Lyman E De Wolf.

Money; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained online

. (page 7 of 19)
Online LibraryLyman E De WolfMoney; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained → online text (page 7 of 19)
Font size
QR-code for this ebook

any paper such as that used, or provided to be used, for tl
Treasury certificates, or bonds to be prepared in the Treasur
buildings and to all officials of the Treasury Department engaged
in engraving or preparing the Ti-easury certificates hereby
authorized to be issued, and to all oflicial and unofficial persons
in any manner employed under the provisions of this act.

Sec. 5. And be it further enacted. That so much of the act
entitled " An act to provide a national currency secured by a
pledge of United States stocks, and to provide for the circulation
and redemption thereof," approved February twenty-fifth, one
thousand eight hundred and sixty-three, and so much of "An
act to provide a national currency secured by a pledge of United
States bonds, and to provide for the circulation and redemption
thereof," approved June third, one thousand eight hundred and
sixty-four, and also so much of all acts amendatory of either of
the before mentioned acts as authorizes the Secretary of the
Treasury, Comptroller of the Cmnency, or other officer or agent


(f the, to deliver circulating notes to any banking
issociation, be, and the same are hereby, revoked and repealed.

Sec. 6. And be itfia'ther enacted, That it shall be the duty of
he Secretary of the Treasury, and he is hereby directed to
lotify, within thirty days after the passage of this act, by publi-
;ation or otherwise, all banking associations organized under the
icts of which this act is amendatory, to return to the Treasury
Department of the United States all circulating notes heretofore
ielivered to such associations, or any of them, upon pledge of
jnited States stocks or bonds, within the six munths after the
Mssage of this act; and when any such association shall return
ts circulating notes in sums of not less than one thousand dol-
ar.s, it shall be the duty of the Secretary to deliver to such
issociation a just proportion of the amount of the stocks or
jouds deposited to secure the redemption of the circulating notes
>t' fsuch banking association : And wherever in any case such
tanking association shall neglect or fail to return to the Treasury
Department the ^vhole or any part of the circulating notes
k'livered to such association within six months from the passage
jf this act, then, and in every such case of neglect or failure,
uterest shall cease to accrue on all stocks or bonds deposited by
any such association to secure the redemption of the circulating
notes delivered to such association : But at all times whenever
any such banking association shall neglect or fail to return to
the Treasury Depai'tment the whole or any part of the circulat-
ing notes delivered to such association within two years from
the passage of this act, then, and in every such case, it shall be
the duty of the Secretary of the Treasury to declare the stocks
or bonds remaining in the possession of the Government
deposited by such association forfeited to the Government, and
to redeem the outstanding notes of circulation of such associa-
tion in the Treasury certificates authorized by this act.

Sec. 7. A.nd be it furtJier enacted. That it shall be unlawful
fur any banking association organized under either of said acts
of which this act is amendatory, after six months from tlie
passage of this act, to pay out or put in circulation any circulating
medium or currency which is not made a legal tender and
declared lawful money of the United States by act of Congress ;
and in case any such banking association shall violate the provi-
sions of this section, it shall be the duty of the Secretary of the
Treasury to declare the stocks or bonds remaining in the pos-


tie«sion of the Government, deposited by such association, for-
feited to the United States, and to redeem the outstanding notes
of circulation of such association.

Sec. 8. And be it further enacted, That after ninety days
from the passage of this act it shall not be lawful for the Secretary
of the Treasury, or other disbursing officer or agent of the
Government, to pay out the circulating notes of any banking
association organized under the acts to which this is amendatory,
or the United States legal tender notes heretofore issued; but
shall discharge or pay all the bonded and other indebtedness of
the United States, of every kind and nature incurred or con-
tracted to be paid since the first day of July, eighteen hundred
and sixty-one, or which may hereafter be incurred, in the Treasury
certificates authorized to be issued and declared to be lavvful
money by this act, or to give in exchange for all such indebted-
ness the interest-bearing bonds authorized to be issued by this
act, at the pleasure of tlie owner or holder of such indebtedness,
(except where it has been by law expressly provided that pay-
ment shall be made in coin.)

Sec. 9. And be it further enacted^ That it shall be the duty
of the Secretary, or such other officer or officers as may be
authorized by law, to keep a correct record of all the Treasury
certificates and interest bearing bonds issued under or in pur-
suance of this act, describing the same by their numbers and
denominations ; also of all the bonds and other evidences of
debt of the United States, and of the United States legal tender
notes redeemed, and the circulating notes of banking associations
returned to the Treasury Department, describing the same in
like manner, and publish monthly reports showing the amount of
Treasury certificates and interest-bearing bonds issued, and the
amount of bonds and other evidences of debt, and United States
legal-tender notes redeemed, and of the circulating notes of
banking associations returned to the Treasury Department ; and
shall cancel and destroy all su(;h bonds or other evidences of
debt, and United States legal-tender notes so redeemed, and
circulating notes of banking associations so withdrawn from
circulation, and shall make annual reports thereof to Congress,
as now is, or hereafter may be provided by law : Provided, That
the Treasury certificates and bonds authorized to be issued by
this act shall not be so destroyed unless they shall be mutilated
or rendered unfit for use.


The passage of the foregoing bill would be an attempt to
establish a just system of finance, a re-investment of the long
usurped sovereign power hitherto leased out and held by
financiers and bankers for unlawful gain. It would, therefore, be
necessary to pi'ohibit these classes under severe penalties from
issuing any bank or other paper designed for a circulating
medium, or from in any way interfering with the circulation of
the money issued under said act, either by unlawfully withdraw-
ing from circulation a large amount of said notes, or in any
other manner or by other unlawful device to attempt to depre-
ciate the value and the usefulness of the legal money. It might
also be necessary further to provide, temporarily at least, to
issue money to a certain limited extent, secured by a pledge or
lien upon j^roperty, both personal and real, or by State stocks.
Under certam clearly defined limits to provide for every possible
contingency which might arise in carrying into efiect the Act
establishing the people's money in place of bankers faithless

The Government cannot well be too provident in making
provisions to furnish an ample supply of money, and on the
other hand it cannot be too cautious in guarding against every
form of abuse, which would be likely to arise in this exercise of
the sovereign power. The ideas, habits and customs of the
people formed under the usurped reign of financiers, might
possibly be used to retard the inauguration and practical
working ot the new system. Financiers and bankers will
unquestionably throw every obstacle in the way, which is cal-
culated to defeat the just objects intended by this Act. Notliing
less than war could have inaugurated the reign of the "green-
back," and have laid the foundation for the establishment of a
just system. The great mistake made in the first place was in
not relying upon the " greenback " entirely for our home supply
of products and materials, and only borrowed money to procure
what was absolutely necessary to be obtained from foreign

The only effectual and safe remedy for the financial evils we
now suffer, and which will be indefinitely increased under our
past and present regime, is at once to abolish national banking,
our gold interest bond, to pay those where the whole is payable
in coin, and to return immediately and unconditionally to the
people's money, made a legal tender for all debts public and


private without exception. We shall thus inaugurate a just
system, and redeem our country from a slavery of money so
enormous and so terrible that even African slavery, is a mere
shadow, compared with this bond-representative-money-interest-
eatin"- out system. Let any man who has examined this subject
carefully, deny if he can, that African slavery, bad as it might be,
was anything more than a mere pigmy in enormity by the side of
this cold-blooded or heartless device. If such was its character
in the past, wliat must it not be that is evil in the future. To get
rid of it, and to establish a just system the people may count
the privations and cost of war a trilling sacrifice to obtain such
a permanent good.

The benefits of instituting money in the manner proposed,
may be summed up as follows : A legalized instrument of pay-
ment furnished by the Government, is substituted for a mere
promise to pay ; its power is the sovereignty of the people ; its
base their property ; its amount depends upon the public will,
and not that of the financiers. They furnish the property, and
determine for themselves how much they will put into money,
and how much into lands, goods, wares and merchandize. A
property base is furnished instead of a credit base, and sovereign
law controls the circulation instead of the interest of the
speculating sovereign bankers. Thus, the money power is
detached from a species of property, to be attached to all
property. If then A., B. C. and D. choose to buy arid import
300,000,000 of dollars worth of foreign goods, more than we
have other commodities for which to exchange, they can buy
their gold if they choose, to fill the foreign demand, and the
exchange of the people's products can be made through the
medium of their legal, honest money, and no derangements of
business or industry will take place, except perhaps among those
who needed this gold and silver to make nose and ear-rings or
some other equally useless purpose. Now, do the people through
just laws want this money within their reach, at cost, or do
they want it upon the terms fixed by bankers, and through laws
framed to build them up at their expense ? If they desire the
former, then the act proposed will meet their approval, if the
latter, they have only to continue the convertible gold base, and
gold interest bond schemes of the capitahst. We have thus
distinctly presented some of the leading points involved in this
issue between the people's money and the banker's " currency,'''

. j^.j^^v^^e of provoking honest, earnest enquiry into this
important subject — on the part of the people themselves.

But here we are met with tlie objection that governmental
systems have ever proved a failure. While this is true as applied
to certain governmental issues, it is also true that all systems
based upon gold and silver, have ever proved failures of gigantic
jiroportions. Nevertheless Ave are repeatedly told, that all that
is necessary now to remove our deranged finances, and to restore
confidence, is to fund the greenback, and inaugurate specie pay-
ments. All these representations may be, and undoubtedly are,
very satisfactory to those who make unjust gain through such
fraudulent means ; but their gold base is as false and as baseless
as dreams and visions of the night. Neither in this country, nor
in England has a specie basis lasted for a period exceeding
fifteen years, and seldom has it lasted ten. In 1844, the English
Government made five pounds the smallest denomination of
notes, which the Bank could issue, erroneously imagining, that
these commercial disasters result from an excessive issue of
paper instead of an excessive purchase of goods and wares very
mucli beyond the products furnished in exchange for their pur-
chase. But there has been no less than three most severe
financial revulsions since the passage of that Act, and indeed it
ought to tinge the cheek of any man, with a blush of shame,
who has been familiar with the bitter history of finance for the
last fifty years, to even intimate that there is any reliability to be
jilaced upon any money or currency, based on what is called a
specie basis.

Yet, while these ill-omened prophets on governmental paper
issues can see nothing but stability and value in their own system,
they do not fail to remind us of the fatal misfortunes which have
usually overtaken "all the Government paper issues ever made."
They do fail to give us another fact, equally important to be
known, and that is, that these governmental paper issues which
have proved so fatal to the interest of the people and so dis-
creditable to the financial wisdom of Governments who instituted
them, were in no sense, either in substance or form, money, or
if they were, they originated out of, and were inseparably con-
nected with the false system which these financiers so loudly
commend. Another omission equally tmfortunate for the truth of
their representations is, that those paper issues which have been
money — have been generally good, and some of them for



centnries have borne a premium over coin, averaging over
twenty per cent.

Although not much can be expected from the despotic gov-
ernments of the old world which is calculated to benefit the
people, and much less, as a general rule, ought we to copy after
them. Yet, two important questions relating to money may be
considered as settled, adverse to the gold base theories of finan-
ciers, if any thing can be settled under such grossly j^artial class
laws. The first is, that State paper money, when the debt itself
is circulated has been universally good, and the second is, that
the only reliable fund for the present redemption of a paper
money has not been gold or silver, but the avails of the property
purchased by the paper or currency.

In the ensuing chapters the history of money bearing upon
these two questions will be examined at length for the purpose
of showing that the system of Treasury certificates is not a
mere theory, like the Financiers system, but a theory based
upon fundamental principles, nnd well established facts. The
lessons taught by the Banks of Venice, Genoa, Amsterdam and
Hamburg can be studied with profit by statesmen and people.
The history of these banks, therefore, will be next presented.



The Bank of Venice was established in 1171. It owes its
origin to a forced loan taken from the most wealthy Venetians to
sustain the Republic in a war against the Grecian Emperor,
Manuel, at the same time carrying on a war with the Emperor
of the East. Each citizen was required to contribute according
to his ability, and by a decree of the Great Council, the office of
Chamber of Loans, {^La Camera Degl. Imprestiti) was instituted.
The contributors to the loans were made creditors to that office,
and were to receive an annual interest of four per cent. " This
was no doubt far below the customary charge of that day ; but
whether foreseen or not, the privileges of the Chamber of Loans
soon indemnified these public creditors for this then low rate of
interest." Colwell, p. 289.

These loans were inscribed in a book, alithenticated and made
evidence of the whole debt, as well as what belonged to each
subscriber. This interest was punctually paid into ■ the office,
and thence distributed to each creditor. This practice in the
course of time exhibited to all the lenders how simple and easy
to pay and receive debts among themselves by transfer on these
books ; and from the moment that the advantages which com-
merce might derive from this method of paying debts was per-
ceived, bank money was invented. Econ Politique, par Henri
Storch ; Vol. IV. p. 95.

Facility of transfer, coupled with the security of the State,
and regular payment of the interest, seams to have led to a very
rapid circulation of this loan. Colwell, p. 289. There was at
Venice that which more than any previous commercial policy,
opened men's eyes to an advantage of great importance, con-
tributing ahke to the prosperity of the State, and to the benefit
of trade. She was the glorious inventress of the Guarrantied
Bank, {banco garantito) differing both in its operations and by
its security from common banks, as much as from those called


public banks. Broggia Tratte delle Moneti Vol. TI. p. 270. It
is worthy of remark, says Col well, that this very efficient mode
of adjustment discovered and used so largely at this early period
in tlie history of commerce, was not dependent for its efficacy
on tlie guarantee of the Republic. Tliat guarantee sprung out
of the mode in which the bank originated; this convenient mode
of liquidation came from the use of the new substitute for money.
" The facility of payment furnished by the bank, wliich made
it the admiration of Europe, honorable at once to the Govern-
ment and merchants of Venice, and a support to the pride and
power of its people, consisted in substituting as a medium of
payment the DEBT of the REPUBLIC for CURRENT

" This system of payments, without the use of coin, was so
well adapted to the exigencies of commerce, that it was main-
tained in its full vigor, in the great commercial city of Venice,
for almost five hundrel years. It was an institution or device
of the credit system, for by its aid payments were effected, and
that to a vast amount annually, without any use of coins or
bullion." It only perished when the city itself fell, at the con-
quest of Italy by Napoleon ; but the conqueror carried off no
coin, no penny of prey. The credits of the bank were crushed
under the rude touch of an invading foe ; they were lost to the
proprietor, but no equivalent passed into the hands of the
destroyers. If the holders of these credits suffered, the invaders
were not enriched. In assuming the sovereignty of Venice, the
conqueror assumed the right and the duty of making good these
bank credits."

In the course of time it was found convenient to have a place
of deposit for specie and bullion, and the Government established
a department for that purpose, as a co-ordinate branch of the
bank. This was simply a place of deposit, an.l was in no way
connected with the operations of the other departments of the
bank, except as to its management, being under governmental
control each branch having its own peculiar mode of manage-
ment, governed by the specific objects for which it was insti-
tuted. The necessity which existed of making occasional pay-
ments in gold, or coin, gave rise to the opening of this deposit
office, for those who wished to be paid in coin. "Experience
proved that this measure did not cause any sensible diminution
in the funds, (the paper, credit, or money,) of the bank."


Diet, de Com. par Savary, article Banque, p. 2*70. The
Government acting in the capacity of a depository, performed
that duty, by effecting a change of the ownership of the
coin deposited to any extent desired by the owner. It exercised
no discretion, simply followed the rules laid down for the Govern-
ment of the transfer of deposits.

The amount thus deposited fluctuated largely, but the surplus
of coin not used was always very large. The Government in
times of pressing need used this deposit.

The deposit or cash office suspended payments twice, once for
several years. Yet the management of the older branch had
been so satisfactory, that the transfers of these removed deposits
continued as if the specie was present. The Government
received them in payment, and the two departments of the bank,
jsractically, during the sus])ension were resolved into one. Each
fund being equally and simply a public debt, but the old bank
credits maintained their higher rate of premium over that of the
specie debt. A writer in the London Encyclopedia not under-
standing this fact, has exhibited the premium on the bank fund
as a depreciation, he says, " that derangements in the social
economy of the state soon ensued, the agio or difference between
the current money and transferable amounts at the bank attained
to thirty per cent." But unfortunately for Encyclopediast, the
agio instead of being against the bank, was in its favor, and
against the specie credit. Its funds bore thirty per cent,
premium over current coin, and remained near this high rate
until the Government fixed the premium at twenty per cent.,
where it remained so long as the bank existed. This agio was
clearly not understood by Encyclopediast, who was probably a
British gold worshipper, and he could not conceive of any good
reason why paper should for centuries bear a premium over
gold, and therefore, he quoted the agio or premium as a depre-
ciation. But, nevertheless, the Government bank paper did bear
this high premium for centuries, and the reason probably was,
that although there was no coin in the bank, its credits were the
funds in which payments were made. If these credits had been
convertible into coin, at will, the agio would never have existed,
for the reason, that the moment the holders of credits advanced
the price, specie if it had been a legal tender would have been
the medium of payment.

The full operation of this bank credit is so well explained in


a work entitled: Parfait Negociant, Vol. I. page 463, that we
give the article entire.

"If Jean, Pierrre, Claude and Jacques, and consequently
every inhabitant of the same town, had but one banker, who
kept an account with each one of tliem, in a register provided
for that purpose ; this banker could make all their reciprocal
payments without moving a cent of their money, and it would
suffice simply to write upon his i-egister the receipt from one, and
the payment by another from which would result two things —
they would avoid the trouble of receiving and counting money,
and the expense of each having a cashier and bookkeeper."

" Another respect in which the position of this banker would
be advantageous to them would be, tliat he could put the money
of all to good use, without diverting it from' its proper destina-
tion, or interrupting the progress of their payments which would
be effected there by means of his books, and a third advantage
would arise, if this same banker would lend the money thus
economized to his customers by which they would augment their
trade, both at home and abroad.'"

" This is what the Republic of Venice happily accomplished
by the establishment of its bank, which became a perpetual bank
for its inhabitants. It received from them money previously
employed in payment of merchandize in gross, and of bills of
exchange, and gave them the Government paper, credit, or
power for it, and by public edict all payments for merchandize,
in gross, were to be made only in bank. All debtors were
obliged for this purpose to carry their money to the bank, and
receive credit therefor, and all creditors to receive payment
there. Every payment was made by a simple transfer of a
credit upon the books of the bank from one to another. He,
who was a creditor upon the book of the bank became debtor as
soon as he assigned to another, who thus became a ci'editor in
his place ; and so on, from one to another, the parties simply
changing their position of debtor and creditor ; without any
necessity of a payment in money." This self-same result can be
better attained through the medium of the treasury certificate.

The lesson then, taught by the Bank of Venice, is worthy
serious consideration of the Government and people of the
United States. Way back in the twelfth century is a govern-
mental paper money, not based on gold, nor payable in coin or
bullion, which by being made a legal tender for all taxes and


dues to government and people at only four per cent, interest,
promptly paid, is not only worth more than coin-certificates of
deposits, but bearing from twenty to thirty per cent, premium
over coin and bullion for a period of five hundred yeai'S. What
a contrast between that paper money, and the United States gold

1 2 3 4 5 7 9 10 11 12 13 14 15 16 17 18 19

Online LibraryLyman E De WolfMoney; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained → online text (page 7 of 19)