Chapter V: Summary and Conclusion (2)

Increase in population does not prove an increased need of money. It may prove the contrary. If the population becomes more dense over a given area, a higher organization may make less money necessary. If railroads and other means of communication are extended, money is economized. If banks and other credit institutions are multiplied, and if credit operations are facilitated by public security, good administration of law, etc., less money is needed. If these changes are going on at the same time that population is increasing (and such is undoubtedly the case in the United States), who can tell whether the net result is to make more or less currency necessary? Nobody; and all assertions about the matter are wild and irresponsible.

If it was true that an increase of two millions in the population called for more dollars, how does anybody know whether the current gold production is adequate to meet the new requirement or not? The assertion is arithmetical. It says that two quantities are not equal to each other. The first quantity is the increase in the currency called for by two million more people. How much more is needed? Nobody knows, and there is no way to find out. The silver men have put figures for it from time to time, but the figures rested on nothing and were mere bald assertions. The second quantity is the amount of new gold annually available for coinage in the United States. How much is this? Nobody knows, because if an attempt is made to define what is meant it is found that there is no idea in the words. The people of the United States buy and coin just as much gold as they want at any time. Hence two things are said to be unequal to each other, when nobody knows how big either one of them is. It may be added that it makes no difference how big either one of them is. How much additional tin is needed annually for the increase of our population? Do the mines produce it? Nobody knows or asks. The mines produce, and the people buy, what they want. The case is the same as to gold.

We find, then, that Mr. St. John begins with a doctrine which is untenable; then he asserts a relation between population and the need of money which does not exist; then he assumes that this need is greater than the amount of new gold produced, although neither he nor anybody else knows how big either one of these quantities is. This is the argumentation by which he aims to show that prices are reduced and misery produced by the single gold standard. It is the argumentation which is current among the silver people. Not a step of it will bear examination. The inference that we must restore the free coinage of silver, to escape this strangulation of prosperity, falls to the ground.

CAUSE AND CURE OF HARD TIMES[36]

It is an essential part of the case of the silver men that the country is having “hard times.” The bolters from the Republican convention say, in their manifesto: “Discontent and distress prevail to an extent never before known in the history of the country.” This is an historical assertion. It is distinctly untrue. There is no such discontent and distress as there was in 1819, or in 1840, or in 1875, to say nothing of other periods. The writers did not know the facts of the history, and they made use of what is nowadays a mere figure of speech. People who want to say that a social phenomenon is big, and who do not know what has been before, say that it is unparalleled in history.

There has been an advancing paralysis of enterprise and arrest of credit ever since the Sherman act of 1890 was passed. The bolters say that “No reason can be found for such an unhappy condition of things save in a vicious monetary system.” The reason for it has been that the cumulative effect of the silver legislation was steadily advancing to a crisis. The efforts by which the effects of that legislation had been put off were no longer effective, and it was evident that the country was on the verge of a cataclysm in which the standard of value would be changed. What man can fail to see the effect of such a fear on credit and enterprise? And with such a fear in the market, how idle it is to try to represent the trouble as caused by the fact that the existing standard was of gold, or of silver, or of anything else! Men will make contracts and go on with business by the use of any medium, the terms of which can be defined, understood, and maintained until the contract is solved, but uncertainty as to the terms, or danger of change in them, makes credit and enterprise impossible. In the whole history of finance no crisis can be found which was so utterly unnecessary, and so distinctly caused by the measures of policy which had gone before it, as that of 1893.

So much being admitted as to “hard times,” it remains true, however, that by far the greatest part of the current declamation about hard times is false. Prosperity and adversity of society are not capable of exact verification. At all times some people, classes, industries, are less prosperous than others. The fashion has grown up among politicians and stump orators of using assertions about prosperity and distress as arguments for their purpose, and parties come before the public with prosperity policies. They have programs for “making the country prosperous.” If this country, with its population, its resources, and its chances, is not prosperous by the intelligence, industry, and thrift of its population, does any sane man suppose that politicians and stump orators have any devices at their control for making it so? The orators of the present day see prosperity where they need to see it for the purposes of their argument. They say that all gold-standard countries in Europe are in distress. Mr. St. John says that Mexico is prosperous. As to Canada, we have seen no statement. According to some discussions which are current, the bicycle rivals the gold standard as a calamity-producer. As the bicycle has certainly gravely affected the distribution of expenditure and the accumulation of capital, its efficiency as a crisis-maker, in its degree, whatever that may be, can be rationally discerned, but nobody has ever been able to show any rational grounds of belief that the gold standard is a crisis-maker.

A crisis will also be produced whenever capital has been invested on a large scale in any unproductive investment, whereby it is not reproduced, but is lost. The enterprises are always made the basis of engagements and contracts. When the enterprises fail, the engagements cannot be met; other engagements based on these also fail, and so on through the whole industrial organization. Such crises are inevitable in a new country. Enterprises run in fashions. At any one time great groups of producers tend to one line of industry. That industry is sure to be overdone and to come to a crisis. In a free country, where every man is at liberty to direct his enterprise as he sees fit, what is the sense, when it turns out that he has made a mistake, of trying to throw the losses on other people? No one would propose it as to an individual or a number, but when there is a great interest it makes itself a political power and produces a platform for the same purpose, generally with inflated principles of humanity, justice, democracy, and Americanism as wind-attachments to make it float.

Mr. St. John says that the farmers are spending ten dollars an acre to get eight or nine dollars an acre. What farmer in the United States can tell how many dollars he spends on an acre? What is the sense of these pretendedly accurate figures? But, if they had sense, what would be the gain of cutting the dollars in two? If the farmer spent twenty silver dollars on an acre and got back sixteen or eighteen, how would he be benefited? The dollars of outlay are of the same kind as the dollars of return in any case. If it is true that the return does not equal the outlay, it must be on account of some facts of production, and it requires but a moment’s reflection to see that changing the currency in which outlay and income are reckoned cannot change the relation between the two.

A dispassionate view of facts will go to prove that the world is reasonably and ordinarily prosperous at the present time, except where particular classes and industries are affected by special circumstances, as some classes and industries are being affected at all times. The land-owners of western Europe are in distress on account of the competition of new land, with cheapened means of transportation, but now we are told that the holders of the other side of the competition, the land-owners of the new soil, are victims of distress. It must be, then, that too much labor and capital are being expended on the soil the world over, and that, too, in spite of all the protective tariffs drawing people to the textile and metal industries. Our silver men say that this is not the correct inference. They say that the people on the new land suffer because the prices are set in coins of gold and the debits and credits are kept in terms of those coins. The prices are fixed in the world’s market in gold. They will be so fixed, whatever we may do with our coinage laws. If the proceeds, in being brought home, are converted into silver value, a new opportunity for brokerage and exchange gambling will be given to the hated bankers and brokers of Wall Street. That is the only difference which will be produced. It would be far more sensible to say that distress is produced by doing the business on the English system of weights and measures, in bushels and pecks, and that prosperity would be produced by doing it on the metric system, in litres and hectolitres, for that charge would at least be harmless. Our distress could all be dispelled in a week by an act of Congress making all contracts, beyond political peradventure, that which they are in law and fact, gold contracts.

There is, however, another cause of hard times for some people which is far more important in our present case than any other. That is the case of the boom which has collapsed. We hear a great deal about “Wall Street gambling.” The gambling in Wall Street is insignificant compared with the gambling in land, buildings, town sites, and crops which goes on all over the country, and which is participated in chiefly by the men who declaim about Wall Street. For three hundred years our history has been marked by the alternations of “prosperity” and “distress” which are produced by the booms and their collapses. When the collapse comes the people who are left long of goods and land always make a great outcry and start a political agitation. Their favorite device always is to try to inflate the currency and raise prices again until they can unload.

It is a very popular thing to tell men that they have a grievance. That most of them find it hard to earn as much money as they need to spend goes without saying. Now comes the wily orator and tells them that this is somebody’s fault. In old times, if a man was sick, it was always assumed that somebody had bewitched him. The witch was to be sought. The medicine-man had to name somebody, and then woe to the one who was named. Our medicine-men say that it is the gold-bugs, Wall Street, England, who are to blame for hard times. Whether there is any rational proof of connection is as immaterial as it always was in witchcraft. It is a case of pain and passion. The “gold standard” has done it! There is something to hate and denounce. All would be well if silver could be coined at four hundred and twelve and a half grains to the dollar. But the assumption is that while the farmers would sell their products for twice as many “dollars” as now, in silver, all the prices of things which they want to buy would remain at the same number of dollars and cents as now, in gold; that is, it is believed that wheat would be at, say, one dollar and fifty cents per bushel in silver, instead of seventy-five cents in gold, but that cloth would remain at fifty cents a yard in silver, if it is now fifty cents a yard in gold. When this assumption is brought out into clear words, every one knows that such can never be the result. The proposed cure is like a witch cure. It lacks rational basis, and cannot command the confidence of men of sense. If the times were ever so bad, such a cure could only make them worse.

THE FREE-COINAGE SCHEME IS IMPRACTICABLE AT EVERY POINT[37]

THE PROGRAM.

In two former articles I have discussed some points which are presented by the advocates of the free coinage of silver, on the assumption that their project was feasible and their conception of its operation correct. They have laid out a program; free coinage, silver standard, great demand for silver, rise of prices, rise in the value of silver, cancellation of debts, prosperity. They now admit that this program would involve a panic, but it would come out, they say, at the desired result in two or three years. They denounce the gold standard as having caused hard times, but they plan a program with a panic as an incident on the way to a silver standard as if it was a trifle.

_There is not a step in this program which could or would be carried out as planned._

FREE SILVER MEANS FIAT PAPER MONEY.

The amount of circulating cash of all kinds in the hands of the people at the present time is about nine hundred millions. If the dollar was reduced to half its present value, and if allowance was made for reserves, two thousand million silver dollars would be the specie requirement of the country. We already have nearly five hundred millions of such dollars. Hence the country could not use at the utmost, if the new silver dollar was worth not more than half the present gold dollar, and if the total circulation consisted of silver without any paper, but three times as many more silver dollars as we have now. But every one knows that such a state of the currency never would exist. We should have paper “based on silver”; that is to say, the silver inflation never will be carried out. It will turn to paper inflation at the first step. Who can believe that, if the silver standard was adopted, silver would be bought and piled up dollar for dollar against the paper, and that the paper would be issued only as fast as the silver could be coined? In fact, silver would no doubt be dropped and forgotten, and we should have plain and straightforward fiat money of paper. Such ought to be faced as the only real sense and probable outcome of the present agitation for the free coinage of silver.

LIMIT OF THE AMOUNT OF SILVER WHICH COULD BE ABSORBED.

Let us, however, proceed upon the assumption that the plan proposed is sincere, and that the attempt would be made to carry it out in good faith. The circulation in the hands of the people would be paper, for they would become sick of silver and revolt against it. There would then be two thousand million dollars in paper afloat, each “dollar” being of silver and worth half a present gold one. We have now five hundred million silver dollars. At the utmost not more than another five hundred millions of silver could be absorbed into the system. That would give reserves of fifty per cent of the total currency, and that is the maximum of the demand for silver which could be created if the United States went over to the silver standard. The supply would come from all over the earth. Mr. St. John is sure that none would come from Europe, because legal tender silver there is at a higher ratio than sixteen to one. Not a nation in Europe which is now under the yoke of silver would hesitate a moment to demonetize it and send it here if we opened our mints to it at sixteen to one. He also assures us that none would come here from the East because the course of silver has always been from West to East. The course of silver has turned from East to West more than once when there was a profit on bringing it back, and that is the only condition necessary to bring it back again. Japan would adopt a gold currency the moment that the United States adopted a silver one.

IT IS IMPOSSIBLE INDEFINITELY TO INCREASE THE CIRCULATION.

The power of our currency to absorb silver is not unlimited. People seem to believe that they can go on and increase the monetary circulation indefinitely. This is possible with paper, which has no commodity value and cannot be exported, always understanding that the paper will depreciate as issued, but it is not possible with any money which has commodity value. When silver has been put into circulation here to such an amount that all the fictitious value given to it by the coinage law has been eliminated--that is to say, when so many silver dollars, or paper bearing the obligation of silver dollars, have been issued as will equal in value the present circulation--then there will be no profit in sending silver here from elsewhere, and no more profit in minting silver here than in sending it elsewhere. As we have seen, there is no reason to estimate the amount of silver which would be absorbed in this operation at more than five hundred millions. The miners are making all this agitation for the sake of that share which they could get in furnishing this sum. That share would really not exceed the silver they had on hand when the law was put in force.

ANTAGONISTIC INTERESTS OF MINERS AND POPULISTS.

What share, then, would the silver-miners get in the results of the enterprise? They could get none unless the new silver was bought only of them, and only bought gradually as they produced it, and bought at a rising price as the demand of debtors acted upon it. Not one of these conditions would be fulfilled. The debtors and the silver-miners really have antagonistic interests at every point. It has been proposed that only American silver should be accepted at the mint. That plan is impracticable in any case, but, when the Populists had their victory in hand, does anybody suppose that they would wait eight or ten years for the realization of their hopes while the mines were producing new silver, being certain that that delay would cause all they hoped for to slip through their fingers? I repeat: The interests of the two factions are all antagonistic to each other, and one of them is destined inevitably to be the dupe of the other. That destiny is reserved for the miners who, besides, are paying all the expenses.

Already, so far as the campaign has proceeded, this antagonism has begun to manifest itself. Mr. Bryan says that his plan will make silver worth one dollar and twenty-nine cents per ounce fine. He thus takes his position with the miners’ faction. Thereupon the organs of the repudiators’ faction have begun to remonstrate. That is not at all what they are fighting for. They do not want their scheme to raise silver at all. But if it does not, the miners gain nothing. If it does, then again the repudiators take to paper money and the miners win nothing.

The mechanical difficulty of recoining the silver with the necessary rapidity could probably be overcome. There are machine-shops enough to do it if there was a party in power which had that reckless determination to execute its will which these people show. We may, therefore, go on to consider the rise of prices.

THE RISE OF PRICES.

The rise in prices would regularly occur only as the new silver or paper was put out, but as the consequences would all be discounted it would be sudden and rapid. It would not, however, affect all things at the same time or to an equal degree. It is here that one of the first disappointments would occur. It is not possible to put up prices when and as one would like to do it, even when the rise is due to inflation. The effect cannot all be distributed at once. An advance in price reacts on business relations, that is, on the industrial organization. Many people and many interests find that they cannot push against others until long after they have been pushed against themselves. The wages class and the farmers are the ones who are most clearly in this position, at least as far as the latter do not produce articles for export. It must be plain that in such a convulsion of the market everybody will try to save himself at the expense of others. Who will succeed? Those certainly who spend their lives in the market and already possess the control of its machinery; not those whose time is occupied in the details of production.

WHERE THE EXPECTED GAINS WOULD GO.

It is said that the farmer would sell his grain and cotton, as now, for gold; that he would exchange the gold for silver; would get the silver coined and would pay his debts with it. Would any individual farmer do this? Would any one man go through the steps of this operation?--see the buyer of his products, handle the gold and silver, go to the mint? Certainly not. All these operations would go on through the commercial and financial machinery. They would be executed by different individuals, in the way of business, through the organization, and every one of them would be lost to view. Every operation would have to be paid for. Every operation would give a new chance for more middlemen and more charges. Would, then, the gains of this grand scheme go to the farmer? Not at all. They would go to the “brokers and speculators of Wall Street.” They would be lost in commissions and charges. The type of operator whom the Populist seems to think of when he talks about “Wall Street sharks,” exists, although his importance in Wall Street is not as great as that of the political farmer in agriculture; but this type of man does not care what the currency legislation is, except that he would like to have a great deal of it, and to have it very mixed. Whatever it is, when it is made and he sees what it is, he will proceed to operate upon it.

PLAYING INTO THE HANDS OF THE MONEY SHARKS.

We hear fierce denunciations of what is called the “money power.” It is spoken of as mighty, demoniacal, dangerous, and schemes are proposed for mastering it which are futile and ridiculous, if it is what it is said to be. Every one of these schemes only opens chances for money-jobbers and financial wreckers to operate upon brokerages and differences while making legitimate finance hazardous and expensive, thereby adding to the cost of commercial operations. The parasites on the industrial system flourish whenever the system is complicated. Confusion, disorder, irregularity, uncertainty are the conditions of their growth. The surest means to kill them is to make the currency absolutely simple and absolutely sound. Is it not childish for simple, honest people to set up a currency system which is full of subtleties and mysteries, and then to suppose that they, and not the men of craft and guile, will get the profits of it?

THE DELUSION OF THE DEBTORS[38]

Fifty years ago a political agitation was started for the annexation of Texas. As the enterprise appeared like a barefaced piece of land-grabbing, it was necessary to invent some historical, political, and moral theories which would give it another color. One such theory was that Texas had properly belonged to us, but that it was given away by Monroe and Adams in 1819. Therefore the project was presented as one for the _re_-annexation of Texas.

THE RE-MONETIZATION OF SILVER.

An attempt is now made to impugn the coinage act of 1873 under various points of view, in order to lay a foundation for the claim that it is only sought now to re-monetize silver. Not a single imputation on the act of 1873 has ever been presented which will stand examination, but, if that were not so, that act was like any other act of Congress which has become the law of the land, and under which we have all been obliged to live for twenty-five years. We cannot go back and undo the law and live the twenty-five years over again. All the mistakes and follies of the past are gone into the past for all classes and all persons amongst us. The men of the past must be assumed to have acted according to their light, and we who inherit the consequences of what they did must make the best of both the good and ill of it, as the case may be, or as we think it is. If now we make a new coinage law it must stand on its own merits, and on the responsibility of the men who make it, now and for the future. All references back to 1873 are idle and irrelevant.

The plain fact, therefore, to be faced without any disguise, is that we are invited to debase the coinage and lower the standard of value, _now_ and for the future, as a free act of political choice, to be deliberately adopted in a time of profound peace, and that this is to be done with the intention and hope that it will perpetrate a bankruptcy at fifty cents on the dollar for all existing debtors. Can this project be executed? It cannot. The scheme and plan of it for a nation of seventy million people is silly and wicked at the same time, and is both, beyond the power of words to express. The projectors of it deal with the economic phenomena of a great nation as if they were talking about a game at cards, and they plan to do this with prices and that with debts, this with exports and that with banks, as if they were planning a program for building a barn. If we try to realize the operation proposed we shall see how childish and absurd it is.

We must distinguish between three classes of debtors: great financial institutions, small mortgagors, and partners in collapsed booms.

FINANCIAL INSTITUTIONS AS DEBTORS.

The great financial institutions are intermediaries between debtors and creditors. They have received capital from some people and lent it to others. They have to recover it and pay it back. If they only recover it at fifty cents on the dollar, they can only repay it in the same way. What this would mean is that the creditors of those institutions would be paid “dollars,” but that when they tried to re-invest them they would find that prices had risen to a greater or less degree in those dollars for the things which they wanted to buy. To this the Populists answer, triumphantly, that now the debtors find that the prices of their products have fallen, so that when they try to sell them they cannot get enough to pay their debts; but the debtors are those who made contracts and undertook enterprises five, ten, fifteen, or twenty years ago, expecting to make gains which they certainly would have kept. As things have turned out they have not made the gains, and their plan is to escape the loss by throwing it on some one else. The institutions in question, however, are bound to protect the interests of either body of their clients, borrowers or depositors, when either is unjustly threatened, and they are by no means destitute of means to do it. A law to forbid specific coin contracts is but one step in the desperate policy of prostituting law and corrupting the administration of justice, which would be necessary in the attempt to force through the plan under discussion. It would fail at last, because the advocates of it would find that, as the popular saying is, it would “fly up and hit them in the face.” It is not possible to throw society and all its most important institutions into confusion without ruining all the interests of everybody, and at last everybody but the tramp or pauper has to ask himself whether it will pay. As for the institutions, many of them would be ruined in the operation. It is not possible for them simply to collect and repay in the debased dollars. The operation would produce snarls and knots at every turn. Lawsuits would multiply on all sides, and would so entangle the affairs of the institution as to ruin it. The proof of this is presented by the difficulties of liquidation in any case, even when there is no question of currency revolution, and when general affairs are in a normal condition, unless there is time and security for all the operations. In this case the demands on the institution would be precipitated at once, so far as the form of contract would allow.

SMALL MORTGAGORS.

The small mortgagors are either wages-men or farmers. As to the wages-men, their wages would undoubtedly go up in time as prices went up, but in the paralysis of industry which would be the first distinct effect of the plan, as soon as it was known that the experiment was to be made, immense numbers of wages-men would be thrown out of employment, and all wages would fall on account of this condition of the labor market. Later, when things began to adjust themselves to the new basis, wages would be low with prices high, both in silver. Advance of wages would come, but it would have to be won through strikes and a prolonged industrial war. In the state of things supposed it would be every man for himself. The wages class would be weakest of all under the circumstances, as they are in every case of “hard times.” How would mortgagors of this class traverse such a time and keep up their interest? As to the principal, which is to be halved, it cannot be halved unless it is paid, and the mortgagor has nothing to pay it with except the _surplus_ which he can save from his wages over the cost of living. The project promises woe and ruin to the wages class, with industrial war and class hatred as moral consequences of the most far-reaching importance.

FARMER-MORTGAGORS.

The farmers expect to double the price of their products, and so get silver to pay off their mortgages. It has been shown elsewhere[39] how illusory this expectation is as regards prices. Prices would rise, indeed, in silver, but irregularly and unequally. They would rise for all things which a farmer buys as well as for all that he sells. If, as the silver theorists generally say, all prices were to rise uniformly, the farmer would gain but little. For the only means he would win toward paying off his mortgage would be the _surplus_ of his income over his outgo, and this he could only apply year by year as he won it. If, then, the whole scheme could be made to work smoothly provided the victims of it would submit to it without resistance, does this afford any probability of realizing the great hopes which are built upon the scheme?

SOCIAL WAR THE CONSEQUENCE.

But victims would not submit without resistance, and once more we come to the result that no effect can be expected from this undertaking but social war, and a convulsion of the entire social system, whose consequences defy analysis or prediction. If a man says that he “does not see” what great difference going over to the silver standard will make, it must be that he is little trained to understand the workings of the industrial system in which he lives and on which he depends. It is a monstrous thing that a free, self-governing people should join a political battle, in this year of grace 1896, over the question whether to debase their coinage or not.

THE EXPLODED BOOMS.

The third class of debtors is by far the most important in this matter--those who are caught in exploded booms. The peaceful and honest mortgagors of farms and homesteads are not the ones who have gotten up this political agitation. The jobbers, speculators, and boom-promoters have been one of the curses of this country from the earliest colonial days. They are men of the “hustling” type, jobbing in politics with one hand and in land or town lots with the other. It is they who, at the worst periods of financial trouble in our history, have always appeared in the lobby, eager for “relief,” declaiming about the “people,” the “money power,” the “banks,” “England,” etc. They have always favored schemes for fraudulent banks, or paper money, or state subsidies, or other plans by which they could unload on the state or on their creditors. Just now it is silver, because silver has fallen within twenty-five years so much that it is what is called “cheap money.” This type of men have always used a dialect, part of which is quoted above, which is so well marked that it suffices to identify them. The history of financial distress in this country is full of it. No scheme which has ever been devised by them has ever made a collapsed boom go up again. With very few exceptions, they have, on account of such expedients, only floundered deeper in the mire. The exceptions have been those who have succeeded in making the state provide them with capital, although by no means all of these have been hard-headed enough to use it to “get out.” Generally they believe in themselves and their schemes, and use new capital only to plunge in again still deeper.

It is men of this class and the silver-miners who have brought the present trouble upon us, who have invented and preached the notions about the crime of ’73, the hard times, the magical influence of silver, and all the rest. It is they who have filled and engineered conventions. They will gain no more now than in any former crisis, but they insist on involving us all in turmoil, risk, and ruin by their schemes to save themselves.

THE CRIME OF 1873[40]

LEGISLATIVE HISTORY OF THE ACT OF 1873.

It is alleged that the law of 1873 was enacted surreptitiously. Mr. Bryan is quoted as having said that the free-coinage men only ask for a restoration of “that system that we had until it was stricken down in the dark without discussion.” Within the last ten years the facts of the legislative history of that law have been published over and over again. They are to be found in the report of the Comptroller of the Currency for 1876, page 170; in “Macpherson’s Political Manual” for 1890, page 157, and in “Sound Currency,” Vol. III, No. 13. The bill was before Congress three years, was explained and debated again and again. The fact that the silver dollar was dropped was expressly pointed out. It is not now justifiable for any man who claims to be honest and responsible to assert that it was passed “in the dark and without discussion.” The fact is that nobody cared about it. It is noteworthy that the act is not in “Macpherson’s Manual” for 1874. It was not thought to be of any importance. It was not until after the panic of 1873 that attention began to be given to the currency. To that, I who write can testify, since I tried in vain, before that time, to excite any interest in the subject. I was once in the gallery of the House of Representatives when a question of coinage was before the House. I counted those members who, as far as I could judge, were paying any attention. There were six. What is it necessary to do in such a case in order to prevent the claim, twenty-five years later, when countless interests have vested under the law, that the law is open to “reversal” because it was passed “in the dark”?

WAS IT PASSED SURREPTITIOUSLY?

How can a law be passed through Congress surreptitiously? We have indeed heard of bills being “smuggled through” in the confusion attending the last hours of the session, or as an amendment, or under a misleading title. There are the rules of order, however, by which all legislation is enacted. All laws which get through the mill are equally valid. There never has been and never can be any distinction drawn between them according to their legislative history. In the present case there was not the slightest manœuvre or trick, nor is there even room to trump up an allegation of the kind.

THAT THE PEOPLE DID NOT KNOW OF IT.

It is said that “the people” did not know what was being done. How do they ever know what is being done? There is all the machinery of publicity, and it is all at work. If people do not heed (and of course in nearly all cases they do not), whose fault is it? Who is responsible to go to the ten million voters individually and make sure that they heed, lest twenty-five years later somebody may say that the fact that they did not heed lays down a justification for a new project which certainly is “a crime” in the new sense which is given to that word here?

MOTIVE OF THE LAW.

The act of 1873 did not affect any rights or interests. It took away an option which had existed since 1834, but had never been used, and, for ten years before this act was passed, had sunk entirely out of sight under paper-money inflation. Secretary Boutwell, when he first brought the matter to the attention of Congress in 1870, explained the proposed legislation as a codification of existing coinage laws. Later it took the shape of a complete simplification of existing law, history, and fact, in order to put the coinage on the simplest and best system as a basis for resumption. As we had then no coin, we had a free hand to put the system on the best basis, there being no vested rights or interests to be disturbed. That this was a wise and sound course to pursue under the circumstances is unquestionable. Three years later, by the rise in greenbacks and the fall in silver, it came about that four hundred twelve and one-half grains of silver, nine-tenths fine, was worth a little less than a greenback dollar. The old option would, therefore, if still existent, have been an advantage to debtors. Complaint and clamor for the restoration of the option then began, but to give such an option, after the market had changed, would be playing with loaded dice. The European countries which still retained the option abolished it as soon as silver began to fall, and we, if we had retained it open until that time, ought to have done the same.

ALTERNATE RUIN TO DEBTORS AND CREDITORS.

The inflation of the Civil War had a direful effect upon all creditors on contracts outstanding in 1862. The resumption of specie payments had a similar effect on debtors under contracts made between 1868 and 1878. Greenbackism and silver debasement were produced by resistance to this operation. The debtors of to-day are not those of that period. The debts of that period are paid off. The pain and strain have been borne. The credit of the United States has been established, the currency restored, and the whole business of the country for seventeen years has been completely established on the gold dollar as the dollar of account for all transactions whatsoever. The population of the country is now two and a half times what it was in the war time, and its wealth is probably a much greater multiple. The debts now outstanding have, with unimportant exceptions, been contracted since the resumption of specie payments. What is now proposed is to enter upon a new period of these alternations of wrong and injustice, first to creditors, then to debtors, and so on, and to do this in a time of peace, not from any political necessity, but on the ground of some economic interpretations of the facts of the market, which are incapable of verification and proof, when they are not obviously erroneous and partisan. The effect of the various compromises with silver is that the currency is once more intricate and complicated, excessive and confused, so that few can understand it, and it offers all sorts of chances for perverse and mischievous interpretations.

DEMONETIZATION REMOVED NO MONEY FROM USE.

The law of 1873 never threw a dollar of silver or other currency out of circulation. We hear it asserted that “demonetization” destroyed half the people’s money. People say this who know nothing of the facts, but infer that demonetization must mean that some silver dollars which were money had that character taken from them. No one of the other demonetizations, which took place in Europe at about the same time, diminished the money in use. The result of changes in 1873–1874 was that the amount of silver coin in use in Europe was greatly increased, and has remained so since.

The resumption of specie payments after 1873 by a number of nations which had issued paper money in the previous period, and the alternate expenditure and re-collection of war-hoards of gold, had far greater importance than the demonetizations.

There has been no diminution of the world’s coined money within fifty years, but a steady and rapid increase of it. There have been fluctuations in the production of gold and silver such as belong to the production of all metals and are inevitable.

THE ALLEGED SCRAMBLE FOR GOLD.

There has been no “scramble for gold.” Those who do not put any obstacle in the way of gold get more of it than they want. The Bank of England has had lately the largest stock of gold that it ever had, and complaints have begun to be heard of a glut. The gold-production in the last five years is the greatest ever known and there is no fear of any lack of it, whatever may be the sense in which any one chooses to speak of a “lack.” There is not and has not been any “scarcity of gold.” There is no such thing conceivable, except where paper has been issued in excess, so that it is hard to keep enough gold to redeem it with.

PROOF THAT THERE HAS BEEN NO SCARCITY OF GOLD.

There is one proof that there has been no scarcity of money for twenty-five years past which has not indeed passed unnoticed, but which has not received the attention which it deserves; that is the rate of interest. The rate of interest is normally due to the supply and demand of loanable capital, and has nothing to do with money. The value of money is registered by prices, not by the rate of interest. But whenever there is a special demand for money of account--that is, for the solvent of debts--the rate of interest on capital passes over into a rate for the solvent of debts. Banks lend capital in its most universal form, _i.e._, the currency or money of account, or bank credits. If credit fails, as in a time of crisis and panic, actual cash in the money of account is wanted. This now is loaned, under a rate, by the same persons and institutions who formerly loaned capital, and the one phenomenon passes into the other without any line of demarcation. The transition, however, never takes place except in time of crisis, and therefore at a _high_ rate. From this it follows certainly that never when the market rate is _low_ can it be a rate for the solvent of debts. Now, ever since 1873, with the exception of periods of special stringency in 1884, 1890, and 1893, we have had very low rates of interest; the rate for call loans (which in this connection are the most important) has been about two per cent. This is a demonstration that the country has not been suffering from a crisis on account of a lack of currency for the normal needs of business. Proofs could be presented, on the other hand, that the currency for the last six years has been constantly in excess, excepting in 1893, when the credit of the currency failed for a time.

HOW TO GET POOR AND RICH AT THE SAME TIME.

Mr. St. John tries his hand at the relation between prices and interest in connection with our subject. He says: “If the dollar can be cheapened by increasing the number of dollars, so that each dollar will buy less wheat, the increasing price of wheat will increase the demand for dollars to invest in its production.” Evidently he fails to distinguish between the rise in price of wheat from one gold dollar to two gold dollars per bushel, and the rise in wheat from one gold dollar to two fifty-cent silver dollars per bushel. The former would undoubtedly stimulate production. The latter would do so also, among farmers who shared Mr. St. John’s confusion on this matter. There would be many of them. They would imagine that they were getting rich by raising wheat to sell at two silver dollars, or five, ten, fifteen, or twenty paper dollars, as depreciation went on. Hence, as he says, they would pay a banker eight, ten, twelve, or fifteen per cent, in the depreciated dollars, in order to get “money,” as he calls it, with which to raise wheat. Mr. St. John thinks that this would mean that farmer and banker were both magnificently prosperous. It would mean that the real value which came in was steadily growing less than that which went out, so that the capital was being consumed. Hence the high rates of inflation times, and the disaster which follows when the truth is realized. They told a story in Revolutionary times of a man who invested his capital in a hogshead of rum which he sold out at an enormous advance--in Continental paper; but when he went to buy a new supply, all his “money” would only buy a barrel. This he retailed out at another enormous advance--in Continental--but when he went to buy more he had only enough money to buy a gallon. If he had borrowed his first capital he might have paid twenty per cent for it--in Continental--but the banker would hardly have made a good affair.

MONOPOLY OF THE MONEY.

We hear it asserted that the gold standard gives the owners of gold power to appropriate the money and make it scarce, and that they have used this power. Why, then, under silver or paper, may not the holders of silver or paper do the same? That the holders of gold have not done it has been shown above. But nobody can do it with any kind of value money. There are no “holders of gold.” He who holds gold wins no gains on it. The bankers who are supposed to hold it, if peace and security reign, put it all out at loan in order to get gain on it. When peace and security do not reign it is not safe to put it out, and borrowers, fearing to engage in new enterprises, do not present a demand for it. Furthermore, the greatest gains can then be won by holding money ready to buy property when the crash comes. That is what those who own surpluses are doing now. Hence there are no “holders of gold” until monetary threats and dangers call them into existence. Silver legislation has made a great many. The law of 1873 never made any.

There is not, therefore, a fact or deduction about the law of 1873, or the history of the market since, which the silver men have put forward, which will stand examination.

A CONCURRENT CIRCULATION OF GOLD AND SILVER

[1878]

It seems as if the United States were destined to be the arena for testing experimentally every fallacy in regard to money which has ever been propounded. A few years ago only a very few people here had ever heard of the “double standard” or knew what it meant. In 1873 we became simply and distinctly a “gold country” in law, as we had been for forty years in fact. Immediately after that date silver began to fall in value relatively to gold, so that, if we had been on the “double standard,” and had not been deterred by considerations of honor, morality, and public credit, which considerations kept the double-standard countries from taking that course, we could have paid our debts in silver at an advantage. Forthwith all those persons who had before been racking their brains to devise some scheme for resumption without pain or sacrifice, turned their attention to silver, and began to devise plans for getting back to the position which, as they thought, we had unwisely abandoned. The consequence has been that, for the last year, the country has produced numberless editorials, essays, lectures, and speeches, full of the most crude sophistry, and the most astonishing errors as to all the elementary doctrines of coinage and money. The favorite object of all these schemes is to find some means of increasing the amount of money at the disposal of the world, or of this nation, so as to raise prices and make it easier to pay debts. These schemes have taken their point of departure in the speculations of some European economists. In Europe the propositions of the economists in question have never passed beyond the realm of speculation and theoretical discussion amongst professional economists. They have been regarded by some as probably sound, and capable of being made the basis of advantageous legislation. By others, superior in number and authority, they have been regarded as unsound. Inasmuch as they involve an international coinage union between all civilized countries and could be put to the experiment only on a scale involving immeasurable risks, the overwhelming judgment has been that they were out of the question. Here, however, our amateurs and empirics are in hot haste to make the experiments, without any coinage convention, or with the coöperation of only a few and the less important nations, that is to say under circumstances which even the most extreme bimetallists condemn as ruinous.

It must be observed then that there lies back of all this popular discussion a scientific and technical question of great delicacy. I might even say that it is a speculative question, or a question in speculative economics, for we have no experience of an international coinage union, or of a concurrent circulation, of the metals. We have to imagine the state of things proposed and reason _a priori_ as to what must be the result. There is a postulate to all these schemes which has never been expressed and never been discussed, but which is assumed to be true. It has two different forms: (1) A concurrent circulation of gold and silver may be established in any country: (2) A concurrent circulation of gold and silver may be established by a coinage union of all civilized nations. These postulates, or we may say this postulate, for the latter includes the former, I have now to bring in question. If the science of money teaches that there cannot be a concurrent circulation of the metals, then the schemes which I have referred to are all condemned. The question, moreover, has won such an immediate and practical significance in the country that it is no longer a subject for academical discussion amongst economists, about whom opinions may differ without importance.

The Senate of the United States has just passed a bill containing the following provision: