In order to see the effect of the redemption of these Treasury notes in
bullion, we have but to look at the possibilities of the situation.
Suppose there were in the Treasury $300,000,000 worth of that bullion,
which, by the taking up, little by little, and month by month, of the
amount not used in the arts, would be taken by the Treasury at or about
par. Then, suppose that for any reason, such as fear of approaching
panic or otherwise, $100,000,000 of the Treasury notes were suddenly
presented for redemption, and canceled, and the bullion as suddenly put
on the market, what would it be worth? What would gold bullion be worth
if it had not the privilege of coinage, and if $100,000,000 of it,
deprived of the money use, was suddenly put on the market? Can there be
a doubt that the abrupt output of so large a quantity would have the
effect of immediately and enormously depreciating its value? In the case
under consideration, the result would be that the silver remaining in
the Treasury would not bring one-fourth the sum necessary to redeem the
outstanding Treasury notes, so that not only would a heavy loss result
to the Government, but, by reason of the sudden and serious contraction
of the money volume, an infinitely greater loss would result to all the
people.
But if it be deemed a remote contingency that any extraordinary amount
would in that manner be suddenly taken from the Treasury, there is
another danger which can not be put aside as improbable, but which, on
the contrary, is to be looked for with almost absolute certainty, and to
my mind, constitutes an irremovable and insurmountable objection to any
system of bullion redemption.
A large number of merchants in London need, monthly, millions of dollars
worth of silver to make payments in India. They will naturally want
to get it at the lowest price, and it is not to their advantage to
intensify the competition for it. On the contrary, it is to their
direct advantage to depress the price to the lowest possible point.
As the Treasury of the United States would buy silver at the lowest
price, the London merchants would refuse to enter the open market in
competition with our Government for its purchase. But no sooner could
the silver be stored in the vaults of the Treasury, than the agents of
the London merchants would appear, and before any opportunity had
offered for a favorable change in the price of the bullion, could
present as many millions of these notes as might suit their purpose, and
receive bullion therefor. A Secretary of the Treasury who
conscientiously believed that it was his duty to maintain the gold
standard at all hazards, would naturally feel compelled--certainly it
would be in his power--to put out whatever amount of bullion he might
deem necessary to accomplish that purpose, even if it all had to go.
Thus the United States Treasury would become the convenient and
capacious conduit through which silver should immediately flow from this
country to England, depriving our people, notwithstanding the
legislative measures for their relief, of practically all use of silver
as money, inasmuch as the four and a half-million dollars of Treasury
notes would be withdrawn and canceled about as soon as issued.
Thus would our Treasury Department be made practically the purchasing
agent in this country of any syndicate or combination of English
merchants who might desire silver for the East India trade.
If it be said that no Secretary of the Treasury would attempt thus to
defeat the will of the people as expressed in the law, the sufficient
reply is that a conscientious man who believes that the honor of the
United States is pledged to the maintenance of the gold standard, and
that it is indispensable to the prosperity of the people, will exercise
all the power vested in him by law to prevent a departure from that
standard, and will regard himself as for the time being the savior of
the Republic by keeping it from "the edge of so dangerous a peril" as
the execution of the people's will.
Certainly no man will deny to the present Secretary of the Treasury
entire rectitude of motive in all his conduct. From the well-known fact
that since the passage of the limited coinage act of 1878 all our
Secretaries have refrained from purchasing more silver than they were
compelled to do by the mandatory provision of that law, it is reasonable
to infer that none of them, if called upon to execute a law containing a
silver bullion redemption clause, such as is suggested, would feel
called upon to make a net purchase of more than $2,000,000 worth in each
month; and that none of them would hesitate to exchange for Treasury
notes all the monthly purchases of bullion in excess of that amount.