CHAPTER XXVIII- FINANCES AND CUR RENCY 168. Demonetization of Silver (1872) BY MEMBERS OF THE HOUSE OF REPRESENTATIVES The Mint Law, or Coinage Act, of 1873, as the bill discussed in this extract was called, was prepared in the treasury department and passed the Senate during the Forty-First Congress. At that time the bill did not provide for the coinage of the silver dollar. In the House of Representatives the bill was considered during the next Congress, when a clause was added providing for the coinage of a subsidiary silver dollar. The discussion of this clause and the passage of the bill in the House are shown in this extract. The bill then went to the Senate, where the coinage of the subsidiary silver dollar was cut out and a substitute added providing for the coinage of the "trade" dollar. In this form the act became a law. Later it was contended that the bill passed the House by fraud because the purpose to demonetize silver was not stated. — Bibliography: Brookings and Ringwalt, Briefs for Debate, Nos. xxxiv, xxxv; Bowker and Iles, Reader's Guide in Economic, Social, and Political Science, 38-40; Providence Public Library, Monthly Bulletin, II, 233–241. For a detailed history of the bill, see Edward McPherson, Hand Book of Politics for 1890, 157-169. ECTION fourteen declares what the [April 9. Mr. HOOPER.] Sold coins shall be, and their respec tive weights, and makes them a legal tender in all payments at their nominal value, when not below the standard weight and limit of tolerance prescribed, and at a valuation proportioned to their actual weight when below the standard weight and tolerance. Thus far the section is a reënactment of existing laws. In addition, it declares the gold dollar of twenty-five and eight tenths grains of standard gold to be the unit of value, gold practically having been in this country for many years the standard or measure of value, as it is legally in Great Britain and most of the European countries. The silver dollar, which by law is now the legally declared unit of value, does not bear a correct relative proportion to the gold dollar. . . . ... The committee, after careful consideration, concluded that twenty-five and eight tenths grains of standard gold constituting the gold dollar should be declared the money unit or metallic representative of the dollar of account. . . . Section sixteen reënacts the provisions of existing laws defining the silver coins and their weights respectively, except in relation to the silver dollar, which is reduced in weight from four hundred and twelve and a half to three hundred and eighty-four grains; thus making it a subsidiary coin in harmony with the silver coins of less denomination, to secure its concurrent circulation with them. The silver dollar of four hundred and twelve and a half grains, by reason of its bullion or intrinsic value being greater than its nominal value, long since ceased to be a coin of circulation, and is melted by manufacturers of silverware. . . . Section eighteen provides that no coins other than those prescribed in this act shall hereafter be issued. The effect of it is to discontinue the coinage of the one and two cent bronze coins. . . [Mr. STOUGHTON.] The gold coins provided for ... are declared to be a legal tender for all sums at their denominational value. Aside from the three-dollar gold piece, which is a deviation from our metrical ratio, and therefore objectionable, the only change in the present law is in more clearly specifying the gold dollar as the unit of value. This was probably the intention, and perhaps the effect of the act of March 3, 1849, but it ought not to be left to inference or implication. The value of silver depends, in a great measure, upon the fluctuations of the market, and the supply and demand. Gold is practically the standard of value among all civilized nations, and the time has come in this country when the gold dollar should be distinctly declared to be the coin representative of the money unit. . . . The silver coins provided for are the dollar, 384 grains troy, the half dollar, quarter dollar, and dime of the value and weight of one half, one quarter, and one tenth of the dollar respectively; and they are made a legal tender for all sums not exceeding five dollars at any one pay ment. . [Mr. POTTER.] . . . this bill provides for the making of changes in the legal-tender coin of the country, and for substituting as legaltender coin of only one metal instead as heretofore of two. I think myself this would be a wise provision, and that legal-tender coins, except subsidiary coin, should be of gold alone; but why should we legislate on this now when we are not using either of those metals as a circulating medium? . . . ... [May 27.] Mr. HOOPER. .. I desire to call up the bill (H No. 1427) revising and amending the laws relative to mints, assay off 5, and coinage of the United States. I do so for the purpose of off an amendment to the bill in the nature of a substitute, one which has been very carefully prepared and which I have submitted to the different gentlemen in this House who have taken a special interest in the bill. . . . The SPEAKER. Does the gentleman from Massachusetts (Mr. HOOPER) move that the reading of the bill be dispensed with? Mr. HOOPER. . . . I will so frame my motion to suspend the rules that it will dispense with the reading of the bill. . . . The question was put on suspending the rules and passing the bill without reading; and (two thirds not voting in favor thereof) the rules were not suspended. Mr. HOOPER. ... I now move that the rules be suspended, and the substitute for the bill in relation to mints and coinage passed; and I ask that the substitute be read. The Clerk began to read the substitute. . . The question being taken on the motion of Mr. HOOPER, of Massachusetts, to suspend the rules and pass the bill, it was agreed to; there being ayes 110, noes 13. Congressional Globe, 42 Cong., 2 sess. (Rives and Bailey, Washington, 1872), 2305-3883 passim, April 9 and May 27, 1872. 169. Resumption of Specie Payments (1879) The law providing for the resumption of specie payments was passed in 1875. Sherman was secretary of the treasury when the law was finally carried into effect. For Sherman, see No. 52 above. - Bibliography: Bowker and Iles, Reader's Guide in Economic, Social, and Political Science, 35-38; Horace White, Money and Banking, 469-477. N the 1st of January, 1879, when the resumption act went into effect, the aggregate amount of gold coin and bullion in the treasury exceeded $140,000,000. United States notes, when presented, were redeemed with gold coin, but instead of the notes being presented for redemption, gold coin in exchange for them was deposited, thus increasing the gold in the treasury. The resumption of specie payments was generally accepted as a fortunate event by the great body of the people of the United States, but there was a great diversity of opinion as to what was meant by resumption. The commercial and banking classes generally treated resumption as if it involved the payment and cancellation of United States notes and all forms of government money except coin and bank notes. Another class was opposed to resumption, and favored a large issue of paper money without any promise or expectation of redemption in coin. The body of the people, I believe, agreed with me in opinion that resumption meant, not the cancellation and withdrawal of greenbacks, but the bringing them up to par and maintaining them as the equivalent of coin by the payment of them in coin on demand by the holder. This was my definition of resumption. I do not believe that any commercial nation can conduct modern operations of business upon the basis of coin alone. Prior to our Civil War the United States undertook to collect its taxes in specie and to pay specie for its obligations; this was the bullion theory. This narrow view of money compelled the states to supply paper currency, and this led to a great diversity of money, depending upon the credit, the habits and the wants of the people of the different states. The United States notes, commonly called greenbacks, were the creature of necessity, but proved a great blessing, and only needed one attribute to make them the best substitute for coin money that has ever been devised. That quality was supplied by their redemption in coin, when demanded by the holder. The feeling in the treasury department on the day of resumption is thus described by J. K. Upton, assistant secretary, in an article written at the close of 1892: "The year, however, closed with no unpleasant excitement, but with unpleasant forebodings. The 1st day of January was Sunday and no business was transacted. On Monday anxiety reigned in the office of the secretary. Hour after hour passed; no news came from New York. Inquiry by wire showed all was quiet. At the close of business came this message: $135,000 of notes presented for coin- $400,000 of gold for notes.' That was all. Resumption was accomplished with no disturbance. By five o'clock the news was all over the land, and the New York bankers were sipping their tea in absolute safety. "Thirteen years have since passed, and the redemption fund still remains intact in the sub-treasury vaults. The prediction of the secretary has become history. When gold could with certainty be obtained for notes, nobody wanted it. The experiment of maintaining a limited amount of United States notes in circulation, based upon a reasonable reserve in the treasury pledged for that purpose, and supported also by the credit of the government, has proved generally satisfactory, and the exclusive use of these notes for circulation may become, in time, the fixed financial policy of the government." The immediate effect of resumption of specie payments was to advance the public credit, which made it possible to rapidly fund all the bonds of the United States then redeemable into bonds bearing four per cent. interest. . . ... Letters written about this date will show my view better than anything I can say now. . . WASHINGTON, D. C., January 8, 1879. R. C. STONE, ESQ., Secretary Bullion Club, New York.. I regret that my official duties will not permit me, in person, to respond to the toast you send me, and I cannot do so, by letter, in words more expressive than the toast itself, 'To Resumption-may it be forever.' Irredeemable money is always the result of war, pestilence, or some great misfortune. A nation would not, except in dire necessity, issue its promises to pay money when it is unable to redeem those promises. I know that when the legal tenders were first issued, in February, 1862, we were under a dire necessity. The doubt that prevented several influential Senators, like Fessenden and Collamer, from voting for the legal tender clause, was that they were not convinced that our necessities were so extreme as to demand the issue of irredeemable paper money. Most of those who voted for it justified their vote upon the ground that the very existence of the country depended upon its ability to coin into money its promises to pay. That was the position taken by me. We were assured by Secretary Chase that nearly one hundred millions of unpaid requisitions were lying upon his table, for money due to soldiers in the presence of the enemy, and for food and clothing to maintain them at the front. We then provided for the issue of legal tender United States notes, as an extreme remedy in the nation's peril. It has always seemed strange that so large and respectable a body of our fellow-citizens should regard the continuance of irredeemable money as the permanent policy of a nation so strong and rich as ours, able to pay every dollar of its debts on demand, after the causes of its issue had disappeared. To resume is to recover from illness, to escape danger, to stand sound and healthy in the financial world, with our currency based upon the intrinsic value of solid coin. Therefore I say, may resumption be perpetual. To wish otherwise is to hope for war, danger and national peril, calamities to which our nation, like others, may be subject, but against which the earnest aspiration of every patriot will be uttered. John Sherman, Recollections of Forty Years in the House, Senate, and Cabinet (Chicago, etc., 1895). II, 701-704 passim. [By permission of the Saalfield Publishing Co., Akron, O.] 170. The Sherman Act (1890) BY PROFESSOR FRANK WILLIAM TAUSSIG Taussig is professor of political economy at Harvard University, and an authority upon subjects connected with the financial and economic development of the United States. Bibliography as in No. 168 above. FIR IRST of all, it must be noted that the present act makes no important change from the provisions of the Bland act of 1878, except in the amount of silver currency to be issued. It is true there is a change |