302 



FINANCES OF THE UNITED STATES. 



The President replied as follows : 



EXECUTIVE MANSION, ) 

 WASHINGTON, D. C., June 4, 1874. ) 



DEAR SIB : Your note of this date, requesting a 

 copy of a memorandum which I had prepared, ex- 

 pressive of my views upon the financial question, 

 and which you, with others, have heard read, is re- 

 ceived, but at too late an hour to comply to-night. 

 I will, however, take great pleasure in furnishing 

 you a copy in the morning, as soon as I can have it 

 copied. 



It is proper that I should state that these views 

 were reduced to writing because I had been con- 

 sulted on this question, not only by some of the 

 members of the Conference Committee, but by many 

 other members of Congress. To avoid any and all 

 possibility of misunderstanding, I deemed this course 

 both justifiable and proper. 



With this explanation I inclose you herewith the 

 memorandum referred to. 



Very respectfully, U. S. GKANT. 



To Hon. J. P. JONES, United States Senate. 



The memorandum inclosed was as follows : 



MEMORANDUM OF VIEWS ENTERTAINED ON THE SUBJECT 

 OF DESIRABLE LEGISLATION ON THE FINANCES. 



I believe it a high and plain duty to return to a 

 specie basis at the earliest practicable day, not only 

 iu compliance with legislative and party pledges, but 

 as a step indispensable to lasting national prosperity. 

 I believe, further, that the time has come when this 

 can be done, or at least begun, with less embarrass- 

 ment to every branch of industry than at any future 

 time after resort has been had to unstable and tem- 

 porary expedients to stimulate unreal prosperity and 

 speculation, on basis other than coin as the recog- 

 nized medium of exchange throughout the commer- 

 cial world. 



The particular mode selected to bring about a res- 

 toration of the specie standard is not of so much 

 consequence as that some adequate plan be devised, 

 the time fixed when currency shall be exchangeable 

 for coin at par, and the plan adopted rigidly adhered 

 to. It is not probable that any legislation suggested 

 by me would prove acceptable to both branches of 

 Congress ; and, indeed, a full discussion might shake 

 my own faith in the details of any plan I might pro- 

 pose. I will, however, venture to state the general 

 features of the action which seems to me advisable, 

 the financial platform on which 1 would stand ; and 

 any departure from which would be in a spirit of 

 concession and harmony in deference to conflicting 

 opinions : 



1. I would like to see the legal-tender clause, so 

 called, repealed, the repeal to take effect at a future 

 time, say July 1, 1875. This would cause all con- 

 tracts made after that date, for wages, sales, etc., to 

 be estimated in coin. It would correct our notions 

 of values. The specie dollar would be the only dol- 

 lar known as the measure of equivalents. When 

 debts afterward contracted were paid in currency, 

 instead of calling the paper dollar a dollar and quoting 

 gold at so much-premium, we should think and speak 

 of paper as at so much discount ; this alone would 

 add greatly in bringing the two currencies near to- 

 gether at par. 



2. I would like to see a provision that at a fixed 

 day_, say July 1, 1876, the currency issued by the 

 United States should be redeemed in coin, on pre- 

 sentation to any assistant treasurer, and that all the 

 currency so redeemed should be canceled and never 

 reissued. To effect this it would be necessary to au- 

 thorize the issue of bonds, payable in gold, bearing 

 such interest as would command par in gold, to be 



Eut out by the Treasury only in such sums as should 

 om time to time be needed for the purpose of re- 

 demption. Such legislation would insure a return 

 to sound financial principles in two years, and 

 would, in my judgment, work less hardship to the 



debtor interest than is likely to come from putting 

 off the day of final reckoning. It must be borne in 

 mind, too, that the creditor interest had its day of 

 disadvantage also when our present financial sys- 

 tem was brought in by the supreme needs of the na- 

 tion at the time. 



I would further provide that, from and after the 

 date fixed for redemption, no bills, whether of na- 

 tional banks or of the United States, returned to the 

 Treasury to be exchanged for new bills, should be 

 replaced by bills of less denomination than $10. and 

 that in one year after resumption all bills of less 

 than $5 should be withdrawn from circulation, and 

 in two years all bills of less than $10 should be with- 

 drawn. The advantage of this would be strength 

 given to the country against time of depression re- 

 sulting from war, failure of crops, or any other cause, 

 by keeping always in the hands of the people a large 

 supply of the precious metals. With all smaller 

 transactions conducted in coin many millions of it 

 would be kept in constant use, and, of course, pre- 

 vented from leaving the country. Undoubtedly a 

 poorer currency will always drive the better out of 

 circulation. With paper a-legal tender and at a dis- 

 count, gold and silver become articles of merchan- 

 dise as much as wheat or cotton. The surplus will 

 find the best market it can. With small bills in cir- 

 culation there is no use for coin except to keep it in 

 the vaults of banks to redeem circulation. During 

 periods of great speculation and apparent prosperity 

 there is little demand for coin, and then it will flow 

 out to a market where it can be made to earn some- 

 thing, which it cannot do while lying idle. Gold, 

 like every thing else, when not needed, becomes a 

 surplus, and, like every other surplus, it seeks a 

 market where it can find one. By giving active em- 

 ployment to coin, however, its presence can, it seems 

 to me, be secured, and the panics and depressions 

 which have occurred periodically in times of nominal 

 specie payments, if they cannot be wholly prevented, 

 can at least be greatly mitigated. Indeed, I question 

 whether it would have been found necessary to de- 

 part from the standard of specie in the trying days 

 which gave birth to the first legal-tender act had 

 the country taken the ground of no small bills as 

 early as 1850. 



Again, I would provide an excess of revenue over 

 current expenditures. I would do this by rigid econo- 

 my and by taxation where taxation can best be borne. 

 Increased revenue would work a constant reduction 

 of debt and interest, and would provide coin to meet 

 demands on the Treasury for the redemption of its 

 notes, thereby diminishing the amount of bonds 

 needed for that purpose. All taxes, after redemp- 

 tion begins, should be paid in coin or United States 

 notes. 



This would force redemption on the national banks. 

 With measures like these, or measures which would 

 work out such results, I see no danger in authorizing 

 free banking without limit. 



The views of the t Secretary of the Treasury 

 respecting the resumption of specie payments 

 were briefly expressed in his report, as follows : 



While it seems to be very generally conceded that 

 resumption of specie payment is essential to the hon- 

 or of the Government and to the general welfare, the 

 views of intelligent and well-informed persons as to 

 the best method of resumption are so widely diver- 

 g_entj and the plans that have been suggested so mul- 

 tifarious, that the Secretary feels embarrassment in 

 suggesting a plan, the details of which will commend 

 themselves to Congress. But there are one or two 

 fundamental ideas underlying the subject which, it 

 is believed, must be the basis of any practicable plan 

 for resumption, and are, therefore, submitted for the 

 consideration of Congress. 



It is obvious that there can be no resumption by 

 the Government so long as the volume of paper cur- 



