FINANCES OF THE UNITED STATES. 



293 



cially \vhfii, hcmgso, it is made by tbo sov- 

 ereign power n legal tender, it becomes prolific 



.hief. Tlion specie becomes demonetized, 

 and trade is uncertain in its results, because tbo 



is lluctuating; tlien prices advance as the 

 volume of currency increases, and require as 



:i Jvanco further additions to tbe circulating 



.MI; then speculation becomes rife, and 

 ' tho few are enriched at the expense of the 

 many;' then industry declines, and extrava- 

 gance is wanton ; then, with a diminution of 

 products and consequently of exports, there is 

 an increase of imports, and higher tariffs are 

 required on account of the general expansion, to 

 which they in their turn give new stimulus and 

 supports, while tho protection intended to be 

 given by them to home industry is in a groat 



ire rendered inoperative by the expansion. 

 This, notwithstanding our large revenues and 

 the prosperity of many branches of industry, 

 is substantially the condition of the United 

 States." 



The paper circulation of the country on 

 December 1st, consisted of United States notes, 

 National and State bank-notes and certificates 

 of the Government- divided as follows : 



United States notes, legal tender $385,441,849 



Fractional currency 28,620,249 



Circulation issued to National Banks. . . 292,671,753 

 State bank-notes. 46,533,060 



$753,266,911 



To this should be added a considerable por- 

 tion of the following items : 



Gold certificates of deposit $19,638,500 



Compound-interest notes. 147,387,140 



$167,025,640 

 Total $920,292,551 



It was also estimated that there were amounts 

 of specie in circulation, as follows : 



Specie in actual circulation on the Pa- 

 ciBc $25,000,000 



Specie in actual circulation in the Atlan- 

 tic States. 15,000,000 



Copper and nickel 3,000,000 



$43,000,000 



If this is added to the paper currency, it 

 makes the whole amount of the circulating me- 

 dium $963,290,551. West of the Rocky Moun- 

 tains, on the Pacific slope, gold and silver main- 

 tained its ascendency, and very little paper 

 was circulated. Indeed, throughout the whole 

 country, and particularly where merchandise 

 was distributed at wholesale, many articles 

 were bought and sold exclusively for gold no 

 other prices were quoted for them. Instead of 

 coin, gold bars and bullion were largely used by 

 banks and by importers to pay for foreign 

 merchandise. The copper and nickel coinage 

 has been depreciated, so that a five-cent token 

 contains about one cent of real value, or, in the 

 words of the chairman of Ways and Means in 

 the House of Congress (Mr. Morrill), " until it 



is almost as light as any paper which can be 

 produced, even by the genius of the hydro- 

 static power at tho Treasury Department and it 

 once more rises and floats triumphantly over 

 the dirty sea of paper currency in vulgar frac- 

 tions.' 1 The gold certificates of deposit were 

 conveniently and daily used by millions for 

 many purposes, especially to pay for exchange 

 in tho liquidation of foreign accounts and 

 among gold operators. Bills of exchange be- 

 came a currency, and an enormous amount was 

 afloat The compound-interest notes were 

 largely used, and almost universally, though 

 without authority, took the place of the United 

 States legal tender notes in the reserve required 

 to be held by the national banks. In some 

 instances the seven-thirties took the place of 

 lawful money, and were given and taken in 

 financial transactions at their current value. 

 To some extent also the coupon bonds of tho 

 United States were used as money, and remitted 

 to pay balances due especially balances of trade 

 due abroad. (See BANKS.) 



Such was the state of the public debt and 

 the circulating medium at the close of the year. 

 It remains, therefore, to present the operation 

 of the internal revenue system, of the tariff, 

 and the commercial condition, to have a com- 

 plete view of the problem presented for solo 

 tion to the Government and the people. 



Previous to the year 1861, the United States 

 presented the unusual spectacle of a great na- 

 tion with comparatively no debt. Since then 

 the measures required for the maintenance of 

 the Government have entailed upon the nation 

 a debt rivalling or exceeding in magnitude the 

 accumulated debts of any of the old states of 

 Europe, and rendering necessary the collection 

 of an annual revenue, which may be safely 

 stated as unequalled by the collections of any 

 other nations excepting Great Britain and 

 France. While the accumulation of this debt 

 was in progress the present system of internal 

 revenue was adopted to aid in obtaining the 

 money necessary for military and naval opera- 

 tions. The pressing nature of the circum- 

 stances under which it was framed was such as 

 to afford but little opportunity for any careful 

 and accurate investigation of the sources of 

 revenue, and the most suitable measures of 

 developing them. The old methods of taxation 

 in this country, by assessments on real and per- 

 sonal property or capital, were chiefly allowed 

 to remain undisturbed in the States which had 

 hitherto applied them for their own support, 

 and the plan was adopted to obtain this 

 branch of the national revenue from the fruits 

 of capital, or of capital and industry com- 

 bined. One of the greatest defects which was 

 immediately felt in the system thus put in 

 operation, was its diffuseness, wherein the ex- 

 emption of an article from taxation was the 

 exception rather than the rule. A system so 

 diffuse necessarily entailed a duplication of 

 taxes, which hi turn led to an undue enhance- 

 ment of prices ; a decrease both of production 



