Henri Cernuschi.

Nomisma; or, Legal tender. online

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so anxious to restore the silver dollar, that they consid-
ered as a dilatory motion the resolution passed by the
Senate for an international monetary convention. There
prevails also, so to say, a national pride, which suggests
the adoption of bi-metallic money before entering into
any agreement with foreign nations. Taking these cir-
cumstances into consideration, I framed last evening a
proposition which I now beg to submit to the commis-
sion. If adopted, general bi-metalism would be estab-
lished without recourse to conferences and treaties.


The Secretary of the Treasury to be authorized and
required, as rapidly as practicable, to open for three days,
in the principal markets of Europe, a public subscription
to a loan of 85,000,000 (nominal), to be called the
" United States Sterling Consols," with perpetual interest
at the rate of 4 per cent, per annum, payable half yearly
in London, in pounds sterling.

The coupon first due shall be paid on the 1st day of
October, 1877.

The price of issue shall be under par, at such rate as,


in the judgment of the Secretary of the Treasury, will in-
sure the success of the operation.

The installments on the loan shall be payable monthly,
and shall extend over a period of twelve months, with op-
tion of payment in advance, under discount, at a rate to
be fixed from time to time by the Secretary of the Treas-

Should the amount applied for be in excess of the whole
amount of the stock, the subscriptions will be reduced pro

The expenses of the issue will be paid out of the funds
produced by the loan.

The United States sterling consols to be exempt from
the payment of all taxes or duties of the United States.

The specie-payments resumption will take 1 place in Jan-
uary, 1878, and the greenbacks will continue to circulate,
but as certificates of deposit reimbursable in coin, at call,
in New York.

On and after the 1st of January, 1878, the mints of the
United States will be open for the coinage of the old sil-
ver dollar, weighing 412 grains, ^ fine ; and, upon the
adoption of this plan, the weight of the gold dollar will be
immediately raised to 26.61 grains, -fa fine, and the gold
pieces will be coined accordingly.

The mint-charge for converting gold and silver stand-
ard bullion into coin shall be equal for the two metals, at
the rate of one-half cent per dollar coined.

Until the 1st of January, 1878, the gold coins now cur-
rent may be exchanged for new gold coins, dollar for dol-


lar, at the office of the Assistant Treasurer of the United
States in the city of New York, after which time they will
cease to be a legal tender.

On and after the 1st of January, 1878, all existing
debts stipulated in dollars, of whatever denomination, shall,
without exception, be payable in the new bi-metallic cur-
rency ; and gold and silver dollars shall be equally legal
tender in full for all payments.

EXPLANATORY NOTE. To resume specie payments,
the Government of the United States must not only retire
$300,000,000 of greenbacks, but must supply their place by
putting into circulation $300,000,000 of metal. Should
the greenbacks be converted directly into interest-bearing
bonds, the country, being deprived of currency, would be
exposed to a monetary crisis, and the Government, after
having issued interest - bearing bonds in exchange for
greenbacks, would possibly be under the necessity of
issuing new greenbacks.

Admitting that the excess of exported over imported
merchandise shall result in an importation of gold, and
admitting that the Nevada mines shall be very produc-
tive, the metal so imported or extracted is not the prop-
erty of the Government, but of individuals ; and the
fact still remains that, if the Government shall retire
greenbacks, it will have to procure a metallic sum of

For that purpose bonds must be issued, but what
bonds ? If the Government issues bonds with principal


and interest payable in gold and silver at its pleasure (as
are all the United States bonds issued in Europe up to the
present), and if, at the same time, the law of 1873 pro-
hibiting the coinage of silver is abrogated, these bonds
will undoubtedly be refused in Europe. Europe has taken
them until now because, although stipulated payable in
gold or silver dollars, there were no silver dollars exist-
ing, and no silver dollars could be coined. But if you
begin to recoin silver dollars, all is changed ; silver dollars
are then at your disposal, and as the coinage of silver is
now prohibited throughout Europe, and silver is there no
more than a merchandise without monetary power, your
bonds would be unsalable. Austria, which has always
issued silver bonds, was recently obliged to issue gold

If, on the other hand, in beginning to recoin silver
dollars, you should issue bonds with principal and inter-
est payable exclusively in gold dollars, you would recog-
nize the gold dollar as having a superiority over the silver
dollar. In place of the bi-metallic standard you would
then have two conflicting standards, gold as international
money, and silver as merely national money ; all your
gold would be rapidly exported, and you would remain
with only silver. As compared with such a result, it
would be better to maintain the present national currency,
the greenbacks, and thereby save to the Government the
burden of issuing^ new bonds.

The only safe means to overcome all difficulties is to
issue an external loan in sterling. By this you not only


avoid making a distinction between the gold dollar and
the silver dollar, but you do not engage to pay the cou-
pons expressly in gold. You will pay in pounds sterling.

The pound sterling was for a long time of gold and
silver, then of paper. It is of gold to-day, but before
long may be again of gold and silver. Therefore it is
evident that for the American people a debt in sterling is
less stringent than a debt in gold dollars.

.Once in possession of $300,000,000 of gold, produced
by the sterling loan, the United States will be strong
enough to establish bi-metalism. Then France recoins
silver willingly, and the general rehabilitation of this
metal follows as a natural consequence. Silver being
rehabilitated in America and in Europe, the silver dollar
having the same paying-power as the gold dollar, you
injure nobody in declaring that all debts stipulated in
dollars, of every denomination, will be paid in the new bi-
metallic money, dollar for dollar.

All. this is possible with a loan in sterling. All this is
impossible with a loan in coin dollars.

Being drained of a considerable sum of gold, England
cannot fail to see to what dangers she is exposed by her
gold mono-metalism, and perhaps she will consent to con-
fer with the powers for assuring by international law a
perpetual peace between gold and silver.

The subscriber will have to deposit only the small sum
which will be sufficient to guarantee the payment of all
the installments.

Issued under par, the United States sterling consols



will easily command a premium on the market so soon as
the subscription is announced, and the whole stock will
be eagerly sought after, as well for permanent investment
as for speculation.

All loans issued in France within the last thirty years
have been issued by public subscription and under par.
Through this method France obtained the money required
for the wars in the Crimea and in Italy. Through this
method France was empowered to pay so rapidly the Ger-
man indemnity.

Once the subscription covered (and it can be covered
within twenty-four hours), more than $300,000,000 gold
are assured to the United States, and the era of paper-
money is closed.

The reason why the issue of a perpetual debt is prefer-
able to that of a debt reimbursable at a fixed date is that
when the amount is very large, the engagement to reim-
burse at a fixed day is too onerous.

And it is for this main reason that the English consols
and French rentes are constituted as perpetual funds.

Let the United States finances be prosperous. The
excess of the revenue will then be first employed to ex-
tinguish the dollar bonds ; and when the perpetual debt
shall be the only debt in existence, it will be easy to re-
duce it in buying bonds on the market or by reimbursing
them in series.

Raise the weight of the gold dollar to 26.61 grains, in
order to establish between the weight of the gold dollar
and the weight of the silver dollar the ratio 15 \ a ratio


without which bi-metalism cannot be realized. If you re-
vive the ratio 16, France cannot recommence to coin the
five-franc piece, which weighs 15 times the five-franc gold

In 1"834 the weight of the gold dollar was reduced 6
per cent. In now bringing it to 26.61 grains its weight
is augmented 3 per cent., and the error committed in 1834
is duly repaired.

The loan, the resumption, and the coinage of silver
as legal tender in full, are three operations whose success
depends upon their being realized simultaneously and


This is my plan and these are my explanations. If
the United States, instead of reducing the amount of
the interest-bearing debt, had reimbursed the debt with-
out interest paper-money specie payment would have
been resumed some years ago. Not having done this,
you are now obliged to issue new interest-bearing bonds
in place of the bonds you have reimbursed too soon.


Q. lias France made any considerable loan except
through bankers? A. Since 1848 all loans issued by
the French Government have been offered to public
subscription, and have never been offered through
bankers. I am confident that, if you issue this loan iii


Europe, the first financial institutions and the first
bankers will open the subscription with a trifling com-

Q. In what manner was the Gambetta (what is
called the " Morgan ") loan put on the market ? A.
It is true that when Paris was besieged, and when all
the public service of France was disorganized, a small
loan was made in London through the medium of a
banker ; but this exception does not impugn my asser-
tion. I may add, that the three or four loans issued by
the city of Paris in the last six years have been issued
by public subscription, and they have always been sub-
scribed for within twenty-four hours, and to amounts
several times in excess of the amounts of the loans,
commanding at once a good premium on the market.
The credit of this country is so good and so deserved,
that great success will certainly be achieved in opening
a public subscription in Europe.

Q. How was that loan placed which was authorized
after the close of the Prussian War ? A. By public

Q. "Were bankers then employed as agents? A.
They were not.

Q. What was the rate of interest on that loan, and
at what price was it sold ? A. The first half, which
was issued in July, 1871, was in 5 per cents., perpetual.
It was issued, I believe, at near 82. The second, issued
in 1872, was offered at 8J. These two loans consti-


tute the same fund, and the loan is worth at present
106, ex-dividend.


Q. In what coin is it understood that the national
loan of France is held ? A. In francs ; that is to say,
in the legal standard, which can be changed, but which,
at the moment of the issue, was bi-metallic.

Q. Was the Morgan loan an exception ? A. The
Morgan loan was contracted in London, and was pay-
able in sterling, but now it has been reimbursed.

Q. Do you think that the market value of French
rentes in Europe would be essentially affected by the
removal of the restrictions now placed upon the coin-
age of silver by the Latin Union? A. I suppose that
France will never remove these restrictions except in
the case of some great event in the other monetary
legislations, which would permit her to ~ act without
danger. I entertain the conviction that if the United
States, by the operation here suggested, becomes a
powerful bi-metallic country, France will immediately
open her mints to silver.

Q. Is there any probability that the remonetization
of silver in the United States would either materially
affect the public credit of this country, or influence the
value of American securities? A. My conviction is
absolute on that point. If you are alone in coining
silver, it would be impossible for you to place other


bonds in Europe, and then I do not see how you could
resume specie payments.

Q. There is another question upon which I think it
is fair that your views should be presented: Have
you any reason to suppose that the restoration of the
double standard in this country would be regarded in
Europe as a breach of public faith, or as indicative of
a want of national integrity ? A. All these questions
are subordinate the one to the other. If the operation
is well conducted, you would command public confi-
dence ; and as France is bi-metallic, 110 one will care
in what metal your bonds will be paid. When bi-
metalism shall be restored on a solid basis, there will
be no difference at all in the purchasing-power of the
gold dollar and of the silver dollar.

Q. Is it the general belief among the leading econ-
omists and financiers of the Old World that the matter
of the adoption of a money standard in the United
States is one which our own people are fully entitled
to determine and settle, provided the national debt is
paid in the coin in which it was stipulated to be paid at
the time the debt was contracted? A. Certainly; you
have the right of choosing for your domestic use a mon-
etary standard, and to maintain for the national debt a
different standard, but in so doing you would create a
great confusion. If by law .you give to the gold and
to the silver dollar the same paying-power, you are at
liberty to change the ratio, 1 to 16, stipulated in all


your bonds, into the ratio 1 to 15. No creditor
would be wronged. But, in order to gratify all scru-
ples, no matter how unfounded, instead of reducing
the weight of the silver dollar from 412.5 grains to
399.90, you can raise the weight of the gold dollar
from 25.8 to 26.61, and declare all debts, old and new,
public and private, to be payable as well in silver as in
gold dollars.

Q. Then would not an increase of the weight of
the gold dollar be virtually an increase of our national
debt, and would we not then, in the discharge of our
obligations, pay more than we had agreed to pay ? A.
If you desire to pay less, you can reduce the weight
of the silver dollar ; but, if you desire to institute bi-
metalism, you are obliged to choose between the in-
crease of the gold dollar and the decrease of the silver
dollar. In reality, the increase of the gold dollar more
directly affects the interests of the mining community
than it affects the interests of your Government. You
will receive as taxes gold and silver dollars, and you
will pay your debt with the same. The real damage
that you will suffer will consist in the retirement of
the now-existing gold dollar, upon which you will lose
3 per cent., because you will be obliged to change every
gold dollar for a heavier one.

By Mr. BLAND :

Q. If the United States adopts the bi-metallic sys-
tem and the Latin Union continues bi-metallic-money,


will not the effect be to make silver as valuable as
gold ? A. Certainly ; but it is absolutely necessary
that the United States should resume specie payments.
If the United States adopts bi-metalism without re-
suming, its situation will resemble that of Italy, which
is bi-metallic only in name, and which affords no as-
sistance to the bi-metallic cause.

Q. Do you think that we can resume specie pay-
ments after adopting the bi-metallic system? A. In
my opinion the two operations must commence simulta-


Q. What kind of money is now in circulation in
France ? A. Silver, gold, and the notes of the Bank
of France.

Q. Are the notes of the Bank of France at par
with specie ? A. Yes ; they are at par.

Q. Practically, then, the business of France is con-
ducted on a specie basis ? A. Yes.

Q. Then, by the resumption of specie payments in
France is meant that the Bank of France shall resume
specie payments, and make its bills convertible, at the
will of the holder, into gold 'and silver ? A. Yes, sir ;
this resumption can be made at any moment. But
France adjourns the resumption, to avoid giving to
Germany the possibility of driving gold from the Bank
of France.

Q. How much of specie (gold and silver) do you


estimate to be in circulation at the present time in
France ? A. I estimate it at $1,000,000,000 gold -and
silver together.

Q. How much paper is in circulation in France at
the present time ? A. The notes of the Bank of
France in circulation amount to $500,000,000 ; and
the cash in hand of the bank is not very far from the
same sum.

Q. Do I understand you to say that there is now
in circulation in France $1,000,000,000 in specie and
$500,000,000 in paper, making a total circulation of
$1,500,000,000 ? .A. JSTo; the cash which is in the
Bank of France is to be deducted, as it is, so to say,
already represented by the notes.

Q. That would leave a total of about $1,000,000,-
000 in circulation ? A. Yes, sir.

Q. Do you know what is the circulating medium
in Italy ? A. In Italy, as in Austria, it is entirely a
paper circulation. The silver circulating in France
comprises almost all the silver and gold coined in Italy.

By Mr. BLAND :

Q. If the United States resumes specie payments,
adopts the bi-metallic system, and makes coinage free,
will not France remove the restrictions on the coinage
of silver ? A. Certainly. But she can hesitate if bi-
metalism is only nominal in the United States, and it
in fact you continue to make your payments with


Q. Cannot France and the United States, provided
the latter resumes specie payments, sustain the bi-
metallic system without the aid of England and Ger-
many, or of either ? A. I have no doubt of it. You
have seen France maintaining for a century the ratio
of fifteen and a half between the value of the two
metals, in every part of the world. Since 1871, cer-
tainly, the circumstance that Germany has renounced
her ancient silver mono-metalism is disfavorable to bi-
metalism. The accession, the frank and courageous
accession, of the United States to the bi-metallic sys-
tem will more than compensate for that disadvantage.

Q. Would not France and the United States in that
event have a better monetary system for the people
than is that of England or that of Germany? A. Yes;
a monetary system based on two metals is more safe
than it is when based on only a single metal. England
has suffered many monetary crises, simply because she
had only one metal in circulation.


Q. Would the fluctuation in the value of services
and commodities be as great under the bi-metallic
system, provided one or two great nations adopted
such system at the same relation of value between
gold and silver, as it would be under the mono-metallic
system, even though a variation did occasionally occur
in the values of the two metals and the temporarily
cheaper one were used for the purposes of payment ?


A. If several great nations adopt the bi- metallic sys-
tem, all the nations, including China and England, are,
so to say, involved in that system, the relative value
of the two metals being everywhere determined by
the legal ratio of the bi-metallic nations. Then, the
prices of all commodities are more stable than if only
gold was used as money by every nation. The volume
of gold and silver together is less sensible to the
variations in production than the volume of a single
metal. These demonstrations I have frequently made
in my publications.


Q. Suppose that the United States should recoin
silver, and make it a legal tender at the standard pre-
vious to 1873, in connection with the suspension of the
coins of gold, would the restoration of the silver stand-
ard in that case have an unfavorable effect upon the bi-
metallic system of the Latin Union? A. In that case
your position is a mono-metallic position. All the sil-
ver of Germany will arrive here, and later, also, the
silver of France, and then there will be no monetary
communication between Europe and the United States.
There will be a return to barter, the barter between
gold and silver without a legal ratio. It is impossible
to make payments if there is not a common money. So
between individuals and so between nations.

By Mr. BLAND :

Q. I understand your position to be that, in the


restoration of the double standard in this country as it
was previous to 1873, the United States Government
undervalued silver as compared with France and the
other nations of the Latin Union, and that now this
undervaluing of silver would be one of the reasons
which would prevent the further coining of silver in
the Latin Union ? A. There is nothing more certain.
Should you resume specie payments with bi-metalism,
at the ratio of 16, France would persist in refusing to
undertake the coinage of silver; and for this reason,
that if she coins at the ratio of 15, not a single dollar
in silver would be coined in the United States, as was
the case immediately after your law of 1834, enacting
the ratio of 16.


Q. But if the United States, by stopping for the
present the coinage of gold, should practically adopt the
mono-metallic system of silver, how could silver in that
case be said to be undervalued in the coin in this coun-
try, and how could that have an unfavorable effect upon
the bi-metallic system of the Latin Union? A. The
Latin Union would not coin silver if she is alone to
possess bi-metalism ; she will wait. And the evil will
be with you, because in coining only silver you remain
isolated, in a "monetary point of view, just as is the
case with India.

Q. Has your attention been specially called to the
coinage system of the United States ? A. I have im-


proved such opportunities as have been given me foi
studying its history in the Library of Congress, and
have had the very courteous and intelligent assistance
of the librarian, Mr. Spofford. In 1792 you had estab-
lished the ratio of 1 to 15. It was a mistake, because
the ratio in Europe was 15. In this connection I
would ask attention to an extract from a letter from an
eminent financial man, Mr. Gallatin, to the Secretary
of the Treasury, dated Washington, December 31, 1829,
as follows :

" The ratio 15 was the result of information clearly in-
correct respecting the true relative value of gold and sil-
ver in Europe, which was represented as being at the rate
of less than 15 to 1, when it was, in fact, from 15.5 to
15.6 to 1."

Under this ratio (15) the consequence was that gold
was not coined in the United States ; and as in 1816
England resumed specie payments in gold, there was on
the general market an oscillation in favor of gold. Then
the debatee upon the subject of changing the ratio were
opened in the American Congress in the year 1818.
From those debates I have made certain extracts, to
which I beg to call the attention of the commission.
They are as follows :


Debates, 1818 to 1834, for changing the ratio 1 to 15
of 1792.

1818. March 27. Matter introduced in Congress by
William Lowndes, chairman of Ways and Means.

1819. January 19. William Lowndes presents his
report, in which he says : " The committee proposes to
restore gold to its original situation in this country 1
to 15.6."

1829. December 29. Albert Gallatin writes to the
Secretary of the Treasury : " The most convenient ratio
is 1 to 15.6."

1830. May 4. Mr. Ingham, Secretary of the Treas-
ury, in his special report to the Senate on the relative
value of gold and silver, says : "To adopt the ratio of
France might tend to a general conformity of mint-regu-

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Online LibraryHenri CernuschiNomisma; or, Legal tender. → online text (page 5 of 10)