OUR MONETARY EQUILIBRIUM 153 



veto of the Inflation Bill, and the only way for the fragments to come 

 together again was for Congress to accept the President's platform. 

 It was a case of Mahomet and the mountain. If the President would 

 not agree to inflation, then Congress must agree to resumption. 

 That it did so with reluctance was proved by subsequent events. 

 General Bristow, then Secretary of the Treasury, informed me that 

 it was with much difficulty that Senator Sherman was brought to 

 the support of a resumption policy. Mr. Sherman was a man of 

 clear and sane ideas on finance, but of extreme timidity in facing 

 hostile votes in his own state. His hesitation in adopting a policy of 

 resumption in 1875 was indicative, not of any misconception in his 

 own mind, but of much misconception in the public mind, which 

 manifested itself in the House two years later by the passage of a 

 bill to repeal the Resumption Act altogether. This bill failed in the 

 Senate by only one vote. Failing to repeal the Resumption Act out- 

 right, Congress passed by large majorities a bill to forbid the retire- 

 ment of the greenbacks, whose redemption the Resumption Act 

 had provided for. It was commonly believed that the retirement of 

 the redeemed greenbacks would cause contraction of the currency. 

 The fact was overlooked that the gold with which the greenbacks 

 were redeemed would take their place in the circulation, in the form 

 of coin or certificates, so that there would be no contraction. 



Doubts existed as to the ability of the Treasury to resume on the 

 appointed day, notwithstanding a slow but persistent decline of the 

 gold premium. These doubts were felt even by men in the higher 

 ranks of finance, and some Wall Street capitalists lost large sums of 

 money by speculating on a speedy exhaustion of the government's 

 redemption fund. The saying of an influential banker, who was not 

 a speculator, that he would give a large sum to have the foremost 

 place in the procession at the door of the sub-treasury on resumption 

 day, was widely repeated and generally approved. These doubters 

 had failed to give due weight to events which were lowering the gold 

 premium independently of the action of the Treasury, and which 

 would soon have extinguished it altogether, even if no Resumption 

 Act had been passed. Given a fixed sum of depreciated currency in 

 a growing country, the demand for the circulating medium increases 

 pari passu with population and wealth, and augments the value of 

 the currency by the law of supply and demand. Secretary Boutwell 

 was right when he said, in 1871, that the country would grow up to 

 the volume of greenbacks and that the gold premium would disap- 

 pear in obedience to natural causes. Although he was right, neither 

 he nor anybody else imagined that the growth of business would 

 overtake the volume of the greenbacks within eight years. That 

 it did so may be reasonably inferred from the fact that the gold 

 premium disappeared before the date fixed for resumption and that 



