calling for aid to make 
 this wealth available to carry on the war. 
 
 The government had three practical methods : 
 
 First, to seize commodities wherever found, by 
 force, and then to convert them by exchange into 
 the form desired. 
 
 Second, to impose a tax by which the owners of 
 the commodities should be compelled to deliver a 
 portion of their gains from time to time as needed. 
 
 Third, to borrow the commodities with prom- 
 ises to return an equivalent at some specified time 
 with proper compensation for their use. 
 
 Any one of these methods was proper, manly, 
 and honest. 
 
 The first, however, was not to be thought of 
 except in extreme necessity. The second, though 
 a fair method, would, if carried beyond a certain 
 limit, be unpopular even among the most patriotic. 
 The third, though requiring time and "shinning" 
 through the streets to affect negotiations, was the 
 most expedient.
 
 FALLACY OF LEGISLATION. 101 
 
 The government levied a tax to meet a small 
 portion of its needs, and undertook to borrow for 
 the remainder. For a } f ear or so it was success- 
 ful. Through the banks and other fiscal agencies 
 owners of wealth were reached, and were induced 
 to part with their commodities in exchange for 
 government promises, at not unreasonable rates. 
 The law of supply and demand fixed the rates as 
 it does in other exchanges. 
 
 As the war progressed, however, doubts began 
 to be entertained whether the government would 
 be able to fulfil its promises as they matured, — in 
 fact, whether there would be any government left 
 for that or any other purpose ; consequently hold- 
 ers of wealth declined to part with it except on 
 terms commensurate with the increased risk. The 
 supply of commodities, at the same time, grew 
 less as the demand increased, and the rates of 
 exchange at best were naturally somewhat en- 
 hanced. If the government continued to borrow 
 it must do so only upon less favorable terms than 
 had before existed. The owners of commodities 
 had an undoubted right to exaet the best terms 
 they could obtain, and there was no alternative 
 left for the government but to accept the best 
 rates obtainable. 
 
 To do this, however, was regarded by many 
 as humiliating to the national pride, and so a loan 
 was attempted, to be negotiated in this way : The
 
 102 MONEY IN POLITICS. 
 
 ^y, government, in exchange for commodities desired, 
 gave to the lender a paper saying to him, in 
 effect, " Here is my note for the amount due ; it 
 has no specified time for payment, it bears no 
 interest, but take it, and if you don't think it is 
 good make haste to trade it off on the first person 
 you meet, and the faster you run the less you will 
 lose." The lender was, however, generally pre- 
 pared for the proposition, and he rated his com- 
 modities so high that even with this note taken in 
 payment he could replace them at a profit. 
 
 Some, however, were not as vigilant ; and it is 
 related of one merchant that he sold to the govern- 
 ment a hogshead of sugar at twenty per cent 
 advance on cost, receiving these notes in payment. 
 With the notes received he bous-ht another ho^s- 
 head, and sold this with a like advance, and 
 repeated the operation until he had neither the 
 notes nor suinir left ; although he thought he was 
 all the time accumulating wealth. He may have 
 thought that the sus;ar was exchanged for value, 
 
 o o o 
 
 but he might as well have made it a gift to the 
 government at once, and thus saved time and 
 trouble. 
 
 Secretary Chase, members of Congress, and many 
 others believed that in issuing such notes the 
 country was benefited ; that for nothing it had 
 obtained soineth:n<>\ and some went so far as to 
 think that wealth was created by such issues.
 
 FALLACY OF LEGISLATION. 103 
 
 They did not know that with the sixth day the 
 labor of creation ended, and some there be who 
 have not learned it yet. 
 
 The policy of issuing these notes has been justi- 
 fied on several grounds : 
 
 First, the notes were a necessity. 
 
 Doubtless in the winter of 1861-2 the govern- 
 ment was sorely pressed for means to carry on its 
 operations. Its credit was untarnished, however, 
 and subsequent events showed there was ample 
 wealth in the country to meet all the demands 
 necessary. The government had only to levy a 
 proper tax, and then to exchange its credit, the 
 only commodity it possessed, for what it needed, 
 at the best rate obtainable. This rate might seem 
 like extortion, but there was no help for it, and it 
 was not avoided by the issue of the notes. 
 
 Second, the notes enabled the government to 
 obtain money without begging for it. 
 
 The notes themselves were a loan as much as 
 though they had coupons attached to them, but 
 they had one advantage over other loans. The 
 government could not only exchange them for 
 commodities, but it could impose them at par 
 upon the soldiers in the field, and upon other per- 
 sons in its employ whose compensation had been 
 fixed by law; and debtors generally could pay 
 obligations with them to the extent of an equal 
 amount of coin. The difference between the face
 
 104 MONEY IN POLITICS. 
 
 value of the notes at the time of their issue in 
 payment of salaries and their value in coin was a 
 gain to the government, and to that extent the 
 government was benefited, but no further. To 
 compensate the soldier for the depreciation in the 
 value of the notes his pay was increased, so that 
 even in his case the government gained little. In 
 purchasing supplies for forces in the field it paid 
 prices commensurate with the depreciation of the 
 notes. From a table carefully prepared in the 
 treasury department, it appears that for the year 
 1864 the average coin price in New York of the 
 leading commodities was twelve per cent above 
 that of the same commodities in 1861, and that 
 $110.10 in coin had an average purchasing power 
 for 1864 equal to $223.80 in paper. The average 
 price of $100 of gold for that year, measured in 
 paper, as shown by other official publications, was 
 $203.30, or, in other words, $1.00 in gold was 
 worth $2.03 of paper. If a purchaser then, with 
 $110.10 in gold, had converted it into paper at 
 that rate he would have had $223.50, almost pre- 
 cisely the amount required to make it of equal 
 purchasing power with gold. There could, there- 
 fore, be no possible gain in using these notes, and 
 coin, or its equivalent, might as well have been 
 employed at the outset. 
 
 Third, the notes helped to float the loan. 
 
 The loans were exchanged for commodities at
 
 FALLACY OF LEGISLATION. 105 
 
 the best rates obtainable, — no better and no 
 worse, — and the notes had no more to do with float- 
 ing them than had the Atlantie Ocean. It is true 
 the bonds were exchanged for the notes dollar for 
 dollar, but when owners of the notes declined to 
 part with them at that rate more notes were issued 
 until the value was so depreciated that a bond 
 would be accepted for them at par. Mention has 
 already been made of an instance where the right 
 to exchange these notes for six per cent bonds at 
 par was taken away, so that the Secretary could 
 force down the price of the notes until the owners 
 would be willing to accept for them even a five 
 per cent bond at par. In this way and no other 
 did the notes float the loan. Had the notes been 
 issued for coin the government would have re- 
 ceived precisely the same equivalent, the gold 
 having a purchasing power correspondingly great. 
 Instead of the notes facilitating the issue of loans, 
 there is every reason to believe that the govern- 
 ment could have obtained better rates for its credit 
 if the notes had never been issued. Undoubtedly 
 the great cause for the depreciation of the bonds 
 was the doubt existing as to the result of the 
 stru<™;lc with the rebellion. There should have 
 been no other cause. Of wealth to meet the pay- 
 ment of the loan at maturity there was an abund- 
 ance in the country, and until the issue of these 
 notes there had been no occasion to question the
 
 106 MONEY IN POLITICS. 
 
 good faith of the government in all its monetary 
 transactions ; and integrity in a government as 
 well as in a person has a commercial value. 
 
 Unfortunately, however, the several acts under 
 which the loans of the government were issued 
 did not state in what kind of dollars the bonds 
 would be paid when they became due. Many 
 persons asserted that, as the notes were a legal 
 tender in the payment of all debts public and 
 private, the holders of matured bonds would be 
 compelled to accept the notes therefor, whatever 
 might be their depreciation, and as the law espe- 
 cially specified that the interest on the loans was 
 to be paid in coin, there seems strong reasons for 
 such assertions. Doubts of this kind could not 
 but affect the exchange value of the loans, and 
 they did. The purchaser of the bonds had calcu- 
 lated the chances of military success, and parted 
 with his commodities at a rate which he believed 
 was justified by the risks assumed. But when the 
 character of the money in which the payment of 
 the bonds at maturity was to be made became 
 questionable, there entered into his reckoning 
 another element of doubt, making the purchase of 
 the bond a lottery in which the purchaser had 
 against him success in arms and integrity in legis- 
 lation. To buy a government bond under such 
 conditions was like purchasing a pool on a horse- 
 race when the record of the horses was unknown
 
 FALLACY OF LEGISLATION. 107 
 
 and little confidence felt in the integrity of the 
 jockeys. Under such circumstances investors de- 
 manded, and the government had to give, large 
 odds. Thus the notes, instead of floating the 
 loans, helped to depress them. 
 
 Fourth, the notes furnished a uniform circulat- 
 ing medium. 
 
 When the civil war broke out the government 
 had a uniform circulating medium of gold coin, 
 supplemented by bank-notes substantially circu- 
 lating at par with gold. The gold was a medium 
 uniform throughout the civilized world, and bein^ 
 everywhere recognized for what it was worth 
 could maintain its uniformity of value without 
 f dventitious aid. The introduction of these notes 
 c/rove the gold from circulation and depreciated 
 the value of the bank-notes. In less than a 
 3 r ear after their issue the notes had an exchange 
 value for other commodities less by thirty per 
 cent than when originally issued, and they fluctu- 
 ated violently from day to day, all the time 
 growing of less and less value, until a witty 
 member of Congress suggested an increase in rate 
 of duty on paper and dye stuffs, so that in case of 
 further issue the notes might not become wholly 
 worthless. The notes destroyed a uniform circu- 
 lating medium, and such a medium was not re- 
 stored until the resumption of 1879, when the 
 notes themselves became redeemable in coin.
 
 108 MONEY IX POLITICS. 
 
 They were never uniform except in their varia- 
 tions of value. 
 
 Fifth, the notes had an additional value from 
 their legal tender quality. 
 
 At the outbreak of the rebellion there was in 
 circulation $180,000,000 of bank issues, and an 
 estimated amount of $250,000,000 in coin, in all 
 about $430,000,000. "We have before seen that 
 money left to itself will always equal the precise 
 amount needed to effect the exchanges of products. 
 As gold was the medium circulating in Europe, 
 any excess in this country in 18G1 would have 
 gone there until the equilibrium of circulation 
 between the countries was restored. None went, 
 but in fact a small amount came into the country 
 from Europe in that year, indicating that the 
 amount in circulation here had somewhat passed 
 the minimum limit and was being restored. We 
 have also seen that if a circulating medium be- 
 comes excessive through artificial restraint, prices 
 of commodities will be correspondingly raised. If 
 two dollars exist where there is a demand for only 
 one, nobody will give of his commodities for both 
 dollars more than he would for one, there being, 
 practically, no use for the extra dollar. Whether 
 the circulating medium is gold, silver, copper, or 
 paper the same rule is true. 
 
 In 1861 the business of this country required in 
 making exchanges about $430,000,000 in gold
 
 FALLACY OF LEGISLATION. 109 
 
 coin, or equivalents thereto. In 18G4 gold coin 
 had been supplanted by legal tender issues, the 
 face value of which averaged for that year about 
 $840,000,000, and this amount had an average 
 value for the year, in gold, of about $420,000,000. 
 In addition thereto gold was maintained in circu- 
 lation in California, and enough of it in ports of 
 entry to meet custom duties. But on the other 
 hand, in 1864 eleven States, having a portion of 
 the circulation in 1861, were in rebellion, and a 
 fair estimate would indicate that on the whole 
 there had been no especial demand in 1864 for 
 an increased circulating medium. In 1864 the 
 exchange, and not the face, value of the notes, 
 fixed with an inexorable law the amount of 
 them which could be maintained in circulation. 
 As notes depreciated, more of them, in amount, 
 could be made to circulate, but this increase was 
 owing to their decreased value, not to airv extraor- 
 dinary quality with which the notes were endowed. 
 Four hundred and twenty millions of gold, or its 
 equivalent, was the amount of circulation the coun- 
 try required in 1864. The issue of notes fur- 
 nished this amount, and no more. Other circum- 
 stances fixed the value of the notes, and business 
 accepted them for circulation at the rate thus 
 fixed. Had there been no issue of notes, coin, or 
 its equivalent in convert ible paper, would have 
 continued to do duty. There was an abundance
 
 110 MONEY IN POLITICS. 
 
 of coin in the country for this purpose. When 
 Secretary Chase asked the banks where he could 
 get coin to carry on the war, what he wanted was 
 wealth, not coin, since the latter would come of 
 itself, when needed, if not prevented by legisla- 
 tion. 
 
 The owner of legal tender notes, however, could 
 not only exchange them for commodities, but he 
 could with them pay debts ; and their use for this 
 purpose might possibly give them a little addi- 
 tional value over that of notes not enjoying a legal 
 tender quality, but the bank notes of the country, 
 which no one was obliged to receive for any pur- 
 pose, circulated at par with United States notes, 
 and so strongly competed for favor that the gov- 
 ernment taxed them out of existence. The demand 
 notes of the government, before endowed with a 
 legal tender quality, circulated generally at par 
 with ijold, maintaining a higher rate than that ever 
 reached by the legal tender notes until their 
 redeemability was secured. The United States 
 notes circulated at a discount until within three 
 days of the time of redeemability, in itself an indi- 
 cation of the futility of effort of the government to 
 give to the notes a value which would not be 
 recognized by the laws of commerce and trade.
 
 CHAPTER XV. 
 
 NATIONAL BANK ISSUES. 
 
 In 18G1 sixteen hundred bunks, organized and 
 operated under the widely differing laws of the 
 several States, provided the greater part of the 
 currency of the country. Their issues aggregated 
 at that time about $200,000,000, their deposits 
 $250,000,000 —a total immediate liability of 
 $450,000,000, to meet which there was held about 
 $116,000,000 of specie, or its equivalent. The 
 loans outstanding aggregated about $700,000,000, 
 while the capital stock was about $430,000,000. 
 Of the capital $110,000,000, and of the circula- 
 tion of $50,000,000, were in the seceding States. 
 
 The circulating notes were far from satisfactory. 
 Except in the amount of the reserve held against 
 them, the banks had a clear profit in their issue, 
 and generally the weaker the bank the greater was 
 its effort to sustain itself by an excessive issue. 
 The notes of even the stronger banks were subject 
 to more or less discount, as they were far from, or 
 near to, the place of issue. Chicago bills were at 
 a discount in New York, and New York bills at a 
 
 ill
 
 112 MONEY IN POLITICS. 
 
 discount in Chicago of sometimes as high as five 
 per cent. A traveller between the two cities, 
 with a capital of §1,000, could pay travelling ex- 
 penses b}* a judicious trading of bills, buying the 
 depreciated bills in one city to be disposed of at 
 par in the other. A conductor on a " through " 
 train would often refuse bills outright at one point 
 of the line which he received at par at another. 
 The use of bank-note detectors was necessary in 
 order to ascertain the genuineness of notes, and 
 the solvency, or the existence even, of the banks 
 of which they purported to be the issue. 
 
 The inferior quality of the paper on which the 
 bills were printed, and the imperfections in the 
 printing itself, made counterfeiting easy and its 
 detection difficult. Trustworthy reports from 
 eighteen different States show that in 18(50, out of 
 twelve hundred and thirty banks, one hundred and 
 forty were broken, two hundred and thirty-four 
 r closed, and one hundred and thirty-one worthless. 
 There were in existence at that time three thousand 
 kinds of altered notes, seventeen hundred varieties 
 of spurious notes, four hundred and sixty varieties 
 of imitation, and over seven hundred of other 
 kinds more or less fraudulent. The various kinds 
 of genuine bills in circulation were about seven 
 thousand. It* those who tampered with the notes 
 were as industrious as were the bank officials in 
 putting them into circulation, one might expect, 

 
 NATIONAL BANK ISSUES. 113 
 
 by the law of chance, to find that out of every 
 eleven notes in circulation five had been tampered 
 with and that only six were genuine ; but even the 
 genuine ones were at par only near their respective 
 places of issue. 
 
 After our experience of twenty years with the 
 present currency, we can hardly realize the annoy- 
 ances and loss to which the country was subjected 
 by the circulation of such bills. The present 
 currency, in its purchasing power, may fluctuate 
 greatly, but one bill is as good as another of the 
 same denomination, and wherever, or b}^ whom- 
 soever issued, is received at par everywhere in the 
 country. The paper of which the notes are made 
 is of the best quality, and of late years has been 
 characterized by distinctive marks. The printing 
 is done from steel plates of the highest order of 
 the engraver's art, thus rendering counterfeiting 
 difficult and the publication of detectors almost 
 unnecessary. A portion of this currency is issued 
 directly by the government, and the remainder by 
 the national banks, which have, in issuing bills, 
 wholly supplanted the State banks. 
 
 The first suggestion of the national banking sys- 
 tem appears to have come from Secretary Chase. 
 Thinking at once to get rid of the objectionable 
 issues of the State banks, and to substitute there- 
 for a currency which would protect holders from 
 loss, and at the same time enable the government
 
 114 MONEY IN POLITICS. 
 
 to obtain means for prosecuting the war, he sub- 
 mitted to Congress, on the 9th day of December, 
 1861, two plans for effecting the object. 
 
 One plan contemplated the withdrawal from cir- 
 culation of all the State bank notes, and the issue 
 in their stead of United States notes payable in 
 coin on demand, in amount sufficient to meet the 
 wants of a representative currency. The other 
 plan contemplated the preparation and delivery to 
 institutions and associations, of notes prepared for 
 circulation under a national direction, and secured, 
 as to prompt convertibility into coin, by a pledge 
 of United States bonds and by needful regula- 
 tions. 
 
 The first of these plans had already been par- 
 tially adopted by the issue of demand notes, and 
 had the issue of these notes been extended grad- 
 ually, with a proper reserve to maintain their 
 redeemability in coin, and had the State banks 
 been imperatively required to keep their issues at 
 par in coin, the country would have had a currency 
 as creditable and profitable, perhaps, as any form 
 of credit issues. 
 
 But to Mr. Chase this plan presented inconveni- 
 ence and hazard. He feared that the temptation to 
 issue notes beyond adequate provision for redemp- 
 tion would not be resisted, and that there would 
 thence arise "the immeasurable evils of dishonored 
 public faith and national bankruptcy," and that
 
 NATIONAL BANK ISSUES. 115 
 
 possible disasters which might result therefrom 
 would far outweigh any possible benefit. He 
 therefore proposed a second plan, which, in brief, 
 "was : — 
 
 1st. The circulation of notes bearing a com- 
 mon impression, and authenticated by common 
 authority. 
 
 2d. The redemption of these notes by the asso- 
 ciations and institutions to which they might be 
 delivered. 
 
 3d. The security of the redemption by a pledge 
 of United States stocks, and an adequate provision 
 of specie. 
 
 He believed that the notes thus issued and 
 secured would form the safest currency the 
 country had ever enjoyed ; that being receivable, 
 as he thought they should be, for all public dues 
 except customs, they would be of equal value as 
 currency in every part of the United States ; that 
 the large amount of specie in the country, esti- 
 mated at $275,000,000, would easily support pay- 
 ment of duties in coin, and that with such pay- 
 ments, and with the ordinary demand, the specie 
 would stay in the country, as a solid basis both for 
 circulation and loans. 
 
 He expressed great confidence in the plan be- 
 cause it was not wholly an untried one. In the 
 State of New York, and perhaps in other States, 
 it had been subjected to the test of experience, and
 
 116 MONEY IN POLITICS. 
 
 found practicable and safe. He also thought that 
 existing: solvent institutions would substitute these 
 notes for their own, that the notes of weaker banks 
 would disappear, and that the government would 
 be greatly benefited by the sale of bonds, to be 
 issued as a basis of circulation. 
 
 Such was the scheme presented to Congress by 
 Secretary Chase in December, 1861. It met with 
 but little favor. In less than two months there- 
 after Congress was discussing the policy of issuing 
 legal tender notes with no provision for their re- 
 demption, and was endeavoring to drag the Secre- 
 tary into its support as a last resort for obtaining 
 means to carry on the war. It is worthy of note 
 that on the 9th day of December the Secretary saw- 
 no necessity for suspending specie payments, and 
 shrank from such a contingency ; yet at the same 
 time that he was thus opposing their issue, he was 
 pushing the demand notes into circulation, and 
 forcing the suspension which came at the end of 
 the month. 
 
 The issue of United States notes under the act 
 of February 25, 1862, bridged over the existing 
 financial embarrassments, and Congress adjourned 
 without considering the proposed plan for a 
 national banking system. 
 
 Upon the re-assembling of Congress, in Decem- 
 ber following, Mr. Chase, in his annual report, re- 
 newed his recommendation of a system of national
 
 NATIONAL BANK ISSUES. 117 
 
 banks, and reinforced it with strong arguments. 
 He again expressed his conviction that, while gov- 
 ernment notes were preferable to the issue of State 
 banks, the circulation to be furnished by national 
 banks, as he had recommended, would be better 
 than either. He recognized the cheapness of gov- 
 ernment notes and their facility of production in 
 times of emergency, but on the other hand thought 
 that there would be danger of excessive expansion, 
 which would be accompanied by lavish and cor- 
 rupt expenditure. 
 
 The associations he proposed were to be volun- 
 tary, but as a bounty he would impose a tax on 
 the issues of the State banks. Their establish- 
 ment would give every person holding a dollar of 
 their circulation an interest in the preservation of 
 the government, upon whoso credit the notes were 
 issued, and thus out of the public debt, though 
 never of itself a i^ood, this benefit might be ex- 
 tracted. 
 
 At the close of the previous Congress this 
 measure was, as we have seen, almost friendless. 
 Representative Hooper, of Boston, almost alone 
 favored it in the House. The State banks were 
 almost unanimously opposed to it. Rankling 
 memories of the old United States Bank were 
 everywhere revived, and the proposed repression 
 of the Stale issues and the substitution of notes 
 issued by associations organized under authority
 
 118 MONEY EST POLITICS. 
 
 ot'lhe general government were measures especially 
 obnoxious to Democratic congressmen. But mean- 
 while the measure had evidently gained in popu- 
 larity, and a bill embodying the scheme recom- 
 mended by the Secretary was promptly introduced 
 in the Senate and exhaustively debated. Mr. Col- 
 lamer summed up the chief objections against it. 
 They were : — 
 
 That it proposed to tax State banks out of 
 existence. That it substituted for the State banks 
 then doing business at least three thousand, and 
 perhaps six thousand institutions, entirely inde- 
 pendent of the power of visitation by the States. 
 That the capital employed would not be subject to 
 State taxation. That it made the government 
 responsible for the ultimate redemption of the 
 circulation to be issued. That it put great political 
 power into the hands of the Secretary of the 
 Treasury. That it hired the banking associations, 
 at a yearly expense of $12,000,000 in gold, to cir- 
 culate $300,000,000 of currenc}" among the people, 
 who were at last responsible for its redemption. In 
 short, that the people of the country would derive 
 no benefit from the operations of the bill, and that 
 after all the profits derived to the banks would be 
 very small. 
 
 To this Mr. Sherman replied that if $100,000,- 
 000 of the circulation of the State banks were 
 withdrawn, the government would reap an advan-
 
 NATIONAL BANK ISSUES. 119 
 
 tage, at any rate, of a market for $100,000,000 of 
 its stocks, and that the creation of the demand for 
 $100,000,000 would excite a farther demand for 
 $500,000,000. That the power of the Secretary 
 ■would be weakened rather than strengthened by 
 the operation of the proposed system, inasmuch as 
 the powers conferred by the bill were more likely 
 to make enemies than friends for the Secretary 
 who exercised them. 
 
 The bill passed both houses. In the Senate the 
 vote stood 23 for, and 21 against it; in the House 
 78 for, and 64 against it. One Democratic senator 
 — Nesmith of Oregon — voted for the bill, and 
 seven Republican senators voted against it. In 
 the House two Democrats voted for it, and twenty- 
 five Republicans against it. It became a law 
 February 25, 18G3." 
 
 The act provided for an additional bureau in the 
 Treasury Department charged with the execution 
 of the law, the chief officer of which was to be 
 denominated "The Comptroller of the Currency." 
 
 The principal features of the bill relating to the 
 issue of notes were these : — 
 
 Thirty per cent of the capital stock was to be 
 paid in before the bunk could begin business. As 
 a preliminary to the beginning of business an asso- 
 ciation was required to transfer and deliver to the 
 United States Treasurer interest-bearing bonds of 
 the United States, in amount not less than one-
 
 120 MONEY IX POLITICS. 
 
 third of the capital stock paid in, whereupon it 
 was entitled to receive from the Comptroller circu- 
 lating notes of various denominations in blank, 
 but registered and countersigned at the depart- 
 ment, equal to ninety per cent of the current 
 value of the bonds, but not exceeding their par 
 value. 
 
 The whole amount of circulation authorized was 
 $300,000,000, of which one half was to be appor- 
 tioned according to population, the other half 
 according to the then existing banking capital, 
 resources, and business of the States, Territories, 
 . and District of Columbia. 
 Cl^ To reimburse the expense of the government in 
 / preparing the notes, a tax of two per cent per 
 annum was imposed upon the amount of the circu- 
 lation of the associations in lieu of all other taxes 
 upon the notes and the security bonds. 
 
 ^The notes were made receivable in payment of 
 all dues to the United States except duties on im- 
 ports, and payable in satisfaction of all demands 
 against the United States, except interest on the 
 public debt. 
 
 Every association was required to have on hand 
 at all times, in lawful money of the United States, 
 a sum equal to twenty-live per cent of the aggre- 
 gate of its outstanding circulation and deposits. 
 
 No association was to pay out or put in circula- 
 tion the notes of any bank or banking association,
 
 NATIONAL BANK ISSUES. 121 
 
 which should not bo receivable at the time at par, 
 on deposit or in payment of debts due the asso- 
 tion paving out or circulating them. Nor could it 
 circulate the notes of any association which did 
 not at that time redeem its notes in the lawful 
 money of the United States. Provision was also 
 made for the conversion of State banks into these 
 associations. 
 
 Secretary Chase, in his next annual report, Dec. 
 10, 1863, ascribed salutary effects to the operation 
 of the act. Up to that time 134 banks had been 
 organized, chiefly in the west, with an aggregate 
 capital of $16,000,000. Some defects in the act 
 had naturally been developed in the year's experi- 
 ence of its practical working, to correct which he 
 recommended several amendments. 
 
 The debate upon the amendatory act developed 
 all that could be urged against the system, to 
 wit : — 
 
 1st. That it inflated the currency and raised 
 prices. 
 
 2d. That it provided for an irredeemable cur- 
 rency. 
 
 3d. That it relieved the capital of the associa- 
 tions from State taxations. 
 
 In answer to the first allegation, that prices of 
 commodities had largely increased, no denial could 
 be made, but it was alleged that the increase was 
 no more due to the expansion of bank circulation
 
 122 MONEY IN POLITICS. 
 
 than to the issue of United States notes, and that 
 the evils at best were but temporary and would 
 disappear with success in the field. 
 
 Nor could the second allegation be denied, but 
 it was alleged that after the suspension of the 
 banks in 1861 a coin circulation was not believed 
 possible, and that the government had to choose 
 between the two paper currencies offered, one by 
 the State banks also irredeemable in coin, which 
 currency could be expanded and depreciated with- 
 out restriction, the profits accruing to the banks 
 issuing it; or one furnished by the government 
 under its own direction and control, secured by 
 the pledged faith of the United States, the profits 
 of which should be for the benefit of the whole 
 people of the country. 
 
 In reply to the third objection it was urged that, 
 under the decisions of the Supreme Court, banks 
 chartered by the United States could not be taxed 
 by the State authorities, even without a special 
 exemption therefrom by law, and the same was 
 true as to the bonds and stocks of the government, 
 and that for the benefit which might arise from the 
 circulation the banks paid the government a gene- 
 rous tax. 
 
 The amendatory tax passed the Senate, only two 
 Republicans voting against it, and none of the 
 Democrats voting for it. In the House no Repub- 
 lican voted against it, and no Democrat voted for
 
 NATIONAL BANK ISSUES. 123 
 
 it. The bill became a law June 3, 1864. The 
 amendments affecting the circulation were mainly 
 these : — 
 
 1st. There was to be no restriction as to the 
 distribution of the circulation, the aa-orerrate 
 amount, however, to remain at $300,000,000. 
 
 2d. The tax on circulation was reduced to one- 
 half of one per centum semi-annually, and a tax 
 was imposed upon the deposits, and upon the capi- 
 tal stock in excess of the amount represented by 
 bonds pledged to secure the circulating notes. 
 
 3d. Any association wishing to close its busi- 
 ness could deliver to the Treasurer of the United 
 States lawful money to the amount of its out- 
 standing notes, and be entitled to receive there- 
 for the return of the bonds pledged for their 
 security. 
 
 By subsequent legislation, changes have been 
 made, so that the banks can, at the present time, 
 receive of circulating notes but ninety per centum 
 of the face value of the pledged bonds, and they 
 are not otherwise restricted as to the limit or dis- 
 tribution of their circulation. 
 
 In lieu of any reserve for circulation, every bank 
 is now required to keep in the Treasury of the 
 United States five per centum of the amount of 
 its circulation ; and the Treasurer is required to 
 redeem therewith any notes of the hank presented 
 for that purpose. If the bank issuing the redeemed
 
 124 MONEY IN POLITICS. 
 
 notes is still doing business, now notes are issued 
 to it in lieu of those redeemed and destroyed, and 
 the five per cent fund must be reimbursed to that 
 extent. 
 
 Every bank can also, at its discretion, decrease 
 the amount of its circulation by depositing with 
 the Treasurer of the United States legal-tender 
 notes to the amount of the reduction contemplated. 
 The Treasurer, upon receipt of the deposit, returns 
 to the bank a corresponding amount of its security 
 bonds, and redeems the notes of the bank to the 
 extent of the deposit when they come into his 
 possession. No limit is fixed to the time during 
 which the notes of banks which have closed busi- 
 ness must be presented for redemption, and, as a 
 result, many notes will be worn out or otherwise 
 destroyed, and will never be presented for redemp- 
 tion. No provision as to the disposition of the 
 fund provided for the redemption of such de- 
 stroyed notes has been made. 
 
 The fund deposited with the Treasurer for the 
 redemption of notes of banks which have failed, 
 gone into liquidation, or are reducing circula- 
 tion, reaches at times nearly $50,000,000. This 
 amount, whatever it may be, lies idle in the 
 Treasury vaults. 
 
 Of this system of circulation much good can be 
 said. No holder of a national bank-note has ever 
 lost a cent through the failure of the bank issuing
 
 
 NATIONAL, BANK ISSUES. 125 
 
 it ; nor has he been subjected to a vexatious dis- 
 count in passing it. Everywhere throughout the 
 country the note passes at par, and no scrutiny is 
 required to ascertain the place of its issue. Coun- 
 terfeit issues are almost unknown, — so rare, indeed, 
 that no one takes any precaution to guard against 
 them. There is no monopoly in the system. Ten : 
 persons in any city having less than twenty-thou- I 
 sand inhabitants can organize a bank by contribut- 
 ing $5,000 each, one-half down, the remainder in 
 easy instalments., and have whatever profits they 
 can find in issuing circulating notes. 
 
 It is true that at first the national-bank notes, 
 being made redeemable in lawful money of the 
 United States, did not circulate at par in coin, but 
 that time is happily passed, and hereafter no bank 
 should be permitted, under any circumstances, to 
 refuse payment of its notes in specie at par. 
 
 Opposition to the system has almost entirely 
 disappeared throughout the land. From no source 
 come any complaints of its operations, and in the 
 United States Senate this winter no reply was 
 elicited, no denial made, when one of its ablest 
 members, a Democrat from Kentucky, remarked, 
 "The national banks are out of politics. There is 
 nobody making war upon them, nor arc they, as 
 such, interfering in political affairs. "We need their 
 circulation for a growing country, and therefore it 
 will be a benefit for us all to maintain it."
 
 126 MONEY IN POLITICS. 
 
 The rapid payment of the public debt, however, 
 if continued, will in a few years retire the bonds, 
 by the deposit of which, under existing laws, the 
 banks will obtain circulation, and the whole ques- 
 tion of a paper circulation for the country will 
 again be opened.
 
 CHAPTER XVI. 
 
 CONTRACTION. 
 
 At the close of the civil war the State banks 
 had a circulation of $143,000,000, but a law im- 
 posing a tax of ten per cent upon the amount of 
 the notes of such banks paid out by any banking 
 association took effect on the first day of July, 
 1865, and there could be but one result, — the 
 issues of State banks must go. The national 
 banks at that time had issued but $146,000,000 
 of the $300,000,000 authorized. The government 
 had outstanding $433,000,000 of United States 
 notes, $104,000,000 of compound-interest notes, 
 $43,000,000 of the one and two year notes, and 
 $25,000,000 of fractional notes. The total amount 
 of paper currency outstanding was $983,000,000, 
 having a coin value of $692,000,000, the coin 
 value of the paper dollar being seventy-one cents. 
 
 Fiscal Year 1866. 
 Secretary McCulloch, in his annual report for 
 1865, expressed the opinion that the issue of legal 
 tender notes, being a war measure, a temporary 
 
 127
 
 128 MONEY IN POLITICS 
 
 expedient adopted in a great emergency ; they 
 ouo-ht not to remain in use longer than was neces- 
 sary to enable the people to return to a gold 
 standard, and that the work of retiring the notes 
 which had been issued should be commenced with- 
 out delay and carefully and persistently continued 
 until all were retired. The House of Representa- 
 tives on December 18, 1865, under a suspension 
 of the rules, by a vote of one hundred and forty- 
 four yeas to six nays, resolved : — 
 
 " That this House cordially concurs in the views 
 of the Secretary in relation to the necessity of a 
 contraction of the currency, with a view to as 
 early a resumption of specie payment as the busi- 
 ness interests of the country will permit, and we 
 hereby pledge co-operative action to this end as 
 speedily as possible." 
 
 To carry out this policy, Congress, by an act 
 approved April 12, 1866, directed: "That of 
 United States notes not more than $10,000,000 
 may be retired and cancelled within six months 
 from the passage of this act, and thereafter not 
 more than $4,000,000 in any one month." 
 
 On the date of the approval of this act there 
 were outstanding of United States notes $422,- 
 000,000. At the close of the fiscal year, June 
 30, 1866, the circulation of State banks had de- 
 creased $141,000,000, that of United States notes 
 $33,000,000, the amount of compound-interest
 
 CONTRACTION. 129 
 
 notes $143,000,000, and that of the one and two 
 year notes $40,000,000, while the circulation of 
 the national-bank notes had increased but $135,- 
 000,000. 
 
 It may be alleged that the interest-bearing notes 
 had passed entirely out of circulation. In one 
 sense this allegation is true, — they were no longer 
 used in making exchanges ; but being a legal 
 tender for their face value they furnished, and 
 were used as, a lawful reserve for the national 
 banks, taking the place of United States notes to 
 the extent that they were thus used, and swelling 
 the aggregate circulation by a corresponding 
 amount. Upon maturity, large amounts of them 
 came back to the Treasury from the banks, with 
 the seals of their original packages unbroken. 
 Notwithstanding the great reduction in the paper 
 circulation, the coin value of one dollar in paper 
 was live cents less at the end of the year than at 
 the beginning, — a poor encouragement for any 
 plan of resumption by contracting the currency. 
 
 It should l)e remembered, however, that on 
 June 30, 18G5, a year before, a large army had 
 just been disbanded and paid off, calling into use 
 a large amount of circulating notes throughout the 
 country ; large sales of public stores and property 
 were being made for cash, and these transactions 
 caused a demand for circulation which did not 
 exist in 1866. The total amount of paper circula-
 
 130 MONEY EST POLITICS. 
 
 tion Jane 30, 1866, was $892,000,000, a reduc- 
 tion within the year of $9,500,000. The coin 
 value of the circulation was, however, but $589,- 
 000,000, a reduction of $103,000,000 of coin 
 valuation, the coin valuation of paper being sixty- 
 six cents. 
 
 Fiscal Year 1867. 
 
 The Secretary continued his policy of retiring 
 United States notes, as provided by law. The 
 compound-interest notes were also being rapidly 
 funded into five-twenty bonds, but the national 
 banks meanwhile were increasing their issues. By 
 the withdrawal of the interest-bearing notes the 
 banks had to keep their reserve in non-productive 
 money, and they made an earnest appeal to Con- 
 gress for relief. This relief was partly granted. 
 Congress, by an act approved March 2, 1867, 
 authorized a temporary loan of $50,000,000 in the 
 form of certificates, bearing three per cent interest 
 per annum ; the proceeds to be used in the redemp- 
 tion of the compound-interest notes ; the certifi- 
 cates issued to be used as a lawful reserve for the 
 banks. The}^ were thus used, and any reduction 
 during that year in the amount of United States 
 notes was more than offset by the issue of this 
 loan. Notwithstanding the issue of the three per 
 cent certificates, the aggregate amount outstanding 
 of interest-bearing notes rapidly decreased, and
 
 CONTRACTION. 131 
 
 there was no means by which the aggregate circu- 
 lation could be increased, the circulation of the 
 banks having already reached the limit authorized 
 by law. The amount of outstanding paper circu- 
 lation June 30, 1867, was $827,000,000, having a 
 coin value of $587,000,000, a decrease during the 
 year in face value of $65,000,000, but a decrease 
 in coin value of only $2,-000,000. The paper 
 dollar now had a coin value of seventy-one cents, 
 an increase duriug the year of five cents. 
 
 Fiscal Year 1868. 
 Upon the assembling of Congress in December, 
 1867, there was a threatened stringency in the 
 money market. A considerable decline in the 
 prices of commodities had already taken place, 
 the country was on the road to resumption at last, 
 but the wrecks of fortunes threatened to strew its 
 pathway. Congress became alarmed and deter- 
 mined to postpone the evils it could not avoid. 
 On February 4, 1868, the authority to further 
 retire United States notes was suspended, leaving 
 outstanding $356,000,000. On June 30, 1868, 
 there remained outstanding of compound-interest 
 notes only $28,000,000, but the issues of three 
 per cent certificates had increased to $50,000,000. 
 Including the amount of these certificates, the total 
 paper circulation at that date was $770,000,000, 
 having a coin value of $540,000,000, a reduction
 
 132 MONEY IN POLITICS. 
 
 during the year of $57,000,000 in face value and 
 of $47,000,000 in coin value. The paper dollar 
 was now worth seventy cents in coin, one cent less 
 than it was a year before, notwithstanding the 
 large reduction in the aggregate amount of circu- 
 lation. 
 
 Fiscal Year 1869. 
 
 On July 25, 18G8, Congress, in order to favor 
 the banks and to avoid a possible stringency in 
 the money market, authorized an additional issue 
 of $25,000,000 of the three per cent certificates. 
 A new question now arose and had to be met. In 
 several of the acts authorizing the issue of United 
 States bonds the character of the currency in 
 which they were to be paid at maturity was left in 
 doubt, and a determined effort was made by a 
 large class of people, especially by those who had 
 not been friendly to the purposes of the war, to 
 secure the payment of these loans in the notes for 
 which they were issued. Congress, however, by 
 an act approved March 18, I860, set these ques- 
 tions at rest by declaring that the faith of the 
 United States was solemnly pledged to the pay- 
 ment, in coin or its equivalent, of all the obliga- 
 tions of the United States not bearing interest, 
 known as United States notes, and all the interest- 
 bearing obligation of the United States, except 
 in cases where the law authorizing the issue of any
 
 CONTRACTION. 133 
 
 such obligations had expressly provided that the 
 same might be paid in lawful money or other cur- 
 rency than gold or silver. And it also pledged 
 the faith of the United States to provide at the 
 earliest practicable period for the redemption of 
 United States notes in coin. This act had the 
 effect of strengthening the public credit and of 
 increasing the value of United States notes. In- 
 cluding the amount of these three per cent certifi- 
 cates, the afnrreuatc amount of outstanding circula- 
 tion at the close of the fiscal year ending June 30, 
 1869, was $75(3,000,000, having a coin value of 
 $552,000,000, a decrease of $14,000,000 in face 
 value and an increase of $12,000,000 in coin 
 value. The paper dollar was now worth in coin 
 seventy-three cents, a gain during the year of 
 three cents. 
 
 Fiscal Year 1870. 
 On June 30, 1870, the aggregate of paper cir- 
 culation was $745,000,000, having a coin value 
 of $(133,000,000, a decrease during the year of 
 $11,000,000 in its face value, but an increase of 
 $81,000,000 in its coin value. A dollar in paper 
 was now worth eighty-five cents, a gain in value 
 during the year of twelve cents. 
 
 Fiscal Year 1871. 
 On the 12th of July, 1870, an act was approved
 
 134 MONEY IN POLITICS. 
 
 authorizing an additional issue of $54,000,000 
 national bank circulation, an equivalent amount of 
 three per cent certificates to be redeemed ; and on 
 June 30, 1871, the banks had increased their 
 circulation to $418,000,000. The aggregate cir- 
 culation at this date was $748,000,000, with a 
 coin value of $(565,000,000, a paper dollar being 
 now worth eighty-nine cents, an increase within the 
 year of four cents. 
 
 Fiscal Year 1872. 
 
 Another question now arose to agitate the coun- 
 try. The acts of Congress of February 25 and 
 June 11, 1862, and March 3, 1863, had together 
 authorized the issue of $400,000,000 of United 
 States notes in addition to $50,000,000 of such 
 notes reserved for the purpose of securing prompt 
 payment of temporary loan deposits, and the act 
 of June 30, 1864, contained these words: "Nor 
 shall the total amount of United States notes, 
 issued or to be issued, ever exceed $400,000,000, 
 and such additional sum, not exceeding $50,000,- 
 000, as may be temporarily required for the re- 
 demption of temporary loans." 
 
 The temporary loans referred to having been 
 redeemed, the maximum amount of United States 
 notes was evidently fixed by the last-named act at 
 $400,000,000. 
 
 The act of April 12, 1866, provided, as we have
 
 CONTRACTION. 135 
 
 seen, that a certain amount of United States notes 
 might be retired and cancelled. The act of Feb. 
 4, 1868, provided that the authority to make any 
 reduction of the currency by retiring and cancel- 
 ling United States notes should thereafter be sus- 
 pended. Between the dates of these two acts the 
 amount outstanding of United States notes was 
 reduced from $422,000,000 to $356,000,000, and 
 as the notes withdrawn had been retired and can- 
 celled, as provided by law, and reduced to ashes, 
 as provided by Treasury regulations, they were 
 generally supposed to have passed beyond the 
 power of resurrection ; but some financial genius 
 discovered that the maximum limit of $400,000,000 
 to which the notes could be issued remained un- 
 touched, and that the Secretary of the Treasury 
 had consequently a reserve of $44,000,000 of 
 United States notes which he could issue and 
 retina at his discretion. By virtue of this newly 
 discovered discretionary power Secretary Bout- 
 well, in October, 1871, to relieve a stringency in 
 Wall Street, issued of this reserve $1,500,000. 
 
 At the end of the year, June 30, 1872, the 
 amount of paper circulation was $738,000,000, 
 the banks having increased their issues about 
 $20,000,000. The coin value of this circulation 
 was now $646,000,000, a paper dollar being worth 
 eighty-seveu cents and a half, a decrease in value 
 during the year of one cent and a half, mainly
 
 136 MONEY IN POLITICS. 
 
 brought about by the alarm which arose from the 
 action of the Secretary in reissuing the notes. 
 
 Fiscal Year 1873. 
 
 The previous year ended with seeming prosper- 
 ity throughout the country. In all parts labor 
 met with good demand and remunerative compen- 
 sation, and manufacturing enterprises were espe- 
 cially prosperous. The Secretary, at his discre- 
 tion, had from time to time caused additional issues 
 to be made from the alleged reserve, although his 
 authority to do so was doubted by many. Even 
 if the right to re-issue these notes existed, the 
 necessity of exercising what at best was a doubt- 
 ful and dangerous prerogative may be questioned. 
 The receipts of the government were largely in 
 excess of i he expenditures, and bonds were being 
 purchased with the surplus at a considerable pre- 
 mium. The public Treasury, at the same time, 
 was strong, holding of cash more than $70,000,000 
 in excess of all matured demands outstanding. 
 
 The Secretary, in his annual report to Congress, 
 made no reference to this important subject. The 
 increased amount of the notes, however, appeared 
 in the monthly debt statement and other official 
 publications, and neither Congress nor the coun- 
 try was ignorant of their issue. Of this reserve 
 there was issued in all $4,637,256, but the outcry 
 against the policy was so strong that $3,481,541
 
 CONTRACTION. 137 
 
 was retired. Secretary Richardson, who suc- 
 ceeded Secretary Boutwell in March, 1873, imme- 
 diately retired the remainder of the reserve issue, 
 and at the close of the year, June 30, 1873, the 
 amount outstanding was again reduced to $356,- 
 000,000. Meanwhile the banks had increased 
 their issues to $347,000,000, and the amount of 
 fractional currency which had been gradually in- 
 creasing now reached more than $44,000,000. 
 
 The entire circulation June 30, 1873, was $750,- 
 000,000, coin value $048,000,000, the value of 
 the paper dollar being eighty-six and a half cents, 
 a still further depreciation of one cent. 
 
 Fiscal Year 1874. 
 Another year of intense activity in business had 
 passed, the credit circulation of the country had 
 been considerably increased, while the public 
 debt had largely diminished, and there seemed 
 to be no reason why this prosperous condition of 
 affairs should not continue indefinitely. But sud- 
 denly in September, 1873, when the country was 
 revelling in apparent prosperity, there came a 
 crash. The country was roused from pleasant 
 dreams to unpleasant realities. It was now seen 
 that a million men in arms destroyed wealth 
 instead of creating it ; that goods manufactured 
 beyond need were a drug in the market ; that rail- 
 roads built where there were neither passengers
 
 138 MONEY IN POLITICS. 
 
 nor freight to carry could not pay dividends ; that 
 the values of commodities were not governed by 
 the imagination of the owners ; that men who 
 habitually spent more than they earned would 
 eventually become paupers, and generally that 
 paying for the music did not give the ecstatic 
 delight produced by the whirl of the dance. 
 
 The first indication of the approaching cyclone 
 was the failure of a well-known banking house. 
 The storm did not abate until all the industries of 
 the country were wrecked or damaged. Failures 
 in business were numerous on every hand, and the 
 man in active business who could pay promptly 
 the demands upon him was looked upon as a skin- 
 flint who had been devoid of enterprise and public 
 spirit. Doubt and suspicion succeeded to hope 
 and confidence. Men no longer dared to trust 
 each other, and each one grasped all the money he 
 could lay his hands on and kept it in his personal 
 possession. The banks no longer received their 
 customary deposits and consequently could with 
 difficulty meet their obligations. With collateral 
 of undoubted worth they could induce holders of 
 money to part with their treasure only at exorbi- 
 tant rates, if at all. The savings banks, although 
 generally solvent, having extended their loans to 
 the utmost limit to enable them to pay large divi- 
 dends, were especially embarrassed to meet the 
 demands of depositors, and their officers were
 
 CONTRACTION. 139 
 
 forced into the streets to borrow money at ruin- 
 ous rates in order to avoid the mortification of 
 temporarily closing their doors. 
 
 In the vaults of the Treasury lay $50,000,000 
 of gold coin which could lawfully have been paid 
 out in exchange for public obligations without 
 embarrassing the operations of the government ; 
 but as specie could not be employed to pay private 
 debts without a sacrifice at once of about twelve 
 per cent, — the amount of its premium in paper, — 
 it was not wanted. Nowhere else did there appear 
 to be any accumulation of money, nor could the 
 banks expand their issues, their maximum limit 
 having already been reached. All eyes were 
 therefore turned to the $44,000,000 note reserve 
 lying in the Treasury, a portion of which had done 
 duty in the previous year in an exigency far less 
 pressing than this, and urgent demand arose for 
 its issue. The Secretary yielded to this demand, 
 and in exchange for public securities paid out 
 $25,000,000 of it, thus affording a temporary 
 relief to the embarrassed banks. For this action 
 he was censured as well as praised. In his favor 
 it can be said that for more than a year Congress 
 had known that the Secretary claimed the right to 
 issue and withdraw any portion of this reserve as 
 circumstances might in his judgment require, and 
 no steps had been taken to dispossess him of this 
 extraordinary and dangerous power. Congress
 
 140 MONEY IN POLITICS. 
 
 had also by its inaction needlessly left the country 
 with only a local currency with which to effect 
 exchanges. Gold, the currency of the world, was 
 still only a commodity and unavailable for circula- 
 tion. From the conditions indicated, only evils 
 could flow in such a crisis, and the Secretary 
 endeavored to make the evils as bearable as pos- 
 sible. Had the country been conducting its ex- 
 changes on a specie basis, no such crisis could have 
 arisen. The gold of the Treasury would have met 
 immediate wants, and for any additional needed 
 amount European gold would have poured into 
 Wall Street as soon as electricity could have 
 invited it and steam brought it to our shores. 
 Only by having the whole world for a market can 
 a stringency of money be avoided in a panic like 
 that of 1873. 
 
 Congress assembled in December following. 
 The scarcity of money still continued to be se- 
 verely felt throughout the country. The Secre- 
 tary had from his reserve given relief to the banks, 
 and men then asked "If banks can thus obtain 
 relief, why not make the reserve large enough so 
 that from it the government can relieve everybody 
 and make money plentiful again?" The inquiry 
 was pertinent and suggestive. The Senate crys- 
 tallized the idea into a bill of two sections. The 
 first section fixed the maximum limit of United 
 States notes at $400,000,000 ; the second author- 
 ized $46,000,000 additional bank issues, and re-
 
 CONTRACTION. 141 
 
 quired each bank to retain as a part of its lawful 
 reserve one-fourth part of the coin received by it 
 as interest on the United States bonds deposited 
 with the Treasurer of the United States to secure 
 its circulation and deposits. The bill, however, 
 prohibited an}' bank from keeping more than one- 
 fourth part of its reserve in the banks of the 
 reserve cities where the entire amount had usually 
 been kept at a low rate of interest. Whether 
 inflation or contraction would result from this 
 measure nobody could tell. The friends of re- 
 sumption opposed it, but were unable to defeat its 
 passage. The President vetoed it, however, as 
 an inflation measure, giving such cogent reasons 
 for his action that even the promoters of the 
 scheme had no reply to make. The influence of 
 the action of the President had a gratifying effect 
 throughout the country and called a halt to all 
 inflation purposes. 
 
 On June 20, 1874, an act was approved fixing 
 the issue of United States notes at $382,000,000, 
 the amount then outstanding. The act also re- 
 quired every national bank to keep with the Trea- 
 surer of the United States five per cent of its 
 circulation with which to redeem its notes, and 
 required no other reserve for that purpose. The 
 act also authorized any bank to reduce its circula- 
 tion by depositing with the Treasurer for the 
 redemption of its notes an amount of United States 
 notes equal to the reduction proposed.
 
 142 MONEY IX POLITICS. 
 
 On June 30, 1874, the fiscal year ended with 
 $781,000,000 of circulation outstanding, $46,000,- 
 000 being fractional notes; coin value $711,000,- 
 000 ; coin value of the paper dollar, ninety-one 
 rents, a net gain during the year of four and a 
 half cents, notwithstanding the increase in circu- 
 lation of $31,000,000. 
 
 Fiscal Year 1875. 
 The distress following the panic of 1873 was 
 not easily or quickly relieved, and Congress as- 
 sembled in December, 1874, with the country 
 looking to it for corrective legislation. The firm- 
 ness of the President, as evinced in his veto mea- 
 sure of the preceding session, precluded any hope 
 of further inflation of the currency and strength- 
 ened the hands of those who favored a return to 
 specie payments. Early in the session a measure 
 was reported to the Senate, commanding the sup- 
 port of the Republican side, and it was pressed 
 through both houses as a purely partisan measure, 
 no Democrat voting for it. It became a law 
 Jan. 14, 1875, but its immediate effects were not 
 encouraging. By the close of the fiscal year, June 
 30, 1875, the banks had increased their issues to 
 $354,000,000 and the amount of United States 
 notes was reduced to $375,000,000 ; total circula- 
 tion $773,000,000, coin value $674,000,000, value 
 of the paper dollar eighty-seven cents, a loss of 
 four cents, notwithstanding the resumption act.
 
 contraction. 143 
 
 Fiscal Year 1876. 
 
 No further legislation affecting the issue of a 
 credit circulation was adopted during this year. 
 The banks, somewhat to the surprise of those who 
 feared they might largely expand their issues, re- 
 ported a decrease in the aggregate amount. New 
 banks, however, had received issues which, under 
 the provisions of the resumption act, required a 
 corresponding reduction in the amount of United 
 States notes. Contraction, therefore, resulted in 
 both forms of credit circulation. 
 
 On June 30, 1876, the total circulation was 
 $738,000,000, coin value $656,000,000, value of 
 the paper dollar in coin eighty-nine cents, a gain 
 of two cents, owing largely without doubt to a 
 decreased circulation of $35,000,000. 
 
 Fiscal Year 1877. 
 During this year a large amount of fractional 
 notes was redeemed by the issue in their place of 
 fractional silver. The banks also continued to 
 withdraw their circulation, and the volume of 
 United States notes was considerably diminished. 
 The circulation being now relieved of many re- 
 straints began to adjust itself to the needs of 
 business, and good effects were felt. The total 
 circulation, June 30, 1877, was $698,000,000, coin 
 value $662,000,000, value of paper dollar ninety- 
 five cents, a gain of six cents.
 
 144 money ix politics. 
 
 Fiscal Year 1878. 
 
 By the end of this year nearly all the fractional 
 notes not destroyed had been redeemed in silver, 
 only $16, 000,000 remaining, of which only about 
 $1,000,000 has since been redeemed. Congress 
 contented itself with passing an act which was 
 approved May 31, 1878, prohibiting the retire- 
 ment of any more United States notes, and provid- 
 ing that when any such notes should thereafter be 
 redeemed they should not be cancelled, but should 
 be paid out again and kept in circulation. As no 
 limit had ever been placed on the amount or kind 
 of fund which the Secretary could keep on hand 
 the last provision was of no possible consequence, 
 but it pleased the opponents of resumption and at 
 the same time did no harm. At the close of this 
 year, June 30, 1878, the total amount of circula- 
 tion was $688,000,000, coin value $684,000,000, 
 value of a dollar in coin ninety-nine and a half 
 cents. Resumption took place six months later, 
 as provided by law. 
 
 To those who believe that the aggregate ex- 
 change value of a circulating medium can be 
 increased or diminished by the will of Congress or 
 any human agency is commended the fact that 
 after sixteen years of legislative effort, by which 
 the face value of the circulation was reduced more 
 than $300,000,000, the coin value was reduced 
 less than $6,000,000. The great law of demand
 
 CONTRACTION. 
 
 145 
 
 and supply fixed the amount needed and mocked 
 the futile efforts of those who tried to overrule it. 
 The following statement shows in tabular form 
 the changes which took place in the amount and 
 valuation of the paper circulation for the years 
 named : — 
 
 Statement showing the amount in millions of outstanding paper 
 circulation and its value in coin, together with the value in 
 coin of one dollar in paper, at the close of each fiscal year, 
 from 18G5 to 1879 inclusive. 
 
 Year ending 
 June 30. 
 
 Amount of 
 circulation. 
 Millions. 
 
 Coin value of 
 
 circulation. 
 
 Millions. 
 
 Coin value of 
 One Dollar 
 of paper. 
 
 1865 
 
 983 
 
 697 
 
 .71 
 
 1866 
 
 892 
 
 589 
 
 .66 
 
 1867 
 
 827 
 
 587 
 
 .71 
 
 1868 
 
 770 
 
 540 
 
 .70 
 
 1869 
 
 756 
 
 552 
 
 .73 
 
 1870 
 
 745 
 
 633 
 
 .85 
 
 1871 
 
 748 
 
 665 
 
 .89 
 
 1872 
 
 738 
 
 646 
 
 .87* 
 
 1873 
 
 750 
 
 648 
 
 .86* 
 
 1874 
 
 781 
 
 711 
 
 .91 
 
 1875 
 
 773 
 
 674 
 
 .87 
 
 1876 
 
 738 
 
 656 
 
 .89 
 
 1877 
 
 698 
 
 662 
 
 .95 
 
 1878 
 
 688 
 
 684 
 
 .99* 
 
 1879 Jan. 1 
 
 686 
 
 686 
 
 1.00
 
 CHAPTER XVn. 
 
 RESUMPTION. 
 
 The panic of September, 1873, called attention 
 to the defects of our monetary system. United 
 States notes were hoarded with such avidity that 
 they rose in value to about ninety-three cents in 
 gold or about the value of fractional silver coins 
 — these coins being intentionally debased about 
 seven per cent below their face value to keep them 
 in circulation. President Grant noted this favor- 
 able change, and in a letter to Mr. Cowdrey, of 
 October 6, 1873, expressed surprise that silver 
 was not already coining into the market to supply 
 the deficiency in the circulating medium. On the 
 27th of that month Secretary Richardson issued a 
 circular letter to the several sub-treasury officers, 
 directing them to pay out silver coin to public 
 creditors, should they desire it, in sums not to 
 exceed five dollars in any one payment. At that 
 time the government held of such coin but a few 
 thousand dollars, and the step taken by the Secre- 
 tary, although well intended, brought nothing but 
 ridicule upon the administration. The instruction? 
 
 146
 
 RESUMPTION. 147 
 
 looking to the paying out of silver coin in this 
 manner were quietly revoked by verbal orders and 
 by private letters. 
 
 Upon the assembling of Congress Senator Sher- 
 man promptly introduced a measure looking to the 
 resumption of specie payments in gold on January 
 1, 1876, but it was amended into the inflation 
 measure which was vetoed by the President, to 
 which reference has been made in another chapter ; 
 and no further legislation with a view to resump- 
 tion was attempted during that session. But the 
 action of the President fixed the policy of the Re- 
 publican party. No steps backward could now be 
 taken. In the next session (December, 1874,) 
 efforts to secure harmonious party action in the 
 future were diligently made. A congressional 
 caucus took upon itself the duties of the finance 
 committee of the Senate and perfected a bill which 
 pleased nobody, but which was the best that could 
 be framed with any prospect of securing its enact- 
 ment into a law. Mr. Sherman reported the bill 
 to the Senate and, alone, urged its passage. The 
 party whip had done its work and the bill imme- 
 diately passed, no Republican voting against it 
 except Mr. Schurz. This senator insisted that 
 positive provision should be made in the bill for 
 the retirement of the notes after redemption, a 
 provision which had been necessarily omitted to 
 secure for the support of the bill Mr. Morton and
 
 148 MONEY IN POLITICS. 
 
 others who had . little faith in any scheme for 
 resumption at so early a period. 
 
 In the House the bill passed without debate, and 
 the President added his approval January 14, 1875. 
 The act provided (1st) for the redemption of the 
 fractional notes in subsidiary silver coin ; (2d) for 
 an unlimited issue of national bank notes with a 
 provision for the retirement of legal tender notes 
 to the extent of eighty per cent of such issue of 
 bank notes until the amount of United States notes 
 outstanding should be reduced to $300,000,000; 
 and (3d) for the redemption in coin of the legal 
 tender notes, on presentation in sums of fifty 
 dollars and upwards at the Sub-Treasury in New 
 York, on and after January 1, 1879. To carry 
 out the provisions of this act, ample authority was 
 given the Secretary of the Treasury to use all sur- 
 plus revenues of the government, and also to issue 
 such an amount of bonds bearing five, four and a 
 half, or four per cent interest, as he might deem 
 proper. The immediate effect of the passage of the 
 bill was a decrease in the volume of United States 
 notes, as also of national bank notes. 
 
 The fractional notes were at that time about at 
 par with fractional silver coin. Silver bullion was 
 therefore purchased, and the mints began the 
 manufacture of fractional coins with which to re- 
 deem the fractional notes as provided by law. The 
 Secretary, however, had some doubts as to hi?
 
 RESUMPTION. 149 
 
 authority to pay out the coin in the redemption of 
 the notes, and an act was approved April 17, 1876> 
 directing the exchange to be made and the notes 
 to be permanently retired. 
 
 For a time the notes were presented in amounts 
 beyond the capacity of the mints to supply the 
 coins for their redemption, notwithstanding the 
 fact that they were operated over hours and to 
 their maximum capacity. 
 
 The amount of fractional notes outstanding was 
 about $42,000,000, but long before that amount 
 was redeemed their presentation for redemption 
 practically ceased. A great demand for the coins 
 continuing, however, Congress authorized the issue 
 of an additional $10,000,000 in exchange for 
 United States notes, these notes to bo held as a 
 special deposit with which to redeem the fractional 
 notes when they should be presented for redemp- 
 tion. Straggling fractional notes subsequently 
 reached the Treasury, to some extent, but Con- 
 gress, convinced that a large amount of them 
 would never be presented for redemption, author- 
 ized the United States notes held to be paid out 
 for otherjpu rposes. Ab out- -$!£,< >< >( U h h ) of t'nie- 
 "Honal notes still remain outstanding, to that ex- 
 tent constituting a clear gain to the government. 
 
 To reimburse the Treasury in part for the money 
 paid out in the purchase of silver bullion, and to 
 make £ood the deficit occasioned by the retirement
 
 150 MONEY IN POLITICS. 
 
 of United States notes, Secretary Bristow sold of 
 United States five per cent bonds $17,594,150. 
 The balance needed for these purposes was made 
 up from the surplus revenues. Neither Mr. Bris- 
 tow nor his successor, Mr. Morrill, took any steps 
 toward accumulating a fund with which to redeem 
 United States notes on Jan. 1, 1879, as provided 
 in the Resumption Act. In March, 1877, Mr. 
 Sherman succeeded Mr. Morrill as Secretary of 
 the Treasury. Of the action taken by this officer 
 the writer has heretofore published the follow- 
 ing:— 
 
 "On April 6, 1877, Secretary Sherman addressed 
 a letter to a prominent banking firm, in which he 
 announced his purpose to sell bonds to secure coin 
 with which to meet the redemptions required, pro- 
 vided the surplus revenues proved insufficient to 
 enable him to redeem the notes as required by law. 
 lie also announced that whenever the. sales of four 
 and a half per cent bonds (funded loan of 1891) 
 then being made for refunding purposes reached 
 $200,000,000, he proposed to withdraw from the 
 market the remaining $100,000,000 authorized to 
 be issued for refunding purposes, and to issue 
 thereafter only four per cents (funded loan of 
 1907). Before the 1st of July ensuing the limit 
 of $200,000,000 was reached, and of the amount 
 sold $15,000,000 were applied to resumption pur- 
 poses. On the 9th of June a contract was made
 
 RESUMPTION. 151 
 
 by the Secretary for the sale of said four per cent 
 bonds, under which also $25,000,000 were reserved 
 for resumption purposes. 
 
 " This amount of $40,000,000 was received in 
 gold coin before October, 1877. In that month 
 Congress convened in special session. Among its 
 first measures was the introduction on one day of 
 thirteen bills for the repeal of the Resumption 
 Act. One of these bills passed the House on the 
 23d of the following month. This extraordinary 
 change of sentiment had been brought about by 
 various causes. The depression in business, which 
 had existed since 1873, was attributed by many to 
 the effects of the Resumption Act. 
 
 " During the winter of 1877-78 no further action 
 was taken by the executive officers of the govern- 
 ment concerning resumption. On April 1, 1878, 
 in an interview with the House Committee on 
 Banking and Currency, Secretary Sherman an- 
 nounced his purpose to increase the coin reserve 
 by the sale of bonds to the amount of $50,000,- 
 000. With this additional amount the total coin 
 reserve in the Treasury applicable to resumption 
 would be about forty per cent of the amount 
 of legal tender notes outstanding ; and with this 
 reserve the Secretary thought it would be practi- 
 cable and prudent to commence the redemption of 
 the notes on the appointed day as required by law.
 
 152 MONEY IN POLITICS. 
 
 Four days later negotiations were begun in New 
 York between the Treasury Department and the 
 banks for the sale of four and a half per cent bonds 
 (funded loan of 1891) for this purpose; and after 
 a little delay a sale was effected to the amount of 
 $50,000,000 at a premium of one and a half per 
 cent. The ability of the contracting parties to 
 place the coin in the Treasury as proposed could 
 not be doubted, and from that date there was but 
 little fear of the success of resumption. Further 
 efforts to repeal the law were abandoned, and the 
 business of the country began to adjust itself to 
 the basis of the approaching resumption of specie 
 payments. The payments for the $50,000,000 of 
 bonds were promptly met, and in addition thereto 
 the Treasury reserved of the proceeds of sales of 
 four per cent bonds (funded loan of 1907), then 
 being made, an additional amount of $5,500,000 
 in gold coin necessary for the- extraordinary pay- 
 ment of that amount on account of the so-called 
 "Halifax award." 
 
 " In addition to providing the necessary coin re- 
 serve, every step was taken by the Treasury which 
 the law would permit to maintain the reserve in- 
 tact. On the 1st of January, 1879, about $25,- 
 000,000 of interest on the public debt, payable in 
 coin, was to fall due ; and, as the law required the 
 redemption-reserve fund to be kept in New York, 
 Secretary Sherman determined that the payment
 
 RESUMPTION. 153 
 
 of coin on account of interest should thereafter he 
 made only in that city, but gave permission to 
 other Sub-Treasury officers to pay interest to all 
 persons who might be willing to accept legal tender 
 notes. Arrangements were also made with the 
 several assay offices by which gold could be pur- 
 chased for legal tender notes, whereby the Treasury 
 was replenished to that extent for the probable 
 coin payments in redemption of notes. Steps were 
 also taken by which the government, to a certain 
 extent and for certain purposes, became a member 
 of the Clearing-House Association of New York. 
 Under this arrangement, in consideration of the 
 jjovernment's receiving and collecting its checks 
 through the Clearing-House, that body agreed to 
 receive all balances due it upon such checks at the 
 counter of the Sub-Treasury in that city, and to 
 accept legal tender notes in payment of govern- 
 ment checks and drafts of all descriptions. As 
 all interest-checks, as well as checks issued in pay- 
 ment of called bonds, were, by law, payable in 
 coin, this agreement on the part of the Clearing- 
 House, through which institution nearly all of the 
 checks passed, relieved the Treasury almost en- 
 tirely from the necessity of making actual coin 
 payments after resumption took place. This 
 necessity being removed, there was no longer any 
 reason for requiring duties on imports to be paid 
 in coin as provided by law ; and the Secretary of
 
 154 MONEY IN POLITICS. 
 
 the Treasury, in his annual report of December 
 2, 1878, announced to Congress his purpose to 
 receive notes in payment of such duties. Congress 
 adjourned for the holidays without expressing any 
 opinion as to the legality or advisability of the ac- 
 tion proposed, whereupon instructions were given 
 to the government officers to receive such notes in 
 payment of duties, the notes to be redeemed in coin 
 at New York on government account whenever it 
 became necessary. Instructions were also given 
 to the Treasurer and other officers of the Depart- 
 ment to close up in their accounts all distinctions 
 between coin and currency, and after January 1, 
 1879, to recognize, in the accounts as well as in 
 the money, that the government had resumed spe- 
 cie payments, and that the several kinds of money 
 in circulation were of equal value. 
 
 " The preparations were so complete that on Jan. 
 1, 1879, the date when resumption took effect, the 
 Treasurer held, of gold coin and bullion, $135,382,- 
 639.42 ; of standard silver dollars coined under 
 the act of February 28, 1878, $16,704,829 ; and of 
 fractional silver coin, including silver bullion, 
 $15,471,265.27. The amount of coin held by the 
 Treasury as available for resumption purposes on 
 that day, after deducting all matured coin liabili- 
 ties, was about $135,000,000, or about forty per 
 cent of the amount of notes to be redeemed. The 
 thoroughness of preparation for resumption had
 
 RESUMPTION. 155 
 
 quieted all apprehensions as to the success of the 
 policy, and on the first day of resumption only 
 straffsrlins: demands for coin were made, the amount 
 aggregating less than the amount of notes pre- 
 ferred by the holders of coin obligations. And 
 during the entire year there were redeemed of the 
 legal tender notes only the amount of $11,456,536 ; 
 while for the same period there were paid out of 
 such notes on account of coin obligations more 
 than $250,000,000. There were also received of 
 such notes in payment of customs dues in the year 
 ending Dec. 31, 1879, $109,467,456. 
 
 "Thus, after much labor and sacrifice, the 
 country was lifted out of the financial bog of de- 
 preciated paper currency, and with the resumption 
 thus happily secured came a revival of business, 
 an extraordinary demand for labor of all kinds, 
 and a confirmation of that confidence which was 
 so necessary for all business enterprises, and which 
 had grown step by step with every movement 
 made toward a specie basis." 
 
 No material draft has yet been made upon the 
 resumption fund thus accumulated, nor has the 
 precise amount of that fund yet been fixed by 
 positive law. The whole amount is carried as a 
 part of the ordinary Treasury balance, subject to 
 the warrant of the Secretary at any time and 
 perhaps for any purpose. The Secretary, in his 
 annual report for 1879, called the attention of
 
 156 MONEY IN POLITICS. 
 
 Congress to the matter, and recommended that to 
 avoid all uncertainty this fund be specifically de- 
 fined and set apart for the redemption of United 
 States notes, and that the notes redeemed be re- 
 issued only in exchange for or purchase of coin or 
 bullion. 
 
 Congress, by an act approved July 12, 1882, 
 provided that the issue of gold certificates should 
 be suspended whenever the amount of gold re- 
 served in the Treasury for the redemption of 
 "United States notes should fall below $100,000,- 
 000, thus indirectly recognizing that amount as 
 constituting the reserve fund. The Secretary, 
 however, has not been prohibited from paying out 
 the fund, and the whole subject is left in that 
 vexatious state of uncertainty which seems to 
 result from every effort of Congress to provide a 
 circulating medium.
 
 CHAPTER XVm. 
 
 THE SUPREME COURT. 
 
 The act of Congress authorizing the issue of 
 legal tender notes was a partisan measure, no 
 Democrat voting for it. The act providing for the 
 redemption of the notes in coin was framed in 
 a Republican caucus, and curried through both 
 Houses by force of party discipline. The courts 
 of fifteen of the States have affirmed, from time to 
 time, the constitutional power of Congress to issue 
 such notes, the judges dividing in their opinion on 
 the subject according to their political affinities; 
 and the court of only one State has denied to Con- 
 gress this power, — the Court of Appeals of the 
 State of Kentucky. In this court the opinion was 
 unanimous, but the judges were not of opposing 
 politics. In the Supreme Court of the United 
 States the justices have divided upon the subject 
 whenever it has been brought before them, accord- 
 ing to party prejudice. The action of this court 
 on the legal tender question constitutes one of the 
 most remarkable chapters in the history of that 
 tribunal. The first decision pertaining thereto 
 
 157
 
 158 MONEY IN POLITICS. 
 
 arose in the now celebrated case of Hepburn v. 
 Griswold. The facts in this case are briefly as 
 follows : — 
 
 A certain Mrs. Hepburn of Kentucky, on the 
 20th of June, 1860, made a promissory note to 
 one Henry Griswold, by the terms of which she 
 was to pay to the order of said Griswold $11,250, 
 on the 20th of February, 1862. At the time of the 
 making and maturity of the note there was not in 
 the United States any legal tender money except 
 gold and silver coin. The note, however, was not 
 paid at maturity, and interest therefore accumu- 
 lated upon it. On the 25th day of February, 
 1862, Congress passed the act authorizing the issue 
 of United States notes, and making them a legal 
 tender in the payment of private debts. In March, 
 1864, the Hepburn note not having been paid, suit 
 was brought upon it, and the maker tendered in 
 payment $12,770 in United States notes, that being 
 the undisputed amount of note and interest. This 
 tender was refused on the ground that it changed 
 the terms of the contract, coin being the only legal 
 tender money when the note was made. The 
 Chancellor of the Court, however, declared the 
 tender good, and adjudicated the claim to be set- 
 tled accordingly. The payee, however, was not 
 satisfied and appealed the matter to the Court of 
 Errors, where the Chancellor's judgment was re- 
 versed. The maker of the note was now dissatis-
 
 THE SUPREME COURT. 159 
 
 fied, and she carried the case to the Supreme Court 
 of the United States. In that court the case was 
 first argued during the December term, 1867, and 
 it was elaborately reargued in the December term, 
 18G8, especially with reference to the constitutional 
 power of Congress to authorize the issue of such 
 legal tender notes. The case was withheld for 
 decision until the December term, 1869, when, by 
 a majority of the court, the act was declared to be 
 unconstitutional, so far as it made the notes a legal 
 tender for debts existing prior to the date of the 
 authorizing act of Feb. 25, 1862. "When this 
 decision was made the court consisted of eight 
 justices, there being one vacancy. The five jus- 
 tices concurring in the opinion were Chief Justice 
 Chase, and Associate Justices Nelson, Clifford, 
 Field, and Greer. Justice Miller read the dissent- 
 ing opinion, in which Justices Swayne and Davis 
 concurred. The court divided in accordance with 
 the political sympathies of the justices composing 
 it. It may be alleged that the Chief Justice was 
 known as a prominent member of the Republican 
 party, but it will be remembered that for some 
 time his sympathies with that party had somewhat 
 abated, and while the ease in question was pending 
 before the court, he had been a prominent candi- 
 date for presidential honors at the hands of the 
 Democratic party. 
 
 The judgment of the court was generally ap-
 
 K30 MONEY IN POLITICS. 
 
 proved, but there was a considerable feeling that 
 in some way the " greenbacks " had helped the 
 country through the war, and that a like necessity 
 for help might again arise, and for the country to 
 deprive itself of any power likely to be needed in 
 such an emergency would be political suicide. 
 Hence arose a demand that the opinion of the court 
 should be reversed. The case decided could not, 
 however, under a rule of the court, be reargued, 
 except upon the request of one of the judges who 
 had joined in affirming the decision, and none of 
 them asked to have the case reopened. 
 
 Mr. Justice Greer, however, resigned, — his resig- 
 nation to take effect Feb. 1, 1870 ; and Mr. Strong 
 took his place as justice on the 14th of March fol- 
 lowing. Mr. Bradley took his seat as an additional 
 justice ten days later. It has been alleged, and 
 never denied, that one or both of these gentlemen 
 had formerly been employed as counsel for the 
 Camden and Amboy Railroad, and, as such counsel, 
 had given opinions affirming the legal tender act to 
 be constitutional ; and also that both held consider- 
 able stock of that corporation. It was known, too, 
 that, subsequent to the decision in the Hepburn 
 case, the company, in paying interest on its obliga- 
 tions contracted previous to 18^2, had, in accord- 
 ance with the opinion of their counsel, made a 
 reservation looking to the reversal of judgment in 
 that case, by which reversal the indebtedness of
 
 THE SUPREME COURT. 161 
 
 the road could bo paid in United States notes in- 
 stead of coin. 1 
 
 The opinions of these two gentlemen on the 
 power to issue legal tender notes were therefore 
 well known, and the proceedings of the court im- 
 mediately following their entering upon official 
 duty has given color to the oft- repeated assertions 
 that the court was organized to secure a reversal 
 of the legal tender decision. The next day after 
 Justice Bradley took his seat, Friday, the 26th of 
 March, the Attorney General moved the court that 
 certain cases appealed from the Court of Claims 
 should he set down for argument, and suggested 
 that the leinil tender decision might be reconsidered 
 in these cases. The next day the motion was con- 
 sidered, and, contrary to the wishes of the justices 
 who had joined in the opinion in the Hepburn case, 
 an order was directed that the cases in question 
 should be heard on the 4th day of April following, 
 berns: the second Monday next ensuing. This 
 
 O */ CD 
 
 order was in disregard of the usual practice of the 
 court, the time for argument in such cases being 
 usually fixed by counsel subject to the approval of 
 the court. Before the order was announced, how- 
 ever, Mr. Carlisle, the attorney for the appellants, 
 protested against a re-argument of the legal-tender 
 question in these cases, the rights of his clients, 
 he asserted, having been already determined. The 
 Schuckers' Life of Chase.
 
 1G2 MONEY IN POLITICS. 
 
 court, therefore, on Monday morning deferred the 
 announcement of the order for the re-argument of 
 the cases until the protest of Mr. Carlisle could be 
 considered, and the time for considering the pro- 
 test was fixed for the next day (Tuesday) after 
 adjournment of the court, and this happened 
 accordingly. 
 
 After hearing Mr. Carlisle the court immediately 
 ordered that the matters involved in the motion of 
 the Attorney General should be argued on the 
 Thursday following; that the subject should be 
 considered in conference immediately after the ad- 
 journment of the court for that day ; and that the 
 result should be announced on the opening of the 
 court the following morning. This order was made 
 against the remonstrances of the justices who had 
 agreed in the judgment of the Hepburn case, and 
 it is alleged that so far as the history of the court 
 is known the order was unprecedented. The 
 regular motion day of the court was Friday, the 
 regular conference day Saturday, and in no re- 
 corded case had there been any anticipation of the 
 regular order of business for those days in order 
 to reach a special case. 
 
 The order was, however, carried into effect, an 
 argument in progress being suspended that the 
 cases might be heard. That in itself constituted 
 another unprecedented movement. The conference 
 was held after adjournment, and a new order was
 
 THE SUPREME COURT. 163 
 
 passed, regardless of the convenience of counsel, 
 directing that the cases be heard in all matters in- 
 volved in the records on the 11th of the following 
 month, but the time was subsequently extended to 
 the 18th. 
 
 These cases had previously been continued under 
 the order of the court, distinctly stated by the 
 Chief Justice, and acquiesced in by the counsel, 
 by the appellants, and by the government, that the 
 legal tender question should not be reopened, but 
 that both sides should abide by the decision in the 
 Hepburn case. The Chief Justice called the at- 
 tention of the justices to these facts, but without 
 effect. The appellants in these cases, however, 
 knowing w r ell enough what would be the decision 
 of the court, decided to withdraw the cases, and so, 
 when the time for argument arrived, their counsel 
 moved that the cases be dismissed. To this motion 
 the Attorney General and Justices Miller and Brad- 
 ley objected, but, after consultation, the court 
 granted the motion, Justice Bradley objecting. 
 The opportunity to reverse the decision in the 
 Hepburn case was lost at present, but the country 
 knew that the reversal would come in due time, 
 and the fact of such reversal was discounted. The 
 appointment of these two justices, whose opinion 
 on the legal tender question was well known in 
 advance, the fact of their connection with a great 
 railroad corporation, and their well-known owner-
 
 164 MONEY IN POLITICS 
 
 ship of its stock, the haste of the court in at- 
 tempting to secure a reversal of the legal tender 
 decision together, created a painful impression that 
 other interests than those of the government were 
 bein^ served. 
 
 The court had not long to wait for an oppor- 
 tunity to reverse the opinion, as had been fore- 
 shadowed in the December term, 1870. Several 
 cases came up similar in character, the controlling 
 questions of which were : — 
 
 1st. Are the acts of Congress known as the 
 legal tender acts constitutional when applied to 
 contracts made before their passage ? 
 
 2d. Are they valid as applicable to debts con- 
 tracted since their enactment? 
 
 The cases were considered in the full bench, and 
 by a vote of five to four the court held such acts 
 of Congress constitutional as applied to contracts 
 made either before or after the passage of the acts, 
 thus overruling the previous decision in the matter. 
 The opinion was rendered by Mr. Justice Strong, 
 and concurred in by Justices Bradley, Miller, 
 Davis, and Swayne ; Chief Justice Chase delivered 
 a dissenting opinion, as did also Justices Nelson, 
 Clifford, and Field, the court being again divided 
 in accordance with the opposing politics of the 
 justices composing it. 
 
 In delivering the opinion of the court, Justice 
 Strong recounted the exigencies of the government
 
 THE SUPREME COURT. 165 
 
 which brought the notes into existence, and main- 
 tained that Congress, in such an emergency, being 
 called upon to devise means for maintaining the 
 army and navy, — in fact to preserve the govern- 
 ment created by the Constitution, — not only had the 
 power to issue the notes, but that the condition of 
 affairs justified such an issue. lie also plainly inti- 
 mated that Congress, under its constitutional power 
 to coin money and to regulate the value thereof, 
 could at any time declare Treasury notes a legal 
 tender, if such declaration should be adapted to 
 cariying into execution the admitted powers of the 
 government. 
 
 The power of Congress to issue Treasury notes 
 at any time and in any amount, and to make them 
 a legal tender in payment of private debts, has 
 since been distinctly affirmed by the court. 
 
 The act of May 31, 1878, prohibited the further 
 retirement of United States notes, and provided 
 that when any of the notes might be redeemed or 
 paid into the Treasury, they should not be retired 
 or cancelled, but should be reissued and paid out 
 again and kept in circulation. The effect of this 
 act, so far as it applied to the reissue of notes that 
 had been redeemed, was to authorize the issue of 
 new legal tender notes in time of peace, and when 
 no necessity of the government required such an 
 emission. A case testing the power of Congress 
 to thus authorize the issue of such notes was car-
 
 166 MONEY IN POLITICS. 
 
 ried to the Supreme Court on a writ of error, and 
 a decision therein was rendered by the court in 
 March, 1884. A synopsis of the decision pre- 
 pared by the court is as follows : — 
 
 "The question presented by this case, as it is 
 stated by the court, is ' whether notes of the United 
 States, issued in time of Avar, under acts of Con- 
 gress declaring them to be a legal tender in pay- 
 ment of private debts, and afterward, in time of 
 peace, redeemed and paid in gold coin at the 
 Treasury, and then reissued under the act of 1878, 
 can, under the Constitution of the United States, 
 be a legal tender in payment of such debts.' . . . 
 
 "The court holds, therefore, that Congress has 
 the power to issue the obligations of the United 
 States in such form, and to impress upon them 
 such qualities as currency for the purchase of mer- 
 chandise and the payment of debts as accord with 
 the usage of sovereign governments. The power, 
 as incident to the power of borrowing money and 
 issuing bills and notes of the government for 
 money borrowed, of impressing upon those bills 
 or notes the quality of being a legal tender for the 
 payment of private debts, was a power universally 
 understood to belong to sovereignty in Europe 
 and America at the time of the framing and adop- 
 tion of the Constitution of the United States. 
 
 "This power of making the notes of the United 
 Sates a legal tender in payment of private debts,
 
 THE SUPREME COURT. 1G7 
 
 being included in the power to borrow money and 
 to provide a national currency, is not defeated nor 
 restricted by the fact that its exercise may affect 
 the value of private contracts. If, upon a just and 
 fair interpretation of the whole Constitution, a 
 particular power or authority appears to be vested 
 in Congress, it is no constitutional objection to its 
 existence or to its exercise, that the property or 
 the contracts of individuals may be incidentally 
 affected. 
 
 " Congress," the court says, in conclusion, " as 
 the legislature of a sovereign nation, beinsr ex- 
 pressly empowered by the Constitution ' to lay and 
 collect taxes to pay the debts and provide for the 
 common defence and general welfare of the United 
 States,' and 'to borrow money on the credit of the 
 United States,' and ' to coin money and regulate 
 the value thereof and of foreign coin," and being 
 clearly authorized, as incidental to the exercise of 
 those great powers, to emit bills of credit, to charter 
 national banks, and to provide a national currency 
 for the whole people, in the form of coin, Treasury 
 notes, and national bank bills, and the power to 
 make the notes of the government a legral tender 
 in payment of private debts being one of the 
 powers belonging to sovereignty in other civilized 
 nations, and not expressly withheld from Congress 
 by the Constitution, we are irresistibly impelled to 
 the conclusion that the impressing upon the Tress-
 
 168 MONEY IN POLITICS. 
 
 ury notes of the United States the quality of being 
 a legal tender in the payment of private debts is 
 an appropriate means, conducive and plainly 
 adapted to the execution of the undoubted powers 
 of Congress, consistent with the letter and spirit 
 of the Constitution, and therefore, within the mean- 
 ing of that instrument, ' necessary and proper for 
 carrying into execution the powers vested by this 
 Constitution in the government of the United 
 States.' 
 
 "Such being our conclusion in the matter of law, 
 the question whether at any particular time, in war 
 or in peace, the exigency is such, by reason of un- 
 usual and pressing demands on the resources of 
 the government, or of the inadequacy of the sup- 
 ply of gold and silver coin to furnish the currency 
 needed for the uses of the government and of the 
 people, that it is, as a matter of fact, wise and ex- 
 pedient to resort to this means, is a political ques- 
 tion, to be determined by Congress when the 
 question of exigency arises, and not a judicial 
 question to be afterward passed upon by the 
 courts. 
 
 "It follows that the act of May 31, 1878, is 
 constitutional and valid, and that the circuit court 
 rightly held that the tender in Treasury notes re- 
 issued and kept in circulation under that act was a 
 tender of lawful money in payment of the defen- 
 dant's debt to the plaintiff.
 
 THE SUPREME COURT. 1G9 
 
 "The judgment of the Circuit Court is affirmed." 
 Opinion by Justice Gray. Justice Field dissenting. 
 
 In this decision a political line is again drawn 
 among the justices, but prominent men of both 
 parties are already alarmed at the dangerous doc- 
 trine enunciated by the court. 
 
 Article 10 of the amendments to the Constitu- 
 tion is as follows : — 
 
 " The powers not delegated to the United States 
 by the Constitution, nor prohibited by it to the 
 States, are reserved to the States respectively, or 
 to the people." 
 
 The court holds that in the issue of notes Con- 
 gress has such power as accords " with the usage 
 of sovereign governments," and that the power 
 " of impressing upon these bills or notes the quality 
 of being a legal tender in the payment of private 
 debts was a power universally understood to be- 
 long to sovereignty in Europe and America at the 
 time of the framing and adoption of the Constitu- 
 tion of the United States." 
 
 No such omnipotent power was ever claimed for 
 Congress by the most ultra federalist in the early 
 days of the Republic, as that conceded to it by 
 this court, and measures looking to a reversal of 
 the decision of the court by an amendment to the 
 Constitution expressly prohibiting to Congress 
 such powers have already been introduced into 
 thai body. Such an amendment will, in time,
 
 170 MONEY IN POLITICS. 
 
 doubtless become a part of the organic law of the 
 land. Meanwhile the sacredness of contracts, the 
 stability of wealth, the success of business enter- 
 prises, and the prosperity of the whole country, 
 must depend upon the integrity of that body, 
 whose actions have too often been the result of 
 successful log-rolling, or been dictated by a poli- 
 tical caucus. 
 
 Thirty years ago this same court decided that 
 the nesrro had no rights which the white man was 
 bound to respect, and only four years of bloody 
 war reversed the decision. The pending amend- 
 ment to the Constitution, reversing the legal 
 tender decision of the same court, should be vigor- 
 ously pressed to adoption in season to prevent, not 
 another war, but national disgrace and bankruptcy.
 
 CHAPTER XIX. 
 
 GOLD COIN AND CERTIFICATES. 
 
 The coinage act of April 2, 1792, which em- 
 bodied the recommendations of Mr. Hamilton, pro- 
 vided for the manufacture of certain gold coins, as 
 follows : Eagles, each to be of the value of ten 
 units or dollars, and to contain 247A grains of 
 pure gold, or 270 grains of standard, thus making 
 these coins eleven-twelfths fine ; and half-eagles 
 and quarter-eagles, of the same fineness and of 
 proportional weight. The act also provided for 
 the coinage of silver dollars or units, each to be 
 of the value of the Spanish milled dollar, con- 
 taining 371] grains of pure silver, or 41G grains 
 of standard silver ; and of halves, quarters, and 
 dimes or tenths, of the same fineness and propor- 
 tionate weight. Coinage of both gold and silver 
 coin was to be free to all persons bringing bullion 
 to the mint for that purpose. All the coins were 
 to be legal tender in all payments for their face 
 value. 
 
 171
 
 172 MONEY IN POLITICS. 
 
 The legal relation in weight of pure gold to 
 pure silver was thus fixed by this act at 1 to 15. 
 
 This ratio happened to be nearly the commer- 
 cial one for the year 1793 ; but it was too small 
 for the next year, and too large for the two 
 succeeding years. In 1797 the commercial ratio 
 was 1 to 15.45 ; in 1799 it was 1 to 14.29 ; in 
 1809 it was 1 to 1G.25 ; and up to the present time, 
 in one year only (1813), has it ever been less than 
 1 to 15. Gold was therefore, on the whole, un- 
 dervalued, and consequently little of it came to 
 be coined, and less went into circulation. Silver 
 coins were still manufactured at the mints, but 
 bank issues and foreign coins furnished most of 
 the circulating medium of the country. The bank 
 issues were, however, uncertain in value, and in 
 some parts of the country a considerable demand 
 arose for a coin circulation, whereupon the ques- 
 tion of a circulating medium at once got into 
 politics. The Democratic party, headed by Sen- 
 ator Benton, of Missouri, demanded that the weight 
 of gold coin should be so reduced as to equalize 
 its commercial value to a corresponding amount 
 of silver coin ; or, if there was to be any differ- 
 ence, that gold should be so underrated as to en- 
 sure its circulation. Mr. Benton asserted that, in 
 adjusting at any time the relative value of gold 
 and silver so as to retain both in circulation, there 
 was a nicety, but no difficulty. Such adjustment,
 
 GOLD COIN AND CERTIFICATES. 173 
 
 he asserted, was the proper work for a committee 
 of Congress. Several nations of antiquity had 
 accomplished it, some modern nations also, among 
 which were England and France ; and he intimated 
 that in the latter country the adjustment was es- 
 tablished by the genius of Napoleon. 
 
 As England had adopted the single standard of 
 gold in 1816, and as gold then circulated in France 
 only at a premium in silver, his mention of the 
 modern nations which had achieved the simultane- 
 ous circulation of both metals was not so happy 
 as to create any curiosity as to which were the 
 nations of antiquity to which he referred. 
 
 But relief from the alleged evils of Hamilton's 
 coinage act was at hand. A measure was intro- 
 duced into Congress before which, Mr. Benton 
 said, the machinery of distress was to balk. The 
 bill originated in the House, and provided for 
 "equalizing the value of gold and silver," and 
 " legalizing the foreign coins of both metals." 
 The ratio between the two metals was fixed at 1 
 to 15f . Mr. Benton, in his " Thirty Years' View," 
 states that this ratio at first commended itself to 
 all who seemed best calculated, from their pursuits, 
 to understand the subject; that the majority of 
 speakers, and the eighteen banks of New York, 
 with Mr. Gallatin at their head, favored it; that 
 the difficulty of adjusting this ratio so that neithei 
 metal could expel the other had been a stumbling-
 
 174 MONEY IN POLITICS. 
 
 block for a great many years ; and that now this 
 difficulty seemed to be as formidable as ever ; that 
 refined calculations were «;one into, scientific liirht 
 was sought, history was rummaged back to the 
 times of the Roman empire ; but that there seemed 
 to be no way to get an accord of opinion, either 
 from the lights of science, the voice of history, or 
 the results of calculation. 
 
 The author of the "View," however, then took 
 up the question in a practical point of view, re- 
 gardless of history, calculations, and opinions of 
 bank officers ; and, looking to the actual and equal 
 circulation of the two metals in different countries, 
 he saw, or thought he saw, that this equality and 
 actuality of circulation had existed for three hun- 
 dred years in the Spanish dominions of Mexico 
 and South America, where the ratio was 1 to 16. 
 Taking his stand upon this single fact, as a prac- 
 tical test which solved the question, he urged the 
 adoption of this ratio, and all the friends of the 
 gold question soon rallied to his support. 
 
 One to 16 was at last found to be the true ratio 
 between the two metals. Truly the finder de- 
 served the sobriquet of " Old Bullion " given him 
 by his admiring friends. 
 
 The proposed measure became a law June 28, 
 1834. Under this act the eagle was to contain 
 232 grains of pure gold, or 258 grains of stand- 
 ard gold, a reduction in weight of 15| grains of
 
 GOLD COIN AND CERTIFICATES. 175 
 
 pure cold. The half-eagle and quarter-eagle wore 
 to be of equal fineness and proportionate weight.* 
 Upon the passage of this act Mr. Benton and 
 his friends were in high glee, but their joy was 
 brief. The gold coins Mere so reduced in weight 
 that it was now cheaper to pay debts in them than 
 in silver coin. In consequence no more silver 
 was coined for circulation, and the amount then in 
 circulation, upwards of $50,000,000, at once dis- 
 appeared, being sent abroad in payment of obliga- 
 tions, or melted down for other uses at home. 
 This sudden contraction of the currency created 
 considerable distress, and the loss of the small 
 silver pieces caused no little inconvenience. The 
 panic of 1837 followed. Depreciated bank bills, 
 "shin plasters," and a few worn Mexican pieces 
 came into circulation to take the place of full- 
 weight silver pieces, which had been superseded 
 by the cheaper gold coins. The author of the 
 "View" admits that he was now called a f 'Gold 
 Humbug;" that the newspapers expended their 
 wit "in stale depreciation of his efforts;" but 
 while apparently unable to explain what had be- 
 come of the silver which the experience of Mexico 
 led him to suppose would circulate with gold, he- 
 still vaunted the excellence of his scheme, boasted 
 of a coining abundance of his favorite metal, and 
 
 * In ls:J7 the amount of pure gold in these coins was slightly 
 reduced to make the standard nine-tenths fine.
 
 176 MONEY IN POLITICS. 
 
 prophesied that at some day "gold would flow up 
 the Mississippi and spread through the land." 
 Gold did come, all that was wanted, but with it 
 came no benefits sufficient to compensate for the 
 disappearance of silver. 
 
 By the reduction in the weight of the gold 
 coins the gold dollar became the unit of account, 
 changing the terms of all pre-existing contracts 
 .payable in dollars to the extent of its depreciation 
 below the value of the silver dollar. 
 
 It remained the unit of value until, by the act of 
 February 25, 18(32, the paper issues of the gov- 
 ernment thereby authorized were declared a legal 
 tender in payment of debt. Gold now became a 
 commodity, and was quoted at a premium, as was 
 silver when gold took its place. Duties on im- 
 ports and interest on public debt were, however, 
 still payable by law in coin, and enough gold 
 coin to meet these payments remained in circula- 
 tion. To avoid handling the actual coin, the 
 fifth section of an act approved March 3, 1863, 
 authorized the Secretary of the Treasury to re- 
 ceive gold coin or bullion on deposit, and to 
 issue therefor certificates in denominations of 
 not less than $20, to be used in payment of coin 
 interest, and to be receivable in payment of 
 customs dues. The coin deposited was to be held 
 for the redemption of the certificates. The issue 
 of these certificates proved to be a great con-
 
 GOLD COIN AND CERTIFICATES. 177 
 
 venience to brokers, bankers, and bullion dealers, 
 who in this way had use of the Treasury vaults in 
 which to store specie free of risk and expense to 
 themselves. 
 
 Although the issue of United States notes drove 
 most of the gold from circulation, foreign ex- 
 changes continued to be made in terms of that 
 metal ; hence commerce was compelled to recog- 
 nize two kinds of money, although but one was in 
 "reneral circulation. This condition of affairs 
 brought into existence the Gold Board of New 
 York, at which exchanges of gold and currency 
 could be made, and the rates of exchange prevail- 
 ing at this Board fixed throughout the country the 
 relation between the two. As lomj as the govern- 
 ment retained the luxury of two kinds of money, 
 the existence of this Board was a convenience, if 
 not a necessity, to persons engaged in foreign 
 trade. Its operations may be thus illustrated : A 
 Liverpool cotton merchant telegraphs to the New 
 York commission house, "If you can buy ono 
 thousand bales of middling cotton so as not to 
 cost me more than ten pence or twenty cents gold 
 per pound, laid down in Liverpool, you may do 
 so." The commission merchant finds that the 
 freight, insuranco, and other charges will amount 
 to about two cents. He can therefore afford to 
 give eighteen cents, gold, for the cotton itself. 
 He goes into the cotton market and inquires the
 
 178 MONEY IN POLITICS. 
 
 price of cotton in gold. The dealer answers that 
 cotton is sold for notes, not for gold ; that the 
 planters in the South pay their laborers and buy 
 their provisions and agricultural implements with 
 notes ; and that they can tell what their cotton 
 costs them in notes, but not what it is worth in 
 gold. The price of cotton is 27 cents a pound in 
 notes. His next inquiry is to ascertain the price 
 of gold, so as to know how much in notes he can 
 afford to pay for the cotton without exceeding 
 the orders of his Liverpool correspondent. He 
 finds gold selling at 150. In other words, his 
 18 cents gold are worth exactly 27 cents in notes, 
 and he can therefore buy his cotton at this rate 
 without exceeding his correspondent's orders. 
 Thus far the transaction is simple enough. He 
 has only to take as much gold as would pay for 
 the thousand bales of cotton, sell it at 150, and 
 with the notes pay the cotton dealer, and the 
 whole transaction is concluded. But the Liver- 
 pool merchant has not sent the gold. It will be 
 several days before the cotton will be ready for 
 shipment, and not until thus ready will payment 
 for it be made. Should he contract for the cotton 
 without any assurance at what rate he could dis- 
 pose of his gold when received, he would take a 
 risk of loss in case the value of gold should in 
 the meanwhile depreciate. To avoid this risk he 
 contracts at the Gold Board to sell sufficient gold
 
 GOLD COIN AND CERTIFICATES. 179 
 
 to pay for the cotton at 150, the gold to be deliv- 
 ered at his option, within say ten days. He now 
 can purchase his cotton with safety, store it aboard 
 the vessel, and procure the bill of lading there- 
 for. This bill of lading he presents to a dealer 
 in foreign exchange, obtains the gold therefor, 
 which he delivers to the party to whom he 
 has previously sold it, and the transaction is 
 closed. Without the intervention of the Gold 
 Board he would have run the risk of paying 
 more for his cotton than his correspondent had 
 authorized. 
 
 What was a useful and necessary adjunct to 
 transactions involving exchanges with foreign 
 countries became a resort for fictitious trading, 
 and fortunes there changed hands as rapidly as 
 they ever did on the green cloth of Baden or 
 Monaco. Nor was the speculation confined to 
 New York. Telegraphic indicators furnished to 
 all the cities quotations of the ever-changing 
 price of gold. Speculation was raised to a fever- 
 ish height throughout the country, and attention 
 was turned to the Gold Board in New York as 
 eagerly as to the embattled army at the front, en- 
 gaged in a life-and-dcath struggle for the nation. 
 The fluctuations in the price of gold in 18G3 and 
 1864 were remarkable. Gold was quoted on the 
 1st of January, 1863, at 134 ; on the 24th at 150 ; on 
 the 31st at 160 ; on the 12th of February at 154^,
 
 180 MONEY IN POLITICS. 
 
 and on the 28th at 172i. The price then began 
 to decline, and on the 28th of March gold stood 
 at 143£ ; on the 28th of August at 1221, and the 
 lowest figure for 1863 ; but the fluctuations con- 
 tinued during the remainder of the year, resulting, 
 on the whole, in a considerable advance in the price. 
 On the 1st of January, 1864, gold was quoted at 
 152; on the 26th of February at 16<H ; on April 
 12th it was 175 ; and on the 26th it ran up to 184 ; 
 on the 10th of May it was 168 ; and on the 27th 
 186]. These fluctuations reacted upon prices, and 
 turned the most legitimate of business enterprises 
 into a kind of gambling. The government had 
 brought about this condition of affairs by its 
 unfortunate legislation, and to the government 
 everybody turned for relief. As the gold paid 
 into the public Treasury on account of duties 
 on imports was in excess of its requirements 
 for the payment of interest, the government owned 
 a considerable amount of that coin. It was now 
 generally supposed that if the government should 
 enter the market as a "bear," the premium on 
 gold would be reduced. Accordingly Congress, 
 in March, 1864, authorized the Secretary of the 
 Treasury to dispose of any surplus gold in the 
 Treasury by selling it for other currency. 
 
 On the 12th of April following the passage of 
 this act, gold reached 175, and seemed likely to 
 reach a far higher figure. Secretary Chase was
 
 GOLD COIN AND CERTIFICATES. 181 
 
 urged from all quarters to enter the market, sell 
 cash gold, break down the premium, and teach the 
 gold gamblers a lesson. To these entreaties he 
 yielded, and on the evening of April 13 he started 
 for New York, at which city he arrived the next 
 morning. The "bulls," notwithstanding the au- 
 gust presence of so important an official, showed 
 fight, and during the day tossed the premium to 
 89. The Secretary was, however, armed with the 
 authority of Congress, a body to which had been 
 delegated the power to regulate money, and ho 
 opened wide the vaults of the Sub-Treasury, and 
 poured into Wall Street $11,000,000 of solid 
 gold, striking a momentary terror to the hearts of 
 his adversaries. But the next day he wrote to the 
 President : "The sales which have been made here 
 yesterday and to-day seem to reduce the price, 
 but the reduction is only temporary." The Sec- 
 retary returned to the Department, and as soon as 
 the pressure was removed the premium rapidly 
 advanced, and gold, on the 20th of April, was 
 quoted at 184. 
 
 The result of the governmental bearing opera- 
 tions in Wall Street was, one would think, suffi- 
 ciently convincing that even the great power of 
 ( 'ongress was unequal to the task of controlling 
 the market. But Congress admitted no such in- 
 capacity. There was yet one untried resource, 
 the majesty of a restraining law. A bill \* as
 
 182 MONEY IN POLITICS. 
 
 promptly introduced in the Senate, the purpose of 
 which was, as stated by Senator Sherman, to pre- 
 vent gambling in gold. It prevented sales of 
 coin for future deliveries, and it prohibited also 
 any sale of gold by any broker or banker at other 
 than his regular place of business. The penalty 
 for the violation of this act was to be a fine of not 
 less than $1,000, nor more than $10,000, and im- 
 prisonment not less than three months nor more 
 than one year, or both, at the discretion of the 
 Court. Mr. Shuckers, the biographer of Sec- 
 retary Chase, says this bill was the result of a 
 protracted consultation between the Secretary, 
 experienced financial gentlemen, and members of 
 Congress, who agreed generally that if the bill 
 did no good, it was not likely to do much harm. 
 This acknowledgment of doubt was creditable to 
 the intelligence of the gentlemen in conference, 
 but it must have been humiliating to the pride of 
 the Congressional portion ; for had not the Consti- 
 tution declared that Congress had power to regu- 
 late the value of money, and had not the author 
 of the legal tender act declared that, by the suc- 
 cess of that measure, the government would avoid 
 "shinning" through Wall Street? 
 
 The bill for the suppression of gambling in 
 gold became a law June 17, 1864, and w 7 ent at 
 once into operation. Its disturbing effect upon 
 the price of gold became at once conspicuous
 
 GOLD COIN AND CERTIFICATES. 183 
 
 On the 20th gold closed at 1981 ; on the next day 
 the act was authoritatively notified to the Gold 
 Board, and its evil effects became apparent. 
 Gold ceased to be called at the Board, but no 
 power could prevent men from dealing in it. 
 Gold stood on the 21st at 208 ; the next day at 
 280, but closed at 213 ; on the 27th it reached 238 ; 
 on the 29th, 250 ; on the 1st of July it reached 280, 
 thou fell to 255, and closed at 225. The next 
 day it fluctuated between 225 and 237. By this 
 time Congress was impressed with the disastrous 
 result of its legislation, and beiyan to talk of re- 
 pealing this act, which, at worst, its advocates 
 thought, could do no harm. On the 6th the act 
 was repealed, but too late ; the mischief had been 
 done. Violent fluctuations followed in the fever- 
 ish market which the act had created ; on the 10th 
 the rate varied between 200 and 270 ; and the 
 next morning it was 285, the highest point reached 
 during the war. From this point it receded, but 
 slowly. Of course, the stock, grain, and pro- 
 vision markets were strongly affected, and the ca- 
 lamitous effect of the act was felt in the increased 
 price of commodities. Perhaps no greater amount 
 of evil was ever crowded into so brief a period by 
 the interference of legislation with the functions 
 of a circulating medium ; certainly no measure 
 more disastrous and humiliating has ever been 
 transferred from a political conference to the stat- 
 utes of this country.
 
 184 MONEY IN POLITICS. 
 
 Congress made no further attempt to control the 
 gold market, but as coin accumulated in the Treas- 
 ury beyond need for coin payments, the Secretary 
 was compelled, from time to time, to sell the 
 surplus for notes which were needed in current 
 transactions. These sales necessarily affected the 
 markets more or less, but this disturbance could 
 not be avoided as long as depreciated paper fur- 
 nished the circulating medium. 
 
 The Treasury also tried other schemes to repress 
 the advance in the gold premium. For a time it 
 privately sold exchanges on London through the 
 National Bank of Commerce in New York, and 
 also publicly through the New York Sub-Treasury. 
 It also issued to importers gold certificates of de- 
 posit upon the deposit of United States notes, at 
 one-quarter of one per cent less than the current 
 rate of coin. These certificates were not negotiable, 
 and were receivable in payment of customs dues at 
 their face value ; but, despite every precaution, 
 they became subject to speculation, and this plan, 
 for which a great triumph in checking gold specu- 
 lation was predicted, was found to be so incon- 
 venient and dangerous that, after a few weeks, it 
 was abandoned. 
 
 For a time the sale of gold was conducted pri- 
 vately through the Sub-Treasury in New York, but, 
 after 1807, contemplated sales were usually an- 
 nounced several days in advance, and generally
 
 GOLD COIN AND CERTIFICATES. 185 
 
 were limited in amount to the needs of the public 
 service. 
 
 Chief among the schemes of speculators during 
 these occurrences was that of making gold scarce 
 in order to "move the crops." It was plausibly 
 urged by them that farmers would withhold grain 
 from the market until a certain price therefor in 
 paper could be obtained. As the gold premium 
 advanced, prices advanced, consequently the point 
 at which wheat would be sold could be reached by 
 making gold scarce and the premium high. To 
 the exporter of grain the increase of premium was 
 of no moment. He was paid for his shipments in 
 coin, and he could, without loss, increase the price 
 to be paid the purchaser precisely as the premium 
 increased. As prices of other commodities fol- 
 lowed the rise in premium, the money the farmer 
 obtained for his wheat, at the higher rate, was 
 worth no more to him than the lower. 
 
 This newly found device for moving the crops 
 met with great favor among many public officials, 
 and was diligently advocated by speculators, who, 
 while pretending to be shipping grain, were really 
 speculating in the rise in the gold premium. 
 
 In the summer of 18 G9 gold was quoted at about 
 135. Sales of gold by the Treasury, in the amount 
 of $1,000,000, were being made every alternate 
 Wednesday. An abundant grain crop had been 
 harvested throughout the west, and shipments of
 
 186 MONEY IN POLITICS. 
 
 grain to the seaboard were made as freely as 
 prices would warrant ; but the speculators made a 
 great outcry that the Treasury should increase the 
 gold premium and further stimulate the movement 
 of the crops. In August, certain well-known 
 gentlemen in New York joined in a gold specula- 
 tion, operating for an increase in the premium. 
 To secure success they desired, 
 
 1st. To know precisely how much gold was held 
 by the banks and the Treasury. 
 
 2d. To have the ordinary sales of gold sus- 
 pended. And — 
 
 3d. To be assured that in case of a rise in the 
 premium the Treasury would not interfere by sell- 
 ing o-old. 
 
 They knew that outside of the Treasury there 
 was comparatively but a small amount of gold, 
 perhaps not $25,000,000 all told. By purchasing 
 gold persistently at the Gold Board, they believed 
 they could obtain control of all the gold in the 
 street, and force the settlement of contracts upon 
 their own terms. A relative of the President was 
 associated with them in the enterprise, and there 
 is reason to believe that the Assistant Treasurer at 
 New York aided the scheme. Of the action taken 
 in this matter by public officials the records show 
 as follows : — 
 
 On August 18, the Assistant Treasurer at New 
 York addressed a letter to the Secretary of
 
 GOLD COIN AND CERTIFICATES. 187 
 
 the Treasury, stating that he was under apprehen- 
 sion with regard to gold certificates issued by his 
 office, and su^srestino: that the national bank ex- 
 aminers in the principal cities be instructed, on 
 a certain fixed day, to run over the specie items 
 of the banks, and to take a brief record of the 
 amounts held in gold and in certificates. Two 
 days later he recommended that the inquiry be ex- 
 tended to the several Treasury offices. 
 
 The information asked for would, if furnished, 
 have been wholly useless to him for any purpose 
 of checking his record of issues, for which he 
 claimed to desire it. A numerical record of every 
 certificate issued was kept at the Treasury as well 
 as at his own office, and the amount outstanding 
 could at any time have been verified with very 
 little labor ; but in order to answer his request 
 the Acting Secretary called upon the banks 
 and the Treasurer of the United States to report 
 the respective amounts of gold and of gold cer- 
 tificates held by the banks and in the Treasury 
 on the morning of the 8th day of September fol- 
 lowing. 
 
 Meanwhile the projectors of the scheme had not 
 been idle. They had secured an interview with the 
 President, and impressed him with the importance 
 of moving the crops promptly by suspending the 
 sale of gold until the premium became high enough 
 to induce the farmers to part with their wheat.
 
 188 MONEY IN POLITICS. 
 
 On August 30, one of the clique addressed a letter 
 to the Secretary of the Treasury, complimenting 
 him for refraining from putting gold on the market 
 at that season of the year, when the bulk of our 
 agricultural products was to be marketed, and ex- 
 plaining to him the great advantages which would 
 result from a policy which could not but enrich 
 the whole country by causing a large exporta- 
 tion of grain and other agricultural products. 
 On the 20th he wrote a£>ain, reasserting his 
 opinion that the premium on gold should be 
 maintained. 
 
 "In my judgment," he said, "the government 
 cannot afford to sell gold during the next three 
 months while the crops are being marketed, and if 
 such a policy were announced it would immediately 
 cause a high export of breadstufl's and an active 
 fall trade." This specious reasoning had its effect 
 upon the President, and he addressed a letter 
 about the 3d of September to the Secretary of the 
 Treasury, then away from Washington, in which 
 he expressed the opinion that it was undesirable 
 to force down the price of gold. He spoke of the 
 importance to the West of being able to move its 
 crops. On the 12th he addressed another letter 
 from New York, stating that a desperate struggle 
 was then taking place between the bulls and bears 
 of Wall Street, and that each party wanted the 
 government to help it out. He advised the Secre-
 
 GOLD COIN AND CERTIFICATES. 189 
 
 tary to move on without change until the struggle 
 was over. On the 20th the Treasury Department 
 sent to the Assistant Treasurer at New York the 
 information that he desired in reference to the coin 
 and coin certificates held by the national banks. 
 
 On the same day the member of the clique who 
 had previously written to the Secretary wrote that 
 there was a panic in Wall Street, engineered by a 
 bear combination, which had withdrawn currency 
 to such an extent that it was impossible to do 
 ordinary business. He now advised that, until the 
 crops were moved, the banks should be given some 
 currency out of the Treasury reserve. The facts 
 were, that the clique of which he was a member, 
 having matured all their plans, had several days 
 before commenced the purchase of gold, running 
 up the price to such an extent that all business was 
 disturbed and an artificial stringency in the cur- 
 rency created. On the morning of the 24th of 
 September, gold was at 150, before noon at 162, 
 and the excitement in Wall Street was unpre- 
 cedented. At 11.45 that day the Secretary tele- 
 graphed the Assistant Treasurer to sell $4,000,000 
 of gold. This broke the combination, and gold, 
 in fifteen minutes, was selling at 140 for cash. 
 For once the Treasury was in Wall Street with 
 effect, either for good or for evil. 
 
 Of the allegations that were frequently made, 
 that public officials aided in this plot, there never
 
 ICO MONEY IN POLITICS. 
 
 was a shadow of proof, except, perhaps, in the 
 case of the Assistant Treasurer at New York. 
 For the part he took in the affair he was compelled 
 to resign his position. The result of the combi- 
 nation was immense loss to many innocent indivi- 
 duals, and the wreck of some of the clique to 
 whom the others proved unfaithful. A general 
 disturbance was felt throughout the whole country, 
 and gave to the day in which the scheme cul- 
 minated the name of " Black Friday," which will 
 be long remembered in the annals of the country. 
 Of the operations of the parties other than gov- 
 ernment officials, the following account, taken from 
 a newspaper published at that time, furnishes full 
 information : — 
 
 "In the spacious exchange room of the Gold 
 Board, crowded as it had never been crowded, 
 even in the wildest excitement of war times, amid 
 the strangest variations of deathlike silence and 
 tumultuous uproar, the pallid, half conscience- 
 stricken brokers of this gambling clique appeared, 
 one after another, to do their dirty work. By the 
 little fountain which plays in the centre of the floor, 
 and around which the principal business is trans- 
 acted, first one bid arose, 145 for $100,000, and 
 there was no response. Then another bid, 146 
 for $100,000, and again no answer ; 146, 147, 148, 
 149 for $100,000, with a pause between each, all 
 amid deathlike silence.
 
 GOLD COIN AND CERTIFICATES. 191 
 
 "The hundreds gathered there, and the thousands 
 who read the ominous words on all the telegraphic 
 indicators in the principal business offices in the 
 city, and the hundreds of thousands who watched 
 the telegraph offices throughout the country, stood 
 appalled. Each one per cent advance involved 
 losses of millions ; the gain was with the clique. 
 Who could tell what would be the end? There 
 was no resisting such power. They could advance 
 to 200 if they chose. And the usually surging, 
 bustling, shouting mass of humanity crowded there 
 was held silent, almost motionless, as by a magic 
 spell. One hundred and fifty is now bid for 
 $100,000, and despair suddenly gives back life to 
 many. They rush eagerly to bid and buy. Orders 
 come in by telegraph to buy at any price. Mes- 
 sengers from all parts of the city, the great bank- 
 ers, the merchant princes, from up-town and 
 down-town, force their way in through the crush, 
 and give back to the brokers the sense of reality 
 which they seem to have lost amid the dream-like 
 terror. The stillness is suddenly succeeded by 
 frantic excitement. Transactions of enormous 
 magnitude are made amid the wildest confusion, 
 and the most unearthly screaming of men, always 
 excitable, now driven to the verge of temporary 
 insanity by the consciousness of ruin, or the delu- 
 sive dream of immense wealth. But amid all the 
 noise and confusion the penetrating voices of the
 
 192 MONEY IN POLITICS. 
 
 leading brokers of the clique are still heard ad- 
 vancing the price at each bid, and increasing the 
 amount of their bids at each advance, until at last, 
 with voice overtopping the bedlam below, the 
 memorable bid burst forth, ' 160 for any part of 
 $5,000,000.' Again the noise was hushed. Terror 
 became depicted on every countenance. Cool, 
 sober men looked at one another, and noted the 
 ashy paleness that spread over all. Even those 
 wdio had but little or no interest at stake were 
 seized with the infection, of fear, and were con- 
 scious of a great evil approaching. And from the 
 silence again came forth that shrieking bid, '160 
 for $5,000,000,' and no answer; f 161 for $5,000,- 
 000,' « 162 for $5,000,000,' still no answer; f 162 
 for any part of $5,000,000.' And a quiet voice 
 said, ' Sold $1,000,000 at 162.' 
 
 "That quiet voice broke the fascination. The 
 bid of 162 was not renewed. But 161 was again 
 bid for a million, and the same quiet voice said, 
 ' Sold ; ' and the bid of 161 was not renewed. But 
 160 was again bid for $5,000,000. Then dimly it 
 dawned upon the quicker-witted ones that, for 
 some reason or other, the game W'as up. As if 
 by magnetic sympathy the same thought passed 
 through the crowd at once. A dozen men leaped 
 furiously at the bidder, and claimed to have sold 
 the whole $5,000,000. To their horror the bidder 
 stood his ground and declared he would take all.
 
 GOLD COIN AND CERTIFICATES. 193 
 
 "But before the words had fairly passed his lips, 
 before the terror at his action had had time to gain 
 men's hearts, there was a rush amid the crowd. 
 New men, wild with fresh excitement, crowded to 
 the barriers. In an instant the rumor was abroad, 
 ' The Treasury is selling.' Quick as thought men 
 realized that it was not safe to sell to the clique 
 brokers. Scarcely any one now wanted to buy. 
 All who had bought were mad to sell at any price, 
 but there were no buyers. In less time than it 
 takes to write about it the price fell from 1(32 to 
 135. The great ffijyantic cold bubble had burst, 
 and half Wall Street was involved in ruin." 
 
 Congress upon assembling in December prompt- 
 ly ordered an investigation as to the cause of the 
 disaster. It could not well do otherwise, the 
 Treasury having entered Wall Street to control 
 the gold market in the interest of the bears. 
 Nothing came from the investigation, however, 
 except two reports from the committee appointed 
 to do the work, the opinions of the members being 
 divided on the subject according to their political 
 predilections, and the Treasury resumed the ordi- 
 nary sales of gold. 
 
 In February, 1873, another coinage act was 
 passed, making the gold dollar the standard unit 
 of account, but no change was made in the weight 
 or fineness of the gold coins. It authorized, how- 
 ever, the coinage of the gold dollar and three
 
 194 MONEY IN POLITICS. 
 
 dollar pieces, and made all gold coins of the 
 United States a full legal tender in all payments 
 when not below the standard weight and limit of 
 tolerance, as therein provided for each piece, and 
 when below such standard and tolerance to be a 
 legal tender at valuation in proportion to their 
 actual weight ; " And any gold coin of the United 
 States, if reduced in weight by natural abrasion, 
 not more than one-half of one per centum below 
 the standard weight prescribed by law, after a cir- 
 culation of twenty years, as shown by its date of 
 coinage, and at a ratable proportion for any period 
 less than twenty years, shall be received at their 
 nominal value by the United States Treasury," 
 &c. 
 
 The standard weight of a gold dollar was fixed 
 at 25.8 grains troy. The deviation allowed by 
 law in adjusting the weight of gold coins was 
 to be, in the double eagle and the eagle one-half 
 of a grain, and in the other coins one-fourth of a 
 grain for each piece. Precisely at what point one 
 of these coins through abrasion ceases to be a legal 
 tender, or not receivable at the Treasury, be- 
 comes under the law an interesting question in 
 vulgar fractions, and, when ascertained, the pos- 
 sessor would require a nicely adjusted scale to 
 make his information of any service. 
 
 Congress borrowed this provision of the coinage 
 act from England, in which country it had for
 
 GOLD COIN AND CERTIFICATES. 195 
 
 some time existed. When first put into operation 
 in that country considerable attention was paid to 
 its provisions, and society ladies took pride in 
 being able to tell precisely how much any worn 
 coin was worth. Miniature scales accurately ad- 
 justed and highly ornamented were manufactured 
 for the purpose, and ladies wore them hung about 
 their necks. These scales are now frequently met 
 with in pawn-shops and second-hand jewelry estab- 
 lishments. No attention is now paid to the com- 
 plicated requirements of the act, however, except 
 by the Bank of England ; and coins, however much 
 worn, pass readily at their nominal value, only the 
 ignorant and the unwary ever presenting a doubt- 
 ful piece at the counters of that institution. 
 
 The coinage act of 1873 also directed that all 
 coins in the Treasury below legal weight should be 
 recoined, and in accordance therewith light coins, 
 representing in nominal value upwards of $25,- 
 000,000, were recoined into full-weight pieces at 
 an expense of about $100,000. As nearly all the 
 coin in the country was at that time held by the 
 Treasury, but few light-weight pieces in existence 
 escaped the melting-pot, and consequently the gold 
 coins now in circulation are but little worn or 
 defaced. 
 
 Upon the resumption of specie payments in 
 January, 1879, a vast amount of gold coin re- 
 turned to this country from Europe, where it had
 
 196 MONEY IN POLITICS. 
 
 been driven by the paper issues of the govern- 
 ment. Since that time the gold dollar has been 
 maintained as a standard of value and a unit of 
 account. Owing to the prevalence of notes of 
 small denomination, however, but little gold 
 appears in circulation. At this time gold is 
 exported in considerable quantities to meet the 
 payment of balances heretofore met b} r the expor- 
 tation of cotton and agricultural products. Should 
 the drain continue to any great extent, silver dol- 
 lars will necessarily take the place of gold coins, 
 and the silver dollar will become the unit of ac- 
 count again, being worth about 15 per cent less 
 than gold at the present coinage rate of 1 to 
 15.98. Gold will then become a commodity and 
 will again be quoted at a premium. Such is the 
 beautiful diversity of a double standard !
 
 CHAPTER XX. 
 
 THE SILVER DOLLAR. 
 
 The Spanish milled dollar, or, more strictly 
 speaking, the Mexican pillar-piece, was a popular 
 coin amonof the colonists. The British mint de- 
 clared in 1707 that it contained -386| grains of 
 pure silver. By the British standard at that time 
 444 grains of such silver was rated at 62 pence. 
 Consequently the dollar contained 54 pence. A 
 pound sterling contained 240 pence, and was 
 therefore worth 4.44$ of those dollars, and this 
 valuation of the pound sterling continued as an 
 assumed value until January 1, 1873, notwith- 
 standing that meanwhile both the pound and the 
 dollar had been subjected to many important 
 changes. 
 
 In the year 1772 the amount of pure silver in 
 the dollar was by law reduced to 377£ grains. In 
 1785 the Congress of the Confederation adopted 
 the dollar as a unit of account, declaring that it 
 contained 375.64 grains of pure silver. 
 
 In 1792 Congress passed an act establishing for 
 the country a uniform money of account, with this 
 
 107
 
 198 MONEY IN POLITICS. 
 
 dollar for a unit, declaring that it should contain 
 371 | grains of pure, or 416 grains of standard 
 silver. The same act also provided that 24.73 
 grains of pure gold should be the legal equivalent 
 of this dollar, and that, in all coined pieces, one 
 pound of pure gold should be deemed equivalent 
 to fifteen pounds of pure silver. 
 
 The legal relation between the two metals of 
 1 to 15 thus established proved to be a close ap- 
 proximation to the commercial one existing at that 
 time. If anything, gold was for a short time a 
 little undervalued, yet but little of it came to 
 the mint for coinage. Foreign gold coins, to 
 which the people were accustomed, furnished a 
 satisfactory medium for making coin exchanges. 
 Their values were reckoned in shillings and pence, 
 and the new money of account, with its dollars, 
 its decimal divisions and multiples, for a long time 
 met with but little favor. 
 
 The irold and silver coins were full legal ten- 
 der for their face value in the payment of all 
 debts, but their paper representatives, though 
 often much depreciated below their face value, 
 constituted much of the circulating medium of the 
 country, although not endowed with any legal 
 tender power. 
 
 Soon after the beginning of the present century 
 silver became comparatively cheaper than gold, 
 and a considerable amount of it found its way to
 
 THE SILVER DOLLAR. 199 
 
 the mint for coinage. By 1809 one pound of 
 gold was worth in the market 16^ pounds of 
 silver. 
 
 The legal relation, however, remained unchanged 
 between the two metals. Gold therefore became 
 a commodity, and the small amount coined was 
 shipped abroad to pay for imported goods. Silver 
 had meanwhile superseded gold as a circulating 
 medium, and its comparative cheapness stimulated 
 its coinage. Of silver dollars there had been 
 coined, to the date mentioned, 1,439,457 pieces. 
 
 The silver dollar was now the unquestioned unit 
 of account, and in this coin all contracts calling 
 for dollars could be satisfied. Mr. Jefferson, who 
 was then President, had favorably indorsed the 
 ratio of 1 to 15 proposed by Mr. Hamilton, and 
 adopted in the coinage act of 1792. He be- 
 lieved that both metals could and would circulate 
 side by side under the relation fixed by that act. 
 He desired that gold should circulate as well as 
 silver, and, to prevent the expulsion of gold, he 
 peremptorily ordered the mint to discontinue the 
 coinage of the silver dollar, and Congress and the 
 country seem to have approved his action, although 
 taken without authority, if not in direct violation, 
 of law. To the effect of this executive interfer- 
 ence is probably due the fact that from 1809 to 
 1836 no silver dollars were coined. 
 
 Fractional silver pieoes, however, of like fine-
 
 200 MONEY IN POLITICS. 
 
 ness and proportional weight, were freely coined, 
 and were put into circulation, so far as they could 
 successfully compete with the depreciated issues 
 of the banks. The country, however, demanded 
 a gold circulation, and in 1834 Congress enacted a 
 law chano-ins: the ratio between the two metals 
 from 1 to 15 to 1 to 16, by reducing the weight 
 of pure gold in a dollar about seven grains. At 
 this rating gold was a cheaper metal than silver, 
 and the gold dollar became the unit of account. 
 Gold coins now took the place of silver ones as 
 rapidly as they could be manufactured at the 
 mints. 
 
 Silver, at the new rating, became a commodity, 
 and the coins of that metal were rapidly shipped 
 abroad or melted down for uses in the arts. No- 
 body would take silver to the mint to be manufac- 
 tured into coins for circulation, when for it they 
 could obtain gold bullion, which the mint would, 
 without charge, coin into more dollars than the 
 silver would make. 
 
 The country soon became drained of silver 
 "change." Consequently worn Mexican and Span- 
 ish pieces, and corporation tokens, took the place 
 of the full-weight pieces, which unwise legislation 
 had driven out of circulation. 
 
 A small number of silver dollars were minted 
 from time to time, but only for bullion dealers, 
 who found it profitable to turn their silver into
 
 THE SILVER DOLLAR. 201 
 
 this form for exportation. Until 1873 there had 
 been coined of these pieces for purposes of circu- 
 lation only $1,439,457, and these were coined 
 previous to 1810. 
 
 On the 25th day of April, 1870, the Secretary 
 of the Treasury sent to Consress a bill revising 
 the laws relating to the mint, assay offices, and 
 coinage of the United States, accompanied by a 
 report giving a concise statement of the method 
 adopted in preparing the bill, of the various 
 amendments proposed to existing laws, and of the 
 necessity for the changes recommended. In the 
 letter of transmittal the Secretary stated that there 
 had been no revision of the laws pertaining to the 
 mint and coinage since 1837, and he expressed a 
 belief that the passage of the bill enclosed would 
 conduce greatly to the efficiency and economy of 
 that important branch of the public service. 
 
 From the report it seems that in preparing the 
 bill the existing laws pertaining to the matter were 
 first arranged in a concise form, with such addi- 
 tional sections and suggestions as seemed valuable, 
 and then submitted to the different mints and assay 
 offices, to the officers of the Treasury Department 
 familiar with coinage operations and the accounts 
 arising therefrom, and to such other gentlemen 
 as were known to be versed in metallurgical and 
 numismatical subjects, with a request for such 
 suggestions as experience and education should
 
 202 MONEY IN POLITICS. 
 
 dictate ; that in this way the views of more than 
 thirty gentlemen, conversant with the manipulation 
 of metals, the manufacture of coins, and the execu- 
 tion of laws pertaining thereto, were obtained ; and 
 that the bill was framed in accordance with these 
 suggestions. 
 
 Among the amendments proposed to existing 
 laws as set forth in the report, the important ones 
 were the establishment of a Mint Bureau in the 
 Treasury Department, to have charge of the opera- 
 tions of the mints and assay offices, and the dis- 
 continuance of the coinage of the silver dollar. 
 The reason given in the report for proposing the 
 latter amendment was that, under the existing legal 
 ratio between the two metals, the silver dollar was 
 worth a premium in gold of about three and a half 
 per centum, and that consequently the gold dollar 
 was the unit of account, and no change therefrom 
 was deemed advisable. 
 
 The appendix to the report also contained a 
 marginal note, stating that the silver dollar was 
 omitted from the bill. Subsequently, on June 25, 
 1870, the Secretary of the Treasury transmitted 
 to the House of Representatives copies of the cor- 
 respondence of the Department, with the public 
 officers and other gentlemen upon whose sugges- 
 tions the bill had been framed, together with a let- 
 ter from the Deputy Comptroller of the Currency, 
 to whose supervision had been committed the pre-
 
 THE SILVER DOLLAR. 203 
 
 paration of the bill. Seven of these gentlemen 
 discussed the proposition to discontinue the silver 
 dollar, giving thereto their unqualified approval. 
 
 On December 9, 1870, the bill was reported 
 from the Finance Committee of the Senate, and 
 printed with amendments. 
 
 On January 9, 1871, in accordance with pre- 
 vious notice, the bill came before the Senate, 
 where it was discussed for two days and then 
 passed. 
 
 On January 13, 1871, the House ordered the 
 Senate bill to be printed. On February 25, 1871, 
 the bill was reported from the Coinage Committee 
 with an amendment, when it was again printed and 
 recommitted. No further action on the bill was 
 taken by Congress during that session. 
 
 On March 9, 1871, the bill was again introduced 
 into the House and ordered to be printed. On 
 January 9, 1872, Mr. Kelly of Pennsylvania, Chair- 
 man of the Coinage Committee, reported the bill 
 to the House with a recommendation that it pass. 
 In his opening speech he said the bill had received 
 as careful attention as he had ever known a com- 
 mittee to bestow on any measure. " AVe pro- 
 ceeded," he said, "with great deliberation to go 
 over the bill, not only section by section, but line 
 by line and word by word." 
 
 The bill, after considerable discussion, was again 
 recommitted, again reported, again printed and
 
 204 MONEY IN POLITICS. 
 
 recommitted, to be again reported and printed, and 
 to be made the special order for March 12, 1872, 
 until disposed of. An exhaustive discussion fol- 
 lowed. Mr. Hooper, of Boston, in a carefully 
 prepared speech of ten columns of the " Globe," 
 explained the provisions of each section of the bill, 
 and dwelt at length upon the proposition to dis- 
 continue the silver dollar. " This dollar," he said, 
 M by reason of its intrinsic value being greater than 
 its nominal value, long since ceased to be a coin of 
 circulation, and is melted by manufacturers of sil- 
 verware. It does not circulate in commercial 
 transactions with any country, and the convenience 
 of these manufacturers, in this respect, can better 
 be met by supplying small stamped bars of the 
 same standard, avoiding the useless expense of 
 coining the dollar for that purpose." 
 
 Mr. Stoughton, of the Coinage Committee, ex- 
 pressed like views. 
 
 Mr. Potter, of New York, spoke of the change 
 proposed, whereby the legal tender coin of the 
 country would consist of one metal instead of two, 
 and said : " I think this would be a wise provision, 
 and that the full legal tender coins should be of 
 gold alone." 
 
 Mr. Kelly also said : " It is impossible to retain 
 the double standard. The values of gold and sil- 
 ver continually fluctuate. . . . Hence all experi- 
 ence has shown that you must have one standard
 
 THE SILVER DOLLAR. 205 
 
 coin which shall be a full legal tender, and then 
 you may promote your domestic convenience by 
 having a subsidiary coinage of silver which shall 
 circulate in all parts of your country as legal 
 tender for a limited amount." 
 
 On May 27, 1872, the bill passed the House, — 
 yeas, 110 ; nays, 13. 
 
 So far as it related to the silver coinage, it was 
 identical with the bill prepared at the Treasury, 
 w r ith the exceptions that it provided for the coin- 
 age of a silver dollar weighing 384 grains, and 
 made all the silver coins a legal tender for $5 in 
 any one payment, instead of for all sums less than 
 $1. This dollar would be but the weight of two 
 half dollars, and was designed to be coined only on 
 government account, as were the fractional pieces. 
 
 Just before the passage of the bill, Mr. McNeeley, 
 of the Coinage Committee, said he had carefully 
 examined every line of the bill, and, understand- 
 ing the subject, he was satisfied that the bill ought 
 to pass. 
 
 The bill was again printed in the Senate, and 
 referred to the Committee on Coinage. Subse- 
 quenth r , upon being again reported from that com- 
 mittee, it was again printed. Further amendments 
 were proposed, and it was again printed witli the 
 amendments, and, after a discussion oec^rying 
 nineteen columns of the " Congressional Glol>e," 
 it passed the Senate.
 
 206 MONEY IN POLITICS. 
 
 The bill was sent to the House, where it was 
 again printed and referred to a Committee of Con- 
 ference, which finally agreed as to its form, and 
 the bill as reported from the conference became a 
 law February 12, 1873. 
 
 In place of the subsidiary dollar of 384 grains, 
 with a limited legal tender quality, the Senate sub- 
 stituted a trade dollar weighing 420 grains, in 
 accordance with the wishes of the dealers in bul- 
 lion upon the Pacific Coast, that being considered 
 as the most advantageous weight for a coin to be 
 used for shipment to China and Japan. 
 
 The steps taken in framing and passing the 
 act by which the coinage of the silver dollar was 
 discontinued are herein so fully detailed because 
 charges have frequently been made that the act 
 was passed inadvertently or surreptitiously. As 
 a final answer to such charges, it may be summed 
 up that the bill was read in full in the Senate 
 several times, and once, if not more, in the House ; 
 that it was printed by order of Congress thirteen 
 times ; that it was considered at length by the 
 proper committees of both Houses during five 
 different sessions, and that the debates on the 
 bill in both Houses occupy 144 columns of the 
 "Globe." 
 
 The passage of the act caused no material change 
 in the coin circulation of the country. Since 1809 
 no silver dollars had been coined for circulation,
 
 THE SILVER DOLLAR. 207 
 
 and the small amount which had ever entered into 
 circulation had long before disappeared. Yet the 
 act took from these dollars, if any there were, 
 none of the properties they ever possessed. They 
 were still a full legal tender in the payment of 
 debts. But this property was soon to be taken 
 from them. Congress, in 1867, authorized a com- 
 mission to codify the statutes of the United States. 
 These statutes were embraced in seventeen vol- 
 umes, and for more than seven years the commis- 
 sion was employed in the work, expending therein 
 upwards of $80,000. The result of all this labor 
 and expense was put into the form of a bill, which, 
 after consideration by both Houses, became a law 
 June 20, 1874. The "Revision," as it was called, 
 superseded all pre-existing general laws to which 
 it referred. By this "Revision" all the silver 
 coins of the United States were made a legal 
 tender for payments not exceeding $5, no excep- 
 tion being made of the silver dollar. In this 
 ■way the silver dollar, whose coinage had been by 
 law discontinued the year before, had now its 
 full debt-pa} r ing power taken from it, doubtless 
 through an error. 
 
 Thus the silver dollar, the coinage of which 
 Hamilton recommended, Jefferson forbade, and 
 Benton made unprofitable, was discontinued with 
 general approval, and subsequently demonetized 
 by a clerical blunder.
 
 208 MONEY IN POLITICS. 
 
 Hardly had the coinage act of 1873 gone into 
 effect, discontinuing the issue of the silver dollar, 
 when silver, as compared with gold, fell rapidly 
 in price. In less than twelve months thereafter, 
 the amount of silver required for the coinage of a 
 dollar could be purchased in the market for 98 
 cents in gold. In 1875 it could be purchased for 
 94 cents ; in 1876 for 79.2 cents ; and in 1877 for 
 90 cents, — the most violent fluctuation in the rel- 
 ative values of the two metals of which history 
 gives any record. 
 
 Many causes combined to produce this fluctua- 
 tion, some of which are well known. The' ex- 
 traordinary yield of silver in Nevada had increased 
 the stock on hand. The German government had, 
 in 1871, undertaken to redeem the enormous 
 amount of silver coin circulating in that empire, 
 and to replace it with gold coin, the silver re- 
 deemed to be melted down and sold at the best 
 rates obtainable. Through this operation over 
 seven million pounds of pure silver had been 
 thrown into the market. Alarmed at the abun- 
 dance of this metal, the Netherlands changed their 
 coins from silver to gold, and the Latin Union — 
 composed of France, Italy, Belgium, and Switzer- 
 land — in 1874 suspended the coinage of silver 
 throughout the Union. 
 
 There is also much reason to believe that the 
 demand for £old in the arts had meanwhile in-
 
 THE SILVER DOLLAR. 209 
 
 creased at a greater ratio than had the supply, 
 thus enhancing the exchange value of that metal. 
 
 Had the coming disparity in the relation be- 
 tween the two metals been foreseen, the action of 
 Congress in 1873, establishing a single gold stan- 
 dard, would, in view of the action of European 
 governments, have been considered as conservative 
 and judicious legislation by many well versed in 
 monetary affairs. 
 
 By maintaining the gold dollar as a unit of ac- 
 count, Congress kept the circulating medium of 
 this country in harmony with that of Europe, thus 
 saving to the producers in this country heavy 
 premium charges in effecting exchanges, which 
 bankers would have been compelled to impose to 
 protect themselves against loss from the constantly 
 changing relation of the two metals. 
 
 Had the silver dollar not been discontinued, its 
 coinage at the mint for purposes of circulation 
 "would have been resumed upon the fall in price of 
 silver bullion, and resumption of specie payments 
 would have occurred probably in 1876 upon a sil- 
 ver basis twenty per cent below that of gold. 
 Public, state, municipal, corporate, and private 
 indebtedness, contracted prior to the change of 
 standard and payable in coin, would then have 
 been satisfied by the payment of silver dollars, 
 these coins having had a legal if not an actual 
 existence at the time the obligations were con
 
 210 MONEY IN POLITICS. 
 
 tracted. Nor would the debtor have had, in such 
 an event, any just ground of complaint. No one 
 had ever alleged of either metal an immutability 
 of value, and the obligee to a contract calling for 
 "coin" took a risk, which he was presumed to 
 know, of being paid in the cheaper metal. 
 
 The discontinuance of the silver dollar, how- 
 ever, took from the obligor the power, if not the 
 right, to satisfy his coin obligations by payment 
 in silver coin. The number of private contracts 
 affected by the discontinuance of the silver dollar 
 in the country was probably not great, nor their 
 amount excessive ; but a large amount of corpo- 
 rate, municipal, and state indebtedness existed, 
 payable in coin, and contracted previously to 1873, 
 and this could now be paid only in gold. 
 
 The entire bonded debt and the circulating me- 
 dium of the United States was affected by the 
 discontinuance. A large portion of the debt con- 
 tracted during the rebellion called only for "dol- 
 lars," and not without reason there had arisen in 
 the country a considerable demand that these ob- 
 ligations should be satisfied with United States 
 notes, those being the kind of dollars the govern- 
 ment received for the obligations. To explain the 
 meaning of previous legislation, Congress in 1869 
 had pledged the faith of the United States to the 
 payment in coin or its equivalent of all the obliga- 
 tions of the government, except in cases where
 
 THE SILVER DOLLAR. 211 
 
 the authorizing act expressly provided that pay- 
 ment therefor might be made in other money than 
 gold and silver. Subsequently only the issue of 
 bonds for refunding purposes was authorized, but 
 in this case the act of authorization specifically 
 provided that the bonds should be redeemable in 
 coin of the then existing standard value. The act 
 was approved July 14, 1870, at which time the 
 silver dollar had an existence in the public stat- 
 utes, and of course neither the discontinuance of 
 that dollar, nor the great fall in the price of silver 
 bullion, was contemplated or foreseen. 
 
 While these changes in the coinage laws were 
 being made, and the relative values of silver and 
 gold were so rapidly fluctuating, the country was 
 employing for a circulating medium only United 
 States notes and the issues of the national banks, 
 and current exchanges were consequently not 
 affected to any appreciable extent by the fluctuat- 
 ing ratio between the two metals. Gold con- 
 tinued to be employed in payment of customs 
 dues and interest on the public debt as before, 
 and nobody felt wronged. 
 
 But the same class of men that had sought to 
 pay the public debt in depreciated paper, and had 
 been defeated by the act of 18G9, now saw another 
 opportunity to lessen the obligations of the gov- 
 ernment. The restoration of the silver dollar to 
 the place it occupied previously to its discontinue
 
 212 MONEY IN POLITICS. 
 
 ance in 1873 would at once make that dollar the 
 unit of account, and as soon as a supply of the 
 coins could be issued from the mint, payments on 
 account of interest or principal of the public debt 
 would be made in silver instead of gold dollars, a 
 saving of about twenty per cent in all payments 
 thus made. They asserted that no repudiation 
 was involved in the transaction, silver as well as 
 gold being the coin " nominated in the bond." 
 Legally the position was well taken, and the gov- 
 ernment had only to consider what in equity was 
 due to the holders of public notes and bonds, and 
 whether it could afford to take advantage of its 
 technical right to pay its debt with the depreciated 
 metal. The larger portion of the debt had been 
 contracted when gold was the only coin in circula- 
 tion, and holders of the public securities naturally 
 supposed that the securities would eventually be 
 paid in gold. To pay them in a cheaper metal 
 would subject the government to the charge of 
 a partial repudiation of its indebtedness. This 
 charge would be unjust, but no explanation would 
 ever fully satisfy the w T orld that the government 
 had acted w r holly in good faith in thus returning 
 to a silver basis to take advantage of its creditors. 
 As the silver dollar had not for two generations 
 formed any essential part of the metallic circula- 
 tion of the country, its discontinuance attracted 
 no attention for some time. Occasional mention
 
 THE SILVER DOLLAR. 213 
 
 of its absence was made in the public press, in 
 connection with the rapid decline of the price of 
 silver bullion in 1875 and 1876. No demand for 
 its restoration was urged, and the question of its 
 further coinage formed no part of the issues on 
 which were conducted the local and national cam- 
 paigns in the autumn of the last-named year. 
 
 In the House of Representatives on March 25, 
 1875, Mr. Regan had offered an amendment to a 
 bill to provide for the issue of small silver coins, 
 declaring that the silver coins of the United States 
 of the denomination of one dollar should be a 
 legal tender in any one payment at their nominal 
 value, for any amount not exceeding $50. This 
 amendment was agreed to. The only effect of 
 the proposed change was to increase the legal 
 tender power of the trade dollar, that being the 
 only dollar coin either authorized or fabricated. 
 But in the Senate, a month later, the amendment 
 was changed so as to provide for the coinage of a 
 silver dollar nine-tenths line, to weigh 412^ grains 
 troy, and to be a legal tender for any amount not 
 exceeding $20 in any one payment, except for 
 customs dues and interest on the public debt. 
 This dollar was not to be coined for depositors of 
 bullion, but only upon government account, the 
 profit in its issue to accrue to the public Treasury. 
 Nothing came, however, of either proposition. 
 
 The session of Congress following the presiden-
 
 214 MONEY IN POLITICS. 
 
 tial campaign of 1876 was occupied principally in 
 determining the succession to the Presidency, and 
 pending that controversy little attention was paid 
 to the monetary affairs of the country, in Con- 
 gress or elsewhere. That matter settled, the pro- 
 posed remonetization of the silver dollar at once 
 became a disturbing element in local and national 
 politics. The newly-made friends of the silver 
 dollar became very numerous and unnecessarily 
 noisy. They alleged that designing men had sur- 
 reptitiously secured the passage of the act discon- 
 tinuing that coin, although one of their number 
 had in the House advocated the passage of the act, 
 and especially commended the provision for such 
 discontinuance. 
 
 They attributed to the absence of the silver 
 dollar the disasters following the panic of 1873, 
 although up to the time of that panic, even had 
 there been no adverse legislation, the dollar would 
 not have appeared in circulation, owing to the 
 high price of silver bullion. They euphoniously 
 termed the coin the " dollar of our daddies," and 
 alleged that, in discontinuing it, an indignity had 
 been heaped upon the worthy founders of the 
 republic, although, upon a most liberal estimate, 
 an equal distribution of all such coins ever in cir- 
 culation would not have given one piece to every 
 ten voters when Jefferson stopped its coinage. 
 
 In the press, on the platform, and in Congress,
 
 THE SILVER DOLLAR. 215 
 
 they pictured the distress the poor man hud suf- 
 fered through the alleged mischievous legislation, 
 and stoutly demanded the restoration of the coin 
 as a panacea for all the evils, real or imaginary, 
 with which the country was afflicted. With un- 
 sparing epithets they denounced those who had 
 invested their earnings in public securities as 
 "leeches," "bloated bondholders," "vampires, flap- 
 ping their dragon wings over a ruined country," 
 and hinted that, unless the coin was restored to 
 circulation, communism and anarchy would follow. 
 One over-zealous Congressman openly asserted 
 that, unless the public debt was paid in silver, he 
 and his friends would rise in their might and wipe 
 out the entire debt as with a sponge. 
 
 In May, 1877, the legislature of Illinois deter- 
 mined that the evils resulting from the discontin- 
 uance of the silver dollar should be remedied, as 
 far as within its power, and as there were no silver 
 dollars in existence, and the State had no power to 
 coin any, it resorted to the unhappy device of 
 declaring the halves, quarters, and dimes a full 
 legal tender for the payment of debts within that 
 State. The measure was promptly vetoed by the 
 governor, and the State was thus spared any fur- 
 ther humiliation from the action of its too zealous 
 legislators. 
 
 The restoration of the silver dollar to its former 
 place as an alternative dollar with gold was gen-
 
 216 MONEY IN POLITICS. 
 
 erally demanded throughout the country, without 
 distinction of party. The Republicans of Ohio, 
 in convention, August, 1877, demanded the rcmon- 
 etization of silver, but with coinage and valuation 
 so regulated that our people should not be placed 
 at a disadvantage in their trade with foreign na- 
 tions, and that both metals should be kept in cir- 
 culation, as contemplated by the Constitution. 
 About the same time the Democrats of that State 
 in convention denounced the demonetization of 
 silver as an outrage upon the rights of the people, 
 although no member of the convention had prob- 
 ably ever seen a silver dollar at that time, except 
 in a museum of curiosities, and for more than 
 four years the " outrage " mentioned had been 
 endured without being known. 
 
 The Republicans of Pennsylvania, a month 
 later, thought that the long and successful exist- 
 ence of the double coin standard warranted them 
 in demanding a repeal of the legislation which 
 had demonetized silver and established "an almost 
 exclusive gold standard," and a return to the free 
 use and unrestricted coinage of the silver dollar, 
 thus preserving the equality of the commercial 
 value of the silver dollar with the gold dollar, and 
 keeping both in circulation. With sop of this 
 diluted character both parties fed their adherents 
 through the campaigns of that year. 
 
 The Forty-fourth Congress having adjourned
 
 THE SILVER DOLLAR. 21 7 
 
 without making the annual appropriation for the 
 support of the army, President Hayes called an 
 extra session of that body to convene October 16, 
 1877 ; and on November 5, Representative Bland 
 of Missouri, moved to suspend the rules and pass 
 a bill directing the coinage of silver dollars of the 
 weight of 412?r grains standard silver, as provided 
 in the act of January 18, 1837, the coins to be a 
 leoral tender at their nominal value for all debts and 
 dues, public and private, except where otherwise 
 provided by contract, and providing that any 
 owner of silver bullion might deposit the same at 
 the mints to be coined into such dollars for his 
 benefit, upon the same terms and conditions as 
 gold bullion. This was agreed to, — yeas, 164; 
 nays, 34 ; not voting, 92. 
 
 This bill, if it had become a law, would have 
 restored the double standard ; and as the silver 
 bullion necessary for a dollar could have been pur- 
 chased in the market for eighty-five cents in gold, 
 every person, corporation, or State, owing debts 
 payable in coin, would have been enabled to satisfy 
 such obligations at a discount of fifteen per cent 
 from their face value, as soon as a sufficient amount 
 of the coins for the purpose could have been put 
 into circulation. 
 
 The passage of the bill in tho House was re- 
 ceived with general satisfaction throughout the 
 country, the masses of the people believing that
 
 218 MONEY IN POLITICS. 
 
 with cheaper money good times would come. Any 
 question of political or personal integrity involved 
 in the scheme was little considered. 
 
 On November 21, in the Senate, Mr. Allison, 
 from the Committee on Finance, reported the bill 
 with several important amendments. The authority 
 for owners of silver bullion to have dollars coined 
 therefrom for their benefit was stricken out, and, 
 instead, the Secretary of the Treasury was author- 
 ized and directed, out of any money in the Trea- 
 sury not otherwise appropriated, to purchase, from 
 time to time, silver bullion at the market price, not 
 less than two million dollars nor more than four 
 million dollars per month, and to have it coined into 
 such dollars as fast as purchased, the gain arising 
 from the transaction to be paid into the Treasury. 
 
 The bill thus amended gave to the government 
 alone the right to pay coin obligations at the rate 
 of eighty-five cents on a dollar, because the coins 
 manufactured would be sold by the mints to other 
 parties only at their face valuation in gold. 
 
 No action upon the proposition was taken during 
 the extra session. Upon the assembling of Con- 
 gress in December, President Hayes in his annual 
 message, recommended the limited coinage of sil- 
 ver dollars of increased weight, with a proviso that 
 in no case should the then outstanding public debt 
 be ever paid in any coinage of less commercial 
 value than the gold coin as it then existed. No
 
 THE SILVER DOLLAR. 219 
 
 heed was paid to his recommendations ; the Allison 
 amendment was adopted by the Senate and con- 
 curred in by the House, by large majorities. The 
 bill was however vetoed by the President, but upon 
 its return to Congress became a law February 28, 
 1878, notwithstanding the veto, more than two- 
 thirds of each House voting in its favor. 
 
 Before the passage of the bill two sections had 
 been added ; one directing the President, imme- 
 diately upon the passage of the act, to invite the 
 governments of the countries comprising the 
 " Latin Union," and of such other European 
 nations as he might deem advisable to join the 
 United States in a conference to adopt a common 
 ratio between gold and silver for the purpose of 
 establishing, internationally, the use of bi-metallic 
 money, and securing fixity of relative values be- 
 tween the two metals, and to appoint commission- 
 ers for that purpose ; the other authorized the 
 holders of the silver dollars to deposit them in the 
 Treasury in sums not less than ten dollars, and to 
 receive therefor certificates, the coin to be held for 
 the redemption of the certificates, and the certifi- 
 cates to be receivable for customs, taxes, and all 
 public dues, and when so received to be rcissuable. 
 
 Under the operations of this act there has been 
 coined up to June 30, 1884, an amount of $175,- 
 355,829, resulting in a gain to the government of 
 about $21,000,000. Of the amount coined, the
 
 220 MONEY IN POLITICS. 
 
 government has sold $39,794,913, leaving in the 
 Treasury vaults $135,560,916, of which amount 
 outstanding certificates represent $96,427,011. 
 
 Two monetary conferences have been held with 
 no result. The government has not yet resorted 
 to its privilege of paying its obligations in the de- 
 preciated coin ; the mints continue to turn out the 
 pieces with unabated energy, and the Treasury to 
 bury them with equal diligence, no purchasers 
 being found. Slowly but surely the silver dollars 
 are accumulating in the moneys of the public Trea- 
 sury to the displacement of notes and gold, and in 
 the not distant future, should the coinage continue, 
 the srovernment will have no resources with which 
 to meet its obligations except these silver dollars.
 
 CHAPTER XXI. 
 
 CIRCULATION OF THE SILVER DOLLAR. 
 
 Promptly upon the passage of the act author- 
 izing the issue of the silver dollar, the Treasury 
 Department took steps to carry the act into exe- 
 cution. The Director of the Mint caused new 
 designs to be prepared for the proposed coin. 
 On the one side the " emblem of liberty " required 
 by law was to be represented by a female head, 
 with hair in curls, and a somewhat brazen expres- 
 sion of countenance, while on the reverse, in 
 place of the familiar French eagle, which had been 
 adopted from the arms of the Washington family, 
 a new bird, having its wings pointing forward, was 
 substituted — an addition to numismatic designs as 
 fresh and unique as was the acquisition to natural 
 history of the " Snark " and the "Boojum." 
 
 The Treasury accepted the designs, and invited 
 bids for a supply of silver from which to coin the 
 pieces, and England furnished the first instalment, 
 much to the disappointment of the producers of 
 
 221
 
 222 MONEY IN POLITICS. 
 
 domestic bullion, who supposed that the effect of 
 the new coinage would be to greatly enhance the 
 value of their mining products. 
 
 The mints had capacity to coin conveniently 
 only the minimum amount required each month, 
 but in three months a considerable supply of the 
 new coins was on hand, and on June 8, 1878, the 
 Treasurer of the United States offered the coins 
 for sale to the public. At that time a dollar of 
 the paper circulation was worth 98 cents in gold, 
 while the bullion in a silver dollar was worth only 
 about 83 cents in gold, but the Treasury would 
 receive the coins at their face value in payment of 
 customs dues, while it could not receive for that 
 purpose the paper circulation at any rate. Conse- 
 quently to an importer having duties to pay there 
 was a profit of about two per cent in exchanging 
 notes for silver dollars. As a further inducement to 
 purchase, the Treasurer offered to deliver the coins 
 at any national bank depository free of expense to 
 the purchaser, upon the amount in notes being 
 placed to his credit in the bank ; but the pur- 
 chaser was cautioned not to use the coins in any 
 way which would facilitate their return to the 
 department in coin payments. 
 
 On the 17th of the following month the Treas- 
 urer offered to send to any national bank at the 
 expense of the department any amount of silver 
 dollars needed upon payment therefor in notes,
 
 CIRCULATION OF THE SILVER DOLLAR. 223 
 
 but requested the banks to use them for any pur- 
 pose other than directly for payment of coin dues 
 to the government. Two days later the Treas- 
 urer authorized depositary banks and sub-treasury 
 officers to pay out silver dollars for any purpose in 
 lieu of notes, except where the coins would be likely 
 to come back to the Treasury in coin payments. 
 The result was not unexpected. Nobody who 
 could obtain small notes desired the heavy coins, 
 and consequently but few pieces went into general 
 circulation. The coins paid out came back to the 
 Treasury in lieu of gold coin, at a handsome 
 profit to customs brokers. 
 
 Meanwhile certificates calling for silver dollars 
 were prepared and issued by the Treasury, as 
 provided by law. They, being less bulky, ob- 
 tained considerable circulation, especially those 
 sent to places remote from ports of entry, where 
 they could not be used in paying customs dues 
 calling for coin. Neither the coins nor certificates 
 met with much favor from the banks in the large 
 cities. On November 12, 1878, fifty out of fifty- 
 eight banks, members of the New York clearing- 
 house, unanimously resolved that on and after the 
 resumption of specie payments, January 1, 1879, 
 they would receive silver dollars upon deposit 
 only upon special contract to withdraw them in 
 kind, and would prohibit payments to the clearing- 
 house in silver certificates, or in silver dollars,
 
 224 MONEY IN POLITICS. 
 
 excepting as subsidiary coins in small sums, say 
 under ten dollars. Three days later the associated 
 banks of* Boston passed similar resolutions. The 
 action of the banks in these two cities in discrimi- 
 nating against silver was severely condemned by 
 the advocates of silver remonetization, they having 
 predicted for the new coin a most hearty wel- 
 come ; but there was no way to control the action 
 of the banks. 
 
 Meanwhile the Treasury officials continued their 
 efforts to dispose of the coins, offering to takers 
 every inducement which the law would permit, 
 and to November 1, 1878, of $18,000,000 coined, 
 $5,000,000 was in circulation. To the same date 
 silver certificates had been issued to the amount 
 of $8,500,000, of which, however, there was in 
 circulation only $1,500,000, the remainder having 
 been paid into the Treasury in satisfaction of coin 
 obligations. 
 
 Public creditors, although objecting to the coins, 
 have generally accepted the certificates without 
 protest. These plans of getting the coins into 
 circulation have been continued to the present 
 time ; but with all the effort of public officials, 
 and the inducements offered, which have cost the 
 government large sums of money, only about 
 twenty-five per cent of the amount coined has 
 remained in circulation, the remainder lying in the 
 vaults of the Treasury.
 
 CIRCULATION OF THE SILVER DOLLAR. 225 
 
 By the retirement from circulation of the one 
 and two dollar notes, and the forced payment to 
 creditors of these coins, a considerably larger 
 amount could doubtless be kept in circulation, but 
 it has not been the policy of the Treasury or of 
 Congress to resort to such measures. 
 
 By an act approved July 12, 1882, Congress 
 prohibited any national bank from being a member 
 of any clearing-house in which silver certificates 
 were not receivable in settlement of balances, but 
 no bank has paid any attention to the act. The 
 United States Treasury itself is in effect a member 
 of the New York clearing-house, the Assistant 
 Treasurer in that city making his daily settle- 
 ments with the clearing-house banks through that 
 agency with great convenience to public business. 
 During the year ending November 1, 1883, this 
 officer paid to the association in excess of the 
 amount received by him, $181,728,065.15. This 
 entire amount was paid in gold coin or gold certifi- 
 cates, and Treasury officials can therefore but look 
 with leniency upon the disregard of the law by 
 the banks. 
 
 The demand for increased currency in the West 
 has offered favorable opportunities to put the sil- 
 ver dollar into circulation. But events have 
 proved that there is no necessity for issuing this 
 coin, and a continuance of its coinage can lead to 
 but one result, — the expulsion of the gold coins
 
 226 MONEY IN POLITICS. 
 
 from circulation, and the substitution of the silver 
 dollar as a unit of account, much to the benefit of 
 railroads and other corporations having outstand- 
 ing large amounts of bonded indebtedness, and 
 this event cannot Ion": be deferred.
 
 CHAPTER XXII. 
 
 MONETARY CONFERENCES. 
 
 Foreseeing the difficulties which would follow 
 the attempted introduction of the silver dollar 
 into the currency at the proposed fictitious valua- 
 tion, Congress, in the act of 1878, which again 
 authorized the manufacture of this coin, directed 
 the President to invite the governments of the 
 so-called Latin Union,* and such other European 
 nations as he might deem advisable, to join the 
 United States in a conference, with a view to the 
 adoption of a common ratio between gold and sil- 
 ver, " for the purpose of establishing internation- 
 ally the use of bi-metallic money and securing 
 fixity of relative value between these metals." 
 
 * France, Italy, Belgium, and Switzerland had, in 1865, 
 formed what was known as the Latin Union, entering into 
 an agreement by which the amount of silver to be coined each 
 year was fixed for each member of the Union. The coins 
 were to be of like character, and to be received without dis- 
 crimination throughout the Union, both on public and private 
 account. Greece joined the Union in 18G8. In 1874, by mutual 
 agreement, the coinage of silver was suspended throughout the 
 Union. 
 
 227
 
 228 MONEY IN POLITICS. 
 
 In pursuance of these directions, the President 
 invited European nations to send delegates to meet 
 the delegates of the United States in Paris in con- 
 ference for the purpose mentioned. The delegates 
 selected, and who went to that city from the United 
 States, were Hon. R. E. Fenton, Hon. W. S. 
 Groesbeck, Prof. Francis A. Walker, and Prof. 
 S. Dana Horton, gentlemen well known in politi- 
 cal and scientific circles. 
 
 The European nations invited who sent dele- 
 gates to the convention, were Austria-Hungary, 
 Belgium, France, Great Britain, Greece, Italy, 
 the Netherlands, Russia, Sweden, Norway, and 
 Switzerland. Germany, although invited, de- 
 clined to send. 
 
 The deleo-ates assembled in Paris August 10, 
 1878, in accordance with the invitations, and Mr. 
 Leon Say, the French Minister of Finance, was 
 elected president of the convention. 
 
 From the report of the proceedings it seems 
 that the several nations represented in the con- 
 vention were not favorably disposed to the re- 
 establishment of the bi-metallic system. 
 
 The delegation from Austria-Hungary, in which 
 country depreciated paper furnished almost exclu- 
 sively the circulation, defended the bi-metallic sys- 
 tem, but thought its adoption by that country at 
 that time could not possibly have much effect. 
 
 The delegation from Belgium, a member of the
 
 MONETARY CONFERENCES. 229 
 
 Latin Union, was very unfavorable to the pro- 
 posed bi-metallic system. 
 
 France, a leading state of the Union, declared 
 through her Finance Minister, the president of the 
 conference, that in suspending the coinage of sil- 
 ver in 1874 she did not incline to the single smld 
 standard, but, on the contrary, she occupied a 
 position in which she might await a favorable 
 moment to re-enter the system of the double 
 standard, but offered little encouragement for any 
 renewal of the double system at that time. 
 
 The delegates from Great Britain, which coun- 
 try had, since 1816, maintained an exclusively 
 gold standard, expressed a willingness, and even 
 a desire, that other nations should maintain a 
 bi-metallic system, and give to silver the greatest 
 possi'^ i nlation ; but in their own country 
 they said there was no disposition to use silver, 
 except as a subordinate coin of a limited legal 
 tender capaci y. 
 
 The delegates from Greece appeared to be in 
 sympathy with the views of France, and were 
 willing to remain in a state of expectancy, hoping 
 that other and greater nations might bring about 
 the r< -introduction of silver. 
 
 clegates from Italy, another member of 
 
 Jnion, took advanced ground in defence of 
 
 the bi-metaluc system, but the circulation of that 
 
 country being depreciated paper, the re-establish'
 
 230 MONEY IN POLITICS. 
 
 ment of silver would, they thought, be of but 
 little importance, there being no demand for silver 
 for circulation. 
 
 The delegates from Holland declared that while 
 England and Germany adhered to the gold mono- 
 metallism, that country, standing between them 
 both geographically and financially, must conform 
 to their action. 
 
 The delegates from Russia announced the inten- 
 tion of that country to reserve its decision upon 
 the question before the conference until such time as 
 it should be prepared to resume specie payment. 
 
 The delegates from the government- of Sweden 
 and Norway announced that they had been ap- 
 pointed with instructions to refrain from partici- 
 pating in any measures which might compromise 
 in any way the mono-metallic position of those 
 States. 
 
 The delegates from Switzerland appeared as the 
 uncompromising advocates of gold mono-metallism 
 for Europe. 
 
 The Empire of Germany was not represented. 
 At the second session the conference also invited 
 that government to participate in its deliberations. 
 This invitation, having been communicated to the 
 ambassador of Germany, was declined, that na- 
 tion having, after mature deliberation, but recently 
 established the single gold standard. 
 
 Upon the assembling of the convention Mr.
 
 MONETARY CONFERENCES. 231 
 
 Groesbeck, in behalf of the United States, stated 
 the position of our government, making the fol- 
 lowing humiliating confession : — 
 
 "In 1873, in a law which did not very accurately 
 carry out its purpose, silver was made to disap- 
 pear through inadvertence rather than intention- 
 ally, by an omission to say anything about it. As 
 a matter of fact, the silver standard w T as found to 
 have been suppressed. The example of Germany 
 had proved contagious ; no newspaper had dis- 
 cussed the question ; public opinion, "by no means 
 enlightened, was, so to speak, taken unawares, 
 and great surprise was felt when, a short time 
 after the law was passed, the change was fully 
 perceived." 
 
 He closed by proposing that the conference 
 should pronounce itself on the two following 
 propositions : — 
 
 " 1. It is the opinion of this assembly that it is 
 not to be desired that silver should be excluded 
 from free coinage in Europe and the United States 
 of America. On the contrary, the assembly be- 
 lieve that it is desirable that the unrestricted coin- 
 age of silver, and its use as money of unlimited 
 legal tender, should be retained where they exist, 
 and, as far as practicable, restored where they 
 have ceased to exist. 
 
 " 2. The use of both gold and silver as unlimited 
 legal tender money may be safely adopted ; first,
 
 232 MONEY IN POLITICS. 
 
 by equalizing them at a relation to be fixed by 
 international agreement ; and, secondly, by grant- 
 ing to each metal, at the relation fixed, equal 
 terms of coinage, making no discrimination be- 
 tween them." 
 
 These propositions were discussed, but did not 
 become the subject of a general vote. France, 
 instead of supporting the delegates from the 
 United States, as would naturally be expected of 
 a country having so large an interest in the rein- 
 statement of silver, joined with England in pre- 
 paring an answer to be made by the European to 
 the American delegates, which answer was adopted, 
 as follows : — 
 
 "The delegates of the European states repre- 
 sented in the conference desire to express their 
 sincere thanks to the government of the United 
 States for having procured an international inter- 
 change of opinion upon a subject of so much im- 
 portance as the monetary question. 
 
 " Having maturely considered the proposals of 
 the representatives of the United States, they 
 recognize, — 
 
 " 1 . That it is necessary to maintain in the world 
 the monetary functions of silver, as well as those 
 of gold, but that the selection for use of one or 
 the other of the two metals, or of both simultane- 
 ously, should be governed by the special position 
 of each state or group of states.
 
 MONETARY CONFERENCES. 233 
 
 " 2. That the question of the restriction of the 
 coinage of silver should equally be left to the dis- 
 cretion of each state or group of states, according 
 to the particular circumstances in which they may 
 find themselves placed, and the more so in that 
 the disturbance produced during the recent years 
 in the silver market has variously affected the 
 monetary situation of the several countries. 
 
 "3. That the differences of opinion which have 
 appeared, and the fact that even some of the states 
 which have the double standard find it impossible 
 to enter into a mutual engagement with regard to 
 the free coinage of silver, exclude the discussion 
 of the adoption of a common ratio between the 
 two metals." 
 
 In adopting these propositions, the delegates 
 from America were treated more as messengers 
 who had come across the water to submit a propo- 
 sition to the conference, than as members of the 
 conference and the representatives of the nation 
 which had invited it. The European members 
 withdrawing by themselves to vote upon the 
 proposition, left the delegates from the United 
 States to wait for an answer like criminals waiting 
 for the verdict. 
 
 This action closed the conference, no result of any 
 value having been obtained, and the delegates from 
 the United States returned home to thus report. 
 
 For some time the matter rested, but the con-
 
 234 MONEY IN POLITICS. 
 
 tinued depression of the price of silver kept the 
 subject under discussion, and in February, 1881, 
 the governments of France and the United States 
 extended joint invitations to the European nations 
 to again take part in a conference with a view to 
 establishing the use of gold and silver as interna- 
 tional money. 
 
 The conference was to examine and " adopt, for 
 the purpose of submitting the same to the govern- 
 ments represented, a plan and a system for the 
 establishment, by means of an international agree- 
 ment, of the use of gold and silver as bi-metallic 
 money, according to a settled relative value be- 
 tween these tw T o metals." 
 
 The conference assembled in Paris April 19, 
 1881. Delegates from the nations represented in 
 the previous conference were present, and in addi- 
 tion thereto were delegates from Germany, British 
 India, Denmark, and Portugal. The delegates 
 representing the United States of America were 
 Hon. William M. Evarts, Hon. Allen G. Thur- 
 man, Hon. Timothy O. Howe, and Prof. S. Dana 
 Ho r ton. 
 
 Mr. Magin, the French Minister of Finance, 
 was elected president of the conference. 
 
 The sentiment in favor of a re-establishment of 
 the bi-metallic system did not appear to have 
 gained since the previous conference. Many of 
 the delegates announced at once important res-
 
 MONETARY CONFERENCES. 235 
 
 ervations on their part. The delegates from 
 Germany stated that between 1865 and 1870 a 
 considerable quantity of gold had found its way 
 into the treasury of the German Empire, and that 
 that government had taken advantage of the 
 occasion to firmly establish its monetary system 
 upon the basis of a gold standard, and that this 
 reform was now in a very advanced state. They 
 also stated that there still remained in Germany 
 at most only 500,000,000 marks in silver thalers, 
 and declared that this reform had sensibly bettered 
 the condition of the monetary circulation in Ger- 
 many. Still, they had not failed to recognize the 
 import of the fall of silver which had since 
 occurred, and to relieve the Latin Union from 
 the apprehension that this amount of marks, in 
 old silver thalers, would be thrown upon the mar- 
 ket as silver bullion, Germany had, in May, 1879, 
 resolved to suspend its sales of silver, and they 
 had not since been resumed. The delegates, how- 
 ever, recognized without reserve that a rehabili- 
 tation of silver was to be desired, and hoped that 
 its free coinage might obtain in a certain number 
 of the most populous states represented by the 
 conference, but declared that Germany did not call 
 for a change of system, and did not find herself in 
 a position to concede the free coinage of silver. 
 Still, having a disposition to assist the other 
 powers which might unite for the purpose of a
 
 236 MONEY IN POLITICS. 
 
 free coinage of silver at a fixed ratio with gold, 
 Germany would agree for a period of some years 
 to abstain from all sales of silver, and during an- 
 other period of a certain duration Avould pledge 
 itself to sell annually only a limited quantity, so 
 small in amount that the general market would 
 not be glutted thereby, and it would, perhaps, 
 melt down and recoin 172,000,000 of old five- 
 mark and two-mark silver pieces at a ratio between 
 the two metals of about 1 to 15^, whereas the 
 ratio then was 1 to 14. Stripped of all technical 
 verbiage, the proposition was as if Germany 
 should say, " Gentlemen of the other powers, be- 
 lieving you to be in earnest in your proposition to 
 establish a fixed relative value between £old and 
 silver, and that value to be as 1 to 15^, Germany 
 offers her prayers for your success. She will not 
 herself return to the free coinage of silver, but 
 she will kindly hold 2,500 tons of old silver tha- 
 lers, worth now about 77 per cent of their face 
 value in gold, until, in accordance with your own 
 theories, by your free coinage of silver you will 
 force so much of that metal into new channels of 
 circulation, that its price will be enhanced, and a 
 fixed relation of equal value between gold and sil- 
 ver will be secured. When that time comes, we 
 will unload our silver on }'ou in exchange for gold 
 at a profit of 30 per cent ; and we are now pre- 
 pared to discuss the details of the execution."
 
 MONETARY CONFERENCES. 237 
 
 The delegate of Great Britain then followed, 
 staling that for more than sixty years the monetary 
 system of the United Kingdom had been with gold 
 as a single standard, that this system had satisfied 
 all the needs of the country, without giving rise to 
 those disadvantages which had shown themselves 
 elsewhere, and under other monetary regulations. 
 That the government of Her Majesty could not, 
 therefore, take part in a conference as support- 
 ing the principle of the double standard, but the 
 representatives of the United States at London 
 having declared that the powers represented at 
 the conference reserved to themselves entire liberty 
 of action after the discussion, the government of 
 Her Majesty considered that it would be lacking 
 in consideration towards friendly powers to persist 
 in its refusal to .send a delegate from the United 
 Kingdom. That thus he had come, and that he 
 stood ready to furnish any information desired 
 concerning the monetary system of England, but 
 he was not at liberty to vote upon any proposition 
 which might be submitted to the conference. 
 Subsequently he presented to the conference a 
 communication from the Bank of England to the 
 British government, setting forth to what extent 
 the bank could aid the proposed league of coun- 
 tries for the rehabilitation of silver, which was in 
 these words : — 
 
 "The Bank Charter Act permits the issue of
 
 238 MONEY IN POLITICS. 
 
 notes upon silver, but limits that issue to one- 
 fourth of the gold held by the bank in the issue 
 department. 
 
 " The purchase of gold bullion is obligatory and 
 unlimited ; the purchase of silver bullion is dis- 
 cretional and limited, the distinction being en- 
 forced by the necessity of paying notes in gold on 
 demand. 
 
 " The re-appearance of silver bullion as an asset 
 in the issue department of the Bank of England 
 would, as is understood by the Foreign Office 
 letter, depend entirely on the return of the mints 
 of other countries to such rules as would insure 
 the certainty of conversion of gold into silver, and 
 silver into gold. The rules need not be identical 
 with those formerly in force ; the ratio between 
 silver and gold, and the charge for mintage, may 
 both or either of them be varied, and yet leave 
 unimpaired the facility of exchange, which would 
 be indispensable to the resumption of silver pur- 
 chases by a bank of issue whose responsibilities 
 are contracted in gold. 
 
 " Subject to these considerations, the Bank 
 Court are satisfied that the issue of their notes 
 against silver, within the letter of the act, would 
 not involve the risk of infringing that principle of 
 it which imposes a positive obligation on the bank 
 to receive gold in exchange for notes, and to pay 
 notes in gold on demand.
 
 MONETARY CONFERENCES. 239 
 
 rf The Bank Court see no reason why an assur- 
 ance should not be conveyed to the monetary 
 conference at Paris, if their lordships think it 
 desirable, that the Bank of England, agreeably 
 with the act of 1844, would be always open to the 
 purchase of silver under the conditions above 
 described." 
 
 The proposition of the Bank Avas a worthy rival 
 of that of the delegates of Germany. In sub- 
 stance, the Bank proposed to accumulate silver in 
 its vaults, worth in gold considerably less than its 
 face value, so long as other countries than Great 
 Britain would leave unimpaired the facilities of 
 exchange, by which it could at any time obtain 
 gold therefor, par for par, at a handsome profit. 
 
 The delegate from Denmark stated that the 
 Danish government had no intention of abandon- 
 ing the single gold standard introduced into the 
 country a few years before, and that he had re- 
 ceived instruction on the part of his government 
 to abstain from all discussion of the manner in 
 which the bi-metallic system could be regulated. 
 
 The delegate from Portugal frankly stated that 
 the Portuguese monetary system then in force 
 would not allow of its entry into the bi-metallic 
 union then contemplated, and that he had no duty 
 except to report to his government any action 
 taken by the conference. 
 
 The delegate from Kussiu declared that the
 
 240 MONEY IN POLITICS. 
 
 Russian government reserved to itself entirely its 
 right of opinion upon the whole matter, and in 
 nothing renounced its liberty of action by reason 
 of any resolution of the conference. 
 
 The delegate from Greece stated that his coun- 
 try had adopted mono-metallism, and he would 
 not be able to join in any measure which might 
 lead to a change in that system. 
 
 The delegate from Austria-Hungary stated his 
 attitude to be one of friendly reserve, and that, if 
 he thought proper to take part in the discussion, 
 it would only be to express his personal opinions. 
 
 The delegates from Sweden and Norway an- 
 nounced that their countries had adopted a mone- 
 tary union based upon a single standard of gold, 
 but that they had been given permission to take 
 part in the discussions, and to report to their 
 respective governments. 
 
 The delegates of the Swiss Confederation an- 
 nounced that they should confine themselves to 
 hearing the reasons which had moved the govern- 
 ments of the United States and France in calling 
 the conference, but that they should not take part 
 in any decision, of whatever nature it might be, 
 without having first made a report to the Federal 
 Council, and having received subsequent instruc- 
 tions from that body. 
 
 Notwithstanding these dispiriting responses, and 
 especially those of the great powers of Germany
 
 MONETARY CONFERENCES. 241 
 
 and Great Britain, without whose aid there was 
 no hope of securing bi-metallism, the conference 
 proceeded to the discussion of the following propo- 
 sitions, which had been prepared for it by a com- 
 mittee of its own body : — 
 
 "1. Have the diminution and the great oscilla- 
 tions which have taken place in the value of silver, 
 chiefly within the last few years, been hurtful or 
 not to commerce, and consequently to general 
 prosperity ? 
 
 " Is it desirable that the relation of value be- 
 tween the two metals should possess a high degree 
 of stability? 
 
 " 2. Should the phenomena referred to in the 
 first part of the preceding question be attributed 
 to increase in the production of silver or to acts 
 of legislation? 
 
 "3. Is it or is it not probable that, if a large 
 group of states should agree to the free and un- 
 limited mintage of lawful coins of the two metals, 
 with full legal tender faculty at a uniform ratio 
 between the gold and silver contained in the mone- 
 taiy unit of each metal, a stability in the relative 
 value of these metals would be obtained, which, 
 if not absolute, would at least be very substantial? 
 
 " 4. If so, what measures should be taken to 
 reduce to a minimum the oscillations in the rela- 
 tive value of the two metals? 
 
 " For instance : —
 
 242 MONEY EST POLITICS. 
 
 " 1. Would it be desirable to impose upon privi- 
 leged banks of issue the obligation to receive, at 
 a fixed price, any gold and silver bullion which 
 the public might offer? 
 
 "2. How could the same advantage be secured 
 to the public in countries where privileged banks 
 of issue do not exist? 
 
 "3. Should coinage be gratuitous, or at least 
 uniform, for the two metals in all countries? 
 
 " 4. Should there be an understanding that in- 
 ternational trade in the precious metals should be 
 left free of all restraint? 
 
 "5. In adopting bi-metallism, what should be 
 the ratio between the weight of pure gold and of 
 pure silver contained in the monetary units?" 
 
 On these propositions a long discussion ensued, 
 eliciting much valuable information, but it seemed 
 to be generally conceded that without the co- 
 operation of Germany and Great Britain, which 
 nations had been conspicuous in declining all 
 propositions with a view of countenancing any 
 hopes on their part of returning to the double 
 standard, the convention must ultimately fail of 
 its purpose. 
 
 As indicating more definitely the purpose of 
 France and the United States, Mr. Evarts, in 
 behalf of the delegates of those two countries, 
 submitted, on the last day of the session, the fol- 
 lowing declaration : —
 
 MONETARY CONFERENCES. 243 
 
 "The delegates of France and of the United 
 States, in the name of their respective govern- 
 ments, make the following declarations : — 
 
 "1. The depreciation and great fluctuations in 
 the value of silver, relatively to gold, which of 
 late years have shown themselves, and which con- 
 tinue to exist, have been, and are, injurious to 
 commerce and to the general prosperity, and the 
 establishment and maintenance of a fixed relation 
 of value between silver and gold would produce 
 most important benefits to the commerce of the 
 world. 
 
 "2. A convention, entered into by an important 
 group of states, by which they should agree to 
 open their mints to free and unlimited coinage of 
 both silver and gold, at a fixed proportion of 
 weight between the gold and silver contained in 
 the monetary unit of each metal, and with full 
 legal tender faculty to the money thus issued, 
 would cause and maintain a stability in the relative 
 value of the two metals suitable to the interests 
 and requirements of the commerce of the world. 
 
 " 3. Any ratio, now or of late in use by any 
 commercial nation, if adopted by such important 
 group of states, could be maintained ; but the 
 adoption of the ratio of 15^ to 1 would accomplish 
 the principal object with less disturbance in the 
 monetary systems to be affected by it than any 
 other ratio.
 
 244 MONEY IN POLITICS. 
 
 " 4. Without considering the effect which might 
 be produced toward the desired object by a lesser 
 combination of states, a convention which should 
 include England, France, Germany, and the United 
 States, with the concurrence of other states, both 
 in Europe and on the American Continent, which 
 this combination would assure, would be adequate 
 to produce and maintain throughout the commer- 
 cial world the relation between the two metals 
 that such convention should adopt." 
 
 After the conference had held but thirteen ses- 
 sions, upon the suggestion of the two governments 
 of France and the United States, at whose instance 
 it w T as convened, it adjourned to meet again April 
 12, 1882. 
 
 In submitting the proposition of adjournment, 
 Monsieur De Normandie, a delegate of France, 
 said : " We cannot disguise from ourselves that 
 the observations just now submitted to you tend 
 to nothing else than to establish, at least virtually, 
 that nothing has been done here but an imperfect, 
 useless, empty work." 
 
 No further action was taken by the convention 
 at this session, and, so far as known, it did not 
 reassemble at the date appointed ; nor have the 
 delegates from the United States ever submitted 
 any report on the conference held. 
 
 Had the proposition submitted by Mr. Evarts 
 on behalf of France and the United States been
 
 MONETARY CONFERENCES. 245 
 
 accepted, even as a unanimous expression of the 
 opinion of the entire conference, it could hardly 
 have received the sanction of the United States 
 government, as it fixed the ratio between sjold and 
 silver at 1 to 15i. The Great embarrassment 
 under which the government has labored in the 
 coinage of silver since 1878 has been the lack of 
 intrinsic value in that metal, eighteen ounces bein^ 
 hardly equal in value to one ounce of gold, al- 
 though by law sixteen ounces of it are declared 
 to be equal to one of gold, and any proposition 
 looking to a further reduction of the lawful equiv- 
 alent would hardly be sustained, as, in such an 
 event, all our standard silver dollars would be 
 undervalued, and would be either melted down for 
 bullion or shipped from the country. A new 
 coinage of silver would result, having a dollar for 
 the unit of still less value than the present one, 
 which would effectually drive all the gold from 
 the country and lead to endless complications, not 
 to say repudiation and dishonesty. France could 
 hardly consent to any other ratio than 1 to 15.V, as 
 the immense amount of silver already coined and 
 held in that country has been coined at that ratio. 
 As the matter now stands silver is not coined 
 by any European power without restrictions, and 
 the effort of this government to secure unrestricted 
 coinage of that metal has proved so futile, there is 
 little hope of the re-establishment of unlimited
 
 246 MONEY IN POLITICS. 
 
 silver at any ratio, unless happily the price of sil- 
 ver bullion should advance so as to make the ratio 
 what it was previous to the great depression of 
 1874. So long as this country continues the pur- 
 chase of silver and its coinage, even to the present 
 limited amount, the nations of Europe, now bur- 
 dened with silver bullion, cannot but regard our 
 policy as one entirely in their interests. Should 
 the government cease the further coinage of silver, 
 European nations would no longer have a hope 
 that the consumption of silver in this country for 
 monetary purposes would be sufficient to restore 
 its old value, and they would be compelled to re- 
 sort to some means to secure the use of silver as 
 money, or to suffer the loss which must result in 
 disposing of it for bullion at present rates. The 
 government of the United States, however, appears 
 to be still hopeful that in some way foreign nations 
 may come to its aid, and help it out of the dilemma 
 into which unwise legislation has plunged it. At 
 the last session of Congress an additional appropri- 
 ation of $10,000 was made to enable the President 
 to again confer with foreign powers, with a view 
 to establishing a fixed ratio between silver and 
 gold. Should a conference for this purpose be 
 held, whatever may be its result, it is hoped that 
 the delegates appointed will at least make a re- 
 port, setting forth the results of their labors, that 
 the country may know with what favor the renewed 
 proposition has been received.
 
 CHAPTER XXm. 
 
 THE TRADE DOLLAR. 
 
 Among the documents transmitted by the Sec- 
 retary of the Treasury to Congress in 1870, with 
 the draft of the bill proposing a revision of the 
 coinage acts, was one by Prof. E. B. Elliot, of 
 the Treasury Department, containing an elaborate 
 discussion of the questions involved. In place of 
 the then existing legal tender dollar he suggested 
 the issue of a commercial dollar of nine-tenths 
 fineness, and containing 25 grains of pure silver, 
 being almost the exact equivalent of the silver 
 contained in the old Spanish-Mexican pillar dol- 
 lar, established in 1704 by a proclamation of 
 Queen Anne, and declared to contain 38G£ grains. 
 The draft of the bill transmitted, however, con- 
 tained no provision for such a coin, but it did 
 provide for the coinage, on government account, of 
 a silver dollar of 384 standard grains, being equal 
 to the weight of one dollar of fractional coins, 
 instead of the existing dollar of 412?, grains, and 
 
 247
 
 248 MONEY IN POLITICS. 
 
 this provision remained in the bill as it first passed 
 the Senate, January 9, 1871 — the suggestion of 
 coining a piece for purely commercial purposes, 
 and not for circulation, receiving little attention. 
 The House failed to pass the bill in any form that 
 session. Secretary Boutwell, however, in his 
 annual report for 1872, renewed his recommenda- 
 tions for the passage of the coinage-revision bill, 
 and suggested such alterations as would prohibit 
 the coinage of silver as a general currency for 
 the country, and also suggested that authority be 
 given for the coinage of a silver dollar that should 
 be as valuable as the Mexican dollar, to be fur- 
 nished at cost ; and he added that the Mexican 
 dollar was used in trade with China, and was sell- 
 ing at a premium of eight per cent over the actual 
 expense of coining. 
 
 In May, 1872, a new Congress having convened, 
 the House took up the bill and passed it as origi- 
 nating in that body. The bill still provided for 
 the coinage of a dollar of 384 standard grains. 
 On January 7, 1873, Mr. Sherman reported the 
 bill from the Senate finance committee, with cer- 
 tain amendments, of which by far the most impor- 
 tant was the proposition to strike out the authority 
 to coin a dollar for circulation, but in place of 
 the one proposed to authorize a coin for only 
 commercial purposes, to be coined for private 
 parties at cost. He stated in explanation that
 
 THE TRADE DOLLAR. 249 
 
 this dollar had been adapted mainly for the benefit 
 of the people of California and others engaged in 
 trade with China. The amendment was accepted 
 by the House, and the bill thus amended became 
 a law February 12, 1873. The amendment was 
 as follows : — 
 
 " That any owner of silver bullion may deposit 
 the same at any mint, to be formed into bars, or 
 into dollars of the weight of 420 grains troy, desig- 
 nated in this act as trade dollars . . . and the 
 charges for converting standard silver into trade 
 dollars ; for melting and refining, when bullion is 
 below standard ; for toughening, when metals are 
 contained in it which render it unfit for coinage ; 
 for copper used for alloy, when the bullion is above 
 standard ; for separating the gold and silver, when 
 these metals exist together in the bullion ; and for 
 the preparation of bars, shall be fixed from time 
 to time by the Director (of the Mint), with the 
 concurrence of the Secretary of the Treasury, so 
 as to equal, but not exceed, in their judgment, the 
 actual average cost to each mint and assay office, 
 of the material, labor, wastage, and use of ma- 
 chinery employed in each of the cases aforemen- 
 tioned." 
 
 The name of the coin, and the manner in which 
 it was to be issued, confirmed the oft-repeated 
 assertions of its friends, that the coin was for com- 
 mercial purposes onlv, and not intended for circu-
 
 250 MONEY IN POLITICS. 
 
 lation. Through what appears to be an oversight, 
 however, another section of the same law, in 
 declaring what should be the silver coins of the 
 United States, included the trade dollar, and 
 made that coin, like other silver coins, a legal 
 tender for any amount not exceeding five dollars 
 in any one payment. 
 
 Immediately upon the passage of the act, 
 designs for the new coin were prepared and ac- 
 cepted. On the one side was to be a left-handed 
 view of the goddess of liberty, and on the other 
 side the name of the coin, with the announce- 
 ment that the piece contained 420 grains of sil- 
 ver nine-tenths fine, surrounded with the words 
 "The United States of America." Arrange- 
 ments for its coinage beino; concluded, holders of 
 silver bullion were notified that, upon presentation 
 of it at the United States Mint in either Phila- 
 delphia or San Francisco, they could obtain these 
 coins in return, upon additional payment of 1| 
 cents for each piece, the estimated cost of manu- 
 facture. 
 
 The certificate the coin bore as to its weight and 
 fineness was accepted in China and Japan without 
 farther assaying or weighing of the metal, and 
 the form of the metal being adapted for circula- 
 tion, the coin created a new market for silver, and 
 readily sold at a considerable advance above other 
 forms of silver bullion. As the coin would bring
 
 THE TRADE DOLLAR. 251 
 
 for exportation more than a dollar in gold, there 
 was no object in putting it into circulation in this 
 country. But owing to the depreciation in the 
 value of silver, which soon followed, it became 
 of less value than the paper dollar, and eventually 
 less than that of the gold dollar. 
 
 The holders of bullion then found it more profit- 
 able to put the coin into circulation in this coun- 
 try than to export it, and suddenly, as if by magic, 
 the coins appeared in all parts of the country, to 
 the surprise of nearly everybody, as even the 
 authority for its coinage was not generally known. 
 It soon came into competition with the other 
 dollar authorized by the same act, and holders 
 were perplexed beyond measure to understand 
 why the former coin, having 1\ grains more of 
 silver in it than had the latter, should be a legal 
 tender for five dollars onl} r , while the latter was 
 an unlimited tender in the payment of all debts. 
 The confusion Avas increased when they ascer- 
 tained that the government sold the former in any 
 amount, with only cost of coinage added, while 
 it was restricted in the coinage of the latter, and 
 compelled to sell it at its face value in gold, re- 
 gardless of the price of silver bullion. Appeals 
 for information concerning this financial puzzle 
 came to the Treasury from all parts of the coun- 
 try, not unfrequently accompanied by a statement 
 that the information was desired to settle a wager
 
 252 MONEY IN POLITICS. 
 
 as to the relative worth of the two coins. A full 
 explanation was embodied in one reply, and to 
 save labor this reply was printed, and thereafter 
 sent to all inquirers. The letter was dated Sep- 
 tember 1, 1878, and was signed by the Secretary. 
 The following extract fully explains the character 
 and circulation of the coin : — 
 
 "As its name indicates, the purpose of this coin 
 was for trade, not for circulation, though by classi- 
 fying it with other silver coins, the law made it a 
 legal tender to the amount of five (5) dollars in 
 any one payment. 
 
 " At the time of the passage of the act the ac- 
 tual value of this dollar, including the charge of 
 \\ cents for coinage, was a little more than $1.04 
 in gold. 
 
 "Under such circumstances there could be no 
 object for the owner to put the coins into circula- 
 tion, and consequently they were exported mostly 
 to China, where, from lack of a circulating me- 
 dium, these pieces, convenient in size, and bearing 
 the guaranty of a great government as to their 
 weight and fineness, obtained an extensive circula- 
 tion, and created a market for the silver of the 
 Pacific States, as intended by the act. 
 
 "After a few months, however, an unforeseen 
 depreciation in the value of silver bullion occurred ; 
 and in the early part of 187G this depreciation 
 reached such a point that one dollar in gold would
 
 THE TRADE DOLLAR. 253 
 
 purchase more than the necessary amount of silver 
 for a trade dollar, and pay for its coinage. 
 
 " Under such conditions, dealers in bullion found 
 a profit in putting trade dollars into circulation at 
 par in the Pacific States, where the currency was 
 upon a gold basis ; but the coin being a legal ten- 
 der for only five (5) dollars, its circulation was 
 necessarily limited in amount as well as restricted 
 in locality. 
 
 rt The people of the Pacific States, however, 
 objected to its use at all for circulation, and the 
 attention of Congress having been called to the 
 matter, on the 8th of May, 187G, Hon. Samuel J. 
 Randall of Pennsylvania introduced into the 
 House a bill, the third section of which repealed 
 the legal tender quality of these coins. 
 
 " On the 10th of June following, Hon. S. S. 
 Cox of Xew York reported the measure to the 
 House, urging its adoption. 
 
 "No objection was raised, and it became a law 
 July 22, 187G, without modification or an opposing 
 voice or vote in either House, and is as follows : — 
 
 "'That the trade dollar shall not hereafter be a 
 legal tender; and the Secretary of the Treasury is 
 hereby authorized to limit, from time to time, the 
 coinage thereof to such an amount as he may deem 
 sufficient to meet the export demand for the same.' 
 
 "Up to that time (excepting a few days), and 
 for several months thereafter, the trade dollar cost
 
 254 MONEY IN POLITICS. 
 
 more than a paper-currency dollar, and conse- 
 quently none of the coins got into circulation in 
 other than the Pacific States. 
 
 "Owing to the appreciation of the paper cur- 
 rency, however, in the fall of 1877, the trade 
 dollar became of less value than the paper dollar ; 
 and in December of that year a large number of 
 them were put into circulation, at their nice 
 value, at a profit to the owners of the bullion." 
 
 "Apprehensive of such misuse of the coins, on 
 the 15th of October in that year I ordered the 
 discontinuance of their coinage at the mint at 
 Philadelphia, and four days later at the other 
 mints. Meanwhile the Department, in reply to 
 numerous inquiries, had uniformly stated that the 
 trade dollar possessed only a commercial value, 
 depending upon the price of silver bullion. 
 
 "It will be seen that the coins were put into 
 circulation months after the passage of the act 
 taking from them their legal tender character, and 
 mainly after their coinage had ceased. 
 
 "But in their use as money, the Department has 
 never had any interest or derived any profit. For 
 the expense of their coinage the owner of the 
 bullion reimbursed the government, and this ended 
 the connection of the government with the transac- 
 tion. At no time and on no account have they 
 ever been received, or paid out, by the Treasury ; 
 and it is a cause of regret that so manv of our
 
 THE TEADE DOLLAR. 255 
 
 people should have accepted them at their face 
 value, thus enabling their owners to put them into 
 circulation at a considerable profit. 
 
 "Under date of July 25, 1878, the Director of 
 the Mint published tables from which the value of 
 these coins can be ascertained, and the terms on 
 which they are received at the mints. He does 
 not advise any one to dispose of them at such 
 rates. The law under which the Department buys 
 bullion with which to coin the standard silver dol- 
 lar, requires the same to be bought at the market 
 price, and it can purchase trade dollars only as 
 bullion. Possibly in time these coins will find a 
 ready market in China at nearly or quite their face 
 value, for circulation as coin." 
 
 The repeal of the law giving this coin a legal 
 tender quality only added to the mystery of its 
 existence. Congress could but recognize the il- 
 logical position the coin occupied in the currency 
 of the country. Although containing more silver 
 than the standard dollar, it would not be received 
 in payment of public dues, nor could the holder 
 lawfully pay with it any private debt. 
 
 There have been coined 35,959,300 of these 
 pieces, of which about 6,000,000 probably re- 
 main in this country. To finally dispose of the 
 troublesome coins the House of Representatives, 
 during the present Congress, has passed an act 
 authorizing their redemption at par in gold, and
 
 256 MONEY IN POLITICS. 
 
 directing their recoinage into standard dollars. 
 This would doubtless relieve the circulation of 
 the country from their undesired presence ; but 
 the plan offers to foreign holders of these coins 
 ten per cent more than would be paid to holders 
 of silver bullion in other forms, and such a per- 
 centage of profit would hardly fail to bring back 
 to the country all the trade dollars yet in exist- 
 ence. And after settling with foreign holders, at 
 a profit to them of ten per cent, the government 
 proposes to take out about eight per cent of the 
 silver for itself, and then to sell the coins again 
 to the public at par in gold ! The act sleeps in 
 the Senate, and common honesty demands that 
 the sleep shall be the sleep of death. 
 
 The purpose and the result of the issue of this 
 coin affords but another example of the fallacy of 
 legislative acts to improve upon natural commer- 
 cial laws. Authorized as an avowed agency to 
 assist mining industries, the coin at first filled its 
 mission satisfactorily, but events which legislators 
 could not foresee have completely changed its 
 original character and object, and has brought to 
 its holders loss, annoyance, and confusion. The 
 government should never have embarked in the 
 enterprise. It departed from its proper functions 
 to legislate in the interests of a few persons, with 
 the result we have seen. It might as well upon a 
 proper consideration have placed its stamp upon
 
 THE TRADE DOLLAR. 257 
 
 the ends of a pork-barrel for the pork-packer in 
 Chicago, certifying that tlie barrel contained the 
 lawful amount and quality of mess pork. To 
 complete the illustration, it might then declare the 
 barrel to be a legal tender within a prescribed 
 limit ! 
 
 What action can be taken to get rid of the 
 trade dollars without doing injustice to innocent 
 persons is a question whose solution Congress 
 has thus far vainly endeavored to solve. Mean- 
 while speculators are depressing and raising their 
 price as may suit their purposes. The last of 
 their schemes noted is to pass the coins in Am- 
 sterdam to emigrants leaving for America. Great 
 therefore will be the surprise of the worthy Hol- 
 lander when, upon tendering his silver to our 
 customs officials, he finds that the great Ameri- 
 can Caesar does not recognize the coin, although 
 bearing his image and superscription.
 
 CHAPTER XXIV. 
 
 OTHER MONEYS. 
 
 Minor Coins. The act of April 2, 1792, au- 
 thorized the coinage of copper cent and half-cent 
 pieces, of 264 and 132 grains respectively. These 
 pieces were not legal tender for any amount or 
 made redeemable upon any terms. To those who 
 wished for them, they were sold at the mints at 
 their face value for gold or silver. Consequently 
 no greater amount got into circulation than was 
 required for convenience in making change, for 
 which purpose they were readily accepted. In 
 the following year the weight of the cent piece 
 was reduced to 208 grains ; in 1796, to 168 grains, 
 the half-cent suffering a corresponding reduction. 
 The coinage of both pieces was discontinued by 
 law in 1857, to which time they were the only 
 authorized coins in circulation of less value than 
 the silver half-dime. 
 
 At the same time, to take the place of these 
 worthy coins, a so-called nickel cent was author- 
 
 258
 
 OTHER MONEYS. 259 
 
 izecl, to weigh 72 grains, and to be composed of 
 88 per cent copper and 12 per cent nickel. This 
 piece was smaller than its predecessor and less 
 cumbersome, but was apt to be mistaken for the 
 gold quarter-eagle, being of nearly the same diam- 
 eter and thickness. It had no legal tender quality, 
 and was not redeemable in any other money ; but 
 it answered the purpose for which it was coined as 
 well, but no better, than its predecessor. 
 
 By the act of April 22, 1864, the coinage of 
 this nickel cent was prohibited, and in its place 
 one and two cent bronze pieces were authorized, 
 to weigh respectively 48 and 96 grains, to be 
 composed of 95 per cent copper and 5 per cent 
 tin and zinc, and to be a legal tender in any pay- 
 ment for 10 cents and 20 cents respectively. 
 Their issue was prohibited by the act of February 
 12, 1873. 
 
 By the act of March 3, 1865, a three cent nickel 
 piece was authorized, to weigh 30 grains, to be 
 composed of 75 per cent copper and 25 per cent 
 nickel, and to be a legal tender in any payment to 
 the amount of 60 cents. The same act reduced 
 the legal tender limit of the one and two cent 
 coins to four cents. 
 
 By the act of May 16, 1866, a live cent nickel 
 piece was authorized, to weigh 77.16 grains, to be 
 composed of 75 per cent copper and 25 per cent 
 nickel, to be a legal tender in any payment to the
 
 2G0 MONEY IN POLITICS. 
 
 amount of one dollar, and to be redeemed by the 
 Treasury in national currency when presented in 
 sums of one hundred dollars. 
 
 By the act of March 3, 1871, the redemption in 
 lawful money of all the above coins is provided 
 for when presented in sums of twenty dollars. 
 
 It is doubtful if any case has arisen in which 
 any advantage has arisen from the legal tender 
 quality of these coins, and no harm or good has 
 therefore come from this endowment. The coins 
 were however designed only for the convenience 
 of the public in rt making change," and only this 
 purpose was served until they Avere made redeem- 
 able in lawful money. Taking advantage of that 
 provision, banks, street-car companies, bake-shops, 
 and others receivimr large amounts of minor coins 
 have turned these coins into the Treasury in ex- 
 change for lawful money ; and the Treasury has 
 been compelled thus to receive them and then to 
 reissue them to persons needing them, thus throw- 
 ing upon the government a labor and expense 
 which should be borne by the parties in interest. 
 
 Fractional Silver. Half-dollar, quarter-dol- 
 lar, dime, and half-dime pieces were authorized 
 by the act of April 2, 1792. They were of the 
 same fineness as the dollar, and of relative weight. 
 They were a full legal tender in payment of debts, 
 and their coinage continued after 1809, when the 
 coinage of the dollar ceased ; but they were mainly
 
 OTHER MONEYS. 261 
 
 exported, depreciated paper constituting the circu- 
 lating medium of the country. 
 
 Upon the reduction in the weight of gold coins 
 in 1837, silver coins were undervalued, and the 
 country consequently left without any silver for 
 change, a want partly supplied by worn Mexican 
 pieces. To correct this evil the act of February 
 21, 1853, provided that the weight of these frac- 
 tional pieces should be reduced, so that one- dol- 
 lar in value should weigh 384 grains, instead of 
 41 2i, making a dollar worth considerably less than 
 one dollar in gold, an intentional over-valuation, 
 in order that the pieces might not be melted down 
 or exported. The pieces were then no longer 
 coined for depositors, but on government account, 
 being issued in exchange for gold, par for par, the 
 profit in the coinage being turned into the public 
 treasury. They were also made a legal tender 
 only for sums not exceeding five dollars. Subse- 
 quently a three-cent piece and a twenty-cent piece 
 were authorized, but the authority for their issue 
 has been discontinued. 
 
 By an act approved June 9, 1879, the redemp- 
 tion in lawful money of the silver coins of smaller 
 denominations than one dollar was authorized, and 
 the coins made a lc^al tender for all sums not 
 exceeding ten dollars. Unexpected results fol- 
 lowed the provision for redeeming these coins. It 
 was supposed that the excess likely to be pre-
 
 262 MONEY IN POLITICS. 
 
 sented for that purpose would be insignificant ; 
 and, could the redemption have been limited to the 
 coins then in the country, such would have been 
 the result. 
 
 But while the country was using fractional paper 
 currency the fractional silver had been largely 
 exported to Canada and the South American 
 States, in which places it circulated at its bullion 
 value. As soon as the government offered to re- 
 deem the coins at par in gold or its equivalent, 
 the holders in those countries lost no time in send- 
 ing in their coins for redemption, realizing from 
 the exchange a profit of not less than 25 per cent. 
 The amount of about $28,000,000 of these coins 
 has been redeemed and now lie in the Treasury 
 vaults. 
 
 Not only has the government been thus over- 
 reached, but, as in the case of the minor coins, the 
 public Treasury has become a distributing agent, 
 but working in this case for the benefit of the 
 banks, dime museums, and travelling shows in 
 redeeming and redistributing these coins. As the 
 coins are convertible at sight into full legal tender 
 money, the limit of their legal tender quality 
 becomes of no importance. 
 
 Clearing-house Certificates. By the act of 
 June 8, 1873, the Treasury was authorized to re- 
 ceive United States notes on deposit from national 
 banks in sums of not less than ten thousand dol-
 
 OTHER MONEYS. 263 
 
 lars, and to issue certificates therefor, receivable 
 at the clearing-house in payment of balances, 
 the certificates to be payable on demand, and 
 no expansion or contraction of the currency to 
 arise from the transaction. Under this authority 
 banks employ the public Treasury to keep them in 
 notes of denominations which may suit their con- 
 venience, turning into the Sub-Treasury one day 
 worn notes of undesirable denominations, obtain- 
 ing certificates therefor to be redeemed the next 
 day in new notes of desired denominations, com- 
 pelling the Sub-Treasury offices to make the 
 exchange in Washington, at the expense of the 
 government. No other advantage in the plan has 
 yet become evident. 
 
 Silver Certificates. These certificates, here- 
 tofore mentioned, are issued upon deposits of silver 
 dollars held in the Treasury for their redemption 
 upon presentation. These are receivable by the 
 government for any public dues, but arc not a 
 legal tender for private debts. Thus far they 
 have circulated at a ffold valuation ; and so long 
 as the Treasury redeems any excess at a gold rate, 
 they cannot fall to their true value. 
 
 Gold Certificates. These certificates are 
 issued upon the deposits of gold in the Treasury, 
 and are redeemable in gold at sight. They are 
 receivable by the government only for customs 
 dues, and are not a legal tender for private debts.
 
 264 MONEY IN POLITICS. 
 
 The Treasury has, without authority of law, re- 
 cognized them as lawful reserves for national 
 banks ; and for this purpose they are ever in de- 
 mand. In any stringency, gold can be obtained 
 for them at sight, and the banks can thus have 
 available gold without cumbering their vaults 
 with the heavy metal, the government kindly 
 performing that function for them. Excepting for 
 the resumption fund of $100,000,000, the Treas- 
 ury can issue certificates for any gold it owns.
 
 CHAPTER XXV. 
 
 THT PAK OF EXCHANGE. 
 
 By the r ng of the British mint in 1707 the 
 pound sterling silver was valued at 4.44$ Spanish 
 silver dollars, as they were then current in the 
 American colonies. At that time the dollar con- 
 tained 386 } grains of pure silver. Subsequent 
 reductions were made in the legal weight of this 
 piece, until the coinage act of 1792 fixed the 
 weight at 371£ grains of such silver, at which it 
 has since remained. 
 
 The silver pound sterling, which in 1707 
 contained 1719.4 grains of pure silver, remained 
 unchanged until 1816, when Great Britain demon- 
 etized silver, and declared in effect that the pound 
 sterling or the sovereign should consist of 113 + 
 grains of pure gold. Of course the value of this 
 pound expressed in silver dollars would thereafter 
 vary in accordance with the unceasing fluctuations 
 in the relative commercial value of the two metals. 
 But an official proclamation had declared the 
 pound sterling equal to $4.44$ ; and in all commcr- 
 
 265
 
 266 MONEY IN POLITICS. 
 
 cial dealings this rating continued to be mminally 
 recognized until 1834, although the amount in 
 dollars, where pounds were called for, would be 
 calculated at an entirely different rate, and at a 
 rate which changed from day to day. 
 
 In 1834 the o;old dollar became the unit of 
 value in the United States, and that unit bore 
 fixed relation to the unit of value in Great Britain, 
 both being of the same metal, but the pound ster- 
 ling still continued to be rated at $4.44$. In 1837 
 the amount of pure gold in the dollar Avas fixed at 
 23.22 grains. The number of these dollars in a 
 pound sterling would therefore be 4.8665, or in' 
 other words the value of the pound was $4.8665, 
 being 9£ per cent above the recognized value of 
 $4.44*. 
 
 Until January 1, 1873, the valuation of the 
 pound sterling at $4.44$ continued to find place in 
 all transactions involving the currencies of the 
 two countries. The school arithmetics taught the 
 value of a pound sterling to be $4.44$, but that 
 the true " par of exchange " was found in this 
 country by adding to that value 9^ per cent of 
 itself, and that the commercial value would then 
 be found by adding to or subtracting from this 
 result the small percentage fixed by dealers, vary- 
 ing from time to time according to the rates of 
 insurance, interest, and transportation, and the 
 demand for drafts on London payable in pounds
 
 THE PAR OF EXCHANGE. 2G7 
 
 sterling. Thus for 1G6 years the value of the 
 pound sterling Avas estimated in accordance with 
 the proclamation issued by Queen Anne in 1707, 
 although meanwhile the silver dollar had twice 
 been changed in weight, and both dollar and 
 pound had been changed from silver to gold. 
 
 This undervaluation of the pound sterling 
 caused in commercial transactions only an incon- 
 venience of calculation ; nobody gained anything 
 by it, or lost anything except additional time con- 
 sumed in arithmetical calculations. 
 
 In computing duties on imported goods from 
 England levied at a certain percentage upon their 
 value at the place of shipment, customs officers, 
 however, found that, reckoning the pound sterling 
 at $4.44*, the government was not obtaining the 
 revenue which the law evidently contemplated, 
 and at the same time was discriminating in favor 
 of England as against other nations sending their 
 goods to this country. 
 
 In 1842 Congress imposed a high tariff on im- 
 ported goods, and, with a, view of equalizing rates 
 among the different countries from which the 
 goods came, determined to readjust the value of 
 the pound sterling, known to be underrated. For 
 this purpose an English sovereign was tested at 
 the; mint, and upon the result of the test Congress 
 declared the value of that pied' to be $4.84. This 
 erroneous rating, evidently based upon the weight
 
 268 MONEY IN POLITICS. 
 
 of a piece somewhat worn, gave more duties to 
 the government, more protection to " infant indus- 
 tries," and to the importer of dutiable goods from 
 England another rating of the pound to confuse 
 his reckonings. 
 
 To relieve the importers and others in any way 
 interested in foreign exchanges, Congress in 1872 
 enacted a law declaring that the value of foreign 
 coins, as expressed in the money of account of the 
 United States, should be that of the pure metal of 
 such coin of standard value, and that the stan- 
 dard coins in circulation of the various nations of 
 the world should be estimated annually by the 
 Director of the Mint, and proclaimed on the first 
 day of January, by the Secretary of the Treasury ; 
 and that in all payments to or by the Treasury, 
 where it became necessary to compute the value 
 of the pound sterling, such pound should be 
 deemed equal to $4.8665, and the same value 
 should apply in appraising merchandise imported 
 where the value was expressed in pounds or sov- 
 ereigns, and that this valuation should be the par 
 of exchange between the United States and Great 
 Britain. 
 
 The first proclamation of value of foreign coins 
 was issued by the Secretary, January 1, 1873, and 
 immediately thereafter quotations of sterling ex- 
 change were based upon the new value of the 
 pound.
 
 THE PAR OF EXCHANGE. 2G9 
 
 This value was found by dividing the number of 
 grains of pure gold in a standard sovereign by the 
 number of sueh grains in a standard dollar, — a 
 process so simple that the delay of forty years in 
 reaching the result seems unaccountable. 
 
 England, however, had been in this matter 
 equally as dilatory as the United States. In all 
 transactions involving dollars, the pound was rated 
 at $4,443, and the result corrected by the per- 
 centage necessary to obtain the true value. Pub- 
 lished quotations of the value of American secu- 
 rities in London assumed that undervaluation of 
 the pound as the correct par of exchange ; and to 
 the extent of the undervaluation they were mis- 
 leading, except to the comparatively few who 
 knew of the error so persistently maintained. 
 
 In 1873 the Secretary of the Treasury commu- 
 nicated with the proper representative of the 
 Stock Exchange in London, advising him of the 
 reform in this country, by which the pound ster- 
 ling had come to be reckoned and quoted at its 
 true value, and suggested that a corresponding 
 change be made in the usage of the London Stock 
 Exchange, that the value of American securities 
 might be correctly published in that city. 
 
 The matter was favorably presented to the Ex- 
 change, but it met with little favor. Theerror was 
 so well understood, it was alleged, that no change 
 was necessary or desirable ; but finally, in the
 
 270 MONEY IN POLITICS. 
 
 nature of a compromise, the Exchange adopted 
 $5 as the value of the sovereign, upon which par 
 future quotations of American securities would be 
 published, and peremptorily closed the discussion, 
 perhaps fearing an inquiry as to what process of 
 reasoning had been used to obtain the result. 
 
 To ascertain the true value in London of secu- 
 rities calling for dollars, the published quotations 
 of the Stock Exchange in that city must now be 
 reduced in the ratio of 500 to 486.65 ; but, to 
 obtain the commercial value of such securities, the 
 current exchange value of the pound should be 
 substituted in place of its legal value. 
 
 THE END. 
 

 
 S£l«i!lll[iMii?l^. GI0NAL LIBRARY FACILITY 
 
 AA 001023 091