Part 2 — CONTENTS OF PART II. (continued 2)

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 330possible 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:

“France borrowed largely, collected large amounts of capital by the creation of her national debt, and, on the other hand, retained her circulating medium in so perfect a condition that the moment the war was over she slipped along smoothly upon the wheels of industrial success and prosperity, without any derangement of her business. And, during that time, she carried through one of the most magnificent schemes of exchange, in the form of the payment of indemnity, that has ever taken place in history. She actually paid that foreign indemnity of the war to Germany practically without deranging the rate of exchange in France.”

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 331the 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:

“France has just paid Germany one billion dollars. Her chief cities have been sacked and plundered. Humiliated by defeat, torn by civil dissensions, she laughs, while all the rest of Christendom wade through the mire of bankruptcy. Her ships are full busy, and what little other nations do is in carrying to and fro her manufactures. Her homes are happy, her streets crowded with passing trains loaded with goods; all her mills hurrying night and day to get even with her demand upon them. Labor walks rejoicing and capital sleeps easy, fat with its gains. What magician has done this? Paper money. Like the rest of the nations, she ran to its protection during the stress and strain of her German war. Unlike and wiser than the rest of us, she has not hurried back to coin. Wiser than we, she received the paper she offered to others. This honesty has its reward. Her paper is, to-day, more valuable than gold.”

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.

“Ivan C. Michels says: ‘The indemnity from France to Germany, after the war of 1870-71, including interest at five per cent. per annum, amounted to $1,060,209,015. After crediting France with the value of certain railroads in Alsace and Lorraine, the amount of indemnityindemnity due Germany was $998,172,069, or 4,990,860,349 francs, which was paid by the French government through the Bank of France. At my request the Bank of France furnished to me several years ago the following statement as to the mode of having paid said indemnity:

Francs.

In bank notes of the Bank of France 125,000,000

In French gold coins 273,003,050

332In French silver coins 239,291,875

In German bank notes 105,039,045

Bills of exchange drawn in thalers 2,485,513,729

Bills drawn on Frankfurt in florins 235,128,152

Bills drawn on Hamburg in marksbancs 265,216,990

Bills drawn on Berlin in reichsmarks 79,072,309

Bills drawn on Amsterdam in florins 250,540,821

Bills drawn on Antwerp and Brussels in francs 295,704,546

Bills drawn on London in pounds sterling 637,349,832

——————-

Total francs 4,990,860,349

“‘The patriotic people of France raised the vast sum by a loan in less than six months from the time the government appealed to them. Germany expected to receive for years to come five per cent. per annum on the indemnity bonds; but the Bank of France, through the French bankers, drew on Germany, England, Scotland and Belgium, and in four months’ time the whole indemnity was paid. Never in the history of the world has this financial transaction been equaled, and I doubt that any other banking institution could have succeeded so well as the Bank of France. Germany expected the payment in gold coin or bullion, having previously and purposely demonetized silver. But the fact remains that actually in gold only 273,003,050 francs, equal to $54,600,610, was paid by the Bank of France, and that sum only left France, was remelted in Germany and coined into reichsmarks. England, with her gold standard, had to part with her gold to the amount of 637,348,832 francs, equal to $127,469,964. Bills of exchange on the German bankers throughout the German empire, especially on Hamburg, Berlin and Frankfurt, came to 3,064,901,180 francs, equal to $612,986,236, nigh on two-thirds of the whole amount of the indemnity. This magnificent stroke of finance on the part of the Bank of France and the French bankers came near ruining the leading German bankers; and forty-one banking houses throughout the German empire had to suspend temporarily, not being able to honor the drafts made upon them. The extravagance of the German people during the war of 1870-71 brought them into debt to France for luxuries, wines, etc., to an enormous extent; 333and when the Bank of France purchased bills of exchange from the French bankers, who drew on their German correspondents, a panic ensued, and the Germans suffered more than is generally supposed.’”

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 334alone 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:

“In the Bank of England the first moment of stringency the rate of discount is raised. That has the effect of preventing all unnecessary loans. The borrower who has good collateral will get the money if he is willing to pay an increased rate. Our system is such that we can loan until we come to the legal limit; and is deficient in that respect, as we cannot loan at a greater discount because of the iniquitous action of the usury laws. You can help a customer by increasing the rate. Just at the moment of the greatest stringency our American system is deficient.”

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.

335In 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 monetary function has to do solely with exchanges of goods; it hasn’t anything to do with their production.”

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 336attempted 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 337to 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:

“The bankers are to have free issue; and when one fails the government is to collect from the other banks and redeem its currency. But in time of panic the government would not and could not do that.”

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:

“The new bill, like the old one, authorizes an inflation of our paper currency, by at least $550,000,000, without providing for its redemption in gold, and without any effectual provision for diminishing the volume of outstanding legal tender. Our New York financial magnates, who have put up, this year, $116,000,000 in gold, to save the treasury from suspending gold payments, ought to bestir themselves in opposition to this latest administration folly, if they would not see all their efforts go for naught and the 338catastrophe which they have labored to avert rendered inevitable.” [!!]

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:

“Like other bankers, he thinks the chief end to be sought is to relieve the government of the duty of issuing the circulating medium of the country. Upon this point we must note an emphatic disagreement with Mr. Gage, and with the whole school of financiers of which he is a type.”

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:

“One of the perils of the present financial situation is 339the disposition shown to reopen the greenback question. It took fifteen years to fight the great battle. Secretary McCulloch attempted to take snap judgment against legal-tender notes, paying them off at a rapid rate. Illinois, through one of its Congressmen, E. C. Ingersoll, stepped in the very first day Congress convened after that payingoff process had begun with a resolution which stopped it. Then began the intriguing of the Eastern bankers to destroy the greenbacks, and when the last decisive conflict occurred Illinois was again in the leadership, G. L. Fort being the especial champion of the greenback cause as against both the contractionists and the expansionists. There was a great victory. For half a generation the anti-greenbackers have been quiescent. They have come to the front again with this session of Congress. The knock-out received in caucus Monday ought to satisfy them that the greenback is here to stay. There never could be a better money. It is good for its face the world over. In that uttermost end of the earth, China or Japan, the United States legal-tender note is good for its face value, and, whatever changes are made, that part of our currency should remain intact. Should the current of Congressional events occasion a show of hands in the Republican party on this question, no doubt an overwhelming majority would say, as did the Democratic caucus, let the greenbacks alone.”

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 340called 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.

341Mr. 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.

342As 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 343no 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 344then 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.

345

IV. THE EIGHT MONEY CONSPIRACIES.

“When I stand in the United States Treasury, I stand on English soil.”—Nathaniel P. Banks.

“HUGH McCULLOCH hamstrung the whole nation. His management of the finances, while it enriched him and made him a great London banker, has cost the American people more than the war did.” These words were uttered by Hon. William D. Kelley, and they are true as gospel. They would be equally true if the name of John Sherman were substituted for that of Hugh McCulloch.

That the constant aim and object of the manipulators of our financial legislation since the war has been to contract the currency and to burden the people with interest-bearing debt, thereby enriching the usurers and impoverishing the producing classes, is evidenced in the following brief summary of the eight principal enactments affecting money which passed Congress since 1861:

1. The Exception Clause. (Feb. 25, 1862.) In 1861 and 1862 demand treasury notes to the amount of $60,000,000 were issued by the government and made legal-tender money for all debts, public and private—equal to coin. Wall Street could not gamble in legal-tender paper money; so, as soon as the legal-tender act passed the House and was sent to the Senate, the Shylocks placed on the greenback what is known as the “exception clause”—“Except duties on imports and interest on the public debt.” This practically demonetized the United States treasury note, 346and cost the producing classes millions of dollars. The greenback “went down,” or, more correctly speaking, gold “went up,” until $1 in paper money was valued at only 37 cents when comparedcompared with gold. John Sherman said: “We purposely depreciated the greenback, to get sale for our bonds.” He was willing to destroy the people’s money to appease the greed of gold gamblers at home and abroad.

2. The National Bank Act. (Feb. 25, 1863.) This scheme was introduced in the Senate and advocated by John Sherman in the interest of bondholders and capitalists, just one year after legal-tender notes were authorized by law, and before sufficient time had been given to test their utility. The express object was to have the bank notes supersede the legal-tender notes, after the investment of legal tenders in bonds.

“I look upon the national bank, as now recognized by law,” says Myers in his “Money, Its History and Functions,” “as one of the most gigantic schemes for robbing the people ever devised by man. I cannot conceive of a single reason for perpetuating the system one day beyond the time required to settle its affairs. The national banks of this country have cost the people, in thirty years of their existence, over $6,000,000,000. The credit which the banker sells at from 7 to 15 per cent. costs him only 1 per cent. on actual circulation; hence it is virtually a present to him. He draws interest on this credit; on what he himself owes. His note is not money, nor is it in any sense a legal tender between man and man. It is simply a ‘promise to pay.’ The banker lends his credit, with which he has supplied himself by gift from the government, and the borrower pledges his wealth; the banker being far more secure than the holder of the banker’s paper. The banker takes pay for something he does not furnish; for the capital (wealth) is furnished by the borrower. So the banker 347gets something for nothing, and the borrower pays for that which he never receives.”

Banks are run on the deposits, rather than on any capital the banker himself may have. The patrons of the bank furnish the capital, and also the security. The banker lends other people’s money to other people; on this he draws interest; he conducts his business on your money and his credit, which you furnish him.

Now, if the government can afford to let the banker have credit at 1 per cent. on actual circulation, why can’t the treasury supply all the people with legal-tender money at the same rate? Why not issue the money direct to the people and then pay interest into the United States treasury, instead of into the coffers of corporate institutions? National banks are expensive luxuries which we don’t need. So let the people unite in demanding their abolition at once, and then institute in their stead United States banks, sub-treasuries if you please, backed by all the people, and hence absolutely safe. This would make a government for the people, instead of for the corporations. Let us do business on the credit of the people—on the credit of the government; not, as we are now doing, on the credit of banks and bankers.

3. The Funding Act. (April 12, 1866.) Commonly called contraction. This law authorized the Secretary of the Treasury to retire the legal-tender notes by investing them in 6 per cent. bonds. Contraction continued until some $1,500,000,000 were destroyed, and a corresponding amount of 6 per cent. bonds issued. The treasury notes, or legal tenders, were nearly all non-interest-bearing. This reduction of the currency was an outrage upon the people. The volume should have been increased to keep pace with an increasing population. But Shylock must have interest.

3484. The Credit-Strengthening Act. (March 18, 1869.) This law provided that the legal-tender treasury notes be paid in coin, as also all interest-bearing obligations of the government. Prior to the passage of this law public obligations had been payable in the lawful money of the country; the greenback was lawful money, redeemable the same as gold and silver coin, except duties on imports and interest on the public debt. The credit of the nation was good, and needed no strengthening. The war was over, and the country was prosperous and the people contented. Why, then, add another burden?

5. An Act Refunding the Public Debt. (July 14, 1870.) This act authorized the issue and sale of $1,500,000,000 United States bonds, to refund 5-20 bonds and make them conform to the law of 1860. To fund means to put public obligationsobligations into stocks and securities, making them interest-bearing.

The public debt should have been paid, as at first provided, in the lawful currency of the country, gold, silver and treasury notes. The law of 1869 added $500,000,000 to the 5-20 bonds, by making them payable in coin; then to refund the bonds, just to please English Shylocks, is villainy unnamed and unnameableunnameable.

6. The Demonetization of Silver. (Feb. 12, 1873.) The act of 1869 had made all public obligations payable in coin, gold or silver; while the act of 1873, clandestinely passed, by omitting the silver dollar from the list of coins enumerated, practically demonetized silver, making the public debt, interest and all, as well as the paper currency, payable in gold coin—a further contraction of the volume of currency.

The silver dollar was created by the Congress of the United States on April 2, 1792, and made the unit of value. It contains 412½ grains of standard silver, nine parts pure 349silver, one part alloy. At that time the mints of all the principal nations of the world were open to the free coinage of both gold and silver. That is, all of such metal presented to the mints could be converted into money without any charge except the actual cost of coining. The ratio then was about 15½ to 1; that is, one ounce of gold was equal to 15½ ounces of silver. January 18, 1837, the ratio between gold and silver coins of the United States was changed to 15.988 to 1, commonly referred to as 16 to 1.

The act demonetizing silver was understood by few, and, in fact, many of those who voted for it, and President Grant, who signed the bill, were unaware of its actual meaning and effect. The money speculators of England, backed by cupidity and ignorance on this side, were its real instigators. There was every reason in the world why England should desire the demonetization of silver here. She is a creditor nation, and her capitalists hold vast amounts in government and other securities abroad. From this country alone the capitalists of Great Britain derive each year more than five hundred millions of dollars for interest on their investments, all of which is paid in gold or its equivalent. The United States produces an enormous quantity of silver, but we very humbly submitsubmit to the gold standard as set up by Great Britain. We deny ourselves the right to use a metal of which we have an abundance and adopt one more scarce and, consequently, more expensive. By this policy we are forced to purchase gold abroad, thus adding constantly to the burden of a perpetual, interest-bearing national debt.

By accomplishing the demonetization of silver in this country, England gained a double victory, for the governments of the Latin Union, France, Belgium, Italy, Switzerland and Greece, were soon afterward forced to suspend 350silver coinage. The gain to England and the loss to the other countries involved, especially to the United States, by this general demonetization of silver, can hardly be estimated. The loss, of course, was the heaviest in this country, where the production of silver is very large, where so many are engaged in agricultural pursuits, and where a large and freely circulating volume of money is so essential to commercial activity.

Before silver was demonetized, we were under the burden of an enormous national debt, but every dollar of this was payable in silver. The stimulated demand for gold, and, consequently, its increase in value, was not the only gain to England. She now buys our cheap silver bullion, exchanges it at its coinage value for products in the silver-using countries of Asia, Africa and South America, and nets a profit of over one hundred per cent. by the transaction. We then buy from her at gold prices and pay with gold or products at prices which, by forcing us into competition with the world, England fixes herself.

7. The Resumption of Specie Payment. (January 14, 1875.) This law provided for the retirement of the fractional currency ($45,000,000) and the legal-tender treasury notes, their places to be supplied by national bank notes, which are not a legal tender between man and man. The name “specie payment” is simply a blind; it does not mean anything; to get rid of the much despised greenback was the real object of the act. The moneyed aristocracy had long ago confessed their inability to “control” the “greenback as it is called.” Had the provisions of this law been carried out, it would have added to our annual interest charge about twenty millions of dollars.

8. The Sherman Purchasing Clause. (July 14, 1890.) This act was a miserable makeshift or substitute for a free coinage bill. It provided for the purchase of not less 351than 2,000,000 nor more than 4,500,000 ounces of silver bullion per month, 2,000,000 ounces of which was to be coined each month into silver dollars until July 1, 1891. Instead of redeeming the treasury notes issued in the purchase of silver with their equivalent in silver, upon the demand of the holder, the Secretary of the Treasury was required to redeem these notes in gold or silver coin at his discretion. The legal-tender power of the silver dollar was modified so as to read: “Except otherwise expressly stipulated in the contract.” In 1893 President Cleveland called Congress together in extraordinary session to consider the financial condition of the country. November 1, 1893, the Sherman law was repealed, leaving us on a single gold basis.

352

V. FINANCIAL AUTHORITIES.

“Above all things good policy is to be used, that the treasures and money of the state be not gathered into a few hands; for, otherwise, a state may have great stock and yet starve. And money is like muck, not good unless spread. This is done by suppressing, or at least keeping a strait hand upon the devouring trade of usury, engrossing, great pasturages and the like.”—Bacon.

THE following is a carefully prepared collection of quotations from the writings and speeches of eminent statesmen, jurists, financiers and economists, ancient and modern, foreign and American. It will be found not only interesting and instructive to the casual reader, but of extreme value to the student for reference:

Alexander Hamilton (report on the mint, 1791): “To annul the use of either of the metals as money is to abridge the quantity of the circulating medium. It is liable to all the objections that arise from a comparison of the benefits of a full with the evils of a scanty circulation.”

Benjamin Franklin, April 3, 1792 (Jared Sparks, page 255): “Want of money in a country reduces the price of that part of its products which is used in trade. A plentiful currency will occasion the trading produce to bear a good price.”

Page 185 of his autobiography (speaking of his pamphlet on “The Nature and Necessity of a Paper Currency,” for the purpose of increasing the circulation): “It was well received by the common people in general, but the rich men disliked it, for it increased as well as strengthened the clamor for more money. The utility of this currency by experience became so evident as never to be 353much disputed, so that it grew soon to be £55,000, and in 1879 to £80,000, since which it rose to £350,000, trade, buildings and inhabitants all the while increasing.”

Daniel Webster: “A contraction of the currency, even if not sudden, contracts business, discourages enterprise and restrains the commercial spirit. A sudden contraction aggravates these circumstances.”

Henry Clay (debate on the sub-treasury, 1840): “The proposed substitution of an exclusive metallic currency to the medium with which we have been so long familiar is forbidden by the principles of eternal justice. Assuming the currency of the country to consist of two-thirds paper and one of specie, and assuming, also, that the money of a country, whatever may be its component parts, regulates all values, and expresses the true amount which the debtor has to pay his creditor, the effect of the change upon that relation, and upon the property of the country, would be most ruinous. All property would be reduced in value to one-third of its present nominal amount, and every debtor would, in effect, have to pay three times as much as he had contracted for. The pressure of our foreign debt would be three times as great as it is, while the six hundred millions, which is about the sum now probably due to the banks from the people, would be multiplied to eighteen hundred millions!... A man, for example, owning property to the value of $5,000, contracts a debt of $5,000. By the reduction of one-half of the currency of the country, his property in effect becomes reduced to the value of $2,500. But his debt undergoes no corresponding reduction.... But if the effect of this hard money policy upon the debtor class be injurious, it is still more disastrous, if possible, on the laboring classes.... Of all the subjects of national policy, not one ought to be touched with so much delicacy as that of the wages—in 354other words, the bread—of the poor man. In dwelling, as I have often done, with inexpressible satisfaction, upon the many advantages of our country, there is not one that has given me more delight than the high price of manual labor. There is not one which indicates more clearly the prosperity of the mass of the community....

“The revulsions of 1837 produced a far greater havoc than was experienced in the period above mentioned. The ruin came quick and fearful. There were few that could save themselves. Property of every description was parted with at sacrifices that were astounding, and as for the currency, there was scarcely any at all. In some parts of the interior of Pennsylvania the people were obliged to divide bank notes into halves, quarters, eighths, and so on, and agree from necessity to use them as money. In Ohio, with all her abundance, it was hard to get money to pay taxes. The sheriff of Muskingum County, as stated in the Guernsey Times, in the summer of 1842, sold at auction one four-horse wagon at $5.50; ten hogs at 6¼ cents each; two horses (said to be worth from $50 to $75 each) at $2 each; two cows at $1 each; a barrel of sugar at $1.50, and a store of goods at that rate. In Pike County, Missouri, as stated by the Hannibal Journal, the sheriff sold three horses at $1.50 each; one large ox at 12½ cents; five cows, two steers and one calf, the lot at $3.25; twenty sheep at 13½ cents each; twenty-four hogs for 25 cents for the lot; one eight-day clock at $2.50; a lot of tobacco, seven or eight hogsheads, at $5; three stacks of hay at 25 cents each.”

Horace Greeley (“Political Economy,” page 65): “They [false economists] assume that if half the money in a country leaves it for goods imported, the residue will perform the functions previously devolved on the whole, save only that there will be a general reduction of prices. I, on 355the contrary, issue an appeal to the experience of mankind to sustain me that in such cases the remainder, so far from subserving the end formerly answered by the larger volume of currency, will not even subserve half of it, for it will all but cease to circulate at all.... In its absence the people will quite generally be driven back to barter, a discouragement of industry and a long stride on the downward road to barbarism.”

Treasurer Spinner (that portion of his report for December, 1873, which was suppressed by President Grant): “When ... legitimate money becomes more and more abundant, credits are asked for and given on shorter and shorter time, until the time comes when there is money sufficient to transact all the legitimate business and to effect all necessary exchanges of the merchantable commodities of the country; then private credits will be almost entirely unknown, as will commercial revulsions and consequent panics.... Inflation can only be when the people are excessively in debt. Such is not the position when money is plentiful; for when money is plentiful people get out of debt and acquire habits of promptness, punctuality, and pay as they go.”

George S. Coe (“Financial History of the War”): “As the war progressed and the country became poorer, the currency increased. It is strange that all other property was eagerly sought for in preference to this, and that prodigal expenditure became the law of the land.”

Report of George S. Coe, John J. Knox, James Harsen Rhoades and W. P. St. John (committee of New York Chamber of Commerce, 1891): “The enlarged volume [of legal-tender money], besides disturbing the equitable relations of men to each other, at once adjusts itself to the prices of all commodities and relatively enhances their cost, so as to absorb at once whatever advances their 356cost.... This is why thoughtful men see in any issue of legal-tender notes the way to inevitable destruction.”

Robert G. Ingersoll: “We have passed through a period of wonderful and unprecedented inflation. For years every kind of business has been pressed to the very sky line. A wave of wealth swept over the United States. Tatters became garments and garments became robes. Walls were covered with pictures, floors with carpets, and for the first time in the history of the world the poor tasted all the luxuries of wealth. But monopoly changed that paradise into hell by creating a money famine.”

John J. Ingalls: “No people in a great emergency ever found a faithful ally in gold. It is the most cowardly and treacherous of all metals. It makes no treaty it does not break; it has no friend it does not sooner or later betray. In times of panic and calamity, shipwreck and disaster, it becomes the agent and minister of ruin. No nation ever fought a great war by the aid of gold. In the crisis of the greatest peril it becomes an enemy more potent than the foe in the field.... In our own civil war it is doubtful if the gold of New York and London did not work us greater injury than the powder and lead and iron of the rebels. It was the most invincible enemy of the public credit. It was in open alliance with our enemies the world over, and all its energies were evoked for our destruction. But, as usual, when danger has been averted and the victory secured, gold swaggers to the front and asserts supremacy.”

Hugh McCulloch, Secretary of the Treasury (1866): “The process of contracting the circulation of the government notes should go on just as rapidly as possible without producing a financial crash.”

John A. Logan (Feb. 17, 1874): “You may theorize and argue to the farmers until you are hoarse, and you will fail to get them to prefer low prices to high ones for their 357products.... The people have and do realize that their most prosperous times were when currency was the most plentiful....

“I can see the people of our Western States, who are producers, reduced to the condition of serfs to pay interest on public and private debts to the money sharks of Wall Street, New York, and of Threadneedle StreetStreet in London, England. And this will be accomplished by withdrawing the treasury notes from circulation, and destroying them until the banks can control the entire volume of money.... It was the contraction and increased want of currency, and not a superabundance, which produced the necessity for running in debt.

“Falling prices and misery and destruction are inseparable companions. The disasters of the dark ages were caused by decreasing money and falling prices. With the increase of money labor and industry gain new life.

“I can see benefit only to the money-holders and those who receive interest and have fixed incomes. I can see, as a result of this legislation, our business operations crippled and wages for labor reduced to a mere pittance. I can see the beautiful prairies of my own State and of the great West, which are blooming as gardens, with cheerful homes rising like white towers along the pathway of improvement, again sinking back to idleness. I can see mortgage fiends at their hellish work. I can see the hopes of the industrious farmers blasted as they burn corn for fuel, because its price will not pay the cost of transportation and dividends on millions of dollars of fictitious railway stocks and bonds.”

Preston B. Plumb (Senate, April, 1880): “The contraction of the currency by 5 per cent. of its volume means the depreciation of the property of the country three billions of dollars.”

358The Chicago Tribune (1878): “Straight along for four and a half years the dollar has grown dearer and larger, the debts heavier and harder to pay, and the value of property has withered; business has been done at a continual loss. Real estate—lands, lots and improvements, the foundation of all wealth—has gone down year after year in value, while the mortgages have devoured it, wiping out equities and all that had been paid thereon, and annihilating multitudes of fortunes.”

President Grant (message, 1870): “Immediate resumption, if practicable, is not desirable. It would compel the debtor class to pay beyond their contracts the premium on gold at the date of their purchase and would bring bankruptcy and ruin to thousands.”

Message of 1873: “The experience of the present panic has proven that the currency of the country, based as it is upon its credit, is the best that has ever been devised.

“To increase our exports, sufficient currency is required to keep all the industries of the country employed. Without this, national as well as individual bankruptcy must ensue....

“Prices keep pace with the volume of money.”

John Sherman (1869): “The contraction of the currency is a far more distressing thing than Senators suppose. Our own and other nations have gone through that process before. It is not possible to take that voyage without the sorest distress. To every person except a capitalist out of debt it is a period of loss, of danger, lassitude of trade, fall of wages, suspension of enterprise, bankruptcy and disaster.”

William D. Kelley (House of Representatives, Jan. 3, 1867): “The experiment [on contracting the currency], if attempted as a means of hastening specie payments, will 359prove a failure, but not a harmless one. It will be fatal to the prospects of a majority of the business men of this generation, and strip the frugal laboring people of the country of the small but hard-earned sums they have deposited in savings banks. It will make money scarce and employment uncertain. It will increase the purchasing power of money, and by thus unsettling values will paralyze trade, suspend production and deprive industry of employment. It will make the money of the rich man more valuable and deprive the poor man of his entire capital, the value of his labor, by depriving him of employment. Its final effect will be widespread bankruptcy.”

Toledo Blade (May 17, 1877): “In financial crises the thing men want is money; that which everybody must receive in payment of debt or forever thereafter forego all claim of interest thereon. What men want in such seasons of panic and distress is that which will pay a note in a bank, will meet the exactions of government, will avert the sacrifice of homestead, warehouse or other property by sheriff’s or marshal’s sale; which, being money, will, when tendered in payment, arrest such proceedings.... The existence and inflexibility of the law are indisputable. If the volume of money is increased creditors complain that the prices of commodities are further enhanced.”

George William Curtis (Harper’s Weekly, July, 1877): “There can be no doubt that as the volume of money decreases the purchasing power increases.... It is unquestionably true that it is a maxim of money that the increase of its volume decreases and the decrease increases the purchasing power of the unit.... It may be a fair question whether the demonetization of silver did not increase the value of gold.”

Thomas Ewing (November 22, 1877): “No greater wrong can be inflicted on the people by government than 360a contraction of the volume of the currency. The prices of commodities, whether land, product or labor, are determined absolutely by the effective volume of the currency. An increase of the volume raises the price of commodities.”

James G. Blaine (House, February 7, 1878): “The destruction of silver as money and establishing gold as the sole unit of value must have a ruinous effect on all forms of property except those investments which yield a fixed return in money. These would gain an unfair advantage over other species of property.”

James A. Garfield (1880): “Whoever controls the volume of currency is absolute master of the industry and commerce of the country.”

Senator Mills, of Texas (House, February 3, 1886): “But the crime that is now sought to be perpetrated on more than fifty millions of people comes neither from the camp of a conqueror, the hand of a foreigner, nor the altar of an idolator. It comes from the cold, phlegmatic marble heart of avarice—avarice that seeks to paralyze labor, increase the burden of debt, and fill the land with destitution and suffering to gratify the lust for gold—avarice surrounded by every comfort that wealth can command, and rich enough to satisfy every want save that which refuses to be satisfied without the suffocation and strangulation of all the labor of the land. With a forehead that refuses to be ashamed it demands of Congress an act that will paralyze all the forces of production, shut out labor from all employment, increase the burden of debts and taxation, and send desolation and suffering to all the homes of the poor.”

Leland Stanford (Senate, March 10, 1890): “An abundance of money means universal activity, bringing in its train all the blessings that belong to a constantly employed, 361industrious, intelligent people.... Abundant and cheap money places the power in the hands of the industrious.... Cheap and abundant money means co-operation of labor to an extent hitherto unknown.... Would go far towards aiding his [labor’s] intelligence, toward realizing his highest destiny. It seems to me that the great thought of humanity should be how to advance the great multitude of toilers, increase their power of production and elevate their condition.... To me one of the most effective means of placing at man’s disposal the force inherent in the value of property is through furnishing a bountiful supply of money.... If money were suddenly annihilated from all business affairs there would be a general suspension of business all over the country. It is the duty of statesmen to furnish the means, if possible, to find out the way by which the Creator’s design for the highest advance of civilization is to be obtained. Want, discomfort and misery are not necessarily the heritage of the industrious and provident man. So far as I can ascertain, no government has ever attempted to furnish an adequate supply of money or establish any standard by which its want could be ascertained.”

John G. Carlisle (in the House, February 21, 1878): “According to my views of the subject the conspiracy which seems to have been formed here and in Europe to destroy by legislation and otherwise from three-sevenths to one-half the metallic money of the world is the most gigantic crime of this or any other age. The consummation of such a scheme would ultimately entail more misery upon the human race than all the wars, pestilences and famines that ever occurred in the history of the world. The absolute and instantaneous destruction of half the entire movable property of the world, including houses, ships, railroads and other appliances for carrying on commerce, 362while it would be felt more sensibly at the moment, would not produce anything like the prolonged distress and disorganization of society that must inevitably result from the permanent annihilation of one-half the metallic money of the world.”

John G. Carlisle (speaking for the Bland bill, 1878): “It will reverse the grinding process that has been going on for the last few years. Instead of constant and ruthless contraction, instead of constant appreciation of money and depreciation of property, we will have expansion to the extent of at least $2,000,000 a month, and under its influence the exchangeable value of commodities, including labor, will soon begin to rise, thus inviting investments, infusing life into the dead industries of the country, and quickening the pulsations of trade in all its departments.”

Secretary Windom (Jan. 31, 1891): “The ideal financial system would be one that should furnish just enough absolutely sound money to meet the legitimate wants of trade, and no more. Had it not been for the peculiar condition which enabled the United States to disburse over seventy-five million dollars in about two and a half months last autumn, I am firmly convinced that the stringency in August and September would have resulted in widespread financial ruin.”

Chauncey M. Depew: “Fifty men can paralyze the whole country, for they can control the circulation of the currency, and create panic whenever they will.”

Hon. G. G. Symes, of Colorado (commenting on the demonetization of silver): “There would be truly enough money to do the business after the shrinkage of prices and the financial disasters. For the new order of things and basis of values there would still be gold enough to carry on the business. It would only require one-half after the new 363condition and basis was reached. The monometallists, then, would still argue that gold was not scarce.”

Henry Clews, Wall Street financier (March 16, 1895): “Wall Street keeps a quick eye upon the prospects of the suggested international silver conference. It sees in the adoption of a world-wide policy of bimetallism the certainty of a material increase in the metallic money of the commercial nations, and assumes that, in such case, there would be a general rise in values and a consequent speculative boom of wide dimensions.”

Franklin H. Head, of Chicago (business man): “That an increase in the quantity of money reduces prices, and a diminution lowers them, as stated by Mill and other economic writers, is the most elementary proposition in the theory of currency, and without it we should have no key to any of the others.”

Amasa Walker, of Massachusetts: “Other things being equal, the amount of currency in circulation determines the prices of everything that is for sale; and these are increased or diminished as the volume of the currency is increased or diminished.”

A. B. Hepburn, of the United States Treasury (Forum, 1894): “When credit is withheld a money stringency is easily created.”

Prof. William G. Sumner, of Yale (“History of American Currency,” page 205): “In 1872 this issue was forced out of between forty and fifty million, reducing a redundancy and enhancing retail prices.” Page 211: “The war being ended, the financial question took this form: ‘Shall we withdraw the paper, recover specie, reduce prices, lessen imports and live economically until we have made up the waste and loss of war? Or shall we keep paper as money?’ Mr. McCulloch proposed to contract inflated paper and pursue the former alternative.” Page 221: “The whole 364story goes to show that the value of paper currency depends upon its amount.” Page 329: “If, therefore, a nation has a specie currency, a drain upon it by an adverse balance of trade, a foreign payment, or any other similar cause, would immediately produce a lowering of prices and a return of current specie until the natural level was once more restored.”

Prof. Francis A. Walker, Yale (“Money,” page 57): “The value of money in any country is determined by the quantity existing. Its power of acquisition depends not upon its substance, but upon its quantity.... That prices will fall or rise as the volume of money be increased or diminished is a law that is unalterable as any law of nature.” Page 210: “Gold and silver undergo great changes of value and become in a high degree deceptive. Prof. Jevons estimates that the value of gold fell, between 1789 and 1809, 45 per cent.; from 1809 to 1849 it rose 145 per cent., while in the twenty years after 1849 it fell again at least 30 per cent.... When the process of contraction commences the first class on which it falls is the merchants of the large cities; they find it difficult to get money to pay their debts. The next class is the manufacturer; the sale of his goods at once falls off. Laborers and mechanics next feel the pressure; they are thrown out of employment. And lastly the farmer finds a dull sale for his produce.”

Robert Ellis Thompson, M. A., University of Pennsylvania (“Political Economy,” page 151): “The influx of money into a progressive country is one of the most powerful promoters and increasers of production. When it is plenty all sorts of productive work is stimulated. Labor is the master of capital, and industrial enterprise gains a more than proportionally large return for its outlay.” Page 209: “The possession of a large quantity of money 365enables any country to organize its industries upon such a scale as to carry its division of labor to such perfection as will bring down the prices of all the products of industry, while affording a larger return to both capitalist and laborer. It therefore makes such a country a cheap place to buy in, mainly because of that accumulation of money which was to make everything dear.”

Professor Thompson (“Political Economy”) quotes Thomas Tooke, page 208: “If money has increased, industry and trade are increased.... If iron and cotton are scarce, those who need them suffer by the scarcity, but it has no effect upon the prices of other materials. If, on the other hand, money is scarce, the price of everything else is affected. Every one must make exchanges, just as when the water falls in the rivers traffic is interrupted because the vessels are aground.”

Professor Francis Bowen, Harvard (“American Political Economy,” page 280): “The whole process of exchange may be compared to the process of weighing a well-poised balance, the money and the merchandise being placed on the opposite arms of the lever. Increase the weight on the money side, and the merchandise is sure to rise.” Page 281: “The equalization of money is but another name for the equalization of prices.” Page 244: “The probability of the notes being redeemed at some future day, more or less remote, is not the cause even of the depreciation in the value of paper money, ... but solely on the relative amount of the currency compared with the needs of business. How great are these needs? Commerce needs money or currency enough to enable it to perform its peculiar function; that is, to make the prices of commodities in the home market equal or as nearly equal as possible to the prices of the same commodities in foreign markets.” Page 245: “If there is only $100 to buy flour with, and 366only ten barrels of flour offered for sale, the competition of buyers and sellers must fix the price at $10 a barrel. If there was twice as much flour, the number of dollars being the same, the price must be reduced to $5. On the other hand, double the quantity of money; there would be $200 available for this purpose, and, as at first, only ten barrels to be sold; the price would rise to $20 a barrel.” Page 301: “The general principle is that the value of money falls in precisely the same ratio in which its quantity is increased. If the whole quantity of money in circulation was doubled, prices would be doubled; if it was only increased one-fourth, prices would rise one-fourth.”

President Steel, Lawrence University: “The conventional unit of lineal measure must not be a line which averages a foot, though it may be fourteen inches to-day and nine inches to-morrow; for the same reason it is desirable that the unit of value should have the same purchasing power next week as it has now.”

Prof. Francis Wayland (“Elements of Political Economy,” page 297): “If there is more money in a country than is needed for its exchanges, the price of goods is raised and it is sent abroad for new purchases. If there is a scarcity of money in a country, the price of goods declines, and money comes in from other lands to be exchanged for them.” Page 298: “If money is abundant because business is stagnant and exchanges are few, it is a sign of adversity rather than of prosperity.”

Edwards Pierpont (North American Review): “When currency is small it is always easy for a few lords of corporations and rich money-lenders to combine and lock it up, and thus throw down the price of stocks, wheat, cotton and other commodities, and work a corner on the currency. Thus the market is made tight and extortion easy.”

John Sheldon (New England Yale Review, March, 1890): 367“This is of supreme importance, for prices tend to carry with the amount and not simply with the kind of legal-tender money in circulation. The greater the amount the higher the range of prices; the less the circulation the lower the prices. Prices tend ever to follow up and down the amount of legal-tender money in circulation; they do not tend to fixity of the particular kind of money or standard used.”

Alexander Baring (before the committee, House of Lords, 1819): “The reduction of paper would produce all those effects which arise from reduction in the amount of money in any country.”

Sir Robert Peel (May 6, 1844, speaking of the act to regulate the currency): “There is no contract, public or private, no engagement, national or individual, which is unaffected by this.”

Lord George Bentinck (Parliamentary Debates, about 1847): “Of all the subtle devices which the wit of man has contrived to despoil the community of their property, nothing equals the contrivance of laws which limits the currency to gold.”

Lord Beaconsfield (“Agricultural Depression”): “Gold is every day appreciating in value, and as it appreciates in value the lower become prices.”

Sir Walter Scott (speaking of abundant currency): “It is not less an issue that the consequences of this banking system as conducted in Scotland have been operated with the greatest advantage to the country; have converted Scotland from a poor, miserable and barren country into one where, if nature has done less, art and industry have done more than in perhaps any country in Europe, England itself not excepted.”

Encyclopedia Britannica (1859): “A fall in the value of precious metals, like a fall of rain water after a long course 368of dry weather, may be prejudicial to certain classes. It is beneficial to an incomparably greater number, including all who are engaged in industrial pursuits, and is, speaking generally, of great public or national advantage.”

North British Review (November, 1861): “Metallic money, whilst acting as coin, is identical with paper money in respect to being destitute of intrinsic value.”

William JacobJacob, F. R. S., gives statistics of the world’s volume of money from the year 14 A. D., when it was $1,790,000,000, to 806, when it had fallen to $168,000,000. The price of a horse in England then was £1 15s 2d; an ox, 7s 2d; a cow, 6s 2d; sheep, 1s 2d; goat, 4d.

Ernest Seyd (1867, speaking of a reduction in volume): “Throughout the world a fall in prices will take place, injurious alike to the owners of solid property and to the laboring classes, and advantageous only, and unjustifiably so, to the holders of state debts and other contracts of that kind.” (“Bullion,” 1868:) “On this one point all authorities are agreed: that the large increase in the supply of gold has given a universal impetus to trade, commerce and industry, and to greater social development and progress.”

Baron Rothschild (French Monetary Convention, 1869): “The suppression of silver would amount to a veritable destruction of values without any compensation.”

Ricardo, M. P. (high priest of the bullionists), in his reply to Bauset, said: “The value of money in any country is determined by the amount existing.... The commodities would rise or fall in price in proportion to the increase or diminution of money. I assume that as a fact that is incontrovertible. However debased a coinage may become, it will preserve its mint value.... A well-regulated paper currency is so great an improvement in commerce that I should greatly regret if prejudice should induce us to return to a system of less utility.... By 369limiting the quantity of money it can be raised to any conceivable value.”

John R. McCulloch (commenting on Ricardo): “He explains the circumstances which determine the value of money ... and he shows ... its value will depend upon the extent to which it may be issued compared to the demand. This is a principle of great importance, for it shows that intrinsic worth is not necessary to a currency.”

Speaking in favor of a gradual reduction in the burden of debts, through the natural increase in the volume of precious metals, McCulloch said: “It promotes industry and diminishes the weight of obligations which press upon the producing classes, whether employer or employed.... Thus it appears that, whatever may be the material of the money of a country, whether it consists of gold, silver, copper, iron, salt, cowries, or paper, and however destitute it may be of any intrinsic value, it is yet possible, by sufficiently limiting its quantity, to raise its value in exchange to any conceivable extent.”

Samuel Bailey (Sheffield): “However some men doubt the advantage of an increase of the currency, no one can deny the ruinous effects of a decrease.”

Sir James Stewart: “Money is nothing more than a scale of equal parts for the measurement of things vendible.”

Sir James Graham (British statesman): “The value of money is in the inverse ratio to its quantity, supply of commodities remaining the same.”

William E. Gladstone (1876, speaking of the banks issuing money): “It will be exactly the same thing, so far as the money is concerned, to grant a legislative privilege to a person or to pay over to him a considerable sum from the consolidated fund.”

London Economist (1883): “England being the chief 370creditor nation of the world, it is to her interest to keep the volume of money as small as possible in countries from which debts are due, in order to get more of their product in payment of interest due to her citizens.”

The Royal British Commission, appointed August, 1885, to inquire into the causes of the depression of business, made world-wide inquiries and was composed of twenty-three members, a number of whom were distinguished statesmen and economists. They agreed that gold had greatly appreciated in value and that the rise in the value of gold was caused by the demonetization of silver and the falling off in the supply of gold, and it was the leading cause of the general depression in trade and industry. But it was added:

“This country [England] is largely a creditor country of debts payable in gold, and any change which entails a rise in the prices of commodities generally—that is to say, a demonetization of the purchasing power of gold—would be to our disadvantage.”

Archbishop Walsh (Dublin, 1893): “Of all conceivable systems of currency, that system is sure to be the worst which gives you a standard steadily, continually, indefinitely appreciating, and which, by that very fact, throws a burden upon every man of enterprise and benefits no human being whatever but the owner of fixed debts.”

Count Leo Tolstoi (Russian philanthropist): “Only by means of money do some people command the labor of others nowadays; that is, into slavedom. Money tribute has become a chief means of the subjugation of men, and by it are determined all the economic relations of man.”

Cernuschi (French economist): “The purchasing power of money is in direct proportion to the volume of money existing.”

Professor Chevalier (France), speaking of the increase of money, says: “Such a change will benefit those who 371live by current labor and enterprise; it will injure those who live upon the fruits of past labor.... It has been wisely said that there is no machine which economizes labor like money, and its adoption has been likened to the discovery of letters.”

Sauerbeck (German statistician): “The propositions of some economists, that we have quite enough money in our country, or that there is sufficient gold to carry on the trade of the world, are valueless. They assume that there is a certain quantity required that need not be increased. Of course there is enough gold, and we could perhaps do with half the quantity. It only depends upon the state of prices.”

Fichte (German philosopher): “The amount of money current in a state represents everything that is purchasable on the surface of the state. If the quantity of purchasable articles increases while the quantity of money remains the same, the value of the money increases in the same ratio. If the quantity of money increases while the quantity of purchasable articles remains the same, the value of money decreases in the same ratio.”

Herr von Barr, speaking of the loss to German miners by the demonetization of silver, says: “This direct loss, important as it is, is nothing, however, compared with the indirect loss resulting from the fall of prices.”

M. Edouard Cazalet, banker of Milan (“Bimetallism,” page 14): “Since the value of all articles of commerce is represented by the currency, the value of these articles must fall in proportion to the reduction in the volume of the currency. Otherwise the moneyed currency could not possibly do the work which the two metals combined have previously performed.”

Dr. Soetbeer (German statistician): “The value of 372money has fallen through the issue of paper money as well as through the increased production of gold and silver.”

Leon Fouchet (1843): “If all the nations of Europe adopted the system of Great Britain the price of gold would be reduced beyond measure. The government could not decree that legal tender should be only gold, for that would be to decree a revolution, and the most dangerous of all, because it would be a revolution leading to unknown results.”

M. Wolowski (French Institute, 1868): “The suppression of silver would bring on a veritable revolution. Gold would augment in value with rapid and constant progress, which would break the faith of contracts and aggravate the situation of all debtors.... If by a stroke of the pen they suppress one of these metals [gold or silver] in the monetary service, they double the demand for the other metal, to the ruin of all debtors.”

John Locke (“Considerations, etc., in Relation to Money,” 1691): “The greater scarcity of money enhances its price and increases the scramble, and makes an equal portion of it exchange for a greater of any other thing.” 1690: “Money is really a standing measure of the falling and rising value of other things. If you increase or lessen the quantity of money current, then the alteration of value is in the money. The value of money in any one country is the present quantity of the current money in that country in proportion to the present trade.”

Adam Clark’s commentary on II. Matthew: “The scarcity of money in England in 1351 influenced Parliament to pass an act fixing a day’s labor at 1d. Twenty-four eggs sold for 1d; a pair of shoes 4d; wheat 3d; a fat ox 80d.”

Copernicus, the astronomer (treatise “Monete Cudende 373Ratio,” addressed to the King of Poland): “Numberless as are the evils by which kingdoms, principalities and republics are wont to decline, these four are, in my judgment, most baleful: civil strife, pestilence, sterility of the soil, and corruption of the coin. The first three are so manifest that no one fails to apprehend them; but the fourth, which concerns money, is considered by few, and those the most reflective, since it is not by a blow, but little by little, and through a secret and obscure approach, that it destroys the state.”

Daniel Watney, of England: “I cannot suppose that everybody is wise. Must think of the folly of the United States, when they were a debtor nation, in adopting a gold standard. They knew nothing about currency matters; they did not know it was going to increase their debt enormously.”

Paulus (Roman jurist, third century): “Money circulates with a power which is derived, not from the substance, but from the quantity.”

Blackstone (vol. I., page 2761): “As the quantity of precious metals increases they will sink in value and become less precious. If any accident were to diminish the quantity of gold and silver they would proportionately rise.”

Faucet (“Handbook of Finance,” page 146): “The decline of prices since 1872 and 1873 is explained by the increased value of gold. The first effect was to cause a collapse of speculative securities, namely, bonds of railroads, etc.”

Professor De Colange (“American Encyclopedia of Commerce”): “The rate at which money exchanges for other things is determined by its quantity.”

Beasey: “Slavery is the inevitable result of poverty. Poverty is the inevitable result of low wages. Low wages are the inevitable result of a scarcity of currency.”

374A. H. Gaston: “Money is simply a measure of value, and as a nation contracts its circulation it contracts the value of all property in like proportion.”

Colton’s Public Economy (page 224): “We hold that money enough for the demands of trade is the tool of trade to a nation.” Page 193: “It is very desirable that there should not be sudden and great fluctuations, as such changes affect the value of incomes. For example, when the products of the American mines had raised the general prices on comforts of life as 4 to 1.”

Silver Commission Report of 1876, page 49: “Whenever it becomes apparent that prices are rising and money falling in value in consequence of an increase in its volume, the greatest activity takes place in exchange and productive enterprises. Every one becomes anxious to share in the advantages of a rising market, and the inducement to hoard gold is taken away; its circulation becomes exceedingly active; labor comes into great demand and at remunerative wages. It not only increases production, but increases consumption.” Page 50: “Falling prices and misery and destitution are inseparable companions. It is universally conceded that falling prices result from the contraction of the money volume.” Page 50: “Money is the great instrument of association, the very fiber of social organism, the vitalizing force of industry, the pure, true organ of civilization, and as essential to existence as oxygen is to animal life. Without money civilization could not have had a beginning.” Page 51: “It is estimated that the purchasing power of the precious metals increased between 1809 and 1840 fully 145 per cent.... They had come to regard money as an institution fixed and immovable in value, and when the price of property and wages fell they charged the fault not to the money, but to the property and the employer. Their prejudices 375were aroused against labor-saving machinery; they were angered against capital.” Page 53 (effects of a decreasing volume of money): “It circulates freely in the stock exchange, but avoids the labor exchange. It has in all cases been the worst enemy with which society has had to contend.” Page 56: “However great the natural resources of a country, fertile its soil, intelligent, enterprising and industrious its inhabitants—if the volume of money is shrinking and prices falling, its merchants will be overwhelmed with bankruptcy, industries paralyzed, and destitution and distrust will prevail.” Page 59: “All respectable authorities agree as to the relative effects of an increasing and decreasing money.... History records no such disastrous transition as that from the Roman empire to the dark ages. In the Christian era the metallic money of the Roman empire amounted to $1,800,000,000. By the end of the fifteenth century it had shrunk to less than $200,000,000. Population dwindled, and commerce, arts, wealth and freedom all disappeared.”

Henry C. Carey, LL. D. (“Social Science,” page 297): “Money tends to diminish the obstacles interposed between the producer and the consumer precisely as do railroads and mills.... The most necessary part of the machinery of exchange being that which facilitates the passage of labor and its products from hand to hand, any diminution of its quantity is felt with tenfold more severity than is the diminution of the quantity of railroad cars or steamboats.”

Before the Congressional committee: “We next find him [Secretary McCulloch] issuing the destructive Fort Wayne decree, by means of which we were made to know that the currency was in excess and prices too high; that the policy of the treasury was to be one of contraction; and that unfortunate debtors must as speedily as possible place 376themselves in a position to meet the shock to be thus created. In other words, all debtors were required to sell, capitalists meanwhile being advised not to buy, the government being determined that labor, lands, houses, stocks and property of all other descriptions should be promptly reduced to gold values.”

Treatise on “Wealth”: “A period of contracted currency is one of embarrassment, difficulty, and generally, in the end, of insolvency to the small farmer and moderate landholder.... It will rise in price from that scarcity, and become accessible only to the more rich and affluent classes.”

[This greatest of American political economists, the late Henry C. Carey, estimated the cost of contraction in order to secure resumption between the years of 1873 and 1879 at thirty billion dollars.]

Henry Carey Baird (March 13, 1882): “The man who has the greatest horror of the inflation of the currency generally has no horror of the inflation of bank credits. He likes it because it increases his power over his fellow men. What he objects to is the inflation of the people which causes an increase of their power.”

September 3, 1889: “People know that the expansion of the currency means life, and equally well that contraction means death.”

Henry Carey Baird (“Money and Bank Credit,” page 14): “The first and greatest need of a man is that of association and combination with his fellow men, and the daily life of a civilized people involves such countless myriads of acts of association or commerce that a medium having the quality of universal acceptability is absolutely necessary to that life. That medium is money.... In its absence in sufficient volume in Great Britain and Ireland, thousands of millions of dollars of labor power annually 377in those islands perish. While the Trenholms, the Russell Sages, the Pearsalls, the Fahnenstocks and the Seligmans wrangle over the efforts of the people to secure a sufficient supply of ‘current money,’ more labor power will go to waste than will represent the value of the capital of all the banks in the city of New York many times over.”

Peter Cooper: “Contraction in finance is not the same as economy in private life. Contraction in the finances of a country means a stoppage of a certain amount of the industry and exchanges, by reason of the contraction of the credit by which these are sustained. Nothing can be more certain than that a contraction of the currency by our government has been followed by a reduction of all values, so that a wrong has been inflicted upon all the enterprising business men of this nation, whose property has been virtually confiscated by this process of contraction.”

B. F. Butler (August, 1875): “I am informed that Mr. Duncan, of Duncan, Sherman & Co., went to Washington when the currency bill was before the President to advise him to veto it because it was necessary to depreciate values. The President did veto the bills. Values have been depreciated, I trust, to an amount entirely satisfactory to Messrs. Duncan, Sherman & Co.” [The firm of which John Sherman was a member was bankrupted by the depreciation.]

Solon Chase: “I bought a yoke of steers a year ago for $60; fed them all summer and winter, and in the spring was offered but $60 for them in the market. Who got the hay? So long as the owners of funded wealth control the volume of money they control the price of a day’s work down east and the price of a bale of cotton down south. The higher the price of hogs and corn, the easier the people can pay the debt. The farmer cannot pay off his 378debt on a falling market. The fight of the men who deal in money is not for the metal, but to control the volume.”

James D. Holden (President National Citizens’ Alliance): “So magical is the operation of this wonderful device known as money that by simply restricting its issue wealth is transferred from the hands that created it to the possession of those not in the remotest degree responsible for its production. Let the reader who does not indorse this view give himself, if possible, a reason why a people who by their laws create the supply of money should limit the issue.”

A Georgia editor (speaking of the effects of contraction) says: “In 1868 there was about $40 per capita of money in circulation; cotton was about 30 cents a pound. The farmer then put a 500-pound bale of cotton on his wagon, took it to town and sold it. Then he paid $40 taxes, bought a cooking stove for $30, a suit of clothes for $15, his wife a dress for $5, 100 pounds of meat for $18, one barrel of flour for $12, and went home with $30 in his pocket. In 1887 there was about $5 per capita of money in circulation; this same farmer put a 500-pound bale of cotton on his wagon, went to town and sold it, paid $40 taxes, got discouraged, went to the saloon, spent his remaining $2.30 and went home dead broke and drunk.”

Arthur Kitson (“Scientific Solution of the Money Question,” 1894, page 284): “A restricted currency means restricted commerce; restricted commerce means restricted production, and restricted production means poverty, misery, disease and death.” Page 396: “The gold standard is a device of the bankers for the measuring of everybody else’s corn with their bushel.”

Sealy (“Coins and Currency,” 1853): “The commerce of the country is now in the power of the Bank of England as it was before in the legislature.”

379Doubleday (“Financial History of England”): “We have already seen the fall of prices produced by this universal narrowing of the paper circulation. Distress, ruin and bankruptcy which took place were universally among the landholders whose estates were burdened by mortgages. The effects were most marked. Owners were stripped of all and made beggars.”

President Andrews (Eaton University): “Demonetization of silver was the hardest, saddest blow to human welfare ever delivered by the action of states. So long as gold is the sole standard of that money, so long these wrongs and sufferings must continue.”

James Mill (father of John Stuart Mill): “In whatever degree the quantity of money is increased or diminished, other things remaining the same, in that proportion the value of the whole and every part is reciprocally diminished or increased.”

Herbert Spencer: “Barbarians do not want any money but hard money; semi-civilized people want hard money and convertible paper; but when the world becomes civilized and enlightened no other kind of money will be used but paper money.”

380

VI. INTEREST AND USURY.

“It is against nature for money to breed money.”—Bacon.

THE great Napoleon said, after studying a set of compound interest tables: “There is one thing to my mind more wonderful than all the rest, and that is, that the deadly fact buried in these tables has not before this devoured the whole world.” The ethical sense of mankind saw at an early day the wrong of usury. The Mosaic law was very explicit on the subject. Cicero mentions that Cato, being asked what he thought of usury, made no other answer to the question than by asking the person who spoke to him what he thought of murder. The Christian Church, in its early days and until the end of the Middle Ages, utterly forbade the exaction of interest. In the reign of Edward VI. a prohibitory act was passed, for the stated reason that the charging of interest was “a vice most odious and detestable and contrary to the word of God.” It was not until the time of the Reformation that this interpretation of the divine law was ever questioned. Calvin was one of the first to contend that the sentiment against exacting interest arose from a mistaken view of the Mosaic law. A series of enactments, known as the Usury Laws, restricted the maximum rate to be charged in England. By Act 21 James I. this rate was fixed at 8 per cent. During the Commonwealth this rate was reduced to 6 per cent., and by Act 12 Anne to 5 per cent., at which rate it stood until 1839. In the United States the legal rate of interest varies, nearly all the 381States having passed statutes fixing a maximum rate.

“Usury bringeth the treasures of a realm or state into a few hands; for the usurer being at certainties, and others at uncertainties, at the end of the game most of the money will be in the box; and ever a state flourisheth when wealth is more equally spread.”

This quotation is from the essay “Of Usury,” by that wisest of philosophers, Francis Bacon. The reader must bear in mind that while nowadays the term “usury” is applied generally only to excessive interest, in Bacon’s time the word was used for any rate of premium or interest for the use of money. The word usance, now obsolete in that sense, conveyed the same meaning, and is used in Shakespeare’s “Merchant of Venice.” The provocation which Antonio first gave Shylock was that—

“He lends out money gratis and brings down

The rate of usance here with us in Venice.”

All are familiar with the conditions which Shylock exacted of Antonio:

Shylock. This kindness will I show.

Go with me to a notary, seal me there

Your single bond; and, in a merry sport,

If you repay me not on such a day,

In such a place, such sum or sums as are

Express’d in the condition, let the forfeit

Be nominated for an equal pound

Of your fair flesh, to be cut off and taken

In what part of your body pleaseth me.

Antonio. Content i’ faith: I’ll seal to such a bond

And say there is much kindness in the Jew.

Bassanio. You shall not seal to such a bond for me:

I’ll rather dwell in my necessity.

Antonio. Why, fear not, man; I will not forfeit it;

Within these two months, that’s a month before

This bond expires, I do expect return

382Of thrice three times the value of this bond....

Come on; in this there can be no dismay;

My ships come home a month before the day.

But Antonio’s ships did not come in—just as the farmer’s crop often fails and the artisan’s employment gives out just when the mortgage is due—and Shylock claimed his pound of flesh. “The Merchant of Venice” is a comedy, and Shylock, Bassanio and Antonio are mere creatures of imagination; but there are thousands of tragedies enacted every day in real life in which real Shylocks play a part. The Shylocks of to-day are quite unlike the Shylocks of fiction, however. Banker Morgan, who negotiated with Grover Cleveland the star-chamber bond deal by which the American government sold to the Rothschilds at a premium of only 4½ per cent. $100,000,000 of interest-bearing gold bonds which were immediately after quoted at a premium of 21 per cent., is a philanthropist. As soon as possible after the deal was made his portrait appeared in many of the great dailies with a fulsome account of his many charities! It will take many a pound of human flesh, many a drop of life’s blood, to pay the interest on the bonds which he negotiated, and out of the sale of which he made a cool million in one day.

The Bible has much to say on the subject of usury. The writer has never heard a sermon preached on any of the following texts, however—perhaps because bankers and money-lenders rent the best pews. Remember that usury here means simply interest—not excessive interest:

Exodus 22:25: “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.”

Deuteronomy 23:19-20: “Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of anything that is lent upon usury. Unto a stranger 383thou mayest lend upon usury, but unto thy brother thou shalt not lend upon usury, that the Lord thy God may bless thee.”

Nehemiah 5:7: “Then I consulted with myself, and I rebuked the nobles, and the rulers, and said unto them: Ye exact usury every one of his brother. And I set a great assembly against them.”