FINANCES OF THE UNITED STATES. 



339 



ful money is not now recommended, the Secretary is 

 of the opinion that they ought not to remain in force 

 one day longer than shall be necessary to enable the 

 people to prepare for a return to the constitutional 

 currency. It is not supposed that it was the inten- 

 tion of Congress, by these acts, to introduce a stand- 

 ard of value, in times of peace, lower than the coin 

 standard, much less to perpetuate the discredit which 

 must attach to a great nation which dishonors its own 

 obligations by unnecessarily keeping in circulation 

 an irredeemable paper currency. It lias not, in past 

 times, been regarded as the province of Congress to 

 furnish the people directly with money in any form. 

 Their authority is " to com money and fix the value 

 thereof;" and", inasmuch as a mixed currency, con- 

 sisting of paper and specie, has been found to be a 

 commercial necessity, it would seem also to be their 

 duty to provide, as has been done by the National Cur- 

 rency act, that this paper currency should be secured 

 beyond any reasonable contingency. To go beyond 

 this, however, and issue Government obligations, 

 making them by statute a legal tender for afl debts, 

 public and private, is not believed to be, under ordi- 

 nary circumstances, within the scope of their duties 

 or constitutional powers. 



The influence of this feature of the debt on 

 the commercial affairs of the country in a time 

 of peace, and the dangers that financial dis- 

 aster -will ensue, were looked upon with so 

 much apprehension as to cause the Govern- 

 ment to urge upon Congress the policy of con- 

 traction. The evidence of these dangers is 

 drawn from the past financial history of the 

 country. The bank note circulation of the 

 country at various periods of highest and 

 lowest issues prior to the war was as fol- 

 lows : 



It appears by the above that the bank note 

 circulation of the United States increased from 

 $61,324,000 to $149,185,890 between January 

 1, 1830, and January 1, 1837, in which latter 

 year a great financial collapse took place. The 

 circulation, deposits, and loans of that year com- 

 pared as follows : Circulation, $149,185,890 ; 

 deposits, $127,397,000 ; loans, $525,115,000. 

 The circulation then fell from $149,185,890 in 

 1837, to $58,564,000 in 1843, and rose to 

 $214,778,822 on January 1, 1857, in which 

 year the next severe crisis occurred. The cir- 

 culation, deposits, and loans at this time com- 

 pared as follows: Circulation, $214,778,822; 

 deposits, $230,351,000 ; loans, 684,456,000. 

 The amount of specie in circulation at these 

 periods may be estimated at $30,000,000 for 

 1837, and $50,000,000 for 1857. On the 30th 

 of September, 1865, the deposits of the national 

 banks alone amounted to $544,150,194; their 

 loans, estimating the national securities held by 

 them as a loan to the Government, amounted 

 to $913,045,629 ; both of which items were in- 

 creased during the month of October, while on 



the 30th of that month the oirculation, bank 

 and national, exceeded $700,000,000. 



The years of 1837 and 1857 were ones of great 

 inflation ; and the revolution of the former not 

 only produced great immediate embarrassment, 

 but a prostration which continued until 1843; 

 at the commencement of which year the bank 

 note circulation amounted only to $58,566,000 ; 

 deposits, $56,168,000 ; loans, $254,544,000. 

 Flour declined in New York from $10.25 per 

 barrel on January 1, 1837, to $4.69 on January 

 1, 1843, and other articles in about the same 

 proportion. In 1857 the evil had not been long 

 at work, and productive industry had not been 

 seriously diminished, yet the reaction, though 

 sharp and destructive, was not general, nor 

 were the embarrassments protracted which 

 resulted from it. The effect of the present in- 

 flation of prices upon the cost of labor and of 

 all elements entering into the production of the 

 staple commodities, whether in agriculture, me- 

 chanics, or manufactures, has been such as to 

 invite the direct competition of all other conn- 

 tries in our markets. This has made the Amer- 

 ican market the best to sell in and the worst 

 to buy in n the part of foreigners. In the 

 absence of an adequate export demand, which 

 there is a tendency to diminish, it will result in 

 stripping the country of the precious metals, 

 and the creation of a debt abroad that will be 

 a greater drain on the national resources than 

 the present debt. 



On a gold valuation of the imports and ex- 

 ports, the balance which has accrued against 

 this country during the four years previous to 

 June 30, 1865, including the interest on Ameri- 

 can securities held abroad and purchased within 

 that time, and also taking into consideration 

 the difference between the standard of American 

 and that of foreign gold (9| per cent.), has been 

 $308,000,000. In consequence of the probable 

 falling off in the export of coin, and the in- 

 creased amount of interest to be paid abroad, 

 it is estimated that the accruing balance during 

 the present fiscal year will amount to $120,000- 

 000, making a total for five years of $428,000- 

 000. The only resource to pay this gold balance 

 has been, and still is, the sale of securities abroad. 

 The amount required, if sold at an average dis- 

 count of forty per cent., will be $713,000,000, 

 and the annual interest at six per cent, will be 

 $42,780,000. The discount of forty per cent, 

 will amount to $285,200,000 ; every dollar of 

 which will be an entire loss to the country. 



As contraction appeared to be a measure of 

 safety imperatively demanded, and which re- 

 quired the action of Congress, the Secretary of 

 the Treasury recommended to that body to de- 

 clare that the compound-interest notes should 

 cease to be a legal tender from the day of their 

 maturity, and that the Secretary should be au- 

 thorized, in his discretion, to sell bonds of the 

 United States, bearing interest at a rate not 

 exceeding six per cent., and redeemable and 

 payable at such periods as might be conducive 

 to the interests of the Government, for the pur- 



