CONFEDERATE STATES. 



205 



caused much discussion among the public men 

 as to the cause and the remedies. Mr. Toombs, 

 of Georgia, in a published letter, presented the 

 following views: 



The first great error was in attempting to cany on 

 a great ana expensive war solely on credit without 

 taxation. This is the first attempt of the kind ever 

 made by a civilized people. The result of the experi- 

 ment will hardly invite its repetition. During the 

 first year of its existence, the present Congress neither 

 levied nor collected a single cent of taxes, and post- 

 poned the collection of those levied for the second year 

 to a period fatally too late to support our currency. 



The second error naturally resulted from the first, 

 and consummated the destruction of public credit. 

 This error was the use of the public credit almost ex- 

 clusively in the form of currency. The natural result 

 of this policy was plain, inevitable, overwhelming. It 

 is a well-settled and sound principle in currency that a 

 nation which has a sufficient quantity of circulating me- 

 dium properly to answer the wants of its trade and com- 

 merce, cannot add to the value of that currency by any 

 further addition to its quantity. In the ordinary state 

 of trade, any excess of the proper quautitv exhibits 

 itself in the form of the exportation of bullion any 

 deficiency, in importation. When, from any cause 

 whatever, the operation of this law is prevented, any 

 redundancy of currency must necessarily depreciate 

 the whole mass, and this depreciation will exhibit 

 itself in the rise in price of all commodities which it 

 circulates. It is also true that if this redundant cur- 

 rency exists in the form of paper money not convert- 

 ible into coin at the will of the holder, the measure of 

 this depreciation is the difference between the standard 

 or mint price of bullion and the market price when 

 paid in this currency. 



Tested by these plain and sound principles, the solu- 

 tion of the causes of our present financial troubles is 

 easy. When this revolution commenced, our currency 

 was in excess of the wants of society. The proof is 

 that nearly all of the banks within the Confederate 

 States had suspended cash payments, and their notes 

 were depreciated ; therefore, the first Treasury note 

 which was put into circulation added its nominal val- 

 ue to this excess ; each succeeding issue enlarged it, 

 and increased the depreciation of the whole mass. 

 This depreciation soon began to manifest itself in the 

 rise of commodities ; yet the Government has unwise- 

 ly continued daily by a forced circulation to add to 

 this excess, increase the depreciation, and enhance the 

 price of all the commodities which it is compelled to 

 purchase, and is thus exhausting the national re- 

 sources in the ratio of geometrical progression. 



This ruinous policy would have long since run its 

 course but for the fact that law, intimidation, and, 

 above all, the ardent, sincere, honest but mistaken 

 patriotism of the people have been invoked to uphold 

 it. But the principle being radically wrong, no human 

 power could uphold it long, and in spite of all these 

 powerful proofs, our national currency is depreciated 

 more than one thousand per cent, below gold and 

 silver, four hundred per cent, below suspended bank 

 notes, and prices and payments are rapidly adjusting 

 themselves to the inexorable facts. 



Others denounced the Government for the 

 existing state of affairs, but all agreed that the 

 evil consisted in the excess of paper money. 

 The problem to be solved was to sustain the 

 operations of the Government, and at the same 

 time reduce the volume of the currency. Mr. 

 Toombs suggested the following measures : 



This depreciatio_n of currency having been shown to 

 have resulted chiefly from the excessive issue of 

 Treasury notes, we can only correct this evil by stop- 

 ping instantly any further issue under any pretence 

 whatever, and by reducing as rapidly as possible our 

 present outstanding issues. It requires large, compre- 



hensive, and efficient measures for their continual de- 

 duction, until they shall rise in value, and approximate 

 as nearly as our circumstances will allow to the stand- 

 ard value of gold and silver. 



Taxation and loans are the only means of attaining 

 this result taxation, comprehensive, simple, rigid, 

 and equal. The present tax law does not possess these 

 qualities it is partial, unequal, and complex ; it fos- 

 ters vulgar prejudices, and will gather an abundant 

 harvest of frauds and perjuries. The tax in kind and 

 principle is subject to many grave objections. This 

 mode of taxation should never be resorted to when the 

 currency is redundant, but with all its faults may be a 

 necessary evil whenever there is a great deficiency in 

 the circulating medium. The execution of such a law 

 is necessarily difficult, irritating, wasteful, and produc- 

 tive of much fraud. 



But certainly, in our present condition, the war can- 

 not be carried on and the currency sustained by taxa- 

 tion alone ; we must resort to loans. I am not in the 

 least discouraged by the ill success of the Government 

 lately in funding its Treasury notes. Treasury notes 

 are in great excess ; the holders are anxiously hunt- 

 ing for a safe and profitable investment for them. The 

 Government is perfectly able to supply that want ; 

 heretofore it has not done so. We must issue new 

 bonds with principal and interest payable in gold and 

 silver, or their equivalent, and adopt measures to make 

 such payment certain. This can be done by mort- 

 gaging a specific portion of the revenue to the new 

 bondholders, adequate to the payment of both princi- 

 pal and interest as each may respectively fall due, 

 coupled with clear provisions that their taxes shall be 

 irrepealable until the mortgages are paid, and that 

 these taxes shall only be paid in gold or the coupons 

 of the bonds for which they are pledged. 



By making the provision for our bonds ample at 

 the beginning, so that no future legislation shall be 

 necessary to preserve the public faith, we give the 

 public creditor the best possible security for his money 

 which we are able to offer. The overthrow of Govern- 

 ment will be his only danger ; that cannot be provid- 

 ed against. 



Mr. Oldham, of Texas, later in the year, pro- 

 posed a plan in Congress, the main feature of 

 which was the levy of such a tax as would ex- 

 tinguish a large portion of the debt. The fea- 

 ture of it was a tax on all outstanding Treasury 

 notes and other securities of the Government. 

 This is similar to the plan suggested in his 

 message to Congress by Mr. Davis. (See PUB- 

 LIC DOCUMENTS.) 



Another scheme proposed was the following : 



First, a continued money tax should be levied to pay 

 the interest of our debt ; and second, the levy of a tax 

 or forced loan of twenty-five per cent., or as much 

 more as may be needed, upon the property of the coun- 

 try, the taxpayers to receive either seven or eight per 

 cent, bonds for such forced loan. I would suggest that 

 the bonds bear not a less rate of interest than seven per 

 cent., this being less than the average rate of interest 

 in the different States. This tax should be distributed 

 equally upon the wealth of every individual in the Con- 

 federacy, to be collected in sums sufficient first to 

 absorb the present currency, and next to provide for 

 the future wants of Government up to fifteen hundred 

 millions. 



Jfcelieve there are few men of property who could 

 not raise the money to pay this tax, navmg bonds to 

 hypothecate. But it would not be necessary to require 

 cash from individuals. A tax note would be taken. 

 This tax note, having a prior lien over all other debts, 

 and in addition having the bonds collaterals attached, 

 would command money anywhere, and be at a pre- 

 mium, until our currency became equal to gold and 

 silver. They would be negotiable here and in every 

 other country. Such an assumption of our national 

 debt by the wealth of our country would silence the 



