788 



UNITED STATES. 



the public credit, and maintain the national honor ; " 

 and it goes on to " demand a judicious system of 

 preparation by public economies, by official re- 

 trenchments, and by wise finance, which shall en- 

 able the nation soon to assure the whole world of its 

 perfect ability and its perfect readiness to meet uuy 

 of its promises at the call of the creditor entitled to 

 payment." 



The object .demanded by the convention is a re- 

 sumption of specie payments on the legal-tender 

 notes of the United States. That would not only 

 "restore the public credit" and "maintain the na- 

 tional honor," but it would " establish a sound cur- 

 rency " for the people. 



The methods by which this object is to be pur- 

 sued, and the means by which it is to be attained, 

 are disclosed by what the convention demanded for 

 the future, and by what it denounced in the past. 



BANK-NOTE RESUMPTION. 



Resumption of specie payments by the Govern- 

 ment of the United States on its legal-tender notes 

 would establish specie payments by all the banks on 

 all their n:/tes. The official statement, made on the 

 12th of May, shows that the amount of the bank- 

 notes was $300,000,000, less $20,000,000 held by 

 themselves. Against these $280,000,000 of notes the 

 banks held $141,000,000 of legal-tender notes, or a 

 little more than fifty per cent, of their amount. But 

 they also held on deposit in the Federal Treasury, as 

 security for these notes, bonds of the United States 

 worth in gold about $360,000,000, available and cur- 

 rent in all the foreign money-markets. In resuming, 

 the banks, even if it were possible for all their notes 

 to be presented for payment, would have $500,000,000 

 of specie funds to pay $280,000,000 of notes, without 

 contracting their loans to their customers, or calling 

 on any private debtor for payment. Suspended 

 banks undertaking to resume have usually been 

 obliged to collect from needy borrowers the means to 

 redeem excessive issues and to provide reserves. A 

 vague idea of distress is, therefore, often associated 

 with the process of resumption. But the conditions 

 which caused distress in those former instances do 

 not now exist. 



The Government has only to make good its own 

 promises, and the banks can take care of themselves 

 without distressing anybody. The Government is, 

 therefore, the sole delinquent. 



LEGAL-TENDER RESUMPTION. 



The amount of the legal-tender notes of the United 

 States now outstanding is less than $370,000,000, be- 

 sides $34,000,000 of fractional currency. How shall 

 the Government make these notes at all times as 

 good as specie? 



It has to provide, in reference to the mass which 

 would be kept in use by the wants of business, a 

 central reservoir of coin, adequate to the adjustment 

 of the temporary fluctuations of international bal- 

 ances, and as a guarantee against transient drains 

 artificially created by panic or by speculation. 



It has also to provide for the payment in coin of 

 such fractional currency as may be presented for re- 

 demption, and such inconsiderable portions of the 

 legal tenders as individuals may from time to time 

 desire to convert for special use, or in order to lay by 

 in coin their little stores of money. 



RESUMPTION NOT DIFFICULT. 



To make the coin now in the Treasury available 

 for the objects of this reserve, to gradually strengthen 

 and enlarge that reserve, and to provide for such 

 other exceptional demands for coin as may arise, does 

 not seem to me a work of difficulty. If wisely planned 

 and discreetly pursued, it ought not to cost any sac- 

 rifice to the business of the country. It should tend, 

 on the contrary, to a revival of hope and confidence. 

 The coin in the Treasury on the 30th of June, includ- 

 ing what is held against coin certificates, amounted 



to nearly $74,000,000. The current of precious met- 

 als which has flowed out of our country for the eleven 

 years from July 1, 1865, to June 30, 1876, averaging 

 nearly $76,000,000 a year, was $832,000,000 in tne 

 whole period, of which $617,000,000 were the product 

 of our own mines. 



To amass the requisite quantity, by intercepting 

 from the current flowing out of the country, aad 

 by acquiring from the stocks which exist abroad 

 without disturbing the equilibrium of foreign money- 

 markets, is a result to be easily worked out by prac- 

 tical knowledge and judgment. 



With respect to whatever surplus of legal tenders 

 the wants of business may fail to keep in use, and 

 which, in order to save interest, will be returned for 

 redemption, they can either be paid or they can be 

 funded. W nether they continue as currency or be 

 absorbed into the vast mass of securities held as in- 

 vestments, is merely a question of the rate of inter- 

 est they draw. Even if they were to remain in their 

 present form, and the Government were to agree to 

 pay on them a rate of interest, making them desir- 

 able as investments, they would cease to circulate, 

 and take their place with Government, State, mu- 

 nicipal, and other corporate and private bonds, of 

 which thousands of millions exist among us. In the 

 perfect ease with which they can be changed from 

 currency into investments lies the only danger to 

 be guarded against in the adoption of general meas- 

 ures intended to remove a clearly-ascertained sur- 

 plusthat is, the withdrawal of any which are not a 

 permanent excess beyond the wants of business. 

 Even more mischievous would be any measure which 

 affects the public imagination with the fear of an ap- 

 prehended scarcity. In a community where credit 

 is so much used, fluctuations of values and vicissi- 

 tudes in business are largely caused by the tempo- 

 rary beliefs of men, even Before those beliefs can 

 conform to ascertained realities. 



AMOUNT OF NECE8SART CURRENCY. 



The amount of the necessary currency, at a given 

 time, cannot be determined arbitrarily, and should not 

 be assumed on conjecture. That amount is subject 

 to both permanent and temporary changes. An en- 

 largement of it, which seemed to be durable, hiip- 

 pened at the beginning of the civil war by a substi- 

 tuted use of currency in place of individual credits. 

 It varies with certain states of business. It fluctu- 

 ates, with considerable regularity, at different sea- 

 sons of the year. In the autumn, for instance, when 

 buyers of grain and other agricultural products be- 

 gin their operations, they usually need to borrow 

 capital or circulating credits by which to make their 

 purchases, and want these funds in currency capable 

 of being distributed in small sums among numerous 

 sellers. The additional need of currency at such 

 times is five or more per cent, of the whole volume ; 

 and if a surplus beyond what is required for ordi- 

 nary use does not happen to have been on hand at 

 the money centres, a scarcity of currency ensues, 

 and also a stringency in the loan-market. 



It was in reference to such experiences that, in a 

 discussion of this subject in my annual message to 

 the New York Legislature of Jnnuary 5, 1875, the 

 suggestion was made that "the Federal Government 

 is bound to redeem every portion of its issues which 

 the public do not wish to use. Having assumed to 

 monopolize the supply of currency and enacted ex- 

 clusions against everybody else, it is bound to fur- 

 nish all which the wants of business require. . . . 

 The system should passively allow the volume of 

 circulating credits to ebb and flow, according to the 

 ever-changing wants of business. It should imitate, 

 as closely as possible, the natural laws of trade, 

 which it has superseded by artificial contrivances." 

 And in a similar discussion in my message of Jan- 

 uary 4, 1876, it was said that resumption should be 

 effected " by such measures as would keep the ag- 

 gregate amount of the currency self-adjusting during 



