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not avoid that conclusion; and, although I should be very glad to find an alternative corrective of the grievance complained of, I can. not vote either for the inflation or for the transmutation of $20,000,000 which bear no interest into $20,000,000 bearing oppressive and extravagant interest.

Mr. SHERMAN. Mr. President, there is one view only, and that I wish to present in connection with the views presented so very clearly by the Senator from Vermont and the Senator from New York in regard to this matter; a view that neither of them has taken, and that, when presented, I think presents the whole case. This bill does not seek to inflate the currency nor to diminish the currency; it does not propose to affect the currency question. The Senate has directed us substantially not to interfere with the currency, either by an increase or a diminution; but still there is one evil that must be rectified, which is so palpable that every man can see it. It is made a political question as well as a financial question. That is that the present circulation of the banks in this country is grossly and improperly distributed. I can give the reason for it, if necessary; it is owing to a misconstruction of the act. I agree with the Senator from New York that it grew out of a misconstruction of the act by the Comptroller of the Currency, but I do not wish to find any fault now. The fact exists; it is so palpable and so gross that every man can see it without knowing the difference between two and four. In some of the States they have seventy-seven dollars in circulation for each inhabitant; in others sixty do lars; in others fifty dollars; in others forty dollars; and in others thirty dollars; while in some of the States they have only twenty-five cents for each inhabitant.

The Senator from Vermont triumphantly says, "Why did not these States come forward and get their circulation when they could; New England did it, and New England therefore ought to retain what she has." The answer is palpable. Take the State of Missouri: Missouri was threatened by guerrillas, and no man of ordinary prudence would start a bank there at the time this banking circulation was absorbed; and the result was that Missouri, a powerful State with a large city within her limits, the city of St. Louis being larger now than any city in all New England, has no banking circulation of any account. That is so gross and palpable as to present a case where every Senator would say that State ought to have the benefit of this circulation if it is of any benefit whatever. So in regard to Kentucky: Kentucky was more or less threatened during the whole war; and although Louisville was never occupied by the rebels, it was so threatened that no prudent man would embark there in banking capital, which requires safety above all other pursuits. The result is that Kentucky has no circulation, and so of every rebel State. Your law was passed when it was not in the power of any one to start national banks in those States. They are without them. They are now being restored to their former places in the Union; they are about to have Senators and Representatives on these floors. They have cities; they have commerce; they furnish cotton; they furnish the basis of a large and profitable commerce and manufacturing operations. It is necessary to have currency to move their crops. Is it not right that they should have some? They

have none now.

The inequality of the distribution of the banking circulation is so palpable that no Senator can overlook it. How shall that be corrected? If I wanted to make this a matter of sectional feeling I would say at once New England onght to give from her excess what is wanted. The Comptroller of the Currency says $20,000,000 will be sufficient to satisfy the reasonable demands for currency of these States, for a time at least, until the question can be treated in a broader and more statesmanlike view. He says that with fifteen or twenty million dollars he could satisfy all the reasonable

demands of the southern States at present, and
he asks us to authorize him to issue circulation
to that amount to the South. But where shall
we get it?

reduce the volume of our greenbacks or our national bank currency. We dare not, I say, in fair obedience to the popular will which governs Senates as well as everybody else.

Why, therefore, this persistent objection to a small increase of circulation which will only present local advantages and local facilities to communities that never had the benefit of the system at all, either of greenbacks or of banks. If you could issue $20,000,000 of greenbacks and distribute them over the South, that might be fair. It would give us $20,000,000 without interest; but you cannot do that. Greenbacks have no local habitation and no local name. But when you establish local banks in a community, say in the city of Mobile, you give to that city the local advantage of banking circulation, you give it the local advantage of bank

less of the benefits of that local circulation and local capital at the seasons when it is necessary to move the crops.

I say, then, that the conclusion to which the committee arrived, to give this little addition, to be distributed as far as may be among those States that have the least, I think is the fairest solution of this matter until the great question can be settled on a more comprehensive basis. So far as my constituents are concerned, this bill does not affect them at all. We have about our share of circulation. We have no cause to complain. We are perfectly satisfied with it. But the relief proposed by this bill will go to the States of the West and South that are now severely pressed by the results of the war and that need this little aid to support them on the revival of trade and commerce, and to give a little impetus to reviving industry.

The amount limited by law, $300,000,000, is already reached. Shall we issue new circulation beyond $20,000,000. If so, we encounter the opposition of those opposed to any increase of circulation. Shall we take from those who, without authority of law, now possess more than their share by a misconstruction of the act as we claim? If we take the first proposition and increase by $20,000,000, how much is that? Only six per cent. of the present amount of bank circulation, or only three per cent. of the aggregate circulation of the country. It is therefore a very small amount. But the limit of $300,000,000 was fixed when in the midst of war, when in no one of the rebeling capital, and the merchants have more or States could you circulate a single dollar of your greenbacks or national bank notes. Since that limit was fixed our population has increased about fourteen per cent. according to the ratio of increase. We have added to our governed population over ten million people that had none of this circulation when you fixed the limit, and since that time our wealth has largely increased. Several of our western States have more than doubled since 1860 when the census was taken on the basis of which the apportionment was inade. Is it, therefore, unreasonable now, five years after this limit was fixed, to propose an increase of $20,000,000, which is only a trifling percentage of increase? We thought not. On the other hand, if we attempt to tamper with the banks already in existence, we incur a formidable opposition. I introduced a proposition some years ago to withdraw from Connecticut, Rhode Island, and Massachusetts, a portion of their banking circulation. Senators very properly said: "We took this circulation at your request; we adopted your banking system; we surrendered our own; we did it in good faith; is it right or fair now for you to withdraw a portion of our circulation when we accepted your banking system?" My answer was: Although you have your circulation, upon, I think, an erroneous construction of the law, yet your people did it in good faith and have based their operations upon it; therefore it would be hard, to say the least, to withdraw from these three States that have an excess of circulation, $20,000,000." These States have an excess of over twice their share of $60,000,000-$59,573,837based upon population. If you allow these States twice their share on account of their wealth, their being old States, and having an old banking circulation, allowing them that to make them equal, then they have $60,000,000 more than their share. If there was a way by which $20,000,000 of this circulation could be withdrawn from them and given to the other States I should be very glad to do it; but, sir, I say it is impracticable.

66

Their

Several bills have been introduced and referred to the Committee on Finance proposing this equalization of circulation, but none of them have been satisfactory. None of them could be adopted without doing injury to local interests that have accepted your banking system in good faith; and, therefore, as the lesser of two evils we propose to add $20,000,000 to the aggregate of circulation. Some Senators are disposed to exaggerate the evils of inflated paper money. Why, sir, our paper is far less inflated now than it was two or three years ago. We had at one time $450,000,000 of greenbacks at the same time when we had $300,000,000 of bank currency; and we had, besides, compound interest notes and various forms of floating indebtedness which now are all paid off. We have no circulation and nothing that enters into circulation except greenbacks, bank circulation, and three per cent. certificates, which can only be held by banks. So that that which forms the circulation of the country has been vastly diminished until a demand has come to us rather to increase than to diminish; and we dare not now in face of the popular opinion

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Mr. STEWART. I should like to inquire of the chairman of the Committee on Finance whether the first section of the bill, by correcting the abuse, which undoubtedly is an abuse, of using the reserve, will not have a tendency practically to produce contraction to some extent?

Mr. SHERMAN. That will not affect this question, because, as a matter of course, these banks will be chartered where there are no banks now.

Mr. STEWART. Will it not affect the aggregate amount of circulation?

Mr. SHERMAN. Not at all. The only question is whether the circulation shall be kept at home and lent at home, or whether it shall be sent to New York and lent at New York. The first section applies to a different state of facts entirely.

Mr. FESSENDEN. Mr. President, the Senator from New York [Mr. CONKLING] seems to advocate a very desirable state of things, which is a return to specie payments at some day or other, and as early a day as possible; and at the same time he has pointed out certain difficulties which would follow from the course proposed by the committee, even with the amendment offered by the Senator from Vermont. He has shown that by it we either do increase, or do not reduce, our interest account. It is certainly very desirable to reduce it if we can, and surely we ought not to increase by any means if we can avoid it. But I failed to perceive in his argument that he proposed any remedy whatever for what is said to be the difficulty that this proposed issue of $20,000,000 is designed to remedy. He left that question untouched.

The question before the Senate, as I understand it, is whether or not the condition of affairs in some of the States is such as absolutely to require an increase of their local circulation, and as that increase of the local circulation cannot be had under the present amount fixed by law, whether it is desirable to increase that amount to a certain extent? My friend from Vermont says it may be desirable to do it, but at the same time you must not increase at all the total circulation; that is already sufficiently inflated; and therefore he proposes that just in proportion as you increase the banking circulation you shall diminish and contract the national circulation

proper; that is, United States notes. That idea undoubtedly has the germ in it of what I believe to be the correct principle and the solution of the whole difficulty. We wish to return to specie payments at as early a day as possible, for obvious reasons, which I will not stop to argue. The reasons address themselves to everybody's mind. It is quite apparent that you cannot do that so long as the national circulation remains as high as it is. That is out of the question. It therefore becomes desirable to reduce that circulation in order to accomplish that object; and that was the idea upon which Congress a short time ago proceeded.

tion where specie payments could be resumed,
and having that time to look forward to that
the banks would also be prepared to meet it
in the same way, and capital would be so ac-
cumulated as to enable the country to do it
safely.

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Well, sir, what have we seen at this session?
Forthwith there is an outcry, "You must stop
reduction ;" and not only stop reduction, but
by a vote that was passed here in the Senate,
"You must not intimate that you ever mean to
reduce any more.' You will not even say that
the volume of United States notes shall not go
back to the $400,000,000 where it started from,
although we got it down to $360,000,000.
Those were the notes of the Senate. The two
cries were simultaneous; one was, "Stop the
reduction" with reference to these greenbacks,
the national circulation. Another was, "Re-
duce taxation so as to have no surplus in the
Treasury to reduce with." We were having a
presidential election coming off; candidates
were advocating greenbacks ad libitum and
other schemes like it; and the consequence
was that Congress got frightened, and we cried,
"Reduce taxes; stop reducing the amount of
the greenbacks; stay just as we are;)
what is the consequence? It was passed. We
refused to carry out the system, and here we
are in precisely this difficulty at the present day.

and

There are men in the community who are very strict and very close who argue that $300,000,000 is circulation enough for the whole country. I do not believe that; but at the time when that limit was fixed for the national bank notes it is quite obvious it was as high as we ought to go, for the reason that it only made a part of the circulation, and was only to make a part of the circulation. We had at that time, and were to have, about $400,000,000 additional of Government currency; and it was not desirable that we should throw the whole system of banking open and let everybody bank as much as he pleased without fixing any limit and without adopting any system by which it could be brought down to and confined to a reasonable amount. Consequently, it was fixed at about three hundred million dollars. The idea was, or at least my idea was, that if that system was to remain permanent the amount must necessarily be increased in proportion to the increase of business of the country from time to time, either by increasing the limit or by throwing the whole matter open to anybody that wished to enter into it, which I believe might safely be done under a proper state of things. But that could not be done then; that is, it could not be done without dangerously inflating the currency, until you adopted a system by which you took the Government circulation out of existence; and it could not be done with a hope of returning to specie payments so long as you left this Government circulation in existence at the same time. It was evident it would not do to leave all that in existence which prevented our return to specie payments, and throw the whole matter open for everybody to have as much circulation as they chose to risk their capital upon, because there would be no end to it, and the circulation would be enormous, and the return to specie paying if he did not know he was making somements would be indefinitely postponed.

Now, sir, what was the system which Congress hinted at, and which, in my judgment, was a sound one? It was the gradual reduction of the national circulation down to a point when the Government could resume specie payments safely, and to so graduate it, although its termination and its course were to be perfectly evident, as to show those engaged in they must get

order and prepare themselves when the Government was prepared also to resume specie payments, for one must follow the other; not to do the thing suddenly, which might break the banks, or expose them to great difficulties, but to reduce gradually that which had grown gradually according to the necessities of the case and the ability of the country, so that you might finally come to a point where the Government liabilities were so reduced that the Government could resume, and the banks having due notice could also be prepared to resume at the same time.

It was for that purpose, with that leading idea, although the action taken did not go so far, perhaps, as I would have been willing to go at that time-that we adopted the rule that we would, in the first place, fix the amount that was to be reduced each year-$4,000,000 a month, I think it was; that was considered to be enough, as much as the country would bear at that time; but the idea was that it was to continue and be a gradual reduction, so as to gradually but surely bring the Government back to a condi

If we had carried on our system and contin-
ued our reduction, we should not have been
met with the difficulty that my friend from
New York has stated in his speech to-day; and
that is, it will not do to issue this $20,000,000,
because you inflate the currency, unless you
take in the greenbacks. We should have had
the $20,000,000 in; we should have been in a
condition, and we should have been getting
gradually into a condition in the course of a
year or two hence when we could have resumed
specie payments, if necessary, and when we
could have done the other thing that will then
make itself obvious to the mind of everybody.
You may either fix a much larger point or a
point far beyond that to which you are now
limited, $300,000,000, or you may, when you
get back to specie payments and have taken
the national circulation out of the way, just
say to everybody, "Bank as much as you
please; take out your charter; furnish the cir-
culation." There is no danger in it if the
thing is well secured, because business will
regulate it. No man will bank unless he can
make money by it. My friend from Pennsyl-
vania [Mr. CAMERON] would not carry on bank-

thing out of it; nor would anybody else. It
will be regulated by the demands of the coun-
try for circulation, and with specie payments
resumed, and the circulation itself well pro-
tected by a pledge of bonds, or anything else
you may substitute for bonds of equal value
and protect the country entirely, you might
well say to anybody, "Take out your charters;
let business regulate the matter."

The difficulty, therefore, Mr. President, in
which we are at this moment comes from this:
I foresaw, everybody foresaw, that the unequal
distribution of the $300,000,000 of bank circu-
lation would make trouble. It had made it
before; and that trouble is constantly increas
ing as the southern States are coming in and
calling for the use of circulation; and as other
States which have not had their sufficient share
are increasing in their business, they want more.
It is necessary that they should have it; but you
have closed it out of your power to give them
more for the very reason of your legislation at
this session, that you have stopped reducing
the amount of national circulation, that you
have not been taking in one side in order to
prepare yourself to let out on the other side.

Now, sir, my general idea is that the whole solution of the problem is very simple. I have looked at this matter, studied it in my way, and read the schemes that have been sent to me and sent to every Senator in favor of this way, that way, and the other way to return to specie payments. They have been of all sorts and sizes and dimensions and characters; but

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there is not anything in any of them hardly. There is but one simple mode of proceeding, and that is, take in your national circulation to a point where you can redeem. If you take it in to $150,000,000 you can resume specie payments easily, I take it, because those $150,000,000 would be held by the banks; they would not trouble anybody. My friend on my right [Mr. CATTELL] could fix the amount much better than I could, but my own impression is that when you have got it down to $150,000,000 you may easily, so far as the Treasury is concerned, resume specie payments at that moment.

Mr. HENDERSON. You can do it when you get it down to $250,000,000.

Mr. FESSENDEN. I doubt whether you could do it at $250,000,000; but you certainly could at $150,000,000. The banks in the mean time could prepare themselves. They understand when a storm is coming. They see, when the policy of the Government is once fixed, what they have got to do. They understand managing their own affairs; and, fixing the time at a reasonable distance ahead they would unquestionably be ready to start with the Government in the resumption of specie payment.

But the fright about taxation, the cry for diminution of taxation, cutting it down to the lowest notch, and the cry also against any further reduction of the currency, of which we heard so much, have placed us precisely in the category where we find ourselves; and that is, we cannot meet the demands upon us for increased circulation from different sections of the country of local character, for the very reason that we have not put ourselves in a condition to do it without inflating the currency so much. That is the trouble; and undoubtedly my friend from New York is right when he says, suppose you do this thing that is proposed and adopt the amendment of my friend from Vermont, you just take $20,000,000 which you might appropriate to reducing the interest account. So you might if you had it; but that does not relieve us of this difficulty, and that is, that circulation is wanted in certain portions of the country which have not got any. That is the matter to be solved. That is the problem just now before the Senate for its consideration.

I merely rose to point out the failure in proper policy which, in my judgment, has led to this difficulty; but nevertheless, pointing that out, here we are. Shall we deny to these sections of the country that which they need so much, if they do need it; and on that point I am very much inclined to follow my friends on the Committee on Finance. When I was a member of the committee I liked very much to have people follow me, and therefore I am very much inclined to be a good soldier myself, unless I can see very good reasons for not being

So.

They think it is absolutely necessary. It undoubtedly involves a sacrifice to a certain extent, but that sacrifice it is necessary to make from the necessity of the case and from the course of our own legislation, from our own want of firmness, from our own want of system in not adhering to a correct principle when we had once adopted it, and being frightened by the cry out of doors with reference to it.

Mr. CONKLING. Will the honorable Senator allow me to make an inquiry of him?

Mr. FESSENDEN. Yes, sir. I do not know that I can give an answer; but I have no objection to the question.

Mr. CONKLING. The honorable Senator stated that the amendment of the Senator from Vermont had in it the germ of the true idea, if I caught his expression, proposing to reduce greenbacks so called in proportion as national currency was issued. Now, I have here, and have been looking at it to see if I was right, a national bank bill upon which I see is printed the language of the act making it a legal tender for everything due from the United States and to the United States, in substance, except customs duties, and on the other side of the account, interest on the public debt. I wish

now to inquire of the Senator whether, if we could exchange the whole greenback circulation, $445,000,000, or whatever it may be, for national bank circulation, so as to annihilate the one and substitute the other, we should thereby be any nearer specie payments than we are now, unless we were to violate the faith of the Government establishing the national banks; and whether, aside from there being the same volume of paper out, answering the same purpose, we should not simply be increas ing our interest account for the whole amount? In other words, if he will be kind enough to explain how it is that the germ of the true idea appears in this amendment, that by putting out national bank bills as fast as we retire greenbacks we are thereby approximating specie payments?

Mr. FESSENDEN. I had explained it. There is a very great difference between the two. I want to get rid of this whole system of legal-tender notes. When you have taken them up, they are out of the way and no longer a legal tender, and a circulation replaces them which is not a legal tender to the same extent; at any rate which is of an entirely different character, protected in the way that it is by law. You substitute one for another. The Senator asks me how you can do that without increasing your interest account. You cannot if you borrow money to pay it; but if you will put your taxation at a rate that will give a surplus, there is no difficulty about it, because you have a surplus raised, and that is the only way you can do it.

The difficulty in this whole matter, in my judgment, is that financial men and speculators of all sorts, and even members of Congress, have been trying to find some way of getting rid of our difficulties besides paying our debts. There is no other way. We have got to pay them some how or other, and we can only pay them by raising money, and by raising money by taxation. I agree that I do not want the taxation to be enormous, and I do not want it done this year, or next year, or any particular year or number of years that you sug gest; but be in the way of doing it, pay something each year, reduce your taxes to such a point as will meet the expenses of the Government and give you some surplus to apply to the payment of your debts. That is the only way, and the first application that I would make of that surplus would be to redeem this legaltender currency so called. It is a nuisance, as 1 think all that currency issued by the Government is, so long as it prevents the Government from being able to pay every demand upon it in specie. That is the simple idea I have; and therefore I say I would substitute one for the other, for the reason that when you have got the demands upon the Government which are payable in specie out of the way to an amount that they can meet, then you get back to specie payments as a matter of course; there is no trouble about that, and the banks come with you if they manage their affairs rightly.

but you

The honorable Senator from Ohio suggested one other idea, which I agree with in part, but not in the whole. He says the people outside have settled this question in making these demands, and we must echo their sentiments with regard to them. So we must so far as their sentiments are just and right; cannot tell how the people are upon these questions. A portion of them are one way; a portion of them another way; and a portion of them another way. The difficulty is, that each gentleman supposes that those he represents constitute the people, or the majority of them. They do not constitute the people; that is, the whole people. We must make a system for the country, and I believe there is no way in which we can satisfy the claims of the people upon us so well as by ourselves devising a proper remedy for these evils, even although at the time it may seem disagreeable to them, and following it strictly and straightly. If they do not like it at first, they will like it when it

works well. If rightly devised it will work well. That is our duty; and I say again, we were upon the right track, in my judgment, when we were reducing the claims against the national Treasury, and approximating as fast as we could, consistently with the interests of the country, to what would be a correct normal condition of things, and that is what we ought to have continued to do, instead of being frightened out of it, in my judgment. Still, I know so little about these matters that I do not speak with any degree of confidence; and yet that is my idea, and for so much as it is worth I give it to the Senate.

Mr. MORTON.

Mr. President, we are told that this is simply $20,000,000 that Senators propose to inflate the currency with, and that it is demanded by the necessity of equalizing the circulation and giving to certain western and southern States and Territories circulation which they need. I realize that necessity as strongly as anybody; but I do not agree with the Senator from Ohio that the responsibility of the great inequality that now exists is to be thrown upon the Comptroller of the Currency. From my reading of the law, the responsibility is with Congress, and not with the Comptroller of the Currency.

Mr. President, this bill is not simply a measure to increase the circulation $20,000,000; but it is the beginning of the future financial policy of this country. If passed, it is to be the entering wedge and the beginning of what will be the future financial policy of our country. If we give $20,000,000 for the purpose of equalizing circulation, we recognize the necessity and the importance of that; but can we stop there? Twenty million dollars will not begin to equalize it. Everybody knows that. I heard a Senator say on Friday that it would take over one hundred million dollars to do it; and what would $20,000,000 be to the States and Territories that are spoken of in the way of equalizing the currency? It will be but the beginning, and at the next session you must go on and on, until you do reach that equality of which we hear so much. Then, sir, it will not be simply the question of putting $20,000,000 additional currency in circulation, but it will be the question of putting $100,000,000, or more than that, in circulation, sooner or later, for this very purpose.

The Senator from Ohio [Mr. SHERMAN] is for inflating the currency directly $20,000,000. The Senator from Vermont [Mr. MORRILL] is for taking up an equal amount of United States notes and canceling them, so as to keep the volume of the currency the same that it is now. There are difficulties either way. In the first place, if we take up an equal amount of United States notes, as I argued the other day, it must be done in one of two ways: either by taking the money that is paid into the Treasury in the way of revenue, getting your $20,000,000 of legal-tender notes in that way, or by selling bonds to that amount and getting them in that way, as the Secretary of the Treasury heretofore contracted. I take it for granted that the Senate is opposed to the increase of the bonded interest-bearing debt; that it is opposed to converting a debt that pays no interest into a debt that pays nine or ten per cent. interest in currency. I shall therefore dismiss, as not a thing likely to be done, the idea that we are to go to work, as seems to be argued by the Senator from Maine, and convert this noninterest-bearing debt into an interest-bearing debt. Then if we will not do that

Mr. FESSENDEN. I beg the Senator's pardon; I advocated no such thing. Still, I do not know but that it might be wise in a certain case. My idea is to pay it off. I said we ought to pay off this non-interest-bearing debt, but we ought to pay it off out of moneys taken from the Treasury, raised by taxation. We ought not to increase our debt to do it; but still, as the Senator suggests that idea, I will say to him that it is very questionable in my mind whether we should not benefit the people by borrowing money to take it up; whether

they would not save more than they would lose in that way if we can get to specie payments by it.

Mr. MORTON. Then the Senator's proposition is this: that the people of the country shall be taxed in the course of the next few years to the amount of between three and four hundred million dollars, the money to be drawn directly from the pockets of the people, and at a time when they ought not to be paying off any portion of the national debt for the purpose of paying off the non-interest bearing part of our debt and leaving the bonded debt just what it is. That is the Senator's proposition roundly.

On the other hand, the Senator from Ohio seems to be in favor of inflation. He thinks we could bear a much larger amount of currency than we now have, and even then not get back to what we had a few years ago. I had hoped that the Senate had got past the time when it was necessary to argue the evils of the inflation of the currency-the general increase of speculation; the general diminution of productive industry and the resort to speculation instead. Does not every man know that the result of an inflation of the currency is to increase the price of everything that is bought and sold, first beginning with the price of personal property, then touching real estate, and then, perhaps, coming to labor?

Mr. FESSENDEN. It begins with labor. Mr. MORTON. The Senator says it begins with labor. I submit that it is the experience of the world that the price of labor is the last thing that is inflated.

Mr. FESSENDEN. The Senator does not understand me. I mean to say that labor is the first thing to suffer from inflation.

Mr. MORTON. With that understanding I agree. It is the first thing to suffer from infla tion and the last thing to be improved by it. Sir, as soon as inflation takes place speculation begins; and what is the effect of it? Everything acquires two prices, the real price and the speculative price.

Mr. SHERMAN. If it will not interrupt my friend and make him cross his path, I should like to ask him a question. If inflation has such terrible evils, why does he not adopt the doctrine of the Senator from Maine and resume specie payments in that way?

Mr. MORTON. I do not cross my path. I think the Senator crosses his path, as I can very clearly show him. It is not a question whether you shall go one way or the other, but it is a question of stability. Every interest in this country demands stability and demands that we shall avoid fluctuation.

As I was remarking, Mr. President, when inflation begins property acquires two prices: the real, actual, demand price, and the speculative price. Men can put property into warehouses and hold it for a rise of prices, and thus, as we saw during the war and during this great inflation, the price of goods goes up fifty, one hundred and fifty, two hundred, and three hundred per cent., because of this speculative price brought about by the great abundance of money. But how is it with labor? You cannot put labor into a warehouse and hold it for future demand or speculation. The demand for labor is immediate, as labor is needed; and therefore, when inflation takes place, labor is the last thing to be inflated and the first thing to feel the evils of it. Mr. President, we have already suffered the evils of inflation. We have had one great inflation, and we have got part of the way down. It has cost the American people dearly in coming down. The down grade is marked at every step by bankruptcies and ruin in every part of this country. Would the Senator from Ohio have us make the ascent again, that we may have again the ruinous descent? I trust not.

If this system of increasing the national bank currency shall be adopted the country will not resort to inflation, but it will probably resort to the other system of taking up and canceling the United States notes.

Now, Mr. President, the most important

thing for us to do, and the thing we ought to do before this Congress adjourns, is to take some steps toward the return to specie payments. Every other financial schieme is a nostrum as compared with that. It cannot be done, nor can it be done indirectly. It will not "turn up," as Micawber might suppose it would. It will not come around incidentally or indirectly by resorting to some other gentle, ineffective, meaningless measure. Sir, the way to return to specie payments is by taking some direct step in that direction. As the Senator from Maine said, the only way to pay a debt is to pay it; and I say the only way to return to specie payments is by taking some step in that direction; some step that looks toward it; some step that will give the country assurance that specie payments will be made.

Mr. FESSENDEN. Then you are back to specie payments.

Mr. MORTON. You are back to specie payments; but all the foundation of these banks is then twenty-five to forty per cent. below par. You count by discount then, and not by the premium on gold. Measuring the depreciation of these notes by the premium on gold is precisely like paying taxes under the form of a tariff. The people pay millions of taxes to the Government in the form of a tariff, because the duties are covered up in the general price of the article which they pay to the merchants, and do not reflect that one half of that price has been brought about by duties paid to the Government. The legal tender note is now par in our contemplation. Gold is now out of view, and we think but little of the premium on gold; but the very moment you take away the legal tenders, then it becomes discount and everybody sees it. We do not want an increase of national bank notes, indefinitely or to a large sum, when we know they are only worth seventy cents on the dollar. That is all your national bank note is worth to-day; and we do not even get that much for it, because where the price of commodities is regulated by a depreciated currency that is a legal tender you never do get what is, in point of fact, the actual value of your currency, and especially in deal

Now, sir, how is it to be done? I do not know; I am not a financier; but as I believe in direct measures and not indirect, Machievelian measures, the way to return to specie payments, in my judgment, is to fix some time when this.Government will redeem its legal tender notes. Give everybody notice; let the people prepare for it; let the Government prepare for it by collecting its reserve of gold; let everybody get ready for it; and as the time approaches when you are to return to specie payments, the premium on gold will gradually go down, until as you get to that time it willing in real estate. Now, sir, the moment your have gone altogether; and then the legal tender notes being as good as gold the people will not want the gold except for specific purposes.

Mr. President, it was a strange idea suggested by the Senator from Maine to day, not for the first time, for I have heard it a number of times, and from other Senators on this floor -I believe the Senator from Vermont concurs in it that by simply withdrawing the legaltender notes you thereby return to specie payments. That all you have got to do is to get clear of these notes, either by burning them up, taking them from the revenue, or by canceling them, taking them from the proceeds of bonds sold, and as soon as you have done that, you have got to specie payments. Yes, Mr. President, you have got there then, but you have got there by a panic, by a crash. You have got there in the same way that you would get there if the Supreme Court were to decide to-morrow that the legal-tender notes were unconstitutional, and therefore there would be nothing a legal tender but gold and silver; but what would be the result? There would be a general falling of prices and values, the result of which would be an almost universal bankruptcy. No, sir; it is a mistaken notion to suppose that you have got to specie payments healthfully and safely by simply withdrawing legal-tender notes. You have got there then by necessity; but you have got there by universal bankruptcy and convulsion.

Why, Mr. President, your bonds are worth but seventy-four or seventy-five cents on the dollar in gold, if you count it in the way of discount. The whole country now is under a deception in regard to the value of legal-tender notes and national bank currency; and what is it? It is because the depreciation of these notes is measured, not by discount in the honest way, but is simply measured by the premium on gold, and therefore is kept out of sight of the people. The legal-tender note is par in contemplation of law. It is par because you can make your neighbor take it in payment of debts. If it is only worth six cents on the dollar in gold, still, in contemplation of law, it is par. The gold and silver are kept out of sight. Therefore you measure the depreciation of these notes not by discount but by the premium on gold. You sell your legal-tender notes at par and your bank notes at par; but if you look at gold it is forty per cent. premium. That is the way you measure the depreciation. But whenever you withdraw the legal tender notes from circulation, then they cease to be par and gold becomes par, and you count the depreciation of your bonds and your national bank notes and everything by discount.

legal tender note is gone, the moment it has been withdrawn in accordance with the suggestion of the Senators from Maine and Vermont, then the depreciation in the national bank note remains just what it is to-day.

Mr. SHERMAN. I should like to ask my friend a question. If the legal tender notes were out of the way he says the depreciation would still continue as to bank notes, if I understood him.

Mr. MORTON. I say you do nothing to prevent that continuing as to them.

Mr. SHERMAN. On the contrary, any holder of a bank note might present it to the bank and demand gold, and as a matter of course it would have to be paid in gold, or else it would be brought here and the bank would be exploded at once.

Mr. MORTON. I was just coming to that. Mr. SHERMAN. If the Senator wants to get back to specie payments, it can only be the retirement of the greenbacks that will bring us there.

Mr. MORTON. Not at all; not their retirement in that way, as I shall show you after a while.

Mr. SHERMAN. If the Senator can show us how to retire the greenbacks, except by paying them, I should like to hear it.

Mr. MORTON. That is just what I propose; to return to specie payments by doing what the Government promises to do, and that is, by paying these greenbacks in gold. Now, I wish to ask the Senator a question, because it shows the weakness of the question he asked

me.

He says if you take away the greenbacks the holder of the national bank note can present it to the bank for payment. The bank has got no notes to redeem in; according to the original constitution of the bank it must pay in gold; but, I ask you, where is the bank that can redeem its issues in gold when that bank is predicated upon bonds that are only worth seventy or seventy-four cents on the dollar, when the whole constitution of the bank is thirty per cent. below par? No bank can do it. It is idle to suppose because you take away the greenback circulation and require the bank to pay in gold that you thereby bring up the value of the stocks of that bank and its outstanding notes thirty per cent., so as to make it par in gold. You do not do it. That is the fallacy the Senator from Maine is laboring under-that because you take away greenbacks and require the banks to redeem in gold you thereby give a gold value to their stocks and to their bills, which are to-day thirty per cent. below par, gold being at par. Sir, you cannot return to specie payments in any such

way as that, I respectfully submit. We did not depart from it in that way, and we cannot get back to it in that way. We must get to it through the same medium by which we left it; and that must be by beginning the work of honestly redeeming these legal tender notes in goid.

Why, sir, this system that I have advocated here seems to be predicated on the idea that it is a mere operation of law by which you are to return to specie payments; that Congress can resolve that the banks shall redeem after a certain period, and they will redeem. Sir, that is preposterous. Congress can create no power in the banks to redeem in gold and silver. Their very financial constitution to-day is thirty per cent. below gold in value. You may strike out the legal teuder notes; you may take any course you please, and you cannot restore the difference between their actual value and their gold value. We count their notes at par today, because gold is at forty per cent. premium; but when we take away the legal-tender notes, then we will measure their depreciation by discount, and that will bring them down to seventy cents on the dollar.

Mr. President, in my judgment it is the first business of the Government to take some steps toward a return to specie payments; and as I said before, and I wish to reiterate that statement, it is not to be done by wishing it; it is not to be done simply by some indirect and imperfect remedy; but it is to be done by some legislation looking directly toward it and making provision for it. If it were left to me I would fix a day in the future, and I would say that on and after that day the Government would redeem the legal-tender notes in gold, and thus comply with the promise made on their face. They are to-day over due paper that is dishonored by the maker. We cannot keep these notes up by the mere solvency of the maker. The solvency of the maker never kept over due paper at par, and never will. They have the additional value of being legal tenders, which the bank notes will not have when they stand alone. They are receivable for certain taxes; but all these things have failed to keep them at par, and they are worth but seventy cents on the dollar to-day.

Mr. HENDERSON. Will the Senator permit me to ask him a question?

Mr. MORTON. Certainly.

Mr. HENDERSON. I ask him why he would fix a day to redeem greenbacks in gold at par, when he can commence redeeming them now at seventy cents on the dollar?

Mr. MORTON. Yes, Mr. President, we can go out and buy them at seventy cents; but I ask how it would build up the credit of this nation if it were to go out and buy its own paper in the market, like a broker, at seventy cents on the dollar, when it refuses payment at the Treasury Department, which says that they shall have a dollar for every dollar promised upon the face of that bill? Sir, that would dishonor the credit of the nation.

Mr. HENDERSON. Let me ask the Senator, then, whether it is any less dishonorable to sell gold, which is the only constitutional currency, as I understand, according to hisidea, at a premium?

Mr. MORTON. The cases are entirely different; but I am free to say that I have never approved of the policy of selling gold in the market, instead of reserving that gold until we can redeem our greenbacks.

Mr. HENDERSON. Congress passed a law authorizing the Secretary of the Treasury to do it.

Mr. MORTON. To sell gold? Mr. HENDERSON. Certainly. Mr. MORTON. I never voted for it. Mr. HENDERSON. I think you did. Mr. MORTON. I think not; I was not here. There were a great many sins committed by Congress that I am not responsible for, although I have no doubt in the course of time I shall have my share.

Now, Mr. President, suppose we fixa time

I will suggest now, simply by way of illus tration, the 1st day of July, 1871-and declare that upon that day the Government will begin to redeem her paper. I will not say that she shall carry on all her operations in gold; but that upon that day she will redeem in gold the legal-tender notes presented at the Treasury Department, or at a place fixed for that purpose. What is the effect of it? To day the Government gives no assurance that the legalteuder notes will ever be redeemed. To-day the Government pays no interest on that paper, and does not say whether she will ever pay the paper or not. We have only the vague hope and expectation that she will. But when we fix a time at which we will redeem that paper then every man can take his slate and pencil and set down what his legal tender note is worth to day, and as the time passes on and the period of redemption approaches the premiuin on gold disappears in the ordinary way. At the end of the first year, it will not be more than fifteen or sixteen per cent.; at the end of the next year, seven or eight; and as you come to the actual time of redemption the premium on god fades away before you reach it; and then the people do not want the gold except for specific purposes.

I do not believe that more than $150,000,000 of gold would be required to begin and to carry on the work of redemption. The idea that a great many have that we must have as much gold on hand as we have greenbacks is entirely fallacious. There is no foundation for that opinion. Why, sir, it is a matter of experience all over this country, and, in fact, in Europe, that banks that have one dollar of coin in their vaults for every three dollars in circulation can carry on and do business safely. I am told that no bank has ever failed in this country that had that proportion of coin in its vaults; that upon examination the banks that have failed have not had more than one fifth or one sixth or one seventh the amount of coin in their vaults to their paper in circulation. I have seen a statement from a very able writer saying that no bank has ever failed in this country that kept a proportion of coin in its vaults of one dollar to three.

Now, Mr. President, to take an illustration: in the crash of 1837 the State Bank of Indiana suspended. The Legislature of the State met and gave it five years within which to resume. At the end of three years its notes were as good as gold; and when the five years expired the people had forgotten the time, and there was very little demand made upon the bank for gold. Such instances are numerous in the bank history of this country and of England and Scot land; and such would be the condition in this case if we were to fix a time when we would resume specie payments or redeem these notes in gold. By the time we reached that period, or before, the premium on gold would have run out, and there would be comparatively but a small demand upon the Government for gold. Why? Because, in the first place, of the confidence in the Government; in the second place, these legal tender notes would be more convenient and desirable to the people in every respect except where they required the gold for specific purposes, than the gold itself. And, sir, I make another statement, which I ask some of the eminent financiers arouud me who seem to understand all about this question to bear in mind: there would be less gold required in general circulation in this country than there was before the war when we had a system of local specie-paying banks? Why? Because the bills of the State Bank of Indiana in 1860 -as good a bank as there was in the United States-would not pay my hotel bill at the city of New York or Washington. They were of a local character, and if I traveled East I must supply myself with gold or the bills of eastern bauks. That created a demand for gold; and what was true of the banks of Indiana was true of the banks of Kentucky and Tennessee, and of every other western and southern State. That created a demand for gold that would not exist now. Why, sir, the Indiana merchant in

paying for his goods in New York was compelled to buy his exchange on New York at from one and one third to three and sometimes tive per cent., to pay his debts in the East; and this created a constant demand for gold; and yet the banks paid specie. When the legal tender note comes to be as good as gold the merchant can carry $10,000 of them about his person without show and without inconvenience in going to New York; or he can send them to New York by express for a very small sum, and he will have no occasion to buy gold; whereas before the war, and under a system of local specie-paying banks, he had to buy gold for that purpose, or buy exchanges, which was the same thing.

Mr. FESSENDEN. Will the Senator allow me to ask him a question?

Mr. MORTON. Yes, sir.

Mr. FESSENDEN. He proposes to fix a time ahead when we shall redeem these greenbacks in gold; resume specie payments, in other words, because we shall then have to pay them. I want to ask the Senator where he proposes to get the gold to do it with?

Mr. MORTON. 1 propose to get gold from the same source that we have been getting it. Mr. FESSENDEN. That is taxation, is it not?

Mr. MORTON. That is from duties on imports, is it not?

Mr. FESSENDEN. Does the Senator suppose that we are to import such an amount that we can get gold enough from duties to meet all our interest that we are obliged to pay in gold at the present time, and at the same time have $350,000,000, more or less, to pay off these

notes?

Mr. MORTON. I did not talk about $350,000,000.

Mr. FESSENDEN. More or less, as much as may be necessary.

Mr. MORTON. I endeavored to encounter the fallacy awhile ago that we were required to have as much gold on hand as we had greenbacks out in order to resume specie payments. That was never necessary in regard to banks; and why should it be in regard to the Government, which has better credit than any bank ever had? Sir, that is not necessary. As i said before, you can begin to redeem safely when you have one half or less than one hatf of the amount in the Treasury that you have greenbacks out.

Mr. FESSENDEN. Now, I will ask the Senator whether it is not a similar process to retire the greenbacks immediately in small amounts, as they are taken into the Treasury, provided you have a surplus? because you have got to have a surplus anyhow to do it.

Mr. MORTON. One question at a time. I will answer that question after awhile if you will remind me of it. I think the Senator's question a moment ago was where we would get the gold. By reserving it in the Treasury, and not selling it.

Mr. FESSENDEN. If we reserve it, how are we to pay our debts in the meantime?

Mr. MORTON. Well, sir, we have been paying our gold interest, and still there has been enough gold sold, we are told, to give us premiums to the amount of $20,000,000. Sir, if that gold had not been sold, but had been reserved in the Treasury, we would have gold enough in the Treasury to-day to begin the work of redemption now.

Mr. SHERMAN. Let me answer that matter now.

Mr. MORTON. I should like to finish what few scattering remarks I have to make.

Mr. SHERMAN. I will simply say that up to within the last six months a very large portion of our interest was payable in paper money, and therefore a great deal of gold was sold; but on the 1st of July next the whole of our interest will be payable in gold, and we shall have no considerable sums of gold to sell. We certainly cannot have over twenty-five or thirty millions at the outside each year to sell.

Mr. MORTON. We shall have gold in the future as we have had it in the past.

There is

no question about that. The Government can procure the gold without trouble. Let me suggest, in this connection, how are the banks to resume specie payments unless the Government does it? If the Government does not do it, but throws the responsibility on the banks, they will have to buy the gold. I have endeavored to show that the banks cannot buy the gold. When the very constitution of the banks is thirty per cent. below par they cannot do it, and their paper will come to a discount and a ruinous discount if you throw the responsibility on them. We shall have gold in the Treasury. By reserving it for three years from this time, with what we have on hand now, we shall have enough to begin the work of redemption.

Now, sir, I want to say to the Senator from Maine and my friends about me, who seem to be exceedingly amused, for of course they know all about it and I know I do not, that when we have approached nearly the time of returning to specie payments, and when the premium on gold in this country is no more than ten per cent. or five per cent. we can then, if we should need gold to the extent of thirty or forty or fifty millions, raise it upon our fivetwenty bonds at par. Instead of converting greenbacks worth seventy cents into goldbearing bonds we can then in London raise as much gold as we want on our bonds at par, which are now selling at only seventy cents on the dollar in gold, and if there should be a deficit in gold any small amount could be readily supplied at that time.

Mr. CORBETT. I ask the Senator from Indiana whether, if the Government should first return to specie payments, the bond would not then be at par in gold? Consequently the bonds held by the banks for the redemption of their circulation would be at par also. The natural result follows. The Government must first return to specie payments, and then the banks can return to specie payment, because their bonds will have advanced to par in gold.

Mr. MORTON. My friend is right in the main body of his question. Mr. President, I am going to answer that question indirectly, but I think I shall answer it satisfactorily. I lay down this proposition, that the credit of a country never can get above the value of the circulating medium in which the business of that country is done if that circulating medium is the legal tender.

Now, what is the fact in regard to our bonds? They have followed the value of gold, and it was so clear through the whole war. Your fivetwenties sold at par in legal tenders when gold was worth only 106 and at par in legal tenders when gold was worth 282. The proposition held true in regard to everything. It holds true in regard to State stocks, with one or two exceptions; it holds true in regard to railroad stocks; that is, that the general circulation of the country controls the credit of the country, and you cannot get above it. Railroad stocks that were at par in New York before the war in gold are simply at par in legal-tender notes worth only seventy cents on the dollar. What is the reason of it? Because you cannot get above that currency in which all the business of this great country, amounting to $30,000,000,000 a year, is transacted. Your State stocks that were at par before the war, as a general thing, in gold, although they are cer tainly as good now as they were then, and your railroad stocks, which, on the average, are forty per cent. better in point of average value because their debts have been paid off, are now at par in legal-tender notes worth seventy cents on the dollar, whereas before the war they were at par in gold. They follow the inevitable law that our own Government bonds followed through the war. They are governed by the value of that great currency in which the business of the country is done.

Mr. President, if this be true, it shows that the place to begin with is the circulating medium, and to make that as good as gold. You may talk about getting your bonds up to par in Europe; but to talk about getting your fivetwenties to par when your legal-tender notes

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