"Break, break, break,
On thy cold, gray crags, O Sea!"
"I remember a day," said a friend not long since, "a day as sweet, calm,
cool, and bright as that whose wedding and funeral song the poet sings in
the same verse, when I stood upon the white sea-coast near Naples, and
looked far away across the blue, silent waters, and up the gray, flowery
steeps, to where the towering cone of Vesuvius cleaves the skies. It was in
the spring-time; luxuriant nature seemed to have nothing to do but to grow
and bloom, and the huge mountain itself was profoundly at peace,--smiling
a welcome, apparently, to the delicate bean-plants and wild vines which
clambered up its sides, and wearing a light curl of smoke, like a gay
coronal, around its brow. The bay was alive with red-capped fishermen,
each one intent on fishing up his inverted brother below him; the beach
was thronged with women, who chattered cheerfully over their baskets; and
along the road scampered soldiers in bright uniforms, as if they had no
conceivable purpose in life but to bathe in that clear sunshine, and
breathe that soft, delicious air.
"A few hours later," continued he, "I stood not far from the same spot,
and saw that mountain angrily belching forth pitch and flames; the earth
beneath my feet groaned with sullen, suppressed rage, or as if it were
in pain; vast volumes of lurid smoke rolled through the sky, and streams
of melted brimstone coursed down the hill-sides, burning up the pretty
flowers, crushing the trees, and ruthlessly devouring the snug farms and
cottages of the loving Philemons and Baucises who had incautiously built
too near the fatal precinct. The poor _contadini_, who lately chaffered so
vivaciously over their macaroni and chestnuts, were flying panic-smitten
in all directions; some clasped their crucifixes, and called wildly upon
the saints for protection; others leaped frantically into boats and rowed
themselves dead, in the needless endeavor to escape death; while the
general expression of the people was that of a multitude who, the next
minute, expected to see the skies fall to crush them, or the earth open to
swallow them up forever. But I was myself unmoved," our friend concluded,
in his usual vein of philosophy, "though, I trust, not unsympathizing;
because I saw, through those dun clouds of smoke, the stars still shining
serenely aloft, and because I felt that after that transient convulsion of
nature the great sun would rise as majestically as ever on the morrow, to
show us, here and there, no doubt, a beautiful tract now desolate, here and
there a fruitful vale now filled with ashes,--but also, the same glorious
bay breathing calmly in its bed, the same cloudless sky holding the green
and peaceful earth in its complacent embrace."
We could not, as we listened to the story of the traveller, help
considering it an illustration of that great convulsion of finance
which has visited us during the last month. We do not mean to call
this an eruption, which would scarcely be appropriate,--inasmuch as
the characteristic of it was not a preternatural activity, but rather a
preternatural stagnation and paralysis; but there is certainly a striking
similarity in the contrasts presented by the two pictures just painted, and
the contrasts presented in the condition of the commercial world as it is
now, and as it was only a few weeks since. Then all nature smiled, and we
scarcely thought of the future in the happy consciousness of the present;
whereas now all nature seems to frown, and we eagerly long for the future
to escape the endless vexations and miseries of the present. Our trade,
which lately bloomed like a Neapolitan spring-day, is now covered with
clouds and sifted with ashes, as if some angry Vesuvius had exploded its
contents over us and shot the hot lava-tides among our snug vineyards and
cottages. May we not also, in this case, as in that, draw some consolation
from the knowledge that the stars are still shining behind the smoke, and
that the sun will assuredly come up to-morrow, as it has come up on so
many morrows, for so many thousands of years? Convulsions, by the very
fact of their violence, show that they are short-lived; and though we, who
suffer by them directly, are apt to derive the slenderest solace from the
philosophy which demonstrates their transientness, or their utility in
certain aspects, it is nevertheless profitable, for various reasons, to
make them a subject of remark.
In a season of great public calamity, moreover, everybody feels that he
ought to participate in it in some way, if not as a sufferer, then as a
sympathizer, and, in either capacity, as a speculator upon its causes and
probable effects. The learned historian, Monsieur Alcofribas, who preserves
for our instruction "the heroic deeds and prowesses" of the great king of
the Dipsodes, tells us how that once, when Philip of Macedon threatened
Corinth, the virtuous inhabitants of that city were thrown into mortal
fear; but they were not too much paralyzed to forget the necessity of
defence; and while some fortified the walls, others sharpened spears, and
others again carried the baskets, the noble Diogenes, who was doubtless the
chief literary man of the place, was observed to thwack and bang his tub
with unmerciful vehemence. When he was asked why he did so, he replied,
that it was for the purpose of showing that he was not a mere slug and lazy
spectator, in a crowd so fervently exercised. In these times, therefore,
when Philip of Macedon is not precisely thundering at our walls, but
nibbling at every man's cupboard and cheese-press, it behooves each
Diogenes to rattle his tub at least, in order to prove, in the spirit of
his prototype and master,
"Though he be rid of fear,
He is not void of care."
If the noise he makes only add to the general turbulence and confusion, the
show of sympathy will at least go for something.
The same authority, whom we have just quoted, has a piece of advice with
which we intend to set our tub in motion. "Whatsoever," he says, "those
blindfolded, blockheady fools, the astrologers of Louvain, Nuremberg,
Tubingen, and Lyons, may tell you, don't you feed yourselves up with whims
and fancies, nor believe there is any Governor of the whole universe this
year but God the Creator, who by his Word rules and governs all things, in
their nature, propriety, and conditions, and without whose preservation and
governance all things in a moment would be reduced to nothing, as out of
nothing they were by him created." It is a most sound and salutary truth,
not to be forgotten in times of commercial distress, nor even in discussing
financial questions, remote as they may seem to be from the domain of
ethics. God rules in the market, as he does on the mountain; he has
provided eternal laws for society, as he has for the stars or the seas;
and it is just as impossible to escape him or his ways in Wall Street or
State Street as it is anywhere else. We do not wish to suggest any improper
comparisons, but does not the Psalmist assert, "If I make my bed in
_sheol_, behold Thou art there"?
In other words, commerce, the exchange of commodities, banking, and
whatever relates to it, currency, the rise and fall of prices, the rates
of profits, are all subject to laws as universal and unerring as those
which Newton deduces in the "Principia," or Donald McKay applies in the
construction of a clipper ship. As they are manifested by more complicated
phenomena, man may not know them as accurately as he knows the laws of
astronomy or mechanics; but he can no more doubt the existence of the
former than he can the existence of the latter; and he can no more
infringe the one than he can infringe the other with impunity. The poorest
housekeeper is perfectly well aware that certain rules of order are to
be observed in the management of the house, or else you will have either
starvation or the sheriff inside of it in a little time. But what means
that formidable, big-sounding phrase, Political Economy, more than national
housekeeping? Can you manage the immense, overgrown family of Uncle Sam
with less calculation, less regard to justice, prudence, thrift, than you
use in your own little affairs? Can you sail that tremendous vessel,
the Ship of State, without looking well to your chart and compass and
Navigator's Guide?
When the "Central America" sinks to the bottom of the sea with five hundred
souls on board, though it is in the midst of a terrible tempest, the public
instinct is inclined to impute the disaster less to the mysterious uproar
of wind and wave than to some concealed defect in the vessel. Had she sunk
in a tranquil ocean, while the winds were idle and the waves asleep, the
incident would have produced a burst of indignation, above the deeper wail
of sorrow, strong enough to sweep the guilty instruments of it out of
existence. The world would have felt that some great law of mechanics had
been wilfully violated. But here is a whole commercial society suddenly
wrecked, in a moment of general peace, after ten years of high, but not
very florid or very unwholesome prosperity, on the heel of an abundant
recompense to the efforts of labor,--when there has occurred no public
calamity, no war, no famine, no fire, no domestic insurrection, scarcely
one startling event, and when the interpositions of the government have
been literally as unfelt as the dropping of the dew, a whole commercial
society is wrecked; values sink to the bottom like the California gold
on the "Central America"; great money-corporations fall to pieces as
her state-rooms and cabins fell to pieces; the relations of trade are
dislocated as her ribs and beams were dislocated; and the people are cast
upon an uncertain sea, as her passengers were cast,--not to struggle for
physical existence like them, but to endure an amount of anguish and
despair almost equal to what was endured by those unhappy victims.
How can this have happened arbitrarily, capriciously, mysteriously, without
some gross and positive violation of social law, some wilful and therefore
wicked departure from the known principles of science? Every random
conjecture as to the causes of the prevailing distress implies an answer
to the question, and it need not be repeated. It is more important to
inquire what those violations and departures have been, than to reiterate
the general principle. What has led to the lamentable results under which
we suffer? What has rendered the winds so tempestuous that they must needs
blow down our noble ship? What has provoked the ire of those big bully
waves so that they advance to demolish us? Ah! hark just here how the
Diogenidæ tumble and thump their tubs! each one rapping out his own tune;
each one screaming to boot, to be heard above the din!
One cries, that we Americans are an unconscionably greedy people, ever
hasting to get rich, never satisfied with our gains, and, in the frantic
eagerness of accumulation, disregarding alike justice, truth, probity, and
moderation. Under this impulse our trade becomes an incessant and hazardous
adventure, like the stakes of the gambler upon the turn of the dice, or
upon the figures of the sweat-cloth; a feverish impatience for success
pushes everything to the verge of ruin, and only after it has toppled over
the brink, and we have followed it, does the danger of the game we had
been playing become apparent.--A second qualifies this view, and shouts,
that our vice is not so much greed, which is the vice of the miser, as
extravagance, which is the vice of the spendthrift; and that as soon as
we get one dollar, we run in debt for ten. We must have fine houses,
fine horses, fine millinery, fine upholstery, troops of servants, and
give costly dinners, and attend magnificent balls. Our very shops and
counting-houses must resemble the palaces of the Venetian nobility, and
our dwellings be more royally arrayed than the dwellings of the mightiest
monarchs. When the time comes--as come it will--for paying for all this
glorious frippery, we collapse, we wither, we fleet, we sink into the
sand.--A third Diogenes, of a more practical turn of mind, vociferates,
that the whole thing comes from the want of a high protective tariff. These
subtle and malignant foreigners, who are so jealous of our progress, who
are ever on the watch to ruin us, who make any quantity of goods at any
time, for nothing, and send them here just at the right moment, to swamp
us irrecoverably, are the authors of the mischief, and ought to be kept
outside of the nation by a triple wall of icebergs drawn around each
port. They pour in upon us a flood of commodities, which destroys our
manufactures; they carry off all our gold and silver, which eviscerates the
banks; the banks squeeze the merchants, to the last drop of blood; and the
merchants perish in the process, carrying with them hosts of mechanics,
farmers, and professional men.--Not so, bellows a fourth philosopher,
perhaps a little more seedy than the rest; it is all the work of "the
infernal credit system,"--of the practice of making money out of that
which is only a promise to pay money,--out of that which purports to have
a real equivalent in some vault, when no such equivalent exists, and is,
therefore, a fraud on the face of it,--and which, deluging the community,
raises the price of everything, begets speculation, stimulates an excessive
and factitious trade, and is then suddenly withdrawn from the system, at
the height of its inflation, like wind sucked from a bladder, to leave it a
mere flaccid, wrinkled, empty, worthless old film of fat!
Now, for our part, we think all the Diogenidæ right, but not precisely in
the way in which they state the matter; and we think the seedy Diogenes
the rightest of all,--because he has struck nearest to the centre, to the
organic fact which controls the other facts,--yet, without sharing his
prejudice against credit, one of the blessedest of inventions. As a very
long and a very dull treatise, however, would scarcely suffice to explain
all the reasons for our thinking so, we must devote the one or two pages
that are given us to a few simple, elementary, frontal principles,
familiar, no doubt, to every one, and therefore the more important to be
recalled, when every one seems to have forgotten them. Nothing is better
known than the laws of gravitation; nothing staler in the repetition; but
if the folk around us are building their houses so that they all fall down
upon our heads, it behooves us to remind them of those laws.
1. Human wisdom has discovered nothing clearer than this,--that in all the
operations of trade above a primitive barter, you must have a standard or
measure of values; and human ingenuity has never been able to devise any
standard more perfect, in essential respects, than the precious metals. It
may be doubted, indeed, whether the choice of these metals for currency
is a result of human ingenuity. Paley and his school of theologians
demonstrate the existence, intelligence, and goodness of God from the
evidences of design in creation,--from that nice adaptation of means to
ends which shows an infinite knowledge and infinite benevolence at work;
but no one of the instances in which they found their argument, from
the watch, which affords the primal illustration, to the human body,
which furnishes the most complex confirmations, is a more astonishing or
exquisite proof of pre-arrangement than is the adaptedness of gold and
silver to the purposes of currency. Your standard or measure, for instance,
must, in the first place, possess a certain uniformity; if it be a measure
of capacity, it must not be of the size of a thimble in the morning, and as
big as a haystack at night, like the mystic bottle of the fairy tale; if
a measure of length, it must not be made of caoutchouc, as long as your
finger to-day, and as long as the Atlantic Cable to-morrow; and so, if a
measure of value, it must not equal one thousand at ten o'clock, and equal
zero at three. But the precious metals do possess this uniformity; they
are not scarce, as diamonds are, so that a pinch of them might measure
the value of a city; nor are they as plenty as blackberries, so that a
wagon-load could scarcely buy a fat goose for dinner. They cannot be washed
away like a piece of soap, nor wear out like a bit of wampum, nor crumble
like agate or carnelian in dividing. In short, they combine all the
advantages that are needed, with few or none of the disadvantages that
would be troublesome, in a substance which is used for money. They possess
intrinsic utility, they are equably supplied, they may be easily divided
and then fused again, they take a stamp, and they retain the same qualities
everywhere and at all times. Accordingly, all the civilized nations,
from the time of great-great-great-grandfather Moses down to the time of
President Buchanan, have used the precious metals for their standard of
values; while your barbarians only, your silly Sandwich-islanders, your
stupid troglodytes of interior Africa, your savage red men, have used for
that purpose fish-bones, beaver-skins, cowries, strings of beads, or a lump
of old rags. Q.E.D., then, on Paley's principles, the precious metals were
meant by Divine Providence for use as money, at least more than anything
else, because nothing else is so well adapted to the end. Intelligent man
everywhere has been glad to recognize the Divine teaching; and the American
man--holding himself the most intelligent of all men--has incorporated
the lesson in his fundamental law. Nothing can be money for him,
constitutionally, but metal which has a genuine ring in it.
2. Being the established standard, the precious metals, so long as they
continue unchanged in amount, have a precise and definite relation to all
other commodities. But they do not continue unchanged; and neither do
other commodities continue unchanged. There is more gold at one time than
another, and more wheat at one time than another; so that the relation
between the two is not a determinate, but a variable one; and it is this
variation which causes or constitutes the fluctuation of prices. If wheat
increases in quantity, more of it will be given for the same money; and if
it decreases, less of it will be given for the same money; on the other
hand, if money increases, more of it will be given for a specific quantity
of wheat, and if it decreases, less will be given; while if they increase
or decrease together, a relative equilibrium will be maintained. But the
beauty of the precious metals, as we have said, is that they are not liable
to very sudden or considerable increase or decrease; only twice in the
course of history, on the occasion of the discovery of the South American
mines by the Spaniards, and of the California mines by the Americans,
has there been recorded an unusual production of gold and silver; and in
both cases, it is important to note, the same effect followed,--a very
considerable enhancement of prices; that is, all other articles seemed to
grow dear, although the real fact was that money had only grown cheap. In
Spain every commodity rose; everybody experienced that delicious feeling,
which we sometimes enjoy in dreams, of going up without spring or effort;
and Spain was considered to be enviably prosperous and happy. As for
San Francisco, we all remember the fabulous prices which ruled in that
vicinity. An acquaintance of ours wrote us then, that he gave five dollars
for a dinner consisting of half a pullet and two potatoes, and when he
added a pint of champagne, it came to five dollars more. He allowed his
washerwoman one hundred and fifty dollars a month, paid fifty dollars for
a pair of second-hand cow-hide boots, and hired a cellar, seven feet by
nine, and six feet under ground, at the rate of fifteen thousand dollars a
year. But both in Spain and in San Francisco this ludicrous exaggeration
of values cured itself. The manufacturers and merchants of all the world
sent their goods of all sorts to such tempting markets; and it was not
long before the goods, not the money, were in excess. Prices came down,
as sailors say, by the run, and Spain and San Francisco were reduced once
more to rationality and comfort. These were exceptional cases, but they
illustrate the general principle, that the increase of money raises prices,
and the decrease of money lowers them, which is all we wish to state. In
ordinary cases, however, when the currency is in its normal condition, this
rise and fall of prices is like the rise and fall of the tides, the mere
pulsations of the great sea, which drown and damage nobody, and rather keep
the waters more clear and wholesome by their gentle agitation.
3. The same law is observed to operate, whenever anything is made, either
by the decrees of government or the usages of society, to take the place of
the precious metals as money. Paper, in the shape of bank-bills, promising
to pay money on demand, is the most frequent, because the most cheap
and convenient substitute; accordingly, when convertible paper-money is
increased, it raises prices, and when it is diminished, it depresses
prices, just as in the case of a metallic currency. But there are these
two signal points of distinction between a paper and a metallic currency:
first, that paper money may be increased or diminished much more easily
than metallic money; and, second, that any excess or deficiency of the
former is not so easily corrected by the natural operations of trade. The
sudden or large increase of the metals is prevented by their scarcity and
the laborious processes necessary to produce them, and a sudden or large
decrease of them could be brought about only by some great public calamity
which should destroy them or cause them to be hoarded. But paper money,
whether made by a government or made by authorized corporations, may be
issued and put in circulation almost at will, and again be withdrawn
at will. We do not mean that the issue and withdrawal of it are wholly
unchecked, but that the checks, as the entire history of banking would seem
to prove, are comparatively inefficient and delusive. If the rise and fall
of prices, caused by the fluctuations of metallic money, are to be compared
to the rise and fall of the tides, the rise and fall of paper prices are
more like the increase and decrease of steam in a boiler, which is an
admirable agent, but demanding an incessant and scientific control. The
sea-tides, even after a tempest, will regulate themselves, because they
have all the oceans and all the rivers of the globe to draw upon; but the
steam in a boiler is a thing confined, and yet capable of immense and
destructive expansion. A metallic currency runs from nation to nation, and
has its perturbations corrected from nation to nation; but a paper currency
is local, and cannot be so well corrected by the great interchanges of the
globe. Let us make this clearer in another way.
4. It is universally conceded, by all the writers on finance, that any
unusual production of currency occasions a rise of prices; the relative
value of money is less than it was before, while the relative value of
other articles is greater; a greater quantity of money is given for other
articles, and fewer of other articles are given for the same amount of
money. This rise has the double effect of provoking the importation
of foreign commodities, and of preventing the exportation of domestic
commodities; inasmuch as the same enhancement of rates, which opens a good
domestic market for the former, closes the foreign market to the latter;
and thus an unfavorable balance accumulates rapidly against the country
where the rise occurs, in respect to other countries where it has not
occurred. Now sooner or later this balance must be paid; and as products
cannot be profitably shipped abroad to furnish a fund whereupon to
draw bills of exchange, it must be paid in coin. The coin is therefore
abstracted from circulation; and if coin were the only currency, such an
abstraction would of itself induce a fall of prices, which would operate as
a check upon importations until the old relation of equilibrium should be
restored. But where the government, or where individuals, whether organized
or alone, have the power to replace the departed coin by issues of paper
money, prices are for a while maintained, and importations continued as
vigorously as ever. All this, however, is but a postponement of the day of
settlement. The balance to be extinguished is a substantial balance, which
can be discharged only by substantial means; a mere promise to pay, a mere
sign and representative of debt, will not extinguish it, any more than the
smell of a cook-shop will extinguish a ravenous appetite. The insatiable
creditor will have money; and the depositories of that essential become,
under his assaults, more and more meagre and tenuous. The managers of
them at last get alarmed, and begin to withhold their issues of paper;
which means that they begin to reduce their loans to the community. The
money-market grows "tight," as it is phrased; the money-world feels
generally as if it had taken an overdose of persimmons. Merchants and
dealers, shorn of their usual accommodations, are compelled to borrow at
ruinous usuries, or to fail to meet their payments. Their default involves
others; others fail, and others again. The bowels of the banks, with us
the great money-lenders, close with the snap and tenacity of steel-traps;
and then a general panic, or want of commercial confidence, brings on a
paralysis of the domestic exchanges, and wide-spread bankruptcy and ruin.
Importations are checked, of course; but they are checked in a sharp,
rapid, and violent way, accompanied by the most painful embarrassments and
convulsions.
This we believe to be an outline of the history of all our commercial
catastrophes, stripped of those local and incidental circumstances which
vary from time to time: over-issues of money,--speculative prosperity,--all
the world getting rich in the most agreeable manner,--fairy palaces rising
on all sides, without the sound of trowel or hammer; then,--the day of
adjustment,--the rapid contraction of the currency,--all the world getting
poor in the most drastic and disagreeable manner,--and those fairy palaces,
which rose under our very eyelids over-night, vanishing, like the palace
of Aladdin from the vision of the Grand-Seignior after he awoke in the
morning. But, alas! the revulsion does not stop with the overthrow of the
palaces which had been reared without labor; it is not satisfied with the
dissipation of mere fancies and dreams; but, being itself a most real
thing, it carries with it many a stately structure, which the toil, the
economy, the self-denial of years had hardly raised. Extraneous causes,--a
short crop,--a reduced tariff,--a peculiar mania of enterprise,--may hasten
or retard the various steps of the process which has been described; but
its cause and its course are almost always the same, and the discerning
eye may easily detect them, from the beginning to the end of our modern
commercial experience. In the existing difficulties, in this country, the
railroad speculations have had much to do with producing and aggravating
the effect; but the primary source of it, we think, is to be found in the
ease with which our currency is inflated, under a banking system which
varies from State to State, and which, outside of New England and New York,
where it is by no means perfect, is as bungling a contrivance, for the ends
to be answered, as was ever inflicted on the patience of mankind. Much
of the trouble is due also to the extravagance and reckless waste of our
people, which, though owing in some degree to our want of good manners and
good taste, are directly traceable to the stimulus given to expense by the
over-issue of artificial money. While the paper which passes for money is
plenty, and every man can easily get "accommodations" from the banks, we
squander without thought. No matter how costly the articles we buy; the
expansion of the currency is greater than the rise in market values; and it
is only when the contraction comes that we see how foolishly lavish we have
been.
What, then, is the remedy? "Why, away with paper currency altogether!" says
one. Yes,--tear up your Croton-water-pipes, because the breaking of a main
sometimes submerges your dwellings; destroy your railroads, because the
trains sometimes run off the track; arrest your steamships, because an
"Arctic" and a "Central America" go disastrously down into the deep,
deep sea! That were not wise, surely; that were very unwise, even were
it possible, which it is not.--"Give us a high protective tariff," says
another. Most certainly, friend, if we are to be perpetually flooded with
paper, a high tariff is needed;--your theory is at least consistent,
however it may have worked in practice. But a high protective tariff is
an impossibility, because it can be attained only by favor of the Federal
legislature; and, as we all know, at the door of that legislature stands
the inexorable shape of the Slave Power, which consults no interest but
its own in the management of government, and which will never make a
concession to the manufacturers or the merchants of the North, unless it be
to purchase some new act of baseness, or bind them in some new chains of
servility.--But have you inquired whether that flood of paper is necessary?
We frankly tell you that we do not believe it is; we believe that a better
system is possible,--to be brought about, not by greater restrictions
on banking, but by greater freedom; and we only regret that we have not
now space to discuss that faith with you in all its reasons and results.
We hope to be permitted to do so at some other time. Meanwhile, let us
rejoice that the whole subject is in a position to be frankly discussed. A
few years ago, when the question of the currency was a question of party
politics, there was no aspect in which it could be presented, which did
not arouse all the restless jealousies of party prejudice. If you talked
of hard-money, you were denounced as a Benton bullionist; if you talked
of credit, you were called a Whig banker, plotting to devour the poor;
and the calmest phrases of science were turned into the shibboleths of an
internecine warfare. A better hour has come, and let us improve it to our
mutual edification.