Chapter XLVII: Part II: Present Day Problems (1)

EDITED BY K. L. ARMSTRONG

CONTENTS OF PART II.

PAGE
I. The Impending Revolution 277
II. The Philosophy of Money 283
III. A Bird’s-eye View of American Financial History. 307
By Samuel Leavitt
IV. The Eight Money Conspiracies 345
V. Financial Authorities 352
VI. Interest and Usury 380
VII. Debt and Slavery 387
VIII. The Laws of Property. By Lyman Trumbull 393
IX. Direct Legislation 401

I.
THE IMPENDING REVOLUTION.

“And the Lord said unto Moses, Wherefore criest thou? Speak
unto the children of Israel that they go forward.”—_Exodus_
14:15.

THE purpose of the following pages is to present in compact form a series of articles on money and kindred subjects from the point of view of one who, realizing that a world-wide economic revolution is imminent, hopes that this revolution will be accomplished by reason and in peace, not by treason and violence—by book and ballot, not by bullet and bayonet. It is not intended to make a special plea for the doctrines of any particular school of economics, or of any political party. The object is rather to place in concrete the arguments and principles of many branches of Reform thought which, while widely divergent in respect of methods, have a common aim in the emancipation of industry.

The many elements which make up the great and growing army of Reform may be segregated into two divisions—individualists and collectivists. In the early history of this nation the men who had battled for its independence were similarly divided into two great parties—one advocating the centralization of power in the national government, the other demanding for each State sovereign independence. The flexibility of our Constitution is ascribed to the wisdom of the fathers, who sought out and adopted what was best in the ideas of both. So out of the apparently conflicting elements of the Reform movement will come the ultimate solution of economic problems.

The editor is in thorough accord with the collectivists, whether they be known as socialists, nationalists or co-operators, in so far as they advocate the public ownership of monopolies. The people should own and operate the railroads, the telegraph, the telephone, etc., as they already own the post-office. The people should also own and operate the street railroads, water-works, gas-works, electric light plants, etc. The notorious corruption of our law-making bodies is due almost wholly to their power to grant special privileges and to sell public franchises to private individuals or corporations. Legislative reform that ignores the cause of corruption is never remedial and seldom even palliative. Public ownership of natural monopolies will abolish the bribe-taker by making impossible the bribe-giver.

The editor believes also that it is the duty of the government to provide for every citizen willing to work full and free opportunity to earn a livelihood, and therefore advocates government employment for the unemployed.

The editor further believes that reforms in these directions can only be accomplished by direct legislation, and a special chapter is therefore devoted to that subject.

The problem which now presses most persistently for immediate solution is that of money. The crying need of the hour is to provide work for the unemployed. Tinkering with the tariff will not do this, because you cannot make a people prosperous by taxation. You can set the wheels of industry in motion, however, by putting money in circulation.

And what is money?

_Money is the public credit_, stamped or imprinted upon, or represented by, metal, paper, or any other convenient substance recognized by law or usage, and employed as a medium of exchange and a measure of values.

Money is money only so long and in so far as it represents the public credit. Moses, as well as the early fathers of the Christian Church, undoubtedly adopted this view of money when they denounced usury, which is the device whereby the drones in humanity’s bee-hive, monopolizing the public credit, have in all ages exacted tribute from the workers.

We have seen what money is. Now let us see how we can best circulate it.

Suppose that this country were governed by a czar, an autocrat, with absolute power to make what laws he pleased for the government of his people. Suppose this autocrat should issue an order increasing the standing army to one million men, these one million men to be armed, not with muskets and swords, but with pickaxes, shovels, etc., and to be set to work improving roads, reclaiming desert and waste lands, etc. Suppose these men were paid $1.50 a day in money issued for that purpose by the government. What would be the result?

One million of men would be taken from the overcrowded labor market, and at the end of each week nine million dollars would be put in circulation.

Would it be necessary to pay these men in gold and silver? No. Would not mere paper money inscribed something like this, in denominations of one, two, five, ten, twenty and fifty dollars, answer all purposes?

THIS CERTIFICATE, TO THE AMOUNT OF ITS FACE VALUE, WILL BE RECEIVED BY THE GOVERNMENT OF THE UNITED STATES IN PAYMENT OF ALL PUBLIC DUES, AND IS A FULL LEGAL TENDER IN THE PAYMENT OF ALL DEBTS, PUBLIC AND PRIVATE.

Would not these certificates pass everywhere for their face value? Would they not have back of them all the power of the law?

And would they not have the same power if they were issued and ordained, not by an autocrat holding merely a fictitious authority, but by the will and the vote of a sovereign people? Would they not be backed by all the wealth of the nation?

The right to issue money is a sovereign right and should be jealously guarded by a sovereign people. To delegate this power to banks and money-lenders is as grave an error as it would be to confer on a class the privilege of making laws for the whole community.

The volume of money should be regulated to suit the requirements of all the people and not the greed of those who thrive on usury.

The use of metals for money is unscientific, and they will eventually be relegated to obscurity with the shells, pelts, tally-sticks and other cumbrous mediums of exchange employed by our ancestors. But great reforms cannot be accomplished at once. Gold and silver are the money of the Constitution. The act of 1873, which made gold alone the basis of credit, and which, by reducing the volume of money, doubled the burden of debt, was a violation of the fundamental law of our government. The wrong perpetrated in 1873 must be righted now. This is the first great step in monetary reform.

Following this, the issue of interest-bearing bonds must be stopped forever. The careful student will find that interest is at the bottom of all our financial ills. Unselfish patriotism must abolish usury by substituting the credit of all the people for that of the banks.

Every physical or moral ill is the result of some breach of natural or divine law. For generations we have violated the laws of God as they relate to money and to land.

“And if thy brother be waxen poor and fallen in decay with thee, then thou shalt relieve him; yea, though he be a stranger or a sojourner; that he may live with thee. Take thou no usury of him or increase; but fear thy God, that thy brother may live with thee.” (Lev. 25: 36-37.)

Moses, the inspired law-giver, the great soldier-poet-statesman, who led a semi-barbarous people from the slavery of Egypt and made of them a nation which endured the longest in the world’s history, wrote these words.

We also read: “The land shall not be sold forever; for the land is mine [saith the Lord]; for ye are strangers and sojourners with me.” (Lev. 25: 23.)

Let the Christian world cease bickering over questions of dogma and study again the inspired law of Moses, the law which Christ came to fulfill, and a solution of all the many questions which now vex us will soon be found.

Under the Mosaic law, slaves were emancipated, human life was made sacred, debtors were liberated every seven years, inherited property was divided and paternal inheritances were alienated, luxury and extravagance were discouraged, and by forbidding land-monopoly and usury (in the Bible usury and interest are synonymous) disproportionate fortunes and vast accumulations of wealth, which have caused the decline of the world’s great empires and are now threatening the foundations of modern civilization, were made impossible.

Chattel slavery no longer exists in any part of the civilized world, imprisonment for debt has been abolished, the right of the people to rule is established, but humanity is still bound in chains of servitude as galling and oppressive as in any period of its history. The rule of kings is passing away, but the autocracy of money and monopoly is seated on the throne and swaying a more imperious scepter.

But the people have it in their power to overthrow their oppressors. In this country, at least, we have the ballot. The duty of the hour is to study political economy, so that this weapon may be wielded intelligently and effectively. “Education” must be our watchword. It is only by education that we may hope to gain the three great essentials for perfect liberty and equality: _direct legislation_—_direct money_—_direct taxation_. These will establish forever the sovereignty of the people.

II.
THE PHILOSOPHY OF MONEY.

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

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

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

Varieties of Money.

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

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

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

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

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

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

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

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

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

“Be it enacted by the General Assembly of the State of Franklin, and it is hereby enacted by the authority of the same:

“That from the first day of January, 1789, the salaries of the officers of the Commonwealth be as follows:

“His Excellency the Governor, per annum, 1,000 deer skins.

“His Honor the Chief Justice, per annum, 500 deer skins.

“The Secretary to His Excellency the Governor, per annum, 500 raccoon skins.

“The Treasurer of the State, 450 raccoon skins.

“Each County Clerk, 300 beaver skins.

“Clerk of the House of Commons, 200 raccoon skins.

“Members of the Assembly, per diem, 3 raccoon skins.

“Justice’s fee for signing a warrant, 1 muskrat skin.

“To the constable for serving a warrant, 1 mink skin.

“Enacted into law the 18th day of October, 1788, under the great seal of State.”

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

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

Intrinsic Value.

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

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

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

“Congress shall have power to coin money and regulate the value thereof.”—_Constitution of the United States._

“To coin money and regulate the value thereof as an act of sovereignty involves the right to determine what shall be taken and received as money; at what measure or price it shall be taken; and what shall be its effect when passed or tendered in payment or satisfaction of legal obligations. Government can give to its stamp upon leather the same money value as if put upon gold or silver or any other material. The authority which coins or stamps itself upon the article can select what substance it may deem suitable to receive the stamp and pass as money; and it can affix what value it deems proper, independent of the intrinsic value of the substance upon which it is affixed. The currency value is in the stamp, when used as money, and not in the material independent of the stamp. In other words, the MONEY QUALITY is the authority which makes it current and gives it power to accomplish the purpose for which it was created.”—_Tiffany, Constitutional Law._

“Whatever power is over the currency is vested in Congress. If the power to declare what is money is not in Congress, it is annihilated.... We repeat, money is not a substance, but an impression of legal authority, a printed legal decree.”—_U. S. Supreme Court (12 Wallace, p. 519)._

“The gold dollar is not a commodity having an intrinsic value, but _money_ having only a statutory value; and every dollar has the same value without regard to the material. The gold dollar has not intrinsic value.”—_Supreme Court of Iowa (16 Iowa Rep., p. 246)._

“Money is the medium of exchange. Whatever performs this function, does the work, is money, no matter what it is made of.”—_Walker, Political Economy._

“An article is determined to be money by reason of the performance by it of certain functions, without regard to its form or substance.”—_Appleton’s Encyclopedia._

“Money is a value created by law. Its basis is legal, and not material. It is, perhaps, not easy to convince one that the value of metallic money is created by law. It is, however, a fact.”—_Cernuschi._

Specie Basis.

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

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

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

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

“The authority which coins or stamps itself upon the article can select what substance it may deem suitable to receive the stamp and pass as money; and it can affix what value it deems proper, independent of the intrinsic value of the substance upon which it is affixed.”

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

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

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

“The gospel of monetary science now is, that when a country does not want paper money, it ought to have a great supply of it; and when it does require paper money it shall have none. When a country has enough of specie it ought to double its currency by issuing an equal amount of bank notes; and when there is no specie there should likewise be no notes. Is it necessary to discuss such a theory? In order to be rejected it needs only to be stated; in order to be rejected it only needs to be understood. It is a theoretical monstrosity against which common sense revolts—a burlesque of reason which even the present generation will live to laugh at.”

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

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

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

“Within the last fifty years, say, a money crisis has come quite regularly every ten years. Something—any one of a dozen causes, few know what—sets gold to flowing out. Fifty millions withdrawn in a short time from its usual place of deposit is quite sufficient to make the whole volume of coin disappear from ordinary circulation as completely as if it had never existed. The metallic basis is gone—slipped out; the pivot of the system is dislocated; somebody wanted it and took it, and the pyramid tumbles down, burying in its ruins three-fourths of a business generation.”

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

“The whole paper scheme is founded on the presumption that the holders of these bills will not generally ask for specie at the same time; and, therefore, the amount of specie kept in reserve bears but a small proportion to the notes in circulation. And this is the great evil of the system. A general and simultaneous demand for specie cannot possibly be met, and disaster must follow. To enforce a universal performance of these promises is to insure their being broken. Every sudden panic, therefore, must produce wide-spread calamity.”—_Walker’s American Law, p. 152._

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

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

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

The Legal Tender Basis.

President Grant said:

“My own judgment is that a specie basis cannot be reached and maintained until our exports exclusive of gold pay for our imports, interest due abroad, and other specie obligations, or so nearly as to leave an appreciable accumulation of the precious metals in the country from the product of our mines.”—_Message, Dec. 1, 1873._

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

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

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

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

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

“Making these notes legal tender gave them new uses (or functions), and it requires no argument to prove the value of things as in proportion to the uses to which they may be applied.”—_12 Wallace Reports, p. 519._

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

“On the whole no method has hitherto been found to establish a medium of trade, in lieu of coin, equal in all its advantages to bills of credit founded on sufficient taxes for discharging it at the end of the time, and in the meantime made a general legal tender.”

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

“It is the only resource which can never fail them, and it is an abundant one for every necessary purpose. Treasury bills, bottomed on taxes, bearing or not bearing interest, as may be found necessary, thrown into circulation, will take the place of so much gold or silver.”

President Jackson, in his message, 1829, said:

“I submit to the wisdom of the legislature whether a national one [currency] founded on the credit of the government and its resources might not be devised.”

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

“It appears to me, after bestowing the best reflection I can give the subject, that no convertible paper—that no paper that rests upon a promise to pay—is suitable for a currency. It is the form of credit paper in transactions between men, but not for a standard of value to perform exchanges generally, which constitutes the appropriate functions of money or currency. No one can doubt but that the credit of the government is better than that of any bank—more staple and safe. I now undertake to affirm, and without the least fear that I can be answered, that paper money issued by the government, to receive it for all dues, would form a perfect circulation which would not be abused by the government; that it would be uniform with the metals themselves.”

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

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

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

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

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

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

“The notes are now held and hoarded. The first issue of $60,000,000 were issued with the right of being converted into six per cent. twenty-year bonds and with the privilege of being paid for duties in customs. They are now far above par and hoarded.”

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

“The demand notes, being receivable for customs the same as coin, kept pace with the advance in the price of coin.”

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

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

“It has all the bad qualities that its enemies charged in the original bill and none of its benefits. It now creates money and by its very terms declares it a depreciated currency. It makes two classes of money—one for the banks and brokers, and another for the people. It discriminates between the rights of different classes of creditors, allowing the rich capitalists to demand gold, and compelling the ordinary lender of money on individual security to receive notes which the government had purposely discredited.... But now comes the main clause. All classes of people shall take these notes at par for every article of trade or contract unless they have money enough to buy United States bonds, and then they shall be paid in gold. Who is that favored class? The bankers and brokers, and nobody else.”

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

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

“The experience of the present panic has proven that the currency of the country, based, as it is, upon the credit of the country, is the best that has ever been devised. Usually, in times of such trials, currency has become worthless or so much depreciated in value as to inflate the values of all necessaries of life as compared with currency. Every one holding it has been anxious to dispose of it on any terms. Now we witness the reverse. Holders of currency hoard it as they did gold in former experiences of like nature.”—_Message, December 1, 1873._

The Functions of Money.

The functions or uses of money are three-fold:

It is a measure of value.

It is a medium of exchange.

It is a means of storing wealth.

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

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

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

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

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

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

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

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

The Volume of Money.

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

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

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

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

Henri Cernuschi, an ex-banker of Paris, and recognized as, perhaps, the most eminent of the French writers on finance, says:

“The value of money depends upon its quantity. It is the same with gold as with greenbacks. If the stock in circulation is augmented the purchasing power of every greenback is diminished; and so with gold and silver. The purchasing power is always in relation to the quantity of the money.”—_Nomisma, p. 15._

“That commodities would rise and fall in price in proportion to the increase or diminution of money I assume as a fact that is incontrovertible. That such would be the case the most celebrated writers on political economy are agreed.”—_Ricardo, Political Economy._

“If the whole money in circulation was doubled prices would double. If it was only increased one-fourth, prices would rise one-fourth. The very same effect would be produced on prices if we suppose the goods (the uses for money) diminished instead of the money increased; and the contrary effect if the goods were increased or the money diminished. So that the value of money, all other things remaining the same, varies inversely as its quantity; every increase in quantity lowering its value and every diminution raising it in a ratio exactly equivalent.”—_J. S. Mill, Principles of Political Economy._

Wm. H. Crawford, Secretary of the Treasury, in his report, February, 1820, says:

“All intelligent writers on currency agree that when it [money] is decreasing in amount poverty and misery must prevail.”

By joint resolution of the United States Congress, August 15th, 1876, a “United States Monetary Commission” was appointed to inquire into the prevailing “hard times.” It consisted of Senators John P. Jones, Lewis V. Bogy and George S. Boutwell, and Congressmen Randall L. Gibson, George Willard and Richard P. Bland; to whom were added Hon. Wm. S. Groesbeck of Ohio, Prof. Francis Bowen of Massachusetts, and Geo. M. Weston of Maine, the three latter acting as secretaries of the commission. On March 2, 1877, the commission reported. The following extracts are taken from the report:

“While the volume of money is decreasing, though very slowly, the value of each unit of money is increasing in a corresponding ratio, and property and wages are decreasing. Those who have contracted to pay money find that it is constantly becoming more difficult to meet their engagements. The margins of securities melt rapidly, and their confiscation by the creditor becomes only a question of time. All productive enterprises are discouraged and stagnate because the cost of producing commodities to-day will not be covered by the price obtainable for them to-morrow. Exchanges become sluggish, because those who have money will not part with it for either property or service, for the obvious reason that money alone is increasing in value while everything else is decreasing in price. This results in the withdrawal of money from the channels of circulation and its deposit in great hordes where it can exert no influence on prices. Money in shrinking volume becomes the paramount object of commerce instead of the beneficent instrument. Instead of mobilizing industry, it poisons and dries up its life currents. It is the fruitful source of political and social disturbance. It foments strife between labor and other forms of capital, while itself, hidden away, gorges on both. It rewards close-fisted lenders and filches from and bankrupts enterprising producers. An increasing value of money and falling prices have been and are more fruitful of human misery than war, pestilence or famine; they have wrought more injustice than all the bad laws ever enacted.”—_Report of United States Monetary Commission, vol. I, p. 10 et seq._

Pointing out how a contraction of the money volume increases the debt obligations of the past, R. H. Patterson, especially commended by Gladstone as one of the ablest of English writers on finance, says:

“And what is such a dearth of money and rise in the measure of value but an injustice to the many to the gain of the few—an unfair exaltation of the power of the past over the present, an unfair and undesirable aggravation of the poverty of the poor and the wealth of the rich—a stereotyping of classes according to wealth, until they tend to become permanent? We have seen how powerful and beneficial was the influx of the precious metals from the New World four centuries ago in breaking the social bondage which had settled over Europe during the long night of the Dark Ages, enabling that generation to escape from the heritage of the past and bound forward upon the new career then opening to mankind. Such times come from the hand of Providence, and with an exceeding rarity even in the long career of civilized mankind. But at least let us avoid the opposite and never allow successive generations to be unfairly—nay, most unjustly, though it may not be so meant—handicapped, each in its own race, owing to a growing dearth and dearness of money.”—_The New Golden Age, vol. II, p. 500._

President Grant said:

“To increase our exports sufficient money is required to keep all the industries of the country employed. Without this, national as well as individual bankruptcy must ensue.”—_Message, December 1, 1873._

Hon. John Sherman, in a speech in the Senate, January 27, 1869, said, in opposition to a bill to contract the currency by retiring the greenbacks:

“It is not possible to take this voyage without the sorest distress. To every person except a capitalist out of debt, or a salaried officer, or annuitant, it is a period of loss, danger, lassitude of trade, fall of wages, suspension of enterprise, bankruptcy and disaster.... It means the ruin of all dealers whose debts are twice their business capital, though one-third less than their actual property. It means the fall of all agricultural productions without any great reduction of taxes. When that day comes every man, as the sailor says, will be close-reefed; all enterprise will be suspended, every bank will have contracted its currency to the lowest limit; and the debtor, compelled to meet in coin a debt contracted in currency, will find the coin hoarded in the treasury, no representative of coin in circulation, his property shrunk not only to the extent of the depreciation of the currency, but still more by the artificial scarcity made by the holders of gold. To attempt this task by a surprise upon our people, by arresting them in the midst of their lawful business and applying a new standard of value to their property without any reduction of their debts, or giving them an opportunity to compound with their creditors, or to distribute their losses, would be an act of folly without an example in evil in modern times.”—_Congressional Globe, 1869, p. 629._

In a speech in the United States Senate, March 17, 1874, General John A. Logan pointed out the cause of the panic of 1873 as follows:

“But, sir, that the panic was not due to the character of the currency is proved by the history of the panic itself.... No, sir, the panic was not attributable to the character of the currency, but to a money famine, and to nothing else. In the very midst of the panic we saw the leading bankers and business men of New York pressing and urging the President and the Secretary of the Treasury to let loose twenty or twenty-five millions more of the same paper for their relief—the very same men who to-day denounce it as a disgrace to our government. It was good enough for them when they were in trouble.

“Why is it that representatives forget the interests of their own section and stand up here as the advocates of the gold-brokers and money-lenders and sharks, the same class of men whose tables Christ turned over, and whom he lashed out of the temple at Jerusalem?... Carry out the theory of the contractionists, and what must be the inevitable result? Every enterprise and industry must be dwarfed in like proportion. The busy hum of the spindle will cease its sound in many a mill which now gives employment to hundreds of active hands and supplies the comforts of life to many a happy home. The bright blaze of many an iron foundry which gives life and cheerfulness to the grand scenery along the streams of Pennsylvania will cease to gild the night with its rays. And the same industry in my own State, and that of the Senator from Missouri, which has been so rapidly increasing of late, will be crippled, and hundreds who now find employment there will be compelled to seek a home elsewhere for want of work. The undeveloped resources of the South and West, which we have just begun to appreciate, will rest in abeyance until a wiser policy shall bring them into use.... Why, sir, the people were never freer from debt in proportion to the business done than in 1865, at the close of the war, when Mr. McCulloch began his system of contraction, and at the very time when eleven million more people were to be supplied. Was it to be supposed that the activity and energy which the adequate supply of money had put in operation, and which was giving prosperity and happiness to the country, would suddenly dwarf itself to suit financial notions without a struggle? The inevitable result was an expedient to meet the consequent want, and credit was expanded. At the very moment above all others when adequate supply was needed, the opposite course was adopted; and right here lies the true cause of the late panic, which resulted from a money famine and not from an excessive supply.... Sir, turn this matter as we will, and look at it from any side whatever, and it does present the appearance of being a stupendous scheme of the money-holders to seize the opportunity of placing under their control the vast industries of the nation. Therefore I warn Senators against pushing too far the great conflict now going on between capital and labor.... Capital rests upon labor; but when it attempts to press too heavily on that which supports it in a free republic, the slumbering volcano, whose mutterings are beginning already to be heard, will burst forth with a fury that no legislation will quell.”

From the foregoing, which is but a small fragment of the immense literature in harmony with the opinions cited, the following conclusions may be digested:

1. A diminished volume of money always causes a proportional diminution in the price of labor and commodities—or, to express it otherwise, money becomes dear and everything else cheap.

2. This redounds to the advantage of the capitalistic class, who are thereby enabled to exact more for their money in services and commodities, to purchase all kinds of stocks and properties at diminished rates, and to foreclose mortgages and collect other forms of debts under such conditions as to make “hard times” a harvest for the creditor class.