Democratic Sentinel, Volume 2, Number 12, Rensselaer, Jasper County, 3 May 1878 — CAN WE RESUME? [ARTICLE]

CAN WE RESUME?

Not Gold and Stiver Enough In the United States for That Purpose. We give below an extract from that portion of Senator Jones’ great silver speech, delivered in the Senate about two years ago, in which the speaker dealt with the problem of resumption. At the present moment, when the question of resumption is before the country in Buch a form as to call for action, the facts and considerations adduced by the Senator are peculiarly deserving of careful consideration. It will be naticed that when the Senator spoke we had an exclusive gold standard, but this fact does not affect, in the slightest degree, what he says about the amount of coin necessary as a resumption fund, He holds that at least 0510,000,000 would be required, in gold and silver, as a redemption fund. It will be noticed that Senator Jones points to England’s experience as bearing out his deductions; and certainly all those economists who say that it is impossible to resume on a small stock of the precious metals have the former experience of England and the recent experience of France to appeal to.

The world's stock of coin is $6,700,000,000, of which nearly one-half is of silver. Of this sum, Europe, America, and the rest of the Occidental world employ about $3,600,000,000. Previous to the late partial demonetizations of tilver in the Latin Union and in Germany and the United States, these $3,600,000,000 consisted of, let us say, $2,000,000,000 of gold and $1,600,000,000 of silver. They now consist of, say, about $2,400,000,000 gold and $1,200,000,000 silver. By continuing to exclude silver from equal participation with gold in the currency of the United States, and attempting to resume specie payments, we occasion a demand for, say, $360,000,000 of gold wherewith to pay off the greenbacks aud furnish bank reserves, aud $50,600,000 of silver in lieu of the fractional notes. If we could Obtain these $400,000,000 of metal without drawing it from other countries in Europe or America, they would add so much to the stock of coin in the Occidental world, which would then be $2,750,000,000 of gold and $1,260,000,000 of silver. This is the answer to tbe question so far as the Occidental world is concerned. The quantity of tne precious metals needed for money aud the basis of credit in the Occidental world—that is to say, the quantity needed to maintain prices at their present level—is at least $4,000,000 000. Of this sum the United States, if it succeeds in resuming specie payments, will hold about $400,000,000. Now, let me ask, in the first place, where these $400,000,000 are expected to come from? Gentlemen may dispute the premise and contend that no such sum of $400,01.0,000 is necessary. They may point to the fact that just previous to the time of the suspension in 1862 the entire stock of coin in this country was estimated at not over $300,000,000 (Financial Report, 1861, pp. 25 and 62) of which probably not over three-fourths or $225,000,000 were in gold. Granted that this was the fact, and I have no doubt it was, it must not be forgotten that since 1862 the population of this country has increased 50 per cent., and its exchangt s fully 100 per cent. What is the proof of this? Simply that in 1861 our whole circulating media consisted of $300,000,000 in coin and $200,000,000 of bank notes, which circulated witnin limited areas at or nearly par ; whereas now it consists of not more than $140,000,000 of coin and some $750,000,000 of Government and bank paper, the latter circulating (throughout nearly the whole country) at about 87X cents to the dollar ; tay total circulation at par equal to $800,000,000. This is 70 per cent, more than the par circulation of 1861—an incontestable proof that exchanges- have increased in volume at least 70 per cent. Taking into consideration the superior activity of the legal-tender and national-bank nates over the old State-bank notes, and the improvement and development of railways, telegraphs, clear-ing-houses and other mechanisms of exchange, since 1861, it cannot be doubted that the bulk of to-day’s exchanges in this country is at least double that of a corresponding day in 1862. Suppose, however, we put it at only 70 per cent, higher; then, in order to resume specie payment upon at least as firm a footing as specie payments stood in 1861—and the universal suspension of the banks toward tho end of that year proves that it was not so firm a footing as could have been wished—we shall require at least 70 per cent, more specie than we employed in 1861. Add 70 per cent, to $300,060,600, and you have $510,000,000. Allow $140,000,000 for specie already in the country, in the banks, in private hands, and in the vaults of the treasury, and yon will need $370,000,000 in order to resume. Of this $370,000,000 the Government will need, perhaps, about $350,000,000, and the banks the remainder. But the apportionment is of no consequence in this connection. The substantial fact is that in order to resume specie payments we shall need $370,000,0C0 —say, for round ' figures, $400,000,000 —of specie, of which, under the operation of (he act of 1873, about $350,000,000 must be in gold. I now ask where are those $350,000,000 expected to come from? Again, do I fancy I bear interpellation. I sha 1 perhaps be told that a proposi oa is eveu now before Congress, a proposition from careful and able sources, aud boasting the indorsement of high financial authority, a proposition which assumes that $100,000,000 in gold will be sufficient wherewith to enable the country to return to specie payments.

I refer to a speech which has been made in the Senate. But I warn gentlemen to beware of making a mistake in respect of this matter, for a mistake will set us back many years. The British Government tried to resume in 1817, after a suspension of twenty years, but it failed, and resumption was deferred for seven other years, until 1821. If we try to resume in 1879 with $100,000,000 and fail, we may be set back a quarter of a century. Moreover, if we fail, somebody—most probably some clique of stock-gamblers—wilL make 15 or 20 per cent, out of the operation. How? Easy enough! Knowing that $100,000,000 was the limit of the Government’s ability to pay, they could easily make arrangements with the banks and depositors throughout the country to withdraw $100,000,000 in greenbacks on the eve of the day of resumption, and present them for payment at the treasury. After having drawn the last doilar of specie out of the latter, they could, by presenting an additional note, compel it to suspend again. Then gold would jgo ud once more, perhaps to the full extent of the figure from which it would have fallen; and the clique could sell their specie in the market and realize their profit. This is not only d possible occurrence, it is a probable one—a highly probable one—almost a certainty. There is nothing in the world to prevent it except two things: First, Ihe inability of a clique to raise $100,000,000 ; second, the possibility that the treasury, in offering to redeem its issues, may arbitrarily and unexpectedly prefer notes of particular numbers or dates of issne. Bnt these objections are frivolous. Experience has demonstrated that there is no difficulty whatever on the part of stock-jobbing cliques to raise $100,000,000, while, with regard to making preferred credits of certain notes, the treasury has no autnority to do so, and, if it had, the exercise of such authority would be almost certain to be defeated through treachery. Secrets so weighty as this one would be are impossible to keep. Even if it did not leak out, the clique would be certain to monopolize the treasury doors to the exclusion of all comers. In short, wealth, power, organization, experience and special training would be ranged on the one side, against a scattered and indifferent population on the other; and who can doubt which would win? Finally, even if carried out successfully, the exercise of such authority would be unlawful and unjust. We cannot resume with $100,000,000 nor with $200,000,000. Why, gentlemen, we have had $140,000,000 in specie in the treasury on several occasions during the past ten years. If it is practicable to resume now with $100,000,000, why was it not practicable on those occasions with $140,000,000 ? It was certainly not for lack of desire on the part of the Secretary of the Treasury, bnt simply because both the Secretary and Congress plainly saw that the thing eonld not be done. It is better to be on the safe side of an operation of this magnitude and importance. It is better to have a dollar more than is necessary fojr the purpose of resuming than a dollar

less than is necessary. We cannot expect to resume upon false pretenses. We cannot, and if we can We ought not, hoodwink the people or Fun the risk of failing, and, therefore, of unsettling values for an indefinite period in the future. In order to resume we must pay dollar for “deilar,” and dollar for dollar, as the law now stands, means at least $350,000,000 in gold. And now, for the third time, I ask, Where are these $350,000,000 to come from? Gentlemen may differ with me as to the sum needed for resumption. Some may believe $200,000,000 are enough, others may even consider $100,000,000. I have briefly discussed these opiuions and do not believe that less than $350,000,000 will suffice. With only $129,500,000 of Bank of England and $144,000,000 of provincial bank notes afloat in 1815, total $273,500,000 in paper, England required over $270,000,000 in Coin before she was enabled to resume. After you shall have resumed less coin may be required in the country; but in order to resume you will require a dollar in coin for every dollar of Government paper afloat, and, in my opinion, and, as shown by the experience of England, you will also have to give the national banks time to acquire an equal fund of specie before they can resume ; otherwise you may bankrupt every one of them.