OCR Interpretation

The advocate. [volume] (Meriden, Kan.) 1889-1892, October 21, 1891, Image 2

Image and text provided by Kansas State Historical Society; Topeka, KS

Persistent link: https://chroniclingamerica.loc.gov/lccn/sn85029079/1891-10-21/ed-1/seq-2/

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rency, first upon faith In the promise of
ultimate payment, and secondly because
of the legal tender function given them,
and for the further reason that the note
would purchase a bond, payable at a
stated time, principal and Interest, In
money. The soldier who received the
note had the promise of government
that it should be paid in coin; the per
son who held the bond having euch
promise and no more, the government
having made no distinction between the
note holder and the bondholder, the per
son holding either until government
could pay, received money for his paper.
There can then be no valid objection
raised to the "exception" clause in the
legal tender act, save upon the ground
that the notes were not Issued as promises
to pay money, but were issued as "real
money," with but the flat of government
declaring the paper of itself, money. This
character was never contemplated and
never given in the issuance of the legal
tender currency.
You refer to the credit strengthening
act, a measure growing out of a proposi
tion which met with considerable favor
in 1368, that the government should
issue legal tender notes in volume suffi
cient to pay its bonds. The effect of the
agitation was damaging to the national
credit at a time when our obligations
were maturing, hence, upon the meeting
of Congress following the election of
that year, a resolution was passed by
that body declaring that the government
Intended paying all Its obligations In
money, and this was called the "credit
strengthening act." The act was but a
declaration that the government intended
to pay, and not repudiate its debts.
This and the exception clause in the
legal tenders afford no ground for griev
ance to the person recognizing the dis
tinction between money and notes, and
having a due appreciation of the attitude
of the government during the war, as a
purchaser upon credit, and as a debtor
pledged to final payment of its obliga
tions. To the citizen believing it better
to pay than to repudiate, and with a
clear understanding of these questions,
no defense is required for the financial
management of the government by the
Republican party from the day it assumed
control to the present time. It found
the government with an empty treasury,
small revenues, without credit and con
fronted with the greatest civil war of
modern times. It devised the best sys
tem of revenue ever put In operation
and the safest banking system ever es
tablished. Built up credit unsurpassed
by any nation on the face of the globe,
raised the necessary money to equip and
pay one of the largest armies of modern
times, prosecuted the war to a success
ful issue, having since made good every
pledge of the war period, whether the
promise was for payment of money on
its bonds, gold for its legal tender notes,
or payment of bounties and pensions to
Its soldiers. The financial record of the
Republican party, for brilliancy, patriot-
Ism and integrity, is equalled only by
the matchless military record of the na
tion, achieved by its citizen soldiery
under guidance of the same party.
Extracts you have made from speeches
in Congress at the time of the passage of
the. legal tender act,-refer chiefly to the
question, as to whether any legal tender
-.junction should be given the notes,
Jrather than to the proposition looking to
giving them legal tender function in pay
jment of government bonds, many of the
best men of the country having enter
talned serious doubts about the safety of
declaring the notes a tender in pay m en
of any class of debts.
. You claim that conditions which have
operated against agriculture for several
years have resulted largely from legis
lation, mainly of a financial character.
The fallacy of this claim becomes appar
ent upon intelligent investigation as it
shows the causes to be general, world
wide in extent, and not of a local nature,
as agriculture in other countries has had
more serious obstacals with which to con
tend, than tbxse with which American
agriculture has been confronted. With
in the last twenty years the American
farmer has been brought into sharper
competition than ever before, with the
world's labor engaged in agriculture, It
having been within that period that sta
ple food supplies from all productive re
gions, have reached the market in which
the surplus products from this country
are sold, Indian and Russian wheat sup
plies and South American meats in large
quantities having first entered that mar
ket since 1870, these products of the
cheapest labor of the world selling in
competition with supplies from this
country. During this period, European
governments containing a population of
almost two hundred millions of people,
previously using silver as money, dis
carded that metal and adopted gold as
the standard money of those countries,
thus increasing the demand upon gold,
which, together with decrease in the
world's annual product, has tended to en
hance its value, resulting in relative de
cline in value of commodities. Thus we
have had the conditions of increasing
volume of commodities without corres
ponding increase of money circulation
In the market where our products are
priced, value of money like value of com
modities being dependent upon supply
and demand in the market. Apprecia
tion, therefore, in value of gold, which
may have occurred, Is due more to grow
ing demands of the world's business from
increasing use by European governments,
than to appreciation from increased use
in this country. For while silver was
nominally standard money prior to 1873,
it was but nominally so, revenues having
been collected and public dues, Including
pay to the army that year, having been
paid In gold, very little sliver having been
used, the entire coinage of silver dollars
between 1853 and 1873 with no restric
tion on coinage, having been less than
six millions of dollars. Bank reserves
were held largely in gold, while balances
between this and other countries were
settled in the same kind of money, so
that commerce and usage, prior to any
legal enactment in favor of gold, had so
lectedthat metal as Its money, having
virtually discarded silver before any
statutory recognition of the fact. That
the supply of world's money is becoming
inadequate for the world's business,
seems to be a fact, and to this fact Is due
shrinkage in price of commodities, in so
far as money circulation has an effect
upon values. The remedy for this lies
in an enlargement of circulation of the
world's money, a cheapening of gold as
such money, which to prove effective re
quires the action of more than a single
nation. The paper currency of this
country would no more affect general
prices by cheapening gold In the world's
markets, than would the warrants of
Shawnee county issued in volume suffi
cient, and by general agreement of the
people of that county used as currency,
affect the general currency circulation of
the country, or cheapen money by in
creasing the flow to financial centers of
the nation. Should the volume of legal
tender notes, or national bank circulation
be doubled, remaining redeemable dol
lar, for dollar in gold, such Increase
would have nu affect upon prices.
Fluctuation letween relative value of
any commodity and of gold implies
change of relative volume of the two in
the market where the commodity is sold,
decline In price of the commodity Indi
cating increase in volume of such com
modity relatively to demand or decrease
in gold relatively to demand in that mar
ket. To remedy this condition Is not
within the power of any one country, as
no country could do more than to return
its gold reserves to the channels of cir
culation, which would result but in
the cheapening of domestic paper cur
rency from an abandonment of the gold
standard. The danger of such experi
ment would be that gold at a premium,
as it necessarily would be, would be held
as a commodity for speculation, thus pre
venting its flow to and enlargement of the
volume of money and cheapening of
gold in European markets.
The first and most important lesson to
be learned In economics is the fact that
this country is but a part of the world
neighborhood, a fraction of the general
commercial domain within which there
is one market, one money and one price
for staples, varied only by cost of trans
portation from place of production to the
central market, that this general system,
not due to legislation, has superceded
former conditions, when local prices
prevailed, determined by local supply
and demand and the volume of domestic
currency. This condition is the result
of the growth of civilization, due chiefly
to the use of steam and electricity, which
has brought all productive sections,
every wheat field and every piece of
grazing land of the globe, within speak
ing distance of the great centers. That
commerce without legislative aid has
builded its own government, reared a com
mercial realm wholly Independent of po
litical governments, and having by decree
of business selected gold as the money
of its realm, no nation is possessed of the
power to change this or to cheapen gold
relatively to commodities in any other
way, than by returning its gold reserves
to the channels of circulation in the
world's market. Such action on the part
of this government could Increase the
world's gold circulation, if at all, by
but a small percentage, and such increase
would be at the cost to this country of a
surrender of its use. And any currency
legislation which does not propose re
turning our gold reserve to general cir
culation in the world's market, could not
possibly affect prices, as we cannot ad
vance domestic prices above prices in
European markets, so long as the surplus
Is flowing in that direction, and any
change of currency giving such appear
ance would be a delusion, as it would
not be increase in value of commodities,
but decrease in value of local currency.
Prior to 1879, when the government was
approaching resumption, there was an
apparent but not a real shrinkage in
value of commodities, due to shrinking
volume of domestic currency. But
since resumption of specie payments no
real or imaginary shrinkage in the vol
ume of paper currency has haiany ef
feet in causing a decline in values.
The people of this country have not
been Btudents of finance and the philoso
phy of money, a fact observed by the na
tional executive silver committee, whose
chairman, A. J. Warner, speaking of de
monetization of silver; says: "It ap
pears to be a fact, however humiliating
to admit it, that In this country pretty
much all knowledge of the literature on
the subject of money had been lost. If
there was a man In public life in the
United States at that time (1873) who
had any considerable acquaintance with
the literature that arose out of the prob
lems and discussions of suspension and
resumption in England, and subsequent
measures, leading to the bank act of
1844, he made no exhibition of it Other
questions had absorbed the attention of
our people, and then came the war, so
that a generation had passed in this
country since the money question had
been under discussion, and all knowledge
of the source of money and the litera
ture on the subject of money had been
Perhaps members of Congress and
others, from whom you quote, Including
Mr. Sherman and even Mr. Stevens, at
the time of the passage of the legal ten
der act and other financial legislation
of the war period, in the expression of
views contrary to sound finance, were no
better informed at that time upon the
money question than are those people
now who labor under the delusion that
prices of commodities are influenced by
the volume of domestic currency of this
or any other country.
But you ask why was it necessary for
the government to convert its notes Into
bonds? The answer is easy, and is to be
found in the fact that the government
could not create money, and yet it was
obliged to have money, and there were
but two ways of obtaining It, namely,
taxes and loans. Government, no more
than Individuals, being able to borrow ex
tensively without paying interest, it hav
ing borrowed all it could with safety and
a due regard for its pledges upon Its non
interest legal tender notes, was obliged
like other debtors to pay interest or do
without money. At the close of the war
the government having still no money,
found it necessary to replace its 7-30 and
other matured interest notes and bonds
with longer time bonds these having
been negotiated at lower rates of Interest,
due to the Improving credit of a victori
ous government. The volume of its le
gal tender notes at a later date was like
wise reduced until the remainder could
be paid on demand, the government hav
ing thus made good its pledges for pay
ment of all its obligations. The same
reason that leads a county to the ex
change of its bonds for its warrants Is
sued in excess of ability to pay on de
mand, led the government to exchange Its
bonds for Its demand and matured notes.
And while these notes of government
would purchase Its bonds, the govern
ment could no more, with fairness re
quire the bondholder to accept govern
ment notes in exchange for its bonds
than could a county upon the maturity
of Its bonds claim the privilege of ex
changing its warrants in payment of
such bonds, as such process would be an
indefinite exchange of one class of notes
for another, without ever paying the
debt, whether practiced by governments,
states, counties or individuals.
The financial legislation of which you
complain was but the work of govern
ment In systematizing the great debt
growing out of the war. National life
and human freedom had not been
measured against dollars and cents by
the people of this country. The credit
of the nation had been strained appax
antly to Its utmost, but with the majority
of people there was no faltering in the
proposition that every dollar should be
paid according to the spirit and letter of
the contract. And whatever conditions
may attain at this time, they cannot be
chargeable to financial legislation of the
Republican party. And not being due
to legislation, but conditions of world
partnership, it is impoesslble to legislate
ourselves out, as we cannot cut abort our
partnership with the world and with the
world's system. And yet after a survey of
the great struggle and the achievements
of financial legislation In the face of the

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