The A B C of Finance

The Public Faith

LESSON XIII.

“More greenbacks,” “The dollar of our fathers,” and” The repeal of the Resumption Act,” are, at the present time, three loud cries, which we hear on all sides. What is meant by the second cry, however, is not really the dollar of our fathers, but a certain silver dollar which for forty years has been unknown in commerce. The advocates of this dollar claim that the repeal of the law making it a legal tender in the year 1873 was a great wrong. In making this claim, they tacitly assume that the dollar was in use previous to that time, and that by thus demonetizing it a portion of the money power of the country was withdrawn. In fact, however, for the last two generations the gold dollar has been cheaper than the silver one; so that the latter was not really in use at all. The act complained of was nothing more than the acceptance of a fixed fact, the fact that the silver dollar had gone out of use. Not one word of this cry would ever have been heard had it not been for the recent immense fall in the price of silver. The very fact that the dollar has been unknown in commerce for more than forty years is itself one of the strongest possible reasons against reviving it. Another strong reason is, that to revive it would be simply taking the cast-off money of Germany to use ourselves. But the strongest reason of all is found in the fact that gold is immensely better, and more convenient material for making money in large sums, than silver is. Of course, for all small payments silver has been used, and will continue to be used; but when we come to payments involving thousands of dollars, the silver is entirely too cumbrous to be conveniently handled, and is, besides, less durable than gold. The superiority of gold is so obvious that the only real reason for favoring the silver dollar is, firstly, that it is now the cheapest one; and, secondly, that its introduction would tend to make specie payments more difficult. In the second reason, the whole question which we are considering is involved. We shall therefore not consider it at present. Respecting the first, we shall only say that a cheap dollar merely means a dollar which will not buy you so much food and clothing. When the men who live by wages once fully understand that this is the reason why the silver dollar is recommended to them rather than the gold one, very little further argument will be necessary.

The issue of greenbacks, and cheap money generally, is frequently supported on the ground that we shall thus have an instrument with which to discharge debts, and that the more plentiful this instrument, the more readily will the debts be discharged. Those who think thus seem to think paying a debt is a mere matter of form which a person has to go through, and there is an end to it. If we look at it a little closer, we shall see that the payment of a debt is the fulfilment of a contract in which we are to be guided, not by any mere form, but by the intent and meaning of the contract itself. The fact that one person may have made a bad bargain, and may suffer by having to fulfil it, is no reason whatever for annulling it. Now, to issue more greenbacks and new kinds of dollars, in order to enable debtors more easily to fulfil their promises to pay money to their creditors, would be as complete a fraud as it would to take a lot of cornmeal, pass a law calling it first-class family flour, and pass it off on the consumer in fulfilment of a contract to sell him the latter sort of flour. Every contract to pay money made during the last eight years has been made with the legal understanding that it might have to be paid in gold or its equivalent.

In 1869, the Congress of the United States passed a solemn act pledging the faith of the Government to provide for the payment of its notes in coin. As many of my readers may not have seen this law, I will here quote the provisions bearing on legal-tender notes from the Revised Statutes of the United States:

“The faith of the United States is solemnly pledged to the payment, in coin or its equivalent, of all the obligations of the United States not bearing interest known as United States notes. *** The faith of the United States is also solemnly pledged to make provisions at the earliest practicable period for the redemption of the United States notes in coin.”—
Revised Statutes of the United States, p. 735.

In pursuance of this solemn pledge, Congress, in January, 1875, provided for resuming specie payments on January 1st, 1879. I think I have sufficiently shown that the highest interest of the country in all its departments demands this policy. But, interest aside, the solemn faith of the Government is pledged to it, and the law cannot be repealed without a most gross breach of that faith against which no amount of merely material advantage could be placed. Every man who since that time has incurred a debt, has incurred it knowing that, when it became due, the paper in which he paid it would, by the law of the land, be redeemable in gold coin.

During the interval referred to, the rate of interest has been lower than it ever was before in this country, owing to this very expectation of resumption of specie payments. It is the debtor’s own fault if he find that he must now pay more valuable dollars than he expected to. If you are a debtor, you say, perhaps, that you did not expect that specie payments really would be resumed and the gold dollar again come into use. If so, you are simply pitting your own interests against those of society. Your position is very much like that of one of a large number of persons who have given their promissory notes for a much greater amount than value received, under the impression that there was a fair chance of their never being collected. You and I would both be very sorry for those who had taken so heavy a risk on the assumption that law was not to take its course; but that would not be any reason for refusing payment of their notes.

To prevent a possible misapprehension, it must be remembered that resumption does not mean contraction of the currency, and does not of necessity involve any contraction. All it requires is, that Government shall stand ready to redeem the promise printed on the face of every greenback, if the holder desires it: if he does not desire it, but prefers using the note as money, no law will compel him to exchange it for gold. If the total amount of currency in circulation does not exceed the wants of business, none will be sent in for redemption, and there will be no contraction; but if there is more than is really necessary, then the excess will be gradually sent in. And we must never forget that the more certain redemption is to be the permanent policy of the Government, the less owners of currency will send for redemption. The great facts and principles of sound currency can in great part be condensed into three sentences.

1. The experience of the whole human race in all ages shows that exchangeable value can reside only in things which men desire to possess, and that, among the various articles of desire, gold and silver are those best adapted to answer for use as money—the former for large payments, the latter for small ones.

2. Under no circumstances should any paper tokens be allowed to circulate as money except those with which the holder can obtain their face value in gold and silver whenever he wishes it.

3. So long as the payment of all paper money in gold at the pleasure of the holder is well secured, there is no necessity of placing a fixed limit upon its volume.