458 



FINANCES OF THE UNITED STATES. 



89.32 in gold was worth only 86 in gold. 

 Gradually the price rose to 94 for stock and 

 par for the bonds, while gold, after rising to 5 

 per cent, premium, fell back to 1} and 1|. 

 Hence the banks could make a profit by selling 

 their stock for gold, and they could discount 

 paper by paying out the 3 year bonds to be 

 sold by the borrower. The securities disposed 

 of by the banks were, to some extent, purchased 

 by the public. The Government which had ob- 

 tained such large supplies of capital from the 

 public in various shapes, ships, steamboats, 

 clothing, food, munition, &c., was now ready 

 to pay out the paper for them, and the pay- 

 ments took place as fast as the printers could 

 deliver the money. The paper so poured upon 

 the market began at once to inflate the cur- 

 rency. The creditors who received it dis- 

 charged their debts with it, and it accumulated 

 with the banks, which freely offered to loan it, 

 at lower rates of interest. The Treasury was 



the reservoir that received it from the public at 

 5 per cent, interest, and this fact made 5 per 

 cent, the minimum price of money, since no one 

 would take less than he could get from the Gov- 

 ernment. The legal limit of $50,000,000 was 

 thus rapidly filling up, and on the 26th of April 

 the Secretary ordered the rate of interest to be 

 reduced to 4 per cent., except for banks, which 

 were still allowed 5 per cent, interest. The 

 limit of $50,000,000 was completed by the close 

 of April, and the Assistant Treasurer determined 

 on paying off all 5 per cent, deposit certificates, 

 and allowing only 4 per cent, for new deposits. 

 He refrained from this, however, and only re- 

 ceived deposits at 4 per cent., as the old ones 

 were voluntarily withdrawn. 



The issues of these various descriptions of 

 government paper continued, and at the close 

 of May an official report of the public debt was 

 made by the Secretary, showing the following 

 results as compared with Dec. 1st: 



UNITED STATES DEBT. 



Thus in six months the debt had been actu- 

 ally increased $220,628,366.56, and there had 

 in addition been converted $19,082,600 treasury 

 notes into paper payable on demand. The whole 

 amount raised was in demand loans, of which 

 $117,000,000 was in paper money, $47,000,000 

 in one year certificates, and nearly $51,000,000 

 in deposits. The appeal of the Secretary for 

 conversion into the 5-20 bonds had been pro- 

 ductive of only $2,699,400. It might therefore 

 be said that there were during that period ab- 

 solutely no loans of capital to the Government. 

 The 3 year bonds had been paid out to cred- 

 itors, with the exception of the $3,000,000 

 negotiated at par at the close of March. The 

 Secretary had extended the note circulation by 

 $57,000,000, and the amount outstanding was 

 now equal to the whole circulation of the banks. 

 The whole paper currency had therefore been 

 doubled, but there was no manifestation of any 

 desire on the part of the public to convert 

 notes into stock. It is true that the old notes 

 making one half the amount of Government 

 notes outstanding were withdrawn from circu- 

 lation, and held for the use of importers in their 

 payments to the custom house, at continually 

 rising prices, marked by the depreciation of the 

 Government currency, which was now 7 per 

 cent, discount for gold. The point of " extend- 

 ed circulation " which the Secretary supposed 



would bring with it " increased facilities to con- 

 tract loans," was not yet reached. The public 

 did not take the 5-20 stock. The Secretary 

 ascribed the failure of the loan to the terms of 

 the law, which make the bonds convertible at 

 par, and permit the Secretary to sell them at 

 the market value. He objected to the first 

 provision that while the bonds were converti- 

 ble at par to all the world, the brokers and 

 speculators, who might otherwise " take con- 

 siderable amounts," could make no profit, since 

 the price could not rise above par, when every- 

 body had a right to take them at par from the 

 Treasury. The provision to sell only at " mar- 

 ket value " was objectionable in his view for 

 the same reason, since it gave no advantage to 

 large operators. He therefore desired the re- 

 peal of those provisions, and the granting of a 

 " discretionary power " to the Secretary in the 

 making of these loans. Meantime he was again 

 destitute of resources. The deposits and 1 

 year certificates did not suffice to meet current 

 expenditures, and he again appealed to Congress 

 for an issue of paper money. 



The approach of the month of July, when 

 more than $4,000,000 of specie were due the 

 holders of United States stocks for interest, ren- 

 dered some effort necessary to obtain it with- 

 out coming into the market as a purchaser, as 

 that would act upon the premium on gold in 





