Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
(?-1899)
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1881
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New York: Maynard, Merrill, and Co.
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1899
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Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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FINANCE

II.69.1

FINANCE, American. The history of American finance is not less unique than the other sides of American history. The subject may be divided into four periods: the colonial; the revolutionary; the first seventy years of peace under the present constitution, extending from 1789 to 1860; and the period of the civil war, ending with the refunding operations of 1881.

II.69.2

—THE COLONIAL PERIOD. The financial history of this period is very instructive, for it is replete with financial experiments. Each of the thirteen colonies directed its own affairs; though often one colony followed the methods of another. Massachusetts took the lead in paper-money experiments and banking, and her example in the former regard was followed by all the others.

II.69.3

—Trade or exchange was needful in the very beginning of colonial existence, and this was accomplished by barter. In New England the aborigines used a money made of shells, called wampum, peag, or wampumpeag, which the colonists adopted and employed among themselves and with the Indians. After a time it became over-abundant, depreciated, and was abolished about 1650. Silver was also used, though usually it was very scarce, and for a long time exchanges were most frequently made in peltry, especially the beaver, in the northern colonies, and tobacco and rice in the southern. It must be noted, however, that exchanges were often made in other products, while the wampum, though more generally employed in the New England colonies than elsewhere, was not wholly confined to them. The specie in the colonies came from Europe along with the immigrants, and from trade with the West Indies. To the latter ports the colonists first shipped peltry, fish and lumber, and afterward pipe-staves, hoops, beef, pork, peas, fat cattle, horses, etc., and brought back, besides silver and bills of exchange, manufactured goods, sugar, molasses, cotton wool and ram. At a later period the specie thus flowing into the country was sent to England to pay for importations from that quarter.

II.69.4

—In each colony taxation was necessary to support the government therein existing. These were laid and collected in various ways. For many years after the colonial governments were founded, there was not enough gold or silver to be found in them to pay the taxes. It was necessary, therefore, to use other things. In the northern colonies beaver skins, wheat, rye, oats, Indian corn, peas, flax, wool, beef, pork, live stock, bullets, codfish and other articles were taken. In the southern, most of these were also accepted, besides tobacco, rice, beeswax and tallow. Storehouses were maintained in which the tax gatherers deposited the public property until it should be wanted or could be sold or exchanged. Taxes were paid in this mode until the issue of paper money; and in some instances afterward, when the supply of paper money became scarce.

II.69.5

—The prices of the articles thus taken were fixed from time to time by the courts or colonial assemblies; and were usually rated much higher than they were worth. By thus fixing the prices of the selected commodities above their true value, they became, so far as this could be done by governmental action, the exclusive currency, and threw out of use the little coin there was in the country. In other words, they destroyed the market for it, and drove it to other lands. Badly as the colonists needed specie, they adopted the worst policy possible to get it; or to retain even what they had.

II.69.6

—The systems of taxation varied greatly in the colonies. In South Carolina, for example, all the revenue that was needed for a considerable period was raised by a tax on imports, in most of the colonies, however, real and personal estate was taxed, an a poll tax also was levied. In Maryland, in 1639, a tax was levied wholly on "personal estates" which was applied in defraying the expense of an expedition against the Indians. In Virginia at one time the colonial resources consisted first of parish levies, "commonly managed by sly cheating fellows, that combine to cheat the public." Secondly, public levies raised by act of the assembly, both derived from tithables or working hands. The cost of collecting this part of the revenue was estimated at not less than 20 percent. Thirdly, a tax on exported tobacco, together with tonnage duties. Maryland, too, levied a tax on the export of tobacco, pork, pitch and flax which the colonists had to pay. The system of taxation adopted by that colony was perhaps the least politic and wise of any of the colonial systems. Immigration was taxed when no need was greater than that of settlers. English rum was admitted free, but that from Pennsylvania was taxed nine pence per gallon.

II.69.7

—Like older nations, the colonies could not escape contracting debts beyond their immediate ability to pay. These were created in consequence of the wars with the French and Indians. To meet the expenses thus incurred, paper money was issued. Massachusetts invented the system in 1690. She had just come out of war with Canada, which had proved as disastrous to her arms as to her treasury. The troops returned unexpectedly to Boston, and the colony had no money to pay them. There was no time to collect it by tax, and it could not be borrowed. The colony had made no provision for paying them, expecting that the enterprise would be successful, and that the soldiers would get their reward by plunder. In this emergency the general court, "desirous," as they say, "to prove themselves just and honest," and considering the "scarcity of money and the want of an adequate measure of commerce," authorized a committee to issue, forthwith, in the name of the colony, £7,000, in bills of credit, from two shillings to five pounds each. The following is a copy of one of the bills:

No.(916)   20 s

This indented Bill of Twenty Shillings due from the Massachusetts Colony to the Possessor shall be in value equal to money, and shall be accordingly accepted by the Treasurer and Receivers subordinate to him in all Public payts, and to any stock at any time in the Treasury, Boston, in New England, February the third, 1690. By order of the General court. Click to enlarge in new window

II.69.8

The bills were, in truth, treasury notes, payable by a tax, and receivable for treasury dues. At the outset they were not favorably received, and would command neither money nor goods at money prices. The soldiers lost heavily, for they were not able to sell these notes for more than twelve or fourteen shillings in the pound. But two years afterward an order was issued declaring that they should pass current within the province in all payments equivalent to money, and in all public payments at 3 percent advance. Thus they were made a lawful tender, for their face, in private transactions, and were received by the treasurer, in whatever payment, at 5 percent premium. They were to be redeemed in a year. The object of this action was to prevent their depreciation; and for twenty years it had this effect. The demand for the bills, when the tax became due, made them worth more than hard money, because a 5 per cent, bonus was attached to them. An order was passed that no more than £40,000 should be emitted, but like most limitations of the kind since established, the order was disregarded. The "scarcity of money" was a constant cry and every additional issue whetted the appetite for more. The whole amount emitted during the first twelve years, including the re-emissions, exceeded £110,000. At the end of that time Hutchinson says that they were as good as silver, and not until 1710 did they much depreciate.

II.69.9

—Of all the colonies South Carolina tested the magical powers of paper money the most thoroughly. It was first issued there after the unsuccessful expedition against St. Augustine in 1703, "following the example of many great and rich countries, who have helpt themselves in their exigencies with funds of credit, which have fully answered the ends of money". The amount put forth was £6,000, which bore 12 per cent interest. To offer them in payment was a legal tender, and if the creditor refused to receive them he lost his debt. "But such refusal never occurred, for the paper was boarded for the sake of the interest." Several thousand pounds more were subsequently stamped, not bearing interest, and were exchanged for the "old currency" in order to get the bills into circulation and to remove the heavy burden of interest." Notwithstanding this change, the bills remained at par, until the subsequent issue of very large amounts caused their depreciation."

II.69.10

—Nine years later, in 1712, South Carolina tried another experiment in issuing paper money. This was the establishment of a public bank, which issued £48,000, called bank bills, to meet the requirements of commerce and of the government. This was lent on landed or personal security for a year, the colony promising to pay gradually (£4,000 annually) until the entire amount was redeemed. By this method the government gained the interest, and the community the benefit of the circulation. The plan was very successfully executed in Pennsylvania, but not equally so in any other colony.

II.69.11

—In Georgia the trustees who managed the colony sent over considerable sums of silver and minor coins to form a currency. Yet the dearth of money was so great, notwithstanding the inflow of the paper circulation of South Carolina, that the trustees sent "sola bills." or bills of exchange, which were promptly paid when they fell due, and their credit was maintained to the end.

II.69.12

—The mode of redeeming paper money was the same in all the colonies, namely, by taxation. In some of them it was redeemed more punctually than in others; too often they were very slow in laying taxes for that purpose. In South Carolina especially, the debtor class, having discovered the advantages of debasing the circulation and swelling prices, loudly clamored for further issues of paper money as the easiest method of discharging their debts. Sooner or later it depreciated everywhere, and heavy losses were sustained. The following distich, though not remarkable for poetic excellence, tells a true tale of the time:

"The country maids with sauce to market come,
And carry loads of tattered money home."

Whenever it was not issued in such amounts as to create a disinclination to pay it, or belief that it would not be paid paper money retained its face value, although there was no specie in the treasury for redeeming it. It is also true that when the colonies issued so much that distrust of the public obligation to pay it sprung up, it depreciated.

II.69.13

—Measures were taken by the English government to prevent the issuing of so much paper money, because it was harmful to the colonies and to trade with Great Britain. But these measures were often suspended, or winked at and so nearly all the colonies continued to employ it until they ceased to be such, and indeed for several years afterward.

II.69.14

—With so much paper money afloat, of varying kinds and values; with the limitation of prices by a law which were rarely correct; with the payment of taxes in kind, and with the use of tobacco, rice, skins and other things as money, besides silver imported from England, the West Indies and other places, one will easily perceive in what uncertainty and confusion was this entire subject of money, how difficult was trade, how great the risk of making contracts payable at a future day both for the debtor and the creditor. To remedy the evil some-what, a proclamation was issued by Queen Anne in 1704, fixing the value of the various kinds of silver coins then circulating in the colonies. This furnished some relief, but could not remove all the evils attending the use of such a heterogeneous currency, so singularly ill regulated by law and custom.

II.69.15

—In respect to the banking institutions of this period these have been considered elsewhere, and therefore but little need be said here. (see BANKING IN THE UNITED STATES.) It may be added, however, that nearly thirty years before the establishment of Colman's bank, "our fathers, "so says a rare tract published in 1714,"entered into a partnership to circulate their notes, founded on land security, stamped on a paper, as our Province bills, which gave no offense to the government then and at that time, when the prerogative of the Crown was extended further than ever has been since."

II.69.16

—Only one other topic remains to complete our account of the colonial finances—that of the coinage. Two mints were established, one in Massachusetts in 1651, and the other in Maryland nine years afterward. The Virginia colonists, finding that glass beads were a better article of traffic with the natives than either dollars or guineas, in 1621 had erected a manufactory for them, "as a mint for the coinage of a current medium of commerce with the Indians." The Massachusetts "mint house" was established in Boston , and though illegal, it existed for more than thirty years. To conceal its business, all the coins were dated 1632. The mint master, John Hull, coined by contract, and grew very rich from the business! The charge fir coining was 5 per cent. The coins reached Connecticut and the other New England colonies, but did not circulate beyond them as money.

II.69.17

—In Maryland the silver money was struck nine pence to a shilling, and the year after the mint began operations, in 1662,"the people were ordered to buy ten shillings per poll of this sophisticated coin and pay for it in good casked tobacco, at two shillings per pound. "This was a hard measure truly, and was repealed in 1676; but it was only the first of a long series of arbitrary acts relating to the monetary circulation, "one of the most fruitful sources," says Maryland's latest historian, "in every people, of discontent, extravagance and crime."

II.69.18

—THE REVOLUTIONARY PERIOD. When the colonies determined to become their own masters, the step seemed bolder from the lack of pecuniary means than from the want of soldiers and munitions of war. At the time this daring determination was reached, perhaps there were not more than $6,000,000 in hard money in all the colonies. Of course no estimate can be exact, but this is the belief of those who have studied the matter well. The colonies had just concluded an exhaustive war on the northern frontier, and were poorly prepared for the conflict with Great Britain.

II.69.19

—The first, and indeed only, source of revenue to carry on the war for a considerable period was paper money. All the colonies, as we have seen, at some time or other of their existence had issued it, and were well acquainted with its virtues and its defects. It has been maintained that this was a very poor way for the continental; congress to raise money "but it may be asked, what other expedient could have been adopted? In the first place, the congress which had declared the independence of the colonies was composed of delegates having no clearly defined authority. Each colony had sent two or more delegates with instructions which they had no right to exceed or disregard. Congress, therefore, had no inherent authority, and the powers of the delegates were not uniform. It is singular that a body possessing so little power, and deriving that little in such a peculiar way, should have achieved so much. It is true that the action of congress was often weak and vacillating; but no chart existed , the members were obliged to feel their way, and to take good care never to run too strongly against the will of the people. The lack of inherent power prevented that body from legislating more wisely than they did on more than one occasion. They dared not tax the people in the beginning to raise means for waging war, fearing that they would denounce the act as a usurpation of power. Moreover such a step would have cooled the war fever. Nothing ever chills the desire to spend money, especially for the benefit of the public, so quickly as an immediate demand for it. Taxation, therefore, was highly inexpedient. As for borrowing, who would loan money to a dozen rebellious colonies? If they failed to achieve their independence, surely the borrower would get nothing; if they succeeded, they would probably to be exhausted to pay. In either event payment to lenders seemed hopeless. The issue of paper money, whether a wise expedient or not, was the only one which our fathers thought they could adopt. They saw no other resource.

II.69.20

—Yet it must be admitted that the people and congress too, quite generally, were in favor of issuing paper money. Said a delegate during one of the debates on this subject: "Do you think, gentlemen, that I will consent to load my constituents with taxes, when we can send to our printer, and get wagon-load of money, one quire of which will pay for the whole?" Other members shared in this view. They all knew that a certain amount of paper money had been issued and circulated by every colony without causing a depreciation in its value; and they believed that congress could do the same thing. They had no intention, at first, of going beyond the safety line.

II.69.21

—The first issue was for $2,000,000, and shortly afterward there was another issue of one-half that amount. Without long delay a third issue appeared, of $3,000,000 more. In about a year from the time the first issue was authorized, the bills began to depreciate. Some who had favored these issues were opposed to further ones, and urged congress to try the experiment of borrowing the money which was now afloat. But the need of funds was so great and no other way of getting them immediately seeming to be open, congress issued more.

II.69.22

—The war was now raging with great earnestness. Independence had been declared, and all hope or desire of making an accommodation with Great Britain had faded away. Congress having become accustomed to issuing paper money, though seeing the evils, or some of them at least, which accompanied the issue of it, proceeded to increase the quantity. Congress could now do whatever was possible in the way of taxing the colonies, but again appeared the fatal weakness of that body. Congress had not the slightest shadow of power to tax anything. All that the members could do was to apportion taxes among the states, and recommend their payment. If the states had responded to this recommendation, the history of the issue of continental paper money would have been very different from what it was. But the truth is, the states had resisted British taxation so successfully that they were not much more inclined to pay taxes to congress than to the king. Paying taxes has never been done very cheerfully, and the colonists could not altogether understand why, if the object of the war was to escape the payment of them to Great Britain, they should be imposed by a different power. This view may seem to betoken ignorance, but it was entertained by not a few persons in those days. The states throughout the war responded very feebly to the call of congress for money. Some of them paid more than others, but rarely did any state pay the full amount requested. One excuse was, because the quotas assigned were unequal. The quotas were based on population, and not on property, and the numbering of the people had been nothing more than a crude estimate. New Hampshire complained that she had only 82,000 inhabitants instead of the higher estimate made by congress, and accordingly asked that the quota assigned to her be reduced. But the reply of congress was an unexpected as it was unanswerable. It was declared that the population of the other states might be as much smaller in proportion as that of New Hampshire, consequently it did not appear that any injustice had been done to her. Congress promised, too, that in the end the exact population of the states should be ascertained and that justice should be rendered to all. Unhappily this promise was not very faithfully kept. Congress continued to push out paper money until more than $200,000,000 were afloat, and then, having completely exhausted the fountain, other measures were devised. The exact amount issued has never been ascertained. Congress told the people that the amount should not exceed $200,000,000, but a much larger sum was forced out.

II.69.23

—With such an enormous quantity afloat, nothing could keep it buoyant. But there were several causes which weighed it down. One of these was counterfeiting. The bills were executed in such a rough way, that counterfeiting was easy. The British government enraged in this ignoble business in order to destroy the value of the money. At one time a shipload of counterfeit paper money was sent over from England, but the vessel was lost on the way. A great many counterfeits were made in New York and other places in possession of the enemy, and pushed into the frightfully swollen stream of circulation. The severest laws were enacted against counterfeiting, but these proved ineffectual. The British ministry never imagined that, if by counterfeiting and other vile arts they should succeed in destroying paper money, the government would be better off, yet this was the case. When it sank out of sight, the government was relived from redeeming it.

II.69.24

—Another cause contributing to the same end was the issue of paper money by the states. That put forth by congress would have fallen quickly enough had the states not issued any, but their action accelerated the downfall of the entire mass. Congress saw this and besought the states to stop issuing it, but this recommendation was not heeded much better than those for the payment of taxes.

II.69.25

—One of the expedients recommended by congress for maintaining the value of paper money, was the enactment of laws by the states limiting or fixing the prices of commodities. This was an old expedient which had been attempted in the early history of the colonies. The price of labor was one of the first things which fell under legal regulation in the history of the Plymouth colony. This idea was now seized by congress and recommended to the states for their adoption. It was one of the many recommendations of that body with which the states cheerfully and promptly complied. The New England states met several times and fixed the prices of commodities, and passed the severest laws against those who should violate the limitations prescribed; but this attempt to regulate prices utterly failed; indeed, there was many a pure-minded but intelligent patriot who declared that the movement would prove useless before any legal action was taken.

II.69.26

—The continental money was a legal tender, and the miseries suffered by the people in consequence of endowing it with this attribute form one of the saddest and most touching chapters in the history of this period. Thousands were reduced from affluence to poverty by receiving payment in depricated or worthless paper What was still worse, the national and individual conscience hardened; and the moral loss was far greater than that which could be reckoned by a money standard.

II.69.27

—Nothing, however, is more certain than that if a paper money be issued and forced on the people they must pay the full price for it; depreciation is a loss which somebody must bear, from which there is no possible escape. The people of the revolution found this out in due time. Depreciation was a tax, and an enormous one, which they were obliged to pay. Every class of creditors was compelled to receive the bills; every person who took them lost while they were in his hands; however much the merchant might charge for his goods to cover prospective depreciation, he was often caught in taking money which he could pay out except at a heavier discount than he had expected to pay; and thus everywhere, and among all classes, depreciation was a heavy and uncertain tax which all were compelled to bear. It was one of the most pernicious taxes to trade and morals that could have been devised.

II.69.28

—When the continental issues became worthless, congress tried one other experiment with it deserving of brief mention. A new issue was put forth based on the credit of the states at a discount of forty dollars of the old emission for one of the new. In this way congress hoped to retire the former issues. Only a small amount of these new bills were put afloat. The people had grown tired of this kind of money and wanted no more in any form.

II.69.29

—When the printing press was stopped, congress resorted to demands for specific supplies from the states. They were asked to contribute food, clothing, munitions of war, etc, and to bring these supplies to certain places. The states were to be credited at prices fixed by persons appointed for that purpose. When this plan failed, the system of seizure was begun. Certificates were given to those from whom things were taken, specifying what they were. Thus congress and the officers of the government who were so careful about exercising power in 1775 had gone almost as far as it was possible to go in 1780.

II.69.30

—Some funds were obtained by loans both at home and abroad, and these will now be described. The money borrowed at home consisted of the bills issued by congress and the states. At an early period of the war, loan offices were established in all the states, and the funds were solicited. But at the very outset congress made the great mistake of offering only 4 percent interest. The interest was to be paid on one kind of loans in specie, obtained from France; and on the other kind in paper money. The former loans were the most popular, and for a time the interest was duly paid is hard money. Nevertheless the total amount obtained in this way was not very large, and did not afford all the relief that congress desired.

II.69.31

—The loans obtained from foreign countries, however, were of the greatest value. At first, Franco sent money and munitions of war secretly, not wishing to arouse the anger of Great Britain. The negotiations were conducted with Beaumarchais, who pretended to be a lover of our country and interested in furnishing us aid. Tobacco was to be sent in payment of the supplies furnished. Spain also advanced money secretly at the same time. When the alliance was formed with France in 1778, she no longer concealed her designs. Turgot stoutly opposed the policy of exciting the British lion, but Vergennes, the minister of state, disagreed with him, and the king was inclined to listen to the latter. Both the king and Vergennes were desirous of humiliating Great Britain, but Turgot was not willing to do this, especially at the heavy price which France must pay. Several loans were granted from time to time; France also guaranteed the payment of another to lenders in Holland. Other loans were obtained in the latter country chiefly through the influence of John Adams. Those in France were negotiated principally by Franklin. Spain was the best promiser and poorest performer of any of the European countries that furnished us assistance. "The Diplomatic Correspondence of the Revolution " published by Jared Sparks, contains a large number of letters giving a history of these foreign negotiations, and the trials of those who were sent to Spain to get funds from that country were very great. After all the abundant promises made by the Spanish government, but little more than $150,000 were borrowed.

II.69.32

—Having now described how the means were raised to carry the country through the revolution, we must describe the financial machinery invented for administering the finances. Soon after the assembling of congress a "board of treasury" was formed, composed of five delegates, but afterward increased to fifteen, to whom was entrusted the transaction of the financial business of congress. A treasurer was appointed, who was not a delegate, and Michael Hillegas of Philadelphia served for several years in that capacity. An auditor and comptroller were appointed. Afterward two chambers of accounts were created, each chamber consisting of three commissioners besides the necessary clerks. The board was reconstructed several time. Two features were adopted in 1779; one of them was the abolition of the comptroller's office, and the other was the addition of three commissioners who were not members of congress.

II.69.33

—At every period of its history the board proved to be very inefficient. Letters received requiring prompt attention were often neglected, whereby the public interests suffered. The accounts generally were very poorly kept. There was no head to the body; the majority of members were delegates to congress, and having duties to perform in that capacity, too often neglected the weightier matters relating to the financial administration of the country.

II.69.34

—Finally, the work of the board was so poorly done that congress determined to entrust the administration of the finances to Robert Morris. He insisted, however, that full power should be given to him to remove all whom he thought unfit for their positions in the treasure office. Some delegates objected to clothing him with so much power. But the times were dark, and they finally yielded. Morris knew that the treasury officers were filled with incompetent servants. He knew that a reorganization must be made and without delay. Congress, however well inclined, would perform the task too slowly. Morris desired power not for the mere sake of having it, but in order to administer the finances with greater success.

II.69.35

—While Morris remained superintendent of finance, a period of little more than three years, he accomplished great things. He was successful in borrowing considerable funds from abroad; and in abolishing the plan of getting supplies by seizure and specific requests. He founded a bank which contributed no slight aid to the government. (See BANKING IN THE U.S.). He was unceasing in his calls on the states for the taxes due by them. The books of the treasury were faithfully kept, and he displayed all the attention possible to every detail of his office. He was severely pressed for funds throughout his period of office, and when every other source failed, he did not hesitate to use his own individual credit, which always stood higher than that of the government.

II.69.36

—After the war closed, congress grew more lethargic than ever, and the states were less inclined to support the government. The articles of confederation were ratified March 1, 1781, but these did not go far toward cementing the states together. Several attempts were made to induce them to yield their power of taxing imports to the confederation, but one or more states always objected, and no state was willing to part with the power unless all were. Rhode Island was the most strenuous objector. Morris exerted his utmost to induce the states to yield, but failed.

II.69.37

—It was while Morris was at the head of the finances that congress first considered the subject of coinage. He sent an elaborate communication to congress, showing what unit ought to be adopted and tracing all the details relating to this delicate matter. Jefferson and Gouverneur Morris also contributed some valuable ideas.

II.69.38

—After Morris resigned, the board of treasury was re-established, for there was no other man to whom congress would confide so much power. But the new board was not more efficient than the former one. They had less to do, for the war was ended, yet there was a vast debt hanging over the confederation, both foreign and domestic and a multitude of unsettled claims, the delay to settle which was embarrassing to many of the owners. But the less that congress and the board did in adjusting these matters, the more imperative became the stronger federal bond which should have the effect of uniting and awakening the energies of the people. Morris resigned early in 1784, and for the next five years chaos reigned in the treasury office. It became at length apparent to all that the work which the continental congress had begun, that body was utterly unable to finish. If creditors were to receive their dues, a new constitution must be formed giving greatly enlarged powers to the general government, especially in the way of providing a revenue to discharge past and future pecuniary obligations.

II.69.39

—THE SEVENTY YEARS OF PEACE, from 1789 to 1860. With the adoption of the federal constitution a new chapter begins in the history of American finance. The first question that confronted congress related to the funding and payment of the revolutionary debt. The leaders of the republic felt that its destiny turned on the solution of that question. Soon after the first assembling of congress, Hamilton, the secretary of the treasury, was directed to consider the subject and make a report thereon at the second session of that body.

II.69.40

—The debt was of two kinds, foreign and domestic. The foreign debt was due to three nations: Holland, France and Spain. The amount due to each of these countries was well known, and also the terms of payment and there was no difficulty concerning its liquidation, for no one thought of repudiating it. The action of the government, therefore, with regard to it was free from embarrassment.

II.69.41

—Unhappily, the fact was otherwise with respect to the domestic debt. This was divided into three branches. One branch covered the expenditures incurred directly by the government. The evidences of it in the possession of creditors consisted principally of certificates of various kinds. In many cases the creditors had parted with them at varying sums much less than their face value. In providing for their payment two questions were raised. The first question was, ought the government to pay any more than the present holders had paid for them? and secondly, if the government ought to pay the full face value, should not the difference between that value and the sum paid by the assignee be paid to the assignor? Hamilton contended that the government ought to pay to the present holders the face value of the certificates without regard to the fact that some of them had been transferred from the original holders. Jefferson and Madison differed from him. The contention grew sharp but, in the end, the view taken by Hamilton and recommended in his report prevailed.

II.69.42

—A second branch of the expenditures concerned the expenditures incurred directly by the states. Hamilton maintained that throughout the revolution congress had repeatedly promised to equalize the burdens of the states and to do justice to them, and that when they relinquished the right to impose taxes on imports, their richest source of revenue, it was with the expectation that the federal government would relieve them from the burdens they had borne in prosecuting the war for independence. The contest over this question was prolonged and bitter. The votes on various propositions relating to it were exceedingly close, and for a long time the final action of congress was regarded with grave doubt. The amount of these debts was supposed to be $25,000,000. Finally, congress agreed to assume an arbitrary amount, $21,500,000, apportioning this sum among the several states. Northern members generally were in favour of assumption; but those from the south were opposed to it. Hamilton succeeded in getting enough votes from the southern section to pass the measure by persuading northern members to consent to the location of the capital on the Potomac, instead of allowing it to remain at Philadelphia where the country very generally supposed it would be permanently located. Thus the national honor was saved and the capital located at Washington.

II.69.43

—The third branch of expenditures consisted of sums advanced to the states by the continental congress, and by the states to that body. It was very difficult to determine the exact amount of these sums, and commissioners were appointed to consider what was due on the one side and other "according to the principles of general equity."

II.69.44

—The first branch of the domestic debt was funded in the following manner: Interest at the rate of 6 per cent, was to be paid on two-thirds of the principal after 1790, and on the balance after 1800; and 3 per cent, interest was to be paid on the interest which had accumulated on this portion of the debt. The government was permitted to redeem 2 per cent, annually of the principal if it desired, and that portion bearing 3 per cent. Whenever it desired.

II.69.45

—The state debts assumed were thus funded Four-ninths bore 6 per cent, interest beginning with the year 1792, three-ninths 3 per cent, interest beginning at the same time, and the remainder, two-ninths, bore interest at 6 per cent, after the year 1800.

II.69.46

—In respect to the third branch, the debts between the states and the federal government were so adjusted that when the final account was made up it stood as follows:

CREDITOR STATESDEBTOR STATES
New Hampshire... $73,033 New York... $2,074,846
Massachusetts... 1,248,881 Pennsylvania... 76,009
Rhode Island... 299,611 Delaware... 612,428
Connecticut... 619,121 Maryland... 151,640
New Jersey... 49,630 Virginia... 100,879
South Carolina... 1,205,978 North Carolina... 501,082
Georgia... 19,988    
Total... $3,517,584 Total... $3,517,584

The balances due to the creditor states were funded in the same manner as the second branch of the domestic debt. These are the main features of the domestic debt. These are the main features of the funding system, but there were several others which require too much space to be described.

II.69.47

—Having funded the debt the next step was to provide for its payment. Of course the mode of paying interest was settled in the funding scheme, but not that of paying the debt itself. Prior to 1800 the provisions pertaining to the subject were somewhat complex and inadequate. Hamilton, whose financial genius has never been surpassed, had not discovered the fallacy of the sinking fund theory, for Robert Hamilton had not yet pricked the bubble which Walpole and some of his successors had so industriously blown. Commissioners had been appointed for receiving that portion of the public income obtained from taxes and loans which were set apart and delivered to them for discharging the interest and principal of the debt. But there was no fixed amount for discharging the principal. Another feature of this legislation was, that all the debt purchased or redeemed was considered as drawing interest just the same, which was paid to the commissioners to be applied by them in discharging more debt.

II.69.48

—When Jefferson became president he chose Gallatin for secretary of the treasury. Another law was then passed determining the mode of reducing the debt. This provided that $7,300,000 should be set aside annually for that purpose. This was not a purely arbitrary sum, but was the amount needed for paying the interest and principal that might be discharged during the next two years. In 1803 Louisiana was purchased and $700,000 more were added to the sinking fund.

II.69.49

—During the first ten years of the government the debt was not diminished. Several unusual events happened. The war with the Indians on the frontier, the insurrection in Pennsylvania where the collection of the internal revenue tax on whisky was resisted, the difficulty with the Barbary powers, the unprovoked aggressions of France and England-these events necessitated the expenditure of large amounts of money and prevented a reduction of the debt. With the opening of the century the last cloud disappeared, and without increasing the revenues though the mode of collecting them was considerably changed, rapid progress was made in paying the debt. It rose in value, so that the commissioners could not buy any except at a premium, which they had no right to offer. The sinking fund was larger than could always be applied toward discharging the public indebtedness. Gallatin, in order to place the debt more perfectly under the control of the government in respect to its payment, proposed that a certain portion of the debt on which annuities had been paid should be changed, if the holders consented, into paid-up stock for the balance due, payable at a fixed time, instead of discharging a portion of the principal annually Congress heeded the recommendation, and a considerable portion of the debt was changed into a new form.

II.69.50

—The reduction of the debt continued until the second war with Great Britain, when there was a pause. During the first eleven years of the century $46,022,810 had been paid, and $45,154,189 still remained. Had the war not occurred, the remainder would have been paid in twelve years, but in consequence of that event it was not extinguished until 1834.

II.69.51

—Gallatin's plan of finance at the opening of the war was very simple. He proposed that sufficient taxes should be laid to defray the expenses of the peace establishment, the interest on the old debt and the new one that should be contracted, and that the extraordinary expenses of the war should be paid from loans. The following loans were authorized by congress at the dates given: March 14, 1812, $11,000,000, Feb.8, 1813, $16,000,000; Aug. 2,1813, $7,500,000: March 24, 1814, $25,000,000; Nov. 15, 1814, $3,000,000; March 3, 1815. $18,452,800. Six per cent interest was paid on each loan.

II.69.52

—Gallatin thought that, as our commerce for a time at least would be idle, banks and individuals would readily loan their money to the government, and so they did in the southern and middle states, but not in New England, for in that section the war was not popular. At first, individuals were inclined to loan their money quite freely, and when the subscriptions to the first loan were opened, Gallatin said that the amount was the largest ever offered to the government at 6 per cent, interest by individuals since the formation of the government. But after a few months the inclination of the people to subscribe weakened, and finally, in order to get funds, the government asked lenders on what terms they would make loans. They prescribed terms: and having thus prostrated itself before the feet of the money lenders, the government was obliged to stay there untill the close of the war.

II.69.53

—The reason why the credit of the government sank so low was, because congress was unwilling to lay adequate taxes, such as the occasion imperatively demanded. The best fountain of revenue had dried away, yet congress hesitated to introduce a system of internal taxation, which should have been adopted at the outbreak of the war. Gallatin recommended its adoption in the beginning, but congress would not heed his advice. Had congress introduced a thorough system of taxation at the opening of the contest, instead of waiting until near the close, the sad story never would have been told which the committee of ways and means in 1830 did tell, that for the loans of $80,000,000 obtained by the government during this period they yielded only $34,000,000 after deducting discounts and depreciation.

II.69.54

—Another expedient to which congress resorted during the war of 1812 was the issue of treasury notes. They were receivable for all dues to the government, but no individual was obliged to receive them. They were issued for a year, and bore interest, and were really a loan in anticipation of the taxes. The amount swelled until the close of the war. The amount then outstanding equaled the amount of the last loan authorized, the object of which was to get the means for discharging them. A portion was funded and others were paid for taxes and canceled.

II.69.55

—The total debt contracted from the beginning of the war was $80,500,073,50. The sinking fund was increased to $10,000,000, and once more debt-paying began. Portions of it were extended from time to time at lower rates of interest, and one loan for $5,000,000, to pay awards under the Florida treaty, was obtained at 4½ per cent. The government was not able to pay $10,000,000 into the sinking fund every year, but, aggregating the amount paid, there was a compliance with the law. In 1834 the debt was extinguished.

II.69.56

—Shortly afterward there was a surplus of more than $40,000,000 in the treasury, arising from the sale of public lands. Congress decided to deposit all except $5,000,000 with the states. The amount to be deposited was $37,468,819,97. One-quarter of the amount was to be paid every three months. When the first three-quarters had been paid, a financial tornado swept over the land, the banks keeping the government deposits failed, and the government suddenly found itself on the edge of bankruptcy. The merchants were unable to pay their bonds, and the treasury was reduced from a plethoric state to, utter emptiness. Congress was convened and the members voted to extend the time for merchants to pay their dues, and authorized the issue of treasury notes to defray the expenses of the government. The secretary of the treasury, Woodbury, urged congress to recall the deposits from the states, but the plea was not regarded with favour. It has never been repaid. Congress, however, repealed the law authorizing the payment of the fourth installment.

II.69.57

—The worst of the crisis soon passed away, but every year the government authorized the issue of new treasury notes with which the old ones were redeemed. But the amount outstanding kept growing. A very uncomfortable feeling arose, that in a time of profound peace the government should not be able to pay its expenses. After the public debt was discharged, the expenses were greatly increased. New enterprises of great variety and requiring heavy outlays were undertaken. These were continued just the same after the government was overtaken with reverses. Congress did not seem inclined to retrench. Hence treasury notes were put forth in ever-increasing quantities until 1842, when the amount not redeemed was funded. The same thing was done two years later, when there was another accumulation of them.

II.69.58

—In 1847 war was declared with Mexico and there were more issues of treasury notes and stock. The cost of the war was $63,605,621. After its close debt-paying began and continued until 1837, when the amount unpaid was reduced to a low figure. In that year the tariff was revised and the duties were cut down, but hardly had this been done when another financial tornado swept over the land, the revenues were in-sufficient to pay the expenses of the government and consequently more treasury notes were issued to fill the gap. The revenues did not recover rapidly, though it was quite generally expected that they would, and the treasury notes. In 1860 the debt had grown to about $60,000,000.

II.69.59

—The influence of the secretary of the treasury in directing the national finances at times has been very great; at others, very slight. The treasury department was one of the earliest departments organized, and its province was pretty clearly defined at an early day. When Hamilton was ready to make his first report to the house, he inquired whether he should make it orally or in writing. That body determined to receive it in writing, and the mode then observed has always been followed. But there are many reasons why, besides thus making it in writing, he should appear before either branch of congress whenever asked, and explain it. Such a requirement would necessitate putting men at the head of the treasury department processing a familiar knowledge of the finances.

II.69.60

—When the question of organizing the treasury department was before the house; some members favored the establishment of a board of treasury similar to that which existed during the revolutionary war. Gerry, of Massachusetts, was one of the stoutest defenders of the old system. Yet no one knew better than he its defects, for at one time he was a member of it, and condemned it in plainest terms for its inefficiency. (See TREASURY DEPARTMENT.)

II.69.61

—Alexander Hamilton was first chosen to administer the affairs of the treasury department. How he fulfilled the duties of his position was never more felicitously described than by Webster. "The whole country perceived with delight, and the world saw with admiration. He smote the rock of the national resources, and abundant streams gushed forth. He touched the dead corpse of the public credit, and it sprung upon its feet. The fabled birth of Minerva from, the brain of Jove, was hardly more sudden or more perfect than the financial system of the United States as it burst forth from the conception of Alexander Hamilton."

II.69.62

—He remained in office during Washington's first term and a part of his second. He was succeeded by Oliver Wolcott, of Connecticut, who was an admirer of Hamilton and trod closely in his footsteps. He resigned shortly before the close of Adams' administration, and Samuel Dexter, the secretary of war, acted as the head of the treasury department during the remainder of Adam's term.

II.69.63

—Jefferson appointed Albert Gallatin, who was one of the able financiers that ever occupied the post. He was a worthy successor of Hamilton, and for several years was as influential with his party on all questions touching the administration of the national finances as Hamilton had been with the party he represented. But after a time discord arose in his party, and the influence of Gallatin was weakened. To his honor be it said, opposition to him was caused by his exposure of the misdeeds of the secretary of the navy, who was the brother of Senator Smith, of Maryland, one of the most influential members in that body. Not long after the war broke out with Great Britain, he was sent abroad with two other commissioners to negotiate a treaty of peace. But he did not resign, and William Jones, the secretary of the navy, was temporarily placed in charge of the treasury. He was utterly unfitted for the post, especially at such a critical time when the highest order of financial ability and constant attention to the duties of the office were required. After Gailatin resigned, George W. Campbell, of Tennessee, was appointed. But he had neither the health nor the requisite ability, and soon broke down and reared. While he was in office the business of negotiating loans which was of the highest importance, was very largely confided to Mr. Sheldon, the chief clerk, who was opposed to war, and rejoined over the failure of any plan for getting the sinews of war. No wonder, with such officials the treasury department at this time, that incompetency should have shown itself in very glaring colors!—

II.69.64

When Campbell retired, A. J. Dallas, of Philadelphia, was appointed, and in a short period he restored the national credit. He infused new vigor into his department. He increased the taxes. He took strong and sure steps to restore specie payments. He zealously urged the creation of another United States bank. Madison was desirous of appointing him long before he did, but a section in the senate was unwilling, especially the two senators from Pennsylvania, and so Madison was obliged to wait until the finances reached such a deplorable state that they consented to withdraw their opposition. Hamilton, Gallatin and Dallas—a glorious triumvirate of financiers—were all born on foreign soil.

II.69.65

—When Monroe was elected president in 1816 he selected Wm. H. Crawford, of Georgia, for secretary of the treasury, though he would have gladly kept Dallas had he been willing to serve. Crawford did excellent service during the eight years that he remained at the head of the treasury department. His most noted report is one on the "Bank of the United states and other Banks, and the Currency," made in February, 1820. He was succeeded by Richard Rush of Philadelphia, the appointee of John Quincy Adams. He served during a golden day in our financial history, when expenditures were light, the revenues large, and debt-paying was rapid.

II.69.66

—We now approach a stormy time. When Jackson was elected president, Samuel D. Ingham, of Pennsylvania, was first selected for secretary of the treasury. After serving two years he resigned, and Louis McLane, of Delaware, succeeded him. Ingham's resignation grew out of differences with respect to the management of the public deposits, and the Eaton Scandal. McLane remained long enough to make one annual report and then he too resigned, and Wm. J. Duane of Philadelphia, was appointed. A controversy soon sprung up between him and the president concerning the removal of the deposits, and refusing to resign, he was dismissed. Then came Roger B. Taney, of Maryland, who held the office for a short time, when he was appointed chief justice of the supreme court of the United States. Yet he held the office long enough to accomplish the chief work for which he was selected, namely, to remove the deposits from the United States bank.(See DEPOSITS REMOVAL OF). The place was next filled by Levi Woodbury, of New Hampshire, who continued during the remainder of Jackson's presidential term and through that of his successor, Van Buren. Woodbury was an honest and industrious man, but corruption grew rankly at this period. It was at this time, too that the policy of the government with respect to banking and money was radically changed. (See INDEPENDENT TREASURY).

II.69.67

—There was a change of parties in 1840, and Harrison selected Thomas Ewing of Ohio, for chief of the treasury department. But Harrison died shortly after his inauguration, and with the accession of Tyler to the presidency cabinet reconstruction began. Walter Forward, of Philadelphia, succeeded Ewing, and he remained two years and then resigned. The president was very desirous of having Caleb Cushing, and sent in his name three times to the senate but that body refused to confirm him. John C. Spencer, of New York, was then appointed, but unwilling to execute the wishes of the president concerning the putting of some money into the hands of certain persons in New York—an act which he regarded as illegal—he resigned, and George M. Bibb, of Kentucky, filled out the remainder of Tyler's troubled term.

II.69.68

—Polk chose Robert J. Walker, of Mississippi, who served during the next four years. He is generally regarded as a very able and successful administrator of the affairs of that department. In 1848, when Taylor was elected president, William Meredith, of Philadelphia, became secretary, but he did not remain in office long and was succeeded by Thomas Corwin, of Ohio. He served through Fillmore's term, and was followed by James Guthrie of Kentucky, who filled the post whiled Pierce was president. Buchanan appointed Howell Cobb, of Georgia. He remained there until a short time before the close of that administration, when he resigned, and was succeeded first by Philip F. Thomas of Maryland and afterward by John A. Dix, of New York.

II.69.69

—The revenues of the government during this period of seventy years were derived mainly from loans, duties on imports, internal revenue, and public lands. The history of the loans obtained by the government we have already considered; the other sources of revenue will be more appropriately considered under other heads.(See TARIFF; INTERNAL REVENUE; LANDS, PUBLIC.) In respect to coinage, that topic, though forming an important chapter in the history of American finances, is considered elsewhere and nothing further need be said here. (See COINAGE.) The only feature remaining for us to notice relates to the receipts and expenditures, in regard to which a few words must suffice.

II.69.70

—The estimates of expenditure are first made by various departments of the government and presented by the secretary of the treasury to the house. They are then examined by the proper committee, and appropriations are granted. These expenditures have varied greatly during the different periods of the government. Sometimes they have been made with great wisdom and economy, but too often in an unwise and wasteful manner. We have not space to analyze the expenditures, indeed this would require a volume. Something further, however, will be found under another title.

II.69.71

—THE CIVIL WAR PERIOD. We have now reached the last period in the history of our national finances. These were administered on a grander scale than ever before, but they were less difficult to administer than during the revolutionary period, or the war of 1812. All the machinery for transacting the financial business had been perfected, a system of revenue existed, and though the credit of the government at the outbreak of the war was suffering, there was a vast amount of wealth in the country, and the people responded heartily to every call of the government for support. The funds to carry on the war were derived from loans, demand treasury notes, duties on imports, and internal revenues.

II.69.72

—The first war loan was negotiated under an act approved in February, 1861. The credit of the government was so low that the loan, amounting to $18,415,000, bearing 6 per cent. interest, and running twenty years, could be negotiated only at a discount of $2,019,776.10, or at an average rate of $89.03 per $100.

II.69.73

—Another loan was authorized in summer of 1861 for $250,000,000. The banks agreed to furnish $150,000,000 at par, receiving 7 3/10 per cent, interest, but as the secretary of the treasury required payment to be made in gold, it was very difficult for them to comply, especially to pay the last installment of $ 50,000,000. Indeed, the operation compelled the banks to suspend specie payments; at the same time the independent treasury suspended also. This event took place Dec. 28, 1861. It has been affirmed that its existence at this time was very harmful to the government, because its operations were opposed to those of the banks. The occasion required that if possible both should work together. But, in paying gold, the banks, through the desire of aiding the government to the utmost extent, undermined themselves. Had the law been otherwise, and the treasury been permitted to take other money than specie from the banks, the suspension of specie payments with its long train of evils might have been delayed for a considerable period and possibly never have occurred.

II.69.74

—There were other loans issued during the war, the most noteworthy of which were the nine hundred million loan, known as the ten-forty loan; and the loan for $500,000,000, payable after the five years and running no longer than twenty.

II.69.75

—A large amount of bonds was sold to the banks when the national banking system was created. This indeed was one of the objects of Secretary Chase in founding the system—to make a market for the government bonds. Its essential features were copied from the system existing in the state of New York, the real author of which was the Rev. Dr. McVickar, professor of political economy in Columbia college. In his pamphlet entitled "Hints on Banking" addressed to the legislature of New York in 1838, the system is clearly wrought out, though there are earlier publications from which doubtless he drew some of his ideas. These were the literary product of the derangement of the currency in the war of 1812. (See BANKING IN THE UNITED STATES.)

II.69.76

—The demand treasury notes, more commonly known as legal tenders, were declared to be a legal tender for all debts, public and private, and were issued as a temporary relief to the government. The holders had a right to exchange them for bonds bearing interest, and it was not supposed when the first issue appeared that the amount would be very considerably increased, or that they would remain long in existence. Their constitutionality was questioned in the beginning, and their issue was defended solely on the ground that it was a war measure. But as the government was pressed from time to time for funds, the issues were increased until $450,000,000 had been put forth. Secretary Chase was opposed to issuing them for sometime, but the need of funds became so great that he consented. Afterward, the supreme court of the United States declared that the law authorizing their issue was unconstitutional (Hepburn vs. Griswold, 8 Wall., 603), and subsequently that tribunal reversed the former decision. (Knox vs. Lee, 12 Wall., 453.) The state courts have rendered several decisions on the question, and usually they have sustained the validity of the enactment. (See TREASURY NOTES.)

II.69.77

—The various descriptions of bonds and other forms of indebtedness issued from the opening of the war to June 30,1865, amounted to $3,888,686,575.

II.69.78

—The duties on imports were increased in 1861 and again in 1863. (See TARIFF.) An internal revenue system was devised, from which large sums poured into the treasury. (See INTERNAL REVENUE.) It embraced a wide scope liquors, tobacco, manufactures, stamp duties on a great variety of legal instruments, stamp duties on a great variety of legal instruments, succession taxes, personal income, and other things. These measures, though of great importance, were hurriedly prepared and enacted, for there was not enough time to do the work thoroughly, and the difficulties and hardships growing out of the execution of them were numerous and trying. Yet the people bore much uncomplainingly, the spirit of patriotism ran high, and by slow degrees many of the most serious imperfections of this hasty legislation were removed.

II.69.79

—When the war was over, it appeared that on Aug. 31, 1865, the total indebtedness of the government, excluding the "old funded and unfunded debt of the revolution," and the cash in treasury, was $2,844,649,626.56. This was the highest point it ever reached. The amount of legal tenders then in circulation was $433,160,569. The figures first fell below $400,000,000 in September, 1866, nor have they ever exceeded that amount since. The following table will show the amount outstanding at the close of each fiscal year, which ends the 30th of June. It must be remembered, however, that no account is here taken of the cash in the treasury.

1866... $2,773,236,173.69 1874... $2,231,690,218.43
1867... 2,678,126,103.87 1875... 2,232,281,281.95
1868... 2,611,687,851.19 1876... 2,180,391,817.15
1869... 2,588,452,218.91 1877... 2,205,801,142.10
1870... 2,480,672,427.81 1878... 2,256,203,398.20
1871... 2,253,211,832.82 1879... 2,349,567,232.04
1872... 2,253,251,078.78 1880... 2,120,415,120.63
1873... 2,231,482,743.30 1881... 2,069,013,319.58

II.69.80

—The debt was very much increased by the suspension of specie payments, which unsettled prices and contributed to the speculation which grew rankly in almost every business. The issue of legal tender notes enormously aggravated the evil. Fluctuations in prices were rapid. When such a state of things exists an additional price is often asked, as a kind of premium to cover the loss from depreciation. This extra charge is an enormous tax which the people paid during the sixteen years that they were using paper money. While the war lasted, speculation centered on gold. Congress attempted to prevent it by legislation, but their action aggravated the movement.

II.69.81

—As soon as the war ended, many expected that the government would immediately return to specie payments. They had conducted their business with this end in view. So did the merchants in the war of 1812. Mr. McCulloch, who was now secretary of the treasury, believed that the true policy was to contract the legal tender notes until their value should be restored to par. This policy was put into execution; but after contraction had proceeded a short time, a loud cry arose against it, congress stopped it, and not until Jan. 1, 1879, did the desired event take place. Another mistake was committed by congress "greater," says a competent authority, "than all other mistakes in the management of the war"—and that was the abrogation by congress of the right to fund the legal tender notes in gold bonds. The taking away of this right from the holders was manifestly unjust to them; and by this act was prolonged the existence of a depreciated monetary circulation and the many ills which inevitably follow in its train.

II.69.82

—Although the government delayed to take the step, the policy of returning to specie payments was not definitively abandoned. At almost every session of congress bills were introduced and discussed relating to the subject and then laid aside. No plan was matured. Finally, a bill was approved Jan.14, 1875 providing for the resumption of the specie payments on 1879., The act provided, among other things, for the accumulation of gold in the treasury. Besides the amount thus obtained through the sale of bonds, the gold current, which had flowed away from us during the war and for several years afterward, changed and began to run hither. The balance of trade in our favor during the immediate years preceding the resumption of specie payments was enormous, and when the time for resumption arrived, the premium on gold had run down to zero, a large amount had been accumulated in the treasury, and the event occurred without the slightest disturbance to any trade or interest.

II.69.83

—Although the government has not possessed the means to pay all the bonds at maturity, there has been no difficulty in refunding those which could not be paid. Most of the loans specified two dates, after the first of which the government might pay if it desired, and by the second of which it must. The government has always consumed these obligations to mean that it will pay when the first period arrives, and it has been desirable for the government to avail itself of this right, because new loans could be obtained bearing lower rates of interest.

II.69.84

—The last bonds refunded bear 3½ per cent, interest. The operation consisted in a continuing bonds, which originally bore 5 and 6 per cent, interest, at a lower rate during the pleasure of the government.

II.69.85

—Jan. 1, 1882, the principal items of the public debt were the following:

Bonds continued at 3½ per cent. interest... $530,982,800
Bonds hearing 4½ per cent, interest... 250,000,000
Bonds bearing 4 per cent. interest... 738,788,700
Legal tender notes... 346,740,906
Gold and Silver certificates... 74,187,790

II.69.86

—There is a law requiring the payment of 1 per cent, of the debt annually, but it has not always been observed. The whole amount paid to the present time satisfies the sinking fund, though until within the present fiscal year there was a deficiency.

II.69.87

—We have now gone over the field except to state the action of the government with reference to the coinage. Its action in demonetizing and remonetizing silver forms an interesting chapter of the period we are considering, but the articles on COINAGE, and PARIS MONETARY CONFERENCE cover the ground so well that nothing further need be added here.

II.69.88

—AUTHORITIES: The Colonial Period: Douglass' Summary, Historical and Political, of the First Planting, etc., of the British Settlements in North America, 2 vols., 1760; Discourse Concerning the Currencies of the British Plantations in America with Regard to Paper Money, by the same author, 1740; A Model for Erecting a Bank of Credit, with a Discourse in Explanation thereof, reprinted at Boston, 1714; Felt's Historical Account of Massachusetts Currency; Bronson's Historical Account of Connecticut Currency; besides which may be mentioned the various histories of the states. In respect to coinage in the colonies, and subsequently, a good account may be found in the Banker's Magazine, for October and November, 1861, prepared by John H. Hickcox. The Revolutionary Period: The author's Financial History of the United States from 1774 to 1789 and the authorities there cited; and Lewis' History of the Bank of North America. The Third Period: The author's Financial History of the United States from 1789 to 1860, and authorities there cited. The Fourth Period: No work has appeared giving a full history of the financial events covered by it. Monographs have been written on many financial events of this period, and there are almost numberless government publications relating to the subject. Spaulding's History of the Legal Tender Money may be mentioned, and Richardson's Practical Information Concerning the Public Debt of the United States.

ALBERT S. BOLLES.

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