THE MAINTENANCE OF A SOUND CURRENCY AND THE PUBLIC FAITH.
In 1873 the bubble of an irredeemable currency, inflated prices, and
wild speculation burst in the United States, and the era of universal
shrinkage, commercial collapse, and industrial stagnation began. The
financial condition of the government and the people at once became the
absorbing topic of public discussion, and for five years the questions
connected with the currency and the national credit were those which
most completely absorbed popular attention. Mr. Chandler's share in the
prolonged controversy over the financial problem was a conspicuous one;
he came into it equipped with clear ideas and a consistent record; he
contended for the causes of rational finance and public honesty without
wavering in the face of the strongest opposition, and without any
departure from sound doctrine; and he saw the courage and persistence
of those with whom he acted finally rewarded by the enlightenment of
the people, the restoration of a convertible currency, and the raising
of the credit of the United States to the highest standard. For obvious
reasons his record upon all the phases of "the financial question"
can be most satisfactorily treated in a single chapter. That record
will show that he began at a point to which many other public men
were brought only by years of education, and it well illustrates the
clearness of his conceptions of the principles underlying questions
connected with what may be called the practical departments of
statesmanship.
Not the least of the difficulties, which at the outset confronted
the administration of Abraham Lincoln, was the fact that the public
treasury was empty and the national credit impaired. In October, 1860,
the government had contracted a five per cent. loan of $7,000,000 at a
small premium; four months later, a six per cent. loan had been sold
with difficulty at about ninety cents on the dollar. It was true,
by way of offset, that the country was in a generally prosperous
condition. The commercial wrecks of 1857 had disappeared, crops were
abundant, and general business had become again remunerative. This was
an element of national strength, but it was not a quickly available
resource. War meant large immediate expenditure, for which the means
must be promptly provided. There was no time to create and organize
upon an extensive scale the machinery of direct taxation, and some
doubts were then felt as to whether the people would not grow restive
under any general imposition of new burdens. The entire stock of coin
in the North was estimated at but about $121,000,000, while the paper
money in existence was exclusively composed of the notes of state
banks organized under diverse and often insecure systems, and much
of it circulated only at a discount. This condition of the currency
created the fear that the rapid negotiation of large government loans
could not be accomplished without the serious derangement of the money
market; the withdrawal of considerable sums from circulation, even
temporarily, business men believed would be impossible without great
injury to domestic enterprise and commerce. All these circumstances
forced the government (which found itself facing absolutely without
preparation organized rebellion) to resort at once to the issue of a
national paper currency in the form of non-interest-bearing treasury
notes of small denominations. Congress, at its extra session in July,
1861, passed the necessary act for this purpose, and $50,000,000 of
these notes ($10,000,000 more were subsequently authorized) were placed
in circulation; originally they were made redeemable in coin on demand
at any United States sub-treasury, and thus violated none of the
established principles of sound finance. This expedient facilitated
the negotiation of loans, and provided "the sinews of war" for 1861.
But, when Congress met in December of that year, it had become plain
that the struggle would be of indefinite duration, and that past
expenditures would be greatly exceeded in the months to come. To add to
the embarrassments of the situation, at about this time the banks of
the North suspended specie payments, and the Treasury Department was
compelled as a matter of self-protection to also stop redeeming in coin
its own notes then outstanding. It was as a means of escape from this
emergency, that the first issue of greenbacks was authorized (by the
act of Feb. 25, 1862). These notes were not redeemable on demand, but
to secure their free circulation they were made a "legal tender" for
all purposes except the payment of duties and of the interest on the
public debt. The abandonment of the self-operating method of redemption
and the resort to the compulsion of the "legal tender" enactment, as
a means of keeping these notes in circulation, constituted a step
which the Thirty-seventh Congress took with extreme reluctance. A
small minority of its members resisted this measure to the last, but
what seemed to be the overshadowing necessities of the situation and
the earnest appeals of Secretary Chase finally forced the passage of
the law. Mr. Chandler was one of those who, without approving of the
principle of this legislation, still voted for it, on the ground that
it was essential to the public safety at that moment and justified
by the urgency of the situation. But he regarded it as a temporary
expedient, a mere plan for an emergency, and not as a permanent policy.
The first act authorized the issue of $150,000,000 of "greenbacks" and
directed the retiring of the $60,000,000 of treasury notes previously
paid out; this $150,000,000 Mr. Chandler believed it was possible to
so control and use as to avoid the evils inseparable from inflation.
But the proposition to double the amount of "greenbacks," which came
in less than half a year from the Treasury officials, he strenuously
opposed. On June 17, 1862, he offered this resolution in the Senate:
_Be it Resolved by the Senate and House of Representatives_, That
the amount of "legal tender" treasury notes authorized by law shall
never be increased.
On the following day he called up this resolution, and said:
The effect of the recommendation (to issue $300,000,000 of "legal
tender" notes) has been most disastrous. The mere recommendation,
without any action of Congress on the subject, has created such a
panic, and has so convinced the moneyed centers of the world that
we are to be flooded with this paper, that gold has risen in price
from two and three-quarters to seven per cent. premium. National
credit is precisely like individual credit. It is based, first,
on the ability to pay; and, second, upon the high and honorable
principle which would induce the payment of a liability. When the
proposition to issue treasury notes was first made, it was received
with great apprehension by Congress and by the nation.... There
was at that time a vacuum for $50,000,000 that must be filled from
some source.... I then believed that $100,000,000 was requisite,
and that $100,000,000 was enough. I believe so now. When you issue
$100,000,000 of currency you must either find a vacuum or you must
create one for it. A hundred millions in addition to the existing
circulation would at any time create great disturbance in the
financial condition of this country.... The moment you authorize
the issue of $300,000,000 your coin will rise to ten or twelve
per cent., and your notes will full to 90 or 85. The result will
be that the government will be paying just so much more for every
article it purchases than it would if you kept your circulating
notes at or about the value of coin.
Again, the moment you reduce the value of these notes, even
to the point at which they now stand, even to seven per cent.
discount, you drive out of circulation the coin of the country.
The temptation is too strong to be resisted to use something
else besides coin for change and for small circulation. Are we
to be reduced to a shin-plaster circulation, as is the case
to-day all through the South? That will be the result if you
force upon the country an amount of circulating notes beyond its
requirements.... I consider it a duty we owe to the country, a
duty we owe to ourselves, to proclaim that under no circumstances
shall a currency, irredeemable in coin, beyond the present issue of
$150,000,000, be thrust upon the money markets of the country.
But the pressure toward a reckless currency expansion was irresistible,
and the pending bill passed. Mr. Chandler's prophecies were promptly
verified, for the gold premium rose and the "shin-plaster currency"
made its appearance with but little delay. Moreover, these issues only
stimulated the thirst they were intended to quench, and the general
inflation of prices soon again produced an apparent scarcity of
currency. Early in 1863 a demand came from Mr. Chase for authority to
increase the "greenback" circulation to $400,000,000. Congress granted
this application, but Mr. Chandler opposed it, saying in the Senate:
When the first proposition was made to issue $150,000,000 of
treasury notes, I favored it; but when the proposition was made to
increase that to $300,000,000, I opposed it.... I prophesied what
the result of thus thrusting $300,000,000 of irredeemable paper
upon an already overstocked market would be. I said it would carry
up coin to an unlimited extent. The result has proved that my
predictions were true. Now it is proposed to issue $400,000,000;
we propose to thrust them upon an already over-supplied market....
It is our duty to protect the people, so far as in our power, from
this great depreciation in the specie value of the circulating
medium, and this we can only do by decreasing its volume.
The general positions which he stated thus early Mr. Chandler
firmly held throughout every stage of the subsequent contest over
the "currency question." He believed that irredeemable paper money,
although issued by the government itself and made a "legal tender" by
supreme authority, was an unmixed evil; that only the most imminent
peril could justify an even temporary resort to its use; that it ought
never to be employed except within narrow limits; that any excessive
issues, if made, should be promptly called in; that it should be made
redeemable on demand in coin, "the money of the world," at the earliest
possible moment; and that ultimately it should be wholly withdrawn
from circulation by the issuing power. Accordingly, he opposed the
propositions to still further increase (to $450,000,000) the issue
of "greenbacks," supported the principle (while objecting to some
of the details) of the act of April 12, 1866, ordering their steady
contraction, and was opposed to the act of Feb. 4, 1868, stopping
such contraction. The reduction in the volume of the "greenbacks" he
believed to be an indispensable preliminary to the resumption of specie
payments, saying in the Senate: "The government will never resume so
long as it has $400,000,000 of outstanding demand notes." As he opposed
during the war excessive issues of the "greenbacks," so after it closed
he steadily favored the reduction of their volume with the view to the
early restoration of their convertibility and their final redemption
and canceling. The hesitating and halting policy, which perpetuated all
the unwholesome influences of inflation and added to the severity of
the inevitable collapse, was followed against his protest and in the
face of predictions, which were inspired by his intimate knowledge of
natural commercial laws, and were verified by the event.
In the constant discussions of financial measures during the war, Mr.
Chandler did not earnestly oppose the frequent resort to the issue of
irredeemable paper without offering as a substitute policies which he
believed would yield relief, equally adequate, much less costly, and
far less unwholesome in tendency. He proposed to provide the means for
meeting the enormous expenditures required of the government by more
thorough direct taxation and by larger loans; and he believed that
increased imposts, by strengthening the credit of the government, would
greatly improve its standing as a borrower in the money markets of
the world. Briefly, the policy which he favored, in lieu of the mass
of temporary expedients which were adopted, was this: (1.) Declare
that the issue of "legal tender" treasury notes should not exceed
$150,000,000, and thus stop their depreciation by ending all fear
of their inflation. (2.) Tax freely, and by this means convince the
world that the United States could and would redeem its treasury notes
and pay the interest and principal of its bonds. (3.) Use the credit
thus created to borrow on the most advantageous terms, and avoid all
measures that might in any way tend to impair the negotiable value of,
or the general confidence in, the national securities. He developed
these general ideas repeatedly in his speeches and votes, while
questions relating to them were before Congress. On May 30, 1862, he
said in the Senate:
We voted at an early day in the session that we would raise a tax
of $150,000,000 from all sources.... What was the result of that
vote? On the very day that that solemn pledge was given to the
country and the world ... the six per cent. bonds of the United
States stood at 90 cents on the dollar in the city of New York.
To-day with an expenditure of more than a million dollars a day,
... under this simple pledge in advance, of what you would do, your
bonds have gone up from 90 cents to above par, and are now sought
for, not only at home but abroad. If you violate that solemn pledge
given to your country and to the world, what will be the effect on
your securities? Let Congress violate that pledge, and you will
see your bonds not only not worth 104½ but you will see them below
85.... The world abroad does not believe your simple asseveration
that you would impose a tax, but the people of this Union do and
consequently they themselves have carried your bonds from 90 to
104½. But the world does not take them. Impose your tax; carry out
your solemn pledges, and you will see your bonds eagerly sought
for in the moneyed centers of the world.... I hope we shall not
only carry out this pledge which we have given, but I care not if
we exceed it.... Under this pledge ... you are now able to borrow
money at six per cent. instead of seven and three-tenths, and you
are to-day reaping the reward of your pledge of good faith.
All just tax measures Mr. Chandler vigorously supported, as furnishing
the solid basis of national credit and public integrity, and time
established the ability and the willingness of the people to sustain
this war burden. Had the heavy taxation been accompanied by an
adherence to sound principles in the management of the currency and
a resort to borrowing when needed, it would have reduced the cost of
conquering the rebellion by at least $1,000,000,000, probably by nearly
one-half.
The maintenance of the public credit at a high standard was exceedingly
important during the war, but it was of no less moment after the
collapse of the rebellion, and is as great to-day as it has ever been.
On no public question was Mr. Chandler more vigilant and outspoken
than on this. Any attack on the integrity of the national promise
represented by the bonds of the United States he denounced vigorously,
whether it took on the form of the taxation of these securities,
or of propositions to pay them in depreciated currency, or of bald
repudiation. On May 20, 1862, he said, upon the proposition to tax the
bonds:
I believe it to be for the best interest of the government--not
for the benefit of moneyed men, not for the benefit of moneyed
institutions, but for the benefit of this government--to proclaim
in advance that we will never tax these bonds. I believe we
shall receive the _quid pro quo_ now, to-day, or whenever we
negotiate. It is for our interest, not for the interest of moneyed
institutions, to offer these bonds. Here is the best security in
the world, and we proclaim to the world, if you take these bonds
they shall never be taxed. I believe we shall realize more to-day,
or to-morrow, or this year, or next year, for these bonds by that
course, than if we were to impose a tax of one and a-half, or
three, or five, or any other per cent. These bonds are negotiable.
We are the negotiators. They are not in the hands of third parties.
We are to borrow for our daily wants, ... and I believe it to be
for the interest of the government to declare in advance that there
shall never be a tax of any sort, kind or description upon these
bonds which we are now offering to the world in such enormous
quantities.
Mr. Chandler said, in 1868, in a public address at Battle Creek, Mich.,
(on August 24):
The national debt is a sacred obligation upon this government,
and it is to be paid, every dollar of it. But it is a Democratic
debt, every dollar. If anybody should talk of repudiation it should
be the Republican party, who had no instrumentality in creating
it. But did you ever hear a Republican talk of repudiating it? It
is a large debt. It is the price we pay for government. Is the
government worth the cost? If it is, then the debt is not only an
honest debt, but it has been worthily contracted. The Democrats
propose to pay this debt in greenbacks, and they propose to pay the
greenbacks by issuing more greenbacks. What do we gain by that?
Issue $2,500,000,000 more greenbacks and they would not be worth
the paper they are printed on, because the supply would flood the
country and be greater than the demand.... It is a measure of
fraudulent repudiation. In five or ten years the country might
recover financially, but we would never wipe out the national
disgrace that would follow that repudiation. It means the absolute
annihilation of all values. These extra issues would be utterly
worthless.
Mr. Chandler accordingly voted for the act of March 18, 1869, which
formally declared that the United States would redeem its "greenbacks"
and pay the interest and principal of its long term bonds in coin, and
which was simply a new pledge that the government would do what it was
already honorably bound to do both by fair construction of its own
legislation and by the explicit and repeated promises of its agents.
The full maintenance of the public faith, both as a matter of honor
and of wise policy, he always upheld, and saw his arguments sustained
and his prophecies made good in the steady improvement of the nation's
credit and the refunding of its debt at greatly reduced rates of
interest.
Of the national banking system Mr. Chandler was an original supporter.
He regarded it as certain to become a lasting feature of the fiscal
system of the United States, and as destined to ultimately furnish
the paper money of the Union. The uniformity of its circulation, the
security afforded to bill-holders, and the excellent results attending
its method of governmental supervision, he considered as unanswerable
arguments in favor of its permanent maintenance. It was his firm
opinion that ultimately these banks would furnish all the national
currency, and that their notes would supplant the "greenbacks." If
national banking should be kept free, and redemption in coin required
by law, he believed that the result would be a thoroughly-secured and
readily-convertible paper currency, whose volume would be controlled
by commercial demand and not by legislative caprice or political
agitation, and which would lubricate and not obstruct the machinery of
trade.
When the national bank bill first made its appearance in Congress,
Mr. Chandler (in February, 1863) favored it as a measure of relief
offering a quick market for $300,000,000 of government bonds, and as
sure to supply "a better currency than the local banks now furnish."
Holding the views he did, he supported the measures which promised to
substitute bank notes for "greenbacks," although he opposed those which
contemplated any expansion of the aggregate volume of both issues. For
instance, in 1870, when the inflation element in Congress introduced a
bill to add $52,000,000 to the national bank circulation (banking was
not then free, it not being deemed prudent to leave the issue unlimited
while all the paper money was irredeemable), he offered on January 31
an amendment to make the sum $100,000,000 and to withdraw "greenbacks"
to an amount equal to the bank notes issued under this provision. He
said:
The simple effect of my proposition, if adopted, will be to keep
the circulation to a dollar where it is. If no new banks are
started, no greenbacks are withdrawn, and if banks are started
anywhere, then an amount of greenbacks must be withdrawn equal to
the amount of national bank bills put in circulation. Should the
whole $100,000,000 be taken we will be just $100,000,000 nearer to
specie payments than we are to-day, ... and in the meantime the
amount of national currency will not be changed in the slightest
degree.
MR. SUMNER: There is salvation in that.
MR. CHANDLER: Of course there is salvation in it; that is why I
offer it.
All proposals made at the time to increase the aggregate paper
circulation he resisted, saying:
That is a step in the wrong direction.... If you let it go out
that this is to be the policy of Congress, you will see gold go
up immediately, ... because it will show that the Congress of the
United States is in favor of expansion instead of a reduction of
the currency.
After the panic of 1873, when there was such a universal clamor for
further inflation, and scores of propositions were introduced to add
many millions to the existing volume of "greenbacks" and of bank notes,
Mr. Chandler again insisted at all proper opportunities that resumption
was the most essential step toward financial soundness, and that the
substitution of bank notes for "greenbacks" would aid greatly both
in reaching and in maintaining specie payment. On Feb. 18, 1874, he
offered an amendment to a pending bill, directing "the Secretary of
the Treasury to retire and destroy one dollar in 'legal tender' notes
for each and every dollar of additional issue of bank notes," and spoke
upon this proposition at length. He did not urge it as a complete
remedy for the existing situation (contraction and resumption would
alone furnish that), but he said:
This is a step in the right direction. In 1865 I advocated upon
this floor the substitution of bank notes for greenbacks as a step
toward the resumption of specie payments, and a rapid step toward
that resumption. I am now simply advocating what I advocated then.
Mr. Chandler's wishes on this subject were not gratified at that time
nor during his life, but before his death he saw the demand that the
Treasury should cease to be a bank of issue approved by the soundest
financial sentiment of the country. His belief, that the paper money
of the Union should be furnished by commercial institutions operating
under properly regulated governmental supervision, that is, by the
national banking system perfected and enlarged, has been long held by
the ablest and clearest students of monetary problems in the United
States; it is to-day constantly growing in popular strength, and the
result it aims at will form part of any durable settlement of "the
currency question."
In 1873 the vacillating and halting financial policy of the
nation--which had tried and abandoned contraction, and while looking
toward the resumption of specie payments had, in fact, retreated
from it--bore fruit in speculative collapses, followed by a panic in
business circles and widespread commercial disaster. Congress met
amid the crumbling of unsound enterprise, and was called upon to meet
a terrified demand for a renewed inflation of the already excessive
volume of irredeemable paper. To cure the fever, men demanded more
miasma. To repair the ruin, which all history proved to be the natural
result of an oversupply of currency, it was proposed to still further
increase that supply. Measures to this end were introduced at once,
and pushed with great vehemence. They were sustained by a misled but
powerful public sentiment, which was especially strong in the West
and influenced the great mass of that section's representatives at
Washington. Mr. Chandler never served his country better than he did in
that hour. Unmoved by the clamor about him, and refusing to listen to
the cries of even his own people when they demanded false leadership,
he firmly resisted every measure of inflation and every suggestion
that added embarrassments to the business of the future, or increased
the difficulties of preserving the public faith. The pressure in favor
of the inflation bill which President Grant vetoed was unusually
strong. The Western Congressmen were almost a unit for its passage,
but no solicitations, no force of numbers, prevented Mr. Chandler from
opposing and denouncing it. His speech in opposition to this bill (on
Jan. 20, 1874) commenced with one of his terse sentences, which went
straight to the marrow of the situation, and furnished a motto for the
cause he championed. It was, "We need one thing besides more money,
and that is better money." This phrase furnished the text for many
addresses and editorials, and stood upon the title-page of the weekly
circular issued by the friends of a sound currency in Boston during the
controversy which preceded the passage of the Resumption act of 1875.
In the same speech Mr. Chandler said:
To insure prosperity we ought to have something permanent,
something substantial. Then the business of the country will
conform itself to the facts and regulate itself accordingly. This
panic (of 1873) was exceptional, as indeed all panics are. A panic
among men is precisely like a panic among animals. I once saw
2,000 horses stampede, and they were just as the same number of
thousands of men would be in a panic. It is the feeling of animal
fear, and one encourages the other, and so it goes on until it
becomes a perfect insane rush for something, nobody knows what.
Prior to this late panic, as is well known, many of our capitalists
had over-invested in wild railroad schemes; they had undertaken to
do impossible things; when the panic struck them it ought not to
have had the least effect outside of Wall street and operators in
railroad stocks. But the panic swept like a tornado all over the
land, affected values everywhere, values of all kinds. Whoever had
money in bank sought to draw it out and hide it away. The panic
was universal, and yet this nation was never more prosperous than
it was the day before the panic struck. And to-day there is as
much money in the Union as there was then. Every dollar that was
here then is here now. Besides, the enormous borrowers, the men
who would pay any price for money--one-half per cent. a day, one
per cent. a day, or any other given price--have failed and gone
out of the market. And now the money is seeking the legitimate
channels of commerce for interest and use.... The best time for the
resumption of specie payment that has occurred since the suspension
was in 1865, at the close of the war, when gold had fallen from
over 200 to 122. In a few days values had shrunk, and the people
of the nation were comparatively out of debt, and were ready then
for a resumption of specie payments, but the government was not.
The government owed more than $1,000,000,000, that was maturing
daily in the shape of compound interest notes, seven-thirties and
other obligations that must be funded or disposed of. Hence the
government was not prepared for specie payments at that time,
although the people were.... From that day to this we have been
drifting and floating further and further away every hour from the
true path--the resumption of specie payments. I have advocated
from the first the earliest possible payment in coin. I believe
there is no other standard of value that will stand the test, and
I believe the time has arrived, or very nearly arrived, for coming
to it. I have not the same timidity in fixing a date that some of
my friends on this floor have. I believe that if we were to resolve
to-day that we would resume the payment of our greenbacks in coin
on the 1st day of January, 1875, and authorize the Secretary of
the Treasury to borrow $100,000,000 in coin to be used in the
redemption of the greenbacks, and sell no more gold until the 1st
of January, 1875, on that day we would have $200,000,000 of coin
in the Treasury for the redemption of the greenbacks. I am not
particular as to date. I merely suggest the 1st of January, 1875.
But I would accept an earlier date than that if it were deemed more
advisable, but certainly I would not extend it more than six months
thereafter....
It is no part of the business of this government to issue an
irredeemable currency. We cannot afford to place ourselves beside
the worn-out governments of Europe--we cannot afford to place
ourselves on a par with Hayti and Mexico. We are too rich a people
to do it; and it is a disgrace to us as a nation that we have
allowed it to continue one single hour beyond the hour when it was
in our power to remedy the wrong.
The proposition to increase our paper currency is a step in the
wrong direction, and I, for one, am utterly opposed to taking
even one step in the wrong direction when I know what the right
direction is.
As part of the same general discussion, Mr. Chandler made a carefully
prepared financial speech in the Senate on Feb. 18, 1874, in which
he first graphically sketched the history of "wild-cat banking" in
Michigan, and then said:
After the failure of these banks the cry was still, "More money;
and we must have more money; the country is suffering for more
money." The cry was responded to, and more money was furnished.
The Treasury of the State of Michigan, already owing $5,000,000,
undertook to furnish more money, and the State issued treasury
notes _ad libitum_, and the "more money" men got more money until
the value of the state treasury notes, which have been paid to the
last dollar at par, ran down to thirty-seventy cents on the dollar;
and almost every city in the State, including the city of Detroit,
responded to the cry of "more money," and issued shin-plasters;
and individuals, realizing that "more money" was needed, issued
shin-plasters. So the State of Michigan was flooded with more money.
Well, sir, you can see at a glance that the State of Michigan
needed more money. We had as a people been speculating almost to a
man. It was not confined to the merchant, the banker, the man of
wealth; but the mechanic, the farmer, the laborer, every man who
could buy a piece of property of any sort, kind, or description,
bought it, ran in debt, laid out a town, sold the lots, gave a
mortgage, and then wanted "more money" to pay that mortgage.
When the collapse came it was absolute; there was no mistake about
it; the collapse was perfect. Then the people of Michigan had
enough of "more money;" and when our constitutional convention
met, as it did a few years later, they put into the constitution a
clause prohibiting the Legislature forever from chartering a bank
or affording the means of furnishing "more money;" and the people
acquiesced in it. They had enough of the "more money" cry; and for
twenty-five years there was no more cry in the State of Michigan
for irredeemable money.... The losses to which I have referred did
not fall upon the moneyed men of the State of Michigan, the men
who were in sound condition. They fell upon the laboring man, the
farmer, and the mechanic. They fell upon the men who could least
afford to submit to the loss. So it is now. Why, sir, our values
are fixed by a foreign market, and in coin. There is not a bushel
of corn or a bushel of wheat raised in Indiana, or Illinois, or
Michigan, the value of which is not fixed by the foreign value
in coin of that particular article. When you enhance the cost of
production by an inferior currency you put that loss upon the
producer, and the loss falls not upon the wealthy man, but upon the
laborer and producer. Money will take care of itself all over the
world. If it is not safe in this country, it will find a country
where it is safe, and it will go to that country, no matter where
that may be. Hence, capital requires no protection whatever from
this body; money will take care of itself; but the poor man, the
laboring man, the man who submits to all the losses from this
depreciated currency, is the man who suffers all the pain and all
the injury that are inflicted by this false legislation....
Now, sir, we come to the crash of 1873. On the 15th day of
September, 1873, this nation was in a more prosperous condition
than perhaps it had been for the last twenty-five years. Every
branch of industry was prosperous, every interest of the people
was prosperous; but in a day, at the drop of the ball at twelve
o'clock on the 16th of September, the panic struck. What produced
this tremendous panic and crash in this great and prosperous
country? It was over-speculating in railroad securities. It was by
men undertaking to do what it was utterly impossible for them to
do, to wit, for individuals to float untold millions by their own
credit; and when the people became alarmed for fear the crash would
come, the crash came, and there was no salvation from it. But, sir,
on that very self-same day the nation was more prosperous than it
had been for the last twenty years in all its interests--business,
banking and every other. The crash ought not to have extended one
yard beyond Wall street and the few producers of railroad iron who
were manufacturing for these defunct railroads. But, sir, the panic
was so great that it spread until it became universal, and values
sank until there seemed to be no bottom, and everybody was affected
throughout the length and breadth of this broad land.
But, Mr. President, that panic was of short duration. Many failures
took place, and particularly among stock and railroad operators;
but the main business of the country still went on with a few
notable exceptions. Some manufacturers stopped for the want of
money; others stopped for the want of credit. The men that had
been issuing their paper without intending to pay it, issuing
millions of dollars of paper which they knew they could not meet
at maturity, trusting in luck to meet their obligations--those
men cannot borrow money; their lines are full everywhere; nobody
will loan them money; but, sir, upon undoubted security money is
to-day cheaper than it has been at any time for the last twenty
years. These great borrowers, without the expectation of paying at
maturity, are to-day all out of the market. No man will loan money
to a person who does not pay at maturity. Every man that desires to
borrow money for legitimate business can borrow it to-day cheaper
than he could borrow it at any time in the last twenty years. Sir,
you may legislate for this class who have over-speculated, you may
legislate for the benefit of the men who have built factories,
built steamboats, built mills, bought mills, bought mines, bought
everything for sale, and given their paper knowing they could not
meet it unless they could borrow the money over again; you may
legislate them $100,000,000 or $1,000,000,000, and you will not
help them in the slightest degree....
Now, Mr. President, I will ask the attention of the Senate while
I show the effect upon the purchasing value of money of issuing
your greenback circulation from the day it was first issued to the
present time. In 1862 we commenced the issue of greenbacks. In
January, 1862, the premium on gold was 2.5 per cent.; in February
it was 3.5; in March, 1.8; in April, 1.5; in May, 1.3; in June,
6.5; in July, 15.5; in August, 14.5; in September, 18.5; in
October, 28.5, in November, 31.1; in December, 32.3. It will be
remembered that the then circulating medium (which was at that time
state bank notes) amounted to about $200,000,000. This circulation
was increased during the year 1862 by the addition of $147,000,000
in greenbacks, and that increase of circulation carried the value
of gold from 102.5 on the 1st of January to 132.3 on the 31st day
of December following.
In 1863 the necessities of the government compelled us to increase
the greenback circulation to a yet larger extent. We issued during
that year $263,500,000 additional, carrying up our greenback
circulation to $411,200,000, in addition, of course, to our bank
circulation, whatever it may have been. During the month of January
of that year the premium on gold was 45.1 per cent.; during
February, 60.5; March, 54.5; April, 51.5; May, 48.9; June, 44.5;
July, 30.6; August, 25.8; September, 34.2; October, 47.7; November,
48; December, 51.1. In other words, the average rate of premium
upon gold during that whole year was 45.2 per cent. I hold in my
hand a paper showing the cash value of this emission for 1863. The
emission of greenbacks at that time was $411,200,000. The average
premium on gold was 45.2 per cent. The actual cash purchasing value
of that $411,000,000, during the year 1863, was $283,195,000, and
that was the whole purchasing value of that money during that year.
Then we come to the next year, 1864. That year, we increased our
circulating medium by the addition of $237,900,000, making the
whole amount $649,100,000. In 1864 the price of gold was, in
January, 155.5; February, 158.6; March, 162.6; April, 172.7; May,
176.3; June, 219.7; July, 258.1, or less than 40 cents on the
dollar in coin for your greenbacks after you had carried the amount
up to $649,000,000. In August the price was 254.1; in September,
222.5; in October, 207.2; in November, 233.5; in December, 227.5.
There is not a man here who does not remember, nor is there a
farmer or mechanic throughout the length and breadth of the land
who does not remember, that he then paid 60 cents for cotton goods
that he had been in the habit of buying for 12½ cents, and that he
paid for everything else in the same ratio. The merchant took care
that he met with no loss; but the laboring man, the farmer, the man
of muscle, was the man who submitted to this great loss, while the
merchant and while every man with money took care of himself.
During that year the average price of gold was 203.3 per cent., or
your money was a fraction less than 48½ cents on the dollar during
the whole year. You had out that year $649,100,000, and the value
of gold was 203.3, and the purchasing value of your $649,100,000
was $319,281,000, and that was the whole of it.
In 1865 you again increased the volume of your circulating medium
by the amount of $49,800,000; making the whole amount of your
circulation $698,900,000. During the month of January, 1865, the
price of gold was 216.2; during February, 205.5; in March, 173.8;
in April, 148.5; and after that it stood at 135.6, 140.1, 142.1,
143.5, 143.9, 145.5, 147, 146.2. The average of the year 1865 was
157.3; and what was the purchasing value of your greenbacks that
year? Every man here will remark that that year we were disposing
of our bonds at the rate of hundreds of millions of dollars a
month; money was passing through the Treasury almost without limit.
We had $1,000,000,000 that must be negotiated, and negotiated at
once--seven-thirties and compound-interest notes and other floating
liabilities that must be funded; and during that year the war had
closed, and while we were negotiating at this enormous rate, the
price of gold fell to 153.3, and during that year the purchasing
value of our circulation attained a higher rate than during any
other year. That year, although our circulation of greenbacks was
$698,900,000, and the premium on gold 57.3, the actual purchasing
value of that $698,900,000 was $444,310,000.
In 1866 we retired $90,000,000, leaving $608,900,000, and the
average premium on gold that year was 40.9 per cent. The purchasing
value of the $608,900,000, with the premium on gold at 40.9, was
$432,150,000.
The next year, 1867, we retired $72,300,000, and premium on
gold fell to 38.2. So we went on reducing until we got down to
$400,000,000, and then we struck 14.9, 11.7, 12.4 and 14.7 as the
premium on gold. There the matter has stood, and I have here from
year to year, the purchasing value for each year....
Mr. President, what we want is purchasing value, because the
intrinsic value is measured by the purchasing value. There is
not a bushel of wheat that goes from your State or from mine the
purchasing value of which is not fixed by the gold value on the
other side of the Atlantic. We are shipping millions and tens of
millions and hundreds of millions of our agricultural products
every year, and the value of these products is fixed in gold on the
other side of the Atlantic; and yet by this increase of circulation
we enhance the value of everything that the producer raises, but
when the product comes to the market its value must be fixed by its
price in gold across the Atlantic....
Mr. President, I know of no way to substitute the Treasury of the
United States for the banking experience of the last ten centuries.
We have the experience of the past, we have the experience of our
own nation, we have the experience of the world. Now, do we propose
to throw aside this experience, and to launch our boat upon a wild
and uncertain sea, an ocean of expansion and no payments?
Sir, there are very few persons within the range of my acquaintance
who desire expansion of an irredeemable currency. Certainly the
people of Michigan have had abundance of experience of that kind.
But wherever you go you will find two classes of men who are making
a great noise about "more money." One is the speculator, the
impecunious speculator, who has, perhaps, bought real estate and
given a mortgage, and thinks that his only chance is to reduce the
value of your currency until it falls so low that the people would
rather take his land than hold your money; and the other is the man
who has issued his paper without intending to pay when it matures,
and who can borrow no more money upon any terms until he pays what
he already owes.
On the 14th of January, 1875, the act for the resumption of specie
payments became a law. Mr. Chandler was a member of the Senate when
this bill passed. He had but one objection to it; the time fixed
for resumption was unnecessarily remote. Neither present exigency
nor needed preparation required the delay, and he believed it to be
opposed alike to economy, patriotism, and public honor. But it was
the best that could be secured; insistence upon an earlier date would
have divided the friends of resumption, prevented the passage of any
bill at that time, and postponed the day of specie payments. For these
reasons Mr. Chandler favored the measure, and a few weeks later,
when he retired from the Senate, it was with the consciousness that
he had only voted for an irredeemable and inconvertible currency to
meet the imperious exigencies of civil war, that he had opposed its
undue expansion, that he had sustained every measure of contraction
calculated to lessen the difficulties of the return to a sound basis,
and that he finally had crowned his Senatorial career by support
of a measure which insured the return of the government to the
constitutional standard of values.