Before we begin, let me recall what was so fully3 presented last Wednesday night so that we can keep the mile posts constantly before us.
We then learned that during a hundred years, from 1690 to 1790, every one of the thirteen colonies experimented with "Bills of Credit," "Legal tender" "paper money," or "Greenbacks," as we call them, and that they issued fiat4 or "legal tender money" in almost every conceivable shape, form and way. They issued money against their own credit; they issued it against real estate mortgages, that is, in the form of loans secured by mortgages; they issued it against the personal credit of men in the form of ordinary loans; they issued it under the authority of the Continental5 Congress when the Colonies were all united. But in no case did any one of them, or all of them combined, escape the certain and universal fate of all such efforts. The order of events was always the same: (1) Emission6 of paper money; (2) depreciation7 of the issue; (3) disappearance8 of coin; (4) emission of more paper money to make up for the depreciation of that already issued; (5) defrauding9 of creditors11; (6) repudiation12; (7) cancelation; (8) reappearance of gold and silver; (9) resumption of species or coin payment; (10) a return of that degree of prosperity that the times and the conditions of the country justified13.
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Then came that review of the opinions of the framers of the Constitution and the vote in the Constitutional Convention to strike out the power to issue "bills of credit" by the general Government by the decisive vote of 9 to 4, backed up subsequently by the opinions of Thomas Jefferson and Daniel Webster.
As a result of the night's discussion, Mr. Lawyer was forced to admit the unwisdom of any such issue of legal tender money, and that in the light of the evidence, such an issue was without authority of law and unconstitutional.
Mr. Banker: Uncle Sam, I think it should be stated right here that every President of the United States and every successive Congress of the United States down to 1862 recognized the fact that it was the intention of the members of the Constitutional Convention "to shut and bar the door against any such issue." Here is what Horace White says: "During the war of 1812, the Government of the United States issued Treasury14 notes to the amount of $36,680,794. All except $3,392,994 were payable15 to order and payable at a definite time and bore interest at the rate of five and two-fifths per cent. About two-thirds of them were of denominations16 of $100 or more. They did not become a part of the circulating medium and were not intended to. They were paid to such creditors of the Government as were willing to receive them, and they were generally at par18 until specie payments were suspended in September, 1814. On November 12, 1814, Mr. Hall, a member of Congress from Georgia, introduced a bill into the House for an issue of Treasury notes to be legal tender. The House, by vote of 42 to 95, and without debate, refused to consider this bill. No other attempt was made to pass a legal tender bill until 1862.
"In the panic and crisis of 1837-43, during a portion of which time specie payments were suspended, the Government issued Treasury notes to the amount of $47,000,000 to meet deficiencies of revenue. All of these notes[Pg 175] bore interest, and were payable at a fixed19 time. They did not become a part of the circulating medium. A few were issued by the Secretary of the Treasury in 1842, bearing only a nominal20 rate of interest (one mill per $100 per annum). Such notes had not been contemplated21 by Congress. The Committee of Ways and Means of the House, to whom the subject was referred, reported that the Secretary had exceeded his authority, but Congress took no action on the report. It was the opinion of the Committee that these notes were 'Bills of Credit' within the meaning of the Constitution, and that Congress had no power to issue 'Bills of Credit.' In 1847, during the war with Mexico, Treasury notes to the amount of $26,122,100 were issued. They bore interest at the rate of five and two-fifths and six per cent. They did not enter into the circulation, and were not intended to. The foregoing issues of interest bearing Treasury notes were merely Government loans, of which the securities were in small denominations and had only short periods to run.
"When specie payments were suspended in 1814, and again in 1837, silver and small change disappeared because it was worth more per dollar than the bank notes in circulation. On both occasions private notes and tickets or less denomination17 that $1.00, and copper22 coins were issued and put in circulation by bridge, ferry, and turnpike companies and by tradesmen and manufacturers. One hundred and sixty-four varieties of private copper coin of the period of 1837 have been preserved in numismatic collections. Most of them bore the names of the issuers who promised to redeem23 them.
"Prior to the Civil War, the fiscal24 operations of the Government were transacted25 exclusively with coin, by its own officers, without the intervention26 of banks."
Mr. Merchant: Now it seems to me an interesting question why after maintaining this policy for more than seventy years from 1789 to 1862, a fundamentally different view was taken in 1862.
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Mr. Lawyer: I think I can answer that question, if you will allow me. You see, I have been looking this matter up since our last discussion, when you fellows knocked me out, and I am now loaded for bear myself.
Salmon27 P. Chase, Secretary of the Treasury, probably knew as little about finance as any man of his great ability could. He did not seem to be able to think in the terms of economics at all. When the war broke out he happened to do the natural thing by first going to the bankers of New York, Philadelphia and Boston, and making loans amounting to one hundred and fifty million dollars. Though prior to that time the Secretary of the Treasury had had no authority to deposit the Government money in the banks, Congress then authorized28 him to do so, and he was enabled to leave it in the banks until he wanted it; but he did not know enough to do that even. He required the banks to pay the gold into the Treasury at New York at the rate of $5,000,000 per week. Fortunately, the public creditors knew more about this question than he did, or had more confidence in the country than he seemed to have; and so when they received the gold they immediately returned it to the banks. Chase's utter incapacity to deal with the question in his report as Secretary of the Treasury in the fall of 1861, and a threatened war with Great Britain, growing out of the Trent affair, so shocked public confidence that by January 1, 1862, our national finances were in a state of complete and utter collapse29, and the consequence was that specie payments were suspended. I do not see how anyone can fail to conclude, after a careful study of the situation, that had Chase allowed the bankers to finance the war, we should have fared very much better than we did. We should probably have saved thirty-three per cent of the cost of the war, or approximately one billion dollars ($1,000,000,000), the total cost of the war being three billion two hundred million ($3,200,000,000).
Mr. Banker: I agree with you absolutely, Mr. Lawyer, Chase seemed to be as unfit to run the Treasury[Pg 177] Department, as a fish is to run a foot race. If he had allowed James Gallatin, Moses Taylor and George S. Coe, three great New York bankers, who arranged the first loan to formulate30 a financial policy for him, the war could undoubtedly31 have been carried on without issuing greenbacks, or any "legal tender money." But after specie payments had been suspended, the situation was certainly critical, and became more difficult to manage. However, there were those who thought, and I agree with them, that it was never necessary at any time, even then to resort to "legal tender money," or greenbacks.
Mr. Farmer: How do you think it could have been avoided? How do you think James Gallatin, Moses Taylor and George S. Coe would have provided the money for carrying on the war?
Mr. Banker: By selling the bonds of the Government upon the best terms possible, as to rates and interest and time, and by such a system of taxation32, as would help produce the necessary means for prosecuting33 the war. These bankers had already furnished one hundred and fifty million dollars ($150,000,000), and stood ready to go on and finance the war as they certainly could have done, if they had been permitted to do so.
When they, in August, 1861, arranged to furnish the first $150,000,000, the banks of New York, Philadelphia and Boston held gold amounting to $63,200,000, and on December 7th, they held practically the same amount, or $58,100,000, although they had already furnished $100,000,000 of the $150,000,000 they had loaned. However, Chase was both ignorant and obstinate34 and the result was a crisis in our national affairs.
Mr. Lawyer: That is the fact, and as you said a moment ago even then there were those, and they were among the greatest of our public men, who were convinced that it was unwise, dangerous, unconstitutional and unnecessary to issue "legal tender money," or greenbacks, as they are called. Just hear what some of them[Pg 178] said. Justin S. Morrell used this language in the House of Representatives: "If this paper money is a war measure, it is not waged against the enemy, but one that may well make him grin with delight. I would as soon provide Chinese wooden guns for the army, as paper money alone for the Treasury.
"What is it that we most need? Clearly we lack money, and wish to inspire our own people with that confidence that will induce them to lend the requisite35 amount. But the very first step we propose is one to destroy whatever of confidence yet remains36 among those who have a dollar to lend. We proclaim by an engraved37 advertisement—to be forced into the pockets of every man by the fiat of the Government—that we will hereafter liquidate38 all of our debts with paper only....
"I object to this bill on the ground of its utter impolicy. I admit that from the contracts entered into—many of which are now due—I regret have not been paid as promptly39 as they deserve to be, and from the heavy monthly disbursements to our armies, that the Government can flood the country with even $150,000,000 of paper dollars. But from that amount, you would vastly increase the cost of carrying on the war; prices would go up and the addition we should pile upon our national debt would prove that it might have been even wiser to have burned our paper dollars before they were issued; the inflation of the currency would be inevitable40....
"It will be conceded that the power is no where contained in the letter of the Constitution, and that, in all our history since the adoption41 of the Constitution, it has never been exercised.... By making paper a legal tender, no more specie will be seen, except through offers of rewards to draw it from its hiding places, until we emerge from our present difficulties, and not for an indefinite period perhaps, thereafter. The $300,000,000 of specie said to be in the country, though I think there is not quite so much, will be hoarded42 and remain useless and[Pg 179] idle for the rest of the war. I am for keeping this, the vital fluid of commerce, in healthy, active circulation."
Charles Sumner used this language in the United States Senate: "Is there not bad faith toward creditors who are compelled to receive what is due to them in a depreciated43 currency? Is there not bad faith toward all abroad who, putting trust in our integrity, national and personal, have sent their money to this country, in gold or its equivalent? And, surely, just in proportion as this is so, you cannot doubt that we shall suffer alike in character and resources; for what resource is greater to a nation, or to an individual, than a character for integrity?... Is it necessary to incur44 all the unquestionable evils of inconvertible paper, forced into circulation by an Act of Congress—to suffer the stain upon our national faith—to bear the stigma47 of a seeming repudiation—to lose for the present that credit which in itself is a treasury—and to teach debtors49 everywhere that contracts may be varied50 at the will of the stronger? Surely there is much in these inquiries51 which may make us pause. If our country were poor or feeble, without population, and without resources, if it were already drained by a long war, if the enemy had succeeded in depriving us of the means of livelihood52, then we should not even pause. But our country is rich and powerful, with a numerous population, busy, honest and determined53, and with unparalleled resources of all kinds, agricultural, mineral, industrial and commercial; it is yet undrained by the war in which we are engaged; nor has the enemy succeeded in depriving us of any of the means of livelihood. It is hard—very hard—to think that such a country, so powerful, so rich and so beloved, should be compelled to adopt the policy of even questionable45 propriety54."
James A. Bayard, of Delaware, used this language: "The thing is to my mind so palpable a violation55 of the Federal Constitution, that I doubt whether in any Court of Justice in this country, having a decent regard for its respectability, you can possibly except that this bill, which[Pg 180] you now pass, will not, whenever the question is presented judicially56, receive its condemnation57 as unconstitutional, and void in this clause."
Roscoe Conklin used this language in the House: "I propose to assign my reasons briefly58 for voting against the attempt by legislation to make paper a legal tender. The proposition is a new one, no precedent59 can be found in its favor; no suggestion of the existence of such a power can be found in the legislative60 history of the country; and I submit to my colleague as a lawyer, the proposition that this amounts to affirmative authority of the highest kind against it. Had such a power lurked61 in the Constitution as construed62 by those who ordained63 and administered it, we should find it so recorded. The occasion for resorting to it, or at least referring to it, has, we know, repeatedly arisen, and had such a power existed, it would have been recognized and acted on. It is hardly too much to say, therefore, that the uniform and universal judgment64 of statesmen, jurists and lawyers has denied the constitutional right of Congress to make paper a legal tender for debts to any extent whatever....
"It will, of course, proclaim throughout the country a saturnalia of fraud, a carnival65 for rogues66. Every agent, attorney, treasurer67, trustee, guardian68, executor, administrator69, consignee70, commission merchant, and every debtor48 of a fiduciary71 character, who has received for others money, hard money, worth 100 cents on the dollar, will forever release himself from liability by buying up for that knavish72 purpose, at its depreciated value, the spurious which we shall have put afloat. Everybody will do it, except those who are more honest than the American Congress advises them to be. Think of Savings73 Banks, entrusted74 with enormous aggregates75 of the pittances76 of the poor, the hungry and the homeless, the stranger, the needle woman, the widow and the orphan77; and we are arranging for a robbery of 10 per cent, if not of 50 per cent, of the entire amount, and that by a con[Pg 181]trivance so new, as never to have been discovered under the administrations of Monroe, Adams or James Buchanan....
"Such a step, if it should ever be taken by a Government, should be taken when everything else has failed, and the last extremity78 has been reached. It is the last expedient79 to which kings and nations can resort."
William Pitt Fessenden, of Maine, used this language:
"With regard to the particular bill now before the Senate, we all know that it was resorted to as a temporary measure, not in the beginning, but in consequence of the necessities of the treasury, arising from a greater expenditure80 than the Secretary could have imagined, and arising from the necessary delay with reference to other measures. Can it be said that a measure like the one now pending81 before the Senate and the country is a measure of a day or an hour? Why, what does it propose? It proposes something utterly82 unknown in this government from its foundation; a resort to a measure of doubtful constitutionality, to say the least of it, which has always been denounced as ruinous to the credit of any government, which has recourse to it; a measure, too, about which opinions in the community, as perhaps they never have been divided upon any other subject; a measure which, when it has been tried by other countries, as it often has been, has always proved a disastrous83 failure....
"Everybody who has spoken on this question, I believe without an exception—there may have been one or two—but all the opinions I have heard expressed, agree in this: that only with extreme reluctance84, only with fear and trembling as to the consequences, can we have recourse to a measure like this of making our paper a legal tender in the payment of debt....
"A measure of this kind certainly cannot increase confidence in the ability, or the integrity of the country. It can make us no better than we are today, so far as the foundation of all public credit is concerned.
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"Next, in my judgment it is a confession85 of bankruptcy86. We begin and go out to the country with the declaration that we are unable to pay or borrow, at the present time, and such a confession is not calculated to increase our credit.
"Again, say what you will, nobody can deny that it is bad faith. If it be necessary for the salvation87 of the Government, all considerations of this kind must yield; but to make the best of it it is bad faith, and encourages bad morality both in public and in private. Going to the extent that it does to say that notes thus issued shall be receivable in payment of all private obligations, however contracted, is in its very essence a wrong, for it compels one man to take from his neighbor in payment of a debt that which he would not otherwise receive, or be obliged to receive, and what is probably not full payment....
"Again, in my judgment it must inflict88 a stain upon national honor. We owe debts abroad. Money has been loaned to this country, and to the people of this country, in good faith....
"Again, it necessarily changes the values of all property. It is very well known that all over the world gold and silver are recognized as money, as currency; they are the measure of value. We change it here, what is the result? Inflation, subsequent depression, all the evils which follow from an inflated89 currency....
"Again, a stronger objection than all that I have said to this proposition—I am stating the objections which everybody must entertain, because I suppose these facts are palpable—is that the loss is to fall most heavily upon the poor. I believe it never was disputed, it cannot be in the light of experience, that those who are injured most by an inflated currency are the laboringmen, the poor.... The poor laborer91 suffers in the first place more than all; then small capitalists, if I may so call them; and the rich capitalist, last of all. Such is the necessary result and consequence always of this system."
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Thaddeus Stevens used this language in the House:
"This bill is a measure of necessity, not of choice. No one would willingly issue paper currency, not redeemable92 on demand and make it a legal tender. It is never desirable to part from that circulating medium which by the common consent of civilized93 nations forms the standard of value. But it is not a fearful measure, and when rendered necessary by exigencies94, it ought to produce no alarm."
John Sherman used this language:
"I agree that this measure can only be justified on the ground of necessity. I do believe there is a pressing necessity that these demand notes should be made a legal tender, if we want to avoid the evils of a depreciated, dishonored paper currency."
E.G. Spalding, the reputed father of the legal tender act, used these words:
"These are extraordinary times, and extraordinary measures must be resorted to, in order to save our Government, and preserve our nationality....
"This being accomplished95 I will be among the first to agitate96 a speedy return to specie payment, and all measures that are calculated to preserve the honor and dignity of the government in time of peace."
Mr. Merchant: From what transpired97 there was undoubtedly an overwhelming opinion that there was a necessity, and therefore the issue of United States Notes was justified. No one will deny this power, if placed upon that ground, that the issuance of the Notes was essential to the preservation98 of the life of the Nation. But certainly that reason no longer exists, and therefore we should now act as we would then have acted, if we had not believed that it was a national necessity.
The measure for the first issue of $150,000,000 of United States Notes was passed and signed by the President February 25, 1862. The second issue of $150,000,000 came very soon, on July 11, 1862. The third issue of $150,000,000 followed on March 3, 1863, making a to[Pg 184]tal issue in about a year of $450,000,000. If the result of the war had been doubtful and long continued, God only knows what the results would have been, as these United States Notes came very near reaching the zero point, as it was. The astounding99 fact, as the result of having practiced the law of making something out of nothing, followed in 1868 when one of the great political parties in the hot pursuit of political success declared in its platform that it was in favor of paying off the national debt with the I.O.U.'s of the Government or United States Notes. Of course, this action would have been the natural and necessary prelude100 to national repudiation.
Mr. Farmer: What I want to know is how much those greenbacks actually depreciated.
Mr. Banker: I have a sheet here furnished by the Government showing precisely101 what they were worth from February, 1862, to January 1, 1879, when we resumed specie payment, and began their current redemption in gold coin. It shows that they were worth 97 cents on the dollar in February, 1862, when the President signed the bill; in one year, or February 15, 1863, they were worth 60 cents on the dollar; and in a little more than a year afterwards, in July, 1864, they were worth only 35 cents on the dollar. That is, if you had bought a horse for $100 in January, 1862, and given a note due in July, 1864, you could have paid for the horse with $35.
You will perceive that every creditor10 was defrauded103 going down hill until you struck the bottom on that July day in 1864, when it took $2.85 of United States Notes to buy $1.00 of gold coin, and you defrauded every debtor climbing up that long hill from that July day in 1864, when the United States Notes were worth 35 cents, until January 1, 1879, when they became worth 100 cents. It took us just two years to go down the hill, and fifteen years to reach the top of the same hill, only to find the crater104 of a sleeping financial volcano beneath our feet; for if war clouds should now encompass105 us, or we should take one single step in the wrong direction, our National[Pg 185] Credit would again be shattered, and must fall into utter ruin.
Mr. Farmer: Well, it then came out just as those men said it would, didn't it?
Mr. Banker: Certainly, and I want to call your attention to another thing, and that is that the additional cost of the war, because of issuing United States Notes, was greatly increased precisely as they predicted it would be.
Mr. Farmer: Oh, yes, we must find out about that. You remember we investigated the cost of the greenbacks since the war, and that Mr. Banker then demonstrated to our entire satisfaction that the United States Government would have been better off by $339,984,222, if at the close of the war we had issued bonds, bearing 4 per cent, and taken up these United States Notes and paid them off. Now, it would be mighty106 interesting to know just how much the war cost because we issued these United States Notes, and went off the Gold Standard.
Mr. Lawyer: I have something here right on that point. Let me read it: In his work on Public Debts, Prof. H.C. Adams computes107 the extra cost of the war to the tax payers in consequence of the depreciated currency at $850,000,000. And Mr. Wesley Hill, in the "Journal of Political Economy," March, 1897, computes the net cost of the war, due to this cause at $528,000,000. Now to be fair and take the average of these two estimates or $689,000,000, and add the cost of meeting greenback redemption since the war, or $339,984,222, we have $1,028,984,222, or about one-third of the cost of the war which, as I told you a while ago, was three billion two hundred million dollars, proving everything that was said by those who were opposed to issuing the greenbacks.
Mr. Manufacturer: I beg your pardon, sir, except one thing, Mr. Lawyer. According to the decisions of the Supreme108 Court, up-to-date, and that is, that they are constitutional. You remember, of course, that the question of the constitutionality of the Legal Tender quality[Pg 186] of the United States Notes has been before the United States Supreme Court three different times.
This question came up in the case of Hepburn vs. Griswold, December, 1869, and was held by five judges against three, the Court then consisting of eight judges, the opinion of the Court being delivered by Salmon P. Chase, himself, who was then Chief Justice, "that the making of the Notes, or Bills of Credit, a legal tender in payment of pre-existing debts, is not a means appropriate, plainly adapted, or really calculated to carry into effect any power vested in Congress; is inconsistent with the spirit of the Constitution, and is prohibited by the Constitution."
Mr. Farmer: Well, this man Chase, who was then Chief Justice, was Secretary of the Treasury, and favored the issuance of these same United States Notes, didn't he?
Mr. Lawyer: Yes, he is the same person. But you must remember that he was a politician in the one case, and a Chief Justice in the other. Possibly, I should have said a statesman in the first place, but Thomas B. Reed said that a statesman was a dead politician, and probably, you might say, according to his theory, that Chase is a statesman now.
Chase also held that the clause in the Acts of 1862 and 1863, which makes United States Notes legal tender in payment of all debts, public and private, so far as it applies to debts contracted before the passage of these Acts, is unwarranted by the Constitution: "The legal tender quality," Chase said, "was valuable only for the purpose of dishonesty, every honest purpose was answered as well without it."
Just one year afterward102, in December, 1870, the question of the legal tender of the United States Notes was again before the United States Supreme Court, which now consisted of nine members. In a decision of five against four, the above decision was reversed; one judge had died, and a new judge had been created, and these two joined the three formerly109 in favor of the Act.
[Pg 187]
Mr. Manufacturer: That looks a little as though General Grant wanted that kind of a decision, and had picked out the right kind of men to get it. Possibly it was more this decision than pressure of business that called for the creation of an additional member of the Court—was it not?
Mr. Lawyer: A great many have thought so, and that makes it look as though the Supreme Court does some legislating110 occasionally on its own account. However, the same question came up again in the case of Juillard vs. Greenman, and was decided111 the same way in March, 1884. It was then held that Congress has the constitutional power to make Treasury Notes of the United States a legal tender in payment of private debts in time of peace, as well as in time of war.
Justice Gray uses this language: "The power is incident to the power of borrowing money, and issuing Bills or Notes of the Government for money borrowed, of impressing upon those bills or notes, the quality of being a legal tender for the payment of private debts was a power universally understood to belong to sovereignty in Europe and America at the time of the framing and adoption of the Constitution of the United States." It appears that he based his decision upon this fact, but George Bancroft, the historian, reviewed this opinion in both its legal and historical aspects. And referring to the statement quoted above, this great historian declared it to be a stupendous error, and further affirmed that no such power was understood to belong to sovereignty in Europe at the time of the adoption of the Constitution, that is, in 1788.
Mr. Manufacturer: Well, I assume that we have another guess coming yet, haven't we? You know this same Court has guessed four times already on the Sherman Anti-Trust Law. In the Knight112 case, they declared that manufacturing was not and could not be considered as United States Commerce. Then came the Trans-Missouri case, then the Northern Security Co. case,[Pg 188] and last the Tobacco and Standard Oil cases, wherein this august body ran amuck113 the word "reasonable," although that very word was not in the Act at all, and although it had been impossible to get Congress to put it into the Act. But after all, is it not the very soul of the whole question? And is it not a fact that the Supreme Court of the United States ought to be constantly interpreting the Constitution of the United States in the light of changed conditions, and ever advancing public opinion?
Mr. Lawyer: It looks as though it might be well to give the Supreme Court one more chance to guess; they might possibly guess right next time. It is certainly "reasonable" to hope so, both in accordance with the Constitution, and in accordance with economic law, and in accordance with the experience of the whole world.
Mr. Merchant: Well, what would happen if, when the Supreme Court guesses again, it should guess right? Would the fact that the Court declared that Congress had no power to make paper money a legal tender render the greenbacks unfit for reserves, or illegal, as reserves?
Mr. Banker: Congress cannot, by law, make anything fit for reserves, which by economic law is unfit for reserves; but Congress may make anything, however unfit for reserves from an economic point of view, a legal reserve; they might make potatoes, wheat, corn, a bale of cotton, or a bundle of hay reserves. Therefore, although the Supreme Court should declare the Legal Tender Act unconstitutional, as it ought to, the United States Notes might still be held as reserves. The silver certificates and the gold certificates are both legal reserves, but neither of them are made legal tender by law, nor should they be, as nothing but gold, which is our standard of value, should be made legal tender. However, all of these barbarous forms of currency, United States Notes, Silver Certificates, bond-secured National Bank Notes should, and must be maintained upon a parity114 with gold, if possible, as they now are; because the faith and honor[Pg 189] of the Government is at stake. It is this very fact that is the source of our weakness from a national point of view, for the United States has no assets with which to meet these enormous liabilities. The United States has no resources, such as a bank has. It has nothing to sell in the way of grain, meat, cotton, or manufactured goods, or personal property of any kind. It has no capital, and no deposits, as our banks have, whose resources today exceed twenty-five billion dollars ($25,000,000,000). The individual deposits of the United States today exceed seventeen billion dollars ($17,000,000,000). Every month about three billion dollars' worth of notes come due. Compare this situation with the condition of the United States Treasury, and its ability to meet obligations. The Treasury does not control a single dollar's worth of assets, except the incoming taxes, which are more than pledged every year to meet the current demands arising from the expenses of the Government.
Mr. Lawyer: That is correct, as we learned upon a former evening. The United States is bound for more than one billion seven hundred million of demand liabilities, directly and indirectly115, and has only one hundred and fifty million of gold with which to meet them. All the Government has is the power to tax the property of the people. Of course it can anticipate this taxing power by selling bonds to meet an emergency; but let us imagine for a moment what may happen. This very night we may be looking out upon a perfectly116 clear and peaceful sky, and even so soon as tomorrow morning war clouds may curtain the rising sun, and before nightfall blacken the zenith of the heavens, and hang low and lowering the whole horizon round, presaging117 the most titanic118 and wicked struggle in blood that has ever stained the history of the human race. What do you think the effect would be upon our credit, with all these demand obligations outstanding? Would not that fact, coupled with a great war on our hands, impair119 our credit to a very great degree, compelling us to sell our bonds at[Pg 190] much lower prices, and at rates of interest far higher than could be possibly necessary, if there was no question whatever about our remaining steadfastly120 upon the Gold Standard instead of resorting to fiat paper money, as we did the very last time we had to meet a similar difficulty, or crisis?
Mr. Banker: There is no doubt whatever about the imperative121 necessity of our relieving the United States Treasury from the load it is now carrying, and placing the United States Government in the same position precisely that every state and municipality is in, so far as its credit is concerned; for the treasury of the Government, when filling its normal and proper functions, is no more fit to carry on the banking122 business than a man who may be wealthy in land, but has no cash assets; or a township, city, county or state is. And until the United States Government divests123 itself of these unnatural124 burdens, which it is unfitted to carry, we shall continue to suffer immeasurably whenever called upon to use our national credit to any great extent.
Let me explain this principle a little more fully so that we will all get it so thoroughly125 fixed in our minds that we shall not forget, or overlook it, as we go on. A farmer, however wealthy in lands and prosperous he may be, even though he may be worth half a million, or a million dollars, should not have demand obligations outstanding for any considerable amount because his resources are in lands or fixed investments. If he borrows to enable him to produce his crops, he should make his notes come due when he can meet them with the money he receives from the sale of his crops, and the balance, or his profits, will go to pay the interest on the mortgage, and possibly reduce it. So a township, a city, county, or state has no personal property worth considering to meet demand obligations. It has no liquid property of any kind, in fact, nor any resources whatever, except its power to tax the property within its jurisdiction126; and therefore, if it needs money, it may borrow to meet ex[Pg 191]penses; but it will make its notes come due when the taxes come in, precisely as the farmer times his notes' maturity127 with the sale of his crops. If a municipality has no demand obligations, and its bonded128 debt is low, it can borrow on its bonds at a low rate of interest. But if its demand obligations are enormous in proportion to its ready cash, high rates of interest, and possibly even bankruptcy, will always be staring it in the face. Granting or assuming that the United States Government has no power to issue legal tender, or fiat money, which is the greatest peril129 and most unmitigated curse that ever hung over any country, the United States Treasury is in precisely the same position, or situation, that the farmer is, whose property is in land; that the township, the city, the county and the state is in, and should always keep itself in a position where, in case of war, or any other great emergency, it could use its credit to the best possible advantage to itself; that is, to us, the people who must pay the taxes to liquidate whatever debt it may incur.
Mr. Farmer: I for one want to thank you for this explanation, for I have always had a sneaking130 idea that the United States Government owned everything, and was, as we say, the richest Government on earth, when it could not possibly mean anything except that the people who constitute the nation are the richest people on earth. Of course the Government doesn't own anything worth speaking of, and cannot take any property, without due process of law, that is, either through the process of taxation or through condemnation proceedings131, for public uses. It is perfectly plain to me now that the United States Government is no more fitted to carry on the banking business than Lorrain township, where I live, nor this city, this county, nor this state, except that it operates on a bigger scale, that's all. Do you know that's as clear as a pike staff to me now.
Mr. Manufacturer: Now, gentlemen, I want you to correct me if I don't state this credit question right, from[Pg 192] beginning to end; for I'm not sure that I have followed all that has been said with sufficient care to understand it perfectly. I appreciate the fact that we must grasp this question of credit, and comprehend it very clearly, if we are going to prepare a banking bill in which credit must play a most important part.
First: We have credit, which is the result of confidence and trust and gives us the right to demand payment.
Second: If credit is granted for the purpose of producing and distributing consumable commodities, it should be for a short period, proportioned to the time involved to complete the transaction.
Third: If credit is granted upon real estate, it should be for a long period, because the security is not readily convertible46 into cash.
Fourth: Credit granted to a Government, by purchasing its bonds, should be for a long period, unless for some temporary purpose.
Fifth: Neither real estate nor Government credit are a fit basis for currency, because neither is a fit security for a demand debt, nor cash credit, such as consumable commodities are.
Sixth: Government credit should never be used in the form of legal tender money, because it must itself be redeemed132 in coin. It never has been, and never can be its own redeemer, and is always subject to unlimited133 abuse which must necessarily result sooner or later in repudiation.
Mr. Banker: Mr. Manufacturer, you have summarized the discussion upon credit remarkably134 well, I think.
Mr. Merchant: So do I, and I am sure that we all understand what constitutes the difference between the right and wrong basis of demand obligation—convertibility or non-convertibility—quick assets or slow assets—the commercial fund and the investment fund. If we keep this thought steadily135 in view it will help us amazingly when[Pg 193] we come to draw a banking bill demanding the recognition of this fundamental distinction.
Mr. Lawyer: Gentlemen, don't you see that the very nature of things forces the recognition of this fundamental distinction, because you can keep your currency, if of the right kind, and all your credit used in the production and distribution of consumable commodities convertible into gold coin. But you cannot keep all the railroad bonds, all the municipal bonds and all the real estate of the country convertible into coin, practically on demand. That is impossible, and has been proved times without number, as we have already seen.
Mr. Laboringman: Mr. Lawyer, I have been sitting here with a very hazy136 kind of an idea about this credit matter, until this moment, but that last point you made seems to me to clinch137 things, for I saw in the "Evening Journal" last night that there was about one hundred and twenty-five billion dollars' worth of property in the United States. Of course you can't cash that all in tomorrow, nor next week, nor next month, nor next year even, and the fortunate thing about it is that the owners don't want to. When you come to think of it, there is a mighty small part of it that the people want to turn into cash each day.
Mr. Banker: Mr. Laboringman, that is the point exactly, and our problem is to make it absolutely sure that those who have a right, and want to demand cash, can always get it. This can only be accomplished by two things, adequate gold reserves to protect all current demands, and such assets or commercial credits as can be converted into gold, at once to meet any extraordinary demands—yes, even satisfy the panic-stricken mob, and carry the country through such crises as 1893 and 1907 without unnecessary loss, indeed, prevent the recurrence138 of any such experiences again.
Mr. Laboringman: Do you really think that that can be done? What a blessing139 that would be to labor90.
Mr. Banker: I certainly do believe it can be done;[Pg 194] indeed, I know it. But every banker must be compelled to do his part; that is, be ready at all times to carry his proper share of reserves against his deposits. One half of the bankers of this country cannot ride the other half, that is certain.
Mr. Merchant: Mr. Banker, what amount, or percentage of reserves do you think a banker should carry?
Mr. Farmer: Now, hold on, just a minute. You can't get into that subject, because I want to hear it, and I've got to go home right now.
Mr. Banker: Very well, gentlemen, we will put it off, if you say so, until next Wednesday night.
Uncle Sam: This is the second time you men have said that you would take up reserves. Indeed, it has been so long since you talked about taking it up before, that I was afraid that it would be overlooked entirely140, and yet nothing but the standard of value itself is more important. Now, mark this, we want the right kind of reserves, and plenty of them.
Good Night.
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1
patriotic
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| adj.爱国的，有爱国心的 | |
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mightily
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| ad.强烈地；非常地 | |
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fully
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| adv.完全地，全部地，彻底地；充分地 | |
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fiat
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| n.命令，法令，批准；vt.批准，颁布 | |
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continental
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| adj.大陆的，大陆性的，欧洲大陆的 | |
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emission
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| n.发出物，散发物；发出，散发 | |
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depreciation
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| n.价值低落，贬值，蔑视，贬低 | |
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disappearance
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| n.消失，消散，失踪 | |
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defrauding
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| v.诈取，骗取( defraud的现在分词 ) | |
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creditor
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| n.债仅人，债主，贷方 | |
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creditors
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| n.债权人，债主( creditor的名词复数 ) | |
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repudiation
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| n.拒绝；否认；断绝关系；抛弃 | |
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justified
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| a.正当的，有理的 | |
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treasury
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| n.宝库；国库，金库；文库 | |
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payable
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| adj.可付的，应付的，有利益的 | |
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denominations
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| n.宗派( denomination的名词复数 )；教派；面额；名称 | |
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denomination
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| n.命名，取名，(度量衡、货币等的)单位 | |
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par
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| n.标准，票面价值，平均数量；adj.票面的，平常的，标准的 | |
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fixed
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| adj.固定的，不变的，准备好的；(计算机)固定的 | |
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20
nominal
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| adj.名义上的；(金额、租金)微不足道的 | |
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contemplated
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| adj. 预期的 动词contemplate的过去分词形式 | |
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copper
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| n.铜；铜币；铜器；adj.铜(制)的；(紫)铜色的 | |
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redeem
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| v.买回，赎回，挽回，恢复，履行（诺言等） | |
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fiscal
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| adj.财政的，会计的，国库的，国库岁入的 | |
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transacted
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| v.办理（业务等）( transact的过去式和过去分词 )；交易，谈判 | |
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intervention
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| n.介入，干涉，干预 | |
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salmon
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| n.鲑，大马哈鱼，橙红色的 | |
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28
authorized
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| a.委任的，许可的 | |
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29
collapse
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| vi.累倒；昏倒；倒塌；塌陷 | |
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30
formulate
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| v.用公式表示；规划；设计；系统地阐述 | |
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31
undoubtedly
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| adv.确实地，无疑地 | |
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32
taxation
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| n.征税，税收，税金 | |
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33
prosecuting
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| 检举、告发某人( prosecute的现在分词 )； 对某人提起公诉； 继续从事（某事物）； 担任控方律师 | |
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34
obstinate
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| adj.顽固的，倔强的，不易屈服的，较难治愈的 | |
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35
requisite
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| adj.需要的，必不可少的；n.必需品 | |
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36
remains
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| n.剩余物，残留物；遗体，遗迹 | |
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37
engraved
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| v.在（硬物）上雕刻（字，画等）( engrave的过去式和过去分词 )；将某事物深深印在（记忆或头脑中） | |
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38
liquidate
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| v.偿付，清算，扫除；整理，破产 | |
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39
promptly
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| adv.及时地，敏捷地 | |
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40
inevitable
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| adj.不可避免的，必然发生的 | |
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41
adoption
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| n.采用，采纳，通过；收养 | |
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42
hoarded
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| v.积蓄并储藏（某物）( hoard的过去式和过去分词 ) | |
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43
depreciated
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| v.贬值，跌价，减价( depreciate的过去式和过去分词 )；贬低，蔑视，轻视 | |
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44
incur
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| vt.招致，蒙受，遭遇 | |
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45
questionable
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| adj.可疑的，有问题的 | |
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46
convertible
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| adj.可改变的，可交换，同意义的；n.有活动摺篷的汽车 | |
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47
stigma
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| n.耻辱，污名；(花的)柱头 | |
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48
debtor
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| n.借方，债务人 | |
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49
debtors
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| n.债务人，借方( debtor的名词复数 ) | |
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50
varied
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| adj.多样的，多变化的 | |
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51
inquiries
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| n.调查( inquiry的名词复数 )；疑问；探究；打听 | |
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52
livelihood
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| n.生计，谋生之道 | |
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53
determined
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| adj.坚定的；有决心的 | |
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54
propriety
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| n.正当行为；正当；适当 | |
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55
violation
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| n.违反(行为)，违背(行为)，侵犯 | |
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56
judicially
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| 依法判决地，公平地 | |
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57
condemnation
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| n.谴责; 定罪 | |
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58
briefly
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| adv.简单地，简短地 | |
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59
precedent
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| n.先例，前例；惯例；adj.在前的，在先的 | |
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60
legislative
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| n.立法机构，立法权；adj.立法的，有立法权的 | |
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61
lurked
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| vi.潜伏，埋伏（lurk的过去式与过去分词形式） | |
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62
construed
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| v.解释（陈述、行为等）( construe的过去式和过去分词 )；翻译，作句法分析 | |
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63
ordained
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| v.任命（某人）为牧师( ordain的过去式和过去分词 )；授予（某人）圣职；（上帝、法律等）命令；判定 | |
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64
judgment
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| n.审判；判断力，识别力，看法，意见 | |
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65
carnival
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| n.嘉年华会，狂欢，狂欢节，巡回表演 | |
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66
rogues
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| n.流氓( rogue的名词复数 )；无赖；调皮捣蛋的人；离群的野兽 | |
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67
treasurer
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| n.司库，财务主管 | |
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68
guardian
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| n.监护人；守卫者，保护者 | |
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69
administrator
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| n.经营管理者，行政官员 | |
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70
consignee
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| n.受托者，收件人，代销人；承销人；收货人 | |
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71
fiduciary
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| adj.受托的，信托的 | |
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72
knavish
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| adj.无赖（似）的，不正的；刁诈 | |
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73
savings
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| n.存款，储蓄 | |
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74
entrusted
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| v.委托，托付( entrust的过去式和过去分词 ) | |
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aggregates
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| 数( aggregate的名词复数 )； 总计； 骨料； 集料（可成混凝土或修路等用的） | |
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76
pittances
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| n.少量( pittance的名词复数 )；少许；微薄的工资；少量的收入 | |
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77
orphan
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| n.孤儿；adj.无父母的 | |
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78
extremity
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| n.末端，尽头；尽力；终极；极度 | |
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expedient
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| adj.有用的，有利的；n.紧急的办法，权宜之计 | |
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expenditure
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| n.(时间、劳力、金钱等)支出；使用，消耗 | |
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81
pending
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| prep.直到，等待…期间；adj.待定的；迫近的 | |
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82
utterly
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| adv.完全地，绝对地 | |
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83
disastrous
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| adj.灾难性的，造成灾害的；极坏的，很糟的 | |
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84
reluctance
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| n.厌恶，讨厌，勉强，不情愿 | |
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85
confession
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| n.自白，供认，承认 | |
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86
bankruptcy
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| n.破产；无偿付能力 | |
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87
salvation
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| n.（尤指基督）救世，超度，拯救，解困 | |
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88
inflict
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| vt.(on)把…强加给，使遭受，使承担 | |
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89
inflated
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| adj.（价格）飞涨的；（通货）膨胀的；言过其实的；充了气的v.使充气（于轮胎、气球等）( inflate的过去式和过去分词 )；（使）膨胀；（使）通货膨胀；物价上涨 | |
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90
labor
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| n.劳动，努力，工作，劳工；分娩；vi.劳动，努力，苦干；vt.详细分析；麻烦 | |
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laborer
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| n.劳动者，劳工 | |
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92
redeemable
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| 可赎回的，可补救的 | |
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93
civilized
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| a.有教养的，文雅的 | |
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exigencies
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| n.急切需要 | |
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95
accomplished
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| adj.有才艺的；有造诣的；达到了的 | |
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96
agitate
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| vi.(for,against)煽动，鼓动；vt.搅动 | |
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97
transpired
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| （事实，秘密等）被人知道( transpire的过去式和过去分词 )； 泄露； 显露； 发生 | |
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98
preservation
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| n.保护，维护，保存，保留，保持 | |
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astounding
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| adj.使人震惊的vt.使震惊，使大吃一惊astound的现在分词) | |
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100
prelude
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| n.序言，前兆，序曲 | |
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101
precisely
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| adv.恰好，正好，精确地，细致地 | |
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102
afterward
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| adv.后来；以后 | |
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103
defrauded
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| v.诈取，骗取( defraud的过去式和过去分词 ) | |
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crater
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| n.火山口，弹坑 | |
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105
encompass
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| vt.围绕，包围；包含，包括；完成 | |
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mighty
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| adj.强有力的；巨大的 | |
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107
computes
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| v.计算，估算( compute的第三人称单数 ) | |
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108
supreme
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| adj.极度的，最重要的；至高的，最高的 | |
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109
formerly
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| adv.从前，以前 | |
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legislating
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| v.立法，制定法律( legislate的现在分词 ) | |
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decided
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| adj.决定了的，坚决的；明显的，明确的 | |
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112
knight
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| n.骑士，武士；爵士 | |
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113
amuck
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| ad.狂乱地 | |
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114
parity
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| n.平价，等价，比价，对等 | |
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115
indirectly
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| adv.间接地，不直接了当地 | |
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perfectly
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| adv.完美地，无可非议地，彻底地 | |
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117
presaging
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| v.预示，预兆( presage的现在分词 ) | |
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118
titanic
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| adj.巨人的，庞大的，强大的 | |
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119
impair
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| v.损害，损伤；削弱，减少 | |
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120
steadfastly
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| adv.踏实地，不变地；岿然；坚定不渝 | |
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121
imperative
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| n.命令，需要；规则；祈使语气；adj.强制的；紧急的 | |
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122
banking
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| n.银行业，银行学，金融业 | |
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123
divests
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| v.剥夺( divest的第三人称单数 )；脱去（衣服）；2。从…取去…；1。（给某人）脱衣服 | |
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124
unnatural
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| adj.不自然的；反常的 | |
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125
thoroughly
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| adv.完全地，彻底地，十足地 | |
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126
jurisdiction
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| n.司法权，审判权，管辖权，控制权 | |
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maturity
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| n.成熟；完成；(支票、债券等)到期 | |
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bonded
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| n.有担保的，保税的，粘合的 | |
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129
peril
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| n.(严重的)危险；危险的事物 | |
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130
sneaking
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| a.秘密的，不公开的 | |
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131
proceedings
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| n.进程，过程，议程；诉讼(程序)；公报 | |
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132
redeemed
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| adj. 可赎回的，可救赎的 动词redeem的过去式和过去分词形式 | |
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133
unlimited
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| adj.无限的，不受控制的，无条件的 | |
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134
remarkably
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| ad.不同寻常地，相当地 | |
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135
steadily
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| adv.稳定地；不变地；持续地 | |
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136
hazy
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| adj.有薄雾的，朦胧的；不肯定的，模糊的 | |
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137
clinch
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| v.敲弯，钉牢；确定；扭住对方 [参]clench | |
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138
recurrence
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| n.复发，反复，重现 | |
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139
blessing
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| n.祈神赐福；祷告；祝福，祝愿 | |
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140
entirely
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| ad.全部地，完整地；完全地，彻底地 | |
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