The History of Bimetallism in the United States
By J. Laurence Laughlin
It may not be necessary to inform readers again that I have aimed in this book to present only the facts bearing on the experiments of the United States with metallic money. No special attention, therefore, has been devoted to the theory of bimetallism or to the larger principles of money involved in current discussions. In a historical study, such as this aims to be, there is neither space nor propriety for an extended treatment of principles. Hence I do not wish to be regarded as having tried to “settle the money question” merely by this book, even though the facts given must necessarily have an important bearing on the acceptance or rejection of current schemes. In due time I hope to present a careful discussion of the principles of money, and also an examination of the logic and theory of bimetallism. [From the Preface to the Fourth Edition]
First Pub. Date
New York: D. Appleton and Co.
The text of this edition is in the public domain.
- Preface to the Fourth Edition
- Preface to the First Edition
- Part I, Chapter I, The Arguments of Bimetallists and Monometallists
- Part I, Chapter II, The Silver Period, 1792-1834
- Part I, Chapter III, Cause of the Change in the Relative Values of Gold and Silver, 1780-1820
- Part I, Chapter IV, Change of the Legal Ratio by the Act of 1834
- Part I, Chapter V, The Gold Discoveries and the Act of 1853
- Part I, Chapter VI, The Gold Standard, 1853-1873
- Part I, Chapter VII, The Demonetization of Silver
- Part II, Chapter VIII, The Production of Gold since 1850
- Part II, Chapter IX, India and the East
- Part II, Chapter X, Germany Displaces Silver with Gold
- Part II, Chapter XI, France and the Latin Union
- Part II, Chapter XII, Cause of the Late Fall in the Value of Silver
- Part II, Chapter XIII, Continued Fall in the Value of Silver since 1885
- Part III, Chapter XIV, Silver Legislation in 1878
- Part III, Chapter XV, Operation of the Act of 1878
- Part III, Chapter XVI, Act of 1890
- Part III, Chapter XVII, Cessation of Silver Purchases, 1893
- Appendix I, Production of Gold and Silver in the World
- Appendix II, Relative Values of Gold and Silver
- Appendix III
- Appendix IV, Coinage Laws
- Appendix V, Coinage Statistics
- Appendix VI
- Appendix VII
Silver Legislation in 1878
Part III, Chapter XIV
THE UNITED STATES SINCE 1873
§ 1. We now take up the story of the double standard in the United States where we left it after the passage of the act of 1873, by which the coinage of the silver dollar was discontinued.
As after the legislation of 1853, so for a time after the legislation of 1873, there was complete acquiescence in the result. Our country was still laboring under the burdens of a depreciated paper, and gold was not in circulation except for the payment of customs; so that neither the silver dollar, which was worth more than a gold dollar, nor the gold pieces could have been in circulation concurrently with the depreciated United States notes. The acquiescence in the dropping of the silver dollar from our list of coins has been sometimes attributed to the fact that we had only a paper medium, and that no attention was ever paid to the relations of gold and silver coins, which were never seen in use. This, however, was not the reason. It was, simply, that the silver dollar was worth more than the gold dollar. There was no urgency whatever manifested to pay, or for the privilege of paying in the future, with the dearest of two legal coins. It was not until the fall of silver in 1875 and 1876 that the first suggestions were made for a recoinage of silver dollars. What is more, paper money still occupied the field in these years, and gold and silver were not yet in circulation. So that it was not because gold and silver were circulating in 1876 that attention was called to the position of our coins established in 1873 any more than that the acquiescence in the act of 1873 had been before due to the presence of paper money, and to the absence of a metallic circulation.
§ 2. In our preceding chapters of Part II an attempt was made to point out the events which, since 1850, had affected the value of silver and gold, and to account for the diminished value of silver, which began to fall in 1872, culminated in 1876, and has continued with fluctuations to the present time. We saw that the new gold had taken away from silver a place for its employment in several states of western Europe; that silver, crowded out by its superior as a medium of exchange, was being abandoned by the chief commercial nations; and that the Latin Union, accustomed as they had been to silver, and holding as they did large amounts of silver, preferred not to give up gold, but had stopped the free coinage of silver in 1874, and wholly ceased to coin it in 1878. What the tendency of the value of silver was, and what the situation was when the United States plunged into the arena, may be seen by
Chart XVII. The United States took up the cause of silver in 1878, and the chart will show whether the value of silver was affected by this action. In fact, the line continued to drop after 1878 as it had been dropping before. When not a state in Europe dared open its Mint to silver, at this very time
*1 the United States stupidly came forward and made the attempt to support the value of silver quite by itself. It is recorded that a very muscular and willing workman, engaged with several others in raising a huge stone to its place by means of ropes and pulleys, observed that the others had suddenly let go their hold on the ropes, and that the heavy mass was beginning to fall, confident of his strength, he by himself laid hold of the rope and tried to sustain the weight by his unaided power. The momentum of the falling stone was more than he could overcome; he was thrown upward, flung to the ground, and injured for life. The action of the United States was of a similar character. It undertook to do what all the rest of the world without us had not been able to do—namely, to keep up the value of silver in the face of the increased supply of gold. We may break the fall of silver, but we shall imperil ourselves. We shall lose by buying millions of a commodity which we must sell at a great sacrifice, the greater as we sell the more. So bold and daring an attempt, so utterly unwarranted by any financial wisdom, seems almost inexplicable to the student of economic history. So extraordinary a piece of legislation, therefore, demands as fair and cool an analysis of the reasons which caused its passage as we are able to give.
§ 3. In the summer
*2 of 1876 a crop of silver bills came up in the House. July I18, 1876, Mr. W. D. Kelley introduced
*3 a bill to coin the standard silver dollar and to restore its legal-tender character, which was the original of the measure finally passed. A similar bill was introduced
*4 by Mr. Bland, July 25, 1876, and vigorously discussed by Mr. Hewitt on August 5th. At the next session of Congress, Mr. Bland reported
*5 from the Committee on Mines and Mining, December 12, 1876, his original bill (“H. R. No. 3,635”), of which the chief sections are as follows:
“Sec. 1. That coin-notes of the denomination of $50, and multiples thereof up to $10,000, may, in the mode hereinafter provided, be paid by the several Mints and assay-offices…. for the net value of gold and silver bullion deposited thereat; and of the bullion thus received not less than 75 per cent in coin or fine bars shall at all times be kept on hand for redemption of the coin-notes, gold for gold and silver for silver. The gold deposited shall be computed at its coining value, and silver at the rate of 412.8 grains standard silver to the dollar…
“Sec. 4. That the coin-notes issued under the provisions of this act shall be receivable without limit for all dues to the United States; and the coin mentioned in this act shall be a legal tender for all debts of the United States, public and private, not specified to be paid in gold coin.
“Sec. 5. That the gold-coin notes issued under this act shall be redeemed on presentation in gold coin or fine bars, and silver in silver dollars or fine bars.”
This bill, it will be observed, aimed rather at the unlimited issue of coin-notes, based on a fixed silver standard. But he also proposed at the same time the following substitute, which was declared to be the same as that introduced by Mr. Kelley (now numbered “H. R. No. 4,189”):
“Be it enacted, etc., That there shall be from time to time coined at the Mints of the United States silver dollars of the weight of 412½ grains standard silver to the dollar, as provided for in the act of January 18, 1837, and that aid dollar shall be a legal tender for all debts, public and private, except where payment of gold coin is required by law.”
The next day, December 13, 1876, the substitute
*6 was adopted and passed by a vote of 167 to 53. The previous question being ordered, all amendments were prevented, and the debate was limited to two hours.
*7 It will be seen, therefore, that there was no intention whatever in the House to permit the measure to be debated. The bill, however, received no attention from the Senate during this session, and further consideration of it was, therefore, postponed to another session of Congress.
The following autumn the Kelley bill, slightly altered, was again introduced in the House (as “H. R. No. 1,093”) by Mr. Bland, and, under a suspension of the rules, was passed
*8 without debate, November 5, 1877, by a vote of 163 to 34. The, bill which then passed the House and was sent to the Senate read as follows:
“Be it enacted, etc., That there shall be coined at the several Mints of the United States silver dollars of the weight of 412½ grains troy of standard silver, as provided in the act of January 18, 1837, on which shall be the devices and superscriptions provided by said act; which coins, together with all silver dollars heretofore coined by the United States of like weight and fineness, shall be a legal tender, at their nominal value, for all debts and dues, public and private, except where otherwise provided by contract; and any owner of silver bullion may deposit the same at any United States coinage-mint or assay-office to be coined into such dollars; for his benefit, upon the same terms and conditions as gold bullion is deposited for coinage under existing laws.
“Sec. 2. All acts and parts of acts inconsistent with the provisions of this act are hereby repealed.”
The bill reached the Senate December 6, 1877, was made the special order for December 11th, and thereafter received prolonged and full debate. In the Senate the bill was in charge of Mr. Allison, of the Committee on Finance, who reported the bill with important amendments, the chief of which was that one taking away from the House bill the provision granting free coinage. The last clause of the first section of the House bill (beginning “and any owner of silver bullion”) was struck out, and the following words were finally inserted by a vote
*9 of 49 to 22:
“And the Secretary of the Treasury is authorized and directed to purchase, from time to time, silver bullion at the market price thereof, not less than two million dollars’ worth per month, nor more than four million dollars’ worth per month, and cause the same to be coined monthly, as fast as so purchased, into such dollars; and a sum sufficient to carry out the foregoing provisions of this act is hereby appropriated out of any money in the Treasury not otherwise appropriated. And any gain or seigniorage arising from this coinage shall be accounted for and paid into the Treasury, as provided under existing laws relative to the subsidiary coinage:
Provided, That the amount of money at any one time invested in such silver bullion, exclusive of such resulting coin, shall not exceed $5,000,000:
And provided further, That nothing in this act shall be construed to authorize the payment in silver of certificates of deposit issued under the provisions of Section 254 of the Revised Statutes.”
Another important amendment, containing the provision in regard to silver certificates, originated with Mr. Booth (California). In its after-effects this provision proved more effective in carrying out the purposes of the advocates of silver than it was expected, probably, at the time when the bill was passed:
“Sec. 3. That any holder of the, coin authorized by this act may deposit the same with the Treasurer or any assistant treasurer of the United States, in sums not less than $10, and receive therefor certificates of not less than $10 each, corresponding with the denominations of the United States notes. The coin deposited for, or representing, the certificates shall be retained in the Treasury for the payment of the same on demand. Said certificates shall be receivable for customs, taxes, and all public dues, and, when so received, may be reissued.”
The Senate also inserted a provision for an international monetary conference
*10 of delegates from European countries to agree upon a common ratio between gold and silver. The provision for silver certificates was adopted, 49 to 15, and the whole bill, as thus amended, passed the Senate, February 15, 1878, by a vote
*11 of 48 to 21.
The bill, as amended by the Senate, because of the loss of free coinage, proved very unsatisfactory to the silver party in the House, when it was returned to them for concurrence in the amendments of the Senate. There were many brief protests, but the belief was expressed by the advocates of the bill that it would be well to take what they could get from the Senate without delay, and then in the future try to gain ground by adding more extreme provisions in other bills. The measure was discussed
*12 for an hour, and under the previous question was passed as it came from the Senate. The motion to concur in the amendments of the Senate was carried by a vote
*13 of 203 to 72. The test vote at this time was on the motion to lay the bill on the table, which was lost by a vote
*14 of 71 to 205.
The bill, having passed both Houses, was sent to President Hayes, who returned it, unsigned, February 28, 1878, accompanied by a veto message
*15 expressing his objections to the bill. In the House, on the same day, the bill was promptly passed by a vote of 196 to 73, being more than the requisite two thirds. On the same day the Senate likewise passed the bill over the veto of the President by a vote of 46 to 19, and it became a law.
§ 4. In order to understand the existence of the party which in 1878 passed the silver bill,
*16 it is necessary to keep in view the sequence of financial and political events of the preceding ten years.
The close of the Civil War brought with it the necessity of determining upon some treatment of our depreciated paper and the payment and refunding of our huge national debt. The speculative period following the war, moreover, had been scarcely equaled in our financial history; and when it was followed by the inevitable collapse of credit and prices in 1873, very large numbers of our people were caught in that uncomfortable position in which they were obliged to slowly and painfully pay back that which they had borrowed in a sanguine and speculative mood. The Western States had been largely interested in real estate speculations, and the prosperous years after the war gave there no warning of a coming downfall. The disease had acquired such a hold throughout the country as to demand a long time within which the latent fever should burn itself out and leave the body healthy, even if weak and emaciated. Weighed down by debt, and led by skillful politicians, or impelled by selfish interest, the people of the West demanded that the Government should come to the aid of debtors and, by plentiful issues of United States notes, create an inflation which should enable them to get off the shoals of debt on the high tide of rising prices. This claim of the inflationists was met by the wisdom and intelligence of the community, and a fierce and hot contest was waged, which resulted in the defeat of the former, and the veto of their bill by President Grant in 1874. This victory was followed up by the Resumption Act in 1875. Then, when, after our bonds had been mostly refunded under the act of 1870, it became also settled that the principal and interest of the Government obligations should be paid in coin, the threat of inflation from United States notes seemed to have been averted. But, although the inflationists were defeated, the conditions yet existed which produced the original inflation party. There were the demagogues, and there were the debtors. From 1876 to 1878, during which the silver discussions continued, therefore, we shall find it necessary to take into account the existence of the old inflation party if we hope to get a rational explanation of the purpose of the legislation adopted in 1878.
There was another, but related, influence also which had no little force. The older portions of the United States have naturally been the richest in accumulations of capital; the newer portions have naturally been the borrowers. Vast sums, consequently, were invested by the States of the East in railways, buildings, and all the interests of a fertile country like the West, in loans to counties and townships, while insurance companies and individuals loaned money secured by mortgages on Western farms. When the crisis of 1873 came, and debtors, having spent all the borrowed capital, were confronted with the dreary necessity of paying back all they had received, there arose a feeling (utterly irrational, but nevertheless quite human) that the creditor was cruel if he demanded his own again. On this account there was, without doubt, a very serious friction in the relations between the loaning and the borrowing States. This passed away in later years, to some extent, as the prosperity of the West allowed them to pay their indebtedness; but, at the time of which we are writing, the ancient antagonism between the debtor and creditor class was distinctly marked out, not merely between different classes, but between different sections of the country. This state of affairs was eagerly seized upon by ambitious politicians, and, in their desire to represent their constituencies, they outbid each other for favor by exaggerated appeals to this class and to sectional feeling—a feeling, too, not founded on very high standards of honesty. One who has the patience to follow through the voluminous and exhausting debates of Congress during the silver discussions of 1878 must see that this factor of which I am speaking had a very important place. We may be ashamed of it, but it was true. And without an understanding of this factor it is quite impossible to comprehend the tone of the majority of arguments urged in favor of the silver bill. Among other things, for example, it was said that we should soon hear “the maddened roar of labor sounding like a trumpet-blast of prophecy.”
§ 5. It is scarcely too much to say that the demand for the coinage of silver dollars began where the cry for unlimited paper money left off. The movement which resulted in the act of 1878 was but another manifestation of the same desires which led to the hot and fierce debates between the inflationists and contractionists. The evidence of this, it seems to me, is undeniable to any one who will examine the reasons urged in favor of the Eland bill in the debates of Congress. At the same time that this measure was before the country a bill was passed in the House to repeal the Resumption Act. Not, of course, that every member who voted for the silver dollar was opposed to resumption; but it was unmistakable evidence of the opinions of the majority. The debtor class were catered to, and the prejudices of class feeling invoked in favor of the Bland bill as they had been in earlier years in favor of worthless paper.
The silver advocates were largely the advocates of expansion. Said Mr. Ewing
*17 in the House: “Mr. Speaker, nine tenths of the people of the United States demand the unlimited coinage of the old silver dollar with which to pay their debts and conduct their business…. The country is in an agony of business distress, and looks for some relief by a gradual increase of the currency. The House bill authorized not only unlimited coinage, but coinage of silver bullion owned by citizens for immediate use in business.” “If these questions are not settled,” urged another member,
*18 “and settled at once or before this present Congress adjourns, I say to those gentlemen that from the districts of the West and South will come a class of men who will demand, not only that silver shall be remonetized, and that the Resumption Act shall be repealed, but that the national banking law shall be repealed, and the Government of the United States shall issue all the money to be in circulation in this country.” An answering echo came from the Senate:
*19 “In many sections of the country it is now questionable whether, under the most favorable conditions we can hope for in the future, there can be any escape from the embarrassments that surround the debtor class except through bankruptcy…. In view, then, of the condition of affairs, it seems to me that any measure that tends in any degree to uphold the value of property, or to prevent its further depreciation, ought to meet the support and concurrence of all.” When the bill came back from the Senate a Southern member
*20 disclosed his position very clearly: “Let us force a square issue and make every one array himself either on the side of God or Mammon—the people or the gold ring…. The people are in no humor to be trifled with, and a veto would prove a blessing if it would have the effect I believe it would—namely, to arouse a storm which would compel a complete remonetization of silver and the repeal of the Resumption Act.” Another avowal
*21 was quite as frank: “I heartily sympathise with the objects of this bill in remonetizing the silver dollar and thus increasing the volume of our circulating medium.” But, perhaps, the coarsest expression of this sentiment was reserved for the lips of Mr. Bland,
*22 who declared: “I give notice here and now that this war shall never cease, so long as I have a voice in this Congress, until the rights of the people are fully restored and the silver dollar shall take its place alongside the gold dollar. Meanwhile let us take what we have and supplement it immediately on appropriation bills, and, if we can not do that, I am in favor of
issuing paper money enough to stuff down the bondholders until they are sick [Applause].”
Much more evidence could be cited, if more were necessary, to show that, in the minds of a very large number of men who urged the passage of the Bland bill, there was a hope that they might expand the currency by its provisions; and even that silver dollars would be extensively added to the circulation and create the same effects. In fact, Mr. Bland’s original bill aimed rather at an issue of a new kind of legal-tender paper, limited only by the quantity of silver bullion capable of deposit, than at the legitimate union of gold and silver at a ratio which, in the beginning at least, should assure their concurrent circulation.
In fact, one is struck, on every page of the debates, with the radically different temper in which the subject of the coinage was treated in 1878 from that shown in 1853, or even in 1792. There is not a shadow of a doubt that, had silver not fallen in value in 1876, so that a dollar of silver had not become worth much less than a gold or paper dollar—and so afforded a new device for meeting existing debts, which at the same time was technically coin—we should never have heard much of the silver agitation.
*23 It was born of a desire for a cheap unit in which to liquidate indebtedness. And the demand for the free coinage of a dollar containing only ninety cents of intrinsic value received the support of all who had before marched in the ranks of the inflationists. Silver had got into politics, and was henceforth discussed politically, not scientifically.
But others, forming a smaller class, supported this measure in the belief that, even if silver had fallen in value, it was just and right to issue a coin which was of the same weight and fineness as that demonetized in 1873, and to allow debtors to pay in this money. These were persons who probably did not subscribe to the tenets of the paper-money inflationists, and honestly could not see that the arguments against cheap paper had any force in regard to an issue of coin, even if it had fallen in value. The wrong in a ninety-cent silver dollar was not apparent to men who could declare that they were in favor of “hard money.” The fact that greenbacks were worth more than the silver in a dollar, and were steadier in value than it, did not affect them. If payment were offered in coin, that, they thought, was enough. This fact that, although a cheap and depreciated dollar was offered to the country, it had been very lately
*24 (1873) an unlimited legal tender, and that, as the bill was finally passed, the dollars could not be issued in unlimited quantities, made it very difficult for men who did not thoroughly understand the functions performed by a proper medium of exchange to see their error, or to be convinced of it.
*25 They believed that, if it had been right to pay in gold when it fell in value toward the year 1853, it was right in 1878 to pay in silver when, in turn, it fell in value. In all this class, however, it will be seen that they were influenced by the question of the ability to pay debts and existing contracts; and that they overlooked entirely the original justice of a legal-tender law—namely, that it should secure to the lender at the end of his contract only the same purchasing power
*26 which he parted with when the contract was made. Of course, this section of the silver party were quite willing to see only a single standard of silver in the country. They were, therefore, not advocates of a double standard, but of a single standard
*27 established in the cheapest metal, as may be seen by this utterance: “Our money system was not based on the idea that we should have both metals always and concurrently in circulation, but upon the idea that there might occur occasional variations in their value, and that it would always be to our advantage in every respect to make avail of the cheaper of the two.”
This wing of the silver party, however, urged the unlimited coinage of silver dollars of 412½ grains, but were not in favor of a silver dollar containing more grains, which would bring its value more nearly to that of gold or paper. The free coinage of the silver dollar would have given to each man who brought silver bullion to the Mint the benefit of the whole difference between the intrinsic value of 412½ grains of silver and the nominal legal-tender power given it by its face value; and this difference was to be used by any debtor to deliver himself from his obligations to just that amount without returning to his creditor any purchasing power therefor. This was repudiation of debts on a scale to the dollar marked by the descent in the intrinsic value of silver below its face value. Of course, there was no question as to the power of Congress to create a dollar of silver worth only ninety cents in gold; but, inasmuch as Congress was the law-making branch, it was their duty to consider not merely what they could
*29 do, but what they ought to do, in view of all the demands of strict justice and honor.
Another influential section which was actively supporting the bill was made up chiefly of Senators (and their followers in the House) whose constituents were interested in silver mines. These men urged the silver bill exactly after the manner in which legislation was urged in protection of other special industries.
*30 It was urged that the Government should aid the owners of mines in keeping up the value of silver. “I think, too, that, as silver is a product of our own country… it is proper that we should do whatever is well calculated to encourage its production and increase the demand for it,” said Senator Hill, of Georgia. A member
*31 of the House from Kentucky declared: “Our Western States and Territories are rich in silver ore. Let us remonetize silver and thereby increase the production of this metal.” While a Western Congressman
*32 urged: “I am also in favor of restoring silver because silver is a product of this country, and it would give it increased value to make it a legal tender…. Are we to allow the designing legislation of 1873 to further depreciate the value of one of our most valuable products?… Our mining interests have been very much embarrassed for the last few years because of this legislation.”
In close alliance with this body came another class, who argued that silver had not fallen in value, but that gold had risen
*33 in value, and that a dollar of 412½ grains was a just means of payment for all indebtedness. This section of the silver party displayed very much more ability than the ordinary advocate, and on questions of statistics showing a fall of prices since 1873 they were easily able to surround their position with plausible facts and arguments. Senator Matthews
*34 took the following position:
“Then, I answer, and it can be demonstrated by an impregnable array of facts, that silver can to-day buy more of every other known product of human labor than it could in July, 1870, gold alone excepted; lands, houses, stocks of merchandise, machinery, labor, everything but gold; here, elsewhere. In Asia, in Europe, throughout the whole Continent, nowhere, measured by the average price of the general commodities of the world, has silver depreciated the breadth of a hair….”
Mr. Eaton: “… That it can buy more land in America to-day than it could in 1870 undoubtedly is true, but less abroad.”
Mr. Matthews: “What have we got to do with ‘abroad’?… Who does not know that there is and has been throughout this country, throughout Great Britain, throughout Germany, throughout France, throughout Austria, throughout Italy, throughout the civilized world, everywhere, a most extraordinary depression in values for the last four years? And there is no cause that prevails as generally as that effect, and adequate to account for it, but the blindness of that conspiracy which has sought to exalt gold as the god and king of money.”
The most zealous advocate, however, of the theory that gold had risen in value was Senator Jones, of Nevada, who quoted tables
*35 of prices from 1872 to 1876 to show that general prices had fallen from 19 to 25 per cent. Then, as he found that silver had fallen only 10 per cent relatively to gold, he argued that silver had even appreciated
*36 in value, instead of having fallen in value, relatively to all other commodities. This was an untenable ground, as we saw, by the comparison of prices collected from the London “Economist,” in our last chapter,
*37 that prices were as high in 1877 as they had been in 1867. But we do know, and every one admits, that since 1873 there had been a very marked fall in prices until 1880. The conclusion, however, that this was due to the contraction of metallic currency caused by the demonetization of silver, is a complete
non sequitur. It overlooks one of the most important factors in regulating prices; for it ignores the collapse of credit and the fall of prices which inevitably follows in the wake of any financial crisis, and which continues until liquidation of debts arising from the speculative basis of preceding years has been somewhat completed. A fall of prices due to an enfeebled state of credit, one very important part of purchasing power, can take place without any change whatever in the quantity of the metallic medium in a country. It is, therefore, perfectly true that after the panic of 1873 prices slowly fell as liquidation went on, and that a gold dollar could buy more in 1879 than in 1872; but it was not necessarily due to any cause which affected that one factor in the exchange, gold, but to changes in the other factors. Moreover, changes which reduced the cost of production of all kinds of goods came thick and fast, and lessened the price of goods exchanged against gold without changing the absolute position of gold. That this altered the situation unfavorably to debtors is admitted; but it is an alteration of a kind which regularly happens after every unfortunate business revulsion, such as occurred in 1857 and 1866, and is no ground for talking about a cause which is supposed to be operating on gold (when it is operating on the things for which gold is exchanged).
A very large number of our legislators were, no doubt, honestly impressed with the belief that the mere gift of legal-tender power to a silver dollar worth only ninety cents, and its remonetization, would so increase its value that it would very soon become equal to the gold dollar. This was a constant and favorite argument.
*38 Said Senator Allison: “Legislation gives value to the precious metals, and the commercial value simply records the condition of legislation with reference to the precious metals.” It was even urged by Senator Thurman
*39 that the remonetization of silver by the United States alone would stop the tendency to give up silver in other States, and would raise the value of 412½ grains of silver to the level of the gold dollar. Subsequent events did not justify this sanguine hope, as may be seen by reference to
Chart XIV, showing the fluctuations and fall of silver since 1878. It was believed by many that the action of Germany alone had caused the fall of silver; and, ignorant of the fundamental forces which had shown themselves in the single case of Germany, and would have broken out elsewhere if Germany had not acted, they held that the coinage of silver by the United States would exactly fill the breach made by the withdrawal of Germany. An inspection of
Chart XIII will show how fundamental a change was going on in the value of silver since 1870 as compared with the whole course of its history since 1657. It was hardly likely that a single event, such as the action of the United States, could stop so marked a fall.
Some astounding ignorance of monetary principles was, of course, exhibited. “It is said that if we authorize the coining of silver of 412½ grains to the dollar the effect will be to drive gold from the country. I deny
*40 this utterly.” The operation of Gresham’s law was not even admitted, because, forsooth, silver was not an “inferior” currency.
*41 A common fallacy, too, was that, if A owned silver bullion and had it coined at the Mint, where free coinage was allowed, a debtor B who owed a creditor C could thereby come into possession
*42 of A’s dollars by a miracle, and have as many dollars as he wanted. A wholesome reply to this was given
*43 by Senator Bayard:
“It can not be that the laboring class are the debtor class. On the contrary, as I say, there is not a day in the year when the sun goes down when they are not the creditors of capital for the amount of their wages for that time…. So I say, considering the great fact that each man in the community sustains the relation of creditor as well as debtor, that if he can pay his debts in this depreciated money he will be paid himself in the same money, nothing can be made of it that I can understand, excepting that a class of people who, having purchased property at exaggerated prices and finding it now shrinking in value, may have an opportunity of scaling their debts to the injury, the injustice, of their creditors.”
There were, however, men who used this discussion simply as a means to an end, in catching the vulgar ear by buncombe, and went to such an extent as to merit quotation as giving specimens of the humor in the situation. Said one:
*44 “Why, Senators, we had acquired Louisiana and Florida, we had carried on a war with Great Britain from 1812 to 1815, when we had hardly any gold coin,
on the credit of the silver dollar.” Nothing, perhaps, can be better than the following
*45 eulogium of a Southern Senator on silver: “It enjoys this natural supremacy among the largest number of people because the laboring people prefer it. They use it freely and confidingly. It is their familiar friend, their boon companion, while gold is a guest to be treated with severest consideration; to be hid in a place of security; not to be expended in the markets and fairs. It is a treasure. and not a tool of trade, with the laboring people. A twenty-dollar gold piece is the nucleus of a fortune, to remain hid until some freak of fortune shall add other prisoners to its cell. But twenty dollars in silver dimes is the joy of the household, ‘the substance of things hoped for, the evidence of things not seen.’… Silver is to the great arteries of commerce what the mountain-springs are to the rivers. It is the stimulant of industry and production in the thousands of little fields of enterprise which in the aggregate make up the wealth of the nation.” If anything could equal this, it was the utterance
*46 of a well-known Northern Senator, Mr. Blaine:
“Ever since we demonetized the old dollar we have been running our Mints at full speed, coining a new silver dollar [trade dollar] for the use of the Chinese cooly and the Indian pariah—a dollar containing 420 grains of standard silver, with its superiority over our ancient dollar ostentatiously engraved on its reverse side…. And shall we do less for the American laborer at home?… It will read strangely in history that the weightier and more valuable of these dollars is made for an ignorant class of heathen laborers in China and India, and that the lighter and less valuable is made for the intelligent and educated laboring-man who is a citizen of the United States.”
The aristocratic character of the yellow metal is thus
*47 well defined: “Gold is the money of monarchs; kings covet it; the exchanges of nations are effected by it. Its tendency is to accumulate in vast masses in the commercial centers, and to move from kingdom to kingdom in such volumes as to unsettle values and disturb the finances of the world.” The following
*48 unctuous fondness for silver was put forth by Senator Howe, afterward a delegate to the Monetary Conference of 1878: “But we are told the cheaper metal will drive out the dearer, and gold will be banished from our circulation. Silver will not drive out anything. Silver is not aggressive; it is so much like the apostle’s description of wisdom that it is ‘first pure, then peaceable, gentle.’… Put a silver and a gold dollar into the same purse and they will lie quietly together.”
In fine contrast with this spirit was the manly and honest attitude taken by Senator Lamar
*49 when his State Legislature in Mississippi instructed him by resolutions “to vote for the acts remonetizing silver and repealing the Resumption Act,” and to use his “efforts to secure their passage.” He offered to withdraw from public life rather than vote for measures which he deemed to be injurious to the country:
“Mr. President, between these resolutions and my convictions there is a great gulf. I can not pass it…. I have always endeavored to impress the belief that truth was better than falsehood, honesty better than policy, courage better than cowardice. To-day my lessons confront me. To-day I must be true or false, honest or cunning, faithful or unfaithful to my people. Even in this hour of their legislative displeasure arid disapprobation I can not vote as these resolutions direct. I can not and will not shirk the responsibility which my position imposes. My duty, as I see it, I will do, and I will vote against this bill…. Then it will be for them to determine if adherence to my honest convictions has disqualified me from representing them.”
§ 6. During the passage of the Bland-Allison bill through Congress, Senator Matthews (Ohio) introduced a concurrent resolution on which as much debate was spent as on the Bland bill itself. This resolution
*50 aimed to establish the technical right of the United States to pay the principal and interest of its public debt in silver dollars of 412½ grains:
“Whereas, By the act entitled ‘An act to strengthen the public credit,’ approved March 18, 1869, it was provided and declared that the faith of the United States was thereby solemnly pledged to the payment in coin or its equivalent of all the interest-bearing obligations of the United States, except in cases where the law authorizing the issue of such obligations had expressly provided that the same might be paid in lawful money or other currency than gold or silver; and
” Whereas, All the bonds of the United States authorized to be issued by the act entitled ‘An act to authorize the refunding of the national debt,’ approved July 14, 1870, by the terms of said act were declared to be redeemable in coin of the then present standard value, bearing interest payable semi-annually in such coin; and
Whereas, All bonds of the United States authorized to be issued under the act entitled ‘An act to provide for the resumption of specie payments,’ approved January 14, 1875, are required to be of the description of bonds of the United States described in the said act of Congress approved July 14, 1870, entitled ‘An act to authorize the refunding of the national debt’; and
Whereas, At the date of the passage of said act of Congress last aforesaid, to wit, the 14th day of July, 1870, the coin of the United States of standard value of that date included silver dollars of the weight of 412½ grains each, declared by the act approved January 18, 1837, entitled ‘An act supplementary to the act entitled “An act establishing a Mint and regulating the coins of the United States,” ‘ to be a legal tender of payment according to their nominal value for any sums whatever: Therefore,
“Be it resolved by the Senate (the House of Representatives concurring therein), That all the bonds of the United States issued, or authorized to be issued, under the said acts of Congress hereinbefore recited, are payable, principal and interest, at the option of the Government of the United States, in silver dollars of the coinage of the United States containing 412½ grains each of standard silver; and that to restore to its coinage such silver coins as a legal tender in payment of said bonds, principal and interest, is not in violation of the public faith, nor in derogation of the rights of the public creditor.”
The question of moral and legal right was fully argued
*51 by the Senate. There seems to be no doubt as to the technical right of the United States to pay interest and principal of all the public debt in silver, if the Government so chooses. But, on the other hand, it is equally beyond question that resumption of specie payments would have been rendered impossible on January 1, 1879, had it been understood from 1876 to 1878 that “coin” meant silver and not gold; because only on the explicit explanation of the Secretary of the Treasury (John Sherman) that the word “coin” would be interpreted as gold was he able to sell the bonds needed to secure a gold reserve for resumption purposes. The passage of the Matthews resolution, in fact, was recognized as part of a plan to scale debts, public and private, by giving free coinage to silver; and, as a consequence, our bonds began to come back from Europe in large quantities. In one week there came an amount of ten millions, and in 1818 it was said by Mr. Allison that one hundred millions had been returned. This action shows distinctly enough whether there had been any tacit understanding in the minds of purchasers of bonds that they expected to be paid in gold.
When the silver bill was vetoed
*52 by President Hayes, he urged as his reasons for not giving his assent to it that (1) the proposed dollar was 8 or 10 per cent less in value than it professed to be; that (2) it made the dollar a legal tender for debts contracted when the law did not recognize such coins as lawful money; that, (3) by making the dollar receivable for duties, the gold revenue of the United States would be cut off, and so necessitate the payment of principal and interest of the national debt in silver; that (4) of the bonded debt then outstanding $1,143,493,400 was issued prior to February, 1873, when no silver was in use, and $583,440,350 had been refunded since that time, when gold was the only coin for which the bonds were sold (gold being the legal unit since 1873), and so understood by the parties to the contract; that, (5) owing to the fall in the value of silver, the Administration would have been unable to sell the $250,000,000 of bonds at 4 per cent, placed on the market since 1876, had they not quieted the doubts of the purchasers by a public statement of an intention to pay the bonds in gold and not in silver; that (6) to pay the bonds in a coin less than that received would be a grave breach of public faith; and that, (7) in case the silver dollar should not rise to par with gold, the act afforded no provision for exempting pre-existing debts from this law. But these considerations did not prevail with a sufficient number to prevent the bill from being passed over the head of the Executive.
At the time when Congress was discussing the silver bill a commission
*53 was sitting, appointed to investigate the causes of the change in the relative value of gold and silver, the effects upon trade, and to report on the policy of restoring the double standard in the United States. Three Senators, Jones (Nevada), Bogy, and Boutwell; three Representatives, Gibson, Willard, and Bland, and two “experts,” Mr. Groesbeck and Professor Bowen, formed the commission. It was packed in favor of a report for the remonetization of silver, and its conclusions have never had much weight. The minority report of Prof. Bowen and Mr. Gibson is, however, excellently done. Messrs. Jones, Bogy, Willard, Bland, and Groesbeck signed the majority report, submitting the following as some of their conclusions:
(a) The demonetization of silver by Germany, the United States, and Scandinavia has been the chief cause of the fall in silver since 1870.
(b) The commercial depression since 1873 was due to the demonetization of silver, arid will become chronic if gold remains as the only resource for money.
(c) Specie resumption by the United States is not possible until silver is remonetized.
(d) Remonetization of silver by the United States will deter France from wholly giving up silver.
(e) Remonetization of silver by the United States will introduce a period of prosperity, greater in proportion as foreigners pour into this country silver in exchange for wheat, cotton, gold, petroleum, etc. Even if the rest of the world gives up silver, the United States will have “an advantageous exchange of commodities, which we can spare, for money, which we need.”
infra, § 6.
ought to be, I should claim that it would be right or proper for me to aid in passing such a law to enable me and all other dishonest debtors to justify our dishonesty under the legal power conferred by such an act, and thus to encourage dishonesty, I should feel that all men would have the right to say of me that, but for the restraint of the law, I could be a knave and criminal.”—Senator Christiancy, “Globe,” vol. cxxxvi, p. 668.
Part III, Chapter XV