has aroused much discussion as to its effect on the public credit; and
the Senator from Ohio (Mr. Matthews) placed this phase of the subject
in the very forefront of the debate--insisting, prematurely and
illogically, I think, on a sort of judicial construction in advance, by
concurrent resolution, of a certain law in case that law should happen
to be passed by Congress. My own view on this question can be stated
very briefly. I believe the public creditor can afford to be paid in any
silver dollar that the United States can afford to coin and circulate.
We have forty thousand millions of property in this country, and a wise
self-interest will not permit us to overturn its relations by seeking
for an inferior dollar wherewith to settle the dues and demands of
any creditor. The question might be different from a merely selfish
stand-point if, on paying the dollar to the public creditor, it would
disappear after performing that function. But the trouble is that the
inferior dollar you pay the public creditor remains in circulation, to
the exclusion of the better dollar. That which you pay at home will stay
there; that which you send abroad will come back. The interest of the
public creditor is indissolubly bound up with the interest of the whole
people. Whatever affects him affects us all; and the evil that we might
inflict upon him by paying an inferior dollar would recoil upon us
with a vengeance as manifold as the aggregate wealth of the Republic
transcends the comparatively small limits of our bonded debt. And
remember that our aggregate wealth is always increasing, and our
bonded debt steadily growing less! If paid in a good silver dollar, the
bondholder has nothing to complain of. If paid in an inferior silver
dollar, he has the same grievance that will be uttered still more
plaintively by the holder of the legal-tender note and of the
national-bank bill, by the pensioner, by the day-laborer, and by the
countless host of the poor, whom we have with us always, and on whom
the most distressing effect of inferior money will be ultimately
precipitated.
But I must say, Mr. President, that the specific demand for the payment
of our bonds in gold coin and in nothing else, comes with an ill grace
from certain quarters. European criticism is levelled against us and
hard names are hurled at us across the ocean, for simply daring to state
that the letter of our law declares the bonds to be payable in standard
coin of July 14, 1870; expressly and explicitly declared so, and
declared so in the interest of the public creditor, and the declaration
inserted in the very body of the eight hundred million of bonds that
have been issued since that date. Beyond all doubt the silver dollar was
included in the standard coins of that public act. Payment at that time
would have been as acceptable and as undisputed in silver as in gold
dollars, for both were equally valuable in the European as well as in
the American market. Seven-eighths of all our bonds, owned out of the
country, are held in Germany and in Holland, and Germany has demonetized
silver and Holland has been forced thereby to suspend its coinage, since
the subjects of both powers purchased our securities. The German Empire,
the very year after we made our specific declaration for paying our
bonds in coin, passed a law destroying so far as lay in their power the
value of silver as money. I do not say that it was specially aimed at
this country, but it was passed regardless of its effect upon us, and
was followed, according to public and undenied statement, by a large
investment on the part of the German Government in our bonds, with a
view, it was understood, of holding them as a coin reserve for drawing
gold from us to aid in establishing their gold standard at home. Thus,
by one move the German Government destroyed, so far as lay in its power,
the then existing value of silver as money, enhanced consequently the
value of gold, and then got into position to draw gold from us at the
moment of their need, which would also be the moment of our own sorest
distress. I do not say that the German Government in these successive
steps did a single thing which it had not a perfect right to do, but I
do say that the subjects of that Empire have no right to complain of our
Government for the initial step which has impaired the value of one of
our standard coins. And the German Government by joining with us in
the remonetization of silver, can place that standard coin in its
old position and make it as easy for this Government to pay and as
profitable for their subjects to receive the one metal as the other.
* * * * *
The effect of paying the labor of this country in silver coin of full
value, as compared with the irredeemable paper or as compared even with
silver of inferior value, will make itself felt in a single generation
to the extent of tens of millions, perhaps hundreds of millions, in
the aggregate savings which represent consolidated capital. It is the
instinct of man from the savage to the scholar--developed in childhood
and remaining with age--to value the metals which in all tongues are
called precious. Excessive paper money leads to extravagance, to waste,
and to want, as we painfully witness on all sides to-day. And in the
midst of the proof of its demoralizing and destructive effect, we hear
it proclaimed in the Halls of Congress that "the people demand
cheap money." I deny it. I declare such a phrase to be a total
misapprehension, a total misinterpretation of the popular wish. The
people do not demand cheap money. They demand an abundance of good
money, which is an entirely different thing. They do not want a single
gold standard that will exclude silver and benefit those already rich.
They do not want an inferior silver standard that will drive out gold
and not help those already poor. They want both metals, in full value,
in equal honor, in what-ever abundance the bountiful earth will yield
them to the searching eye of science and to the hard hand of labor.
The two metals have existed side by side in harmonious, honorable
companionship as money, ever since intelligent trade was known among
men. It is well-nigh forty centuries since "Abraham weighed to Ephron
the silver which he had named in the audience of the sons of Heth--four
hundred shekels of silver--current money with the merchant." Since that
time nations have risen and fallen, races have disappeared, dialects
and languages have been forgotten, arts have been lost, treasures have
perished, continents have been discovered, islands have been sunk in the
sea, and through all these ages and through all these changes, silver
and gold have reigned supreme, as the representatives of value, as the
media of exchange. The dethronement of each has been attempted in turn,
and sometimes the dethronement of both; but always in vain. And we are
here to-day, deliberating anew over the problem which comes down to us
from Abraham's time: the weight of the silver that shall be "current
money with the merchant."
JOHN SHERMAN,
OF OHIO. (BORN 1823.)
ON SILVER COINAGE AND TREASURY NOTES;
UNITED STATES SENATE, JUNE 5, 1890.
I approach the discussion of this bill and the kindred bills and
amendments pending in the two Houses with unaffected diffidence. No
problem is submitted to us of equal importance and difficulty. Our
action will affect the value of all the property of the people of the
United States, and the wages of labor of every kind, and our trade and
commerce with all the world. In the consideration of such a question
we should not be controlled by previous opinions or bound by local
interests, but with the lights of experience and full knowledge of all
the complicated facts involved, give to the subject the best judgment
which imperfect human nature allows. With the wide diversity of opinion
that prevails, each of us must make concessions in order to secure such
a measure as will accomplish the objects sought for without impairing
the public credit or the general interests of our people. This is no
time for visionary theories of political economy. We must deal with
facts as we find them and not as we wish them. We must aim at results
based upon practical experience, for what has been probably will be. The
best prophet of the future is the past.
To know what measures ought to be adopted we should have a clear
conception of what we wish to accomplish. I believe a majority of
the Senate desire, first, to provide an increase of money to meet the
increasing wants of our rapidly growing country and population, and
to supply the reduction in our circulation caused by the retiring of
national-bank notes; second, to increase the market value of silver not
only in the United States but in the world, in the belief that this is
essential to the success of any measure proposed, and in the hope that
our efforts will advance silver to its legal ratio with gold, and induce
the great commercial nations to join with us in maintaining the legal
parity of the two metals, or in agreeing with us in a new ratio of their
relative value; and third, to secure a genuine bimetallic standard, one
that will not demonetize gold or cause it to be hoarded or exported, but
that will establish both gold and silver as standards of value not only
in the United States, but among all the civilized nations of the world.
Believing that these are the chief objects aimed at by us all, and that
we differ only as to the best means to obtain them, I will discuss
the pending propositions to test how far they tend, in my opinion, to
promote or defeat these obtects.
And, first, as to the amount of currency necessary to meet the wants of
the people.
* * * * *
It is a fact that there has been a constant increase of currency. It is
a fact which must be constantly borne in mind. If any evils now exist
such as have been so often stated, such as falling prices, increased
mortgages, contentions between capital and labor, decreasing value of
silver, increased relative value of gold, they must be attributed to
some other cause than our insufficient supply of circulation, for not
only has the circulation increased in these twelve years 80 per cent.,
while our population has only increased 36 per cent., but it has all
been maintained at the gold standard, which, it is plain, has been
greatly advanced in purchasing power. If the value of money is tested by
its amount, by numerals, according to the favorite theory of the Senator
from Nevada (Mr. Jones), then surely we ought to be on the high road
of prosperity, for these numerals have increased in twelve years from
$805,000,-000 to $1,405,000,000 in October last, and to $1,420,000,000
on the 1st of this month. This single fact disposes of the claim that
insufficient currency is the cause of the woes, real and imaginary, that
have been depicted, and compel us to look to other causes for the evils
complained of.
I admit that prices for agricultural productions have been abnormally
low, and that the farmers of the United States have suffered greatly
from this cause. But this depression of prices is easily accounted
for by the greatly increased amount of agricultural production, the
wonderful development of agricultural implements, the opening of vast
regions of new and fertile fields in the West, the reduced cost
of transportation, the doubling of the miles of railroads, and the
quadrupling capacity of railroads and steamboats for transportation, and
the new-fangled forms of trusts and combinations which monopolize nearly
all the productions of the farms and workshops of our country, reducing
the price to the producer and in some cases increasing the cost to the
consumer. All these causes cooperate to reduce prices of farm products.
No one of them can be traced to an insufficient currency, now larger in
amount in proportion to population than ever before in our history.
But to these causes of a domestic character must be added others, over
which we have no control. The same wonderful development of industry
has been going on in other parts of the globe. In Russia, especially in
Southern Russia, vast regions have been opened to the commerce of the
world. Railroads have been built, mines have been opened, exhaustless
supplies of petroleum have been found, and all these are competitors
with us in supplying the wants of Europe for food, metals, heat, and
light. India, with its teeming millions of poorly paid laborers, is
competing with our farmers, and their products are transported to market
over thousands of miles of railroads constructed by English capital,
or by swift steamers through the Red Sea and the Suez Canal, reaching
directly the people of Europe whom we formerly supplied with food. No
wonder, then, that our agriculture is depressed by low prices, caused by
competition with new rivals and agencies.
Any one who can overlook these causes and attribute low prices to a want
of domestic currency, that has increased and is increasing continually,
must be blind to the great forces that in recent times throughout the
world are tending by improved methods and modern inventions to lessen
the prices of all commodities.
These fluctuations depend upon the law of supply and demand, involving
facts too numerous to state, but rarely depending on the volume of money
in circulation. An increase of currency can have no effect to advance
prices unless we cheapen and degrade it by making it less valuable; and
if that is the intention now, the direct and honest way is to put
fewer grains of gold or silver in our dollar. This was the old way, by
clipping the coin, adding base metal.
If we want a cheaper dollar we have the clear constitutional right to put
in it 15 grains of gold instead of 23, or 300 grains of silver instead
of 412 1/2, but you have no power to say how many bushels of wheat the
new dollar shall buy. You can, if you choose, cheapen the dollar under
your power to coin money, and thus enable a debtor to pay his debts with
fewer grains of silver or gold, under the pretext that gold or silver
has risen in value, but in this way you would destroy all forms of
credit and make it impossible for nations or individuals to borrow money
for a period of time. It is a species of repudiation.
The best standard of value is one that measures for the longest period
its equivalent in other products. Its relative value may vary from time
to time. If it falls, the creditor loses; if it increases, the debtor
loses; and these changes are the chances of all trade and commerce and
all loaning and borrowing. The duty of the Government is performed when
it coins money and provides convenient credit representatives of
coin. The purchasing power of money for other commodities depends upon
changing conditions over which the Government has no control. Even its
power to issue paper money has been denied until recently, but this may
be considered as settled by the recent decisions of the Supreme Court
in the legal-tender cases. All that Congress ought to do is to provide
a sufficient amount of money, either of coin or its equivalent of paper
money, to meet the current wants of business. This it has done in the
twelve years last passed at a ratio of increase far in excess of any in
our previous history.
* * * * *
Under the law of February, 1878, the purchase of $2,000,000 worth of
silver bullion a month has by coinage produced annually an average of
nearly $3,000,000 a month for a period of twelve years, but this amount,
in view of the retirement of the bank notes, will not increase our
currency in proportion to our increase in population. If our present
currency is estimated at $1,400,000,000, and our population is
increasing at the ratio of 3 per cent. per annum, it would require
$42,000,000 increased circulation each year to keep pace with the
increase of population; but as the increase of population is accompanied
by a still greater ratio of increase of wealth and business, it was
thought that an immediate increase of circulation might be obtained by
larger pur chases of silver bullion to an amount sufficient to make
good the retirement of bank notes, and keep pace with the growth of
population. Assuming that $54,000,000 a year of additional circulation
is needed upon this basis, that amount is provided for in this bill by
the issue of Treasury notes in exchange for bullion at the market price.
I see no objection to this proposition, but believe that Treasury
notes based upon silver bullion purchased in this way will be as safe a
foundation for paper money as can be conceived.
Experience shows that silver coin will not circulate to any considerable
amount. Only about one silver dollar to each inhabitant is maintained
in circulation with all the efforts made by the Treasury Department,
but silver certificates, the representatives of this coin, pass current
without question, and are maintained at par in gold by being received
by the Government for all purposes and redeemed if called for. I do not
fear to give to these notes every sanction and value that the United
States can confer. I do not object to their being made a legal tender
for all debts, public or private. I believe that if they are to be
issued they ought to be issued as money, with all the sanction and
authority that the Government can possibly confer. While I believe the
amount to be issued is greater than is necessary, yet in view of the
retirement of bank notes I yielded my objections to the increase beyond
$4,000,000. As an expedient to provide increased circulation it is far
preferable to free coinage of silver or any proposition that has been
made to provide some other security than United States bonds for bank
circulation. I believe it will accomplish the first object proposed, a
gradual and steady increase of the current money of the country.
* * * * *
What then can we do to arrest the fall of silver and to advance its
market value? I know of but two expedients. One is to purchase bullion
in large quantities as the basis and security of Treasury notes, as
proposed by this bill. The other is to adopt the single standard of
silver, and take the chances for its rise or fall in the markets of the
world. I have already stated the probable results of the hoarding of
bullion. By purchasing in the open market our domestic production of
silver and hoarding it in the Treasury we withdraw so much from the
supply of the world, and thus maintain or increase the price of the
remaining silver production of the world. It is not idle in our vaults,
but is represented by certificates in active circulation. Sixteen ounces
of silver bullion may not be worth one ounce of gold, still one dollar's
worth of silver bullion is worth one dollar of gold.
What will be the effect of the free coinage of silver? It is said that
it will at once advance silver to par with gold at the ratio of 16 to
1. I deny it. The attempt will bring us to the single standard of the
cheaper metal. When we advertise that we will buy all the silver of the
world at that ratio and pay in Treasury notes, our notes will have the
precise value of 371 1/2 grains of pure silver, but the silver will have
no higher value in the markets of the world. If, now, that amount of
silver can be purchased at 80 cents, then gold will be worth $1.25 in
the new standard. All labor, property, and commodities will advance in
nominal value, but their purchasing power in other commodities will not
increase. If you make the yard 30 inches long instead of 36 you must
purchase more yards for a coat or a dress, but do not lessen the cost
of the coat or the dress. You may by free coinage, by a species of
confiscation, reduce the burden of a debt, but you cannot change the
relative value of gold or silver, or any object of human desire. The
only result is to demonetize gold and to cause it to be hoarded or
exported. The cheaper metal fills the channels of circulation and the
dearer metal commands a premium.
If experience is needed to prove so plain an axiom we have it in our own
history. At the beginning of our National Government we fixed the value
of gold and silver as 1 to 15. Gold was undervalued and fled the country
to where an ounce of gold was worth 151 ounces of silver. Congress, in
1834, endeavored to rectify this by making the ratio 1 to 16, but by
this silver was undervalued. Sixteen ounces of silver were worth more
than 1 ounce of gold, and silver disappeared. Congress, in 1853, adopted
another expedient to secure the value of both metals as money. By
this expedient gold is the standard and silver the subsidiary coin,
containing confessedly silver of less value in the market than the gold
coin, but maintained at the parity of gold coin by the Government.
* * * * *
But it is said that those of us who demand the gold standard, or
paper money always equal to gold, are the representatives of capital,
money-changers, bondholders, Shylocks, who want to grind and oppress the
people. This kind of argument I hoped would never find its way into the
Senate Chamber. It is the cry of the demagogue, without the slightest
foundation. All these classes can take care of themselves. They are the
men who make their profits out of the depreciation of money. They can
mark up the price of their property to meet changing standards. They can
protect themselves by gold contracts. In proportion to their wealth
they have less money on hand than any other class. They have already
protected themselves to a great extent by converting the great body of
the securities in which they deal into gold bonds, and they hold the
gold of the country, which you cannot change in value. They are not, as
a rule, the creditors of the country.
The great creditors are savings-banks, insurance companies, widows and
orphans, and provident farmers, and business men on a small scale. The
great operators are the great borrowers and owe more than is due them.
Their credit is their capital and they need not have even money enough
to pay their rent.
But how will this change affect the great mass of our fellow-citizens
who depend upon their daily labor? A dollar to them means so much food,
clothing, and rent. If you cheapen the dollar it will buy less of
these. You may say they will get more dollars for their labor, but all
experience shows that labor and land are the last to feel the change in
monetary standards, and the same resistance will be made to an advance
of wages on the silver standard as on the gold standard, and when the
advance is won it will be found that the purchasing power of the new
dollar is less than the old. No principle of political economy is better
established than that the producing classes are the first to suffer and
the last to gain by monetary changes.
I might apply this argument to the farmer, the merchant, the
professional man, and to all classes except the speculator or the
debtor who wishes to lessen the burden of his obligations; but it is not
necessary.
It is sometimes said that all this is a false alarm, that our demand
for silver will absorb all that will be offered and bring it to par with
gold at the old ratio. I have no faith in such a miracle. If they really
thought so, many would lose their interest in the question. What they
want is a cheaper dollar that would pay debts easier. Others do not
want either silver or gold, but want numbers, numerals, the fruit of
the printing-press, to be fixed every year by Congress as we do an
appropriation bill.
Now, sir, I am willing to do all I can with safety even to taking great
risks to increase the value of silver to gold at the old ratio, and
to supply paper substitutes for both for circulation, but there is
one immutable, unchangeable, ever-existing condition, that the paper
substitute must always have the same purchasing power as gold and
silver coin, maintained at their legal ratio with each other. I feel a
conviction, as strong as the human mind can have, that the free coinage
of silver now by the United States will be a grave mistake and a
misfortune to all classes and conditions of our fellow-citizens. I
also have a hope and belief, but far from a certainty, that the measure
proposed for the purchase of silver bullion to a limited amount, and the
issue of Treasury notes for it, will bring silver and gold to the old
ratio, and will lead to an agreement with other commercial nations to
maintain the free coinage of both metals.
And now, sir, I want to state in conclusion, without any purpose to
bind myself to detail, that I will vote for any measure that will, in
my judgment, secure a genuine bimetallic standard--one that will
not demonetize gold or cause it to be hoarded or exported, but will
establish both silver and gold as common standards and maintain them at
a fixed ratio, not only in the United States but among all the nations
of the world. The principles adopted by the Acts of 1853 and 1875 have
been sustained by experience and should be adhered to. In pursuance of
them I would receive into the Treasury of the United States all the
gold and silver produced in our country at their market value, not at
a speculative or forced value, but at their value in the markets of the
world. And for the convenience of our people I would represent them by
Treasury notes to an amount not exceeding their cost. I would confer
upon these notes all the use, qualities, and attributes that we can
confer within our constitutional power, and support and maintain them
as money by coining the silver and gold as needed upon the present legal
ratios, and by a pledge of all the revenues of the Government and all
the wealth and credit of the United States.
And I would proclaim to all our readiness, by international negotiations
or treaties, to bring about an agreement among nations for common units
of value and of weights and measures for all the productions of the
world.