THE CURRENCY SPECIE PAYMENTS. 
 
 SPEECH 
 
 HON. JOHN SHERMAN, 
 
 OF OHIO, 
 
 THE UNITED STATES SENATE, 
 
 JANUARY 16, 1874. 
 
 WASHINGTON: 
 
 GOVERNMENT PRINTING OFFICE. 
 
 1874.
 
 UCSB LIBRARY 
 
 SPEECH 
 
 HON. JOHN SHERMAN. 
 
 The Senate having uniler consideration the following resolution, reported from 
 the Committee on Finance: 
 
 "Kegolved, That it is the duty of Congress during its present session to adopt 
 definite measures to redeem the pledge made in the act approved March 18, 1869, 
 entitled 'An act to strengthen the public credit,' as follows: 'And the United 
 States also pledges its faith to make provision at the earliest practicable period for 
 the redemption of the United States notes in coin ; " and the Committee on Finance 
 is directed to report to the Senate, at as early a day as practicable, such measures 
 as will not only redeem this pledge of the public faith, but will also furnish a cur- 
 rency of uniform value, always redeemable in gold or its equivalent, and so adjusted 
 as to meet the changing wants of trade and commerce;" * 
 
 The pending question being on the amendment submitted by Mr. FERRY, of 
 Michigan, to strike out all after the word ''resolved, 1 ' and insert the following: 
 
 "That the Committee on Finance is directed to report to the Senate, at as early a 
 day as practicable, such measures as will restore commercial confidence and give 
 stability and elasticity to the circulating medium through a moderate increase of 
 currency" 
 
 Mr. SHEKMAN said : 
 
 Mr. PRESIDENT, it was my purpose not to address the Senate until 
 I had the benefit of the opinions of all Senators who wished to express 
 their opinions; and then I proposed, in closing the dehate, to state 
 the general reasons that influenced the Committee on Finance to 
 report this resolution. But as the Senator from Illinois [Mr. LOGAX] 
 tells me he is not very well to-day, and other Senators are not pre- 
 pared, I prefer, rather than cause delay, to state as Lest I can those 
 reasons now. 
 
 And, sir, at the outset of my remarks I wish to state some general 
 propositions established by experience, and the concurring opinions of 
 all writers on political economy. They may not be disputed, but are 
 constantly overlooked. They ought to be ever present in this discus- 
 sion as axioms, the truth of which has been so often proven that proof 
 is no longer requisite. 
 
 The most obvious of these axioms, which lies at the foundation of 
 the argument I wish to make to-day, is that a specie standard is the 
 best and the only true standard of all values, recognized as such by 
 all civilized nations of our generation, and established as such by the 
 experience of all commercial nations that have existed from the ear- 
 liest period of recorded time. While the United States, as well as 
 all other nations, have for a time, under the pressure of war or other 
 calamity, been driven to establish other standards of value, yet they 
 have all been impelled to return to the true standard; and even while 
 other standards of value have been legalized for the time, specie, has 
 measured their value as it now measures the value of our legal-tender 
 notes.
 
 This axiom is as immutable as the law of gravitation or the laws of 
 the planetary system, anil every device to evade it or avoid it has, by 
 its failure, only demonstrated the universal law that specie measures 
 all values as certainly as the surface of the ocean measures the level 
 of the earth. 
 
 It is idle for us to try to discuss with intelligence the currency ques- 
 tion until we are impressed with the truth, the universality, and the 
 immutability, of this axioin. Many of the crude ideas now advanced 
 spring from ignoring it. The most ingenious sophistries are answered 
 by it. It is the governing principle of finance. It is proved by ex- 
 perience, is stated clearly by every leading writer on political econ- 
 omy, and is now here, in our own country, proving its truth by 
 measuring daily the value of our currency and of all we have or pro- 
 duce. I might, to establish this axiom, repeat the history of finance 
 from the shekels of silver, " current money with the me reliant," paid by 
 Abraham, to the last sale of stock in New York. I might quote Aris- 
 totle and Pliny, as well as all the writers on political economy of 
 our own time, and trace the failure of the innumerable efforts to 
 establish some other standard of value, from the oxen that measured 
 the value of the armor of Homeric heroes to the beautifully en- 
 graved promise of our day ; but this would only be the hundred-times- 
 told tale which every student may find recorded, not only in school- 
 books, but in the writings of Humboldt, Chevalier, Adam Smith, and 
 others of the most advanced scientific authorities. They all recognize 
 the precious metals as the universal standard of value. Neither gov- 
 ernments, nor parliaments, nor congresses can change this law. It de- 
 fies every form of authority, but silently and surely asserts itself as a 
 law of necessity, beyond the jurisdiction of municipal law. 
 
 Other mediums of exchange have been devised and are in general 
 use, but their value is measured every moment by the true standard 
 of the precious metals. And this standard Avill measure the value of 
 your three sixty-live convertible, elastic-, irredeemable bonds, and of 
 any currency we may issue, before they are issued, the moment they 
 are issued, and at every hour while they are in circulation. The igno- 
 rant and the credulous will measure their labor, their productions, 
 and their property by that or any other standard you may devise ; 
 but the sagacious and prudent will test it by the specie standard. 
 The barometer in Wall street will quote it by the specie standard, and 
 every banker and broker will have more to do with fixing its daily 
 changeable value than any of you. If we will only now recognize 
 and act upon the fundamental truth that there is and can be but one 
 true standard of value, and that the specie standard, we will have 
 advanced a great way in the solution of the question upon which we 
 are called upon to act. 
 
 The reasons for this are obvious. The innumerable wants of every 
 civilized man, however moderate his income, demands the labor of 
 thousands of persons. The slave who toiled for his daily bread and 
 scanty clothing consumed more or less of the products of the labor 
 and capital of an army of farmers, artisans, and capitalists, and the 
 exchanges of all these productions can only be made by sonic recog- 
 nized standard of value which will measure the value of a pin as well 
 as of the highest production of art. This standard must, be of intrin- 
 sic value, durable, divisible, easily transported, of universal use, and 
 of the same qualities wherever found. Gold and silver alone unite 
 all these qualities. To use the language of another: 
 
 Though far from invariable, the value of those metals changes only hy slow de- 
 grees; they are readily divisible into smy number of parts, which may be n-nnifi-d
 
 by means of fusion without loss ; they do not deteriorate by being kept ; their firm 
 and compact texture makes them difficult to wear ; their cost of production, espe 
 cially of gold, is so considerable that they possess great value in small bulk, ami 
 can, of course, be transported with comparative facility ;. and their identity is per- 
 fect, the pure gold and silver supplied by Russia and Australia having precisely the 
 same qualities with that furnished by California and Peru. No wonder, therefore, 
 when almost every property necessary to constitute money is possessed in so emi- 
 nent a degree by the precious metals, that they have been used as such from a very 
 remote era. Their employment in this function is not ascribablo to accident, to the 
 genius of any individual, or to any peculiar combination of circumstances. It grew 
 naturally out of the wants and necessities of society on the one hand, and the means 
 of supplying them possessed by these metals on the other. They became universal 
 money, as Turgot lias observed, not in consequence of any arbitrary agreement 
 among men, or of the intervention of any law, but by the nature and force of things. 
 
 Of late years much difficulty lias grown out of the slightly varying 
 value of silver and gold, as compared with each other, and the tendency 
 of opinion has been to adopt gold alone as the standard of value. 
 The United States has twice changed the relative value of these metals, 
 and other modern nations have been driven to similar expedients. 
 At the Paris monetary conference, held in 1867, which I had the honor 
 to attend, the delegatesof twenty nations represented agreed to recom- 
 mend gold alone as the standard of value. The United States, and 
 nearly all the commercial nations, have adopted this standard, and 
 reduced the use of silver to a mere token coinage of less intrinsic value 
 than gold, but maintained at par with gold by the right to be con- 
 verted into gold at the will of the holder. So that for all practical 
 purposes we may regard gold as the only true standard, the true money 
 of the world, by which the value of all property, of all productions, of 
 all credits, and of every medium of exchange, and especially of all 
 paper money, is tested. 
 
 Specie, in former times, was not only the universal standard of value, 
 but it was the general medium of all exchanges. In modern times 
 this is greatly changed. Specie is still the universal standard of value, 
 but it has ceased to be even the usual medium of exchange. The fail- 
 ure to distinguish between the standard of value and the medium of 
 exchanges occasions many of the errors into which so many fall, and 
 nearly every Senator who has spoken on one side of the question has 
 fallen into this error. Specie has lost a portion of its sovereign power, 
 for with the enormous increase of exchanges it was found that, valu- 
 able as it is, it is too heavy to transport from place to place as a me- 
 dium of exchange. The perils of the sea, the dangers of theft and 
 robbery, led to devices to substitute promises to pay gold in place of 
 the actual gold. 
 
 In this way bills of exchange, drafts, promissory notes, checks, and 
 like commercial paper came |into use, so that now, even in this age of 
 paper money, it is computed that fully 95 per cent, of all the ex- 
 changes in commercial cities is made by such promises to pay. Only 
 5 per cent., or one-twentieth part, of the payments in New York are 
 made in money, and this chiefly in paper money and not in gold. If 
 gold were now the only legal standard of value it would not be used 
 as a medium of exchange for 1 per cent, of the transactions of daily 
 life. The convenience, the portability of commercial paper and paper 
 money has superseded gold as a medium of exchange, but has left it 
 as the fixed, the only true standard of value, by which the value of 
 all mediums of exchange is tested. 
 
 In England, where the specie standard of values is jealously main- 
 tained, and where no Bank of England note can issue beyond a pre- 
 scribed limit except upon a deposit of an equal amount of gold, specie 
 is not used as a medium of exchange to an" amount exceeding 2 per
 
 6 
 
 cent, of the aggregate payments. Ninety-eight per cent, of ;ill pay- 
 ments is in commercial paper or bank-bills, but the fixed and unalter- 
 able standard of value of all this paper money was gold coin. Some- 
 times the daily payments in London alone exceed all the gold in 
 Great Britain, bur only about 1 per cent, is actually paid in gold, and 
 about 5 per cent, in Bank of England notes. In France, until tin- 
 recent German war. gold and silver were used more as a medium of 
 exchange than in any country of our day. She had from 1868 to 1870 
 in circulation an amount of gold and silver greater than the aggregate 
 of gold and silver of Great Britain, the United States, and rnis>ia. 
 Her specie circulation amounted to $700,000,000. Driven by the 
 necessities of that war she has substituted paper money amounting 
 to $520,000,000 as a medium of exchange for the gold and silver 
 formerly circulated, but with wise statesmanship she now maintains 
 her present vast volume of paper money at or near par in gold. 
 She has adopted another medium of exchange, but she maintains, in 
 harmony with reason and experience, the gold standard of value. 
 
 All modern experience teaches the importance of the division of 
 labor. Indeed that is the favorite topic of every writer on political 
 economy. Every man to his trade, and if the trade can be subdivided 
 into many specialties, then every man to his specialty. I was in the 
 celebrated manufactory of steel pens of Mr. Gillott. and saw that it 
 required the labor of thirty men and women to contribute to the 
 making of this implement. Each one was skillful in his part, and 
 this part was perfectly done, and this subdivision of labor and skill 
 gave increased wages and value to the work of each laborer, secured 
 a fortune to the owners, and a perfect pen to the world. The same 
 law which demands a division of labor is applied to professional and 
 scientific pursuits. The law has many specialties. The honors of 
 science are only won by those who devote their mental faculties to 
 one branch of study. The same law extends to all leading produc- 
 tions, as cotton, wool, wheat, corn, and gold. 
 
 The purposes for which each of these commodities is best fitted 
 are established by experience. In this way the experience of centu- 
 ries in former generations established, gold both as the standard of 
 value and the medium of exchange; but modern necessities have now 
 established paper money, credit money, whether in the form of bills 
 of exchange, checks, bank-bills, or notes of the State, as the best 
 medium of exchange, leaving gold, however, as the best and only 
 true standard of the value of all paper money, as well as of all com- 
 modities. 
 
 Now, it has often happened, not only in the United States, but in 
 other countries, that credit money has proved worthless. This is an 
 unavoidable incident of such money. So far as this money consists 
 of checks or like credits it must depend upon the voluntary contracts 
 of individuals. Each person is at liberty to accept or refuse all such 
 mediums of exchange, and if he suffers a loss by the failure of a 
 banker or broker it is his misfortune, for which the Government is not 
 responsible, and can give him no relief, except the la wsfor the collect ion 
 of debts. Jmt a different rule applies to paper money issued by a State 
 or by a corporation authorized by the State to issue money. Whether 
 this money is a Icgr.i-teuderor not. it is. by usage and custom, money, 
 and its receipt and payment are practically as compulsory as if it was 
 gold coin. Xo man can refuse it unless he is a capitalist, who may 
 resort to the law to enforce payment in legal-tenders. The laborer 
 must take it from necessity or get no employment. The merchant 
 must take it or keep his goods. Usage in such matters is stronger
 
 than law. It is this kind of money that it is the duty of the State to> 
 protect from depreciation and loss. It mnst secure it by the best 
 security possible, and that security in every well-ordered government 
 is the "public faith." Upon this principle Great Britain, France, and 
 the United States have founded their financial systems. 
 
 But one other duty rests upon the government undertaking to issue, 
 or to authorize the issue of paper money, and that is to maintain this 
 paper money at the gold standard. Great Britain and France recognize 
 this duty, and perform it. The United States recognizes its duty, but 
 does not perform it. Our currency is fdundecl upon the public faith. 
 The public faith of the United States is pledged to pay United States 
 notes in coin. The national-bank notes are amply secured by bonds 
 more than sufficient to redeem them in coin; and yet they are all de- 
 preciated; now at 10 per cent, discount, to-morrow at 11, and yester- 
 day at 8. It is the depreciation of our paper money that is the stand- 
 ing reproach of our financial system, which lies at the foundation of 
 all our troubles, and to remedy which is now the most important and 
 difficult duty of Congress. 
 
 Mr. President, thus far my remarks are founded upon the experi- 
 ence of ages, applicable to all countries and to all commercial nations 
 of our time. I present them now as axioms of universal recogni- 
 tion. And yet I have heard these axioms denounced in this debate 
 as "platitudes," useless for this discussion in the Senate of the 
 United States. The wisdom of ages, the experience of three thou- 
 sand years, the writings of political economists, are whistled down 
 the wind as if we in this Senate were wiser than all who have reasoned 
 and thought and legislated upon financial problems that all this 
 accumulated wisdom consists of ''platitudes" unworthy to influence 
 an American Senate ui the consideration of the aft'airs of our day and 
 generation. 
 
 Sir, I do not think so. If we disregard these "platitudes," we only 
 demonstrate our own ignorance and punish our constituents with evils 
 that we ought to avoid. I purpose now to pursue the argument fur- 
 ther, and to prove that we are bound both by public faith and good 
 policy to bring our currency to the gold standard ; that such a result 
 ',vas provided for by the financial policy adopted when the currency 
 was authorized ; that a departure from this policy was adopted after 
 the war was over, and after the necessity for a depreciated currency 
 ceased; and that we have only to restore the old policy to bring us 
 safely, surely, and easily to a specie standard. 
 
 First, I present to you the pledge of the United States to pay these 
 notes in coin " at the earliest practicable period." In the " act to 
 strengthen the public credit" passed on the 18th day of March, 1869, 
 I find this obligation : 
 
 And the United States also soli-mi 1 .!;.- pledges its public faith to make provision at 
 the earliest practicable period for the redemption 3 the United States notes iu coin. 
 
 Without renewing the discussion in regard to the nature of these 
 notes, or quoting the decision of the Supreme Court of the United 
 States, or the declaration of the various acts of Congress from 1862 
 down, I rest upon this pledge of the public faith. Under what cir- 
 cumstances was it made? The condition of our currency, the obli- 
 gation of our bonds, the nature of our promises, had been discussed 
 before the people of the United States in the campaign of 1868 ; vari- 
 ous theories had been advanced; and the result was that those who 
 regarded the faith of the nation as pledged to pay not only the bonds 
 of the United States, but the notes also, in coin prevailed, and General 
 Grant was elected President of the United States. On the eastern
 
 8 
 
 portico of the Capitol on the 4th of March, 1869, he made this declara- 
 tion : 
 
 A great debt has been contracted in securing to us and our posterity the Union. 
 The payment of this, principal anil int<-n->t. as \\ ell us the return to a specie basis. 
 as BOOOM it can be Meompuahed without material dcU-iment to the debtor class or 
 to the country at large, must be provided for. To protect the national honor every 
 dollar of Gov'enimeut indebtedness should be paid in gold, unless otherwise ex- 
 
 Eressly stipulated in the contract. Let it be understood that no repudiator of one 
 irthiug of our public debt will be trusted in public place, and it will go far toward 
 strengthening a credit which ought to be the best in the world, and will ultimately 
 enable us to replace the debt with bonds bearing less interest than we now pay. 
 
 The Congress of the United States, in order to put into form its 
 sense of this obligation, passed the act "to strengthen the public 
 credit," and the last and most important clause of this act is tin- prom- 
 ise which I have just read, that these notes should be paid " at the 
 earliest practicable period" in coin. 
 
 What was the effect of this promi.se ? Why, sir, I have here the 
 daily register of the sales of our greenbacks in New York, )ccause, 
 that is the legal effect of transactions in gold. We have called our 
 false standard the true standard, by calling the dollar of our broken 
 promises the standard of value, when every man of intelligence who 
 bought and sold anything, even our own domestic products, knew 
 that gold was the true standard, and measured our greenbacks by it. 
 I have here the daily sales, and Avhat do they show f On the day 
 we made that promise, the 18th of March, 1869, the greenbacks, the 
 notes of the United States, were worth 75-J cents in gold ; or, in other 
 words, gold was at a premium of 32 per cent. That was the measure 
 of the credit of these notes when we made this promise. It took 
 nearly four dollars of greenbacks to buy three dollars of gold. What 
 was the result ? After you enacted that law the faith of the people 
 of the United States that you would redeem this pledge the value 
 of your greenbacks advanced, not rapidly but gradually, and in one 
 year, to within 12 per cent, of par in gold. 
 
 Mr. BAYARD. Will the Senator permit me to ask him whether he 
 does not consider,as a far more potential fact, in producingthe approx- 
 imation of the paper issues to gold and silver, the decision of the Su- 
 preme Court of the United States, made early in 1870, than the act 
 which he has just referred to f 
 
 Mr. SHERMAN. On the contrary I could show my honorable friend, 
 if it was necessary to go into the quotations, that this rise occurred 
 before the decision was made. 
 
 Mr. BAYARD. I merely suggest, as a matter of historical truth, that 
 the decision of the Supreme Court of the United States, made by a 
 majority of five to three of its judges, declaring that the issue of paper, 
 and creating it a legal tender by Congress, was an unconstitutional 
 exercise of power, had more to do with approximating the value of 
 paper issues with gold than any resolution or act passed by the Con- 
 gress of the United States, merely reiterating the faith which every 
 one knew was pledged and existing when the notes were issued. 
 
 Mr. SHERMAN. Since my friend asks me a question, I am bound 
 to answer it ; and I say that I do not believe that decision had the 
 .slightest influence on the matter. We must judge of causes by re- 
 sults, and results show that the rise in the value of our notes occurred 
 before the decision was made. The causes of the rise are not mate- 
 rial to my argument. The fact is, that in one year from the time that 
 promise was made the value of our greenbacks was over 89 cents in 
 gold. I have here the quotations of the 18th of March. 1870, which 
 give gold at a premium of 11 , so that a greenback in market value was
 
 9 
 
 worth over 89 in gold. Thus, in a single year, from the 18th of 
 March, 1869, to the 18th of March, 1870, the credit of the United States 
 rose, so that the barometer of the money market, which you cannot 
 control, measured the depreciation of your note at only 11 per cent, 
 instead of 25 per cent, the year before. 
 
 Mr. President, we see, then, the effect of this promise. And I here 
 come to what I regard as a painful feature to discuss how have we 
 redeemed our promise ? . It was Congress that made it, in obedience 
 to the public voice ; and no .act of Congress ever met with a more 
 hearty and generous approbation. But I say to you, with sorrow, 
 that Congress has done no single act the tendency of which has been 
 to advance the value of these notes to a gold standard ; and I shall 
 make that clearer before I get through. Congress made this promise 
 rive years ago. The people believed it and business men believed it. 
 Four years have passed away since then, and your dollar in green- 
 backs is worth no more to-day than it was on the 18th of March, 1870; 
 and no act of yours lias even tended to advance the value of that 
 greenback to par in gold, while every affirmative act of yours since 
 that time has tended to depreciate its value and to violate your 
 promise. 
 
 Mr. President, these are simple facts, although it may be painful 
 for us to discuss them. I do not say that Congress, in this matter, 
 disregarded the will of the people, because there was a public feeling 
 against any measure which tended to advance the value of the green- 
 backs to the gold standard. I am not complaining of Senators or 
 Members who represent their constituents, but I do say that the fact 
 stands out as clear as light, that the Congress of the United States 
 which made this promise has done no single act the tendency of which 
 even leads one to suppose that it will ever redeem its promise. 
 
 Sir, let us see what has been done. We have paid $400,000,000 of 
 the public debt, and we boast of it of debt not due for years. We 
 have paid to redeem that debt a premium of ,$40,000,000. In other 
 words, we have paid .$440,000,000 to redeem four hundred millions of 
 debt not yet due, and we have not redeemed a single debt that was 
 due in March, 1869 ; but, on the contrary, we have increased the kind 
 of debts then due more in proportion than the increase of our popula- 
 tion. And, sir, while our promise did advance the credit of our bonds 
 and of our notes alike, and while the execution of that promise as to 
 our bonds has advanced our bonds to above par in gold, yet we have 
 done nothing whatever to redeem the second clause of that pledge ; 
 but, on the other hand, all we have done has been done with the in- 
 tention and with the effect of depreciating the value of our notes. 
 
 Mr. MORTON. I ask the Senator to state what that pledge is. 
 
 Mr. SHERMAN. I will come to my construction of it in a moment. 
 I have read it in full. 
 
 Mr. MORTON. I mean practically. 
 
 Mr. SHERMAN. I will answer your construction that emasculates 
 our pledge in due time. The Senator will find that I shall not evade 
 his question. 
 
 Mr. President, I am not here to find fault with individuals ; but I 
 do say that the Congress of the United States in the measures which 
 have been adopted has not done what it ought to have done to re- 
 deem the pledge of the public faith to pay these notes in coin "at the 
 earliest practicable period." Why, sir, at this moment we are living 
 in daily violation of this pledge. I said a moment ago that instead 
 of adopting measures looking toward specie payments we have in- 
 creased the volume of our currency in every branch of it. Now let us
 
 10 
 
 see if this be true. I have here a statement taken from the official 
 report of the Secretary of the Treasury of the amount of the cur- 
 rency on the 3(th of June, 1869. I cannot find a .statement for the 
 1st of March, 1869, but it was the same, because it was fixed by law. 
 I find on the 30th of June, 1869, we had three hundred and fifty-six mil- 
 lions of greenbacks, the same amount that we had on the 1-t h day of 
 March. That was the maximum amount, as it was supposed, fixed 
 by law. When the act of the 18th of March, 1869, was passed no one 
 dreamed that there existed a power to issue forty-four millions more. 
 
 Our greenbacks were then $356,000,000. On the 1st of .January, 
 1874, according to the last statement of the public debt, they were 
 $378,481,339. We had, then, increased this form of our currency 
 $22,481,000. And that is not all. Since that time, and up to the lOtii 
 of January, according to a New York' newspaper and I suppo- 
 correct I find that the amount of legal-tender notes outstanding was 
 $381,891,000, or an increase since the 1st of January of something like 
 $3,400,000, or at the rate of $400,000 a day. Every dollar of this new 
 issue of paper money directly tended to depreciate that outstanding 
 and was in violation of the spirit and the provision of the law of 1869. 
 I am not now speaking of the legal power of the Secretary of the 
 Treasury to make this issue, because I have already given my opinion 
 fully on this subject in an official report, but only to call your atten- 
 tion to the fact that by our acquiescence Ave have actually watered, 
 debased, and depreciated by new issues the very notes we promised 
 to pay in coin at the earliest practicable period. " 
 
 Nor is this all. Under authority clearly conferred by law to the 
 Secretary of the Treasury, we have increased the fractional currency 
 from $27,508,928, at which it stood on the 30th of June, IrU!', to 
 $48,554,792, or an increase of fractional currency of $21,036,000. Again , 
 sir, driven by a local demand which we could not resist, founded upon 
 a palpable injustice growing out of the mistake of an officer of the 
 Government long ago in the distribution of the national-bank circula- 
 tion, we did authorize by law an increase of the bank circulation to 
 the South and West to the amount of $54,000,000. The amount of 
 bank-notes issued at the time we made this pledge was s-j'J'.t. 7^9,000 ; 
 and to-day the amount outstanding is .<!:>,; '.081, 000, showing an increase 
 in this kind of notes of $39,300,000, or an increase in the currency since 
 the promise to pay it in coin at the earliest practicable period, and all 
 legal tender in effect, of $82,317,000 ; and now this process of inflation 
 is going on daily, first, by the issue of the balance of the forty-four mil- 
 lion reserve, and secondly by the issue of new bank-notes as banks are 
 organized under the act of July, 1870; and \<-T there is a cry for more, 
 more. 
 
 Mr. MORTON. Will the Senator allow me a word right tin 
 
 Mr. SHERMAN. Yes, sir. 
 
 Mr. MORTON. I ask the Senator if the act of 1870. authorizing the 
 increase of national-bank circulation $54,000,000, did not contain a 
 provision that those national-bank notes should not be issued faster 
 than the 3 per cent, certificates were retired, being confined to that 
 limit; and if the 3 per cent, certificates at that lime were not held 
 by the banks as a part of their reserve, instead of greenbacks ; and 
 when the 3 per cent, certificates were retired in accordance with 
 thataet the greenbacks did not have, to take their place, so that there 
 was no inn-rase. Imt, in fact, a contraction, equal to the amount of 
 reserve the ne\v banks would have to hold of the old greenbacks? 
 
 Mr. SI 1 HUMAN. Undoubtedly it is true that the bank-notes could 
 only be issued as the 3 per cent, certificates, another form of (Jov-
 
 11 
 
 eminent indebtedness, were retired. But, sir, at the time tlie law 
 of March 18, 1869, was passed, it was just as well known as at a later 
 period that these 3 per cent, certificates were a demand indebted- 
 ness which the Government was expected to pay at its pleasure and 
 its will. The Government could have paid the 3 per cent, certifi- 
 cates at any time with the money that was itsed for paying the 
 bonded debt of the United States, and thus have advanced toward a 
 specie standard. 
 
 Mr. MORTON. The Senator was speaking about inflation. 
 
 Mr. SHERMAN. I am speaking of the violation of the faith we 
 plighted at the earliest practicable period to pay these notes in coin. 
 We never have paid a dollar of them. We never have made provision 
 for the payment of one of them. We have issued more of them, and 
 compelled the people to take them. That is what I am getting at. 
 
 My honorable friend asked me a while ago what was the nature of 
 the pledge made by the act of March, 1869, as to the time of payment 
 of United States notes in coin. If I was defending a person charged 
 as a criminal for violating this law, or one like it, I would claim, as 
 the Senator from Indiana does, that as no time was fixed no man conld 
 be convicted for a penitentiary offense for a violation of the law. But 
 what is this pledge ? Let nie read it again : 
 
 And the United States also solemnly pledges its faith to make provision at the 
 earliest practicable period for the payment of the United States notes in coin. 
 
 What is the meaning of that ? Does it not mean tliat the United 
 States shall apply its means, its power, its energies, its revenue, its 
 money, to redeem, these notes '? Does it mean a vague promise, such 
 as party platforms sometimes use to deceive and mislead the people ? 
 Does it mean only a vague, indefinite promise by which business men 
 are to be gulled and deluded into basing their contracts upon an arti- 
 ficial standard ? No, sir ; it is the promise of a great, proud, and rich 
 people, who mean what they say that every practicable means shall 
 be iised to that end. 
 
 Mr. BOUTWELL. Unless I misunderstood the Senator, the idea 
 Avhich he seemed to convey was this, that instead of applying the 
 funds of the Treasury to the redemption of the 6 per cent, bonds, they 
 should have been applied to the redemption of the 3 per cent, certifi- 
 cates. 
 
 Mr. SHERMAN. Idid not say whether the Department acted wisely 
 or not ; I did not discuss that question ; and I again say to the honora- 
 ble Senator that I am not here at all to discuss whether he did the 
 best thing that ought to have been done by paying the bonds as he 
 did. On the whole the people are satisfied with what he did, and he 
 will not dispute that the power to apply the surplus revenue to the 
 payment of these 3 per cent, certificates existed every day and was a 
 perpetual right. 
 
 Mr. BOUTWELL. But in the light of history may I be allowed to 
 ask the Senator whether now he thinks that ought to have been done ? 
 
 Mr. SHERMAN. I hope my friend will not press me, because I 
 . might express some opinions which would get up a controversy as to 
 what might have been done by the executive authorities to advance 
 our notes toward a (fpecie standard. I am willing to take my share 
 of the responsibility of results, for I certainly am guilty of aiding in 
 the passage of the law to equalize the distribution of bank circulation 
 by which there was an increase of bank-notes. I have no criticisms 
 to make upon what was done by the executive authorities. What I 
 say is, that Congress has not sufficiently kept in its view that obli-
 
 12 
 
 gation approved by the people in 1868, and declared by Congress in 
 1869 that the United States would redeem, at the earliest practicable 
 period, these notes in coin. 
 
 Now, sir, I ask, has it not been practicable at any time in the last 
 four years to advance in some degree these notes toward the specie 
 standard? My honorable friend from Indiana says that for the last 
 four or five years AVC have had a time of unbounded plenty and great 
 prosperity ; we have built thousands and tens of thousands of miles of 
 railroad ; we have built furnaces ; we have expanded our enterprises 
 and proven our energy. Yes, sir ; all this we have done. We have 
 gone through a period of prosperity almost unexampled; but it seems 
 we never were prosperous enough during all this time, according to 
 the Senator from Indiana, to fulfill any part of this obligation which 
 we made on the 18th of March, 1869. Sir, when will it be practicable ? 
 Was it when the Treasury was overflowing and we were seeking new 
 outlets, new modes of expending money, new modes of paying debts 
 not yet due ? When will it be practicable, according to the Senator's 
 construction ? I press that question upon him, not for answer now, 
 but let him say to the business men of the country when it will be 
 practicable to restore the gold standard. If it cannot be done in 
 seasons of plenty, of prosperity, of overflowing revenues, shall it 
 be done in times of adversity and trial and tribulation ? What con- 
 dition of affairs would justify us in redeeming the sacred obligation 
 which impels rig to do it at the earliest practicable period .' 
 
 Mr. MORTON. If the Senator will allow me, I Avill ask whether it- 
 is practicable to enter upon the work of resumption under the pressure 
 of a panic, or whether it should be in good times ? 
 
 Mr. SHERMAN. Was my friend from Indiana willing to do this 
 when we had good times, and the Treasury was overflowing, and we 
 were paying debts at the rate of one hundred millions a year ? Was 
 he ready a year ago to do it, when an earnest effort was made in the 
 Senate in that direction? Can he state under what circumstances or 
 conditions he will be ready to do it ? I am of opinion that at any time 
 since the promise was made steps could have been taken to have re- 
 deemed it, a,nd that now, under the pressure of panic, when debts are 
 greatly diminished, is a favorable time for entering, by decisive meas- 
 ures, upon the policy of resumption. But I suppose, according to the 
 Senator's ideas, we are to issue more paper money, make more good 
 times, start the ball of inflation, with a view that some time, may be, 
 in the dim future, we will undertake to perform our promise. 
 
 But now let us come to the specific question of the time for resump- 
 tion. Shall the redemption of this pledge be postponed until the 
 public debt is paid? Why, sir, one-tenth of the money we have used 
 to pay the public debt not due would have brought us to a specie 
 standard. No one supposes that under an ordinary state of affairs 
 the currency of the country the greenbacks need be reduced below 
 three hundred millions in order to bring us to a specie standard. I 
 have heard some of the ablest and most experienced business men of 
 the country declare that whenever the right to convert greenbacks 
 into gold or its equivalent was secured so that prudent men would 
 see that the Government had the power to maintain its specie stand- 
 ard, there would be no reduction of the curren(?y to any appreciable 
 extent. But whether that be so or not, no one has claimed that the 
 amount of greenbacks need be reduced below three hundred millions 
 in order to bring that remaining three hundred millions up to the stand- 
 ard of gold. That would be a reduction of $56,000,000. Fifty-six mil- 
 lions of the money that we have applied to the payment of debt not
 
 13 
 
 yet due would have brought all the remaining greenbacks up to par in 
 gold, would have made our bank-notes convertible into the standard 
 of gold, and we would have had, almost without knowing it, specie 
 payment a solid, safe, and secure basis. The forty millions of green- 
 backs we paid as premium for our bonds would have accomplished 
 this result. Thousands of men who have been ruined by the false 
 ideas that sprung from this fever-heated, depreciated paper money 
 would be now useful, able, and successful business men, instead of 
 being ruined by bankruptcy. 
 
 Sir, we gain nothing by postponing the fulfillment of our promise 
 with a view to reduce the public debt. We have to pay the debt in 
 coin anyway, and the same coin that pays it now would pay it after 
 our currency has been restored to par. If the old idea of Mr. Pendle- 
 ton had prevailed, that these bonds should be paid in greenbacks, 
 then there would be a motive for us to depreciate the greenbacks in 
 order to pay off our bonds at the cheapest rate. But this promise to 
 pay in coin extended to the bondholder. We promised to pay the 
 bondholder gold for his bond and the people gold for their green- 
 backs. We have fulfilled our promise to the bondholder. We have 
 paid him in gold. We have bought the gold. We have paid him at 
 a premium of 10 per cent, on our currency. Not a single effort, not 
 a single measure, has succeeded in either House of Congress that looks 
 to the redemption of the promise to the people who hold these green- 
 backs, and which measure their daily toil in their productive avoca- 
 tions. We cannot postpone this obligation until the payment of the 
 public debt, because, although we have rapidly advanced in the pay- 
 ment of the public debt, it will be many long years before that " con- 
 summation most devoutly to be wished " will be reached. 
 
 Shall we postpone the redemption of our greenbacks until we can 
 accumulate enough gold in our Treasury to pay them! We know the 
 effect of that policy. Any attempt to accumulate great masses of 
 gold in the Treasury will not only excite popular opprobrium, by hold- 
 ing idle in the vaults of the Treasury money that ought to draw inter- 
 est, but it will create a stringency in the gold market. Tt will advance 
 the value of the very thing we wish to get. Accumulate gold in great 
 masses, and it will advance the price of gold all over the world. We 
 could not now, with all our teeming productions, draw to this coun- 
 try $200,000,000 in gold without disturbing the Bank of France, the 
 Bank of England, and all the money centers of the world. Therefore 
 the idea of postponing the day of specie payments until we can accu- 
 mulate enough gold to redeem the greenbacks would be the idlest, 
 vainest delusion and the most foolish hope. 
 
 What then ? Shall we postpone the payment of our notes in coin, 
 shall we put off the fulfillment of our promise until the mysterious 
 " balance of trade " is in our favor ? There never was a greater hum- 
 bug in the world than this idea of the balance of trade. Why, sir, 
 the balance of trade is now largely in our favor, and according to this 
 theory we ought now to be prosperous, happy, glorious. The balance 
 of trade is in our favor ; our exports exceed our imports ; now we 
 ought to l>e supremely happy. But a year ago the balance of trade 
 w T as $100,000,000 against us. We sent our exports to Europe, it is 
 true ; but we imported silks and satins and wines. All the luxuries 
 of the Orient, all the rich goods of every clime, came pouring into this 
 country. The balance of trade was against us ; and yet, according 
 to the argument of my friend from Indiana yesterday, the last two or 
 three years, when the balance of trade was against us, was a happy 
 time, halcyon days, when Ave had prosperity in all branches of indus- 
 try, and were building many thousands of miles of railroad every year .
 
 14 
 
 Mr. President, this fallacy of the balance of trade ought not to enter 
 into the calculations of prudent men. When the balance of trade is 
 in onr favor, it indicates thrift and economy. It shows we are ex- 
 porting our surplus products and getting a fail price for them, and 
 taking solid gold or paying debts in exchange for them, instead of 
 silks and satins. But this is not conclusive evidence that when we 
 are importing more than we are exporting we are necessarily carry- 
 ing on a losing trade. These imports may be. in actual wealth- 
 producing property, such as capital, machinery, or the like, more 
 valuable to us than the burden of the interest we pay on the bal- 
 ance of trade. The whole theory depends upon the nature of the 
 imports for which we run in debt. In this respect the balance of 
 trade is precisely like the balance of trade between the merchant and 
 the farmer. If the farmer buys less than he sells, he is surely on a sale 
 footing. If he buys more than he sells, the result will depend entirely 
 upon what he buys, whether luxuries consumed in the using or mate- 
 rials for actual productive improvements on his farm. If the latter. 
 he is prosperous and happy, though "the balance of trade" may be 
 against him. It is not a question of "balance of trade," but a ques- 
 tion of prudence and judgment in the trade itself. Only a year ago 
 I had a controversy with a fellow-Senator, who is now present, about 
 this balance of trade. He insisted that when the balance of trade was 
 .against any nation it was an evidence of decay. I said this was a 
 fallacy. He replied that no country could be prosperous unless the 
 balance of trade was in its favor. I asked him if he thought Great 
 Britain was a prosperous country, and he said it was a very prosper- 
 ous country, and that the balance of trade was always in favor of 
 Great Britain. We made a friendly bet on the subject, and it turned 
 out that the balance of trade was' against Great Britain to the tune 
 of over $300,000,000 per annum, and had been for twenty years. By 
 the fallacious theory of the "balance of trade" Great Britain was 
 on the high road to ruin. Yet the whole of this balance of imports 
 was in commodities sent to pay interest on English investments of for- 
 eign countries profits of trade, and so forth. The profits of the trade 
 were all in favor of Great Britain, which imported raw articles and 
 exported high-priced productions, while the balance of trade only 
 represented increased and increasing wealth, instead of ruin and pov- 
 erty ; so that all this talk about the balance of trade is the sheerest 
 humbug. 
 
 Sir, there is no time unfit to fulfill a sacred obligation, and there has 
 been no day since this obligation was declared by Congress when we 
 should not have directed our attention toward redeeming it. The 
 only question for Congress is to say with what rapidity they will 
 advance toward specie payments. When you tell me you have the 
 right to choose the time and the occasion, I say you have done noth- 
 ing. You have buried your talent and are an unfaithful steward. I 
 ask the honorable Senator from Indiana what single act of Congress, 
 since this pledge was made, has even tended toward specie payments ? 
 Let him look over the statute-books, examine them all. and he will 
 answer, none. I have sought in vain for any legislation, to show that 
 Congress has been mindful of this obligation ; I cannot find a single 
 measure that even tended toward specie payments. 
 
 Now, sir, we are told that we are all for specie payments. Even 
 my friend who now occupies the chair [Mr. FKKKY, of Michigan] 
 tells us he wants to issue one hundred millions more of paper money 
 to prepare us for specie payments. He looks to specie payments as
 
 the ultimate result of his one hundred millions. We are all for 
 specie payments some time, may be. We are not in favor of it in 
 times of plenty. We are not in favor of it in times of great prosperity. 
 We are not in favor of it in view of the panic. When will we be in 
 favor of it * That is the question that Senators ought to be prepared 
 to answer to the business men of this country. There is not a man 
 who buys and sells, who deals in exchanges, a banker or a broker, but 
 measures daily the depreciation of your notes. He is compelled to 
 take them, and he eagerly asks you, as you have promised to redeem 
 them at the earliest practicable period, if yon cannot fix the time, to 
 state under what circumstances, under what condition of trade, 
 under what condition of plenty, under what condition of surplus 
 revenue, you will pay them. 
 
 Why, Mr. President, the very uncertainty of such an obligation, as 
 it is now construed, would prevent the richest man in the city of New 
 York from borrowing a dollar upon it. Mr. Astor, with his untold 
 wealth, could not borrow a thousand dollars of any gentleman who 
 now hears me upon a promise so vague and indefinite as you seek to 
 make this. And yet the people of this country have been compelled 
 to submit to a forced loan, and the business men of this country arc 
 compelled to take such paper as the standard of their values and of 
 all values, when no living man can guess the time when, or the cir- 
 cumstances under which, this promise will be redeemed. 
 
 I say, therefore, that if the ideas of these gentlemen are to prevail 
 in the Senate, they ought to tell the country when and under what 
 circumstances they will redeem this promise. I say to Senators that 
 if now, in this time of temporary panic, a great part of which, as I 
 shall show you, has already passed over, we yield one single inch to 
 the desire for paper money in this country, we shall pass the Rubicon, 
 and there will be no power in Congress to check the issue. If you 
 want forty millions now, how easy will it be to get forty millions 
 aga in t If you want one hundred millions now, convertible into three 
 sixty-five currency bonds, how soon will you want one hundred mil- 
 lions more ? Will there not always be men in debt ? Will not always 
 men with bright hopes embark too far on the treacherous sea of 
 credit ? Will there not always be a demand made upon you for an 
 increase ? And when you have passed the Rubicon and have fulfilled., 
 the pledges you have already made to the people of the United States, 
 where can you stop 1 Where our ancestors stopped at the close of 
 the Revolution; where the French people stopped in the midst of 
 their revolutionary fervor ! 
 
 Sir, I regard it as the proudest achievement of the American people 
 that so soon after the war they so faithfully and honorably redeemed 
 their obligation to the bondholder. I demand the same honorable 
 fulfillment of your promise to the note-holder. Now is the time to 
 make the stand, not only to prevent any further violation of law and 
 of our promise, but to retrace our steps and to give some decisive 
 token that you will pay our paper money in coin, as we agreed to do. 
 
 This is all I desire to say in regard to this pledge of the public faith. 
 But I wish to go a little further. I wish to show you that the policy 
 of the country, adopted at the time these notes were issued, contem- 
 plated that they should be maintained at par in gold ; that that policy 
 was only temporarily abandoned under the pressure of war. The act 
 of February 25, 1862, is the fundamental constitution of our pres- 
 ent financial system. It was passed after the greatest deliberation 
 in both Houses of Congress. It contains every principle and element 
 of our whole financial system. There is not an idea advanced during
 
 1C 
 
 the \viir that operated successfully that is not contained in the act of 
 February '25, 16b''<2. That actprovidedt'orthe issue of live-twenty bonds ; 
 jt provided for the issue of the greenbacks ; it provided for the issue 
 of certificates of indebtedness: it provided that your interim! taxes 
 be paid in paper money and that your duties should be, paid in gold; 
 it established your sinking fund; it secured the interest on the 
 public debt always to be paid in coin ; it set aside the coin from cus- 
 toms-duty to pay it. That act provided that the greenbacks issued 
 under it should be maintained as near at par in gold as possible dur- 
 ing the war, but at all events at par \vitli the best bond that could be 
 issued by the Government of the United States. 
 
 Mr. HOWE. That was the act that made the note convertible into 
 a bond ? 
 
 Mr. SHERMAN. Yes, sir. I will ask the Secretary to read the 
 stipulations that were made in regard to these notes. They will show 
 how sacredly they were regarded and how carefully their security was 
 watched. 
 
 The Chief Clerk read as follows : 
 
 And such notes herein authorized shall be receivable in payment of all tuxes. hi- 
 ternal duties, excises, debts, and demands of every kind due to the I'nited States, 
 except duties on imports, and of all claims and demands against the United SMI < 
 of every kind whatsoever, except for interest upon bonds and notes. whicb shall be 
 paid in coin, and shall also be lawful money and a legal tender in payment of all 
 debts, public and private, within the United States, except duties on imports and 
 interest as aforesaid. And any holders of said United States notes depositing any 
 sum not less than fifty dollars, or some multiple of fifty dollars, with the Treasurt r 
 of the United States, or either of the assistant treasurers, shall receive in exchange 
 therefor duplicate certificates of deposit, one of which may be transmitted to tin- 
 Secretary of the Treasury, who shall thereupon issue to the holder an equal amount 
 of bonds of the United States, coupon or registered, as may by said holder be de- 
 sired, bearing interest at the rate of 6 per cent, per annum, payable senii-annually. 
 and redeemable at the pleasure of the United States after five years, and payable 
 twenty years from the date thereof. And such United States notes shall lie received 
 . the same as coin, at their par value, in payment for any loans that may be. hereafter 
 sold or negotiated by the Secretary of tlie Treasury, and be reissued from time to 
 time as the exigencies of the public interests shall require. 
 
 Mr. SHERMAN. I have had this clause read to show you that the 
 foundation of the greenback was coin. Although it could not at the 
 moment, during the war, be converted into coin for the wants of the 
 Government were greater than all the coin of the United States, or 
 perhaps than all the coin of the world, attainable during war yet the 
 Government based the whole upon coin. Every bond that was issued 
 was issued only upon the sacred pledge contained in this act that the 
 interest of that bond should be paid in coin ; and the principal should 
 be paid, when due, in coin. The fifth section of the act provides that 
 all duties on imported goods shall be paid in coin ; and that this money 
 shall be set aside as a special fund to pay the interest on the bonded 
 debt in coin. Then, in order to secure the greenbacks, it authorized 
 any holder of a greenback to pay any Government debt with them : 
 it authorized the holder of a greenback to pay any debt, public or 
 private, with them; and every citizen of the United States was bound 
 to take them. Then it authorized them to be converted into '6 per 
 cent, bonds of the United States those bonds payable, principal and 
 interest, in gold. If the policy provided for by this act had been main- 
 tained, we Avould long since have been at specie payments, without 
 any serious disturbance of our monetary allairs. 
 
 Mr. MORTON. If the Senator will allow me to ask him a question 
 right there, I will ask him what act or determination of the Govern- 
 ment it was that inflicted the greatest dishonor upon the greenback, 
 that contributed more -than anything else to its dishonor, if it has 
 been dishonored f
 
 17 
 
 Mr. SHERMAN. As I shall refer to all the acts that relate to the 
 greenbacks, I shall no doubt come to tlie one that the Senator would 
 pick out. He can take his choice. 
 
 Now, Mr. President, I come to show the Senate how this provision, 
 the convertible clause of the act of February 25, 1862, was repealed. 
 On the 3d of March, 1863, Congress passed "An act to provide ways 
 and means for the support of the Government." This act was passed 
 during the dark hours of the war. The currency of the country did 
 not flow into the Treasury rapidly enough to pay our Army. I re- 
 member that at about the time this act was passed there were very 
 large unpaid requisitions. The Secretary of the Treasury, instead of 
 issuing any more 6 per cent, bonds, desired to float a ten-forty 5 per 
 cent, bond ; in other words, to reduce the burden of interest upon the 
 public debt. At this time there were three hundred millions of cir- 
 culation outstanding, and with all the rights and all the privileges 
 conferred upon the greenbacks, they did not flow into the Treasury 
 fast enough to furnish means to carry on the operations of the war. 
 The Secretary reasoned somewhat in this way: he said thatthe holder 
 of greenbacks had the right to convert them at any time into bonds 
 bearing 6 per cent, interest; but as that right could be exercised at 
 any time, the people were apt to postpone the exercise of it, and he 
 believed it would advance the conversion of these notes into bonds 
 by taking away the absolute legal right to convert. In other words, 
 the suspension of this convertibility clause was passed with a view to 
 promote conversion ; to encourage conversion ; to induce conversion ; 
 and, if possible, to induce a conversion into a 5 per cent, gold bond 
 instead of into a 6 per cent. bond. When the Secretary of the Treas- 
 ury presented this view to Congress he was at once met with the pledge 
 of the public faith ; with the promise printed upon the back of the 
 greenbacks that they could be converted into 6 per cent, bonds at the 
 pleasure of the holder; and that we could not take away that right. 
 This difficulty was met by the ingemiity of the then Senator from Ver- 
 mont, (Mr. Collamer.) He said that no man ever exercised a right which 
 could not properly be barred by a statute of limitations ; and if this 
 right was injurious to the people of the United States, and prevented 
 the conversion of these notes into bonds, we might require the holder 
 of these notes to convert them within a given time ; that we could 
 give them a reasonable time within which they could convert them 
 into 6 per cent, bonds, and after that take away the right. 
 
 The act of March 3, 1863, was amended by inserting this clause : 
 
 And the holders of United States notes, issued under or by virtne of said acts, 
 shall present the same for the purpose of exchanging the same for bonds as therein 
 provided on or before the 1st day of July, 1863 ; and thereafter the right so to ex- 
 change the same shall cease and determine. 
 
 In reviewing the history of our times I am not sure but that in this 
 we made a mistake. I am not sure but that it would have been better 
 to submit to any sacrifice rather than palter with the public faith. If 
 there was any wrong done by Congress at that time, I am willing to 
 share the responsibility of it, although I felt at the time the danger 
 of the measure. But, sir, undr the pressure of war we could not 
 consider as carefully as we can now all the obligations that rest 
 upon us. The life of our country was at stake ; every man's property 
 was felt to be insecure if the Union was destroyed ; everything was 
 at stake ; and we did a great many things in those times of peril and 
 excitement and trial we would not like to do now. Thousands of 
 men rushed to the battle-field and surrendered their lives ; others 
 
 2
 
 18 
 
 gave up their property ; mothers their children. There were acts of 
 heroism done at those times, arid sometimes acts of wrong. 
 
 I am willing to take my share of the responsibility of the passage 
 of this act ; but casuists and theorists can demonstrate very easily 
 that in this very act we laid the foundation of the long delay in the 
 return to a specie standard. If the right to convert greenbacks into 
 bonds had been retained as the permanent policy of the country 
 during the war, then no man would have been bold enough or bad 
 enough to take that provision away in time of peace. But mark, sir, 
 while the legal right to convert notes into bonds was taken away, 
 no one contemplated a denial of the actual conversion. The notes 
 were still received par for par for bonds during the war and after 
 the war was over. The right to convert them into a particular 
 form of bonds, that is, the five-twenties, was denied; still they weiv 
 converted at par into seven and three-tenths Treasury notes, into 
 ten-forty gold bonds, and into every form of security except only 
 the five-twenties. So that although we repealed the technical right 
 to convert after a given time those notes into one class of bonds, we 
 never did deny in practice the right to convert them into some form 
 of interest-bearing security. 
 
 After the passage of the act of March 3, 1363, Secretary Chase be- 
 lieved that he could negotiate a ten-forty loan, and he tried to do 
 it. One hundred million dollars were taken, and they were takei: 
 by the conversion of these notes, being received at par. Afterward 
 we issued $830,000,000 of three-year Treasury notes bearing 7.3 per 
 cent, currency interest, and when due convertible into 6 per cent, 
 bonds ; and they were sold at par in greenbacks. So that although 
 the legal option of the note-holder to convert was taken away, yet in 
 fact his right to convert existed except as to the five-twenty bonds. 
 During the war, and up until 1866, there was no hour when any holder 
 of greenbacks could not present them to the Treasury of the United 
 States, or to any banker or broker, and buy some form of United 
 States interest-bearing security at par. 
 
 After the passage of this act the five-twenties began to rise above, 
 par in currency. Then the measure of the value of the greenback 
 was the ten-forty bond. When the Government again commenced issu- 
 ing currency securities, seven and three-tenths notes, fearing to issue 
 a larger amount of gold-bearing bonds, the greenbacks were allowed 
 to be received at par for them. 
 
 Now, Mr. President, I have shown you that the greenbacks were 
 based upon coin bonds ; that they had the right to be converted into 
 coin bonds; that that right was taken away as to the five-twenty bonds ; 
 but that, in practice and in effect, the greenback was convertible into 
 an interest-bearing bond of the United States up to 1866, and until 
 the passage of the law to winch I will now refer. 
 
 My friend from Indiana [Mr. MORTOX] inquires what law is the 
 worst of all the laws we have passed in relation to the greenback. 
 
 Mr. MORTON. I did not say " law; " I said " what act of the Gov- 
 ernment." 
 
 Mr. SHERMAN. In my judgment more evil effects have resulted 
 from the "act of the Government" passed on the 12th of April, 1366, 
 than from any other act that was ever passed in regard to our financial 
 system. Indeed, it is the only one that I desire to criticise. 
 
 Mr. President, what was the condition of affairs when the war was 
 over! We had then outstanding every form of liability. We had 
 6 per cent, bonds; we had 5 per cent, bonds; we had seven-thirty bonds; 
 we had certificates of indebtedness; we had two or three issues of green-
 
 19 
 
 back notes ; we had eight or ten different forms of Government securi- 
 ties. Then it was that Congress was called upon to make provision 
 for funding this debt. At that time there was a large circulation ; 
 there were some forms of interest-bearing notes that were a legal 
 tender for the principal ; we had almost every class of securities. The 
 act of the Government which was most injurious to the public credit 
 was an act of omission and not an act of commission. If in the first 
 session of Congress during Andrew Johnson's administration we could 
 have passed a funding bill authoriziuganyholderof any form of Govern- 
 ment security to convert them into a 5 per cent, bond, all the evils that 
 have flowed out of our disordered currency would have passed away ; 
 the questions that afterward were raised that endangered the pub- 
 lic credit never would have arisen; all this long agony of doing what 
 we have promised to do, and never performing it, would have been 
 avoided. If in December, 1865, after our soldiers had returned to their 
 homes and the war was over, we had authorized any holder of any 
 form of security, greenback or bond, to convert it at his pleasure, at 
 his will, into some proper security of the United States, say a 5 per 
 cent, bond, there would have been no difficulty. The condition of the 
 public credit, the advancing credit of the nation, the triumph of our 
 arms, all causes co-operated ; but, sir, it could not be done. At that 
 time came up the controversy between the President of the United 
 States and Congress, and the fierce and angry passions that it excited, 
 the eager debates, the bitter excitement, the quasi civil war that ex- 
 isted, prevented any consideration of our finances. Efforts were made 
 at that time to pass some proper funding bill, but it was impossible 
 to get public attention attracted to it. Congress would not look at 
 it. Finally, after a debate of not over an hour in the Senate, and a 
 short debate in the House, the act of April 12, 1866, was passed, con- 
 ferring upon the Secretary of the Treasury a power that was never 
 conferred upon mortal man before. I will ask the Secretary to read 
 that act. 
 The Chief Clerk read as follows : 
 
 An act to amend an act entitled "An act to provide ways and means to support the 
 Government," approved March 3, 1865. 
 
 Be it enacted by the Senate and House of Representatives of the United States of 
 America in Congress assembled, That the act entitled 'An act to provide ways and 
 means to support the Government," approved March 3, 1865. shall be extended and 
 construed to authorize the Secretary of the Treasury, at his discretion, to receive 
 any Treasury notes or other obligations issued under any act of Congress, whether 
 bearing interest or not, in exchange for any description of bonds authorized by the 
 .act to which this is an amendment; and also to dispose of any description of bonds 
 authorized by said act, either in the United States or elsewhere, to such an amount, 
 in such manner, and at such rates as he may think advisable, for lawful money of 
 the United States, or for any Treasury notes, certificates of indebtedness, or certifi- 
 cates of deposit, or other representatives of value, which have been or which may 
 be issued under any act of Congress, the proceeds thereof to be used only for retir- 
 ing Treasury notes or other obligations issued under any act of Congress ; but 
 nothing herein contained shall be construed to authorize any increase of the public 
 debt: Provided, That of United States notes not more than 810,000,000 may be re- 
 tired and canceled within six months from the passage of this act, and thereafter 
 not more than f 4.000,000 in any one month: And provided further, That the act to 
 -which this is an amendment shall continue in full force in all its provisions, except 
 as modified by this act. 
 
 SEC. 2. And be it further enacted, That the Secretary of the Treasury shall re- 
 port to Congress at the commencement of the next session the amount of ex- 
 changes made or money borrowed under this act, and of whom, and on what terms; 
 and also the amount and character of indebtedness retired under this act and the 
 act to which this is an amendment, with a detailed statement of the expense of 
 making such loans and exchanges. 
 
 Mr. SHERMAN. Under the enormous powers conferred by this act 
 the Secretary of the Treasury, Mr. McCulloch, adopted what is called 
 the contraction policy ; that is, he authorized the funding of all forms
 
 20 
 
 of interest-betiring securities into 6 per cent, gold bonds of the United 
 States, while he proposed to raise the greenback up to par in gold by 
 contracting it by gradual stages limited by the law. This act, and the 
 very first thing done under this act, separated forever the gold bonds 
 of the United States from the legal- tenders, and abandoned all idea 
 of the power, the right, and the practice to convert the greenback 
 into a bond. I remember that the honorable Senator from Michigan 
 [Mr. CHANDLER] and I tried to prevent the passage of this law. We 
 tried hard to do it, and to excite public attention to it, but we could 
 not. Everybody was then fighting Andrew Johnson. And so, sir, 
 this law was passed after a brief debate, and all this enormous power 
 was conferred upon the Secretary of the Treasury. The law did not 
 even stipulate what bond it should be, whether it should be a forty 
 or twenty year bond, or whether it should run five years. The only 
 limitation was that the rate of interest on the gold bond should not 
 be over 6 per cent., but no duration as to time was prescribed. Under 
 th&t act the Secretary funded the Treasury notes, and all the various 
 forms of interest-bearing notes, into 6 per cent, bonds, swelling the 
 amount of our 6 per cent, bonds from about $700,000,000 to about 
 $1,600,000,000. All the Treasury notes payable in currency were con- 
 verted into 6 per cent, gold bonds, and the money of the people, the 
 greenbacks, were left to be canceled and retired under the last clause 
 of the act, which authorized the Secretary to cancel $10,000,000 by a 
 certain time, and $4,000,000 a month afterward. Thus the bond- 
 holder was provided for, and the note-holder was left without any 
 legal right except a naked promise to pay in the indefinite future. 
 
 If this act had contained a simple provision restoring to the holder 
 of the greenback the right to convert his note into bonds there would 
 have been no trouble. Why should it not have been done ? Simply 
 because the then Secretary of the Treasury believed that the only 
 way to advance the greenbacks was by reducing the amount of them ; 
 that the only way to get back to specie payments was by the system 
 of contraction. If the legal-tender notes could have been wedded to 
 any form of gold bond by being made convertible into it r they would 
 have been lifted by the gradual advance of our public credit to par 
 in gold, leaving the question of contraction to depend upon the amount 
 of notes needed for currency. Sir, it was the separation of our green- 
 backs from the funding system that created the difficulty we have 
 upon our hands to-day ; and I say now that, in my judgment, the only 
 true way to approach specie payments is to restore this principle, and 
 give to the holder of the greenback, who is your creditor, the same 
 right that you give to any other creditor. If he has a note which 
 you promised to pay and cannot, and he desires interest on that note 
 by surrendering it, why should you not give it to him ? No man can 
 answer that. It is just as much a debt as any other portion of the 
 debt of the United States. 
 
 Mr. MORTON. If my friend will allow me, I think he has not prop- 
 erly answered the question which I put to him, as to what act of the 
 Government had most dishonored the greenback. 
 
 Mr. SHERMAN. It is not very parliamentary to be putting ques- 
 tions to me and leading me off from the course of my argument ; but 
 if the Senator will tell me what he is driving at, I will answer him. 
 
 Mr. MORTON. If my friend will allow me, I suggest that the act 
 of the Government that I think did more to depreciate the greenback 
 currency than any other, and has cost this Government more than 
 any other, is this declaration, to be found on the back of the note : 
 
 This note is a legal tender at its face value for all debts, public and private, except 
 anties on imports and interest on the public debt.
 
 21 
 
 My friend made a report as chairman of the Committee 011 Finance 
 in 1866, offering an irresistible argument that this note meant just 
 what it says, that these notes were a legal tender in payment of the 
 five-twenty bonds, for the bonds were bought from the Government 
 with these very notes. That argument has*never been answered. But 
 when the Government denied this property in the legal-tender notes, 
 it thereby gave them a permanent ^depreciation. They would have 
 been at par live or six years ago but for that act. 
 
 Mr. SHERMAN. What act is that ? 
 
 Mr. MORTON. The determination upon the part of the Govern- 
 ment that this language did not mean what it says. 
 
 Mr. ALLISON. You refer to the act of 1869. 
 
 Mr. MORTON. That act simply followed a determination that the 
 Government had acted upon for some four or five years. That act 
 was simply carrying it out. But the declaration, made before the 
 war was over, that that language did not mean what it says, and that 
 the Government could not use those notes in taking up the very bonds 
 which were bought with them, in plain violation of the language and 
 of the argument made by the Senator himself I say that that de- 
 termination has cost this Government more than any other blunder 
 that ever was committed in regard to our finances. But for that these 
 notes would have been at par years ago, millions of dollars would 
 have been saved, and more of our public debt would have been paid 
 oif than is now paid. 
 
 Mr. SHERMAN. I do not know for the life of me what the Senator 
 from Indiana is driving at. Does he wish to say that the act of 
 March 18, 1869 is wrong an act of bad policy ? If he does, I under- 
 stand him. 
 
 Mr. MORTON. I am merely stating the position my friend took in 
 his report in 1866 in regard to the effect of that language. I am not 
 quarreling with the act of 1869. When it was passed I acquiesced in 
 it, and it is gone. 
 
 Mr. SHERMAN. I did make a report upon the act of 1866. I did 
 make an earnest appeal to Congress to restore to the greenback the 
 right that had been taken away from it during the war the right to 
 be converted into a bond. I stand there now, and I will stand there 
 until every dollar of this debt is redeemed. 
 
 Mr. MORTON. My friend's argument in that report was that the 
 Government had a right to use these greenbacks in the payment of 
 those bonds. 
 
 Mr. SHERMAN. I insisted that they were convertible one into the 
 other ; that although the authority to convert a greenback into a five- 
 twenty bond was repealed by the act of March 3, 1863, still in fact and 
 in law the holder of a greenback had a right under the legal- tender 
 clause to convert it into a bond. I stand there now, and there is where 
 I wish the Senator from Indiana would stand with me. If he desires 
 to make a tilt at the act of March 18, 1869, why does he not do it 
 squarely and openly ? Did he oppose it or resist ? It is a pledge of 
 the public faith ; and I call upon him to aid me in carrying out that 
 obligation. 
 
 Mr. MORTON. I agree that the Government is now bound by it. 
 
 Mr. SHERMAN. Very well ; then I call n'poii him to aid me to 
 carry it out. We have made the promise, whether wisely or not it is 
 not for us to inquire. 
 
 Mr. MORTON. The act of 1867 does not touch this question at all 
 in regard to paying the greenbacks in coin ; we were always bound 
 to do that ; but the argument of my friend in 1866 was that the Gov-
 
 22 
 
 eminent had a right to issue the greenbacks in payment of five- 
 twenties, and the fact that the Government came to a different 
 conclusion before the war was over did more to depreciate the gieeu- 
 backs than any other act that has ever been performed by the 
 Government, and has cost tnis Government more ; and but for that 
 Wd should have had specie payments long ago. 
 
 Mr. SHERMAN. I always insisted that it was the duty of the Gov- 
 ernment to redeem this broken promise by making the note equal to 
 par in gold before attempting to force it on anybody in payment of a 
 bond. The Senator should see that we had no right to compel any 
 holder of a bond to take a greenback in payment of his bond until 
 we complied with that obligation which we assumed, long, long ago, 
 to make it equal to par in gold. Then it would be a matter of in- 
 difference whether a greenback or gold was paid. But, sir, it was 
 the act of March 18, 1869, that settled all this controversy about the 
 obligation of the Government to the holders of the greenback and 
 the bond ; and it is that act of which he acknowledges the binding 
 force, that I ask Ijim to carry out. 
 
 By the act of 1806 $10,000',000 of greenbacks were to be retired in 
 six months and canceled, and $4,000,000 every month thereafter. 
 Such progress was made under the operation of the act that within 
 less than two years $44,000,000 of these notes had been retired and 
 canceled in pursuance of the contraction policy. 
 
 Mr. ALLISON. If I may interrupt the Senator, I desire to ask, was 
 not that act repealed in 1868 i 
 
 Mr. SHERMAN. It was suspended ; and the Secretary could not 
 cancel any more notes after the passage of the act of 1868. I have it 
 here before me. The authority to retire and cancel greenbacks was 
 suspended ; but I ask the Senator from Iowa whether that revives 
 into life and being the $44,000,000 that were retired and canceled 
 under the law .' 
 
 Mr. ALLISON. I only desire to call the Senator's attention to a 
 part of the history of the withdrawal of these greenbacks. The 
 then Secretary of the Treasury, instead of following out the spirit 
 and letter of the law, which was that 84,000,000 per month should be 
 withdrawn, allowed four or five months of the plethoric time of 1867 
 to pass away without withdrawing a single dollar of greenbacks, 
 and when the months of September and October of 1867 came, when 
 it was necessary to use a large amount of money in the Western States 
 for the forwarding of the crops, the Secretary of the Treasury then 
 reduced the greenback circulation $16,000,000 in two mouths; thus 
 contracting the currency, instead of $4,000,000 a mouth, $16,000,000 
 in two months, so that when Congress came together in December, 
 1867, they withdrew from the Secretary of the Treasury the power which 
 they believed he had abused; and from that time until now no Con- 
 gress has ever authorized the withdrawal or the reduction of the cir- 
 culation of the greenback currency. Am I not right f 
 
 Mr. SHERMAN. I do not differ with the Senator from loAva; but 
 I do not see what that has to do with my argument. 
 
 Mr. ALLISON. It has this to do with the argument, that the 
 policy of returning to specie payments in 1866, by th'e law of 1866 r 
 was reversed in 1868, by an act of Congress, and has never been, 
 resumed. 
 
 Mr. SHERMAN. And to that act I heartily assented. I do not 
 doubt at all that the policy of getting to specie payments by a con- 
 traction of the currency in the way that was proposed was a very 
 unwise one. I aided in its repeal. But that is not the point. When
 
 23 
 
 in. 1869 we pledged the public faith to redeem our outstanding paper 
 in coin, the only amount that then legally existed, or which there 
 was any authority to issue, was the $356,000,000, to which amount, 
 by the policy of the law of 1866, the currency had been reduced 
 when that reduction was suspended. Therefore, I do not question my 
 friend's statement about what Mr. McCullochdid, for I have nothing 
 to say about it. The argument I make is that when we made the 
 pledge of the public faith to redeem our notes in coin, the only cur- 
 rency that was legally outstanding was the $356,000,000. All above 
 that had been retired and canceled. If there are any words in our 
 language that express the destruction, the annihilation, the non-ex- 
 istence of anything, the words " retired and canceled " do. They 
 are the very same words that are used in regard to the cancellation of 
 all our bonds. There have been $3,000,000,000 of bonds in various 
 forms " retired and canceled. Is there any power to reissue those ? 
 Not at all. 
 
 Mr. BOUTWELL. Mr. President, I am unwilling to interrupt the 
 Senator, and I dislike to say a word on this point of the legality of 
 issuing the forty-four millions; but as on three different occasions 
 during my administration there was no other way of maintaining the 
 public credit but to issue a small portion of the forty-four millions, 
 as it had been on one occasion at least used to a small extent by my 
 immediate predecessor, as it was the opinion of the Department that 
 that legal power existed, as that opinion had been confirmed by the 
 Attorney-General of the United States, as that matter had been pre- 
 sented to the Committee 011 Ways and Means of the other House and 
 the Committee on Finance of this House, and as those committees 
 individually and generally were informed by the then Secretary of the 
 Treasury what his view was of the legal rights of the Secretary of 
 the Treasury in this respect, and as no action was ever taken, not only 
 by Congress, but as no action was taken by either House of Congress, I, 
 for one, think it is too late to question the good faith or even the legal 
 authority of the present Secretary of the Treasury, or of either of 
 his two immediate predecessors, upon that point. 
 
 Mr. SHERMAN. Mr. President, the considerations now stated by 
 the Senator from Massachusetts were undoubtedly submitted to Con- 
 gress. The claim of the Secretary of the Treasury that he had tl:e 
 power to issue the forty-four millions was submitted to Congress, and 
 neither House of Congress negatived by a vote the assertion of the 
 power ; and therefore it may be said with great propriety, and I freely 
 accord, that under the circumstances, following the decision of the 
 Department, the present Secretary might be justified in issuing the 
 forty-four millions ; but the argument I am making to-day is not to 
 arraign the Secretary, not to find fault with him. In the written report 
 made by the Committee on Finance on this subject we expressly 
 relieved the Secretary of the Treasury from all fault in the matter 
 and submitted it to Congress. I say that Congress now permits daily 
 the violation of the only act that looked to the advance of green- 
 backs to par with gold by its silent acquiescence. The Secretary of the 
 Treasury submitted to us the claim that he has asserted and exercised, 
 and we have never denied it as a Congress or by either House of Con- 
 gress ; and therefore I do not rind fault with him; but I say that Con- 
 gress does permit this act, which in my judgment is a violation of law 
 and an exercise of authority not delegated to the Secretary of the 
 Treasury, to go on, and we are now daily living upon notes issued 
 without authority of law. 
 
 Mr. President, I have gone into this argument to show, first, that we
 
 24: 
 
 are bound by the obligation that we assumed on the leth of March, 
 1869, to resume specie payments, or to do something to advance our 
 notes to the par of gold. I have endeavored to show that such was 
 the legal and established policy of the Government when the notes 
 were first issued. Now, I have only to say, very briefly, that there 
 are various modes, to none of which do I intend to commit myself 
 until the whole subject is finally discussed, by which this can easily, 
 without trouble, without difficulty, be accomplished. There, are three 
 modes that have been proposed in debate in the Senate, and a multi- 
 tude come to us from the people, but I will group them into three 
 classes. 
 
 There is, first, the proposition to accumulate gold in the Treasury 
 with a view to the actual redemption of our notes in coin. That is 
 supported by two bills now before the committee; one introduced 
 by the Senator from Vermont, [Mr. MORRILT,,] and the other by the 
 Senator from New Jersey, [Mr. FKELIXGHUYSKN.] What are the ob- 
 jections to this plan ? They seem to me to be these : In the first 
 place, any attempt to accumulate large masses of gold in the Treasury, 
 lying idle to await some future event not fixed by act of Congress, 
 would not be a wise use of the public moneys. In the next place, I 
 entirely object to conferring upon the Secretary of the Treasury the 
 power of issuing one hundred millions or any lesser sum of 6 per cent, 
 bonds with a view to buy gold to hoard it in the Treasury to maintain 
 resumption. I believe that it is impossible, in the very nature of 
 things, to maintain the resumption of specie payments at all times 
 and under all circumstances ; and if anything has been established 
 by modern experience, it is that all a nation can do that issues paper 
 money is to maintain it at a specie standard in ordinary times ; but, 
 in times of panic, such as by periodical revulsions come over every 
 country, specie payments cannot be maintained. They can scarcely 
 be maintained in England, and are not now maintained in France, al- 
 though they approach them. Therefore, every plan for specie payments 
 ought to have some provision for the temporary suspension of specie 
 payments, or some means by which in times of great panic and finan- 
 cial distress there may be a temporary departure from the specie 
 standard. I say this not that it ought to be so, but simply as a matter 
 of demonstrated experience shown by the history of almost all com- 
 mercial nations in Europe. 
 
 The second plan is the actual payment of the United States notes 
 and their cancellation ; in other words, the plan of contraction. In 
 the first place, this plan, while it operates, does so with such severity 
 as, in a popular government like ours, to cause its suspension and re- 
 peal. Undoubtedly, the most certain way to produce specie payments 
 is by retiring the notes that are dishonored, paying them off, taking 
 them out of circulation. But the trouble is, the process of contrac- 
 tion is itself so severe upon the ordinary current business of the 
 country that the people will not stand it ; and in this country the 
 people rule. The policy of Mr. McCulloch, already commented upon, 
 if it had been continued further, would have undoubtedly brought us 
 to a specie standard ; but with great distress, great impoverishment, 
 and with more difficulty than was really necessary to accomplish the 
 object in view. 
 
 These are the difficulties that occur to me as against these two 
 policies. 
 
 There is a third plan. This plan, which in my judgment present* 
 the easiest and best mode of attaining specie payments, is by taking 
 some bond of the United .States which in ordinary times, by current
 
 25 
 
 events, is .shown to be worth par in gold in the in oiiey markets of the 
 world, where specie is alone the standard of value, and authorize the 
 conversion of notes into that bond. 
 
 I do not intend to consume much time upon the discussion of these 
 different plans, because they are all open for debate, and I do not 
 intend to commit myself. I have no pride of opinion as to modes if 
 I can secure the substance. I want to get at some measure which, 
 without contraction, without undue distress, will make us redeem 
 our promise. This mode of vesting the specie standard was reported 
 favorably by the Committee on Finance at the last session. I will 
 glance at the results that would have been accomplished by that plan 
 in the present condition of our money market. I am speaking here 
 now, on the 16th day of January, 1874, after the time when, by the bill 
 reported at the last session, United States notes could have been con- 
 verted into coin or bonds at the option of the United States. This 
 would not to-day have produced absolute payment f>f the notes 
 in coin, but their value would be advanced to the value of the 5 per 
 cent. bond. Things that are equal to the same are equal to each other. 
 Five per cent, gold bonds this day, in the midst of the panic, are worth 
 ninety-nine and a half cents ; so that the United States notes would 
 be this day practically at par in gold, having just about the same 
 depreciation as now exists in France where the law of convertibility 
 has always been maintained. In France, with a large currency, that 
 currency may be used to pay the same as gold for any form of debt 
 of or to the government, even the form of duties. 
 
 Mr. FERRY, of Michigan. I should like to ask a question just here. 
 
 Mr. SHERMAN. I would rather not be interrupted now. 
 
 Mr. FERRY, of Michigan. It is on the point the Senator was just 
 discussing. 
 
 Mr. SHERMAN. Very well. 
 
 Mr. FERRY, of Michigan. I ask whether, in the Senator's judgment, 
 the value of the currency in France depends so much on the convert- 
 ibility of the notes into bonds, or on their being made lawful money for 
 all purposes, which our greenbacks are not ? 
 
 Mr. SHERMAN. I have no doubt that it would greatly advance 
 our greenbacks if they were allowed to be received at the custom- 
 houses for duties. 
 
 Mr. FERRY, of Michigan. Is that not the case in France ? 
 
 Mr. SHERMAN. Yes ; but I will ask the Senator a question now. 
 Would he pass such a law in the face of the obligation of the United 
 iStates, made on the 25th day of February, 1852, that this coin shall 
 be set apart sacredly as a fund ? 
 
 Mr. FERRY, of Michigan. If I had control of the finances of this 
 nation I would not discredit my own paper ; I would declare it good 
 for all purposes for or against me, and then enter the market and 
 purchase the gold necessary to meet the obligations which I had 
 agreed to pay in coin. In that ca.se I would stand upon the French 
 basis and maintain the same credit which the French nation main- 
 tains to-day, to wit, a discount of per cent, on its currency, while 
 ours to-day is about 10 per cent., for the very reason that we have not 
 made our currency lawful money for all purposes, but have made an 
 exception in regard to duties. 
 
 Mr. SHERMAN. I only gave way to a question. 
 
 Mr. FERRY, of Michigan. The Senator put a question to nie, aud 
 I was answering it. 
 
 The PRESIDENT pro tempore. The Senator from Ohio declines to 
 be further interrupted.
 
 26 
 
 Mr. SHERMAN. The answer to all this is, that by the act of the 
 25th of February, lro'2, which authorized the issue of bonds and 
 greenbacks both, it was expressly stipulated that the greenbacks 
 should not be receivable for customs duties, but it was expressly 
 stipulated that the customs duties should be paid in coin, and that 
 this coin should be specially pledged and set apart as a fund to pay 
 the interest, and then the principal, of the debt. There is the diffi- 
 culty. If we were now to legislate without any law upon the statute- 
 book, I certainly would not pass an act that would require us to refuse 
 the notes of the United States for the taxes payable to the United 
 States; but we are crippled by the operation of a law that we can- 
 not repeal without violating the public faith. 
 
 Now, sir, taking the case again of the existence of some such con- 
 vertible provision as I referred to in the bill of last year, at this day 
 the notes, instead of being hoarded, would to some extent have floated 
 into the Treasury for 5 per cent, bonds; they would be pa id out for 
 current expenses, and in the purchase or redemption of five-twenties 
 at a discount of one-half of 1 per cent. It is sometimes said that 
 these notes would flow in in unmeasured numbers for 5 per cent, 
 bonds. Why, sir, how many would be withdrawn from t lie volume 
 of the currency before they would be equal to the 5 per cent, bonds 
 now at or near par in gold? But suppose they should flow in to the 
 extent of fifty or one hundred millions, cannot the Government of 
 the United States use them ? First, we have to pay our current ex- 
 penses, which are now more than our income. Instead of consuming 
 the forty-four million reserve, we could use some of them coming into 
 the Treasury for bonds to pay the current expenses ; and we could 
 use all of them in the purchase and redemption of the 6 per cent, 
 bonds of the Unite*d States. There would be no practical difficulty 
 in using all the currency that might flow into the Treasury in the 
 payment and liquidation at a slight sacrifice of a debt now bearing 
 6 per cent, interest. That operation might go on until 81,200,000,000 
 were paid, because every dollar of the five-twenty bonds is now due 
 and payable at our pleasure in coin. 
 
 Sir, the Secretary of the Treasury has for years adopted the policy 
 of buying bonds in greenbacks. He has paid 10 per cent, premium, 
 because he could not get them for less. And suppose our notes were 
 advanced near the par of gold by being convertible into a 5 per cent. 
 bond, the value of which is fixed in foreign countries, then let him 
 use the greenbacks that flow into the Treasury to pay the 6 per cent, 
 bonds. He could only do it by paying the difference bet ween notes and 
 gold. What premium would he have to pay ? One-half of 1 per cent. 
 This operation of funding the 6 per cent, bonds into the new 5 per 
 cents is going on now at an expense of nearly 2 per cent, to the Gov- 
 ernment. First the law allows 1 per cent, for expenses, and then a 
 certain credit or a certain delay iu payment is given to the syndi- 
 cate or bankers who negotiate the exchange. This is equivalent to 1-J 
 per cent., so that we are now carrying on this funding system at an ex- 
 pense of more than 2 per cent. Sir, the practical operation of a law 
 permitting the conversion of notes into bonds would not only advance 
 our notes to near par in gold, but would enable us to reduce the inter- 
 est on the whole mass of 6 per cent, bonds of the United States to 
 5 per cent., thus saving $12,000,000 per annum, or several times the 
 amount of interest we would pay on bonds given for notes permanently 
 retired. 
 
 Now, sir, I will not go into the details of the other provisions of 
 that bill, which was to supply any want of currency needed at the
 
 27 
 
 time. That bill provided for free banking ; it provided for a relief 
 from the reserve to be maintained by the banks as a security for their 
 notes. Sir, if you take the actual facts as they have now developed 
 themselves and apply the principles contained in the bill of the last 
 session, they would have answered by their actual workings all the 
 objections that were made to the bill, and I defy Senators to criti- 
 cise it. 
 
 But, sir, the time will come when whatever plan may be brought 
 before the Senate will be subjected to amendment and criticism. We 
 are not now considering any plan, but only whether we recognize our 
 obligation now at this session to do some definite act to redeem our 
 broken promises. If you will you can find a way. 
 
 Mr. President, there are some objections of a popular character 
 made to specie payments, that I think I ought to answer. 
 
 In a popular government like ours even an unfounded fear ought 
 not to go unheeded. Warnings are uttered ; a great bugaboo is raised 
 against every measure that tends toward specie payments. Let us 
 examine some of these popular objections. 
 
 The first objection (and it is the only one well taken) is that specie 
 resumption will be burdensome to debtors. Undoubtedly, if you 
 advance a standard in which a man's debt is to be paid, you add to 
 the burden of that debt. We are now dealing on a standard of about 
 11 per cent, below par; and if , by some sudden act of Congress, a 
 debtor should be required to pay in a standard worth 11 per cent, 
 more than the present par, it would be burdensome to him. There- 
 fore it is, and for this reason only it is, necessary to make any step 
 moderate, to make the advance slow ; and I for one would not de- 
 sire to see any sudden resumption, because it would be injurious to 
 a class of business men who are now more or less in debt. This injury 
 is greatly exaggerated, for almost every debtor is a creditor, and 
 therefore while he loses on the one hand he gains on the other. Debts 
 are now less than they were a short time since. The recent panic 
 swept away a great many of them. Most of those w T hich remain are 
 being settled on the present basis, so that never was there a time 
 when an act, looking to a change of the standard of values, could be 
 made better than now. There are fewer contracts to be settled upon 
 the old standard. If the time for making this change of standard is 
 postponed for a short period, say a year, all the debts contracted on 
 the present basis would be settled up. 
 
 Why, sir, this is not the first time we have changed the standard. 
 We did it in 1835 ; and we have changed the value of our gold coin 
 twice within my recollection. We have changed the value of silver 
 two or three times. The monthly fluctuations that happen in the city 
 of New York sometimes are greater than all the amount of difference 
 between our paper money and gold now. The people are used to 
 these. Sir, you live in a State whose chief production is now, or was, 
 wheat. You have seen wheat jump up from fifty cents to a dollar a 
 bushel, and go down from a dollar to fifty cents again a fluctuation 
 of 100 per cent. These fluctuations are unavoidable ; but when they 
 affect the standard of all values they ought to be made carefully and 
 slowly. Here, Senators, is the only difficulty in this whole problem. 
 When we made our notes a legal tender, when we repealed the con- 
 vertibility clause, when we took away their value and saw them de- 
 preciate down to 280 per cent., we did great injustice to creditors. 
 We did it because we were compelled to do it. All the Senators 
 around me admit that at some .time we must come to a specie standard. 
 When can we do it more easily, when can we do it better? Will you
 
 28 
 
 flood the country again with more irredeemable paper money, sink 
 again the standard of value, make the depreciation beyond what it 
 was when General Grant was elected, 30 or 40 per cent., and then 
 resume? How foolish! how idle! The moment when we tipproach 
 the specie standard nearest by natural causes, that is the happy mo- 
 ment to complete the cycle, to restore us to the old and true founda- 
 tion. 
 
 The next objection is that the United States will have to pay inter- 
 est on a portion of its debt which is now without interest. I have 
 heard that argument made, I think by my friend from Indiana. He 
 has said, " You would make us pay interest on our greenbacks ; they 
 will be converted into interest-bearing bonds*." Well, why should we 
 not pay interest on our debt that is due ? Why should the people of 
 the United States have a forced loan which they require everybody 
 to take, debtor and creditor, without interest ? Why should they not 
 pay interest on it ? If these notes are idle in the nands of the people 
 and there is no opportunity for investment, and they have no desire to 
 use them, why should we not pay interest while they do not want to 
 use them? It is perfectly obvious that the strongest groundsof equity 
 demand that when anybody has our note not bearing interest, has no 
 immediate use for it, prefers to put it on interest, we are bound either to 
 pay him, as we agreed to pay him, in coin, or we are bound to give him 
 something that will bear interest, and will be as near as practicable 
 to a specie standard. Therefore, this scarecrow about increasing our 
 interest-paying debt does not disturb me. Why, sir, we have in the 
 last five years paid off four hundred millions of bonds, and have saved 
 interest to the amount of $30,000,000. No one has claimed that the 
 interest of the debt of the United States would be increased by this 
 system more than two or three millions. Why should we not do it ? 
 Why should not the people have for their greenbacks the same privi- 
 lege that is extended to other creditors ? 
 
 A third objection that was made, I think by my colleague, who is 
 not now in his seat, [Mr. THURMAN,] was that the United States 
 notes would be retired from circulation and give place to bank-notes, 
 and he has a great prejudice against bank-notes. I am not much of 
 a bank man myself. I would not care if there was only one form of cir- 
 culation in this country, and that a United States note convertible at 
 the pleasure of the holder into a proper bond, or into coin. But the 
 national banks sprang out of the necessities of the war. We could 
 not absorb the State banks and get rid of the horde of inconvertible, 
 irredeemable paper-issuing, irresponsible system of banks all over this 
 country, except by allowing them to be organized into national banks. 
 We cannot get rid of them now. That was the only way in which 
 they could be dealt with. They disturbed during the war our whole 
 system; but now the present banking system is so much better than 
 the old, the currency is so good, so well secured, of such universal 
 circulation, and everywhere at par with greenbacks, that nobody 
 would propose to go back to the old system. 
 
 Mr. President, as these banks are compelled to refleem their notes 
 in greenbacks; as they are bound to maintain in their vaults a reserve 
 of greenbacks ; as every prudent banker will maintain this reserve 
 in greenbacks ; there is no danger that the United States notes will 
 be driven from circulation to give place to bank-notes to any consid- 
 erable amount. The same provision for redemption that is applied to 
 United States notes is applicable also to national-bank notes. If the 
 United States redeem their notes in coin, the banks have to redeem 
 theirs in coin. If the United States notes are redeemed in United
 
 *, 29 
 
 States bonds, the banks are compelled to redeem their notes in the 
 same way. The very moment that a bank-note falls below the value, 
 the purchasable power, the convertible power of the United States 
 note, that very moment it would be returned first to the bank, and in 
 case of its failure .to pay then to the Treasury of the United States, 
 and there, with the bonds in the Treasury or with the proceeds of 
 them, the Treasurer would pay them dollar for dollar. So that the 
 same plan of redemption that we now propose to apply to United.States 
 notes is applicable by existing law to the bank-notes ; and hence the 
 theory that this plan will drive out the United States notes and give 
 way to bank-notes is utterly futile. The same burden which now 
 rests on the United States to redeem its notes will then rest on the 
 banks ; and, as I said a moment ago, you are now dealing with insti- 
 tutions that are amply able to redeem their notes. Whether any of 
 them have in the speculations of the past impaired their capital or 
 not, is a matter of perfect indifference to the people of the United 
 States as long as the notes are secure. You can present no plan of 
 redemption which the banks are not able at this moment, promptly 
 to-day, to comply with. If your law should take effect requiring the 
 banks to redeem either in coin or in bouds of the United States, every 
 bank has these bonds and 10 per cent. over. Therefore this plan of 
 redemption applies not only to the United States notes, but to the 
 banks under existing law ; and it is not necessary to even change the 
 law to make it more rigorous or direct. 
 
 Sir, the last objection is that it will contract the currency. That is 
 the image of alarm that came tons from theexperiment as I thought 
 the bad experiment of 1866. My honorable friend from Indiana, from 
 the way in which he pronounced the word "contraction," seemed to 
 think it was some terrible thing. Well, sir, the people are afraid of 
 contraction. I do not want to contract the currency. But what is 
 contraction ? Is it to fulfill an obligation to pay a note when it is 
 due ; to pay in coin when you have promised to pay in coin ? I do not 
 think that is contraction. Why, sir, I do honestly believe that if now 
 there was a plan of redemption agreed upon by which notes could be 
 converted into coin or bonds at the pleasure of the holder, all restric- 
 tions upon the amount of currency were repealed, the amount of cur- 
 rency thus at par with gold would be greater thanit is at present, and 
 its purchasing power would be just exactly 11 per cent. more. The peo- 
 ple, in the Western States especially, have been very fearful on this 
 point, although they are now getting bravely over it. Look at the re- 
 ports of their chambers of commerce, their boards of trade ; see the in- 
 telligent opinion that comes up from the Western States. The people 
 of the West were terribly alarmed about contraction of the currency, 
 but they begin to understand it. The laboring man who is paid off 
 in a greenback begins to desire that that greenback may buy as much 
 food and clothing and produce as the best dollar that was coined in 
 the mint. He begins to understand that he receives that for his daily 
 labor which will not purchase him the supplies that gold would. The 
 farmer, also, who sells his produce mostly to a foreign market, finds 
 that, under this system, when he is paid in greenbacks, he has to pay 
 greenback prices for his purchases, while his commodities are settled 
 for by the gold standard. 
 
 And, sir, I can here show by the actual returns from Mr. Young, of 
 the Statistical Bureau of the Treasury Department, that although the 
 price of greenbacks fluctuates, as compared with the standard of gold, 
 yet the articles which the farmer sells depend almost entirely on the 
 gold price' and are fixed by the gold standard. Wherever he sells his
 
 30 
 
 surplus products, the ruling price iu the foreign market fixes the 
 prices of his commodities here. The price of the farmer's produce is 
 fixed by the gold standard, and was during all the war, and is to-day, 
 and will he to-morrow. His price is fixed by the gold standard, while 
 what he buys is fixed by the currency standard. 
 
 The people are beginning to understand that ; and when they find 
 out that "contraction," with all its horrors, means good money, con- 
 vertible money, greenbacks convertible into gold, they will sound 
 hallelujahs in favor of that kind of money. They now feel that the 
 greenback money is a good money as niy friend from Indiana says, 
 the best money that ever was devised by man. Well, sir, in many of 
 its properties it is good money ; it is of universal circulation, univer- 
 sal credit; it has a fixed value, fixed daily by the quotations in New 
 York, and it has a universal value ; it passes readily from hand to 
 hand. It is so much better than the old system, and all like it. There is 
 only one thing to crown the perfect work of this money to make it 
 the best in the world, and that is, make it equal to what it promises 
 "to pay. Then you have good money, you have money based upon the 
 public credit, a note of the United States not dishonored, a note whose 
 purchasing power is as good as the best gold that ever was coined in 
 any mint, or ever mined in Peru, or Australia, or America ; a money 
 whose purchasing power will enter into the markets of the world 
 a.nd buy its face value in the products of the world; a money which, 
 if convertible into coin, will travel, like the Bank of England note, 
 all around the world, buying in every mart and every community the 
 production of every clime. Sir, this is what we aim at, this is what 
 we desire ; and when the people begin to understand this question, 
 and see that this cry about contracting the currency means nothing 
 but an effort to stave off the immutable event which will come, which 
 we have promised shall come, namely, a specie standard, they will 
 then silence the demagogical clamor of the hour. 
 
 Why, sir, a year or two ago, if you had convened your chambers of 
 commerce and boards of trade and representative business men of the 
 country before this panic, and submitted to them anyproposition which 
 looked to the advancement of the greenback to the standard of gold, 
 they would have passed resolutions without number against it. But 
 now they are all passing resolutions for it. Almost every one of them 
 is opposing any increase of the paper money of the country. These 
 documents from representative men could not have come here a year 
 ago in favor of specie payments, led off by the great petition from the 
 Chamber of Commerce of New York, presented here a month ago. Sir, 
 the people will soon reply to these popular objections. 
 
 But, sir, we have had a great deal of talk here about the amount of 
 currency we ought to have, and Senators have made the computation 
 how much currency per inhabitant, how much for every man, woman, 
 and colored baby, how much for every child, how much for every 
 bushel of wheat. How much currency should we have f They figure i t 
 out in someway that France and England have more currency than we, 
 and that as no nation, shall have more of a good thing than the United 
 .States, therefore we are determined to have all that any other country 
 has! That is the argument. They say, "We want more money." 
 Well, in the sense in which money means capital, I think we all want 
 more money. In the sense iu which money is used as a mere medium 
 of exchange to measure value, to pass from hand to hand, to facilitate 
 commercial transactions, the only test and measure of the amount 
 necessary is that which can be maintained at the specie standard; no 
 other. Why, sir, you might as well say that a yard is not thirty -six
 
 31 
 
 inches long, and economize by using one thirty inches long ; what 
 would be the effect of it ? It would take more yards of cloth to make 
 the coat ; but the coat would not cost any less. 
 
 Sir, the only standard of the amount of paper money needed in any 
 country is the amount that can be maintained at the specie standard. 
 The amoiint of currency in Great Britain, in Bank of England notes, 
 is 25,162,000; in other banks of England, Ireland, and Scotland, 
 18,226,000; making a total of 43,338,000, or, in dollars, 216,940,000 
 of paper money, as good as gold. That is enough to carry on all the 
 business transactions of Great Britain. 
 
 But my friend from Indiana says Great Britain is a small country 
 compared to the United States ; it does not cover as many arid plains 
 and deserts as the United States ; it has not the area or the population 
 of the United States. Sir, area and population are not the things that 
 demand currency ; it is business, wealth, production ; and, although 
 I wish it was otherwise, we cannot, as yet, compare with the wealth 
 or commerce of Great Britain. 
 
 Mr. MORTON. Does the Senator give that as the entire currency 
 of Great Britain ? 
 
 Mr. SHERMAN. I give that as the entire paper currency of Great 
 Britain. 
 
 Mr. FERRY, of Michigan. I should like to ask the Senator if business 
 can be done without people or area ? 
 
 Mr. SHERMAN. No, sir ; we must have some people to carry on 
 business, and some area on which they may live. We have been told 
 that Great Britain is a small country compared with ours, and yet 
 that kingdom contains thirty million people, who have now twice 
 the actual wealth, and more than twice the commerce, of our people. 
 The accumulated wealth of ages of our own race is there. 
 
 Mr. FERRY, of Michigan. I understood the Senator to say that it 
 was capital that was wanted, and not people or area. Can there be 
 capital without people or area ? 
 
 Mr. SHERMAN. I do not understand the Senator. 
 
 Mr. FERRY, of Michigan. I understood the Senator to say that the 
 volume of the currency depended upon the business of the country, 
 and not upon the people or territory. 
 
 Mr. SHERMAN. I did not say that. I said the currency necessarily 
 depended upon wealth, production, &,c. 
 
 Mr. FERRY, of Michigan. And not upon people, or the extent of 
 territory ? 
 
 Mr. SHERMAN. Without people and area there can be no wealth 
 and production; but the amount of currency needed depends upon the 
 amount and nature of the productions of the people. The Senator 
 from Indiana says that $216,940,000 is only one form of money in 
 Great Britain. So it is; but it is the amount of paper money that 
 they undertake to maintain at par in gold. A wise nation like Great 
 Britain, with ample experience in all financial questions, where they 
 have been managed with great skill, where more time in Parliament 
 is devoted to them than in Congress here that nation has decided that 
 it is not wise ever to attempt to circulate more paper money than can 
 at all times be maintained at par in gold. They prohibit by law the 
 issue of any more paper money. No new stock banks are organized, 
 and the Bank of England cannot issue one pound of paper money 
 more than the amount fixed by law thirty years ago, at 15,000,000, 
 and such additional amouu t as they have actual gold on hand. Every 
 dollar is secured by government securities or gold on hand. 
 
 Senators say that the Bank of England can issue in times of panic
 
 32 
 
 more than the amount allowed. It has done so at three exceptional 
 periods of distress. But this did not cause a suspension of specie pay- 
 ments. Not at all. When the Bank of England note is issued in 
 excess of the legal limit it is done by order of the ministry, at their 
 hazard, just as they -would do any other unlawful act for the public 
 safety. The amount is limited, say to 2,000,000, or -10,000,000 ; 
 securities are required, and the profit of that issue goes to the govern- 
 ment. So careful are they. The amount of notes issued by the Bank 
 of England in excess of the legal limit was never over 2,000,000 
 sterling, and in one case no notes were issued. The authority to issue 
 arrested the panic. The issue when made was within sixty days with- 
 drawn and the old limit restored. Why, sir, we in this country have in- 
 creased our paper money in five years over $60,000,000, and the Secre- 
 tary of the Treasury during and since the panic has issued new paper 
 money foxirfold in volume the aggregate of temporary issues by the 
 Bank of England since Peel's act of 1844. 
 
 But the Senator from Indiana says Great Britain has coin. So it 
 has, and the reason why it has coin is because there is a use for the 
 coin there. So, if we were at the specie standard, coin made in our 
 own country of the gold mined here would be kept here. It would 
 have some useful employment. But, sir, one of the evil effects of a 
 depreciated currency is to demoaetize coin, to drive it out, because 
 the poorer currency always fills the channels of circulation. There- 
 fore it is that we cannot keep in this country any considerable 
 amount of gold in the present condition of our aft'airs, unless we hoard 
 it in the Treasury of the United States. A private citizen has no use 
 for it. He sends it abroad where they do recognize its value, where 
 they do use it in ordinary affairs. The gold of our country is hoarded 
 by the Treasury ; and as long as yon have a depreciated currency one 
 of the inevitable effects of such a currency is to banish gold from the 
 country, although it is our own production. We banish the children 
 of our mines, the work of our hands, because we will deny the funda- 
 mental truth that gold mined from the earth is the standard of value. 
 We have repudiated it. We have rejected the true god and set up 
 an idol of our own ; and thus that which we produce ourselves is 
 fdrced from our own country. 
 
 So with France. I have already given the amount of paper circu- 
 lation there. The issues of the Bank of France were 2,606,377,000 
 francs, or $521,275,000; and this is practically maintained- at par in 
 gold, as the Senator from Michigan [Mr. FERRY] very properly said. 
 
 Now, sir, when this cry is made for more money, I answer, yes ; let 
 us have more money, but let it be more good money, more money that 
 will purchase that which money in any other country will purchase. 
 I want the best ; and if my friends here really believe that France 
 and Great Britain have, counting their gold, a little more currency 
 per capita, than we have, let me console them by telling them that if 
 we come back to specie payments we shall have more good money, 
 both paper and coin, than any country in the world. Now, at this 
 moment, if you take our paper money and add it to the gold in this 
 country, you will see that we have more per capita than any nation in 
 the world. Why, sir, how much paper money have we? About 
 $772,000,000, every dollar of whicli is a legal tender practically. Al- 
 though the bank-notes are not a legal tender by law, yet in fact we 
 know they are. We have to receive them nolens rolens. What other 
 country has got this amount ? France has $521,000,000 of paper money. 
 Great Britain has $217,900,000 paper money. But they have more 
 gold than we. Why? Because you banish it from your country.
 
 33 
 
 Who would keep gold now ? Would a bauk keep it ? It is more dan- 
 gerous to keep than paper money, because it is heavier and more dif- 
 ficult to guard. Would a merchant keep it ? Yes, to the extent that 
 he has to pay it out to the Government for duties. The Government 
 keeps it, and the amount that is owned by merchants is held by the 
 Government in New York on gold certificates. So the Government is 
 the custodian of all the gold in the country banished from circulation. 
 Sir, take the aggregate of our currency, and where are you ? With . 
 more paper money pvr capita than any country in Europe has of paper 
 and gold. 
 
 Now, sir, let me caution Senators in regard to their estimates of 
 gold in foreign countries. In France it was estimated that there was 
 $700,000,000 of gold, and France was compelled to pay of this gold 
 more than $400,000,000 to Germany in the settlement of their diffi- 
 culties. 
 
 Mr. SCHUEZ. A thousand millions. 
 
 Mr. SHERMAN. I beg pardon. The sum paid was .$1,000,000,000 ; 
 but this was partly by credits and partly in gold. The effect of the 
 Germanic war has been that the gold of France has enormously 
 decreased; no one can tell exactly how much is left. 
 
 The Senator from Indiana a moment ago said they had $300,000,000 
 of gold in circulation in Great Britain. I am not prepared to dispute it. 
 
 Mr. SCHURZ. Seventy million pounds sterling, according to the 
 estimate I had yesterday. 
 
 Mr. SHERMAN. I am not prepared to dispute it, because I can 
 show by English writers, and even by the declaration of the chancellor 
 of the exchequer, that it is utterly impossible to tell how much gold 
 there is in England. There are no returns that enable them to do 
 it. It is kept there by joint stock companies, by the Bank of Eng- 
 land, and by private persons. A large portion of the commerce of 
 England being foreign commerce, large masses of gold in the coin 
 of different countries are held by merchants. As to the- precise amount, 
 no one can tell what it is. 
 
 Mr. SCHURZ. I read the other day from the statement of an English 
 financial writer that they had 70,000,000 sterling there ; but it was 
 a mere estimate. 
 
 Mr. MORTON. Three hundred -arid fifty million dollars. 
 
 Mr. SHERMAN. Now add the $350,000,000 of gold currency to the 
 amount of their paper money. Take it as you claim it, but what does 
 it make? Five hundred and sixty-six million dollars to dothebusiness 
 of that nation of thirty-two millions ; while we have of inconvertible 
 paper money $770,000,000. Why therefore say that we have less money 
 than England ? Sir, we have more par capita. 
 
 Mr. BAYARD. Will my friend from Ohio permit me to suggest to 
 him, also, that there is a large part of this country, the Pacific coast, 
 where the currency is gold ; so that that which is merchandise simply 
 in the Atlantic States is currency on the Pacific coast ; and that, also, 
 in the city of New York and other ports of the Atlantic States a 
 large amount of the business of merchants is transacted upon a gold 
 basis, and in gold alone ? In considering the amount of money that 
 is furnished to the people I think he is very much understating 
 when he confines himself to paper currency alone. 
 
 Mr. SHERMAN. I have no doubt of it. I have no doubt that the 
 money now in circulation in this country is greater per capita than in 
 any nation in Europe ; and I thank my friend for reminding me that 
 the Pacific coast uses gold and silver, it is estimated, to the extent of 
 twenty or thirty millions ef dollars, perhaps more. 
 
 3
 
 34 
 
 Mr. SCOTT. Permit ine to say that while I have no idea that any 
 per capita amount can be fixed, I am sure the chairman of the Com- 
 mittee oil Finance would not wish an erroneous impression to go out 
 as to the amount of currency that is really at the service of the busi- 
 ness community when he states that we have $769,000,000 paper cur- 
 rency. The reserve upon that usually amounts to about $200,000,000, 
 which reduces it to about $550,000,000. 
 
 Mr. SHERMAN. While undoubtedly there is a considerable amount 
 held by the banks as reserve, it is not so much as the Senator from 
 Pennsylvania states. Much of that is in the form of credits by deposit 
 banks. But let uie remind the Senator that in England the Bank of 
 England holds, and is compelled to hold, a large portion of the gold in 
 England as a reserve. Every bank has to have a reserve. So with the 
 Bank of France. There is a much larger percentage of reserve held 
 in the Bank of France now than is held by the banks of the United 
 States. Their reserve, if I remember aright, is about 30 per cent., 
 whereas our banks average less than 20 per cent., and much of this in 
 credits. The Bank of England reserve is greater than ours, and Bag- 
 ehot has written a book to show that it is too small. 
 
 As a matter of course, if you go into all the details about reserve 
 you could never get the precise results. The truth is, there is no mode 
 of testing how much money is needed to do the business of a country 
 except that amount which can be maintained at par in gold. The 
 very fact that our money is depreciated 11 per cent, is as conclusive 
 as any sum in arithmetic can be that you have more money than can 
 be maintained at the proper legal standard. You cannot get around 
 that. There is but one standard, and every addition to the volume. 
 that cannot be maintained at that standard is conclusive evidence that 
 there is too much money afloat of that kind. 
 
 Mr. MORTON. Will my friend allow me to make a suggestion ? 
 
 Mr. SHERMAN. Yes; but I fear I shall never get through. 
 
 Mr. MORTON. I understood my friend to assert just now that the 
 depreciation of the currency was evidence that there was too much 
 of it. Is that the statement ? 
 
 Mr. SHERMAN. That is conclusive evidence. * 
 
 Mr. MORTON. If that be true, then if we cut off 10 per cent, of 
 the volume of currency, the depreciation being 10 per cent., that 
 alone, according to his argument, ought to bring it to par. I want 
 to know whether it will do it. 
 
 Mr. SHERMAN. My own impression is that less than that will do 
 it; that when you give additional value to the greenback, so that peo- 
 ple can use it as gold, so that it will be equivalent to gold, the gold 
 itself will become a part of the currency. It is probable the full 
 amount of the present issue of legal-tenders can be maintained if 
 you will only give it an equal value with gold. When you make your 
 paper money equal to gold it floats with gold and fills the channels 
 of trade. In my deliberate judgment, in this country of broad ex- 
 tent, as my friend says, of varied population, of varied productions, 
 a larger amount of currency could be maintained at par in gold than 
 the actual currency now in hand. I have some statistics here, but I 
 am too weary to go into them, which show what amount of currency 
 we maintained at par in gold before the Avar, and by a comparison 
 of our condition then and now I could estimate what amount can h<> 
 maintained. But, sir, the only standard, the only rule, by which we 
 can judge of the amount of paper money is that quantity which can 
 be maintained at par in gold. If you declare illegal and! invalid this 
 standard, no muu can tell how much circulation is needed. The only
 
 35 
 
 way is to test it by the barometer of New York. Tins is as sure a 
 test as the instruments here around the Senate Chamber are tests of 
 the heat of this room. 
 
 There is another class of measures now pending on which I wish 
 to make a few remarks, and they are the propositions to inflate the 
 currency still more. The process of inflation is now going on daily 
 while we are debating. This surely ought to be stopped. This issue 
 of the forty-four millions ought to lie suspended at once. The payment 
 of this money ought to be arrested and some other provision made to 
 pay the ordinary expenses of the Government. The plan that I sug- 
 gested a moment ago would do that, by authorizing the funding of 
 notes into bonds. But there are other propositions. The Senator 
 from Michigan proposes to issue $100,000,000 increased currency, to 
 require the system of banks now organized over this country to retire 
 their circulation, and to issue an amount of greenbacks equal to the 
 whole, aggregating $800,000,000, and this, I suppose, in addition to the 
 fractional currency; in other words, an increase of currency of about 
 $100,000,000. 
 
 Mr. FERRY, of Michigan. Including the forty-four million reserve ? 
 
 Mr. SHERMAN. Yes ; including the forty-four million reserve, an 
 increase of $100,000,000. I appeal to my friend, to his candor, his 
 sincerity, to say whether the immediate effect of that would not be 
 to depreciate that which is outstanding. 
 
 Mr. FERRY, of Michigan. I would merely say that, in 1870, we 
 increased the currency fifty-four millions, and the premium on coin 
 to-day is less than it was during the average of that year. Now, I 
 ask by what reasoning will the price of coin increase if we increase 
 ,he currency to about the same amount, which is the ratio I propose? 
 
 Mr. SHERMAN. The remark now made by the Senator compels 
 me to make a confession, that I believe that act of 1870 did arrest the 
 downward course of gold and the rapid march toward specie payments. 
 As I contributed to the passage of that act, I am sorry to take the 
 responsibility. From the time of the passage of that act the appre- 
 ciation toward the specie standard was arrested, and now, to-day, four 
 years after the passage of that act, your paper money is worth no more 
 than it was at the date of the passcige of that act. 
 
 Mr. FI^RRY, of Michigan. I hold in my hand a statement of the 
 prices of gold during the several months of 1870, and the average pre- 
 mium on gold in 1870 was higher than that in 1873. 
 
 Mr. SHERMAN. I have the standard here. I took the 18th day of 
 March, 1870, which was about the average of that year, because it was 
 a year after the passage of our law of 1869. The premium 011 gold 
 was then 11| ; to-day, I believe, it is 12. Some one tells me gold is 112 
 in New York to-day ; so that in four years the advance we have made 
 to specie payments is one-eighth of 1 per cent, backward. 
 
 Mr. FERRY, of Michigan. Then the Senator admits substantially 
 that the premium on coin is the same now that it was then. With an 
 increase of $54,000,000 circulation in 1870 the premium on coin has 
 not advanced. 
 
 Mr. SHERMAN. Thirty-nine million dollars of bank circulation. 
 
 Mr. FERRY, of Michigan. Of bank circulation. 
 
 Mr. SHERMAN. If $54,000,000 had been issued, it would have been 
 more ; but only $39,000,000 has been issued under the law ; $54,000,000 
 were authorized, but only $39,000,000 issued. 
 
 Mr. FERRY, of Michigan. I do not wish to interrupt the Senator, 
 but he has not escaped the fact that $25,000,000 of the $44,000,000 
 reserve of greenbacks are already out ; that more than makes up the
 
 36 
 
 amount, so that the increase, as I propose it, is about the same that 
 was made in 1870. Then, if that increase of $54,000,000 in 1870 has 
 not advanced the premium on coin, upon what basis or reasoning does 
 the Senator arrive at the conclusion which he states, that my propo- 
 sition of increase of about $50,000,000 will increase the premium on 
 coin? 
 
 Mr. SHERMAN". Because there is no doubt about it. Every addi- 
 tion to the currency does it. If I wanted to teach my friend this plain 
 lesson in political economy I should have to read to him from the 
 school-books used in every college, down to the last work on political 
 economy. It is an axiom of political economy, which lies at the very 
 groundwork and foundation, repeated by every author that ever 
 wrote upon the subject, as necessary a consequence a.s that water will 
 seek its own level. Any increase o'f paper currency tends to impair 
 its value when it is once depreciated. 
 
 Mr. FERRY, of Michigan. I merely put against that theory of the 
 books the facts of the present. The Senator has stared, I believe, 
 that the price of gold in 1870 was substantially what it is to-day : I 
 think only a difference of per cent., or something of that kind. If, 
 then, with an increase of $54,000,000 circulation since 1870 the price 
 of gold has not advanced, then I say that experience against the books 
 verifies what I now say, that the increase which is proposed will not 
 any more advance the premium on coin than did the increase of 1870. 
 
 Mr. SHERMAN. After the passage of the act the Senator refers 
 to, authorizing this increase, the price of gold steadily advanced and 
 again commenced to decline. As a matter of course, if we could 
 once fix the amount, we could no doubt come to it in time ; but what 
 assurance have we that after you have issued your $10(3,000,000, and 
 gold goes up to 133, as it will/aud then after the power of inflation 
 has exhausted itself and gold commences to go down, what reason is 
 there to suppose that my honorable friend from Michigan, or some 
 successor of his, will not come here and demand another inflation, 
 and then say that the inflation will not, at the end of four years, 
 increase the price of gold f 
 
 There is no mode of accounting for the fact that the value of our 
 greenback has not advanced one single step for four years, except that 
 you have increased the volume of paperaud have taken no stops what- 
 ever to advance its value. As a matter of course, if you would main- 
 tain the amount of paper money at a certain rate for one hundred 
 years till our country got to contain three hundred millions of people, 
 it would be all as good as gold ; but if the Senate should follow the 
 lead of my honorable friend and dilute the currency, put water into 
 the elements that now compose our currency, it would undoubtedly 
 depreciate it. 
 
 Senators, we have now arrived at a stage of our history where, if 
 we will obey the law and keep the public faith, we shall surely come 
 to safety, prosperity, resting upon the universal .standard of value 
 when industry will be rewarded, and not cheated by the depreciation 
 of paper money. If, on the other hand, you will enter again into a 
 depreciation of your paper money, adopting the cry of expansion, 
 " more money," you will surely travel a road that many nations have 
 traveled before us, to bankruptcy and repudiation. 
 
 I will turn over my friend from Michigan for a further answer to 
 my friend from Indiana. The Senator from Indiana says that the 
 issue of the paper money under the law of 1870, the authority to 
 grant new banks, was not expansion, because by the same law the 
 3 per cents were retired. He construes, therefore, the law of 1*70 as
 
 37 
 
 not inflating the currency at all. My friend from Michigan, I under- 
 stand, regards it as expansion to the fullest extent of the amount of 
 notes issued. I hope they will settle it between them. 
 
 Mr. MORTON. I would rather settle it just now. 
 
 Mr. SHERMAN. Not in my time. 
 
 Mr. FERRY, of Michigan. It is rather shutting us down. 
 
 Mr. SHERMAN. Mr. President, I want to get through. 
 
 The PRESIDENT pro tempore. The Senator from Ohio declines to 
 yield. 
 
 Mr. SHERMAN. I suppose the Senators who advise more paper 
 money will settle this matter in a private conference. 
 
 There is another view I wish to take of this plan of expansion. If 
 you issue the proposed three sixty-five convertible bonds, what will 
 they be worth ? I see here some New York bankers. They have com- 
 puted the value of these bonds before they are issued by the rule of 
 three. A 5 per cent, bond is now practically par in gold. If a 5 per 
 cent, bond is at par in gold, what would a three sixty-five gold bond 
 be worth? Senators can answer that very quickly, because there is 
 a reduction in value of, one-third to commence with. If a 5 per cent, 
 gold bond is only worth par, a three sixty-rive gold bond would only 
 be worth two-thirds of par. Then, if a three sixty-five gold bond is 
 worth sixty-six cents on the dollar, what will a three sixty-five con- 
 vertible paper bond be worth? That query will be put to every 
 broker and banker in New York the very moment you authorize such a 
 bond to be issued. They would measure your device by the gold stand- 
 ard before you issued it. They would quote a bond convertible and 
 inconvertible into irredeemable paper money at its value in gold. 
 
 But, sir, there is one other reason why all these plans and all these 
 schemes of more paper money ought not even to be debated here. An 
 increase of paper money beyond four hundred millions would be a clear 
 and palpable violation of the public faith. In the darkest hours of 
 the war, when every patriot trembled, when our fate hung in the 
 balance, when our armies were before Richmond, when our armies 
 were on the march through Georgia to the sea, when everybody felt 
 that the danger of inconvertible paper money was likely to strike us 
 from the list of nations, when our paper money then outstanding had 
 fallen so that it took $2.80 to buy one dollar in gold, gold being at a 
 premium of 280, then it was that we entered into a stipulation with 
 the public creditor, which is a part of the act of 1864, a part of the act 
 under which we borrowed money and pledged the public faith. It 
 was a solemn promise that under no circumstances, never would we 
 issue more than four hundred millions of paper money and an addi- 
 tional reserve of fifty million dollars pledged to pay a debt then ex- 
 isting and which has since been paid. 
 
 Mr. SPRAGUE. That was under duress. 
 
 Mr. SHERMAN. From whom ? My friend from Rhode Island sug- 
 gests quietly that this pledge was under duress. No, Mr. President; 
 the United States was never under duress except from the rebellion. 
 Then it was under duress. But when we were under duress from 
 rebellion in the Southern States we gave our sacred pledge to the 
 men who helped us, to the men who loaned us money, to the capi- 
 talists, to the laborers, to the servants, to the women, to the children ; 
 yea, Senators, from every part of this broad laud, every county and 
 every town, every village and every hamlet, every man, woman, 
 and child poured their little earnings into the stream that flowed 
 into the national Treasury in the summer of 1864 ; and every dollar 
 of the loan then made was made upon the faith of the sacred obliga-
 
 38 
 
 tion of the United States that our paper money should never exceed 
 $400,000,000. 
 
 Sir, I trust in God the day never will come when we shall violate 
 that pledge, until we make those promises equal to par in gold. I 
 will not acknowledge, with my friend from Rhode Island, that we 
 were under duress. Certainly we Avere not under duress from the 
 men, women, and children who loaned us money. They gave us the 
 means by which we put down the people who were in arms against 
 our Government, and, so help me God, I never will violate the faith 
 pledged to them. The act of 1864 is known to every Senator. I will 
 not read it. It is as plain and strong and clear as language could 
 make it. 
 
 But, sir, we are told that to issue these three sixty-five bonds con- 
 vertible into paper money will lower the rate of interest ; and my 
 friend from Indiana, with that happy faculty which .he has of avoid- 
 ing difficulties, says when you have a great deal of money, and issue 
 more, does not that cheapen it f Is not the right way to cheapen 
 money to issue more of it ? If you had a great abundance of any 
 commodity to sell would it not be cheaper ? -That is the argument. 
 Well, sir, it will cheapen money to issue more* It will cheapen money 
 as tested by the gold standard, and brokers will tell you every day 
 how much it cheapens it. But who will it benefit to cheapen money ? 
 It will aid a man to pay a debt contracted upon a different basis, and 
 to that extent will cheat the creditor. 
 
 Mr. MORTON. The Senator does not state the proposition correctly. 
 
 Mr. SHERMAN. I will give you time presently. 
 
 To the extent that it is paid in payment of a debt already due and 
 payable, it will cheat the creditor and cheapen his debt; but it will 
 not cheapen supplies, provisions, clothing, food, raiment. It may 
 cheat the laboring man ; for the laboring man may think it is the 
 same money. He may take hist wo dollars a day just as he did before ; 
 but when he comes to spend those two dollars for the food that sup- 
 plies his life, or for the clothing that comforts his children, he will 
 find that somebody else is cheated, and he is the one. Sir. every effort 
 whatever, every device to relieve needy men in distress or in debt, 
 that will depreciate the currency, adds to the daily toil of laboring 
 men, adds to the cost of food and clothing. Why, sir, Mr. Webster 
 never uttered a grander truth in his life than that famous passage, 
 which I have almost forgotten, but the substance of which is that the 
 best way to enrich the rich man's field by the sweat of the poor man's 
 brow is by the use of inconvertible paper money. No truth was ever 
 more forcibly uttered. 
 
 But they tell us that it will lessen the rate of interest. Let us see. 
 This is a matter of experience. We have had a slight experience in 
 this country, and we have had the experience of other countries, and 
 the fact is just the reverse the more money is depreciated the higher 
 is the rate of i nterest . I have some knowledge of this by my own experi- 
 ence. I remember the panics that have occurred in this country since 
 1837. I recall to the recollection of my friend from Iowa what took place 
 in his own State in 1857. I was in that beautiful State in the spring of 
 1857. The people were rich, abounding in riches, fanciful riches; money 
 was plenty. One man had made a profit of 100 per cent, on a piece of 
 land that he had never seen and had owned but three months. An- 
 other had laid out a town and was selling lots at fabulous prices. 
 Everybody was rich ; paper money was abundant wild-cat paper 
 money; all kinds of money. Good money was there, too, gold as well 
 as paper. Interest was 40 per cent., and many told me that they
 
 000611 040 
 
 could make money by borrowing at 40 per cent. They offered to give 
 mo 40 per cent, for money to buy land with within five miles of a 
 settlement. Everybody wa.s rich ; interest high ; times were glorious. 
 In August the failure of the Ohio Life Insurance and Trust Com- 
 pany burst the bubble. The money that was loaned upon that inter- 
 est was not paid, and the men who were dealing in these high-blown 
 speculations " went up the spout." to use a common phrase. So it 
 was in the panic of 1837. Upon this point I could read you what is 
 said by Mr. Mill ; but that is mere " platitude ;" that is only the expe- 
 rience of the past, of old men of a different day and generation. I 
 could read you from many books. I could read' you the story of the 
 South Sea bubble, when securities went up and interest was'lOO per 
 cent. So in all times which precede a financial panic, when people 
 think they are prosperous, when they make money by marking up 
 their goods, interest is enormously high. Sir, the experience of man- 
 kind proves that interest is higher under a depreciated paper money 
 than it is under a gold standard. Is it worth while to waste more 
 time to show the utter fallacy of the allegation that more money 
 would cheapen interest? 
 
 But it is said that the recent panic was caused by the want of money, 
 by the want of more paper money ; and paper money for what ? To 
 build remote railroads, to carry out schemes for the future, to engage 
 iu speculative enterprises. The money of the country and the capi- 
 tal of the country was absorbed in unproductive industry. There- 
 fore it was that the blow fell and destroyed a great many good men. 
 But how is it now ? Why, sir, at this moment money is easier to 
 be had in the city of New York than it has been for years by per- 
 sons who are engaged in ordinary commercial business, where the cir- 
 cumstances that surround them inspire confidence and credit. The 
 same money that was in circulation before the panic is in circulation 
 now, and more. Sir, this is not a currency panic. It has no connec- 
 tion with our currency. Such panics have occurred in Great Britain 
 and the United States in specie-paying times. It was simply caused 
 by unproductive investments. The currency is good, only lacking one 
 quality to make it better ; that is, if it was as good as gold it would 
 then be the best. It is secure. Nor was it a bank panic, I will say, 
 for the relief of my friend from Indiana ; for I am glad to agree with 
 him on one or two things. The banks have stood the panic very 
 well. With the exception of four or five, the national banks have 
 not failed ; and not one has failed unless by a clear violation of the law 
 of its organization. Not one that has been brought to my attention has 
 failed except by the use of the bank by the owners in loans and invest- 
 ments prohibited by the national-currency act. 
 
 Mr. WEST. Is suspension to pay deposits a failure ? 
 
 Mr. SHERMAN. Yes; but this suspension was the result but not 
 the cause of the panic. It was justified by the same circumstances 
 that would authorize the increase, of the amount of notes of the Bank 
 of England in violation of law. The banks did suspend payments ; 
 and that only proved the truth of what I said a while ago, that no 
 plan of redemption would be wise and good unless it has some pro- 
 vision for just such panics. There must betimes when banks are com- 
 pelled to use their reserves, all their resources, and borrow themselves 
 instead of being lenders, and provision should be made for such times. 
 The banks did commit an act of justifiable bankruptcy when they 
 refused to pay their depositors ; but that was temporary a bending 
 before the storm. They rapidly accumulated and gathered in their 
 resources, as the Bank of England would under like circumstances,
 
 UCSB LIBRARY 
 
 40 
 
 calling in their loans and denying loans to their and are 
 
 now in a stronger condition than ever. They now have a greater 
 reserve than they had before the panic. 
 
 Mr. President, the condition of our currency has no relation what- 
 ever to the panic that passed over the country. 
 
 Mr. MORTON. That is a very important admission. 
 
 Mr. SHERMAN. In nay judgment it is true, and is perfectly con- 
 sistent with my argument. At this time, when nearly all debts have 
 been settled; when the panic has swept away m;;ny fortunes ; when 
 we now have all the money that ever was afloat ; when -confidence is 
 restored ; when the price of every commodity is advanced to the price 
 it was before the panic now is the golden moment when we should 
 take a step in the right direction to make our money equal to gold. 
 I never have charged the panic upon the currency. Indeed I was the 
 first in the midst of the panic fto declare that the currency had no 
 connection with the panic. The money was secure : it was good, 
 only that it was not as good as gold. That was the only fault to be 
 found with it. Men hoarded it. That added fuel to the, fire and fed 
 the panic. Its origin, like the panic of 1866 in Great Britain, wan 
 in the absorption of capital in unproductive enterprises. The want 
 of confidence created by the failure of great houses gave The first 
 alarm ; then came the withdrawal of deposits, the depletion of the 
 banks, the suspension of the banks. Then laborers began to be dis- 
 charged, productive Industry began to be stopped; but in a short 
 time the ordinary business of the country was resumed, when people 
 found that they were not all broke. It was the old, old story re- 
 peated periodically, arising from different causes, but having the 
 same history and results. These panics are but the ebb and flow of 
 great enterprises. They start with reviving prosperity ; they grow 
 with expanding hope and energy: they culminate with enterprises 
 too great for the time, and the blind, unreasoning fear that springs 
 from the failure of these enterprises does in the panic more harm and 
 causes more destruction of values than the injury done by failures. 
 No action of ours can prevent these panics. All we e;;n do is to 
 improve the opportunity ottered us to place the public faith of our 
 country on an enduring foundation. 
 
 I again appeal to the Senate to now firmly take its stand against 
 any inflation of paper money under any circumstances, under any 
 provocation, or any plea. This alone will do a great good to the 
 country. But if it will go further if the Senate will lead the way to 
 some wise and practical measure, looking to a redemption of the 
 pledged faith of the United States, the people we represent will have 
 cause to be proud of the political body which they have so long hon- 
 ored. I believe, sir, that no act of the Senate would so much inspire 
 confidence, give strength to our business men. revive our industry, as 
 by a decided vote on these propositions to show that our firm purpose 
 is to take the road that leads to specie payments and a restored currency. 
 Sir, I have been many years here and in the other House, during 
 long and troublesome controversies, during peace and Avar, and I for 
 one desire to see the work of our generation crowned by the greatest 
 of civic triumphs, that of performing every promise, r.nd to leave the 
 nation without dishonor; its promises good, ifs credit untarnished, 
 its wealth and power increasing and expanding.