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. F `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 in form; instead of silver dollars and silver certificates we are to have treasury notes, redeemable at the government's option in gold or in silver coin, which notes are made legal tender for debts. But under the act of 1878 the silver dollars were a legal tender, and the silver certificates were practically so. Both, moreover, were practically redeemable either in gold or in silver; directly of course in silver, and indirectly, but none the less effectually, in gold. This indirect redemption arose because the government was always willing to accept the certificates and dollars freely in payment of all public dues; while, on the other hand, it was always willing and able to pay each one of its creditors gold, if he wanted it. The effect of the double willingness was to keep the silver currency always equal in value to gold, and the new legislation does no more than to simplify matters by making the treasury notes redeemable in gold or silver coin directly. It is safe to say even without the express declaration, wedged into the act, that it is "the established policy of the United States to maintain the two metals on a parity on the present legal ratio" that every administration, in the future as in the past, will wish to keep the notes equal to gold, and will redeem them in gold whenever that metal is demanded. The only important change, therefore, from the act of 1878, is as to amount. In both measures the annual increment of new silver currency is determined in a cumbrous way, depending on the price of silver bullion. The outcome under the old act was an annual issue of about thirty millions of dollars; under the new one it will be between fifty and sixty millions for several years probably nearer sixty millions than fifty. . . . . . . Twenty millions a year, perhaps thirty millions, will find use in the increase of retail transactions arising from the general growth of the community. There is an inevitable elasticity about this item. In any one year, more or less may be absorbed. Present indications point to the use, for the first year or two, of rather more than twenty millions. Then there is the gap left by retired bank notes, where again the count must be uncertain . . . but, on the whole, some temporary aid in finding a lodgment for the new notes in the retail currency will doubtless be found in this direction. Between general growth and retired bank notes, so large a part of the new notes will probably find their way into general circulation for retail transactions that the government will be able to hoard any unused excess without great financial embarrassment. Barring unexpected revulsions in foreign and domestic trade, we may therefore expect that the new silver currency will be issued at the start as smoothly and with as little immediate effect as that of the past. Those who expect any prompt effect on prices, on bank operations, or on government finances, are likely to be disappointed. Next, as to the more ultimate effects, assuming that there will be no fresh legislation by Congress on the bank-note, silver, or greenback issues. We shall reach after a year or two the stage when more notes will be put out than can find a place in the old way. It is almost certain that sixty millions of new notes of the smaller denominations cannot be got into circulation every year. Of course it is possible that the government then will simply hoard the excess, as it did at an earlier period already referred to — the years 1885 and 1886. A continued surplus of income over expenditure might enable it, if it chose, to maintain such a policy for a long time to buy the silver, and simply to hoard so many of the notes as did not readily find their way into circulation or came back into its hands. But this escape from the difficulties of the situation is not likely to be resorted to, except as a makeshift to tide over a temporary emergency, or one expected to be temporary. In the end, the treasury will doubtless have to pay out the notes, whether they find a ready circulation or not. Then, at last, it may be said, we shall have a forced issue of new currency, and surely a period of inflation, with all its intoxicating and demoralizing effects. No doubt the inflation must come, but the how and when are not so clear. The reader's attention must again be called to the importance of banking operations, and to the consequences which flow from the fact that all large payments are made by checks resting on bank deposits. No issue of government notes, large or small, can greatly affect prices, unless it affects the volume of bank deposits and that of the payments made through them. It would be wearisome, and indeed since the precise turn which events may take is quite uncertain — hardly profitable, to speculate on the various possibilities of a future several years distant; but it may illustrate what I have said of the part which bank operations must play in any process of inflation, if I indicate the working of the silver notes under two simple and very possible sets of conditions. First, the notes may be issued at one of the ordinary periods of depression and business inactivity. At such times the banks have plenty of cash in their vaults; they find it difficult to induce business men to increase their credits and deposits; the industrial current is sluggish and is not easily moved by a fresh inflow. The notes which the government would pay out to bullion-sellers, or to other creditors, would accumulate in bank vaults, and thence more and more of them would flow back into the treasury. A larger and larger proportion of the government's revenue would be received in these treasury notes. Meanwhile, gold would be paid out to such as called for it, and, the bank reserves being already over-full, the gold would tend to flow out in foreign payments; the more so because at such times securities, which form ordinarily a considerable part of our resources for foreign payments, would be difficult to sell abroad. By a process of this sort, the treasury might be drained of its gold, and even brought to a suspension of gold payments, while yet the note issues which had brought this about had had no effect on prices. Eventually, no doubt, the continuance of these issues would lead to a movement toward inflation; but only when, in the time of activity which usually follows in due course the time of depression, the banks, and still more the business community, were in a humor to respond. F. W. Taussig, The Working of the New Silver Act, in Forum, October, 1890 (New York), X, 165–171 passim. 171. Defence of Silver (1896) BY WILLIAM JENNINGS BRYAN Bryan entered Congress from Nebraska in 1891, and soon became noted for his advocacy of a bimetallic standard. His speech before the Democratic national convention in 1896, from which this extract is taken, was instrumental in securing for him the nomination for president by that convention. Both during that year and in 1900, when he was again candidate for the presidency, his name was considered as inseparably connected with the free-silver policy. For Bryan, see W. J. Bryan, The First Battle. Bibliography as in No. 168 above. WHE HEN you (turning to the gold delegates) come before us and tell us that we are about to disturb your business interests, we reply that you have disturbed our business interests by your course. We say to you that you have made the definition of a business man too limited in its application. The man who is employed for wages is as much a business man as his employer; the attorney in a country town is as much a business man as the corporation counsel in a great metropolis; the merchant at the cross-roads store is as much a business man as the merchant of New York; the farmer who goes forth in the morning and toils all day who begins in the spring and toils all summer — and who by the application of brain and muscle to the natural resources of the |