“The American people must learn the lesson of money or they are lost.”

THE word “money” is derived from the Latin moneta (from moneo, to warn), meaning “warned” or “admonished.” Moneta was a surname for Juno, because she was believed to have warned the Romans by means of an earthquake to offer sacrifice. In the temple of Juno Moneta coins were made; hence moneta, meaning either a mint, or coin, or coined money.

The English word “money” is defined by Webster as “any currency usually and lawfully employed in buying and selling;” and the word “currency” is defined as “that which is in circulation or is given and taken as having or representing value.”

Varieties of Money.

Until recent times many substances entirely foreign to our modern ideas of money were used as measures of value, among which were:

Leather. In Rome and Sparta 700 B. C., and in Persia, Tartary, France and Spain as late as the sixteenth century.

Bark. China used the inner bark of the mulberry tree in the fourteenth century.

Base Metals. Iron was used by the ancient Spartans, Romans and Hebrews; tin was used in ancient Syracuse and Britain, while lead is still used in Burmah and brass in China.

All of these forms of money were stamped with some sort of design indicating their exchangeable value and by whose authority they were issued.

Wood. Several ancient governments used money made of wood. From the time of Henry I. (A. D. 1273) up to the foundation of the Bank of England, in 1694, a period of over four hundred years, England circulated a legal-tender money make of wood, called “exchange tallies.” The “tally” issued by the British Exchequer was a stick or bit of peeled rod upon which notches were cut, indicative of an account, pledge or other commercial transaction. It was split in such a way as to divide the notches. One-half the “tally” was given to the payer and one-half was retained by the Exchequer; and the transaction might be verified at any time by fitting the two halves together, when the notches would be found to “tally” with each other if the check had not been tampered with. Jonathan Duncan said that these wooden representatives of value circulated freely among the people and sustained the trade of England.

Wampum. One of the prevailing forms of money in use among the New England colonies was wampum. This was simply strings of white and black beads made from sea-shells found along the New England coasts. In 1641 Massachusetts made these beads a legal tender at the rate of six for a penny up to the sum of £10; and they were receivable, at that rate, for all judgments and taxes. In 1643 the limit of this legal tender was reduced to 40 shillings. In 1649 the colony passed a statute forbidding the receipt of wampum for taxes, and its use as money rapidly declined, though it still circulated in a limited way in several of the colonies as late as 1704.

Tobacco. The people of Maryland and Virginia, before the Revolutionary war and for some time after, in default of gold and silver, used tobacco as money, made it money by law, reckoned the fees and salaries of government officers in tobacco and collected the public taxes in that article.

Peltries. In an early day several of the Western States made peltries a legal tender. In 1785 the people of the territory now called Tennessee organized a State called “Franklin” and passed the following act, which is illustrative of similar acts in other States:

Gold and Silver have been used as money metals from the earliest times of recorded history. The Bible has many references to the use of both gold and silver as early as the age of Abraham.

Paper. The first printed bank notes of which we have any record were issued by Palmstruck, a banker of Sweden, in 1660.

Intrinsic Value.

No kind of money, as such, has any intrinsic value, for the instant the material of which the money is made is used for another purpose it ceases to be money. As money, the sole value of the material arises from its function as a circulating medium; and even the value of gold and silver as used in the arts and sciences will be largely determined by the demand for them for money purposes. Of recent years the general demonetization of silver by the principal nations has depreciated the value of that metal about one-half, and there is but little doubt that if gold were similarly demonetized it would correspondingly decline in value. This was the opinion of Cernuschi. He says: “If all nations should demonetize gold it would be worth more than copper, but it would not be worth much more.”

Appleton’s American Encyclopedia (XI, p. 735) says: “After the discovery of gold in California, Austria, the Netherlands, Belgium and Germany all demonetized gold and adopted silver as the legal tender at a fixed rate. In those countries gold only circulated as a commodity, subject to daily fluctuations in value; and as a consequence, deprived as it was of legal support as money, it was but little used.”

Upon the subject of intrinsic value the following authorities are cited:

Specie Basis.

Where paper money is made redeemable in gold or silver the paper money is said to rest on a “specie basis.” This monetary scheme now prevails throughout the civilized world. In almost every commercial nation a large portion of the currency in use is paper money, convertible in theory, at least, into metallic money, at the option of the holder. This financial system is framed upon the violent hypothesis that real money can only be made of the precious metals and that paper bills are not money, but only representatives of money. Those who are addicted to this theory are in the habit of designating coins made of the precious metals as “primary money,” “redemption money” or “standard money;” while paper bills are called “secondary money,” or “credit money,” and are worthless except as they may be redeemed in “primary money.” The specie basis may be gold or silver or both. Since the world-wide demonetization of silver,silver, gold only is the basis in the leading nations of the earth.

The specie basis theory is open to the following weighty objections:

1. It is contrary to the fundamental law of the United States—the Constitution.

Judge Tiffany, in his work on Constitutional Law, expounding the right of Congress “to coin money and regulate the value thereof,” says:

This learned opinion, which annihilates all necessary distinction between “primary” and “secondary” money, was followed by the United States Supreme Court in the celebrated Greenback cases, and hence has all the authority of law. (See 12 Wallace’s Reports, p. 519.)

2. The specie basis theory is contrary to the facts of history, some of which will be recited in succeeding pages. Many instances are recorded in which paper and other material have been successfully used as money where no redemption in coin was promised or possible.

3. The specie basis theory postulates that a certain amount of “redemption money” will support or float a proportional amount of “credit money;” as the specie increases the paper money may be safely increased; and as the specie decreases paper money must also be decreased—a philosophy that would lead to the absurd conclusion that when all specie disappears the people can have no money of any kind. Mr. R. H. Patterson, a distinguished English economist, truly puts the paradox as follows:

4. The specie basis is insufficient in volume to redeem the credit money which is necessarily used in business. The entire circulating medium of the United States is, approximately, sixteen hundred millions of dollars, of which about one-third is gold, one-third silver and one-third paper. Since silver was demonetized it is now only credit money; hence we have but one dollar of redemption money (gold) with which to redeem two of credit money, or, taking into consideration, as we should, the vast volume of checks, drafts and other credits which must finally be redeemed in gold, it is perfectly apparent that the United States has not one dollar of redemption money with which to redeem one hundred dollars of credit—and thus the whole theory of redemption becomes a mere figment incapable of practical realization. And what is true of the United States is true of all other countries.

5. The specie basis is a breeder of panics. In times of prosperity and confidence credits are safely increased to accommodate the increasing volume of business, and the specie basis is sufficient merely because it is not put to the test, the people preferring paper money because of its superior convenience. But at such a time a pebble may start an avalanche. A startling failure occurs somewhere, creditors press for liquidation, the banks are besieged, and, being unable to redeem their promises to pay gold, they suspend—and the panic is complete. Such is the recurrent history of finance in all civilized lands.

Charles Sears, an eminent authority, says of the gold basis:

To the same effect is the opinion of the famous American jurist, Judge Walker. He says:

6. The specie basis affords a means by which greedy speculators work “a corner” in gold and thus extort large sums in profits which the people eventually have to pay. The laws and official rulings, for instance, which require the maintenance of a gold reserve in the Federal treasury and the payment of duties and interest on the public debt in gold, create a special and imperative demand for the yellow metal; and as the supply for that kind of money is almost entirely in the hands of a few great banking firms, the latter can, at their pleasure, extort such terms as they please when applied to for gold. An instance of the kind occurred on Feb. 8, 1895. On that day, in order to maintain its gold reserve, the United States government purchased of M. Rothschild & Sons and J. P. Morgan & Co., bankers of London, 3,500,000 ounces of standard gold coin of the United States at the rate of $17.80441 per ounce, and paid for it in United States four per cent. thirty-year coupon or registered bonds, interest payable quarterly. These bonds were taken by the British bankers at $1.04, and were sold by them within ten days at $1.18, by which the foreign gold exploiters made a net profit of about eight million dollars—to be eventually paid by the people.

7. The specie basis must inevitably become more and more insufficient with the lapse of time, and the disasters due to it in the past become more frequent and distressing. The population of the world is increasing, barbarous nations are becoming commercial, and commercial nations are extending their commerce with unexampled rapidity from year to year. With this increasing business must come a necessity for a corresponding increase in the medium of exchange—money. But no material increase of the precious metals is possible. On the contrary, as the mines successively become exhausted, or deeper and more difficult to work, it is clear that the annual supply of gold and silver must become increasingly insufficient to replace that which has been lost or consumed in the arts and sciences; and hence the difficulties of the specie basis will of necessity become more and more aggravated as time goes on.

Considerations such as the foregoing have led to the rapid development of a new school of finance which, rejecting the specie basis as antiquated and no longer tenable, professes to find a sufficient guarantee for the stability of money in

The Legal Tender Basis.

President Grant said:

Plentiful experience has demonstrated that a paper money based upon the authority, faith and credit of the government and made by law a full legal tender for all debts will serve all the purposes of a staple circulating medium as effectually as gold itself.

The effectiveness of legal-tender paper depends upon two circumstances:

1. Government can by law compel the people to take it in satisfaction of private debts, by refusing to enforce contracts payable in any other kind of money.

2. The government may receive such legal-tender paper in satisfaction of all kinds of taxes and duties, thus giving such money a positive value equal to gold.

The United States Supreme Court, in the celebrated Greenback cases, says:

Benjamin Franklin, defending the Pennsylvania colonial paper money before a committee of the English Parliament, in 1764, said:

Thomas Jefferson, in his letter to Mr. Epps, said of government paper money:

President Jackson, in his message, 1829, said:

John C. Calhoun, in a speech in the United States Senate, December 18, 1837, said:

Legal-tender paper money is usually issued in times of war, when gold and silver are hoardedhoarded or exported from the country; and, as a consequence, such legal tender is put to the severest possible tests, those of an imperilled government, disturbed industry and impeded foreign trade. Nevertheless, history abounds with instances to prove the entire sufficiency of this kind of money.

In 1156 the Republic of Venice established a system of paper credits which served as the principal circulating medium of that country until 1797. This money was always at par and frequently at a premium. In 1770 the Russian government issued its own notes, which sustained the government through two wars and commanded a premium over coin. In 1797 to 1823 England issued $225,000,000 full legal-tender paper with which to carry on war against Napoleon. In his “Political Economy,” John S. Mill says of these notes: “After they were made a legal tender they never depreciated a particle.”

During the colonial period of American history several of the colonies issued and successfully maintained legal-tender paper money. One instance is illustrative of them all. In 1739 Pennsylvania issued $400,000 in legal-tender paper not redeemable in coin, but receivable for taxes, which was loaned directly to the people on security of land and plate. This money continued in circulation until it was prohibited by the British government in 1775. Commenting on the success of this system, Dr. Franklin said: “Between the years 1740 and 1775, while abundance reigned in Pennsylvania and there was peace in all her borders, a more happy and prosperous population could not, perhaps, be found on this globe.”

During the Franco-German war France issued an enormous volume of legal-tender paper money, of which Victor Bonnet, the eminent French economist, says: “In the midst of the greatest calamities that ever befell a nation, with an enormous ransom to pay a foreign nation, and with great domestic losses to repair, a credit circulation was maintained four times as large as its base, without depreciation. This circulation reached $600,000,000.”

During the war of the rebellion in the United States (1861-5) the government issued a volume of legal-tender “greenbacks” which, on July 1st, 1865, was outstanding to the amount of $432,687,966.

The first $60,000,000 of this paper money, issued under authority of the acts of July 17th and August 5th, 1861, and February 12th, 1862, called “demand notes,” was made a full legal tender for all debts public and private. This issue never fell below and often was above par as compared with gold. In a speech delivered in the United States Senate, July 4th, 1862, Hon. John Sherman said of these “demand notes”:

In Schuckers’ Life of Salmon P. Chase, p. 225, the author says:

All of the greenbacks except the first $60,000,000 were purposely depreciated by the “exception clause;” that is, they were made a legal tender for all debts, public and private, except duties on imports and interest on the public debt, which latter were required to be paid in coin. This exception clause created a special demand for coin, and as a consequence metallic money rose to a great premium, at one time (July, 1864) being at a premium of $2.85 in greenbacks to $1 in coin. That these greenbacks were purposely depreciated stands upon the evidence of Hon. John Sherman, who, in a report as chairman of the Senate Finance Committee, made on the 12th of November, 1867, said: “But it was found that with such a restriction upon the notes the bonds could not be negotiated, and it became necessary to depreciate the notes in order to make a market for the bonds.”

Speaking of the amendment by which the “exception clause” was passed, Hon. Thaddeus Stevens, said in a speech delivered in the House, February 20th, 1862:

This conspiracy of the lawmakers, by which the soldier in the field was paid in depreciated greenbacks while the Wall Street usurer received gold, did not deprive the paper money of its splendid functions. While coin rose to a great premium, owing to the special use made of it in payment of customs and interest on the public debt, the legal-tender money carried on the great war and conducted the business of the most prolific and prosperous epoch in the history of the United States.

As a matter of fact the greenbacks, discredited by legislation as they were, did not depreciate in comparison with commodities, but gold appreciated owing to the special demand created for it by law. The people never lost confidence in the government paper money, even in the darkest hours of the panic of 1873, as shown by the language of President Grant. He said:

The Functions of Money.

The functions or uses of money are three-fold:

It is a measure of value.

It is a medium of exchange.

It is a means of storing wealth.

As a measure of value money determines in what proportion commodities and services shall be interchanged. The yardstick measures the quantity of fabrics; but some fabrics are more valuable than others. A bolt of silk, for instance, is more valuable than a bolt of muslin—a difference which the yardstick, alone, cannot indicate; it merely measures quantities, not values. Here the money measure becomes necessary. The abstract unit which we call a dollar measures the values of both silk and muslin, and determines how many yards of muslin should be exchanged for a yard of silk.

Money is a medium of exchange. Smith has a horse and buggy which he wishes to exchange for a piano belonging to Brown. Brown is willing to part with the piano, but does not want a horse and buggy; he does want, however, a gold watch. Jones has such a watch, but wants to dispose of it for clothing. Wilson has clothing, but he wants coal. For these four parties to find out each other’s wants and effect an exchange of actual commodities and adjust the difference in value between the articles would involve time and labor and make so many difficulties that the transactions would be greatly delayed, if not defeated. Here money performs its beneficent offices as a medium of exchange. Smith sells his horse and buggy for money, and with it purchases Brown’s piano. Brown buys the watch he wants, and thus money goes from hand to hand, effecting innumerable exchanges, not only in the small neighborhood, but in great commercial circles, thereby bringing the antipodes together and enabling them to supply each other’s wants with the least possible loss of time and labor.

Money is, also, a means of storing wealth. Jackson has a valuable farm, but is getting too old or infirm in health to work it. He might exchange it for a great quantity of food, clothing, and other necessaries sufficient to last him the remainder of his life; but these articles could not safely be stored so as to preserve them for future years, and some representative, that can be stored, must be found. Money is that representative. Jackson sells his farm for money, and with the money purchases from time to time the necessaries required.

From a brief study of these three great functions performed by money may be readily determined what should be the characteristics of a perfect currency, one that would most effectually and justly serve mankind.

As a measure of values and as a means of storing wealth it is clear that money ought to be stable, that is, it should as nearly as possible have the same purchasing power from year to year and in all sections of the country; for when money fluctuates in purchasing power it is obvious that some men will gain and some will lose without any merit or fault upon their part, but simply in consequence of the fluctuations in the value of money. This is particularly true in case of debt, for if a debt be contracted when money is cheap, and paid when money is dear, the debtor will evidently lose by the change, and if the circumstances be reversed the creditor will lose.

To secure such stability or uniformity of purchasing power no measure or method is so effectual as for the government to make all its money a full legal tender for all debts, public and private.

As a medium of exchange the volume or quantity of money in circulation should be sufficiently large to accomplish the transaction of business without waste or delay. In estimating the necessary volume it is proper to take into consideration the numbers of population, the magnitude of business transacted, and, since a nimble dollar will perform the work of several slow ones, the “effectiveness” or rapidity with which money circulates; and, since population and business are, upon the whole, constantly increasing, and the rapidity of circulation (until some swifter method of locomotion be discovered) remains unaltered, the volume of money, clearly, ought to be increased from year to year. Few who have not patiently studied the problems of finance understand the mighty effects of an expansion or contraction of the money volume upon, not only the material, but the moral well-being of mankind.

The very heart of the complex money question, the center of all its divergent issues, is the question of

The Volume of Money.

The volume or quantity of money in circulation is always hard to determine, principally because banks, brokers and their allies in official and journalistic positions are generally interested in concealing or misstating the facts on purpose to mislead the public; so that, not infrequently, a period of financial disaster steals upon the people unaware and they are compelled to endure all the miseries of such an event without being able to detect the cause or apply the remedy. In such circumstances the masses may dimly perceive that they are being robbed, yet, unable to detect the means of their spoliation, they attribute it to every cause but the real one, and thus the spoliators are enabled to repeat their robbery again and again, undetected by any save a few whose complaints are regarded as the extravagances of uninformed or fanatic minds.

To fully comprehend how the exploiters of money may enrich themselves and impoverish others by merely manipulating the currency, it is necessary to understand the primary fact that an increasing volume of money brings rising prices and business activity, while a diminishing volume of money causes falling prices and business stagnation. Upon this proposition the following authorities are cited:

David Hume, the English historian, in his essay on “Money,” says:

“We find that in every kingdom into which money begins to flow in greater abundance than formerly, everything takes a new face; labor and industry gain new life, the merchants become more enterprising, the manufacturers more diligent and skillful, and the farmer follows his plow with greater attention and alacrity. The good policy of the government consists of keeping it, if possible, still increasing as long as there is an undeveloped resource or room for a new immigrant, because by that means there is kept alive a spirit of industry in the nation which increases the stock of labor, in which consists all real power and riches. A nation whose money decreases is actually weaker and more miserable than other nations which possess less money but are on the increasing hand.”—Essays and Treatises, vol. I, p. 283.

“I am astonished at nothing in our business life so much as the absence of an earnest, determined endeavor on the part of our men of brains to find the cause of these chronic crises and hard times and then set upon the track of some remedy therefor.”—Rev. Heber Newton.

WHAT may well be called the American system of money has been gradually evolved, during three hundred years, from the bitter experiences of the most practical people that ever trod this globe. Franklin, Jefferson, Jackson, Calhoun, Clay, Gallatin and Benton were its prophets. But it first began to take definite shape during our civil war under such men as Edward Kellogg, Thaddeus Stevens, Henry C. Carey, Stephen Colwell, Pliny Freeman, Ben Wade, Oliver P. Morton, Henry Wilson and John Thompson; and later, Warwick Martin, Peter Cooper, Thomas Ewing, Wendell Phillips, John E. Williams, George Opdyke, John G. Drew, John P. Jones, William D. Kelley, B. F. Butler and others.

What first strikes the observer in a bird’s-eye view is that the whole modern movement toward a rational money system was started by that much-maligned genius, John Law, in France, in 1715. His system was one of the first recent revolts against the tyranny of metal money. He was the real founder of the Bank of France and the present French system. The Encyclopedia Britannica calls him an “unequaled financier.” His great thought was plenty of government paper money, and France has kept that thought. Law was finally beaten by politicians and the King’s mistresses when he tried to improve his system.

Turning homeward, we find the first American coin money, succeeding the wonderfully useful wampum, came very curiously—coin usually does. In 1652 a mint was set up in Boston to coin silver into “pine tree” money. The silver came mostly from the West Indian trade. Our rulers in England then, as now, only busied themselves in stealing from us any good money we could get hold of. Singularly enough we depended largely then upon another class of pirates—the buccaneers of the Spanish main, who spent most of their plunder on our shores, where were the nearest civilized ports. This was a great blessing—“a blessed providence”—to our Puritan ancestors and the coin money economists of those days.

In 1745 we had another blessed influx of silver. Governor Shirley, of Massachusetts, and his pious Puritans, went over and captured Louisburg, Cape Breton, from the French, with fire and sword, and made a big loot. This so tickled Mother Britain that, for once, she sent us a lot of silver to “ransom” Louisburg. This enabled Massachusetts to steal away the trade of Rhode Island.

In 1690 the first issue of paper money was made in Massachusetts. This was before the establishment of the Bank of England. It was for £7,000. In 1703 £15,000 was issued, which was made a legal tender for private debts. In 1716 another issue to the amount of £150,000 was authorized. Mark the style of it, as compared with the wild-cat projects of the present Congress, and see which is the most reasonable and conservative, and then inquire if the Farmers’ Alliance plan is so foolish: “The bills were to be distributed among the different counties of the province, and to be put into the hands of five trustees in each county, to be appointed by the legislature, to be let out on real estate security in the county, in specific sums, for the space of ten years, at five per cent. per annum.” Another act for £50,000 in bills was passed in 1720, “which resulted in clearing MassachusettsMassachusetts of debt in 1773.”

In 1723 Pennsylvania led a number of States in issuing paper money. In this year a great crisis occurred in England and the Bank was suspended. The coin of the American colonies was required, and drawn over, in England’s selfish and peremptory way, to prepare the bank for resumption. All coin left Pennsylvania, though the State possessed laws raising its value. Then the State issued treasury notes, and kept them in use until 1773, when English jealousy caused Parliament to make all such issues void. Some of the money was issued, says Adam Smith, on land security of double the value, and redeemed in fifteen years. It was made legal tender and remained at par with coin for forty years. The necessary notes were redeemed, by their payment for taxes, without loss to any one. This is the familiar history of Pennsylvania and the statement of Franklin. The cutting off of this money was the chief cause of the Revolution. The tea-party in Boston harbor was only a side-show.

Continental money was issued by Congress when we had no government—no power to tax. Yet if made full legal tender, with no mad promise of coin, fifty million dollars might have been enough. Gallatin says: “It saved the country.” Jefferson: “It expired without a groan.” Calhoun: “It is the ghost conjured up by all who wish to give private banks control of government credit.” It was used in place of a war tax, and the people so regarded it.

French assignats broke the spell of royal tyranny in Europe. Such is the power of a live nation to use and absorb money that nine billion dollars’ worth of it was issued before it broke down. Even then the cause of the tumble was that it had no suitable foundation. It was founded on land taken from the priests, and naturally fell when that land was returned to the churches.

Our Coin for a Century.

We come now to the coin money of the last half of the eighteenth and the first half of the nineteenth century. Through ignorance of it, some silver advocates are dismayed by the fact that so little silver was coined here before 1878. The great point to be shown is that we had no need to coin, because so much came from abroad. The way metal money flowed here during the wars between England and Spain reads like a fairy story. The treasures of Mexico and South America passed through here and gave many temporary and flitting coin deposits. Then from the opening of the Napoleonic wars until 1820 the most of Europe, including England, was using paper money. So coin came and stayed here. In fact, coin stayed back in our Western wilds often when it was scarce in Eastern sections and large cities. Through all smashes and wild-cat times, Western banks paid coin until 1820. Those were good times for planters on new soil. The old Virginia planter, in his blue swallow-tail coat with brass buttons, and his ruffled shirt, always had a pile of doubloons in his desk. He did not know that European war and paper money put them there.

The banks, warned by wild-cat experiences, grasped at all coin as they do now at gold. One bank sucked all there was in North Carolina and owned the State. It was so plenty in the twenties, in New England, that they shipped it to Europe.

A point never to be forgotten by silver men, in answer to the gold man’s statement about small coinage of silver, is that from the foundation of the United States money laws were passed giving legal value to foreign coins. Our mistaken ratio of 16 to 1, instead of 15½ to 1, made it generally useless for us to coin silver, when we could have plenty from abroad that was legal tender. One fact alone shows how immensely we were using our own silver and foreign silver and gold—viz.: the panic of 1857 was largely due to the demonetization of our small silver and those foreign coins. In 1853 Congress demonetized all silver halves, quarters and dimes in sums of over $5.00. Much of the reserves of the banks was in these fractional silver coins, which had been full legal tender, and in larger gold and silver coins of the United States and other countries. The silver dollars of Spain, Mexico, South America and the United States were worth a premium over gold, and were bought by the Rothschilds and sent out of the country, though they did big service while they stayed here. But the banks did not hold them as reserves. So the demonetization of our small silver deprived the banks of a large portion of their reserves and of paying their circulation therein.

Up to February, 1857, all foreign gold coins and the silver coins of most nations were, in the United States, full legal tender with our coins at the values fixed by our laws; and gold being, since 1834, overvalued in the United States, immense quantities of these gold coins came here and remained. Another reason why we did not coin silver dollars is found in this fact: gold was superabundant. These gold coins were also held by the banks as reserves in large quantities.

But on February 21, 1857, Congress demonetized all foreign coins. This took them out of the banks. They went abroad never to return. And this was one chief cause of the panic of 1857. The facts above given, properly circulated, should forever silence the quibbles of the gold men about the non-use and non-coinage of silver up to 1878. From 1861 to 1878 we used but little coin.

The gold men sneeringly ask if we want to go on a 50-cent dollar like Mexico. It is true they have worked their diabolical will on some of those weak nations, where the currency is thrown into horrible confusion thereby, and foreign business is made almost impossible by the rise in the gold dollar to a $2.00 dollar. They have come near Mexicanizing us in this respect, but have failed as yet. Their plea for the deposits of workingmen in savings banks is like the howl the mortgage people are always raising about the poor widows and orphans of the East, to whom the Western farmer should willingly pay high interest. Wise nations legislate for producers, rather than for interest-suckers—male or female.

United States Banks—Wild-Cat and State Banks.

Ever since the Revolution there has been war between Jefferson’s treasury notes and the sharp fellows who wish to collect interest on their debts. In the lush wild-cat times bankers did not care whether they made their scoop by shoving out bank notes so far that they would hardly ever come back, or lending interest-bearing credit to their neighbors. Now the telegraph, railroad and redemption banks would make hard sledding for State wild-cats.

The United States banks (private) were so mixed with the wild-cats for fifty years—1791 to 1841—that they need describing. The first, in 1791, was got up by Federals who hated treasury notes. But fortunately there was much honesty then, and it was so managed that its notes were like full legal-tender greenbacks. Those were halcyon days. The wild-cats were around, but got little game. They made their first big inflation in New England. The Yankees thought they could swing out to any degree when the Anglo-Spanish and the Napoleon wars made coin so plentiful?’plentiful?’ here.

There was a great rush of banks between 1811 and 1816, when the second United States Bank came in. It was a fraud from the start, violated its charter and was founded mostly on personal notes. But it swung its twenty years. The great plan of the wild-catters was to get its treasury notes, good as gold, and drawing interest, for their red dogs. Right here let us affirm that, for short, all State bank money may be called wild-cats, red dogs and shinplasters. For such it always proves in panic times. The Chicago Tribune says that the Democrats are “committed upon both principle and tradition against a Federal currency—committed also to State banking.” Not so. Jefferson was strong for Federal money, i. e., treasury notes. The Whigs were always as much given to wild-cats as the Democrats. Again the Tribune tells of 34,000 who took the benefit of the bankruptcy act in 1841-2-3, but says nothing of the hundreds of thousands who failed between 1873 and 1890, under the crush of Republican gold resumption, without any such release. Intelligent Democrats could show billions of loss from Republican financiering against hundreds of millions under Democracy. Give the poor devil Democrat his due. He makes a clumsy attempt now to cover his rascality in voting against silver bills by all his talk of returning to wild-cats. The cheeky Republicans offer no shadow of a real remedy for our financial ills.

To return to the time of the twenties. The new, hopeful country kept having booms in spite of bad money. After the close of the war of 1812-15, “blessed peace,” said Matthew Carey, “came and brought two thousand merchant buyers to Philadelphia.” Fortunes were made. It was funny as a circus. The brokers stuffed the United States treasury full of shinplasters, not good thirty miles from home. Congress said “resume” in 1817. Banks said, “Go to the devil.” With twenty-two millions “on hand,” Congress had to borrow half a million to keep house on. The big bank was given over to favorites, bribery and corruption, but ruled the land. There was a whirligig between the branches of the big bank and the little banks. The latter bought, with their red dogs, from the branches, drafts on Eastern cities. The drafts bought European goods. Meanwhile the branches socked it to the wild-catters up to five and ten per cent. a month, till they redeemed their red dogs with the proceeds of another crop.

In 1818 the president of the big bank resigned when it was near ruin. A new president, Cheves, saved the bank, in the Bank of England fashion, by ruining a lot of small banks and merchants. In 1820 came “stay laws” and a “relief system.” Men could redeem their lands and negroes in two years by paying ten per cent. down. North Carolina had an awful time. Robber bankers of Newbern became the practical owners of the State and sucked its blood. Were ruling still in 1833.

In 1825 the great Nick Biddle took the presidency of the bank, and ran the whole country, till knocked out by Jackson. Biddle was the biggest boss yet; moved crops; lent ten millions at a time to the government. Some thought he gave the rising sun a boost. When there was a run, he only allowed his branches to cash their own drafts. In 1832 was high water time for this fine old Philadelphia gent. President Jackson, who hated all undemocratic high kicking, made him pay the government debt from his government deposits. Jackson stopped the abnormal boom in wild lands by his “specie circular,” ordering only specie to be taken for United States lands. Then, to check the torrents of extravagance, he ordered the useless thirty-seven millions that he had foolishly put in State banks distributed back to the people of the States. The wild-catters paid eighteen millions, and then all broke, beginning in New York in May, 1837. That was a grand smash. Jackson had a glimpse of the greenback remedy in his muddled head. Jefferson and Calhoun always had it.

Parallel with all this was the Mississippi tomfoolery of 1830 to 1840. That State borrowed thirty millions on the old personal note plan from Holland, and fooled it away in ten years. Slaves were then the only good assets. These were run off to Texas, and “Gone to Texas” (G. T. T.) was a familiar inscription.

The College Professor and the Facts.

Prof. Laughlin of Chicago University said in his recent speech before the Sunset Club and the Bankers’ Association:

The Chicago Herald of December 10 voiced the same falsity thus:

Are these men simply reckless liars, or are they ignorant of the facts? Here are the facts: From 1812 to 1860 U. S. treasury notes were issued at least twenty times; that is, in every time of emergency, when the bankers’ wild-cat money could not possibly keep business going. These notes were receivable for all debts due the government, including interest on the public debt and custom-house dues; and that fact made them universally acceptable by the people—better than gold. In these respects they were better than the greenbacks; for never until the infernal exception was put upon them, in 1862, did the government refuse to receive its own treasury notes.

Here are most of the dates and amounts of those issues—all by acts of Congress readily traced: June 3, 1812, $5,000,000; February 25, 1813, $10,000,000; March 4, 1814, $10,000,000; December 26, 1814, $25,000,000; February 14, 1815, $25,000,000; October 12, 1837, $10,000,000; March 21, 1838, $10,000,000; May 31, 1840, $5,000,000; June 30, 1842, $5,000,000; August 31, 1842, $6,000,000; July 22, 1846, $10,000,000; June 28, 1847, $23,000,000; December 23, 1857, $20,000,000; December 17, 1860, $10,000,000.

Is that lie nailed? The above treasury notes were hampered in various ways. The money-lenders persuaded Congress that it would be “contrary to the laws of the Medes and Persians” if the notes drew no interest. So they were generally heavily handicapped in that way. Sometimes they only drew one mill per annum, sometimes nothing. When they drew none the Shylocks at once cried that the country was ruined. They liked them well enough plus interest, because they were sharp enough to get hold of them and pull in the interest, while they managed to cram the United States treasury full of their wild-cat stuff.

To thoroughly verify these serious statements, let us look at the statutes under which these issues were made and the particulars of their issue:

Act of June 3, 1812 (Statutes 2, p. 366).—This law authorized the issue of $5,000,000 treasury notes, to run one year, bearing five and two-fifths per cent. interest. They were made receivable for all debts due the government, and were to be paid to such public creditors and other persons as were willing to receive them. They might also be used to procure loans, or might be placed to the credit of the treasury in banks at par and accrued interest.

Act of February 25, 1813 (Statutes 2, p. 801).—This law authorized the issue of $10,000,000 treasury notes to mature in one year, bearing five and two-fifths per cent. interest per annum. Terms same as act of June 3, 1812.

Act of March 4, 1814 (Statutes 3, p. 100).—Authorized an issue of $10,000,000 on same terms as above. No charge to the government was to be made by the banks which credited the notes.

Act of December 26, 1814 (Statutes 3, p. 161).—Authorized the issue of $25,000,000 treasury notes in place of a loan of $25,000,000 previously authorized. Ten millions of these notes were to be applied to the payment of $10,000,000 previously borrowed. Otherwise they were like the above.

Act of February 14, 1815 (Statutes 3, p. 213).—This law authorized the issue of $25,000,000 treasury notes in addition to other issues. Up to this time the Secretaries of the Treasury, Mr. Gallatin and Mr. Crawford, had complained that the treasury notes so far issued were made too large for common circulation, though their standing among the people was good and the people were desirous of having them. They said treasury notes had taken the place of coin and equalized the exchange throughout the country. To meet the wishes of these secretaries and of Jefferson and Madison, as well as the people, these $25,000,000 treasury notes for circulation were authorized and issued. The most of them were required to be less than $100 in denomination, and to be payable to bearer, while those of $100 and over were to be made payable to order and to pay by indorsement, and were to bear five and two-fifths per cent. interest. The smaller ones were to bear no interest. They were also, for the first time, made receivable for six per cent. bonds. They were made to circulate as money, and to have the characteristics of coin, but they were not redeemable therein. They were legal tender to the United States. These notes, after being paid into the treasury, were to be reissued.

When these $25,000,000 treasury notes of small denominations were made to circulate as money, and to bear no interest, the indignation of all the banks in the country was aroused. They saw that if those notes went out among the people, and became the money of the country, there would be an end to the circulation of bank notes. Such was the truth. There was, therefore, a general combination in New England, New York, Delaware and Pennsylvania to kill them off. The old Bank of the United States, chartered in 1791, the charter of which expired and which was not renewed in 1811, was then, as the law allowed, closing up its affairs. The debts of the people to this bank were very large. The bank was pressing for payment. The people presented these treasury notes, which did not bear interest, in payment. The bank, to destroy the credit of the notes, and to force the recharter of a national bank, refused to receive the notes of the government in payment to the bank. As the bank would not receive the notes from the merchants, the merchants were reluctantly compelled to refuse to receive them for debts due and for goods sold. The New England banks, and those of Delaware, were also deeply involved in this conspiracy to destroy the credit of these treasury notes, as all such are now. The embargo and non-intercourse laws of Jefferson and Madison had destroyed the carrying trade of New England, and had caused a suspension of the New England banks in 1809 and 1810. The people of New England were, therefore, greatly opposed to the war with England. They did all they could to cripple the government in carrying it on. They refused all loans, even of bank notes, and were very hostile to all treasury notes, especially to those intended to take the place of bank notes, as were those of 1815.

By a general combination between State banks, the old national bank bondholders and bullion brokers, these notes of the United States were forced to a discount for a short time. One of the strongest arguments in favor of having all treasury notes made full legal tender is here presented. Had they been legal tender to the people, as well as to the government, all the efforts of the banks and brokers to reject them and reduce their value would have been fruitless. If the legal tender character were removed from the greenbacks the national banks would at once discredit them to-day.

Immediately after these efforts of the banks to discredit treasury notes, an application was made to Congress for a charter for another United States bank, which proposed to take from the government, as part of its capital, $15,000,000 of these same treasury notes, to withdraw them from competition with bank notes. (Just as the rascally conspirators at Washington are now trying to do with three hundred and forty-six million greenbacks.)

Mr. Madison vetoed the bill, principally on account of this provision. But $28,000,000 of bonds were substituted for treasury notes, as capital of the bank; and by a combination of the Federal party and a few Democrats it was chartered. The charter provided that no other such bank should be chartered by Congress for twenty years. This implied, also, that all treasury notes intended to circulate as money should be withdrawn, and that this bank should furnish all the national paper circulation for twenty years.

For this privilege the bank paid $1,500,000. The contract on the part of the government was disgraceful, but, having been made, it had to be carried out; and it was carried out, as the following acts of Congress show:

The Act of March 3, 1817 (Statutes 3, p. 377).—The second Bank of the United States had just gone into operation. Congress was compelled to comply with its part of the contract. It, therefore, passed this law, which repealed all laws authorizing the reissue of the “treasury notes of 1815.” But the people had these government notes, and they preferred them to bank notes or coin. They knew that the repeal of the law authorizing their reissue could not affect the value of those then in their hands, for a valuable consideration paid the government. They, therefore, held on to the notes (as our people should now, in spite of Sherman, Gage & Co.) Instead of paying them into the treasury, where the law required them to be destroyed, the people held on to them, and used them in business, greatly to the annoyance of the bank and of the Secretary of the Treasury, then a bank man (Mr. Dallas). This officer ordered the collector of revenue to refuse to receive these notes for duties on imports, supposingsupposing that by this means he could injure their credit and force their presentation at the treasury for payment in coin or national bank notes, that they might be canceled. This gave rise to a suit in Boston. A firm presented treasury notes in payment of duties on imports, for which the law creating them provided that they should be received. The government refused to receive them, and brought suit for the duties. The defendants pleaded a tender of treasury notes. The government answered that they were not legal tender. Judge Story, in 1819, heard the case, and decided for the defendants. The decision is that “Treasury notes are legal tender for everything for which the government makes them receivable.” This decision is in 2 Mason, pages 1 to 18. This decision, though against the government, was never appealed to the Supreme Court. It, therefore, stood as the law of the land.

The Act of May 3, 1822 (Statutes 3, p. 675).—Treasury notes still remained out among the people, to the annoyance of the bank and the Secretary. The decision of Judge Story raised instead of depreciating them in the estimation of the people, and increased the anxiety of the bank and the Secretary respecting them. The notes did not come to the treasury for destruction. (Just so the people acted when John Sherman tried to make them take 5-20 bonds and give up the greenbacks.) They remained among the people until May 3, 1822, when Congress again came to the rescue of the bank and passed the law of that date, which provided that these treasury notes should not be received by any collector of revenue in the United States, and that they should be received and paid at the treasury only. All that came into the treasury were to be destroyed. The people wished to retain these notes; but the bank forced Congress to act against them; and Congress, by destroying their receivability, compelled their surrender by the people. We hear no more of treasury notes thereafter until 1837, when, as usual, the necessities of the government again called them into being.

The Act of October 12, 1837 (Statutes 5, p. 201).—The banks had all suspended, with nearly $40,000,000 government bonds. Not one year before the law had made these banks public depositories, with their promise that they would always pay coin for all liabilities. The government had, in 1835, paid off the last dollar of the national debt. The surplus then in the treasury was nearly $40,000,000. This was in the banks. The government had no money to pay ordinary expenses, unless the treasury used suspended bank notes. This Mr. Van Buren, the President, refused to do. He called Congress together to meet the emergency. Its remedy for the emergency was treasury notes (as it should now be), which Jefferson says are the only reliance of a nation. This act of October 12, 1837, provided for the issue of $10,000,000 treasury notes, in denominations not less than $50, running one year. The law left the interest which they were to bear discretional with the President and the Secretary of the Treasury; but in no case was it to exceed six per cent. Congress appeared too timid to make these notes money bearing no interest. The Secretary, knowing that the people needed them as money, complied with the law by making many of them bear one mill interest per annum. As such they circulated freely as money, and the people were delighted to get and use them. They answered all the purposes of coin, and equalized the exchanges throughout the country. The banks did not, at that time, possess sufficient power to injure them. Men now living remember them and their usefulness, although, imitating the foolishness of the Bank of England, they were never paid out of the treasury but once.

The Act of May 21, 1838 (Statutes 5, p. 228).—This act authorized the reissue of the $10,000,000 treasury notes issued under the act of 1837, which had been canceled. They should have been used till worn out, and then replaced ad infinitum. It has taken time and a great war to open the eyes of the people and Congress to see what Jefferson saw in 1813. And now, again, many are forgetting the facts.

The Act of May 31, 1840 (Statutes 5, p. 370).—This law renews the act of 1837, relating to the issue of treasury notes, and makes the following modifications: 1. That they were to be issued in place of those redeemed; not to exceed in this issue $5,000,000. 2. They were to be redeemed in less than a year, if the treasury was in a condition to redeem them. 3. When ready to redeem them, the Secretary of the Treasury was to give notice. 4. After due notice, these notes should cease to bear interest, if they remained out. This act was to continue only one year. It is evident that Congress supposed the necessity for issuing treasury notes would soon cease. But it was mistaken. Treasury notes continued to be issued up to 1848.

The Act of July 4, 1840 (Statutes 5, p. 385).—This was the first independent treasury act of the days of Van Buren. It had good features, but was badly bungled. The money of the government was to be kept by the government (instead of the banks), in the mints, custom-houses, post-offices and treasury building. The fool part of it was that after January 3, 1843, no payment should be made to the government in anything but gold and silver coin. The banks were suspended. The government was being sustained by treasury notes. But still this law provided that after January 3, 1843, treasury notes should be excluded from the treasury as well as bank notes. An appeal was made to the people, in that year’s election, upon this law, and Van Buren and his coin payments were knocked out by Harrison with wiser plans.

The Act of July 21, 1841 (Statutes 5, p. 438).—This was among the first Whig acts, and they in turn made fools of themselves. They favored a national bank, but opposed treasury notes. The law provided for the issue of $12,000,000 six per cent. bonds. The principal purpose was to redeem the good treasury notes of the Democrats. A Pittsburg man was sent to England to sell the bonds. Though the United States had paid its national debt in 1835, the bonds were no go. The Whigs, having failed to found a bank and sell these bonds, were compelled to rely upon the much-despised treasury notes of the Democrats.

The Act of April 15, 1842 (Statutes 5, p. 473), was a final effort to shove the bonds. They were increased to $17,000,000, the time extended indefinitely up to twenty years. They could be sold at less than par. The rich, strong young nation could not do it, though taxes and duties were pledged for payment. The war was going on between the Whig Congress and sensible President Tyler. The latter advocated the issuing of all the paper money as well as metallic money by the government; but Congress wished the money issued by a national bank. The President vetoed the bank bill. Congress, by way of heading him off, passed the act to make treasury notes bear six per cent. interest, to hinder their being used as money.

The Act of June 30, 1842 (Statutes 5, p. 766).—This provided for $5,000,000 treasury notes to run one year. Interest five per cent. Otherwise like most of the others, as to legal tender, payment to public creditors and placing them in banks.

The Act of August 31, 1842 (Statutes 5, p. 581), shows a lingering hope of selling the bonds. If not successful, the government was to issue $6,000,000 more of treasury notes (trotting out the despised pack-mule again), which might even be reissued. What a let-up! Br’er Fox Shylock, he lie low!

The Act of March 3, 1843 (Statutes 5, p. 614), authorizes the issue of new treasury notes to supply the place of those redeemed.

The Act of July 22, 1846 (Statutes 5, p. 39).—The DemocratsDemocrats resumed power in 1845. This act authorizes $10,000,000 treasury notes in place of those destroyed.

The Act of August 6, 1846 (Statutes 9, p. 59), finally established the independent treasury on a sensible basis. It made all treasury notes and gold and silver coins equal in payment of all debts to the government. This held till 1861, and many of the provisions are still law, but badly enforced, as when our recent Presidents deposited many millions in banks.

The Act of January 28, 1847 (Statutes 9, p. 118), authorized $23,000,000 (more than $500,000,000 now) to fight the Mexican war. No interest was fixed. They mostly drew one mill, and the people gladly used them as money.

The Act of December 23, 1857 (Statutes 11, p. 237), provided for $20,000,000 treasury notes to take the place of coin, the banks having suspended with the coin in their vaults. (Heaven, or something, generally saves the banks.) These were, like most of the previous issues, with nominal interest. The plain people took them gladly.

The Act of December 17, 1860 (Statutes 12Statutes 12, p. 121), provides for $10,000,000 treasury notes, running one year, at six per cent. The interest was to run and the notes remain out until sixty days after notice of readiness to redeem. Otherwise they had the old provisions.

The Act of February 8, 1861, authorized the issue of treasury notes, or a loan of $25,000,000 to take up treasury notes.

The Act of March 2, 1861 (Statutes 12, p. 178), provides for a loan of $10,000,000 to take up treasury notes and for government expenses. Same old story. If bonds not sold, then more notes.

This brings us to the act of July 17, 1861, when the gigantic $250,000,000 of loans and notes came up. The further history is well known. That just given will surprise those who thought treasury notes began with the rebellion.

As many of the foolish propositions now put forth for “reforming the currency” are only feeble imitations of the Safety Fund, Suffolk System and Redemption Bank System that arose before the Rebellion, a brief account of them will be given here. In the thirties and forties there were as many so-called systems as there were States. The Suffolk System of Massachusetts, among those first started, alone deserved the name of system. In 1829 that State decreed that no bank should operate unless fifty per cent. of its capital was paid in coin. Notes must not exceed twenty-five per cent. of the capital. Liabilities, except deposits, must not exceed twice the capital. Such provisions, however, amounted to little, because, much of the loans being simple credits, there was small inducement in the strong banks to overissue notes. As no provision was made for reserves, the coin to set a bank in motion could be bought and sold again right after the organization. The Redemption system, afterward adopted, was much better, but, as will be shown, only a harm in panic times.

The New York banks were placed mostly in New York City and the Hudson River towns. In 1829 the Safety Fund System arose there. It allowed the banks under it to issue notes to twice the amount of their paid-up capital, and loans to twice and a half the amount. Every bank under it had to pay the State Treasurer, annually, one-half of one per cent. upon its share capital—these payments to continue till each bank had a sum equal to three per cent. of its share capital. The amounts so paid were to be held as a common fund for the discharge of notes or other liabilities of any bank of the system.

In 1841 and 1842 eleven of the Safety Fund banks failed, making a loss to the creditors of $2,588,933. The fund was then $86,274. The whole amount of the fund to September 30, 1848, was only $1,876,063. The balance of the loss was provided by the State, which was to be reimbursed by further additions to the fund. That was very nice for the banks. In 1842 the act was so amended that the fund became chargeable only with the losses to the public on the note circulation, just as it is the case with the national banks now.

In 1838 New York founded the “Free Banking System,” by which banks could be formed without application to the legislature. These associations were required to deposit with the State Comptroller United States or State stocks equal to a five per cent. stock, or bonds and mortgages on improved real estate worth twice the sum secured, and equal in amount to their note circulation. The Comptroller issued the notes to them. Up to 1843 twenty-nine of these banks failed—circulation, $1,233,374; nominal value of securities, $1,555,338. These produced $953,371, or 74 per cent. of the circulation secured. The law was then amended to exclude all but United States stocks, and those of the State, which must be equal to six per cent.

A wiser provision had been adopted in 1840, requiring all the State banks to redeem their notes, either in New York City, Albany or Troy, at a discount of one-half of one per cent. In 1851 this discount was reduced to one-quarter of one per cent. After 1851 two New York banks started the Redemption System. The notes of such of the country banks as kept deposits with them were returned, the redeeming banks dividing the discounts between themselves and the issuers. This system was useful, as it forced a constant redemption; but see how it worked in 1857.

After 1838 no more Safety Fund banks were chartered, and the system gradually lapsed. But a curious story could be told of how it ran through the West. That region was deluged with “safety” money—all but the safety. In 1846 the new Constitution of New York took from the legislature all power to pass any act granting any special charter for banking purposes; such organizations to be under general laws. After 1850 bank stockholders were to be liable to the amount of their shares for all the debts, and holders of notes to be preferred creditors.

Now, for the redemption banks in 1857. These banks, useful in their way in ordinary times, did harm in that panic. A few years before a new source of profit was suggested to some New York banks. If the redemption that was distributed among the money-brokers could be monopolized by one or two institutions it would yield a rich revenue; and it could easily be attracted by reducing the rates of redemption so low as to exclude individual competition. The system was based somewhat upon the Suffolk system. Coupled with the payment of interest on country deposits, it had grown into astonishing activity before 1857. It worked admirably as a piece of machinery, with the popular commendation that it restricted the bank currency by enforcing prompt redemption, and saved the merchants a heavy brokerage. It was a great convenience in the first days of the panic, when private capital was withdrawn from the purchase of currency, and when the merchants, but for the redeeming banks, would have been overburdened with unavailable notes.

But the redemption system, like everything else that was susceptible of abuse, was turned aside from its legitimate purpose and made to answer a mischievous end. The low rate at which the bills were taken in New York accelerated their return in bulk, as a basis of exchange, or for credit in account. Thus their distinctive character as circulation was in a great measure destroyed. The cheap redemption, so desirable in a common state of the market, became virtually a premium on the currency of New York. The tendency, then, was to take it out of a healthful circulation and throw it back to its source, whereby it profited nobody so much as the stockholders of the express companies. The country banks might keep their own bills in a perpetual circulation, by exchanging them with each other, and thus creating a trade in them. The same packages were not unfrequently kept unopened in the circuit, and reissued in bulk, as often as they were needed to supply balances.

In a panicky time such redeeming banks must either put more capital into the service or reject the bills. In 1857, in spite of the best management, the currency circuit was kept up; the bills of one bank were paid for the bills of all the others.

Another evil arose from these banks. The credit given to an unsecured currency by their indorsement gave it a wide circulation, to the displacement of bills that were based upon State and United States stocks. It was now seen that this credit had no other basis than a current deposit by the issuing bank, which deposit was in very small proportion to its outstanding bills; and that the redeeming bank was prompt to the hour in repudiating those bills if the deposit was not maintained. This was a fallacious credit, entirely independent of the separate ability of the issuing banks. The general result was that bills were likely to fail in transit, and they would not then be admitted as a deposit, which would involve the rejection of others. And so the row of bricks began to tumble in both directions.

There was no incident of that panic that spread its terrors abroad with such sure and rapid steps as the rejection, by the redemption banks, of bills which they had been accustomed to receive on deposit. If it had been possible to remove all other causes of excitement, that alone would probably have involved the suspension of specie payments. It filled all the shops of the country with alarm. It created mobs in the savings banks, and pushed forward the panic, by exciting the fears of the multitude.

The Example of France.

Professor Laughlin has the gall, as few of his confreres have, to appeal to “the example of France,” after the Prussian war of 1871, in not “interfering with her media of exchange.” It is hard to tell whether his statement is based upon impudence or ignorance. She interfered with all the ideas of propriety entertained by his clique in a way that has been secretly their despair ever since. Yet hear his glorification of a scheme that cuts all the ground from under him. He says:

He don’t tell how. Don’t tell that she flooded all the avenues of trade with her paper money, and thus made her goods so plenty and cheap that Germany bought them instead of her own, and was then in turn nearly bankrupted; so that France paid three quarters of the “milliard” in French goods!

But hear the true story from Wendell Phillips, an all-round, up-to-date reformer, whose motto was,was, “Act in the living present.” When the monopolizers of black men were beaten he turned to face the monopolizers of all men and women. Here is his eloquent picture:

Among the great results of this policy were an abundance of gold and silver coming from abroad, until $1,200,000,000 was found to be in the country.

Lest some may doubt the statement about the Germans only getting a little gold for that indemnity, an extract is here given from “Our Money Wars,” p. 152.

The above from Michels shows that he saw but dimly what Phillips saw so plainly, that government paper money, nourishing all industries, gave France that victory. Michels catches a glimpse of the truth when he speaks of luxuries, wines, etc.

To get a clear view of the French financial genius we have to go back to 1848, when Louis Philippe abdicated and the republic was founded amid great confusion. The French have an instinct for finance far superior to anything yet shown—by our rulers at least—in England and America. “Paris,” says Victor Hugo, “is the city of the initiative.” It is not afraid to start things. It is not, like Washington and New York, always asking what London would do or think. Taking Louis Blanc’s advice in 1848, it started national work-shops to insure the employment of surplus labor. Those did good for a time, but they were soon perverted and destroyed by a treacherous Jew who got hold of them.

Another new departure was more successful. “Besides its regular financial operations,” says the London Times of February 16, 1849, “the Bank of France made vast advances to the city of Paris, to Marseilles, to the Department of the Seine, and to the hospitals, amounting in all to 260,000,000 francs. But even this was not all. To enable the manufacturing interests to weather the storm, at a moment when all sales were interrupted, a decree of the National Assembly had directed warehouses to be opened for the reception of all kinds of goods, and provided that the registered invoices of these goods so deposited should be made negotiable by indorsement. The Bank of France discounted these receipts. In Havre alone 18,000,000 francs was thus advanced upon colonial products, and in Paris 14,000,000 on merchandise. In all 60,000,000 francs was thus made available for all the purposes of trade. Thus the great institution had placed itself, as it were, in direct contact with every interest of the community, from the Minister of the Treasury down to the trader in a distant part. Like a huge hydraulic machine, it employed its colossal powers to pump a fresh stream into the exhausted arteries of trade, to sustain credit and preserve the circulation from complete collapse.”

How like “a grimacing dance of apes” our American way of handling financial crises looks, in comparison with the above.

The Bank of England.

Prof. Laughlin showed the usual gold-bug worship of British finance in this:

Ordinary decorous language would fail to characterize that infamous statement. The fact is that the British system is utterly brutal. Our “iniquitous usury laws” prevent a man from giving everything he has to the banks in hard times. The British system is that of Jay Gould in his gold corner of 1869. He settled with his debtors by “taking all they had.” He was merciful, and forgave them the balance; which is the usual stock exchange style.

In coin-paying eras corrupt governments and Shylocks have debased coins to make them go further. In these credit-mongering times they try to bring their coin basis down to one metal, gold, and clamor for extreme fineness of that, in order to make their inverted pyramid of credit go further and sell dearer. The policy of Great Britain, for instance, has been to make gold, its standard, so dear and inaccessible to the foreigners and debtor class that they would find the other commodities in the market cheaper than the gold in the market, so that settlements in other commodities would be preferable. The retention of gold in the Bank of England, by raising discounts in panicky times, though murderous (“kindness,” says Mr. Laughlin) to individual active business men, is a necessary factor in this piratical scheme, and the fulcrum upon which England derricks into her treasure vaults the plunder of the whole world. Business is made a lottery, turning out dazzling prizes that keep merchants from rebellion. Long-headed American Shylocks hope to see the United States as much more successful in plundering the globe, in this way, as our country is larger than England.

Finally, as to Laughlin, with what bitter scorn this statement from the “closet scholar” will be greeted by the thousands of manufacturers who, during panics, have had to shut their factories for lack of cash “to pay the hands”—though they had all but gilt-edge collateral:

The Washington “Currency Reformers.”

In finishing this bird’s-eye view of the financial history of this country, a brief review of the current financial plans cannot well be avoided. It may be said of them, in a general way, that no other set of robbers ever before attempted to secure a law guaranteeing them unrestricted right to plunder with unlimited government protection. The out and out black-flag pirates, as represented by Walker of Massachusetts, have a plan as simple and explicit as a patent medicine. It runs thus: “Retire the greenbacks, kill silver once for all, and let the bankers manage the currency.” This obsolete idea, that banks should issue money, is showing all the vim of a death struggle. But a thousand columns of speeches in the Congressional Globe on the safety of the national bank system are answered by this solitary fact: In the year 1893, three hundred and sixty banks west of the Alleghanies, owing $125,000,000, went to smash, and about a dozen bankers are now in prison or exile, while many more escaped as by fire.

The Baltimore Plan, which a while ago had the sanction of the Comptroller, Secretary of the Treasury and the President, is, in a word, a scheme for issuing circulating notes by both national and State banks, otherwise than upon the pledge of government bonds as now. The banks are to issue notes upon their own assets, supplemented by a deposit of a certain amount of greenbacks, as a safety and redemption fund. The theory of this plan is that when any special demand for currency arises the banks will make a special issue of notes to supply it; and that as soon as this demand ceases the banks will retire the notes it has called out. Thus the quantity of currency available will, it is assumed, never be either deficient or excessive; and there will never be at any point either a monetary stringency or a monetary plethora. Were the function of currency exclusively that of facilitating exchanges, such a system (like that of 3-65 interconvertible bonds) might be useful. But currency serves the additional purpose of measuring the price of commodities; and since its relation to those commodities is determined by its volume, any change of its volume changes its value also, and consequently impairs its stability as a measure of prices.

Again, as to the State bank feature of the Baltimore plan, the idea prevails extensively in the agricultural districts of the West and South that the chief business of a bank is to lend money to borrowers. That is why they clamor for the removal of the ten per cent. tax on State banks. An abundance of greenbacks and silver would do away with most of the need of borrowing from banks. That’s what’s the matter with the banks.

No further mention is needed here of the schemes of Carlisle, Springer, Vest and others. They seem all dead at this writing, and they certainly should be damned. Even the New York Tribune, a monopolists’ own, says of one of the safety-fund schemes:

On the other hand, the New York Sun, edited by a man who was a radical socialist in his youth, and now a bitter, hardened, cruel cynic, although lately a Greenback paper, is as rabid as the New York Evening Post in advocacy of gold and gold only. It says of the latest safety-fund humbug:

In Chicago we have Lyman Gage’s plan. Mr. Gage is a man of intellect who resembles some of those orthodox clergymen who, by a long course of theological dissipation, i. e., reasoning from false premises, have impaired their naturally fine faculties. Mr. Gage, if we must credit him with sincerity, has come to the same condition by financial dissipation. But his plan is not as vicious as some. To furnish the needed foundation for national bank circulation he would have the treasury issue $250,000,000 of 2½ per cent. bonds, for which greenbacks or Sherman notes should be paid. The money paid would not become an asset of the government. It would be canceled, destroyed, burned up. Of his scheme the Chicago Times well says:

A specimen of the demoralization and danger of the times is seen in a recent statement of Senator Gorman, that he and Quay had settled in their minds that a certain government bond scheme, like that of Mr. Gage, in eight items, including some about silver, was about the only proposition that could pass the present Congress. No. 3 among the eight items coolly dismisses the greenback thus: “The legal tenders to be retired and canceled as the bonds are put out.”

On the other hand, the Chicago Inter Ocean, which is repenting of some of its financial sins, and remembering what a good Greenback paper it was in 1878, says:

An extraordinary scene in the House between Representatives Hepburn and Hendrix so fairly illustrates the muddled stupidity and impudence of the gold-bugs that it deserves notice here as a sign of the situation. Mr. Hepburn described Mr. Hendrix as a self-heralded national banker, who came here with oracular utterances to tell the House what to do. Mr. Hepburn said his self-laudation was impaired by the recollection of his speech sixteen months ago, when the same conditions existed. Mr. Hendrix then found the panacea for all financial ills in the repeal of the Sherman silver law.

Before describing this discussion, attention should be called to the fact that the panic of 1893 was immediately brought on by the bankers because Secretary Carlisle undertook to perform about the only good deed he has ventured upon as Secretary, i. e., to pay the Sherman treasury notes according to the letter of the act of July 14, 1890, in silver, just as France would have done. Now mark how Hendrix “opened his mouth and put his foot in it,” and how, finally, Hepburn tripped him.

Mr. Hendrix described at some length the process by which the gold was withdrawn by speculators for shipment abroad, and then proceeded to contrast this with the situation in France, where the Bank of France refused to pay, except where actually necessary, more than five per cent. of gold on its demand obligations. These aggressions on our gold reserve must be stopped, and if the pending bill would stop them, afford relief, take the government out of the banking business, as it has been taken out of the silver business, he would vote for it.

“Does the action of the Bank of France, in refusing to pay more than five per cent. in gold,” asked Mr. Hepburn, “impair the credit of that bank?”

“No.”

“Then would the credit of the United States be impaired if the United States should exercise its discretion and redeem the Sherman notes in silver?”

“Yes, I believe it would at this time,” replied Mr. Hendrix.

“Why?”

“Because of the general distrust of the government’s ability to pay in gold. One hundred and fifty-nine million dollars of Sherman gold promises [?] to pay cannot be met without gold.”

“But the notes are redeemable in coin, not in gold,” was Mr. Hepburn’s parting shot.

Mr. Hepburn declared that Mr. Hendrix had pointed out unwittingly the remedy for the present evil when he told the House that the great banking houses of Europe exercised their discretion about depleting their gold vaults. “Why will not the Secretary of the Treasury exercise the same discretion?” he asked, amid a round of applause. “The exercise of this discretion did not impair the credit of European banks. Who dared to say that the credit of this country, with 65,000,000 people behind it, and an unlimited taxing power, would be impaired because it refused to kneel at the demands of the Shylocks?”

“Why have not the Republican Secretaries of the Treasury exercised that discretion?” asked Mr. Pence of Colorado.

“I have not been Secretary of the Treasury,” replied Mr. Hepburn hotly. “When I am I will answer. I am as fully convinced, however, as I am that I am alive, that if the Secretary of the Treasury were now to exercise his discretion and pay gold when legitimate redemptions were asked, and refuse it to sharks and speculators, the evils from which we suffer would cease to be.”

A broader view is that the prime motive of the Secretary in exercising his discretion should be the welfare of the government; and gold should be refused where its payment is likely to hurt the treasury.

In the foregoing pages we have attempted to give such a bird’s-eye view of American money and finance as would serve as an example and warning for the future. We behold in this short story how our finances were continually run upon the rocks and shoals of a false “political economy,” so-called, and how they were occasionally pulled off—though remaining most of the time stuck fast in the most dismal way.

As to the general aspects of the money question this is added:

Our financial kings have kept two purposes in view. First: To have our money issued by and for the special use of private institutions called banks; and to have this money scanty in quantity and of fluctuating value. Second: To issue, foster and maintain, by all possible means, bonds and other interest-bearing obligations, as the most convenient means of transferring to the few the product of the industry of the many.

To maintain these humbugs, they use learned language, like doctors writing prescriptions in Latin. All the expert handlers of money, stocks, etc., hate nothing so much as that which is best for the other classes, viz., steady values. Their delight is in ups and downs; and then, if speculators, their effort is to be on the winning side. With brokers, every change is profitable. With them it is: “Heads I win, tails you lose.” Copernicus said of the work of these traitors: “It is not by a blow, but little by little, and through a secret and obscure approach, that it destroys the state.” Further back in the ages Plato, Lycurgus and Solon saw this most plainly.

The new American system of money is plainly and briefly this: Abundant government fiat paper money—founded upon the wealth and credit of a great, stable nation; such money toto be kept at a steady purchasing power by the increase and decrease of its volume; and to be quite void of intrinsic value, and quite free from particular commodities as bases for the monetary units.

For the present we wish free coinage of gold and silver at 16 to 1. The ultimate of gold and silver will probably be free coinage for all who bring them to the mints, into suitable coins stamped with their weight and fineness, and returned to the owners to be used as they choose. And no one will lie awake nights for fear the metals will go abroad.

When we get that “honest” fiat paper dollar, nothing will call for an extra session of Congress quicker than any prospect of a change in its purchasing power, after we have once got it to a generally satisfactory point, say about the buying power of our dollar in 1866. While any kind of a change, up or down, suits many gamblers and speculators, the steady increase in the buying power of the dollar, for thirty years past, has been destroying the producers of this country and largely creating the pestiferous breed of millionaires.

The bulk of our money wars have been crowded into the past thirty years. We might call them “Our Thirty Years’ War.” Its history has been utterly, wofully and willfully misrepresented by such pseudo-historians as Sumner of Yale and David A. Wells.

Those years nearly cover the great and little panics of 1837, ’47, ’57, ’60, ’73, ’84, ’85, ’90 and ’93. Vast tomes might be written concerning the manifold causes. One cause has always been foremost in them—scarcity of legal-tender money.

At times our rulers have tried to deceive us by a great show of abundant currency. Such were the fifteen kinds of money thrust upon the nation to confuse it during the civil war, by McCulloch and Sherman.

Why need we here repeat the many-times-told tales of the craft of the national banks, demonetization of silver, the mystery and raised value of gold, Rothschild tricks, the control of our finances and politics by Europe, and the gradual merging of the gold Democrats and Republicans into practically one party?

The bankers’ rebellion of 1881, which conquered President Hayes. The whirling of stock values up two billions then and down again in 1883. The deluge of trusts and syndicates in full tide in 1887. The bogus silver bill of 1890. Cleveland’s object-lesson of ruin and misery in 1893. The counting out of victorious Bryan in 1896. And now the ghostly attempt to bring prosperity by tariff bills and Lyman Gage “currency reform,” while millions of deceived, disappointed, dazed, discouraged, almost maddened Americans suffer all the tortures of poverty.

And the end is not yet.