of the paper emission, and especially during 1863-65, the specie premium was greater than the general rise in prices; while in later years, say in 1866-70, the reverse is supposed to have been the case, the rise in prices being greater than the gold premium. It is pertinent to inquire what light our statistics throw on this aspect of the history of prices.

Unfortunately, the fact that the index numbers were calculated on the basis of January prices makes it possible to get conclusions only of a very limited sort. On chart II the general index number of prices, as they stood in January of each year, is compared with the gold premium as it stood in January. For the earlier years of the papermoney period, however, the comparison derivable from the lines is of little value. During the first years of the period, from 1862 to 1865, prices and the gold premium fluctuated with great rapidity and with extraordinary irregularity. The paper-money issues were on a large scale, and depreciation set in very quickly. The progress and extent of the real depreciation, as indicated by the change in prices, could be ascertained only by getting statistics. from month to month, or, indeed, from week to week. The gold premium reached its highest point in July, 1864, when it touched 285. Throughout 1865 it fluctuated violently. It ranged between 285 and 222 in the month of July, 1864, and during this year ranged between 245 and 151. How prices fluctuated during this feverish year, we have no means of knowing. Few individual commodities showed fluctuations. as great as gold, and a general index number, month by month, would probably show a less spasmodic and irregular movement than did the gold premium. It is still possible, even probable, that the general movement of prices lagged behind the gold premium. In the first month of 1865, for which we have the high index number of prices indicated on the chart, there is no great difference between the gold premium and the index of prices; but it is not improbable that by this date prices had just attained their highest point, while the premium on specie was already on the decline. All this, however, is speculation; our statistics do not give us more than a hint of the course of events during the period

of sudden inflation. It should be said, however, that the materials for a more detailed investigation are contained in the specific quotations of prices printed in the body of the Report. There the economist will find quotations of prices for all the articles for each quarter of each year,—for January, April, July, and October. Index numbers prepared from these quarterly quotations might furnish instructive results, and present a tempting opportunity for those who may be able to give the investigation the weary labor which it would entail.

After the first years of the period of inflation, when the movement of prices became less irregular and fluctuations. in the gold premium less abrupt, the January index number and the specie premium may be compared with better promise of significant results. And then the movement is certainly striking. The decline in the gold premium is more rapid than the decline in general prices. The real depreciation of the paper, in other words, was greater than its discount in terms of gold would indicate. This is more particularly the case in the years immediately after the war, -in 1866-68, and again in the years immediately before and after the great crisis of 1873,-i. e. in 1871-74. After the war the gold premium fell sharply and suddenly from a range of 200 and over to one of 140 or thereabouts; yet prices fell much more gradually and more slowly. Again, in the years after 1870 the gold premium ranged between 110 and 120, and in general tended to fall. The January quotations in this period are a fair indication of the range of the premium throughout the year. Yet in '70-'73, prices showed a tendency to rise rather than to fall, and the real depreciation of the currency was greater than the specie premium would indicate. After 1873, prices fell sharply and continually; the gold premium fell much more slowly. The country was nearer a specie basis in 1873, so far as the gold premium went, than it was so far as the general range of prices went. The final and real readjustment to a specie basis was accomplished rather by the relentless fall in prices and in wages between 1873 and 1879, than by the more obvious, but less incisive, decline in the gold premium. F. W. TAUSSIG.

Harvard University, Cambridge, Mass.

THI

STATE SOVEREIGNTY BEFORE 1789.

HIRTY years or more ago no position concerning the constitutional relations of the States to the United States was perhaps more fully established or more frequently affirmed, both North and South, than that of the original political sovereignty of the States which in 1789 formed the Union. It was not merely a dogma but a postulate of our constitutional law. Along with this went the doctrine of the Fed-· eralists of our early political history, and of the Unionists of all our political history, that this original sovereignty of the States was limited or abridged by the force and meaning of the Federal Constitution,-limited and abridged to such an extent as to create a new nation, having sovereignty indeed, but a sovereignty in turn strictly limited by the express and implied grants of power in the Federal Constitution. Two sovereignties were thus held to co-exist under our Federal system-a national sovereignty, originally created and limited by the Federal Constitution, and a State sovereignty, originally possessed by each State, but by the adoption of the Federal Constitution in 1789 limited or abridged to the exact extent, and no more, of the powers granted to the United States by the Federal Constitution. The original sovereignty of the States was a concession alike of Calhoun and of Webster; of Jefferson and Madison, as well as of Hamilton. Jefferson, when toying in 1798 with the demon of nullification in the Virginia and Kentucky Resolutions, and Calhoun and his school in their dogmas of secession and constitutional separation, laid the foundation of their arguments on the doctrine of the complete sovereignty of the States prior to 1789; reaching the conclusion that as once possessors of such original sovereignty, the States had still the right under the constitution to withdraw from the Union or to resume the sovereignty and powers conveyed away by the adoption of the constitution. Hamilton, Marshall, Webster, and the school of which they were the most illustrious representatives, conceded and asserted

the original sovereignty of the States; but held that the adoption of the constitution created a nation and not a league, a perpetual government and union, not a temporary or dissoluble compact or confederacy; and that, hence, the original sovereignty of the States was by the adoption of the constitution forever thereafter shorn of its completeness, but to the extent only of the powers granted by the constitution to the United States.

1

Mr. Calhoun's views on this point are found on all hands in his speeches and writings. In his "Discourse on the Constitution and Government of the United States," he says: "That the States when they formed and ratified the constitution were distinct, independent, and sovereign communities has already been established. That the people of the several States acting in their separate, independent, and sovereign character adopted their separate State governments is a fact uncontested and incontestable." In the resolutions introduced by him in the Senate, which led to the great debate of February, 1833, he thus stated his position: "Resolved, That the people of the several States composing these United States are united as parties to a constitutional compact, to which the people of each State acceded as a separate and sovereign community." Again, in his speech in the Senate in reply to Mr. Webster, February 26, 1833, he said: "All acknowledge that previous to the adoption of the constitution the States constituted distinct and independent communities in full possession of their sovereignty.""

No better statement of the Union view can perhaps be found than this passage in Mr. Webster's letter of opinion, addressed to Baring Brothers in 1839: "Every State," he says, "is an independent sovereign political community, except in so far as certain powers, which it might otherwise have exercised, have been conferred on a general government, established under a written constitution, and exercising its authority over the people of all the States. This general government is a limited government. Its

I Works, vol. i. p. 119.

2 Id., vol. ii. p. 262.

3

Id., vol. ii. p. 281, 282.

powers are specific and enumerated. All powers not conferred on it still remain with the States or with the people. The State legislatures, on the other hand, possess all usual and ordinary powers of government, subject to any limitations which may be imposed by their own constitutions, and with the exception, as I have said, of the operation on those powers of the constitution of the United States."'

It is the general judgment, we think, of the most competent that some grave excesses of rightful constitutional power marked the great struggle of our Civil War. It is not strange, but only regrettable, that it should have been so. Great interests, the greatest, were at stake; deep passions, the deepest, were aroused; the flames of civil war, fiercer than of foreign, enveloped us all. "The Union must be saved; let it be saved at whatever cost;"-such, one may say, was the national thought. From such a spirit constitutional circumspection was not always to be expected. Some of the excesses in question were temporary in their direct effects; such as the declaration of martial law or the attempt to override the civil authorities, in States not in rebellion; and the suspension of the writ of habeas corpus by President Lincoln in 1863. Other excesses were more lasting in their results, the Legal Tender Acts of 1862 and 1863, for example, which have since steadily poisoned our financial life, and are destined to cast their baleful effects far forward into the future. Not one of these excesses can be fairly said to have been necessary to save the Union or to put down the rebellion. They were the result of alarmed and excited feelings, not unnatural, but not for that reason the less deplorable in their effects. The war ended, and the Union restored, we might well have hoped for soberer views of public duty as well as of constitutional law. In one respect, and that a most important one, our government and Federal system suffered no detriment from or after the war-the substantial relations of the States to the Union. For this great result we are indebted, above all other men, to the late Chief Justice Chase and the late Mr. Justice

1 Works, vol. vi. p. 537.