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Morgan, W. Scott. History of the Wheel and Alliance and the Impending Revolution . Ft. Scott, KS: J.H. Rice & Sons, 1891. [format: book], [genre: history; narrative; proceedings]. Permission: Northern Illinois University
NEVER since the days when the doctrine that "kings ruled by divine right" prevailed, has there been a more stupendous fraud practiced upon an unwary people than the system of specie payments. To the end that specie payments might be resumed, the contraction act of 1866 was passed. In another chapter we have called the attention of the reader to some of the evils that followed. To say that specie resumption is right, is but to say that contraction, with all the evils that follow in its train, is right. To say that gold and silver is the only material fit for money is to propagate a stupendous lie; is to say that there is gold and silver enough in the country to furnish an adequate amount of circulating medium. The strongest advocates of the system will not for a moment claim this. They hold that it can and should be used as a basis, and that experience has demonstrated that one dollar in coin is a sufficient basis for three dollars in paper; that the foundation can be much smaller than the structure without danger of toppling over. This very confession shows the utter fallacy of the whole system. There is to-day in the United States Treasury one hundred million dollars in coin as a basis for the three hundred and forty-six million dollars of greenbacks in circulation.
This was an assumption on the part of the specie basis advocates that the fools which might exist in this country were in the proportion of the amount of greenbacks
in circulation. In other words that about one-third of the people would take their paper money to the treasury to get coin for it. But the sequel proved that they were mistaken. Instead of presenting paper money for redemption, millions of dollars of gold and silver were deposited in the treasury, and gold and silver paper certificates taken in preference. These certificates, though not clothed with legal tender qualities, circulate and perform all the functions of money, for the very simple reason that the people are willing to receive them as such. The question might naturally arise, is it necessary to keep all this coin hoarded in the treasury for a contingency that is not at all likely to arise, and if it should arise the inadequacy of the coin to meet the demand would only be an additional proof of the utter fallacy of the system?
Is it necessary to keep hundreds of millions of dollars of a commodity (for such is gold and silver) locked up in the treasury, that has a commercial value in the markets of the world, and could be converted into other forms of property that would confer a blessing on society, and be an auxiliary to the Nation's prosperity? One of the greatest objects to be attained with regard to the circulating medium, is uniformity of volume. This would be impossible if gold and silver were the only money, or if the other money is made convertible into gold and silver. The volume of currency would then depend upon the output of the present existing mines, or the chances of discovering new ones. The fact that gold and silver are unfit to be the sole medium of exchange has frequently been indicated by the supporters of the metallic system. In 1849 when gold was discovered in large quantities in California, closely following rich discoveries in Australia, the capitalists of Europe became so alarmed at the rapidly increasing supply, and the consequent rise in prices, and reduced value of the stock of coin on hand, that they
talked seriously of, and in some countries did demonetize it, It will be remembered that the discovery of the Comstock lode and consequent increased output of silver had a like effect. Several countries of Europe demonetized it. In 1873 the United States, yielding to the "persuasion" of Ernest Seyd, who is said to have been sent over here by English capitalists with five hundred thousand dollars for that purpose, demonetized silver.
So great, however, was the public clamor against this act, that in 1876, Congress restored its legal tender quality, but restricted its coinage. It will at once be seen, by any intelligent mind, that with the ever varying circumstances governing the production of these metals, the chances of discovering new mines, or the failure of the old ones, together with the constant danger of demands for exportation to foreign countries, that it would be impossible to preserve a uniform volume of currency, or one relative at all times to the constant and rapidly increasing population and extended business of the country. "It is the limitation of the quantity of money, without any reference to the cost of its production, that regulates the value of each unit of money, whether fiat or metallic. In the case of fiat money the limitation is imposed by law. In the case of metallic money, it is imposed by nature. The effect of limitation upon the value of money is precisely the same in both instances. In the one case the limitation is regulated by the wisdom and justice of man; in the other it is regulated by the variable and uncertain obstacles which nature opposes to the production of the metals. The value of money, of whatever kind, is measured by the cost of obtaining it after it has been produced, and not by the cost of its production, and this value is indicated by the general range of prices.
"The calculations of those who contract to pay money are always based upon the general command which
units of property and services have over units of money, and their expectations of meeting their contracts when they mature, rest upon their confidence in a steady continuance of that command and upon their knowledge that the services of property which they control will, at that rating, be sufficient. But such contracts can only be satisfied legally by the delivery of the specified number of the units of money.
"If in the meantime, population, commodities, and commerce should increase, and the stock of money should not increase in a corresponding ratio, or, if commerce and population remain stationary, and a large portion of the money in existence when the contract was made were struck down by legislation, the equilibrium between money and other things would be disturbed. The money unit would rise in value and prices would fall. The debtor would find that it required more labor and more property to meet the terms than it would to meet the equity of his contract. But the terms, not the equity, must be met, and the debtor must submit to the partial or entire confiscation of his property."
It would be hard indeed to state the case plainer than is done in the above extract from the report of the Silver Commission. From the facts therein set forth we may deduct the following conclusions:
1st. That the value of money is regulated by the limitation of its quantity and not by the cost of its production.
2nd. The quantity is regulated, either by law, fixing its volume, or by nature, governing the production of the material of which it is made.
3rd. The wisdom of man can fix the volume and regulate the value of paper money; but the quantity of gold and silver money depends solely on the ever varying and uncertain obstacles which nature opposes to the production
of those metals. Our position may now be briefly stated as follows:
1st. The limitation of the volume of currency regulates its value.
2nd. To preserve steady values and prices a uniform volume of money is indispensable.
3rd. The volume of gold and silver cannot be regulated by law or the wisdom of man.
4th. The law can issue and the wisdom of man regulate the volume of paper money.
5th. Paper money is better than gold and silver.
It would seem to be a settled fact that the volume of money governs the price of property and the products of labor. Experience has demonstrated it and authorities emphasize it. If the volume of money in circulation is diminished, prices fall and industry languishes. If the volume is increased, prosperity and general activity follows. It would very naturally occur, then, that governments should have the power over the currency, to fix the limits of its circulation by legal enactments, keeping pace with the advance of civilization, growth of business and population, and the consequent and ever increasing demand for a greater circulating medium. For this purpose Congress was given power over the currency. The great Daniel Webster, whose ability as a statesman won for him the title of "constitutional expounder," said in his great speech in 1837:
"The great interests of this country, the producing cause of all prosperity, is labor, labor, labor. The government was made to protect this industry; to give it both encouragement and security; to that very end, with this precise object in view, power was given to Congress over the currency and over the money system of the country." The justice and wisdom of this will at once be seen in the fact, that it looks more reasonable that a
body of representatives, elected every two years by the people, and responsible to them for their actions, sworn to do their duty and to support the constitution, would be better calculated to guard the interests of their countrymen by fixing and preserving a uniform volume of currency, in sufficient quantities to give life and activity to trade, commerce and the productive industries, and preserve a steady range of prices, than would a body of bankers and capitalists, who are responsible to no one, and whose every interest and inducement would lead them to do as they have done, increase the value of the money which they own by limiting its supply.
For the very reason that gold and silver does not, nor ever has existed in sufficient quantities to furnish an adequate amount of circulating medium, or an honest basis for a sufficient quantity of paper money, is one of the most potent arguments of the fallacy of the specie basis system with its twin brothers, Contraction and Resumption.
For a government to issue bonds to purchase coin as a basis for its own money, and thus entail an interest burden upon a people who possess real estate and other property enough to form a sound basis for twenty times the amount of money needed, is a fraud and inconsistency entirely out of keeping with the advanced intelligence and civilization of the latter part of the nineteenth century.
As far as gold and silver will circulate with an absolute, irredeemable, fiat paper money, well and good. Let everything issued as money be endowed with every attribute of money, and the purchasing and debt paying power will be as great and uniform in one as the other. We are not unaware of the fact that, in advocating the theory of fiat paper money, we are treading on grounds, every inch of which is, and has been for ages, vigorously contested. We feel certain, however, in being abundantly able to sustain our position. The fiat money theory is not
a new one; it is as old as civilization itself. It is the only method, and the only means that will ever break up the monopoly of a few bullionists, who, by controlling the material of which money is made, are enabled to furnish and control the currency also. It is the David of the people going forth to battle with the Goliath of Shylock.
Under our present laws, and controlled by a syndicate of bankers, money is our master. Issued and controlled by the people, it becomes their servant. Controlled by men whose only principle is greed, and who are moved by a spirit of avarice, it robs the producer by fixing a price upon his products. Controlled by wise legislation it becomes a lever in the hands of the people to increase prosperity; the key to unlock the resources of wealth. There are many reasons why an absolute, irredeemable paper money would take precedence to, and establish a more perfect, just and equitable system of exchange than metals whose production is too limited to furnish money in sufficient quantities to fill the necessary and wholesome demands of trade. We cannot, however, in the limited space of this chapter, enter into an exhaustive discussion of this subject. We shall content ourselves with a brief indication of some of the advantages which a money, composed of a material possessing comparatively no intrinsic value, would have as a circulating medium. As we have previously remarked, a variety of materials have, at different periods of the world's history, been used as money. The early inhabitants of America used wampum and cocoanuts, and the colony of Massachusetts, at one time, made wampum a legal tender for the payment of debts.
Britain at an early day had two kinds of money; "living money" and "dead money," or slaves and cattle, and land and metal.
"In the fourteenth century the Chinese used a money coined from the inner bark of the mulberry tree."
"At an early day deer and coon skins were a legal tender in Illinois."
"In 1574, large amounts of paste-board money were coined in Holland."
"Rome used both wooden and leather money about 700 B. C."
"Tin money was used by Dionysius I, tyrant of Syracuse."
The Spaniards used leather money as late as 1575.
Carthage and France also used leather money.
"Seneca tells us that Spartacus created money of leather, fixing the stamp to denote its value and by what authority issued."
"Homer never speaks of gold or silver money. He values the armour of Glaucus at 100 oxen and that of Damocles at nine oxen."
Jonathan Duncan, speaking of the exportation of coin as one of the obstacles to its use as money, said:
"One of the earliest plans adopted to surmount the difficulty was the creation of a national currency in each independent State, for internal trade; and its distinctive characteristic was the total absence of intrinsic value, WHICH EFFCTUALLY PREVENTED ITS EXPORTATION.
"This invention greatly economized the use of the precious metals, allowing them to be wholly employed in discharging the balance of foreign trade."
Lycurgus, the great "law giver," made money of iron, but deprived it of its intrinsic value by destroying its maleability.
Plato recommended two kinds of money in every Nation, one for home and one for foreign trade. He says: "A coin, for the purpose of domestic exchange and to pay wages to hired servants and settlers, for which purpose I affirm it must have value among the members of the State, but no value to the rest of the world." For visiting and
purposes of exchange in other States he proposed a coin having intrinsic or commercial value.
Xenophon says: "That most of the States of Greece have money which is not current except in their own territory."
It will be observed that according to the above authorities, gold and silver, having a high commercial value throughout the world, has at all times been subject to export from one country to another, thus creating a scarcity of money in the country from which it is exported. To overcome this obstacle, money composed of material having but little or no intrinsic value, has been resorted to in all ages of the world. That the recent improvements in the manufacture of paper, embracing lightness with firmness in texture, presents a material that fills all the requirements of a non-exportable currency is a well settled fact.
"Every requirement of a perfect system can be met more nearly and more certainly by paper money than by any other ever devised. Not paper money based upon gold, silver, or any fluctuating commodity, whose measure it should be, nor upon a promise of commodities, near or remote, definite or indefinite, of governments, or banks; nor like the French assignats, based upon lands; nor fastened to gold or silver by a chain sure to snap when the metals are wanted; nor convertible into bonds and thereby offering the bribe of interest for its withdrawal from circulation; nor of any use to its owner except when parted with; nor capable of yielding profit except when employed in the production and distribution of wealth; but an absolute money, whose value, conferred by the sovereign authority, and regulated by a pre-arranged and perfected system, and not by the passions and caprices of the hour, would rest impregnably on functions essential to civilization and progress.
"Such money would be portable, divisable, distinguishable and difficult of imitation. The power to regulate its value by fixing its volume would always be present because inherent in the people. It is produced without cost and destructible without loss to society. While the bullion value of gold and silver adds nothing to its value and uses as money, the world is deprived of its value as a commodity by affixing the stamp and creating money out of it. Society must bear this loss without compensation."
Thomas Law, an eminent writer on finance, gives seven reasons why a paper circulation is better than coin:
"1st. Because it can be regulated so as to always bear a proper proportion to the industry and property of a nation, whereas, coin, being an article of commerce fluctuates in quantity.
"2nd. Because the precious metals disappear, being hoarded or exported in times of difficulty when most required, whereas, the paper always remains.
"3rd. Because, as the value of fixed capital and the interest of money depends upon the quantity of money, it is requisite to have a sufficient quantity without excess.
"4th. Because paper money is more cheaply and rapidly transmitted from one quarter of the country to the other than specie.
"5th. Because by this facility of remittance it lowers the rate of internal exchange.
"6th. Because paper money permits the exportation of bullion for advantageous mercantile transactions without derangement of home trade and interchange of labor for money.
"7th. Because paper money increases manufactures and improvements and exports bring back specie."
"A currency would be in its most perfect state if it consisted wholly of paper money of the same value as gold and silver. It is impossible, however, to attain to this
degree of perfection so long as paper money is made convertible into coin, as such convertibility renders paper of the same value as metallic money, but it is defective inasmuch as it does not banish the latter from circulation, and does not save, therefore, the whole expense of a metallic currency." McCulloch's Political Economy.
The great English financial writer, Thomas Atwood, says: "Contrast all the dangers, the changes, the fluctuations, the unjust ruin, the unjust aggrandizement attendant upon a metallic standard, with the security, the equality of prices and of values, the exemption from unjust losses, and from unjust gains, and the general stability of all profits and of all prosperity, which a non-convertible paper currency presents, self existent, self dependent, liable to no foreign actions, entirely under our own control; contracting, expanding, or remaining fixed according as the wants and exigencies of the community may require a non-convertible paper currency presents every element of national security and happiness without the possibility of injuring any one class of the community. By it we may forever insure a wholesome range of prices, neither too high nor too low, but securing at all times the due reward of industry to the productive classes, and the due distribution of mutual rights and interests among all other classes of the community. I have reflected upon the subject for twenty years; I have continually turned it in my mind in a thousand shapes and ways, and I still most firmly retain the opinion above expressed. And one important fact I ought to mention, in confirmation of this opinion: I have never met one single individual who has had leisure and disposition to turn his thoughts to this subject who has not fully adopted the same opinion in the end."
"If these arguments are wrong, is it not strange that no one has ever been found to point out their error? All the experience that we have had in Great Britain confirms
their truth. Every shock that our circulating system has sustained from the year 1791 to this day can be directly traced to the pressure of the metallic standard. In 1816 and 1819 the very foundations of society were giving way. In 1826 the whole circulating system was suddenly falling upon our heads. In every instance the paper saved us, and nothing but the paper."
In the United States Senate, in 1838, Henry Clay said:
"Whatever a government agrees to receive in payment of public dues, is a medium of exchange is money, current money, no matter what its form may be."
John C. Calhoun, the idol of Southern Democracy, and the most eminent statesman of which that party can boast, said: "It appears to me after bestowing the best reflections I can give on the subject, that no convertible paper, that is, whose credit rests on a promise to pay, is suitable for currency. On the other hand, a national currency, while it would greatly facilitate its financial operations, would cost next to nothing, but would give to every branch of industry great advantages. And I now undertake to affirm, without the least fear that I can be answered, that a paper issued by the government, with but the single promise to receive it for dues, would form a perfect paper circulation, which could not be abused by the government; that it would be as uniform in value as metals, and I shall be able to prove that it is within the constitution and power of Congress to provide such a paper, according to the most rigid rule of construing the constitution."
Thomas Jefferson said:
"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 and silver."
Notwithstanding this array of evidence from the eminent authorities above quoted there will still remain some
" "doubting Thomas'." Men whose business consists principally of politics, and whose success, like that of the physicians and pharmacists who surround their prescriptions with the mystery of Latin names and abbreviations, depends on keeping the people in ignorance of the true inwardness of their party's doings, will sneeringly ask a score of unreasonable questions, and present a number of imaginary obstacles in the way of adopting an absolute paper money. To the mind of the party slave who would wear a collar with his bosses' name thereon, these questions and objections might appear plausible and even "smart" and "shrewd." Anticipating that the reader of this work, and the student of this branch of political economy will be subjected to such an ordeal, the author deems this chapter incomplete without subjecting some of these fancied objections to the light of reason.
One of the most common among these is, "This money will be worthless because irredemable." And it is often sneeringly remarked by the objector, "If I was to give you my note without any promise to pay what would it be worth?" The sweet, innocent, child-like ignorance displayed by some self-important and bigoted "cross-roads" politician, in asking this question, should commend him to our careful consideration. In the first place we are not aware that the note of the aforesaid politician would be worth anything with his "promise to pay" inscribed thereon. If he is not more honest in his business transactions than he is in politics, we are inclined to be a little doubtful of his paper.
In the second place, the premises are not well taken; as in the one case the giver of the "note" would be the government possessing absolute power, and clothing it with some of the attributes of money, while in the other case the giver of the note would be an individual forming the insignificant one sixtieth of a millionth part
of the government. Lastly, the whole proposition is incorrect; for it is not proposed to issue notes at all, and call them money; but to issue a full-fledged money in itself. Suppose that we subject gold and silver to the same test. Who redeems it? "Oh, it redeems itself," says the metalist. Let us see how far this is true. Government takes 412 ½ grains of silver, worth in the market 75 or 80 cents, according to its fluctuations, puts a "buzzard" and the words, "UNITED STATES OF AMERICA, ONE DOLLAR" on one side, and the head of a man and "E. PLURIBUS UNUM" and the date on the other, and it passes as current money for one hundred cents in every State and Territory in the Union. The difference between the bullion value, or 80 cents, and the legal value, or 100 cents, are fiat; yes, fiat money. Now, who redeems that? It is redeemed in the same manner that it is intended that all money shall be redeemed, in the products and the labor of the country. A gold dollar is redeemed in wheat, corn, flour, beef, pork, prints, woolen goods, or anything its owner wishes to purchase. It is all the redemption it needs. A paper dollar is redeemed every time it passes from one individual to another in exchange for products or labor. It is redeemed in whatever the owner receives for it. It is all the redemption it needs. In such redemption and the payment of debts it has performed the functions of money, and that is all the use society has for it. Everybody is satisfied with it but the bullionist. To redeem it in coin and retire it from circulation brings us to the bond system in order to obtain the coin; to contraction and resumption with all their attendant evils.
Another common objection to a paper money is: "That it will not circulate in foreign countries."
This is one of the reasons why an absolute paper currency forms one of the most perfect circulating mediums. We are not engaged in making money for other nations;
never have been, nor do we wish to be. Neither do we desire that foreign nations shall have anything to do with controlling our own circulating medium. For the very reason that this money will not circulate abroad, we will always have it at home. It is like a good dog, the closer it stays at home the more useful it is.
By being able to keep our currency at home, we can preserve a uniform volume of circulating medium. If it would go abroad the volume of money would be subject to fluctuation contraction and expansion. This is one of the greatest objections to gold and silver. It leaves us when we most need it. It goes abroad, not as money however, but as bullion, as a commodity; and like beef and pork or any other commodity, goes for what it is worth by weight, and at the market price then ruling. If the American traveler wishes to visit on the Continent, he does not provide himself with the money of his own country, but deposits his money of whatever form it may be paper in an American bank, and takes a draft or letters of credit on some foreign bank. When he arrives in England he must provide himself with the money of that country, pounds, shillings and pence. In France he must have napoleans and francs; in Germany, the thaler and florin; in Sweden, the ducat and rix dollar; in Russia, the rouble. And so in almost every country or nation, he must have a different form of money.
There is no such thing as "money of the world," as we frequently hear it applied to gold and silver. These metals are recognized by the different nations as a commodity, and a material out of which money is made, and as having a commercial value in the markets of the world, but the money of one nation is seldom recognized as the money of some other nation. If there is any such thing as God's money it is not one that is calculated to rob labor of its just reward, and bring starvation and ruin to millions
of people. This "so-called" God's money is the same that the Savior upset in the temple of Jerusalem and drove its owners, whom he very strongly intimated were a set of thieves, out of the house of God. "But if foreign countries will not receive this money how will we pay our foreign debts, and buy foreign goods?" In answer to the first question we would say, that unless we go abroad and negotiate loans, debts due to foreigners are payable in our own country, in its lawful money, unless otherwise stipulated in the contract. Does any one suppose that the bonds of the United States, purchased by foreign capitalists during and after the war, were paid for in gold and silver coin? The foreign capitalist, like his American "cousin," exchanged his coin for greenbacks at about fifty cents on the dollar, and exchanged these for United States bonds at their face value, and these bonds were payable at the treasury of the United States.
But suppose we agree to pay coin to foreign capitalists. The use of paper money does not exclude gold and silver; nor does it shut down our mines in the production of these metals, which can be used, not only in paying our debts, but in carrying on trade and commerce with foreign Nations. We would produce as much gold and silver from our mines if we had a paper circulating medium, as we should if we had a mixed currency, or one exclusively of coin. "Plenty as leaves on the trees." "Give it to everybody that wants it" "Back up your cart and get what you want." "It would be so cheap that you could not pack enough on a mule to buy a farm." "It would take $500 of it to buy a breakfast." "Print the debts to death," and many other wild expressions similar to the above are frequently indulged in by the "shrewd politician," and the subsidized press, for the purpose of alarming the people and to prevent them from doing anything that will destroy the business of those who have always had a monopoly on the
issue of the money, and by controlling it held an iron grip on the industries of the country.
The wildest dreamer of financial reform has never advocated a greater amount of circulating medium per capita than existed at the close of the war. At that time the circulation was exclusively of paper. There was comparatively no coin in sight. When the war broke out gold and silver, cowardly as its owners, slunk out of sight and hid itself until the danger was over. Then, it emerged from its hiding place, and, with an audacity that would have put Annanias to shame, it not only claimed the honor of suppressing the rebellion, but insisted that it had a right to crucify the real Savior of the country the greenback. In 1861, when the slogan of war sounded, the government called upon the bankers for aid. They furnished $150,000,000 in coin and then every mother's son of them suspended specie payment. In the hour of the greatest need the capitalists proved traitors to their country. The system of specie basis failed, as it always does at the time something is expected of it. Then the government smote the rock of public credit. In the face of the opposition of the bullionists, a paper money, crippled with a fatal exception, and only partially clothed with the functions of money, sprang forth and gave new life and vigor to the arm of the nation. It equipped armies, built ships, and supplied provisions and clothing to the men who had gone to the front. It opened up the workshops, built new factories and supplied the munitions of war to a million of men in the field. When the war was over it permeated every State and Territory and helped to restore the waste and exhausted resources of the nation. Did any one say, at that time, that it was as "plenty as leaves," or that it "took $500 of it to buy a breakfast?"
As an organization we only demand a "volume sufficient for the business of the country." We have a respect
for the worm that crawls on the ground, only stinging when trod upon; for the dandy whose only glory is to dress well and act a fool generally; for the idiot who is not idiot enough to be placed in some charitable institution, but too much of an idiot to be of any use in the world, to himself or anybody else; but for the self-willed, self-imposed, self-important, blatant demagogue, whose brains would rattle in the hollow of the hair of a horse's tail, and whose soul is so small that a thousand of them could dance upon the point of a cambric needle, we have an unutterable, inexpressible contempt, that is perhaps a sin to manifest and a greater sin to attempt to conceal. Such are those who indulge in the above and like expressions. Absolutely ignorant of the first principles of finance, or with an utter and totally depraved disregard for truth and justice, they would sacrifice the interests of their country and their fellow-man upon the altar of their own unholy ambition and avarice.
"It is unconstitutional."
We are pleased to remark that in answering the above objection, we are dealing with a more respectable class than the one we have just paid our respects to.
From the early days of the Republic to the first years succeeding the close of the late war between the States, it seems to have been a mooted question among some of our ablest statesmen, as to whether the issue of legal tender paper money was constitutional. The object of the constitution is clearly stated in the preamble, which says: "We, the people of the United Slates, in order to form a more perfect Union, establish justice, insure domestic tranquility, provide for the common defense, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution of the United States of America."
Section eight of the Constitution gives Congress the power "to coin money and regulate the value thereof."
We have already seen that the value of money was regulated by its volume; and, that upon the volume of money depends the prices of property, of the products of labor, and of labor itself; that the body that is empowered to "regulate the value," must also possess the power to control its volume; and that this power should be always present and exercised with wisdom and justice. In connection with this point, the great Daniel Webster has said:
"By denying the states all power of emitting bills of credit, or making anything but gold and silver a tender in payment of debts, the whole control over the standard of value and medium of payment is vested in the general government. Delegating this grant to Congress and prohibiting it to the States, a just reading of the provisions is this:
"Congress shall have power to coin money, emit bills of credit AND MAKE ANYTHING BESIDES GOLD AND SILVER A LEGAL TENDER IN THE PAYMENT OF DEBTS."
Thomas Jefferson said:
"And so the nation may continue to issue its bills as far as its wants require and the limits of its circulation will admit."
John C. Calhoun said:
"I shall be able to prove that it is within the constitution and power of Congress to provide such a paper, according to the most rigid rule of construing the constitution."
But whatever doubts may have existed in the past with regard to the constitutionality of the issue of paper money, they are now put to rest by the decision of the Supreme Court of the United States. The celebrated cases of Parker vs. Davis and Knox vs. Lee were consolidated and brought before the court At the request of the
court the constitutionality of the legal tender acts was to be fully argued and finally settled by the court, so that the question should be forever put at rest. The best legal talent of the country was present, representing the bullionists of both Europe and America. The greatest efforts possible were made by capitalists to secure an adverse decision against the legal tender qualities of the greenback currency. We give below extracts from the opinions of the court.
"Before we can hold the legal tender acts unconstitutional we must be convinced they were not appropriate means, or means conducive to the execution of any or all of the powers of Congress or the government, not appropriate in any degree (for we are not judges of that degree of appropriation), or we must hold they were prohibited." 12 Wallace U. S. Supreme Court Reports, page 509.
"The degree of the necessity for any Congressional enactment, or the relative degree of its appropriateness, is for consideration in Congress, not here. When the law is not prohibited, and is really calculated to effect any of the objects intrusted to the government, to undertake here to inquire into the degree of its necessity, would be to pass the line which circumscribes the judicial department, and to tread on legislative ground." 12 Wallace, 542.
"The constitution was intended to frame a government, as distinguished from a league or compact, a government supreme, in some particulars, over States and people. It was designed to provide the same currency having a uniform legal value in all the States. It was for this reason the power to coin money and regulate its value was conferred upon the Federal Government, while the same power to emit bills of credit was withheld from the States. The States can no longer declare what shall be money, or regulate its value. Whatever power there is over the currency is vested in Congress. If the power to declare what is money is not in Congress it is annihilated. 12 Wallace, 545.
"And generally when one of such powers was expressly
denied to the State only, it was for the purpose of rendering the federal power more complete and exclusive; how sensible, then, its framers must have been that emergencies might arise when the precious metals might prove inadequate to the necessities of the government and the demands of the people when it is remembered that paper money was almost exclusively in use in the States as a medium of exchange, and when the great evil sought to be remedied was the want of uniformity in the current value of money, we say, that the gift of power to coin money and regulate the value thereof, was understood as conveying general power over the currency and which had belonged to the States and which they had surrendered." 12 Wallace, 546.
"The issue of the circulation commonly known as greenbacks was necessary and was constitutional. They were necessary to the payment of the army and navy, and to all the purposes for which the government uses money. The banks had suspended specie payment, and the government was reduced to the alternative of using their notes or issuing its own." 12 Wallace, 377.
"The two houses of Congress, the President who signed the bill, and fifteen State courts, being all but one that has passed upon the question, have expressed their belief in the constitutionality in these (legal tender) laws." Justice Miller 8 Wallace 338.
"It is not doubted that the power to establish a standard of value by which all other values may be measured, or, in other words, to determine what shall be lawful money and a legal tender, is in its nature and necessity a government power. It is in all countries exercised by the government." Chief Justice Chase, 8 Wallace 615.
"If it be held by this court that Congress has no constitutional power, under any circumstances, or in any emergency to make treasury notes a legal tender for the payment of all debts, a power confessedly possessed by every independent sovereignty other than the United States, the government is without those means of self preservation which, all must admit, may in certain contingencies
become indispensable, even if they were not when the acts of Congress now called in question were enacted." 12 Wallace 829.
It will be seen that the question involved in the above decisions, was the constitutional right and power of Congress to say what should be the lawful money of the country, and to issue paper money. The decision of the Court is not, as often claimed, exclusively as a war measure. The court held that the necessity of issuing a paper currency and making it a legal tender was not for it to decide, but for Congress. And if Congress thought the necessity existed it had a perfect right under the constitution to issue paper money and declare it a legal tender., The following is conclusive upon this point:
"There are times when the exigencies of the State rightly absorb all subordinate considerations of private interest, convenience, or feeling; and at such times the temporary though compulsory acceptance by a private individual of the government credit, in lieu of the debtor's obligation to pay, is one of the slightest forms in which the necessary burdens of society can be sustained.
"When the ordinary currency disappears, as it often does in time of war, when business begins to stagnate and general bankruptcy is imminent, then the government must have power at the same time to renovate its own resources and to revive the drooping energies of the nation BY SUPPLYING IT WITH A CIRCULATING MEDIUM. What that medium shall be, what its character and qualities, will depend upon the greatness of the exigency and the degree of promptitude which it demands. THESE ARE LEGISLATIVE QUESTIONS. The heart of the nation must not be crushed out. The people must be aided to pay their debts and meet their obligations. The debtor interest of the country represents its bone and sinew, and must be encouraged to pursue its avocations. If relief were not afforded universal bankruptcy would ensue, and industry would be stopped, and government would be paralyzed in the paralysis of the people." 12 Wallace, 464,465.
There are other objections of minor importance sometimes urged by the advocates of the metallic system which we have not time, nor do we think it necessary for the purposes of this chapter, to consider. We have clearly demonstrated to the reader that, to retain and depend solely on a metallic standard, with paper convertible into coin, that we must have, from time to time, periods of contraction, expansion and resumption, with periods of financial distress, wide-spread ruin, and general bankruptcy that have ever been the results of that system; that by the adoption of the non-convertible, absolute paper system, and the issue of a sufficient quantity to satisfy the business demands of the country, and that volume to be kept uniform with, and relative to the growth of the population and business of the country, would be a remedy against the present prevailing financial distress, and against its probable recurrence in the future.
We believe, however, that this chapter would be incomplete, were we to omit the history of the position of the two great political parties in existence in the government to-day upon this all important question. As has already been seen, contraction was a measure preparatory to resumption, for which a majority of the representatives of both parties voted in 1866.
We now come to a consideration of the position of the two old parties on the Resumption Act of 1875, and on the principle of resumption in general. The Act of 1875, was passed by a strictly party vote; the Republicans voting for, while the Democrats voted against it. Both parties, however, favored the resumption of specie payments. The objection which the Democratic party had to the act of January 14, 1875, was that it fixed the time to resume about four years ahead, or January 1, 1879.
As it has been, and is still claimed by many Democratic speakers in the West and South, that the Democratic
party is in favor of greenbacks and opposed to resumption, it will be necessary to call attention to the record of the party while this matter was pending. It has already been shown that all the Democrats, except one, voted for the act to "contract the currency with a view to as early a resumption of specie payments as possible." This act was a preparatory measure to resumption.
The next place we find them on record is in the act of February 4th, 1868, which reads as follows:
"That from and after the passage of this act, the authority of the Secretary of the Treasury to make any reduction of the currency, by retiring' or canceling United States notes, shall be, and is hereby suspended."
This act passed the House, December 7th, 1867, by 127 yeas to 32 nays, only 24 of those voting yea were Democrats.
In 1872 they declared in their platform that:
"A speedy return to specie payments is demanded alike by the highest considerations of commercial morality and honest government." Plank 8 of platform.
Again, in 1876, we find them declaring as follows:
"We denounce the failure for all these eleven years of peace, to make good the promise of the legal tender notes, which are a changing standard of value in the hands of the people, and the non-payment of which, is a disregard of the plighted faith of the nation. * * * We denounce the financial imbecility and immorality of that party which, during eleven years of peace, has made no advance towards resumption; no preparation for resumption; but, instead, has obstructed resumption. * * And, while annually professing to intend a speedy return to specie payments, has annually enacted fresh hindrances thereto. As such a hindrance we denounce the resumption clause of the act of 1875, and we hereby demand its repeal."
Now, we are getting to the bottom of it. They denounce the resumption clause of the act of 1875.
What is that? Here we have it:
"And, on and after the first day of January, Anno Domini, eighteen hundred and seventy-nine, the Secretary of the Treasury shall, etc., etc."
The time was the only point of difference. The Republicans wanted resumption to take place in 1879; the Democrats wanted it sooner. That this is true, it is only necessary to call attention to the fact that at the Democratic convention, held in St. Louis in 1876, Mr. Ewing, of Ohio, offered as a substitute for that part of the platform which "demanded the repeal of the resumption clause of the act of 1875," one which "demanded the repeal of the whole resumption act forthwith."
Mr. Ewing's substitute was voted down by a majority of 550 to 219. Thus we see that both parties were in favor of contraction, and both were in favor of resumption, and the final destruction of greenbacks.
In further support of this fact, note the following:
"The retirement from circulation of the United States notes, with the capacity of legal tender in private contracts, is a step to be taken in our progress towards a safe and stable currency, which should be accepted as the policy and the duty of the government and the interest and security of the people in it." President Hayes' Message, December 2d, 1879.
"It would seem, therefore, that now and during the maintenance of resumption, it (the legal tender clause), is a useless and objectionable assertion of power, which Congress might now repeal on the grounds of expediency alone." John Sherman's Report, 1879, page 12.
"Resolved, That from and after the passage of this resolution, the treasury notes of the United States shall be
receivable for all dues to the United States, excepting duties on imports, and shall not be otherwise a legal tender." Senator Bayard's Resolution, Dec. 3d, 1879.
"I am now for resumption, and the Democratic candidates for president and vice-president want the same kind of resumption that I do a real and not a sham resumption. We want the resumption intended to be secured by the resolution I offered in the Senate last December. * * * It was a resolution right on the ancient pathway of constitutional Democracy, withdrawing from the treasury notes when paid and redeemed at the treasury, any power of enforced legal tender when re-issued." Senator Bayard's New York Speech, September 23, 1880.
It will appear, from the above, that Hancock and English were in favor of destroying the greenback. Senator-Bayard was in a position that rendered him capable of knowing.
"It would be sound policy, therefore, for us to do our duty and wipe out the greenbacks. But whether we should succeed or fail, whether it is expedient or not, I would make the fight on this issue and on this line." Letter of Wade Hampton, December, 1879.
Had it not been for over 300,000 men who voted for Gen. Weaver of Iowa, in 1880, the greenback would perhaps, ere this, have been destroyed.
It was a manly protest against any further contraction. We call particular attention to the action of the National Democratic Convention at St. Louis in 1876, that nominated Samuel J. Tilden for president. We present the planks adopted by that convention to the consideration of Democratic speakers and editors who seek to convey the impression that the Democratic party is opposed to resumption. Is it not inconsistent to abuse the Republican party for doing everything in its power to bring about resumption
when their own party platform in 1876, denounces them as having made no "advance towards resumption, no preparation for resumption, but, instead, has obstructed resumption." They then denounced them because they had not resumed. They denounced the greenbacks or legal tender notes as a "changing standard of value in the hands of the people." It cannot be denied that Mr. Tilden was a representative Democrat. In him the party trusted as its great leader. From a letter written by Mr. Parke Godwin an intimate friend and supporter of Mr. Tilden in 1875, we are enabled to learn more clearly the position of the Democratic party and its illustrious leader upon the question of resumption. Mr. Godwin, speaking of the financial plank, as quoted from the Democratic platform, in 1876, says:
"It is proper to recall before we scrutinize the scope and meaning of these phrases that were stoutly opposed, both in committee and convention, by inflationist leaders. Whatever their real purport, these men saw in them a flat contradiction of their own schemes.
"General Ewing and Mr. Voorhees, who spoke for the minority, denounced them as a complete surrender to the hard-money theorists. The former, in order to obtain a partial recognition of his ways of thinking, moved a substitute proposing a repeal of the whole Resumption Act ‘forthwith’ " Mr. Dorsheimer of the majority of the committee, refused to accede to it, saying: "I propose right here to make a straight issue between hard and soft money. By that we stand or fall." He was sustained by the convention, and the substitute rejected by a vote of more than two and a half to one 550 to 219. The result was regarded as a decisive victory for the advocates of the sounder doctrines. I cannot doubt that such is the right interpretation of the result; for I discover that these
resolves are mainly a summary of the teachings of Gov. Tilden, to be found in his luminous messages to the New York Legislature, wherein he speaks in no ambiguous language. Governor Tilden was originally opposed to the issue of irredeemable notes, and counseled Secretary Chase against the expedient, which he averred would greatly enhance the cost of the war, and lead to the embarassments and disasters we have since experienced. When they were once issued he insisted that they should be held redeemable at all times in the interest-bearing obligations of the government, which Mr. Spaulding, the author of the Legal Tender Act, tells us was the original intention of its framers. At the close of the war, one of his grounds of quarrel with the party in power was, that it did not at once engage actively and efficiently in preparations for their redemption."
The above letter was endorsed by the National Democratic Committee and printed and circulated as a Democratic campaign document in the Tilden campaign of 1876.
In 1880 they declared for:
"Honest money. * * * consisting of gold and silver, and paper convertible into coin on demand."
It is useless to pursue this subject further. To the unprejudiced mind it must appear that both of the existing political parties are responsible for the present sad condition of the American laborer.
"To secure resumption of specie payments by the shrinkage of values has bankrupted two hundred thousand of the most enterprising business firms in this country. It has caused wide-spread stagnation of business and financial distress. It has caused forced sales of merchandise, of household goods and farming stocks, far below the cost of production and has caused, besides, various sacrifices of landed property. It has caused a general suspension
of labor, the only legitimate source of wealth, by which thousands of our most useful citizens are rendered destitute of the means of living, and reduced to extreme poverty and despair. It has created criminals and organized an army of tramps overflowing our prisons and alms-houses, and consequently increasing the burdens of taxation. Debts are inflated, while the means for paying debts are shrunk out of sight, all for the visionary hallucination of resumption of specie payments, which is only an idea and not a fact. Time is not long enough the recuperative energies of the American people are not strong enough for the next ten generations to outgrow the blighting effect of this attempted resumption, which, in any event, is a fallacy a fraud upon public credulity. The equalization of values may be effected, but to pay all individual and public dues in specie on demand is simply promulgating a monstrous lie. Resumption is a wide-spread a withering curse, and is full of dead men's bones. It is chargeable with more distress upon the American people, more moral degradation, the destruction of more property and the creation of more misery in this country during the past years than all the combined work of all the villians and felons of the civilized world, during the same period of time. Yet, boasted statesmen politicians and professed Christians, insist upon resumption and contraction, with their blighting curses in trying to effect that which has not, and can not be, resumption. To attempt which has only resulted in that which the country has been suffering from these many long years, of business disaster and financial ruin miseries for the many good times for the few."
Morgan, W. Scott. History of the Wheel and Alliance and the Impending Revolution . Ft. Scott, KS: J.H. Rice & Sons, 1891. [format: book], [genre: history; narrative; proceedings]. Permission: Northern Illinois University
Persistent link to this document: http://lincoln.lib.niu.edu/file.php?file=morgan.html