FINANCES OF THE UNITED STATES. 



283 



credit of the Government, bearing interest in gold, 

 and payable at a future day. This was the best the 

 Government could do in the midst of its struggle for 

 existence and rightful supremacy. The state of the 

 public credit did not admit the possibility of the 

 immediate procurement of a sufficient amount of coin 

 to redeem the notes absolutely. A well-settled prin- 

 ciple of political economy forbade the issue of paper 

 currency without providing for its redemption, and 

 in obedience thereto Congress made the only prac- 

 ticable provision for the redemption of the notes 

 which it authorized to be issued and stamped with 

 the quality of legal tender. The act of July 11, 1862, 

 which authorized a further issue of $150,OOOjOOO, con- 

 tained a like provision, and further provided that 

 any notes issued thereunder might be paid in coin, 

 instead of being converted into bonds, at the discre- 

 tion of the Secretary of the Treasury. The notes 

 thus authorized were issued and accepted by the 

 people upon the assurance that they had the right to 

 fund them in gold-bearing bonds of the United States, ' 

 and this consideration undoubtedly constituted an 

 important element of their value, and gave them a 

 quality in aid of tfyeir circulation and free acceptance 

 in all business transactions. In the opinion of wise 

 and patriotic men, who, as the representatives of the 

 people, were charged with maintaining the indisso- 

 lubility and supremacy of our national Union, it was 

 necessary to resort to this extraordinary measure for 

 the purpose of carrying the war to a successful ter- 

 mination. It was, in substance and effect, a national 

 war-loan, based upon the credit of the Government, 

 and coupled with a pledge for redemption, but the 

 period of payment was to be thereafter determined 

 when the public exigency would permit. It was not 

 in the minds of those who devised and consummated 

 the scheme, that the Government was about to enter 

 upon the issue of an irredeemable paper currency, 

 which should permanently take the place of the 

 world's measure of values. Nor was it claimed by 

 the most earnest advocate of the measure that the 

 Constitution had given to Congress power to issue a 

 permanent paper currency as a substitute for, and 

 stamped by the law with, the qualities which, in the 

 estimation of political economists, could exist only 

 in the precious metals. In the light of the experience 

 of the civilized world, such a purpose would have 

 been regarded as little better than financial madness, 

 and its avowal by the authors of the legal-tender 

 acts would surely have caused the defeat of the plan 

 for exerting the borrowing power of the Government 

 by means of such issues. 



But the purpose and meaning of the acts in ques- 

 tion are not left open for forensic discussion, having 

 been authoritatively settled by the unanimous opin- 

 ion of the highest judicial tribunal known to our 

 Constitution. As soon after the termination of the 

 war as 1868, it was argued before the Supreme Court 

 that the legal-tender notes of the United States were 

 issued as money, a substitute for metallic currency, 

 and that, having been made legal tender in payment 

 of all debts, including (with certain exceptions) the 

 Government's own, of course, when presented for 

 payment, if similar notes, being legal tender, were 

 offered in exchange for them, the debt would be dis- 

 charged, by a delivery of new notes of the same 

 kind, and so on ad infinitum. To this argument the 

 court replied : 



Apart from the quality of legal tender impressed upon them 

 by acts of Congress, of which we now say nothing, their cir- 

 culation as currency depends upon the extent to which they 

 are received in payment, on the quantity in circulation, and 

 on the credit given to the promises they bear. In other re- 

 spects they resemble the bank-notes formerly issued as cur- 

 rency. 



But, on the other hand, it is equally clear that these notes 

 are obligations of the United States. Their name imports 

 obligation. Every one of them expresses upon its face an 

 engagement of the nation to pay the bearer a certain sum. 

 The dollar note is an engagement to pay a dollar, and the dol- 

 lar intended is the coin dollar of the United States a certain 



quantity in weight and fineness of gold or silver, authenti- 

 cated as such by the stamp of the Government. 



This authoritative declaration of the Supreme 

 Court defines clearly and precisely the meaning and 

 intent of Congress in the acts which authorized the 

 issue, and should be accepted as conclusive of the 

 obligation and duty of the Government to provide 

 for the payment in specie of all such issues. 



Nor is this all. Subsequent to this decision, and 

 for the purpose of putting a quietus upon the mis- 

 chievous discussion of the subject, Congress, on the 

 18th day of March, 1869, declared by public act that 

 " the United States solemnly pledges its faith to 

 make provision at the earliest practicable period for 

 the redemption of the United States notes in coin." 



These provisions of the various acts of Congress, 

 which were passed with the approval of the Execu- 

 tive, the clear adjudication of the Supreme Court, as 

 well as the plainest principles of political economy, 

 and proper regard for the public welfare, commit the 

 Government to the redemption in coin of the notes 

 issued under the circumstances before stated. Na- 

 tional faith and honor could not be more distinctly 

 or unequivocally pledged to the performance of a 

 plain duty. 



In view of these solemn and repeated pledges, it 

 seems idle to resort to the consideration of element- 

 ary principles of finance to prove the evils of an ir- 

 redeemable paper currency. In the face of such 

 pledges, disregard of which would bring national 

 dishonor, and serious if not irreparable injury to the 

 public credit, it can hardly be necessary to discuss 

 questions of expediency, or to point out the ills which 

 the experience of the civilized world shows must 

 follow a violation of well-known laws of political 

 economy. 



It is among the first and most important functions 

 of government to give to its people a sound and 

 stable currency, having a fixed relation to the stand- 

 ard of values in general use among nations. The 

 true matter with which Government has to do, is not 

 so much a question of volume as of soundness and 

 stability of the currency. When it has established 

 a currency of fixed and stable value, having a known 

 relation to that of other powers, and furnishing a 

 uniform medium of exchange, the volume may and 

 should be left to be determined by the wants of trade 

 and business. Natural causes, aided by individual 

 effort and enterprise, will regulate the volume of 

 currency far more wisely and with greater safety to 

 business than acts of Congress imposing artificial 

 limits, subject to increase or diminution at every 

 session. 



The existing provision of law making United States 

 notes legal tender for all debts, both public and pri- 

 vate, with certain exceptions relating to transactions 

 with Government, is an artificial barrier to the use 

 of gold and silver, tending not only to prevent the 

 flow of gold toward this country, but promoting the 

 shipment abroad of our own production of the pre- 

 cious metals. For this reason, Congress should 

 abolish the legal-tender quality of the notes, as to 

 all contracts made, and liabilities arising after a fixed 

 day. The first day of January, 1879, being already 

 fixed by law as the time when the redemption of 

 United States notes then outstanding shall begin, it 

 would be proper and safe to provide that such notes 

 shall not be legal tender for contracts made, or lia- 

 bilities incurred, after the first day of January, 1877. 

 Such an act would not too suddenly change the value 

 of the notes, and would not affect injuriously either 

 debtors or creditors, but would remove a present ob- 

 struction to the retention of our gold and silver pro- 

 duction, and create a demand for the return of gold 

 now abroad, thus promoting final resumption by pre- 

 paring the country for it. 



In furtherance of the purpose of the act of the last 

 Congress to provide for the resumption of specie 

 payments, the Secretary recommends that authority 

 be given for funding legal-tender notes into bonds 



