Rensselaer Semi-Weekly Republican, Volume 19, Number 43, Rensselaer, Jasper County, 1 February 1898 — THE MONEY QUESTION. [ARTICLE]
THE MONEY QUESTION.
Aa Address Before the Columbia Clut 'at Indianapolis, Ind., Jan. 24, 1898, by Bobert S. Taylor. My them# is “The Money Question." I shall speak of it as a Republican peaking to Republicans upon a subject •f patriotic and party duty. There is imperative necessity that •omething shall be done in relation to the currency which can be done only l»y Republicans, The Bryan Democrats have given notice to the country that the Chicago platform is still good •nough for them, while the Populists have told us In a late manifesto by their general committee that It Is toe food for them. The gold Democrats are a remnant of Israel destined, per- a haps, to be the seed of a great party to come, but two few in number now to he effective as a separate organization, There is a large body of independent citizens ready to lend aid to the cause •f sound money; but they can do nothing except through the Republican party. The crisis is imminent; the responsibility is upon us; we are summoned to the consideration of great and difficult questions. I have said that something must be done. Let me make that plain. We have outstanding, in round numbers, $340,000,000 of Government notes, which we call greenbacks, and $107,000,000, which were issued under the law of IS9O to pay for silver bullion for coinage into silver dollars, and are sometimes called Sherman notes, mak.tog a total of about $460,000,000 of paper payable on demand at the United States treasury. But this Is not all. We have 450,000,000 silver dollars which the Government has promised to keep at par with gold, but which have an actual value of less than fifty cents on the dollar. : We have thus $900,000,000 in round ©umbers of money in circulation, all put out by the Government under a solemn obligation to preserve Its parity with gold. In addition to this we have about $200,000,000 of national bank notes; but as they are redeemable In greenbacks, or silver dollars, they comatltute only an additional superstructure on the same foundation.
The legal standard of value in the United States Is gold. The word “dollar" means 25.8 grains of standard gold coined at the mint, or other money oi equal lawful value. All contracts be tween individuals to pay money mean money which the Government has Issued or authorized with its guaranty of equality in value yvith gold. The Government can keep that guaranty only by actual payment of its own obligations in gold on demand. If it doe 6 not maintain the gold standard In Its transactions the people can not maintain it in theirs. We have thus made the Government the keeper of our consciences and sponsor for our honesty. What means have we placed in its hands for the discharge of that duty? When our greenbacks were issued they were not payable on demand. The fact of their issue was a pledge to pay them some time, and the people took them on the faith of that pledge. Pro vision was made for its performance by the resumption law of 1875, which directed that on and after Jan. 1, 1879, they should be paid in coin on demand, and that the Secretary of the Treasury Bhould make such preparation for that payment as he should deem sufficient giving him authority to issue and sell bondsMf necessary. In order to create a gold reserve for that purpose he sold bonds to the amount of $95,000,000. When the day came the treasury contained $117,000,000 In gold. I With the usual inconsistency of huipan nature, when the Government was ready t« pay gold, few people wanted It. During the following six months less than $8,000,000 in greenbacks was presented for payment; and at the end of that time the gold reserve had risen to $119,000,000. From that time until March, 1893, It was never less than SIOO,OOO, 000. There Is not, and never was, any express provision of l&w requiring th» keeping of any specified sum in reserv* for the redemption of the greenbacks A section of the Kff relating to the is sue of gold certificates directs that gehenover the gold 1b the treasury fall* below $100,000,000 no more gold certificates shall be issued. Partly from this indirect recognition of that sum ns s minimum safe reserve rtnd jwwlly froir the views of the treasury officials, as unwritten rule grew up In the department that the reserve should be main talned'at $100,000,000. And for the $346,000,000 of greenbacks which liavi been in circulation since 1879 tb«
amount was enough, so fair as that goes. But we have added to the greenbacks the treasury notes of 1890, amounting now to $107,000,000, and all the silver dollars, swelling the amount resting on the credit of the Government, as stated, to $900,000,000, with no additional reserve, or provision for any. Meantime the free silver agitation arose, and with it a doubt as to whether the Government would pay its obligations in gold or in silver. Some of those obligations contained no statement as to + he kind of money In which they were to be paid, being simply payable in “dollars”; and some contained the word “coin." The silver dollars are coin, and they are legal tender, and It would have been within the letter of the law, and would be now, to pay everything with them. The weakened confidence which this situation was found to produce reached an acute and perilous stage In the spring of 1893. , There has been much discussion as to the cause of the panic which began at that time; and as is usually the case when two political parties are trying to put the responsibility for, a public disaster on each other, i L has not been entirely fair on either side. It was claimed by the Cleveland Democrats that it was due entirely to the silver legislation of recent ye&rs and the continued coinage of silver under the Sherman law; and the first effort of President Cleveland was to secure the repeal of so much of that law as required the purchase of silver by the Government. On the other hand, it was claimed J>y some Republicans that the trouble was due wholly to the falling off of revenue resulting from apprehehded tariff legislation. The truth, as usual, was between these extremes. The fundamental trouble was the threatened slump to the silver standard. Silver was continually falling in value, and we were continually coining more and more of it. The Democratic party was plainly drifting toward free silver. The vice-president was on that side. At the same time the diminishing revenue, the probability of radical tariff changes, and the general uncertainty of the situation aggravated the trouble—ln fact, constituted the Immediate occasion of It. With a full fi treasury, an abundant revenue, and no apprehension of unfavorable tariff legislation there would probably have been no break-down at that time.
On the other hand, if there had been no money question in the alf; no threat of a change of standard, or degradation of the quality of our money, A mere deficit of revenue would have produced no panic. No one ever doubted the ability of the Government to pay its debts, or that It would do so in some kind of money. But when it began to look as though the people might 'become so infatuated with the idea of cheap money as to go to free silver, the foundation of confidence broke down. The deficit of revenue precipitated the crisis because it was rapidly bringing the treasury to the point where it would be unable to continue redemption in gold of the Government’s notes. But it was only a question of time. We could not have gone on in that course long without a crash with ever so much revenue. The repeal of the compulsory purchasing clause of the Sherman law, the repulse of the free sliver assault, the election of President McKinley, the passage of the Dingley tariff and the good crops and prices of 1897 have restored a measure of confidence and prosperity. But so far as the law and the powers of the Government in reference to its obligations and our money are concerned, we are exactly where we were in 1893. save only that we have repealed that part of the law of 1890 which peremptorily directed the purchase of silver. There is nothing in the law to compel Ihe Secretory of the Treasury to stop coining sliver dollars. There Is nothing to compel him to pay the greenbacks or bonds in gold. He may pay silver if he chooses. There Is no law requiring any pne to pay gold Into the treasury, or any gold reserve to be maintained. The general expenses of the Government and the redemption of Its demand notes all come.out of the same general balance In the treasury. If there happens to be enough for both, well and good; If not, the greenbacks have to take the chances. We are In the situation of a man running a store and a bank at the same time, with no provision for payment of bis circulating notes except the contents of his cash drawer from day to day. More than all, the law still requires that the redeemed greenbacks shall not be cancelled, but paid out again, to come back for redemption over and over, as often as the holders see fit to bring them. We have In fact, since 1879, redeemed our whole greenback circulation once, and almost half of It
twice. We have paid $507,000,000 of our notes in gold, and they are all outstanding yet, except the few that happen to be in the treasury from day to day. , Such a situation is dangerous. Our ship of state floats to-day with her priceless freightage of human life and interests as though she were staunch and strong from stem to stern; and all seems to go well. But under the water line she has a great hole In her hull covered only with canvas. If It should give way, what? THE ST. LOUIS PLAT'FORM. The Republican party in convention at St. Louis in 1896 gave two great pledgee to the country. One of theee was to pass a tariff law which would afford adequate proteePon to American Industry, and adequate revenue for the needs of the Government. The enactment of the Dingley bill was a prompt performance of that pledge. Its sufficiency In the matter of revenue Is yet to pass a final test; bufcwe have reason to believe that it wIH be as successful In that respect as It has been In kindling anew the dead fires of Industry. The other was in these words: * “The Republican party is unreservedly for sound money. It caused the enactment of the law providing for the resumption of specie payments in 1879. Since then every dollar has been as good as gold. We are unalterably opposed to every measure calculated to debase our currency or impair the credit of our country. We are therefore opposed to the free coinage except by International agreement with the leading commercial nations of the world, which we pledge ourselves to promote; and until such agreement can be obtained the existing gold standard , must be preserved. All our silver and paper currency must be maintained at parity with gold, and we favor all measures designed to maintain inviolably the obligations of the United States and all our money, whether coin or paper, at the present standard, the standard of the most enlightened na> tious of the earth.”
It was wise to take up these subjects s’eparately for legislation, and to deal with the tariff first. But the subject of the currency Is no less Important, and our duty to act In regard to It, how that the tariff has been disposed of, Is no less Imperative. A party that is too cowardly or Indifferent to put its platform on the statute book when the people have placed it In power, or use its best efforts to do so, does not deserve to stay in power and will not stay very long. . That part of the money plank of our platform which relates to international free coinage of sdlver has been performed promptly and faithfully, 4 as President McKinley performs every duty which the people lay upon him. Among the first acts of his administration was the appointment of three distinguished citizens—Senator E. O. Wqlcott of Colorado, ex-Vice President Stevenson of Illinois, and Gen. C. J. Paine of Boston, commissioners to go abroad and confer with the governments of the European nations and ascertain whether they would unite with us In an International conference having for its purpose the establishment of a system of free silver coinage upon a common and agreed ratio. No abler men could have been found for that mission. They accepted it, went to Europe, used their best endeavors, but failed to accomplish anything. Not only this, but the situation has changed so rapidly since the date of the St. Louis convention that the establishment of a double standard by international agrement has become, as 'I believe, impossible. In the few months .that have elapsed since that time silver has fallen over fifteen per cent. The real value of our silver dollars was then about 52 cents; now It Is 'about 44. And yet it pays to mine silver. The course of price and production since 1890 has been as follows:
World’s prot . Market value, ductlon, Year. per ounce. ounces. 1890 $1 04 120.000.000 1891 98 137.000.000 1892 87 153.000,000 1893 78 106.000.000 1894 03 167.000.000 1896 65 174,000.000 The%rice has fallen and the output has Increased. I have no exact data of production since 1895; but the price is still falling and the production still Increasing. In view of this maintenance of production, notwithstanding the decline In price, bow much do you think would be mined If all the nations of the earth .should agree to give it free coinage at . 10 to 1, which Is equivalent to $1.29 *er ounce? How much wheat do you think would be raised if there were a guaranteed market for it without limit at $2.50 a : bushel? . Of course, It Is uot to be said that things would work In JUst that way. No one knows exactly bow they would
work. There would be such an upsetting of values that It Is beyond human ken to foresee how they would Anally re-arrange themselves. But we do know that it would give a great stimulus to the production of silver and Increase the quantity of it enormously. For a hundred years prior to the middle of the/present century the relative values of silver and gold were rarely exactly 10 to 1 by weight, but never very far from It. If that were the situation now, and we had good reason to believe that the quantities of these metals stored In the earth and the cost of getting them out would continue to be such that we could regard that approximate relatlop.of value as a permanent one, there would be reasonable safety In international free coinage. But the contrary Is the fact, not only In regard to the present ratio of value, but in regard to the future, so far as we can forecast it There Is every reason to believe that the ratio of real value between silver and gold never will be 16 to 1 again, or anything like it The world’s governments are very powerful, but they cannot work miracles, either singly or combined. They cannot create an equality of value which does not exist in fact. They could adopt an international double standard upon any ratio they might agree on, but they ought not to do it unless it would be a good one. And it would not be a good one unless it rested upon a relation of value between the two metals composing it which was substantially true and substantially stable. An attempt to found such a standard now upon silver and gold at 16 to 1 would be a simple deAance of all the lawa of trade and would be bound to fail in the end. Of course, there might be international free coinage at'some other ratio —one which would approximate the truth for the time being; but the difficulties In that direction are scarcely less than in the other. One of these is, that the selection of any such ratio would be a leap in the dark. So many discoveries are being made of silver and
gold deposits and so many improvements In machinery and processes for treating them, that it Is impossible to foresee the future relation of the metals with any assurance of certainty whatever. If it should b« proposed to act upon the only certain knowledge we have, and adopt the present market ratio we would meet several serious difficulties. In the Arst place, It would outrage the sensibilities of our free silver friends more violently than the crime of ’73. Sixteen to one is the sacred symbol of tneir sect Senator Wolcott did, indeed, give U out abroad that, for the sake of harmony, he might accept 15% to 1; but 85 to 1 would be spurred at the mention.
Id the next place, to call In and recoin the world’s sliver at 35 to 1, or thereabouts, would Involve a sacrifice of more than $2,000,000,000 besides the expense of recolnage, with no assurance when It had been done that the new ratio would hold good for twenty years. No one would agree to that. Finally free coinage on any such tlo as that of present market values would give us a silver coin so bulky and heavy that the people would not use It. They will not use the ones we have except to a limited extent. It Is the practice of the Government to pay express charges on silver coin from ihe sub-treasuries to any part of the country where It Is wanted. But even by that process It Is impossible to force It Into circulation beyond a certain point. During the year ending June 30, 1897, the Government paid out $72,500,000 In silver, of which,s4l,ooo,ooo was shipped by express, prepaid, at a cost to the Government of $81,500. During the same year $73,200,000 In silver coin came back to the treasury at the expense of the senders; leuvlng $700,000 less In circulation at the end of the year than there was at the beginning. The Government has paid over a million dollars Tn express charges on silver sent out without any Increase In the amount in circulation for eleven years past. What then do you think the people would do with sliver dollars twice as large as our preaeoit ones, and other coin* In proportion? For years I hoped to see the vexed question of the standard settled by International free coinage. But I have given up that hope. If It was ever possible It Is so n~> longer. Our Government has done all hut It can for sflveP) both at home dud a,brond. We began buying and coining silver dollars under the Bland bill in I&7B—twenty years ago—at the rate of 12,000,000 a month. Silver bullion was then worth $1 .15 an ounce, making the rel 1 value of the silver dollur 89 cents, we hoped that by thus enlarging the lise of silver we could so lncrense Its market value aa to bring It back to par ,vlth
gold at our legal ratio of 16 to 1; which is equivalent to $1.29 per ounce. But the experiment, failed. For' twelve years we continued to coin $2,000,000 a month, and,yet the decline went on, until the price stood at 93 cents per ounce in 1888-9. At that rate 'our silver dollar was worth onlf 72 cents. But We did not give it up even then. On the contrary we determined to make a greater efTort. By the Sherman bill the Secretary of the Treasury v was directed to buy 4,500,000 ounces a month—an amount equal to the entire estimated output of our mines. Again the experiment failed. There was a little spurt of upward movement and then a steady and rapid decline, reaching 78 cents in 1893; which gave us a silver dollar worth 60 cents. At that point we gave up the experiment, repealed the purchasing clause of the Sherman law and quit buying silver. And It is well that we did, for it has fallen way down since. The last quotation I have seen was 58 cents, which would give us a dollar worth 44 cents. Since 1878 we have spent $464,000,000 in the purchase of silver, whicu would sell now for $206,000,000. We have thus sunk $198,000,000 in trying to hold up the price of silver, and have failed in the attempt. In addition to this we have used our utmost efforts to induce other nations of the world to unite with us in some arrangement on the subject. An Inter-
national conference called by us was held In Paris In 1878, another at the same place in 1881, and another at Brussels in 1892. «In all these we have used our utmost efforts to bring about some amicable international agreement upon which free coinage would be possible, but without success. And Anally, within a few months past we have made a renewed effort to reopen the subject only to fall to receive encouragement enough to warrant even the calling of a conference. The time has come to put that dream behind us. The settled Judgment of mankind Is against any double standard. The world’d standard is gold. If we wish to keep pace with the march of its civilization we must maintain that standard. And if we are to have the beneAt of it to the full we must make it the real standard, remove all doubt of its perpetuity and square our whole monetary system to it. It is only thus that we can keep the promise of our platform. It is only thus that we can, in the language of that platform, “maintain inviolably the obligations of the United States” and keep “all bur money, whether coin or paper, at the present standard, the standard of the most enlightened nations of thb earth.”
Our monetary system, the defects In It and the beet remedies therefor are subjects which have engaged the attention of many able men, and numerous schemes for Improvement have been proposed. It Is possible to occupy only a small part of so great a field In a single address, and I shall confine myself chiefly to the plan which has come be- | fore the country in the report of the Monetary Commission promulgated under the auspices of the IndlanapoMa Monetary Convention. What I shall say further will be mainly In explanation of that plan, not as the only one i that will serve, but as one following sound general principles, and praotlc- j able and workable In Its details.
HISTORY OF TIIE MOVEMENT, i The Indianapolis convention orlginat- | ed In an Invitation sent out by the Indianapolis Board of Trade shortly after the last election to members of slm- j liar bodies In a number of western cities to meet In conference with refer- 1 ence to the financial situation of the 1 country. The conference was held, ' and resulted In the calling of a general convention of delegates from commercial bodies throughout the United States, wrtileb assembled In Indianapolis on Jan. 12, 1897, and was In session two days. The convention adopted a brief statement of principles and appointed an executive committee, which It Instructed to proceed to Washington at the opening of the then anticipated ■ special session of Congress, and en- ! deuvor to procure the jxassage of a law authorizing the appointment of a monetary commission by the President. | The suggestion was favorably received by the President and the Republican ; Senators and Representatives, but It 1 was considered beat not to take up the subject until after the passage of n tariff bill. Aa soon as that had been done ' a bill providing for the creation of n commission was passed In the House. It was not acted on In ’he Setiqle The committee of the Imlln on pul Is convention, In pursuance of the Instructions under which It was proceeding, then appointed an unotllclal commission of eleven members. This commission met at Washington. Sept. 23, lhti7. and on Dec. 17 following submitted its report to the committee by whom It had been appointed. That report was given to the public by the committed through, the presa; and the plan set forth In it
has been embodied in a bill whl«4 hat been introduced toy your own Representative, Mr. Overstreet, and is nowjf pending in Congress. The committal nas also issued a call to the convefl tion to reassemble at Indianapolis 9m. consider what further action should taken in the premises. The subject is now ripe for discussion! The House Oommltt* on Banking and Currency has before it several bills prepared by Its own members, alse a bill prepared in the office of the Secretary of the Treasury, and a WH covering the plan recommended by the Monetary Commission. I am not proposing to discuss the comparative merits of these various measures. The occasion will permit only a general view of the subject; and I can present such a view more intelligibly, I think, toy reference to the plan proposed by the Monetary Commission than In any other way. THE PLAN. Of this I may say, Amt, that the plan is intended to be a complete one; that is, one which, if embodied in the law, would work out, step toy step, a gradual reformation of our currency, and give us in the course of ten years a system as perfect as can be devised In the present state of our knowledge. And this it would do by a process so smooth and easy that no one would discover from any Jar or disturbance in business affairs that any change was going on. The Arst step proposed in this plan is a simple declaration by law that aS the obligations of the Government now existing or hereafter contracted shaH be payable In gold unless otherwise expressed. The reason for such a declaration Is this: By the law as it Is to-day tbs standard money of the United States Is gold. The Government has solemnly pledged its faith that all the money In circulation shall be equal to gold la value. The obligations of the Government (not including gold certiAcatea, silver certiAcatea and currency certificates, all of which are mere deposit receipts, redeemable in kind) are payabls simply in “dollars,” as is the cas| with the greenbacks, or in “coin,” as Is tbs case with the treasury notes of and most of the bonds. At the sams time the sliver dollar is by law a legal tender for all dues, publlcand private. Hence, according to one part of th* law the treasurer of the United States would be entitled to pay the bond% greenbacks and Sherman notes In diver; while by,another part of the law the Government bos given its promise that the silver dollars and all other money Issued by it shall be kept at par with gold. The free silver advocates are Insisting that the Government shall take advantage of one part of the law and pay its debts in silver, and thea disregard the other part of the law. Six million voters endorsed that policy at the last election. Such a course would be a Aat repudiation of its obligations by the Government There is neither moral nor legal difference between the repudiation of 56 per cefll of a debt and the repudiation of all of It.
Inasmuch as the Government lssueo all our money Itself except the bank notes, and they are redeemable ia money issued by the Government, tbo value of the money In which we must pay our Individual obligations is controlled by the action of the Government. A greenback Is worth whmt tha treasurer of the United States will glvn me for It and not a cent more. The moment he refuses to give me anything but slider for It, It Is worth Us faco In silver, and no more. The moment he does that all tb. money In the United States except the gold will drop to a sliver value, nml all business will bo on a sliver basis; aud we will all become repudiutors whether we will or no. Under the law as It stands William McKinley and Lyman J. Gage could put us In that hole to-morrow by four words. All they would need to do would be to say to Assistant Treasurer Jordan at New York; “Pay greenbacks In silver.” These contradictory provisions of the law are Impairing our credit, and costing us more money than we know. In February, 1895, the Government bought 3,600,000 ounces of gold coin—equivalent to $<12,315,400, for the protection of the gold reserve. By the terms of the purchase the Government had an option to make the bonds papable In “gold coin” at 3 per cent Interest or In "coin.” simply, at 4 per cent Interest. The President applied to Congresn, which was then In session, for authority to make the bouds payable In gold coin, but that body declined to give tha authority, aud the bonds were Issued at 4 per cent. We made a cash loss by that transaction of $539,000 per annum in Interest for thirty years, or a grand total of over $10,000,000. At the same time the refusal of Gonffress to authorize the Issue of bonds specifically payable In gold was not altogether without reason. The eubHtaiidlug bonds are mostly payable,ln “coin." The question whether will lie paid In gold coin or silver coin Is a very serious onfc. And the Issue of a miyw set of bonds payable specifically In gold cola might he the foundation >*f an imminent—though not a good one. in my opinion, that the hand* payable In "eoln" might lie paid 111 silver. All this uncertainty would be remove ed by an explicit dec hi ration In the law .Unit all the obligations of the Government, past and future, are and shall bs payable In gold, unless otherwise provided In the contract. The Government has treated tht-fn aa so payable*
•ad has paid them In that -way, and ■mat continue to do so if the gold Standard la to be maintained. Bat the country has no assurance that they will h* «> paid except the general declaration of policy contained in the law and tta confidence that the President and Secretary will maintain that policy, ftach a condition of law ought not to exist. It leaves the most vital question which affects business hanging in mid-air; the most momentous of all issues depending on the will of one man Scarcely less injurious to the general food Is the effect of this ambiguous situation of the law in its tendency to confuse the minds of the people and expose them to misleading influences. When a free silver orator talks to his audience about the injustice of paying Government bonds and notes in. gold, when the law says In terms that silver dollars are legal tender, his hearers may not see the fallacy of the argument. They may not see that as the Government made the silver dollars itself, and put them out at par with gold, and has promised to keep them as good aa gold, it can not in honor pay its own debt with them unless it is ready to take them back the next minute and five gold for them. Otherwise it would by its own act break Its promise to preserve the parity of the two 1 kinds of money.
If we could only remove these two ambiguities from the law and dispel all doubt In the minds of men as to the reality and perpetuity of the gold standard In the United States, our public eredit would rise at once to the highest place known among nations. Our bonds would find buyers at 2 % per cent. Interest, and we could refund our bonded debt, If we do not wish to pay it, at a saving of many millions per annum. This, however, would not be all, nor the greater part of the gain. As I have pointed out, our money, except the gold, all consists of or rests upon Government obligations. Everything hangs on the credit of the Government. Unless that be kept spotless, everything else will become tainted. As long, therefore, as the present ambiguous condition of the law continues, there will be a margin of doubt entering Into •very business transaction among men. livery debtor in the land is paying a penalty for that doubt to-day in high interest. The men who sold gold to the Government In 1895- were willing to abate one-fourth of the Interest on their bornjp to have that doubt removed In that particular transaction. If we could remove It altogether froui every transaction there would soon follow a like saving in interest f6r all of us. The amount of that saving on the aggregate of State, county, municipal, corporate and private Indebtedness in the United States would be a sum beyond my power to estimate.
DIVISION OF ISSUE AND REDEMPTION. The next important feature of the plan of the commission is in the provisions recommended with a view to greater security in the redemption of the demand notes—the greenbacks and Sherman notes. I have pointed out that, as the law now Is, there is no fund for the payment of these obligations except the general balance in the treasury applicable alike to the payment of all dues. Hence, whenever a deficit of revenue occurs or is threatened, there is instant apprehension that the Government may not be able to meet its demand obligations for want of funds. In order to remove this evil, It Is recommended that a separation be made between the ordinary fiscal operations of the Government, which consist In the
collection of public revenues and the payntfent of governmental expen St's, ar>d its operations In connection with the issue and nedmeptlon of Its notes which circulate as money. To this end it is proposed thtut a division shall be created In the Treasury Department to be known as the Division of Issue and Redemption; that the gold reserve and silver bullion and silver dollars shall be transferred to that division; and that the whole business of issuing and redeeming shall be carried on there. The gold reserve so transferred Is to be a sum equal to 25 per cent, of the greenbacks and'ljhennan notes, and 5 per cent, of the silver dollars, which would make about $135,000,000; and is to constitute a common fund for the redemption of the notes nnd exchange for silver dollars, and be used for no other purpose. This redemption fund is to be maintained from surplus
revenue to be transferred from tlie general treasury to the Division of Issue and Redemption when a surplus exists. But if the fund should become Impaired and no surplus be available In the general treasury to replenish it. the Secretary of the Treasury to have authority to sell bonds for that purpose. • In order that there may never be any occasion to take money out of the re* demptlon fund to pay current expenses, It la recommended that In case of a deficit of revenue the Secretary of the 'Treasury be authorized to Issue short time obligations to tide over the deficiency until Congress can provide funds to make It We are redeeming the Government notes in gold now; and when the revenue falls short we have to borrow. It will add nothing to our present burden In that respect to provide a separate di vision In the treasury'to have custody of the funds and do the business, n*. the contrary, It will diminish the burten by Increasing confidence in the cer-' talnty of redemption. THE SILVER CURRENCY. It was considered by the commission that provision he made bf law
for the exchange of gold for silver dollars on demand. Such an exchange, in strict sense of the word, is not a redemption. The silver dollars are not promises to pay, like the greenbacks. The Government has simply agreed to keep them good as gold. These are the Words of the law: '
“It Is hereby declared to be the policy of the United States to continue the use of both gold and Silver as standard money, and to coin both gold and silver into money of equal intrinsic and exchangeable value, such equality to be secured through International agreement, or by such safeguards of legislation as will insure the maintenance of the parity in value of the coins of the two metals, and the equal power of evjgry dollar at all times in the markets and In the payment of debts.” The Government cannot make a silver dollar equal In value to a gold dollar by merely saying that it shall be so. Its promise to preserve that equality means that it will do whatever may be necessary to that end. We have had such confidence 1n that promise that we have accepted the silver dollars as equal to gold In value upon the faith that the Government would do what-
ever might be necessary to keep them so. But the vote for Mr. Bryan was notice that nearly hall of the people were In favor of repudiating that promise, and letting the silver dollar take care of Itself. The seven million citizens who voted the other way ought not to be content with a mere count of the votes, nor with the Installation of a President who will keep the promise while he Is In office. That great veralct ought to be entered of record, and pass Into Judgment In tne form of law. And there Is no form of law which, will give positive and practical effect to that verdict except one which will give the holder of a silver dollar the right and opportunity to exchange It for a gold dollar If he desires to do so. The only objection which any one who believes in maintaining the value of the silver dollar at par with gold can make to this suggestion is that it might put on the Government an added burden—that the silver dollars might be used to raid the treasury In the endless chain fashion. The plan I am discussing contains a provision intended to guard ngainst'that danger. It Is to put our silver dollars into a form In which they will do the small, current business of the people, and so be kept in such constant and universal use that they will not come to the treasury for ex-
change. We have now in circulation greenbacks, Sherman notes, bank notes and silver certificates in denominations of $5 and under, amounting, in ~ round numbers, to $354,000,000; and about 60,000,000 silver dollars In circulation in specie; making the total amount of money in use, exclusive of gold, in denominations of one, two and five dollars, $414,000,000. We have, altogether, some 452,000,000 sliver dollars. Hence If we would withdraw all our paper money other than silver certificates, under $lO, and transform all the silver certificates over $lO in\o smaller ones of sl, $2 and $5, we would have use for nearly all our silver Cellars In the form of coins, and certificates of $5 and under. These would be scattered over the entire country In banks, cash drawers and pockets, doing the daily work of small exchanges and payment. It wouyi be Impossible to get that kind of money together In large amount for presentation to the treasury! No one would have any amount on hand at any one time; and the banks would not let it go in large quantities. It Is the business of a bank to meet the wants of its customers. It. is expected to have on hand supplies of money In the forms which they require
for paying workmen, buying products and transacting business of all kinds. A man could pick up a few thousand dollars In small bills easily enough, but he would have to scour a wide extent of country to get a million. It was considered by the commission to be entirely certain that under such conditions no great volume of sliver dollars will be presented for exchange; while at the same time the opportunity to make the exchange will sustain the value,however few may be presented. The chief weakness of our currency system Is the lurking fear that It may tumble to a silver basis. We have given a general pledge to the country that our silver money shall be kept as good ns gold, but we have provided no specific menns for keeping It so. Let us redeem the pledge by providing the means. So shall we establish nnd strengthen confidence. The stronger the confidence the less will be the burden of keeping our promise. We could go this far—enact as law the provisions I have discussed,- and no more, with Incalculable advantage. We would then have: (1.1 The express and formal pledge of the Government to maintain the gold standard In its own payment of Its own debts. It would be nothing but words, of course, but words of mighty meaning. The faith of a government Is the most sacred of earthly engagements. It binds all the people alike—as well those who dlsßent as those who concur. We have had the gold standard In this country for sixty years, as matter of fact, and by express law since 1873. A movement has been on foot for several years to Introduce the silver standard by free coinage of that metal. It has hneu voted dowu; but the question Id. , and will remain open until wo close It by a further declaration of law. Wi#U Is the use of an election If It settles nothing? The way to make It settle something Is to embody the result of It In law. (2). The separation of the business of • ' - v. ■ •d
issuing and redeeming notes from that of collecting revenue, and paying expenses, with provision for the maintenance of each branch of the business independently of the other. This would demonstrate by acts the sincerity of the words. It would “mean business.” It would inspire confidence. We would not be so easily alarmed as we are now. A deficit In the revenue would involve no danger 6t panic. J (3). The Government would keep Its promise In regard to the silver dollars In a way that we would all understand. There was a great deal of confusion on this subject at the opening of the campaign of 1896. Comparatively few persons understood the situation. The silver dollar seemed to pass current on He merits as a coin. To one who looked at It In that way 4 was not easy to see what harm would come from more of them. Half the work of the campaign was In explaining why the silver dollar was current at par with a real value of only 50 cents. And then the explanation was only half satisfactory, because we had nothing to show but a general promise of the Government without means provided by which it could be performed. It will clear ujs the subject and help the people to a better understanding of the whole situation to supplement that vague sort of guaranty with some gold in the cash drawer ready for exchange for silver dollars. A boy can understand that. These provisions, with nothing more, would make no change in the quantity or kind of our money. Wfe would continue to have Just what we have now, and with no Increased cost to the Government. But its quality would be enormously improved. RETIREMENT OF GOVERNMENT NOTES. • *
The members of the Monetary Commission were called upon by the terms of thedr appointment to formulate the best monetary scheme they could think of—one applicable, of course, to the conditions of life and business In the United States, and to be capable of adoption by a gradual process which would produce no Inconvenience in the operation; but, to these limitations, to be as perfect as It was within their power to bring forth. The discharge of that duty necessarily brought up the question whether orn6 a paper currency issue by the Government, like our greenbacks and Sherman notes, is the best form of paper money. It was* the judgment of the commission that it is not; and the plan recommended by It provides for the retirement of these notes by a gradual process extending over a period of ten years or more. Is that a wise recommendation? The Republican party has been the friend *of the greenback* At first we had to defend it against the attacks of those who opposed its issue, and denounced it when issued* as worthless rags. Then its adversaries shifted their ground and proposed to make flat money of it by Issuing it in unlimited quantities with no provision for its redemption. We stood by it as an honest note, honestly Issued and to be honestly paid. We won that fight When John Sherman opened the treasury doors on Jan. 1, 1879, and said: “I am ready; here is gold for your greenbacks.” Later it was proposed to dishonor the old note by paying It off in 60-cent silver dollars, and again we came to Its rescue and saved Its good name. It is not strange that Republicans should be attached to the greenback. But the question is not one of sentiment. It Is cold business. Are government notes the best form of paper currency—best for us, best for the government, and for all Interests concerned? If the greenback has spent Its day of usefulness we shall honor it and ourselves most by paying It off In good gold and retiring 4 from service. In that spirit let us take up this subject. WHAT IS GOOD MONEY? There Is a disagreeable flavor of pedantry In the discussion of abstract and theoretical questions in an address like this. But I am here to discuss the money question; and all that I shall say will be as tinkling brass unless I make clear to your minds my conception of the nature and functions of money. For our present purpose I know of no better description of money than that It is a labor-saving tool. Human Industry consists chiefly in the production and interchange of iymmodules. Among civilized men the business of interchange is scarcely less important than the business of production. Money is the tool by which interchange is effected. Men could get along without mimey in the same lame and Ineffectual way In which they could get along without harvesting machinery. wagons, locomotives, or other tools of industry. A farmer could pull his wheat wMth his hands, thresh it with a pole, carry it to town on a horse and parcel It out among those with whom he deal* —a bagful to the doctor, another to the blacksmith, and so on. But by selling It for money and using the fjoney to pay his debts and make his he saves much time and labor. To be a good tool of business money must b j capable of two uses. It must be a tr’ic-measure of value; and it must be a convenient medium of exchange. It W impossible to exchange things or deal/in them without some way of immuring them. A idle of wheat is an unfljown quantity until w» measure It In Vushels or pounds. That tells us bow
much there is of it. Bat In order to bay or sell H we mast apply another measure to It; we must have a measure of Its value. ?: As a measure of length must have length and a measure of weight must have weight, soa measure of value must have value. Value is a very different thing from length, or weight, which are purely physical qualities. We could agree on any length we pleased and call It a foot, and measure all lengths by that standard. But Value depends on need, desire, supply, demand, and a multitude of complex circumstances. There Is a world of learning on this subject which need not enter. It Is enough to say that the value of a thing rests on the extent and intensity of human desire to possess it, and the difficulty of obtaining It. That which all men want very much and Is very hard to get is very valuable. That which men generally care little about and Is easy to get has little^value It Is possible to use any form of property as a measure of value, and many such have been used. Grain, tobacco, living animals, the skins of deed ones, and - many other commodities have
served as money at one time and place apd another In the world’s history. A great step was taken when gold and silver became the standard money of the world. It took men centuries to reach that point. Centuries later the next great step was taken in the introduction of money, which in*modern days has been multiplied in its forms and uses until only a small fraction of the business of mankind is done by means of coin. And so, not as a thing made to order, or devised for the occasion, but as a part of the evolution ■of the race, that vast department of its life constituting its mechanism of exchange has come into existence. We have come by our money as we have come by our clothes—by selection, invention, trial, experience. I have spoken of money as the tool of business. The comparison is a helpful one to me, and I would like to make it so to yon. Money is a value-measuring and property-exchanging tool. I can Illustrate my meaning in these expressions best by turning for a moment to measuring tools of other sorts. The simplest unit of measurement is that of length. It requires g standard to begin with, which may be an actual length arbitrarily chosen, and fixed or defined in some way that will taake It certain. We may call that a yard, and suppose that such unit is defined by law and exemplified in standard yard measures deposited in public offices where they are accessible to all the people for the purpose of comparis&n. From this standard the people develop as many different kinds and forms of length-measuring tools as they need to use. The carpenter wants a steel square at his l>ench and a folding rule to carry in his pocket. The merchant wants a yard stick. The surveyor wants a long chain. The draughtsman wants a delicate rule graduated to six-ty-fourths of an inch; while the manufacturer of watches and optical Instruments wants tools that will measure to a thousandth of an Inch. All these tools rest for their authority and value upon one standard. If they depart from that they have no value at all. As long as they adhere to that they dan be multiplied In form to any extent wtych the convenience of men may require. And in this multiplication the invention of man comes Into play, the object being to produce tools which will do all kinds of human work with the utmost excellence and the least labor. When we come to value-measuring tools we have very much the same conditions. We must first have a standard, and just as the standard of all lengthmeasuring tools must have- lengtn so the standard of all value-measuring tools must have value. But value Is a much more indefinite thing than length. It Is not a mere physical property of matter. It rests In the estimation of mankind. The standard of value must therefore be some form of property which is highly estimated by men, and which they will always be ready to accept In exchange for any property which they have to dispose of. Many centuries ago mankind settled down by a general concurrence of choice upon gold and silver as forms of property suitable to express their conception of value. As between these two the world was comparatively indifferent until within fifty years past. But within those fifty years the worl& has made more progress in /ill things that relate to manufacture, trade and commerce, than during centuries preceding. These changes have created a necessity for a more exact, unchangeable and widely accepted standard 6f value than can be furnished by two things Interchangeably used. Let me Illustrate this by reference to the greatest of these modern developments. Every railroad man understands the use of the standard clock in the superintendent's office. As a time-keeper it may not be perfect. It may gain or lose a second or two in a month. But If It be a good clock, and the employes all set their watches by it daily it will serve the functions of a standard. But suppose the company should set up two clockß actuated independently of each other and each subject to some irregularities of its own, and make each ciock a standard for all employes equally with the other. It would be impracticable to operate a railroad in that way. If the trainmen treated them alike nnd one engineer set his watch by one of them, and another by another, the running of trains would lie hazardous and uncertain. If the company had no more sense tlmn*to set up a double Standard of time of that sort the trainmen would be compelled to remedy the blunder of the company as well as they could by agreeing amour themselves that they would always set their watches by one of the cloeks In disregard of the other, or else' set them by the one which was faster or the one
which was slower. By thus either disregarding or.e of the standards entirely, or acting upon a common principle of choice between them, they could keep their watches pretty nearly together, and run their traliis with comparative safety. It is exactly so in money affairs. If two clocks could be made that would run together exactly they would be in effect one dock. And while they would furnish what you might call a double, time standard, it would be in reality a single time standard. If gold and silver would run together in a constant relation of value we could have what we call a double standard. But it would be, in effect, a single standard! And as they will not run together, the effect of setting them up as equal standards of value is to compel mankind to do exactly what the engineers would do if they were compelled to take their time from two clocks which would not run together. The world must either accept one standard in the transaction of its business and reject the other, or it must, upon some common principle of action, take that which is lower or higher for the time being. It does in fact do both. In its large, international transactions it uses gold as the measure of value, no matter what may be the law or the custom of one nation or the other in its domestic affairs. In dealings between individual citizens of., a country having a double standard the actual standard is the metal which is the cheaper for the time being. This is in accordance with Gresham’s law (which was mentioned occasionally in 1896) that the poorer money drives out the better. It is easy to see why the world has chosen gold as its universal measure of value. The first forms of money—tows, skins, shells, etc., were inconvenient. It was a great step in advance to substitute metals, including, as was done at first, iron, copper, brass, and bronze. It was another step forward to, narrow the list to silver and gokft and it was but another step of the same kind to come at last to gold.
In all this the world has been simply hunting the best value-measuring fool. I am not intending this as an argument for the gold standard. I assume that we that an<j are intending to keep it, in law as well ds practice. The point I make now is, that the first requisite of a good money system is a settled and determinate standard. Our present standard is gold, and its unit is a lump “of pure gold weighing 23.22 grains troy, or 25.8 grains 900 parts fine. The law calls that a dollar. Gold could be used as money and was so used for ages without coining, being estimated by weight. The object of coining it is simply to certify by authority of the government the weight and fineness of each piece, and so make It a better labor-saving tool. When we see a ten-dollar gold coin we know at once that it contains 258 grains of standard gold, and we are saved all the labor of weighing it or testing its purity.
Just as men have found it necessary to their highest convenience to multiply their length-measuring tools in a great variety of forms they have found it necessary to multiply their exchangemaking tools. We have silver coins, nickel coins, copper coins, bank bills, bank checks, certificates of deposit, bills of exchange, drafts, letters of credit, postofflce orders, express company ordert, telegraphic orders and promissory notes. Each of these, like each tool in a carpenter’s chest, has some particular use to which it Is better adapted than any other form of money. A cent for a paper, a nickel for a car fare, a dime for ft shave, bills for your pocket, checks for general business transactions, drafts for remittances, letters of credit for travelers and promissory notes for time payments or exchanges. Of such is the tool chest of trade. We do not in ordinary speech call all these tools money. But they are all Instruments of exchange, and they all serve the uses of money. It is one of the incidents of advancing civilization to use these quasi forms of money more and more, because they save labor. observations made through the®tnks have shown that In the United Hates more than 95 per cent, of the business done at bonk counters is done by means of checks draft*, and other credit instruments, leaving less than 5 per cent done in coin and bills put together. As all length-measuring tools must be true to some fixed standard of leqgth, so all tools of trade must be true to their standard. That is, if gold be the standard, they must each be worth the sum expressed on Its face in gold money. Here, again, is to be noted a difference between length and value. You can test your steel square by direct comparison with the standard; but you can not tell whether /or no a $5 bill is worth as much as a $5 gold coin by laying them on the table and looking at them. The only test of value Is voluntary exchange/ If your neighbor will freely give you his coin for yous bill, that is evidence, so far as It goes, that they are equal In value. If every man can make that exchange readily., universally find without limit that is complete evidence of the equality of value. So far as value Is concerned, all such money Is good money. But no money that will not bear that test Is good. This test of good money makes It necessary that there shall be a considerable quantity of gold coin In the country. We have one standard yard measure in every county in Indiana, provided by the State. And that suffices every necessity of comparison in order to test-the thousand and one lengthmeasuring tools which are in use. But we could not get albng with any such number of gold coin*. There must be enough of them to make it possible to apply the tfSt of exchange ns frequently as may be necessary 4o demonstrate the value of all other fonps of money.
No more than this ifc necessary- GbW money is convenient and good as U| every-day tool for use in amounts not too large. But its great and necessary function is as the standard of vaKwj and quality. In a system securely boi-j tomed on that foundation, other formal of money can be multiplied to whafc-j .ever extent the convenience of society! may require. The one supreme and Indispensable condition is, that thootj .other forms shall be convertible inti the standard by exchange on demand.': This requisite is like sweetness in) sugar, virtue in woman, or honor ikj man. Without it, all is bad; with it, all else can be added.
Right here, I may note in passing, i» one of the mischievous errors of oor free silver friends. They argue that; there is not enough gold in the world) to do its business with, and hence Woj must add sliver as a co-standard with) gold. They say that there must bo enough standard money in the worm to buy all Its property, or at least to] buy all that is for sale from time t* time, else the scarcity of standard moan ey will.produce a fall in prices; whlctt is a great mistake. In its ordinary ana current use money Is an exchange-maW ing tool, not a value-measuring tooLi When an Indianapolis merchant ask»| me $2 for a hat he means $2 in gold, o*j its equivalent. When I pay him for one by a $2 bill all he cares to know fgj that the bill is as good as gold. It ma*i ters not to him how much or how littloj gold there is in the country, so there 111 enough to make sure of the redemp-j tion of that bill. If the paper money of the country b* issued and secured in such a way thal its redemption in gold is so certain thalj no doubt of it lies in any one’s mindvj the business of the country goes on jus4j as though all the money in the coimtryj were gold. That is the fundamental test of good paper money—that every one shall accept it as the equivalent of) gold—not blindly and merely becaua* other peojfle take it, but upon an intern Hgent understanding of the manner of! its issue and the nature of its security.; Suppose some one should bring into th* United States $100,000,000 in gold and! scatter it throughout the country in ex J change for paper money, and then lock! up or burn up the paper. What differ-! ence would it make in our business of prices? Not a bit. We.would have tboi same quantity of money as before. Woj would simply use gold money next,' month in place of the paper money wo used last month, to the extent of the, change. Or suppose $100,000,000 of gold were taken out of the country and’ paper money equally good put in it* place. It would make no difference in our prices, trade or business. There are abundant proofs of the, truth of these views in the practice of| nations. We have in this country,, speaking in round numbers, $9 per cap-i ita of gold, $9 ,of silver and $6 of pa-, per. In Great Britain the proportions! are sls of gold, $3 of silver and $3 of, paper. English people carry gold in their pockets and transact their dally business witfc. it. We do not, to anyi large extent. But thai mere difference in the proportion of gold used makes no difference in any condition of business or prices. The money of both, countries rests alike on the gold stand-; ard. If you have to pay a debt in gold; in London you can buy a draft at an, Indianapolis bank to do it with—a draft that will be paid in gold in London;' and the Indianapolis banker will not) care whether you pay for your draft ini gold or in paper. Our paper is just as good as English *gold as long as w»i keep it at par with gold here. In, France the amouiit of gold per capita is S2O, silver sl2 and paper $3. Thai situation of that country as re-; speets its standard Is very much the' same as that of our own. They have a large stock of legal tender silver, but its coinage has been suspended, and that which they have on hand is heldi at par with gold by the credit of the, government and the maintenance ofj free exchange between two metals.. You can buy a draft payable in gold, in Paris with American paper as well) as with gold. These differences in thei relative proportions of gold, silver and; paper used in these three countries make no difference whatever among them in respect to business and prices. There are differences in prices, but noi greater than are distinctly traceable to other causes.
This subject opens up an interesting bit of history which It Is well to remember. Our old friends, the fiat greenbackers, denied the necessity ofj any metallic standard. Their standard was a word; not a thing—Just the word: “dollar.” That word printed on a piece of paper under the “government stamp," was to be the measure of value. The “middle-of-the-road” Populists adhere to that view now. The leading plank in their last party manifesto is a demand for the issue by the government of SSO per capita of “absolute money;” that is, paper money, based, as it is stated, on “all the wealth and resources of the nation,” but without any provision for applying any of those resources to the payment of it. What these gentlemen think they are thinking about in the use of such language is more than I can fathom. But the paper money which they proiH>se is to be absolute, not representative, money, and be legal t#nder fflr all debts, public and private. The free sllverlsta go to the other extreme. The clilef dogma of their creed is, that in order to maintain prices there must be an immense supply of “redemption money*’—that is, metallic money, as distinguished from paper money, in circulation —enough to buy out everything at once, if required. And as the Almighty has missed It in His calculations so far as to create more people than gold, the only way ont Is to add the sliver to the gold as redemption money. It was a curious thing to. sec these extremes, having nothing In common except that they are both
xralte In supporting Mr. Bryan. I hate occupied more time in this digression than I intended. But the point Is really an Important one. This sort «£ stuff fooled* six millions of American citizens in 1896; we must see to that It does not fool any more of them, nor so many, again. The fundamental poipt is this: Civilized society must have as the basis of its exchanges some fixed and stable standard of value. As civilization advances and the transactions of men become more and more complex, profits smaller and valuations more exact, there is more and more necessity for precision and constancy in the standard. At the Same time there is less and less use of the standard fbr the immediate purpose of exchange. Men are all the time inventing new instruments of credit and new ways of doing business 'which take less time and labor than to do it by the direct use of money, and especially metallic money, And so, paradoxical as it may seem, it is absolutely true that the more business they do, the less gold they need relatively to the amount done. Hence It is impossible to say that any specified quantity of gold is necessary for the transaction of the business of the world or any particular people in it. It may be said in general terms that It is necessary that there shall be enough gold in tne country to keep its paper money good, enough more to supply the wants of those who have occasion to use it in specie, with surplus enough to pay without embarrassment *ny foreign balances that may become Cue In the course of trade. The $700,000,000 which we have in this country now is enough, and more than enough for all these purposes. PAPER MONEY. The first requisite of good paper money is, that it shall be easily and certainly exchangeable for gold. No other test of value is possible; and that test is adequate only when It is easily applied. This certainty of redemption must be not merely for a day, but for all the foreseeable future. It must be a certainty resting on a safe and permanent system. The next requisite is, that it shall come Into existence quickly when it is needed and go out of existence as quickly when it is needed no longer; or, to use the common phrase, it must respond in its volume to the demands of trade. Paper money is not a value measuring tool; it is an exchange making tool. It is a better tool for that purpose than gold. It is of the essence of a good monetary system that it shall be able to create these paper tools when they are needed, and as many as are needed. They ought to circulate rapidly and come home often. A note of any kind is a promise to pay money. A note never paid is an unreal promise. The maker of such a note is liable to forget that he is under any obligation to pay it, and neglect to keep himself in readiness to pay it. Every redemption of a note is a demonstration of its value; and quick circulation and frequent redemption is the highest proof of the soundness of the system. Paper money issued by the Government is wanting in this requisite. t It is impossible to give it an elastic quality. Laws can be passed only at long intervals. Every act of legislation involves debate. If Congress were to undertake to follow the varying demands of trade with suitable supplies of money It would be debating the money question all the time; and then with great liability to error in Its conclusions. The future demand of trade for tools is like all its other demands—beyond the foreknowledge of the wisest men. The only way to meet it with always enough and never too many is to let the supply grow out of the demand Met trade furnish its own tools. INSTABILITY OF A GOVERNMENT CURRENCY. But the most serious weakness in a paper currency Issued directly by ‘the Government is the impossibility of securing its stability. Nothing can keep such .a subject out of politics. There will always be some proposition on foot to do something with it; and there will always be a party ready to take up such a proposition. History demonstrates the proneness of men to make one great mistake over and over —to imagine that hard times can be cured by the issue of more money. Tho mistake is a perfectly natural one. When business is dull money ceases to circulate freely. There appears to be a scarcity of it. What more obvious remedy than to create more of it? As long as all that is necessary to the creation ot It is an act of Congress there will be a clamor for such legislation at every return of unfavorable business condition*. Another delusion quite as seductive as this is that cheap money is a blessing to the poor. To a man who has penetrated the subject the fallacy of the proposition is dear enough. Cheap money Is money of little value; and being of little value will buy little else that is valuable. Hence a man gains nothing by cheap money. It is just as much less valuable to spend as It Is easier to get. But there are millions of men whose beads do not seem to be able to hold both of these ideas at once. “To get monexJua blessed thing; cheap things are easier'’to get than dear things; therefore cheap money Is a blessed thing to a poor man;" and there the reasoning ends. The disparities of condition among men will never cease, and while they exist there will be a
class—and in times of distress It is liable to be a large class—who will believe that cheap money would make things better for them. Against these tendencies, which have their origin deep in the constitution of human nature, it requires a constant struggle to hold a currency issued directly by the government up -to its standard. And the worst feature of the struggle is that business is always haunted by the fear that the effort may fail and some disaster occur. This is no mere theorizing of mine; it Is a simple recital of experience. Some question has been pending In respect to our government currency, some threat of change in the air, sopje possibility of trouble ahead, every day for twentyfive years. It is not in human nature to stand up forever under such strain. It is like sustaining a weight upon one’s extended arm. II may be said that the money question will always figure In politics, no matter what system we may have. Perhaps it will. But that element would not be so disturbing if the money of the country were not within such immediate reach of political influence and legislation. As it is now Congress has but to stretch out its hand to make or. unmake. The situation Invites agitation. If we had a money system set on ■ a foundation of Its own beyond the control of Congress otherwise than by innovation upon or destruction of the system, the danger of injudicious change would be Immensely decreased. Every piece of paper money would be a contract enforceable by law. The conditions of its issue would be prescribed by law. The whole system would rest on law and be protected by the sanctity of contract. A government note is payable if the government wills, and when it wills, and as it wilhi; all of which is as the people, or a majority of them, will, for the time being. Our school system and our postal system are creations of legislation, but they rest on law. It would require a tremendous revolution to overthrow 5 them. No one fears such a revolution. Our monetary system ought to have a similar stability, and would have, If It were removed from the immediate control of Congress and given an independent existence under the guaranty of law.
This is, in my opinion, the fundamental objection to a paper currency issued directly by the Government. It is impossible to give it the quality of stability. It is constitutionally tainted with all the uncertainties which attend the vicissitudes of politics. If this difficulty could be removed; if there were some way to pass an irrepealable law, or if the steadfastness of public opinion, once expressed, could be depended upon, and provision for the redemption of the notes could be made upon which we could rely with confidence, the notes of the Government would be good enough money merely as money. But these conditions are impossMWe of attainment; and this sort of money is therefore subject to an inherent weakness which never can be cured under a Government like ours. There are other less fundamental but still serious objections to Government notes as money. One of these is'the mis-educatiug influence ‘ which they have upon the minds of the people. A Government note circulating year after year without redemption ceases to be regarded as a promise to pay money, and is invested' in the public mind with the attributes of money per se. .It has been argued In Innumerable" speeches in this country and believed by their hearers that the “government stamp” is all that Is necessary to make a piece of paper good money. Men who have fallen into that way of thinking become incapable of exercising an intelligent judgment upon the money question. The element of uncertainty which inheres in such a currency communicates itself to all business undertakings. The business men of the United States have no money to use to-day other than gold, except that which depends for Its value upon the continued redemption of the greenbacks by the Government ln'gold. A failure on the part of the Government to maintain such redemption would precipitate a universal and awful crash. The consequence is that business is all the time in a state of nervouhVension. The least incident that excites apprehension on this point sends a cold shiver through the whole business system of the country. Real and enduring prosperity is impossible under such conditions. I think we are suffering more injury from this cause than we are aware. My boyhood was parsed in a part of Indiana where the people lived on malaria. Most of us had some form of ague the greater part of the time. But we became so accustomed to it that it passed for health. Men survived it, as I hn\*e. But we were sick Jill the same; and no doubt less effective for work than we should have been. I think the business men of this country have forgotten, or never knew, how It would seem to breathe the air of a perfectly sound, abundant, elastic, good currency. One of the incidents to which I have referred, and one liable to happen at any time, is a threatened depletion of the gold in the treasury. There is nowhere else in the world so large a pile of gold so easy to get at as ours. It is entirely defenseless against attack. Any one who brings the government notes is entitled to It in any quantity. In countries where the accessible gold is held by banks they can protect themselves to some extent by raising the rate of interest pn call loans when a raid on their gold reserve is threatened. But our government has no such resource. We would be in a far stronger position with reference to our gold supply If it were distributed ankrng our banks and moneyed Institutions and private hands than we are with so much of It in the treasury on call. Another consideration has large
weight in my mind. The world is full of rumors of war. Great events are taking place east of us and west of us. A struggle is on for trade, commerce and political supremacy w-hich reaches round the globe, and of which no one can foresee the end. No more can anyone foresee how it may affect us. It is of infinite importance to us to be strong in our position, and prepared for all possibilities. In the present state of our laws, finances and public opinion war would mean for us further issues of government notes, suspension of specie payments, Inflation of prices and all the frightful demoralization which attends those conditions. If our demand debt were out of the way and our monetary system planted on a sound gold basis wo could go through a war with none of these disasters. I would like to go further and see our whole national debt paid as soon as possible, for this reason, if for no other, that to be out of debt would be our strongest security against aggression. Modern war is almost wholly a matter of money. The national debts of the European governments are the most effective peacemakers among them. If we were out of debt, with a clean sheet to start on, such a record behind us as we would have, and such resources in ’our hands, no nation or combination of nations would dare to encounter us in war. We could raise billions of money. One other thought. The world has reached a point In its civilization when society and business, if suitably organized, can survive the wreck of any existing government. We could and would now, in every respect, except as to our paper and silver money. Our farms, factories, railroads, telegraphs, telephones, stores, churches, schools and libraries would remain, although our government were destroyed. We would organize a on the ruins of the old, and In a very few years lit-' tie trace would be left in the life of the people of the disaster which had occurred. The forces at work for the development and elevation of the race do not originate in government, but in society. The surest guarantee of national growth and progress Is to be found in the highest and freest development of these forces. It is Inconsistent with these Idea! conditions that the monetary system of a people shall be a part of and dependent upon their government. It Is a mixture of business and politics which is injurious to both. THE SAYING OF INTSI^EST. The commonest argument in favor of the greenback currency is, that it saves Interest on so much of the public debt. The argument is a fair one and entitled to consideration. We have $450,000,000 of them, including the Sherman notes. We need a gold reserve of twenty-five per cent, to protect them; that is, $112,500,000. That idle gold offsets that much of the Interest, leaving $337,500,000 to count interest on. We could borrow the money at two and a half per cent., or $8,527,500 pee annum. We borrowed $95,000,000 twenty years ago in order to create the gold reserve. I believe that all or nearly of that is still outstanding in refunded form. We borrowed $262,000,000 during President Cleveland’s last administration in successive loans to replenish the gold reserve. We are paying four per cent, on that, or $lO,480,000 a year, which is a good deal more than we are saving on greenbacks. I do not think it is fair, however, to charge all that up against the greenbacks; nor do I think anybody can tell just how much of It ought to be so regarded. We have used up most of the money in ordinary expenses. At the same time the alarm caused by the fear that the gold resdtve would be exhausted was the Immediate occasion of the borrowing. And the deficit of revenue, which brought on the crisis at that particular time, Was in part due to the uncertainty and want of confidence which existed in our monetary affairs; although It was due in part, also, to the premonition of unfavorable tariff legislation in consequence of the election of Mr. Cleveland. It Is more than any man can do to disentangle all these things and say how much each of these causes contributed to the result. But one thing is certain; a mere deficit in revenue would never have produced the panic of 1893. The government might get out of money and get way behind in Its payments without any demoralization of general business. Everybody would know that the government was good and that it would only be a question of time when salaries would be paid up and all obligations settled. It was the financial situation that made the deficit such a disturbing factor. And it was the existence of the greenback currency, which must be redeemed in gold, else everything would go to smash, that made the panic possible. Hence I think that it is entirely fair to say that a large part of the interest which we are paying on those loans ought to be regarded as an expense which we would not have to bear if the greenbacks had not been In existence. It is impossible to tell how soon we may have to borrow money again to protect the gold reserve. It is not the present year nor the next, nor the next, that Is to be taken into account. The question Is one of permanent economy—economy for tea years to come, twenty years to come. And in view of what has happened within five years )>ast, it Is impossible to say that the greenbacks may not cost us more than they save in Interest. But the question is a wider one than that. If the dangers which I have pointed out as Inherently existing In a currency of this kind under a government like ours, exist, as I believe they do, the Josses which it is liable to inflict Upon us are so vast that the
question of Interest shrinks into unimportance. If we could have these notes on some certain and sure basis, so that they would not bring these dangers with them, the saving of interest would be a solid argument in their favor. As it is, the drawbacks and the dangers far outweigh the advantage of that saving. PROGRESSIVE RETIREMENT. The plan proposed by the commission contemplates-a very gradual withdrawal of the greenbacks and Sherman notes and the substitution of bank notes in their places in such manner as to produce no appreciable contraction in the currency or effect upon business. The division of issue and redemption will pay the notes as they are presented just as |jie treasury is paying them now and must continue to do If the Government is to maintain its credit at all. No bonds are to be issued unless It should become necessary in order to maintain the redemption fund, just as we must do now. The notfs redeemed are to be cancelled to the extent of $50,000,000, if so many are redeemed; after which they are to be cancelled only as rapidly as bank notes are issued to take their place, for the period of five years. After the expiration of five years those redeemed are to be cancelled to an amount not exceeding one-fifth of those then outstanding. At the expiration of ten years those then remaining In circulation are to lose their legal tender quality. But they will still remain as valid demands on the Government and redeemable in gold upon presentation. To guard against the possibility, remote as it is, of a sudden and large demand for redemption of notes, and the consequent accumulation of them in the division of issue and redemption to an extent which might injuriously contract the currency, authority is given to the Secretary of the Treasury in such case to put them in circulation again by purchasing United States bonds with them; such bonds to go into the redemption fund and be sold again at the discretion of the Secretary for the benefit of that fund. This pfovlsion serves two important purposes. First, it will prevent any injurious contraction of the currency. It Is entirely certain that there will be no rapid demand for redemption if such a plan as that recommended by the commission should be adopted, except in some extraordinary contingency which would create a great demand for gold. But it is the part of statesmanship to provide, as far as possible, against even the possibility of disaster. This remote possibility of contraction is provided for by the power given to the Secretary to put the redeemed notes out in the purchase of bonds. The provision that this shall be done In no other way cuts off the “endless chain.” The notes put out purchase bonds, which, by their sale will produce the gold necessary to redeem the notes when presented again. It will never be necessary to raise money by taxation or loan to pay the same note twice, as it may be under our present system. It appears to me'to be morally certain that if this scheme were adopted in connection with a suitable banking law capable of responding sensitively to the demands of business, the government notes would disappear and bank notes take their place by a process so smooth and easy that no one not otherwise informed would know that any change was going on. BANK SYSTEM. No plan of currency reform which involves the retirement of the greenbacks, however gradual that retirement may be, can be called complete which does not provide for the issue of other paper currency to take their place. In considering what that should be there is little room left for choice. A state bank currency as the sole or main source of supply is not to be thought of. The system must be national. It must be so organized that its notes Bhall be equally current through* out the Union and absolutely good everywhere. We have been accustomed to bank notes so perfectly secure that no one ever takes the trouble to notice by what bank the notes that he receives have been issued. We can take no backward step in that respect. Our bank notes have enjoyed that degree of confidence because they have rested upon a form of security which we have all regarded as, and which has been in fact, absolutely safe. We cannot think of Introducing any form of bank note currency less perfectly secure than that which we have now. But it is absolutely necessary, if we are to provide for a system capable of the growth which will be requlrid in order to enable it to supply the country with currency, that we shall find some new form of security for its circulating notes. The national banking systenvas a note issuing system, is drying up on account of the scarcity and high price of U. S. boqds-
There are no other bonds, or stocks, or securities of any sort sufficient in quantity, value and homogeneity to form the basis of a national currency. It Is therefore not a matter of choice, but of necessity to base the note issues upon the assets of the system Itself, providing special security for the immediate payment of the notes of a defaulting bank by a great guaranty .fund to which all the banks are to contribute. The system proposed by the commission Involves only a few Important changes of the existing law. 'Of these the chief is the one to which I have
already referred relating t|> the security of the circulating notes. That change is in substance this: Instead of being required to put up bonds to the amount of SIOO for every S9O of notes issued, /the banks are to be required to put up bonds at their value upon a three per cent basis to an amount equal to -the notes issued up to twenty-five per cent of their capital. AS against the residue of* notes issued they are to put up no security in the form of bonds deposited, but are to secure them in another way, which I will now describe. Each bank is to put up in the hands of the Government an amount in gold equal to five per cent of its total circulation. These deposits are to form one common guaranty fund for the protection of all the notes of all the banks. In case of failure of any bank to redeem its notes they are to be redeemed forthwith out of the guaranty fund; and the Government is then to proceed forthwith to collect the amount from the assets of the failed bank, including the personal liability of the stockholders, if the other assets are insufficient, and thereby reimburse the guaranty fund. If the guaranty fund becomes impaired the Comptroller is to make an assessment upon all the banks pro rata, according to their notes in circulation, to make up the deficiency; so that the fund shall be constantly kept up to five per cent of all the notes outstanding in the country. ' The banks are thus tied together in one vast partnership for the payment of all the notes issued by any of them. Every note has behind it all the capital of all the banks, all their assets and the personal liability of all their stockholders. It is Impossible for security to be more secure. The assets of the banks represent at any given time the active v*ealth and business of the country. They could nk in value to an amount anything like the note circulation without such a condition of universal and hopeless insolvency as would bankrupt the government and destroy the value of its bonds. Such atsecurity is, in Its essential character, a stronger one than government bonds can possibly be. I said a while ago that In civilized countries society was more than government. Government rests upon society; not society upon government. If the Confederate government had established a national bank system exactly like ours at the same time we established ours, with its notes secured by government bonds, what would they have been worth at the end of the war? But if the Confederate government had established a banking system like that which the commission proposes, entirely disentangled in Its foundations and sources of strength from the government, and resting upon the business assets of the country and the personal responsibilities cf the stockholders, there would have been something left of it even after the desolation of war. There were banks in the South which stood alone, without the strength which comes from widely extended association, but which nevertheless survived the war, though In a crippled condition, but whose notes had a substantial value after all the vicissitudes through which they had passed. We have beeu so long accustomed to think of United States bonds as the only absolutely and eternally good security In the world that It is a little hard to get out of our hearts the feeling that no other security cau be quite so good as the basis of bank circulation. But that Is a mere habit of feeling. The notion that our government can never, by any possibility, fall tp pay its debts, is a patriotic instinct rather than an Intelligent conviction. I suppose people have thought so of their governments over and over again in this world. lam not intending to cast any aspersions upon our government or its bonds. I believe that we are entitled to regard them as perfectly good, and so far as security of payment Is concerned, I regard our national bank notes as perfectly good. But notes secured In the way which I have described will also be perfectly good so far as security is concerned. And between two things which are both perfectly good there is no choice of goodness. , In another important respect our present bank notes and those proposed would stand upon a footing of equality. Our present notes all rest upon identically the same kind of security; to wit, United States bonds. They arc therefore equally good, and ! all good in all parts of the country. A j note issued by the smnllcst bank in In- ! dluna is just as good as one issued by j the strongest bank In New York. Under the proposed system all the notes will be payable, in case of failure of the ,bank that issued them, out of the same guaranty fund in the hands of the Treasurer of the United States. And ; to this guaranty fund all the banks are j bound to contribute in due proportion, j So that every note will be as good and as current as every other one, whether Issued by a little bauk In Kansas or I a big bank in Boston. This comparison, you will observe, is between our present system and ono j resting wholly upon the general assets j of the lwinks and their own guurauty ; fund. But according to the plan pro- | posed, we shall not come to that com- j pletely until after the lapse of ten j years. For five years the banks are to j keep up, as I have said, a deposit of.i bonds equal to 25 per cent, of their cap- j ital. At the end of live years they are ! to be entitled to begin to withdraw ; their bonds at the rate of’.one-flfth of | the total amount on deposit per annum. J Thus at the end of ten years we will \ have effected a complete transition from the present system to the new one, at which time the government notes will lmve been retired, provided they have all come in, which is a most unlikely thing. . j - THE RESTRAINING TAX. I have stated that one of the requi- { sites of good paper money is that it
shall come hito existence /ulckly when it Is needed, and go out of existence again* as quickly when it is nb longer ' needed; This is one of the qualities which Hr is Impossible to obtain in & government currency. Congress authorizes the issue of a certain quantity of notes; if.that does not furnish as many tools as business needs for use there is inconvenience in consequence. If It is too ma,ny, the excess constitutes an injurious surplus in the channels of trade. A surplus of money in the com*j muulty at large is* the same sort of* temptation to unwise and extravagant expenditure which a surplus of money Is in the pocket of an injudicious young man. The happiest of all conditions' is to have just enough and no more. what is. this “just enough” for, the wants of business is a thing im-i possible to lay down by any rule of per 1 capita amount or anything of that sort The requirements of business vary In various seasons and in various parts of the same season. In the West a larger amount of money is needed to move the fall crops than during the rest of the year. In the South a like necessity exists during the cotton picking season. To meet these requirements by a government currency is impossible. To meet them perfectly by a bank currency requires, first, that up to a. certain point the Issue of notes shall be ; prompt and easy, so that there shall bo' no obstacle to an adequate supply of all that are needed; and, second, that; beyond that point there shall be some; sort of resttraining Influence which! shall prevent the issue of notes which are not needed, and induce the retirement of those which have been Issued to meet a temporary demand. This Is provided for In the plan proposed by the commission by what may be called a restraining tax on bank nates. Up to GO per cent, of its qapltal each bank may Issue notes without the payment of any tax on Its circulation. This does not mean that the bank Is to pay no fax at all. In place of the present tax on circulating notes there is substituted a tax upon capital, surplus and undivided profits, as I shall explain in a moment. But up to 60 per cent, of the capital no impediment Is put In the way of the quick and free Issue of notes. Then upon all notes Issued above GO per cent, of capital, and not above 80 per-cent., there is a tax of 9, per cent, per annum, payable monthly; upon all above 80 per cent, a tax of 6 per cent, per annum, payable monthly. JDach bank is to have the right at any time to retire any part of its circulation and be relieved of the tax by returning the notes to the Comptroller of the Currency for cancellation, or depositing with him an equivalent amount of lawful money. A bank will not keep out notes on which it has to pay a tas unless it can make something by the operation. The notes Issued up to GO cent, of the capital are intended to furnish the general stock to be kept in use at all times of the year from year to year. If there is a demand for more than that the banks will find it to their interest to Issue another 20 per cent, and pay 2 per cent, per annum for the privilege; and when there is an urgent demand they avlll issue still another 20 per cent, and pay 6 [per cent, per annum for the privilege. But this last issue will not be kept oat unless there is very good use, for it. They will be Issued in times of emergency, to meet sudden and great demands. At such times the power to tome notes may be of incalculable value to the community. In the panic of 1893 people seemed to lose their senses. All the money In the country was locked up. The banks in New York were unable to pay their customers’ checks for want of money. All sorts of Illegal expedients were resorted to to bridge over the difficulty. Manufacturers issued shluplasters of their own, which were taken by their employes for wages. The New York Clearing House Issued an. Immense sum —540,000,000, I believe—in certificates, which were used as money. The Clearing Houses of other cities did the same. At such a time nothing is so valuable as a system which can respond at one© to a sudden demand. We met that emergency in 1893 by illegal deWhen the Bank of England has to face such an emergency It does the same thing. It issues notes illegally, having first received the assurance of the Cabinet that its violation of the law will be winked at. A much better schemh is provided in the system by the commission—a capacity for meeting such an emergency by a regular and lawful issue of notes under such a restraining tax that as soon as the emergency has passed and there Is no furtlHT need for the additional issue they will Ik> retired by the voluntary action of the banks. Such a system is truly elastic. It lias not only a power of expansion in response to the demands of trade, but it baa a power of contraction when the outstanding notes are in excess of thosedemands. TAXATION. A national bonk ought to be taxed exactly as any other business is taxed. They are subject now to taxation under the State law and ought to bo, ami are, I believe, treated by that iaw precisely ns other business institutions and en-, terprlses are treated. Under the Con-| Ktitutlon of the United States the business of banking is not-taxable for revenue, any more than any other specific business. A compensatiQß. may be required for tbe grant of the franchise, » and any United States tax upon national banks must re«t on that ground. That compensation'fiught to extend to an amount sufficient to cover all th«.
t> uivu •UC n u t UUiCiil iUCUid In Hie organization and supervision of the banka, the care of funds deposited, the redemption of notes and all other details of the business. At the present time this la provided by a tax of 1 per cent per annum on the circulation. That Is not a fair tax, because It operates unequally upon the banks, and moat heavily on those which assume the burden of issuing circulation. A considerable part of the great banks In the large cities issue very 'few notes, for the reason that they can make more profit out of their money otherwise. ; The First National Bank of Chicago baa a capital of $3,000,000 and a surplus 6f $3,000,000, and issues, I believe, only $45,000 of notes. Consequently It has to pay a tax on only $45,000. A ■mailer bank, such as we have in Indiana, with a capital of $200,000 and SIBO,OOO issued in notes, pays four times aa much tax as the First National 6ank of Chicago, with its $6,000,000. j The function of Issuing bank notes is an important one to the community, and ought not to be. unnecessarily burdened by taxation. The capital and surplus of the bank represent the property of the stockholders on which the burden ought to rest. It is therefore recommended by the commission that Instead of the present tax on circulation there be imposed a tax of oneeighth of 1 per cent, on the capital, surplus and undivided profits, as a compensation to the government for the franchise bestow r ed, sufficient to cover all the expenses incurred by the government in connection with the system. In addition to this the banks are turned over to the States fpr such taxation as they see fit to impose upon them in common with other propertyowners. A word may be added in regard to the amount of this tax. It may be thought that It ought to be larger—enough not only to cover the expense to which the government is put by the system, but also to produce revenue to the Treasury. And pqssinly it could be somewhat increased, and some revenue obtained in that waj r . That is a detail for further consideration when the question comes before Congress. But there la this to be observed on that point. Any heavy tax of this sort would de- . feat its own purpose by driving the banks out of the national system. A - bank can carry on all of its business except the issue notes as well under State laws as national laws, and also escape some conditions which are more or less burdensome. l%ere Is an Impression In many minds that the issue of notes is a very profitable business for the national banks. But this is not the case. It is so far otherwise that many national banks do not issue notes at all; and many others issue them only to the extent of the bonds which they are required to hold, whether they Issue notes or not. I have just mentioned the case of the First National qf Chicago. The total capital of all the national banks is about $600,000,000. They are entitled by law to issue 00 per cent, of that amount, or $540,000,000. The total amount of their notes at the present time Is less than $200,000,000. There Is no reason why they do not issue more except that they can make more profitable use of their money in the ordinary course of business than to invest it in bonds and Asauc notes on the bonds. There are In the neighborhood of 5,000 banks and tanking institutions organized under the laws of the various States. It is desirable to attract these into the national system as far as possible. To tax the national banks heavily would not ♦nly prevent this increase in the system, but tend to drive national banks into the State system. And Inasmuch as every requisite of equality in taxation can be secured by leaving the national banks to be taxed by the States and municipalities upon the same terms which State banks and other Institutions are taxed, \t seemed to the commission to be wisest to fix the amount of the national tax at such sum as was believed to be ample to •cover the expenses of the system. FROM THE BANKER’S SIDE. It is necessary that the proposed plan shall meet the approval of bankers as well as of the rest of us. The banking
business Is os free as merchandising. Nobody can be compelled to go Into It; and uobody will go Into It unless he can see In It the prospect of a safe and profitable 'business. There are some bankers to whom the Idea of thus going Into partnership with all the banks of the oountry In responsibility for the note circulation Is rather startling at first blush, llut l believe that every such man who will suspend his Judgment until he has carefully and dispassionately considered the question will that the commission plan proposes a better system for the bankers as well aa the people than our present one. It differs from the present one In no Important particular which affects the business tCS a business, except In the mutual guaranty for notes Issued. It Is very natural for a
banker to sAy to himself, “Is such , a sdhome a sa Se one for me? j Can I, as a prudent and care- 1 ful man. afford to become responsible j for Tom, Dick and Hurry, all over the , Country who may see fit to go Into the bustness and Issue notes?” And when 1 you put the question In that bald way It does seem u little brash. But here are the facts to l>e considered. In the first place, each bank lias to put up its whole capital In cash before It can Issue nuy uotes, and Its notes can never exceed the amount of that capital. In the next place, each stockholder Is liable In addition to the money which he pays for Ills stock to an equal additional amount by way of assessment. If necessary to pay the debts of tbs bank. In this respect, by
tiie w tt>, liie cuiituti&sjou iiiu* recoinmended a change in the law. By the present law each stockholder Is liable only for his pro rata share of any deficiency which may exist in the assets of the bank to pay its debts. By the plan proposed each stockholder will be liable to an amount equal to his stock as long as any debts remain unpaid. So that If some of the stockholders prove to be Insolvent the solvent stockholders continue liable, not only for their pro rata, but for all the debts up to an amount equal to'their stock. So that to begin with, the stockholders have to put up in cash and personal re sponsibility $2 for every $1 of notes which they put out. In addition to this, all the surplus which they make and accumulate, and all deposits are liable for their notes. / The new system will he simply a com tlnuation of the ol(}. That system .during the thirty-five years of Its history has developed within itself a trained and educated body of bankers, who are, I suppose, without their equal in the world in number and ability combined. There will be additions of new banks, but these will come in gradually, and mostly by the incorporation of existing State banks into the national system. Hence the system will be managed In the main by the same men who have so i successfully managed the system which we have. Moreover, the system will have the benefit of that admirable oversight and inspection by the government which exists now, with such further develapmeirt and improvement as will be stimulated by the conditions of the new system. The report contains suggestions for some of these improvements, and others will be developed by the quickened interest which the mutual responsibility of the banks will inspire. While the notes of a failed bank are to be paid at once out of the guaranty fund, that fund is to be-immedi-ately indemnified out of the assets of the failed bank, so that the other banks are finally liable only for the deficiency which remains after all those assets have been applied. In such a matter as this we can rely with confidence upon experience provided it has been long enough and upon a widely enough extended scale. There is a wonderful law of average running through all human conduct and affairs which, when ascertained, is almost as reliable as the law of gravitation. Nothing is more uncertain than the time when any one of us will die; yet nothing iftmore certain than that out of ten thousand of us a certain number will die within a year. On this foundation the whole business of life insurance rests. The same law of average runs through all business. A wholesale merchant with a thousand customers knows that some of them will fall to pay for the goods which they buy. At the same time he knows, if he has selected his customers with care, that the percentage of those failures will not vary much from a predetermined sum; and the larger the number of his customers, and the more widely distributed they ate over the country, the more certainly can he rely upon the operation of the law of average. The whole business of banking in all its departments rests on this law. A blinker receives the deposits of 500 customers. Each one of them Is entitled to come back next day and call for his mouey. But the banker knows that they will not do it. He knows that not a quarter of them will do it. He is so certain of this that he sets aside a reserve of 25 or 30 per cent, of his deposits to meet their checks and lends all the rest of the money, and does it safely. Precisely the same law applies to the banks themselves. They reflect as nearly as anything possibly can the great average of the business of the country, its prosperity and its disasters. Our present system did not get fairly under way until 1870, when the number of theih reached 1,526. It is now 3,659. The average for the twen-ty-eight years is 2.607. We have a record of the history of every bank in the system, Including every failure, with the amount of capital, circulation and deposits of the failed bank, and the sum realized out of its assets, so far as the proceedings bare been closed up. That record shows that if the system
had rested ou a guaranty fund basis from the beginning, with no bonds deposited at all. and the hanks had held In their place other assets no better than the average of those they had, and the same failures had taken place, the burden upon the solvent Iwnks of redeeming the notes of the failed banks would have been only a fraction of 1 per cent, per annum. I am prepared to say from my own examination that It would not have exceeded one-half of 1 per cent. A friend who Is more competent than I am to make the investigation tells me that It would be about one-fortieth of 1 per cent. At that rate, if the banks had stnrted in with a guaranty fund of 5 per cent., there would be enough left of It now to last a hundred years. The largest number of
bank failures In one year was In IWVt, when sixty-five bauks failed. If those banks and all the other banks of the country had been doing business on the guaranty fuud phin nnd had had outstanding 80 per cent, of their capital in notes, the amount of assessment necessary to make good the deficiencies of that year would have been only a frac- | tlon of 1 per cent. The proposed plan Is not only safe I to the people and safe to the bankers, but It Is by far the most-economical i way of securing that safety. I’nlusl States bonds, while they, remain as good ns they are now, will necessarily, be high-priced nnd produce a very low return in interest. The most a man can get out of'them now is about 2% per cent. As between the expense of securing a given amount of circulation by buying and depositing such bonds, and putting up a guaranty fund, she latter Is altogether the cheaper. Aside from the assessments which It may
nave to pay, the cost of the guaranty fund to the bank Is simply the interest of the 5 per cent, deposit; for when it goes out of business and retires its notes, It getfc back whatever may remain unimpaired of its deposit in the , guaranty fund. SMALL BANKS AND BRANCHES. ' Under our present law the minimum j of capital permitted Is $50,000. By j the proposed plan this is reduced to authority be given for the establishment of branch banks under regulations to be prescribed by the Comptroller and Secretary of the Treasury. Both of these suggestions are for the -purpose o£ extending the advantages of jthe system to parts of the country where the local capital Is limited. This system appears to me to appeal with great force to those parts of the country where banking facilities are very much needed, but where banks will not organize and issue notes under existing conditions. At the present time the organization of a bank and the issue of notes in a remote locality
takes money out of the place instead of bringing It in. A bank with $50,000 capital is authorized to issue $45,000 in notes. to do that it must buy $50,000 of bonds at a cost of not less than $60,000, and put up $2,250 at Washington for the current redemption of its notes, leaving $42,750 to go Into circulation. But to get that It is necessary to send $60,000 to New York to buy the bonds, leaving $17,250 less money In that towm than there was before. Under the system the bank would have to put up $12,500 in bonds and could take out $30,000 in notes without circulation tax, and SIO,OOO more at its election upon paying the 2 per cent, restraining tax, and so increase the amount of money in that locality by $27,500. The facilities offered by this plan for the organization of small banks are quite as favorable as it would be possible to offer to banks organized under feuate laws and provide a reasonable security for their circulating notes; while it will give to such banks the advantage of membership in the national system and a guaranty of their notes by the whole strength of that system. If it were adopted I should confidently expect to see a large accession to the national system of small State banks already organized, with capital, business and experience already accumulated, which would add a large sum to the currency of the country, and add it in those places where it is most needed and would be most useful. Some persons may apprehend that the banks might not issue notes enough for the convenience of business. To this it may be said that there Is no danger that banks will not Issue notes when they have a fair opportunity to do so. There Is more possibility of danger that they would issue too many for the public good. It is to prevent that, that the restraining tax is provided. Our national banks have now an aggregate capital of about $600,000,000. On that capital they could issue $360,000,000 without Circulation tax and $120,000,000 at 2 per cent., making a total of $480,000,000, which Is more than our whole present government note circulation. But that is by no meanaall. It is certain that with such a system as is proposed, and the greenbacks in process of retirement, there would be a large increase of national banks, both by the coming In of existing State banks and the organization of new ones. I should confidently expect the total capitalization of the national banks to reaclj $1,000,000,000 within the ten .years assigned for the transition, from the present system to the Aew one. Such .a system would have capacity for the issue of $600,000,000 in notes without circulation tax, and $200,000,000 more under the sn\all burdent of 2 per cent. Moreover, the proposed system will come into operation very slowly, and the government notes go out very slowly. There will be ample opportunity to remedy any defects which may appear. But the least of all dangers is that there will not be notes enough.
My fellow Republicans, I submit this plan to you for your thoughtful and patient consideration. Do not pronounce upon it hastily. I)o not pick out a point here and a point there for off-lmnd condemnation. You cannot judge it fairly except as a whole. .It has been put together with much painstaking. Evefy feature of it has a distinct relation to every other one. If it is what it seems to be; If It would lead Us out of our present unsettled, Illogical and dangerous situation, by a gradual and practicable process of transition to one where we would have peace and security, an established standard, and a sound and elastic currency, It would be of infinite advantage to the American people to adopt the plan. We shall hove to come to It, or something sometime, If there Is any truth In those fundamental principles of finance which the Republican party has been defending for a third of a cen-
tury. The thing which concerns me most at tills time Is that RepubPcans shall Interest themselves in.the subject. The people are apt to say, “These ave questions for bur statesmen —our Senators nnd Representatives In Congress; we will let them decide." The Senators nnd Representatives say, “These are pretty delicate que*Uous;nve will wait until we hoar from thP people.” And so we Walt on each other until the crisis comes and we are on the ’eve of disaster. Both are wrong. In n conn try where every man Is a sovereign by -divine right in Ids own person, every man ought to do th£ duty of a sovereign. He ought toxfead, think, have opinions and declare them. Thought Is the force that governs the world. When all the people think the Country
Is safe, We, the people, can afford to think and talk with more freedom than our representatives in .Congress. Everything they do is under the blazing .light of public observation. They must, of necessity move cautiously. They cannot afford to make blunders. We can. If I have advanced views which further discussion and consideration shall show to be erroneous, no harm will be dose. A Senator, speaking from his place in the capitol, could hardly afford to take that risk. In that spirit let us as Republicans take up this subject. Our great captalq, the President, has spoken. He has not undertaken to lay down any detailed plan. That function does not belong to his office. But he has sounded the bugle. He has pointed out the danger. He has said to Congress and us in his recent message, that while we may feel no immediate harm from our present currency while prosperity continues, danger still exists and will be ever present menacing us so long as the existing system continues.” He has reminded us that “it is in times of adequate revenues and business
tranquility that the government should prepare for the worst.” He has told us that “we cannot avoid, without serious consequences, the wise consideration and prompt solution of this question.” Those are his words. The Secretary of the Treasury, as belongs to his office, has dealt with the subject more specifically. In his report to Congress he has outlined a plan which is in its most, fundamental features similar to that proposed by the commission; the principal difference being that the plan of the commission provides for a complete reorganization on a permanent basis, while that of the Secretary does not go so far. The difference is not one of principle, but one of scope. He says himself, “The recommendations which I make must be considered as being in themselves final measures, but rather as tentative steps in a direction which, consistently pursued, will lead to conditions utimately desirable.” The commission’s plan Is Intended to be a final measure. If it were enacted as law to-day It would set on foot a process of transition which would go on silently and quietly until we had passed from our present system to a new one which would have in Itself such possibilities of growth and expansion that, so far as can now be foreseen, there would not need to be any other law passed upon the subject for fifty years to come. Of course, I am not so extravagant as to say that that would be the case. It is not to be expected that any such work can be done so perfectly that time will not disclose imperfections in It. But In its design and scope the commission’s plan is a complete, symmetrical and permanent one, dealing with the whole subject on consistent principles, and leading up at last to a permanent and settled system. THE PLAN DIVISIBLE. At the sam’6 time it can be embodied in independent and successive enactments, each of which would give us its good results at once. It would .be worth a great deal to stick a stopper in the mouths of the free silverlsts who quibble about the meaning of the law simply to declare in unmistakable words' that the United States will keep Its faith and maintain the gold standard In the payment of all Its own obligations. That can be done In ten lines of type. It would be more to provide a division of Issue and redemption ‘and equip it with such plenary power that we shall all know for a certainty that the Treasurer of the United States will at all times be ready to keep that promise. A deficit In the revenue would no longer mean a fit of ague to the country. It would be worth something simply to make logical and sure provision for the silver dollars, so that the simplest minded man could understand what they are and why "they are good. It would be his best defense against thfe misleading sophistry of free silver
arguments. It would mean a great deal simply to reorganize the bank system, so that It could serve the country as a banking system ougbt and extend its usefulness to all parts of the country. The plan proposed by the commission Is complete in itself in each of these departments, and each part Is capable of enactment Independently of tho others. THE GREENBACKS. The point which will arrest most instant attention and probably encounter most objection Is the proposed retirement of the greenback currency. On that subject I want earnestly to bespeak the serious consideration of Republicans. Do not dismiss It with the remark that It will never do; that It would be unpopular among the people. If every Republican dodges the investigation upon the ground that other Republicans, who have also made no investigation, will not approve It, the question will go by without Investigation by anybody. If every Republican wIU patiently and thoughtfully Investigate the subject for himself, then we shall have at the end that consensus of judgment which 1b the highest guaranty of truth. What do YOU think j about it? The question is one which, in Its re- ; lntlon to the ordinary, every-day life of ! the citizen, has very little practical Inil>ortanee. It Is of no consequence to a ! man whether the paj>er money In his pocket bears the signature of the United States 'Treasurer or some bank president, so It Is good. Tbe national bnDk notes have served tbe wants of
the people for thirty-five years Just a* well as greenbacks. If the greenbacks were to pass out of circulation and national bank notes take their place by a smooth and gradual process, no ..one | would miss them In his ordinary use of money. In fact, tie greenbacks have . nearly passed out of circulation *al- J ready, so far as everyday use of them j by the people Is concerned. If you will t lodk In your pockets you will, find that you have bank notes and silver certificates, when you have anything, with rarely a greenback or a Sherman note. The greenbacks are held In the vaults of the banks instead of gold. Very few are in the hands of the people, or ever will be. The retirement of the greenbacks means mostly the substitution of gold in their place In the vaults of tbe banks. There Is no practical difference to us in tbe mere use of money between a government note and a good bank note. The difference lies in considerations which reach beyond our pockets and our every-day use of the small amounts which pass through our hands. It lies In the operation of forces which tend to undermine the foundations of the system and weaken the whole structre. We do not see nor realize those forces in our dally life. No farmer in Indiana thought any less of a $lO greenback in 1893 than in 1883. And
yet there was a world-wide difference. In 1883 we had Just fought the first great battle for sound money and carried the day In the resumption of specie payment. The silver question was agitating the country, but had not yet reached an alarming stage. The silver dollar was worth 86 cents. We were hoping that It would go up instead of down. There was a situation of general confidence. Only two national banks failed In the United States during that year. In 1893 we were in disaster. Sixty-five banks failed. The United States Treasury reached a point where it could not pay gold for greenbacks a week longer. The Secretary of the Treasury went to New York and called a meeting of the strong men of that city. He wanted $50,000,000 in gold to save the government from bankruptcy. They were so profoundly discouraged that they gave it up and the meeting ended without any result. Three of the gentlemen present, however, could not quite consent to see the United States take the place of a defaulting debtor. They asked the Secretary to wait over the next day. They met in the morning and drew up a subscription paper, and putting their own names down for as much as they dared, spent the day circulating that paper, and were barely able to raise the required amount, and that by adding a little more to tbedr own subscriptions. The credit of the government was saved by the circulation of a subscription paper. One of those gentlemen was Charles S. Fairchild, of the Monetary Commission. If those three men had failed In the work of that day the Indiana farmer would have found the $lO greebackAn his pocket worth $5 It Is In these far-reaching causes and Influences that the weakness of the greenback currency consists; not because It is not good enough, so far as we can judge from our every-day use of it It is good enough in that sense. We must believe that when the people come to see and understand these facts they will be entirely willing to give up the greenback, with all Its historical and patriotic associations. If an experi€mce.of a lifetime has demonstrated that It carries In it a concealed but ineradicable element of danger, we shall do It the highest honor by giving It credit for the good It has done and retiring It on full pay.
So, with the courage that belongs to mem, with earnestness and zeal, let us take up this great question. Let us first sepk to Inform ourselves, and then to teach others the truths which we have learned. We need not be afraid of the people. They only need to see the right clearly to do it with courage, and they respect candor and courage In others. The Republican party has never failed of victory when It bravely stood up for the right. Three times in Its history it haa distinctly saved the country from disasters which we can not even now measure as to their possible extent and consequences. First, when It saved the Union. Second, when It restored specie payments. If the schemes of the greenbackers of that day had succeeded we would have put out a mass of paper currency which we never could have redeemed. It would have repeated the history of all such currencies. It would have gone on Increasing and Increasing until it broke down, just as our continental money did; just as nearly all government currencies have done in the history of the world. The third time was in 1896. But that salvation Is only half complete. The silver standard still menaces the country. We have to fight that battle once more In some form, and how can we fight it with effect except under the banner of the gold standard? Does any one think that we can fight it successfully under a banner of International free coinage? Did any party ever gain a victory fighting for »a Impossibility? Free sllverists see that thing. If nothing else. In Its true light. They recognize the Impossibility of international free coinage and urge that as a reason why we should go It alone at 16 to 1. How shall we answer them otherwise than by saying that, ipternatlonal bimetallism being Impossible, the gold standard stands? That Is what our platform mentis; that Is what honest money means; that Is the banner under which we must tight the battle. Without that thare will be no victory to win; nothing In Issue; no meaning In the election; no chance of success. I want to be done With the money : question In politics. The people in In- ; diniin are witnesses of the appeals which I ha've« r 'inde for years from the slump In beh- > of some action on otller great questions which presq, for dects-
lon. We iee evil tendencies at work in society. We see all the business of the country passing into the hands of trusts and combinations. Within a few days one corporation has arrogated to Itself the power of fixing the price 4* so common an article of food as wlre&t crackers throughout the United States. While I speak, proceedings are pending for the organization of a corporation which shall control the business of making steel wire in the United The anti-trust law passed by Congress eight years ago has proved a failure for the malu purposes for which it wan Intended. It assists the corporation* In the suppression of strikes; but ttf affords the people no practical assistance In resigning the grasp of corporate combinations. The labor question still troubles. The laboring man has nqfc yet found out bow to protect himself against tbe arbitrary power of his employer; and the employer has not yet found out how to reconcile his own Interests with the demands of labor. Our taxation laws operate with horrible inequality. The' great mass of the petSonal property of the country escape* taxation. The burdens of the government are borne by. the land-owners and the comparatively poor. The air is full of perplexing questions which clamor for attention. But nobody can accomplish anything in respect to them because our political parties are occupied with the money question. Political issues must be simple and single. Every campaign turns on one overshadowing question. While the money question has the floor nothing else can receive consideration. It is of no avail that I, or any other private citizen, or any number of us, think, or write, or talk upon other questions. The only thing* which reach the attention of the country are the great issues which divide parties. Inasmuch as we must meet the money question as the main issue, let us meet it broadly; let us go to the t bottom of it; let us quit tinkering with' our currency and reform it upon a basis that will take it out of politics and give the Republican party a chance to turn 1 its great energies in the direction of other reforms which demand our attention.
If we will take up the subject in this spirit we shall have allies, whose support we cannot otherwise command. They were with us in 1896. that we would not have succeeded without them. • They are ready to go with us again if we will give them an assurance that we will make thorough work of it. The business men of the United States have inaugurated a great movement for currency reform. The monetary commission was their representative. It was itself a non-partisan body—six Republicans and five Democrats. But the business men understand perfectly well that currency re- - form can be accomplished only through the Republican party. Their movement means that. They expect to join u* in the next campaign and the one following, provided we take a position on the question that will mean something. But such a movement does not live forever, like a political party. It has no offices to bestow or to promise; no motive of organization to hold It together if its efforts are fruitless. Unless we meet this business men’s movement half way and give it onr hand In a pledge of vigorous and effective cooperation, it will come to nothing; #md once dead/lt will be out of our power to call It to life again. I do not mean that the business men will Insist upon the adoption of the plan which their commission has formulated. They are practical men. They understand the situation. They realize the difficulty. But they will want a certain confidence that the Republican party means to set the currency system of the country upon a solid and secure foundation just as soon as it can. 1 began by saying that I desired to talk as a Republican to his fellow Republicans. I conclude by'saying that in dealing with this subject it is the duty of us all, first, to study the question, to put ourselves in possession of the truth, each man for himself; then to communicate his views to others, strengthen those who are weak, encourage tnose who are timid, and bring the general body of the party up to the highest Intelligent understanding and courageous purpose that Is attainable. Let us send back to the President an answer to the message which he delivered to us by Senator Fairbanks at our recent conference by telling him that we dnre to follow where he leads, i Having done all that, each man to the best of the ability that is in him, w* must stand together. 1 have expressed my views with candor. But 1 shall not be a stickler for any part of the scheme i which I have outlined. "We are bound to believe that after due discussion and consideration* the leaders of our party at Washington will agree upon some program which shall represent what Is, in their judgment, the wisest plan of action for the Republican party. W* are bound to believe that that program will follow the principles of the St. Louis platform; that It will be for sound money and the gold standard. In the formulation of that plan every one of us has some influence. The utterances of the press, public discue- ! slons, private letters, current conversation, all contribute to tbe stream of Influence which flows in from the country to the capitol. When our leader* have derided what the line of battle shall be, every one of us will have hie place Ift the ranks. We are each of ua entitled to have something to say In the general council of war, but we take our mini orders from the generals Id ! command. We are entitled to have i faith that with McKinley at headquarj ters those orders will be such as we j shall he glad to obey. I ~ r ~r. • “ 1 , Copies of tbe foregoing address in pamphlet form, aud of the full 'report of the Monetary Commission will- (m> sent I frco on application to R. M. Seeds, Ini dianapolis, Ind.