IV.THE EIGHT MONEY CONSPIRACIES.

Safety Fund—Suffolk and Redemption Banks.

As many of the foolish propositions now put forth for “reforming the currency” are only feeble imitations of the Safety Fund, Suffolk System and Redemption Bank System that arose before the Rebellion, a brief account of them will be given here. In the thirties and forties there were as many so-called systems as there were States. The Suffolk System of Massachusetts, among those first started, alone deserved the name of system. In 1829 that State decreed that no bank should operate unless fifty per cent. of its capital was paid in coin. Notes must not exceed twenty-five per cent. of the capital. Liabilities, except deposits, must not exceed twice the capital. Such provisions, however, amounted to little, because, much of the loans being simple credits, there was small inducement in the strong banks to overissue notes. As no provision was made for reserves, the coin to set a bank in motion could be bought and sold again right after the organization. The Redemption system, afterward adopted, was much better, but, as will be shown, only a harm in panic times.

The New York banks were placed mostly in New York City and the Hudson River towns. In 1829 the Safety Fund System arose there. It allowed the banks under it to issue notes to twice the amount of their paid-up capital, and loans to twice and a half the amount. Every bank under it had to pay the State Treasurer, annually, one-half of one per cent. upon its share capital—these payments to continue till each bank had a sum equal to three per cent. of its share capital. The amounts so paid were to be held as a common fund for the discharge of notes or other liabilities of any bank of the system.

In 1841 and 1842 eleven of the Safety Fund banks failed, making a loss to the creditors of $2,588,933. The fund was then $86,274. The whole amount of the fund to September30, 1848, was only $1,876,063. The balance of the loss was provided by the State, which was to be reimbursed by further additions to the fund. That was very nice for the banks. In 1842 the act was so amended that the fund became chargeable only with the losses to the public on the note circulation, just as it is the case with the national banks now.

In 1838 New York founded the “Free Banking System,” by which banks could be formed without application to the legislature. These associations were required to deposit with the State Comptroller United States or State stocks equal to a five per cent. stock, or bonds and mortgages on improved real estate worth twice the sum secured, and equal in amount to their note circulation. The Comptroller issued the notes to them. Up to 1843 twenty-nine of these banks failed—circulation, $1,233,374; nominal value of securities, $1,555,338. These produced $953,371, or 74 per cent. of the circulation secured. The law was then amended to exclude all but United States stocks, and those of the State, which must be equal to six per cent.

A wiser provision had been adopted in 1840, requiring all the State banks to redeem their notes, either in New York City, Albany or Troy, at a discount of one-half of one per cent. In 1851 this discount was reduced to one-quarter of one per cent. After 1851 two New York banks started the Redemption System. The notes of such of the country banks as kept deposits with them were returned, the redeeming banks dividing the discounts between themselves and the issuers. This system was useful, as it forced a constant redemption; but see how it worked in 1857.

After 1838 no more Safety Fund banks were chartered, and the system gradually lapsed. But a curious story could be told of how it ran through the West. Thatregion was deluged with “safety” money—all but the safety. In 1846 the new Constitution of New York took from the legislature all power to pass any act granting any special charter for banking purposes; such organizations to be under general laws. After 1850 bank stockholders were to be liable to the amount of their shares for all the debts, and holders of notes to be preferred creditors.

Now, for the redemption banks in 1857. These banks, useful in their way in ordinary times, did harm in that panic. A few years before a new source of profit was suggested to some New York banks. If the redemption that was distributed among the money-brokers could be monopolized by one or two institutions it would yield a rich revenue; and it could easily be attracted by reducing the rates of redemption so low as to exclude individual competition. The system was based somewhat upon the Suffolk system. Coupled with the payment of interest on country deposits, it had grown into astonishing activity before 1857. It worked admirably as a piece of machinery, with the popular commendation that it restricted the bank currency by enforcing prompt redemption, and saved the merchants a heavy brokerage. It was a great convenience in the first days of the panic, when private capital was withdrawn from the purchase of currency, and when the merchants, but for the redeeming banks, would have been overburdened with unavailable notes.

But the redemption system, like everything else that was susceptible of abuse, was turned aside from its legitimate purpose and made to answer a mischievous end. The low rate at which the bills were taken in New York accelerated their returnin bulk, as a basis of exchange, or for credit in account. Thus their distinctive character as circulation was in a great measure destroyed. The cheap redemption, so desirable in a common state of the market,became virtually a premium on the currency of New York. The tendency, then, was to take it out of a healthful circulation and throw it back to its source, whereby it profited nobody so much as the stockholders of the express companies. The country banks might keep their own bills in a perpetual circulation, by exchanging them with each other, and thus creating a trade in them. The same packages were not unfrequently kept unopened in the circuit, and reissued in bulk, as often as they were needed to supply balances.

In a panicky time such redeeming banks must either put more capital into the service or reject the bills. In 1857, in spite of the best management, the currency circuit was kept up; the bills of one bank were paid for the bills of all the others.

Another evil arose from these banks. The credit given to an unsecured currency by their indorsement gave it a wide circulation, to the displacement of bills that were based upon State and United States stocks. It was now seen that this credit had no other basis than a current deposit by the issuing bank, which deposit was in very small proportion to its outstanding bills; and that the redeeming bank was prompt to the hour in repudiating those bills if the deposit was not maintained. This was a fallacious credit, entirely independent of the separate ability of the issuing banks. The general result was that bills werelikely to fail in transit, and they would not then be admitted as a deposit, which would involve the rejection of others. And so the row of bricks began to tumble in both directions.

There was no incident of that panic that spread its terrors abroad with such sure and rapid steps as the rejection, by the redemption banks, of bills which they had been accustomed to receive on deposit. If it had beenpossible to remove all other causes of excitement, that alone would probably have involved the suspension of specie payments. It filled all the shops of the country with alarm. It created mobs in the savings banks, and pushed forward the panic, by exciting the fears of the multitude.

Professor Laughlin has the gall, as few of his confreres have, to appeal to “the example of France,” after the Prussian war of 1871, in not “interfering with her media of exchange.” It is hard to tell whether his statement is based upon impudence or ignorance. She interfered with all the ideas of propriety entertained by his clique in a way that has been secretly their despair ever since. Yet hear his glorification of a scheme that cuts all the ground from under him. He says:

“France borrowed largely, collected large amounts of capital by the creation of her national debt, and, on the other hand, retained her circulating medium in so perfect a condition that the moment the war was over she slipped along smoothly upon the wheels of industrial success and prosperity, without any derangement of her business. And, during that time, she carried through one of the most magnificent schemes of exchange, in the form of the payment of indemnity, that has ever taken place in history. She actually paid that foreign indemnity of the war to Germany practically without deranging the rate of exchange in France.”

He don’t tell how. Don’t tell that she flooded all the avenues of trade with her paper money, and thus made her goods so plenty and cheap that Germany bought them instead of her own, and was then in turn nearly bankrupted; so that France paid three quarters of the “milliard” in French goods!

But hear the true story from Wendell Phillips, an all-round, up-to-date reformer, whose mottowas,was,“Act inthe living present.” When the monopolizers of black men were beaten he turned to face the monopolizers of all men and women. Here is his eloquent picture:

“France has just paid Germany one billion dollars. Her chief cities have been sacked and plundered. Humiliated by defeat, torn by civil dissensions, she laughs, while all the rest of Christendom wade through the mire of bankruptcy. Her ships are full busy, and what little other nations do is in carrying to and fro her manufactures. Her homes are happy, her streets crowded with passing trains loaded with goods; all her mills hurrying night and day to get even with her demand upon them. Labor walks rejoicing and capital sleeps easy, fat with its gains. What magician has done this? Paper money. Like the rest of the nations, she ran to its protection during the stress and strain of her German war. Unlike and wiser than the rest of us, she has not hurried back to coin. Wiser than we, she received the paper she offered to others. This honesty has its reward. Her paper is, to-day, more valuable than gold.”

Among the great results of this policy were an abundance of gold and silver coming from abroad, until $1,200,000,000 was found to be in the country.

Lest some may doubt the statement about the Germans only getting a little gold for that indemnity, an extract is here given from “Our Money Wars,” p. 152.

“Ivan C. Michels says: ‘The indemnity from France to Germany, after the war of 1870-71, including interest at five per cent. per annum, amounted to $1,060,209,015. After crediting France with the value of certain railroads in Alsace and Lorraine, the amount ofindemnityindemnitydue Germany was $998,172,069, or 4,990,860,349 francs, which was paid by the French government through the Bank of France. At my request the Bank of France furnished to me several years ago the following statement as to the mode of having paid said indemnity:Francs.In bank notes of the Bank of France125,000,000In French gold coins273,003,050In French silver coins239,291,875In German bank notes105,039,045Bills of exchange drawn in thalers2,485,513,729Bills drawn on Frankfurt in florins235,128,152Bills drawn on Hamburg in marksbancs265,216,990Bills drawn on Berlin in reichsmarks79,072,309Bills drawn on Amsterdam in florins250,540,821Bills drawn on Antwerp and Brussels in francs295,704,546Bills drawn on London in pounds sterling637,349,832——————-Total francs4,990,860,349“‘The patriotic people of France raised the vast sum by a loan in less than six months from the time the government appealed to them. Germany expected to receive for years to come five per cent. per annum on the indemnity bonds; but the Bank of France, through the French bankers, drew on Germany, England, Scotland and Belgium, and in four months’ time the whole indemnity was paid. Never in the history of the world has this financial transaction been equaled, and I doubt that any other banking institution could have succeeded so well as the Bank of France. Germany expected the payment in gold coin or bullion, having previously and purposely demonetized silver. But the fact remains that actually in gold only 273,003,050 francs, equal to $54,600,610, was paid by the Bank of France, and that sum only left France, was remelted in Germany and coined into reichsmarks. England, with her gold standard, had to part with her gold to the amount of 637,348,832 francs, equal to $127,469,964. Bills of exchange on the German bankers throughout the German empire, especially on Hamburg, Berlin and Frankfurt, came to 3,064,901,180 francs, equal to $612,986,236, nigh on two-thirds of the whole amount of the indemnity. This magnificent stroke of finance on the part of the Bank of France and the French bankers came near ruining the leading German bankers; and forty-one banking houses throughout the German empire had to suspend temporarily, not being able to honor the drafts made upon them. The extravagance of the German people during the war of 1870-71 brought them into debt to France for luxuries, wines, etc., to an enormous extent;and when the Bank of France purchased bills of exchange from the French bankers, who drew on their German correspondents, a panic ensued, and the Germans suffered more than is generally supposed.’”

“‘The patriotic people of France raised the vast sum by a loan in less than six months from the time the government appealed to them. Germany expected to receive for years to come five per cent. per annum on the indemnity bonds; but the Bank of France, through the French bankers, drew on Germany, England, Scotland and Belgium, and in four months’ time the whole indemnity was paid. Never in the history of the world has this financial transaction been equaled, and I doubt that any other banking institution could have succeeded so well as the Bank of France. Germany expected the payment in gold coin or bullion, having previously and purposely demonetized silver. But the fact remains that actually in gold only 273,003,050 francs, equal to $54,600,610, was paid by the Bank of France, and that sum only left France, was remelted in Germany and coined into reichsmarks. England, with her gold standard, had to part with her gold to the amount of 637,348,832 francs, equal to $127,469,964. Bills of exchange on the German bankers throughout the German empire, especially on Hamburg, Berlin and Frankfurt, came to 3,064,901,180 francs, equal to $612,986,236, nigh on two-thirds of the whole amount of the indemnity. This magnificent stroke of finance on the part of the Bank of France and the French bankers came near ruining the leading German bankers; and forty-one banking houses throughout the German empire had to suspend temporarily, not being able to honor the drafts made upon them. The extravagance of the German people during the war of 1870-71 brought them into debt to France for luxuries, wines, etc., to an enormous extent;and when the Bank of France purchased bills of exchange from the French bankers, who drew on their German correspondents, a panic ensued, and the Germans suffered more than is generally supposed.’”

The above from Michels shows that he saw but dimly what Phillips saw so plainly, that government paper money, nourishing all industries, gave France that victory. Michels catches a glimpse of the truth when he speaks of luxuries, wines, etc.

To get a clear view of the French financial genius we have to go back to 1848, when Louis Philippe abdicated and the republic was founded amid great confusion. The French have an instinct for finance far superior to anything yet shown—by our rulers at least—in England and America. “Paris,” says Victor Hugo, “is the city of the initiative.” It is not afraid to start things. It is not, like Washington and New York, always asking what London would do or think. Taking Louis Blanc’s advice in 1848, it started national work-shops to insure the employment of surplus labor. Those did good for a time, but they were soon perverted and destroyed by a treacherous Jew who got hold of them.

Another new departure was more successful. “Besides its regular financial operations,” says the LondonTimesof February 16, 1849, “the Bank of France made vast advances to the city of Paris, to Marseilles, to the Department of the Seine, and to the hospitals, amounting in all to 260,000,000 francs. But even this was not all. To enable the manufacturing interests to weather the storm, at a moment when all sales were interrupted, a decree of the National Assembly had directed warehouses to be opened for the reception of all kinds of goods, and provided that the registered invoices of these goods so deposited should be made negotiable by indorsement. The Bank of France discounted these receipts. In Havrealone 18,000,000 francs was thus advanced upon colonial products, and in Paris 14,000,000 on merchandise. In all 60,000,000 francs was thus made available for all the purposes of trade. Thus the great institution had placed itself, as it were, in direct contact with every interest of the community, from the Minister of the Treasury down to the trader in a distant part. Like a huge hydraulic machine, it employed its colossal powers topump a fresh stream into the exhausted arteries of trade, to sustain credit and preserve the circulation from complete collapse.”

How like “a grimacing dance of apes” our American way of handling financial crises looks, in comparison with the above.

Prof. Laughlin showed the usual gold-bug worship of British finance in this:

“In the Bank of England the first moment of stringency the rate of discount is raised. That has the effect of preventing all unnecessary loans. The borrower who has good collateral will get the money if he is willing to pay an increased rate. Our system is such that we can loan until we come to the legal limit; and is deficient in that respect, as we cannot loan at a greater discount because of the iniquitous action of the usury laws. You can help a customer by increasing the rate. Just at the moment of the greatest stringency our American system is deficient.”

Ordinary decorous language would fail to characterize that infamous statement. The fact is that the British system is utterly brutal. Our “iniquitous usury laws” prevent a man from giving everything he has to the banks in hard times. The British system is that of Jay Gould in his gold corner of 1869. He settled with his debtors by “taking all they had.” He was merciful, and forgave them the balance; which is the usual stock exchange style.

In coin-paying eras corrupt governments and Shylocks have debased coins to make them go further. In these credit-mongering times they try to bring their coin basis down to one metal, gold, and clamor for extreme fineness of that, in order to make their inverted pyramid of credit go further and sell dearer. The policy of Great Britain, for instance, has been to make gold, its standard, so dear and inaccessible to the foreigners and debtor class that they would find the other commodities in the market cheaper than the gold in the market, so that settlements in other commodities would be preferable. The retention of gold in the Bank of England, by raising discounts in panicky times, though murderous (“kindness,” says Mr. Laughlin) to individual active business men, is a necessary factor in this piratical scheme, and the fulcrum upon which England derricks into her treasure vaults the plunder of the whole world. Business is made a lottery, turning out dazzling prizes that keep merchants from rebellion. Long-headed American Shylocks hope to see the United States as much more successful in plundering the globe, in this way, as our country is larger than England.

Finally, as to Laughlin, with what bitter scorn this statement from the “closet scholar” will be greeted by the thousands of manufacturers who, during panics, have had to shut their factories for lack of cash “to pay the hands”—though they had all but gilt-edge collateral:

“The monetary function has to do solely with exchanges of goods; it hasn’t anything to do with their production.”

In finishing this bird’s-eye view of the financial history of this country, a brief review of the current financial plans cannot well be avoided. It may be said of them, in a general way, that no other set of robbers ever beforeattempted to secure a law guaranteeing them unrestricted right to plunder with unlimited government protection. The out and out black-flag pirates, as represented by Walker of Massachusetts, have a plan as simple and explicit as a patent medicine. It runs thus: “Retire the greenbacks, kill silver once for all, and let the bankers manage the currency.” This obsolete idea, that banks should issue money, is showing all the vim of a death struggle. But a thousand columns of speeches in theCongressional Globeon the safety of the national bank system are answered by this solitary fact: In the year 1893, three hundred and sixty banks west of the Alleghanies, owing $125,000,000, went to smash, and about a dozen bankers are now in prison or exile, while many more escaped as by fire.

The Baltimore Plan, which a while ago had the sanction of the Comptroller, Secretary of the Treasury and the President, is, in a word, a scheme for issuing circulating notes by both national and State banks, otherwise than upon the pledge of government bonds as now. The banks are to issue notes upon their own assets, supplemented by a deposit of a certain amount of greenbacks, as a safety and redemption fund. The theory of this plan is that when any special demand for currency arises the banks will make a special issue of notes to supply it; and that as soon as this demand ceases the banks will retire the notes it has called out. Thus the quantity of currency available will, it is assumed, never be either deficient or excessive; and there will never be at any point either a monetary stringency or a monetary plethora. Were the function of currency exclusively that of facilitating exchanges, such a system (like that of 3-65 interconvertible bonds) might be useful. But currency serves the additional purpose of measuring the price of commodities; and since its relationto those commodities is determined by its volume, any change of its volume changes its value also, and consequently impairs its stability as a measure of prices.

Again, as to the State bank feature of the Baltimore plan, the idea prevails extensively in the agricultural districts of the West and South that the chief business of a bank is to lend money to borrowers. That is why they clamor for the removal of the ten per cent. tax on State banks. An abundance of greenbacks and silver would do away with most of the need of borrowing from banks. That’s what’s the matter with the banks.

No further mention is needed here of the schemes of Carlisle, Springer, Vest and others. They seem all dead at this writing, and they certainly should be damned. Even the New YorkTribune, a monopolists’ own, says of one of the safety-fund schemes:

“The bankers are to have free issue; and when one fails the government is to collect from the other banks and redeem its currency. But in time of panic the government would not and could not do that.”

On the other hand, the New YorkSun, edited by a man who was a radical socialist in his youth, and now a bitter, hardened, cruel cynic, although lately a Greenback paper, is as rabid as the New YorkEvening Postin advocacy of gold and gold only. It says of the latest safety-fund humbug:

“The new bill, like the old one, authorizes an inflation of our paper currency, by at least $550,000,000, without providing for its redemption in gold, and without any effectual provision for diminishing the volume of outstanding legal tender. Our New York financial magnates, who have put up, this year, $116,000,000 in gold,to save the treasury from suspending gold payments, ought to bestir themselves in opposition to this latest administration folly, if they would not see all their efforts go for naught and thecatastrophe which they have labored to avert rendered inevitable.” [!!]

In Chicago we have Lyman Gage’s plan. Mr. Gage is a man of intellect who resembles some of those orthodox clergymen who, by a long course of theological dissipation,i. e., reasoning from false premises, have impaired their naturally fine faculties. Mr. Gage, if we must credit him with sincerity, has come to the same condition by financial dissipation. But his plan is not as vicious as some. To furnish the needed foundation for national bank circulation he would have the treasury issue $250,000,000 of 2½ per cent. bonds, for which greenbacks or Sherman notes should be paid. The money paid would not become an asset of the government. It would be canceled, destroyed, burned up. Of his scheme the ChicagoTimeswell says:

“Like other bankers, he thinks the chief end to be sought is to relieve the government of the duty of issuing the circulating medium of the country. Upon this point we must note an emphatic disagreement with Mr. Gage, and with the whole school of financiers of which he is a type.”

A specimen of the demoralization and danger of the times is seen in a recent statement of Senator Gorman, that he and Quay had settled in their minds that a certain government bond scheme, like that of Mr. Gage, in eight items, including some about silver, was about the only proposition that could pass the present Congress. No. 3 among the eight items coolly dismisses the greenback thus: “The legal tenders to be retired and canceled as the bonds are put out.”

On the other hand, the ChicagoInter Ocean, which is repenting of some of its financial sins, and remembering what a good Greenback paper it was in 1878, says:

“One of the perils of the present financial situation isthe disposition shown to reopen the greenback question. It took fifteen years to fight the great battle. Secretary McCulloch attempted to take snap judgment against legal-tender notes, paying them off at a rapid rate. Illinois, through one of its Congressmen, E. C. Ingersoll, stepped in the very first day Congress convened after that payingoff process had begun with a resolution which stopped it. Then began the intriguing of the Eastern bankers to destroy the greenbacks, and when the last decisive conflict occurred Illinois was again in the leadership, G. L. Fort being the especial champion of the greenback cause as against both the contractionists and the expansionists. There was a great victory. For half a generation the anti-greenbackers have been quiescent. They have come to the front again with this session of Congress. The knock-out received in caucus Monday ought to satisfy them that the greenback is here to stay. There never could be a better money. It is good for its face the world over. In that uttermost end of the earth, China or Japan, the United States legal-tender note is good for its face value, and, whatever changes are made, that part of our currency should remain intact. Should the current of Congressional events occasion a show of hands in the Republican party on this question, no doubt an overwhelming majority would say, as did the Democratic caucus, let the greenbacks alone.”

An extraordinary scene in the House between Representatives Hepburn and Hendrix so fairly illustrates the muddled stupidity and impudence of the gold-bugs that it deserves notice here as a sign of the situation. Mr. Hepburn described Mr. Hendrix as a self-heralded national banker, who came here with oracular utterances to tell the House what to do. Mr. Hepburn said his self-laudation was impaired by the recollection of his speech sixteen months ago, when the same conditions existed. Mr. Hendrix then found the panacea for all financial ills in the repeal of the Sherman silver law.

Before describing this discussion, attention should becalled to the fact that the panic of 1893 was immediately brought on by the bankers because Secretary Carlisle undertook to perform about the only good deed he has ventured upon as Secretary,i. e., to pay the Sherman treasury notes according to the letter of the act of July 14, 1890, in silver,just as France would have done. Now mark how Hendrix “opened his mouth and put his foot in it,” and how, finally, Hepburn tripped him.

Mr. Hendrix described at some length the process by which the gold was withdrawn by speculators for shipment abroad, and then proceeded to contrast this with the situation in France, where the Bank of France refused to pay, except where actually necessary, more than five per cent. of gold on its demand obligations. These aggressions on our gold reserve must be stopped, and if the pending bill would stop them, afford relief, take the government out of the banking business, as it has been taken out of the silver business, he would vote for it.

“Does the action of the Bank of France, in refusing to pay more than five per cent. in gold,” asked Mr. Hepburn, “impair the credit of that bank?”

“No.”

“Then would the credit of the United States be impaired if the United States should exercise its discretion and redeem the Sherman notes in silver?”

“Yes, I believe it would at this time,” replied Mr. Hendrix.

“Why?”

“Because of the general distrust of the government’s ability to pay in gold. One hundred and fifty-nine million dollars of Sherman gold promises [?] to pay cannot be met without gold.”

“But the notes are redeemable in coin, not in gold,” was Mr. Hepburn’s parting shot.

Mr. Hepburn declared that Mr. Hendrix had pointed out unwittingly the remedy for the present evil when he told the House that the great banking houses of Europe exercised their discretion about depleting their gold vaults. “Why will not the Secretary of the Treasury exercise the same discretion?” he asked, amid a round of applause. “The exercise of this discretion did not impair the credit of European banks. Who dared to say that the credit of this country, with 65,000,000 people behind it, and an unlimited taxing power, would be impaired because it refused to kneel at the demands of the Shylocks?”

“Why have not the Republican Secretaries of the Treasury exercised that discretion?” asked Mr. Pence of Colorado.

“I have not been Secretary of the Treasury,” replied Mr. Hepburn hotly. “When I am I will answer. I am as fully convinced, however, as I am that I am alive, that if the Secretary of the Treasury were now to exercise his discretion and pay gold when legitimate redemptions were asked, and refuse it to sharks and speculators, the evils from which we suffer would cease to be.”

A broader view is that the prime motive of the Secretary in exercising his discretion should be the welfare of the government; and gold should be refused where its payment is likely to hurt the treasury.

In the foregoing pages we have attempted to give such a bird’s-eye view of American money and finance as would serve as an example and warning for the future. We behold in this short story how our finances were continually run upon the rocks and shoals of a false “political economy,” so-called, and how they were occasionally pulled off—though remaining most of the time stuck fast in the most dismal way.

As to the general aspects of the money question this is added:

Our financial kings have kept two purposes in view.First: To have our money issued by and for the special use of private institutions called banks; and to have this money scanty in quantity and of fluctuating value.Second: To issue, foster and maintain, by all possible means, bonds and other interest-bearing obligations, as the most convenient means of transferring to the few the product of the industry of the many.

To maintain these humbugs, they use learned language, like doctors writing prescriptions in Latin. All the expert handlers of money, stocks, etc., hate nothing so much as that which is best for the other classes, viz., steady values. Their delight is in ups and downs; and then, if speculators, their effort is to be on the winning side. With brokers, every change is profitable. With them it is: “Heads I win, tails you lose.” Copernicus said of the work of these traitors: “It is not by a blow, but little by little, and through a secret and obscure approach, that it destroys the state.” Further back in the ages Plato, Lycurgus and Solon saw this most plainly.

The new American system of money is plainly and briefly this: Abundant government fiat paper money—founded upon the wealth and credit of a great, stable nation; such moneytotobe kept at a steady purchasing power by the increase and decrease of its volume; and to be quite void of intrinsic value, and quite free from particular commodities as bases for the monetary units.

For the present we wish free coinage of gold and silver at 16 to 1. The ultimate of gold and silver will probably be free coinage for all who bring them to the mints, into suitable coins stamped with their weight and fineness, and returned to the owners to be used as they choose. Andno one will lie awake nights for fear the metals will go abroad.

When we get that “honest” fiat paper dollar, nothing will call for an extra session of Congress quicker than any prospect of a change in its purchasing power, after we have once got it to a generally satisfactory point, say about the buying power of our dollar in 1866. While any kind of a change, up or down, suits many gamblers and speculators, the steady increase in the buying power of the dollar, for thirty years past, has been destroying the producers of this country and largely creating the pestiferous breed of millionaires.

The bulk of our money wars have been crowded into the past thirty years. We might call them “Our Thirty Years’ War.” Its history has been utterly, wofully and willfully misrepresented by such pseudo-historians as Sumner of Yale and David A. Wells.

Those years nearly cover the great and little panics of 1837, ’47, ’57, ’60, ’73, ’84, ’85, ’90 and ’93. Vast tomes might be written concerning the manifold causes. One cause has always been foremost in them—scarcity of legal-tender money.

At times our rulers have tried to deceive us by a great show of abundant currency. Such were the fifteen kinds of money thrust upon the nation to confuse it during the civil war, by McCulloch and Sherman.

Why need we here repeat the many-times-told tales of the craft of the national banks, demonetization of silver, the mystery and raised value of gold, Rothschild tricks, the control of our finances and politics by Europe, and the gradual merging of the gold Democrats and Republicans into practically one party?

The bankers’ rebellion of 1881, which conquered President Hayes. The whirling of stock values up two billionsthen and down again in 1883. The deluge of trusts and syndicates in full tide in 1887. The bogus silver bill of 1890. Cleveland’s object-lesson of ruin and misery in 1893. The counting out of victorious Bryan in 1896. And now the ghostly attempt to bring prosperity by tariff bills and Lyman Gage “currency reform,” while millions of deceived, disappointed, dazed, discouraged, almost maddened Americans suffer all the tortures of poverty.

And the end is not yet.

IV.THE EIGHT MONEY CONSPIRACIES.

“When I stand in the United States Treasury, I stand on English soil.”—Nathaniel P. Banks.

“HUGH McCULLOCH hamstrung the whole nation. His management of the finances, while it enriched him and made him a great London banker, has cost the American people more than the war did.” These words were uttered by Hon. William D. Kelley, and they are true as gospel. They would be equally true if the name of John Sherman were substituted for that of Hugh McCulloch.

That the constant aim and object of the manipulators of our financial legislation since the war has been to contract the currency and to burden the people with interest-bearing debt, thereby enriching the usurers and impoverishing the producing classes, is evidenced in the following brief summary of the eight principal enactments affecting money which passed Congress since 1861:

1.The Exception Clause.(Feb. 25, 1862.) In 1861 and 1862 demand treasury notes to the amount of $60,000,000 were issued by the government and made legal-tender money for all debts, public and private—equal to coin. Wall Street could not gamble in legal-tender paper money; so, as soon as the legal-tender act passed the House and was sent to the Senate, the Shylocks placed on the greenback what is known as the “exception clause”—“Except duties on imports and interest on the public debt.” This practically demonetized the United States treasury note,and cost the producing classes millions of dollars. The greenback “went down,” or, more correctly speaking, gold “went up,” until $1 in paper money was valued at only 37 cents whencomparedcomparedwith gold. John Sherman said: “We purposely depreciated the greenback, to get sale for our bonds.” He was willing to destroy the people’s money to appease the greed of gold gamblers at home and abroad.

2.The National Bank Act.(Feb. 25, 1863.) This scheme was introduced in the Senate and advocated by John Sherman in the interest of bondholders and capitalists, just one year after legal-tender notes were authorized by law, and before sufficient time had been given to test their utility. The express object was to have the bank notes supersede the legal-tender notes, after the investment of legal tenders in bonds.

“I look upon the national bank, as now recognized by law,” says Myers in his “Money, Its History and Functions,” “as one of the most gigantic schemes for robbing the people ever devised by man. I cannot conceive of a single reason for perpetuating the system one day beyond the time required to settle its affairs. The national banks of this country have cost the people, in thirty years of their existence, over $6,000,000,000. The credit which the banker sells at from 7 to 15 per cent. costs him only 1 per cent. on actual circulation; hence it is virtually a present to him. He draws interest on this credit; on what he himself owes. His note is not money, nor is it in any sense a legal tender between man and man. It is simply a ‘promise to pay.’ The bankerlends his credit, with which he has supplied himself by gift from the government, and the borrowerpledges his wealth; the banker being far more secure than the holder of the banker’s paper. The banker takes pay for something he does not furnish; for the capital (wealth) is furnished by the borrower. So the bankergets something for nothing, and the borrower pays for that which he never receives.”

Banks are run on the deposits, rather than on any capital the banker himself may have. The patrons of the bank furnish the capital, and also the security. The banker lends other people’s money to other people; on this he draws interest; he conducts his business onyourmoney andhiscredit, whichyoufurnish him.

Now, if the government can afford to let the banker havecreditat 1 per cent. on actual circulation, why can’t the treasury supply all the people with legal-tender money at the same rate? Why not issue the money direct to the people and then pay interest into the United States treasury, instead of into the coffers of corporate institutions? National banks are expensive luxuries which we don’t need. So let the people unite in demanding their abolition at once, and then institute in their stead United States banks, sub-treasuries if you please, backed by all the people, and hence absolutely safe. This would make a government for thepeople, instead of for the corporations. Let us do business on the credit of the people—on the credit of the government; not, as we are now doing, on the credit of banks and bankers.

3.The Funding Act.(April 12, 1866.) Commonly called contraction. This law authorized the Secretary of the Treasury to retire the legal-tender notes by investing them in 6 per cent. bonds. Contraction continued until some $1,500,000,000 were destroyed, and a corresponding amount of 6 per cent. bonds issued. The treasury notes, or legal tenders, were nearly all non-interest-bearing. This reduction of the currency was an outrage upon the people. The volume should have been increased to keep pace with an increasing population. But Shylock must have interest.

4.The Credit-Strengthening Act.(March 18, 1869.) This law provided that the legal-tender treasury notes be paid in coin, as also all interest-bearing obligations of the government. Prior to the passage of this law public obligations had been payablein the lawful moneyof the country; the greenback was lawful money, redeemable the same as gold and silver coin, except duties on imports and interest on the public debt. The credit of the nation was good, and needed no strengthening. The war was over, and the country was prosperous and the people contented. Why, then, add another burden?

5.An Act Refunding the Public Debt.(July 14, 1870.) This act authorized the issue and sale of $1,500,000,000 United States bonds, to refund 5-20 bonds and make them conform to the law of 1860. To fund means to put publicobligationsobligationsinto stocks and securities, making them interest-bearing.

The public debt should have been paid, as at first provided, in the lawful currency of the country, gold, silver and treasury notes. The law of 1869 added $500,000,000 to the 5-20 bonds, by making them payable incoin; then to refund the bonds, just to please English Shylocks, is villainy unnamed andunnameableunnameable.

6.The Demonetization of Silver.(Feb. 12, 1873.) The act of 1869 had made all public obligations payable in coin, gold or silver; while the act of 1873, clandestinely passed, by omitting the silver dollar from the list of coins enumerated, practically demonetized silver, making the public debt, interest and all, as well as the paper currency, payable in gold coin—a further contraction of the volume of currency.

The silver dollar was created by the Congress of the United States on April 2, 1792, and made the unit of value. It contains 412½ grains of standard silver, nine parts puresilver, one part alloy. At that time the mints of all the principal nations of the world were open to the free coinage of both gold and silver. That is, all of such metal presented to the mints could be converted into money without any charge except the actual cost of coining. The ratio then was about 15½ to 1; that is, one ounce of gold was equal to 15½ ounces of silver. January 18, 1837, the ratio between gold and silver coins of the United States was changed to 15.988 to 1, commonly referred to as 16 to 1.

The act demonetizing silver was understood by few, and, in fact, many of those who voted for it, and President Grant, who signed the bill, were unaware of its actual meaning and effect. The money speculators of England, backed by cupidity and ignorance on this side, were its real instigators. There was every reason in the world why England should desire the demonetization of silver here. She is a creditor nation, and her capitalists hold vast amounts in government and other securities abroad. From this country alone the capitalists of Great Britain derive each year more than five hundred millions of dollars for interest on their investments, all of which is paid in gold or its equivalent. The United States produces an enormous quantity of silver, but we very humblysubmitsubmitto the gold standard as set up by Great Britain. We deny ourselves the right to use a metal of which we have an abundance and adopt one more scarce and, consequently, more expensive. By this policy we are forced to purchase gold abroad, thus adding constantly to the burden of a perpetual, interest-bearing national debt.

By accomplishing the demonetization of silver in this country, England gained a double victory, for the governments of the Latin Union, France, Belgium, Italy, Switzerland and Greece, were soon afterward forced to suspendsilver coinage. The gain to England and the loss to the other countries involved, especially to the United States, by this general demonetization of silver, can hardly be estimated. The loss, of course, was the heaviest in this country, where the production of silver is very large, where so many are engaged in agricultural pursuits, and where a large and freely circulating volume of money is so essential to commercial activity.

Before silver was demonetized, we were under the burden of an enormous national debt, but every dollar of this was payable in silver. The stimulated demand for gold, and, consequently, its increase in value, was not the only gain to England. She now buys our cheap silver bullion, exchanges it at its coinage value for products in the silver-using countries of Asia, Africa and South America, and nets a profit of over one hundred per cent. by the transaction. We then buy from her at gold prices and pay with gold or products at prices which, by forcing us into competition with the world, England fixes herself.

7.The Resumption of Specie Payment.(January 14, 1875.) This law provided for the retirement of the fractional currency ($45,000,000) and the legal-tender treasury notes, their places to be supplied by national bank notes, which are not a legal tender between man and man. The name “specie payment” is simply a blind; it does not mean anything; to get rid of the much despised greenback was the real object of the act. The moneyed aristocracy had long ago confessed their inability to “control” the “greenback as it is called.” Had the provisions of this law been carried out, it would have added to our annual interest charge about twenty millions of dollars.

8.The Sherman Purchasing Clause.(July 14, 1890.) This act was a miserable makeshift or substitute for a free coinage bill. It provided for the purchase of not lessthan 2,000,000 nor more than 4,500,000 ounces of silver bullion per month, 2,000,000 ounces of which was to be coined each month into silver dollars until July 1, 1891. Instead of redeeming the treasury notes issued in the purchase of silver with their equivalent in silver, upon the demand of the holder, the Secretary of the Treasury was required to redeem these notes in gold or silver coin at his discretion. The legal-tender power of the silver dollar was modified so as to read: “Except otherwise expressly stipulated in the contract.” In 1893 President Cleveland called Congress together in extraordinary session to consider the financial condition of the country. November 1, 1893, the Sherman law was repealed, leaving us on a single gold basis.

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