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OUR MONEY WARS

THE EXAMPLE AND WARNING OF
AMERICAN FINANCE



BY

SAMUEL LEAVITT

AUTHOR OF " PEACEMAKER GRANGE," ETC.




BOSTON
ARENA PUBLISHING COMPANY

Copley Square
1694



Copyright, 1894,

by

SAMUEL LEAVITT.

All rights reserved.



Anna Press



~v8



CONTENTS.



CHAPTER I.
09

«J l6oO TO I70O.

PAGE

The first American Money 1

•The first Bank-notes 4

The British Debt 4

- ^ First American Paper Money 4

CHAPTER II.

17OO TO I776.

More Paper Money 6

Truth about John Low 6

Speculations in France in 1720 , 12

Speculations in England in 1720 13

' Paper in the Colonies . . .» 1 t,

The Money of the Poor. . . 19

Continental Money 19

CHAPTER III.

I776 TO I786.

Continental Money (continued) 24

Jefferson to Epps, 1S13 24

The first Savings Banks 26

/^Shay's Rebellion in 1785 27

The Bank of North America 28

CHAPTER IV.

1786 to 1796. f

The United States Begin 29

The first United States Bank 31

The United States Mint ^

Money of Account 34

The Value of Foreign Coins 35

The Foreign Loans 36



38S249



iv CONTENTS.

CHAPTER V.

1796 to 1806.

^^ PAGE

The Bank of Venice 37

Foreign Coins 38

Small Coins 38

CHAPTER VI.

1806 TO l8l6.

Foreign Coins 39

•v Wild-cat Banks 39

^ Fluctuations of Gold in England 39

State Banks 40

V Interest-bearing Treasury Notes 4 r

The Act of June 30, 1812 41

The Act of February 25, 1813 42

•Jefferson Disgusted 42

Suspension of the Banks 42

The Act of March 4, 1S14 43

An Original Greenbacker 43

Legal Tender to Government 43

How Banks are Created 44

A Fight against Treasury Notes 44

An Old Story 47

Madison on Treasury Notes 47

~aper Money Broke the Power of the first Napoleon 47



\



>>



K




CHAPTER VII.

18 1 6 to 1826.

C urrency Theories 49

Foreign Coins 49

Testing Treasury Notes 50

al-tender Discussions 51

The Acts of May 15, 1820, and March 3, 1821 51

Peel's Resumption 51

A Parallel 56

CHAPTER VIII.

1826 TO 1836.

The Steady Currency of France 57

Gen. Jackson takes Hold 57

Jackson's Veto Message, July 10, 1832 59

Jackson's Message, December 3, 1833 60

The Act of April 1 1, 1833 60

,/^The Act of June 25, 1834 60

>The Change of Ratio between Gold and Silver 60

Banking in the Northwest 64

Speculation in England in 1834, '5 and '6 65



CONTENTS. V
CHAPTER IX.

1836 TO 1846.

PAGE

The Banks in Luck again 67

Wisdom of Sarsaparilla Townsend 67

The Act of January 18, 1837 68

Panic of 1S37 68

^^Thomas Benton on Currency 69

-^^>One Mill Interest per Annum 72

A Thinker cries " Eureka ! " 73

The Act of May 21, 1838 73

.^Albert Gallatin 73

Henry C. Carey's " Credit System " ' 74

The Philadelphia Bank of the United States — Nick Biddle's 75

The Act of July 4, 1S40 75

President Harrison Died 76

. The Act of August 13, 1841 77

^^-> Relief Notes 77

j>Indiana Treasury Notes 78

President Tyler's Financial Instinct 78

The President of the Bank of England 79

The United States Could not Borrow 80

The Act of June 30, 1842 80

The Act of August 31, 1842 81

The Act of March 3, 1843 8l

^ - ^Sumner of Yale Explains Things 81

The Act of March 3, 1845 82

CHAPTER X.

1846 TO 1856.

The Act of May 22, 1846 83

The Act of July 22, 1846 83

The Independent Treasury Act 83

Money for the Mexican War 84

^^•Speculations and Panic of 1847 84

France Helped the Whole World 85

The Act of March 3, 1849 86

Wild Cats in New England 86

S** Gold down, Silver up 86

Bank Notes in Australia 87

Production of Gold and Silver — 1852 to 1876 88

y>"The first Limited Legal-tender Act 88

The Clearing-house Established 89

CHAPTER XL

1856 TO l86l.

ryThe Panic of 1857 90

The Act Demonetizing Foreign Coins 90

"tephen Colwell's Description of the Panic 91



S*



vj/ CONTENTS.

I PAGE

Warwick Martin on Panics 92

Treasury Notes Again : 94

The Fall of Gold 94

The War Panic 96

The Patient Pack-mule — the Treasury Note 96

CHAPTEE XII.

l86l TO 1866.

War



The Act of February 8, 1S61 — the First Treasury Note of the War.

The Act of March 2, 1861

The Yale Hen is " On "

Immense Issues of Money

Seven-thirties and Demand Notes

New York Banks Suspend

Legal-tenders now first Repudiated by the Government

The Act of February 1 2, 1862

7-Thaddeus Stevens' Death Cry

The Exceptions on the Greenback

The Fatal Act of February 25, 1862

^Heath's Great National Bear

The Origin and History of the 5-20 Bonds

Loan Certificates

^^TJemand Notes Made Full Legal-tender

^ The Hazzard Circular

Postage Made Legal-tender

Large and small Greenbacks

Who Bought the 5-2OS

National Banks Authorized

Interior Banks and Redemption Banks

The Ten-forties, fractional Currency, etc

The Act of March 3, 1863

Tricks that Were Not Vain

The Act of July 1 1, 1863, Increasesthe Ten Days' Loans

Sarsaparilla Townsend's Wisdom again

Government Selling Gold

National Banks Fixed for Gambling

Gold Futures Stopped and Unstopped

Chase Frightened Out

The Total Currency Issue — Eessfinden

Six Per Cent. Bonds

Playing Ink-fish

Carey on McCulloch

Seven-thirties

State Banks Taxed to Death

The Freedmaq'g Bank ,

McCulloch's Treachery

Retiring Legal-tenders ,

The total Debt — Birkey



00

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01
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04

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09

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17

17
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2 3

24
2 5

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27
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28
29
29
29

3 1

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■sr



CONTENTS. vii



Two Billions of Currency 132

McCulloch's Mad Policy 133

Judge Wm. D. Kelley Pleads Ignorance 134

CHAPTER XIII.

lS66 TO 1873.

Contraction.

The Contraction Act of April 12, 1866 136

The Financial Difficulties of England in 1866 136

Cash Payments 138

Three Per Cent. Certificates 138

" Addition, Division and Silence " 138

Vanderbilt Waters New York Central 139

Sherman's Entering Wedge 139

A Short Stop 140

' Check to Rothschild 140.

A " Howling Success " 141

The Act of July 25, 1868 141

Rothschilds Win, Seymour Beaten •. . . 142

There's Millions in it 143

Checking the Banks 144

The Credit Strengthening Act 144

Black Friday, 1869 146

National Banks Allowed to Surrender their Circulation 147

The Great Refunding Act 148

The Supreme Court and the Legal-tenders 149

Repeal of the Income Tax 1 50

More Wealth in Ten Years than in 250 Previous 151

The Three- sixty-five Bonds 151

Carpet-bag Debts 151

French Paper Money 152

The Credit Mobilier and Tweed Rings 154

Earnings in Production and in Banking 154

Preparing for the Panic of 1S73 154

Apotheosis of Jay Gould 155

Germany Kicks 157

A Warning Silver Prophet 1 57

"ngland's Five Billions of Credit Money 158



CHAPTER XIV.
1873 T Q. 1880.



Seven Years of Famine in a Land of Plenty.

The Demonetization of Silver 159

"Ernest Seyd 160

fcThe Great Panic of 1873 ! ^9

The Bank Inflation 172

The Legal-tender Contraction — Field 172



viii CONTENTS.

PAGE

""^ Pompous David A. Wells 173

The Broken Banks and Trust Companies 175

A Wise English Opinion 176

— JLittle Chit on Banks 177

" Must Trade it out over the Counter " 178

Pulling Down the American Flag 178

Victorious Grant Conquered 179

'The Public Robbers Let Go 1S0

National Bank-note Redemption 181

The Value of Convertible Currency — Winder 182

Bank C urrency for 60 Years 184

The Three Per Cents 184

Horrors of Resirrffption 185

Who Use Savings Banks 186

- > Whatrthe Hungry Democrats Did in 1S74 187

A National Debt a National Blessing — Henry Carey Baird 188

The President of New York Metropolitan Bank Speaks out 188

>Drevv versus Wells 189

Gold, Flour and Beef 189

Five Million Dollars a Day Lost 190

The Resumption Act of 1S75 Scorched 190

Dead Wendell Phillips Speaketh 191

Debtor and Creditor Nations —Winder , 194

Solon Chase and "Them Steers " 197

Gold-Bug Tricks 199

Ben Butler and Butler Duncan 200

Pandemonium in California 200

Greenbackers Organized December 1, 1875 2or

Frantic Diabolism of New York Tribune 201

Congress and Contraction , 201

Gladstone versus Gold Basis 203

Trade Dollars Repudiated in 1876 203

Postal Currency Gone 203

Grant does Unintended Good 205

Foolish Californians 206

Democrats Repudiate Resumption 206

The Bond Age — $1 50,000,000,000 206

Coin and Bullion in Europe 207

" Money Market " Easiest in the Hardest Times 207

The Silver Commission and Hard Times 208

" A Mad, Mad World, my Masters " 210

The Buell Circular 212

Stupid Astonishment of the Gold-Bugs 212

What " Gentleman George " Pendleton said 213

" The Leading Papers " 214

No more Trade Dollars in 1S77 216

Our Per-Capita Currency 216

Debts in the United States 217

The English See our Amazing P'olly 218

" A Year of National Shame " — 1878 219

The Partial " Uprising of a Great People " *_ 219

Bonds not Payable in Gold 220



CONTEXTS.



The Bland Bill Passed over Hayes' Veto 221

The Chicago Inter-Ocean Told the Truth Then 222

Ernest Seyd on Silver Demonetization 223

Fourteen Dollars Per Capita 224

A Million and a Half Greenback Vote and 20 Congressmen in 1S78. 224

The Greenback Remonetized by Sherman, who was Scared 225

Chicago Tribune on the Fraud of 1873 226

The " Leading Paper " Caught Napping 226

Failures in Business 228

" One Soweth — Another Reapeth " 229

A Resolute Start 229

A Devouring Demon in Philadelphia 230

England a Thousand Millions Out 231

California Cleansed 232

Gold Big-Bug Papers 232

The Interest Equals the Public Debt 233

What Gold the Banks Had 234

Bonds Sold after January 1, 1876 234

Gold Rushes from Europe 235

Paper Money in the United States for 21 Vears — Heath 236

CHAPTER XV

18S0 TO 1885.

The Triumph of the Plutocrats.

Who Held the Bonds 237

Currency of Fifteen Nations 238

Greenbacks and National Bank Notes Compared 239

The Bonded I )ebts of all Nations 239

To Pay the Bonds at Once 240

Pretty Good Picking 240

Compound Interest 241

Gould Becomes Respectable 241

Another Straw (in 1890) 242

The Tonnage of the Lake Ports 242

A Bright Idea — Whose ? 243

The Ohio Idea 244

The Carlisle Refunding Bill — 1SS1 245

The Bankers' Rebellion 246

Gould Must be Sustained 247

Senator Jones Saw a Great Light 248

Silver Certificates Preferred to Gold 249

Keene on Gould 249

The St. Louis Republican 249

An Elastic Currency 250

Gold Sticking in the West 251

Wm. H. Vanderbilt Sells his Friends 251

Eighty-six National Banks Organized in 1881 252

Stocks Go up Two Billion Dollars 252

Severe on Secretary Folger. 253

Jesuitical Nonsense . . ". 253



CONTENTS.



The Gold Drainage from Europe to America . . . v 254

F. 13. Thurber and his Anti-Monopolists 254

Interest Coming Down 254

Knox Knocked Out 255

Bank Charter Bill Passed — 1882 256

Bank Profits 259

Trade Dollars in Siam ' 259

The Water and Gas Gone out of Stocks — 1883 259

The " Seney Crowd's " High Kicking 260

Vanderbilt Gets Palaces and Respectability 264

Thurber on the Lard Failures 265

The Trade Dollar Nuisance 266

" These be your Gods, O Israel ! " 266

A Wall Street Panic— 18S4 267

The Greenback Victory in the Supreme Court 267

Many Marvelous Facts 267

Keene Bucks against " The Wizard " 269

Commodore Garrison Fails 270

" The Blasted Silver Did it " 271

The Bey of Tunis Has Coupon Bonds 272

Back to State Banking 272

False Statement about France 272

Banks Retiring Circulation 273

The Coming Deluge of Silver 273

Godkin's Ghoulish Glee 274

Wm. II. Vanderbilt still Making Hay 274

The Clearing-house and the Treasury 274

" Union of the Puritan and the Black-leg " 275

Gould's Greatness 276

Not Useful Citizens 277

CHAPTER XVI.

1885 TO 1893.

The Beginning of the End.

Belmont — Hewitt — Tildenism 279

Secretary Manning's Panic — 1SS5 2S0

" Great Heads " Rattled 2S1

A Curious Proposition 282

A 'Coon Treed 283

The Ways of the Robber Nation 2S3

Lord Chancelors' Gold Pensions 284

What the Soldiers Lost 285

A Deluge of Trusts and Syndicates 285

" Who Make Lies their Refuge " 286

The Old, Old Story— 1887 286

Blaine Right this Time 288

I Iigh Treason ._. 290

A Poor Creature 290

In a Nutshell 291

All Products Save Gold Fall ^ per cent, between 1873 an< ^ 1887,. . 291



CONTENTS. xi

PAGE

Fair Gambles ." 291

Abundant Silver Helps Producers — Jones 292

Government Loans on Land and Goods 294

Ratio of Silver and Gold 295

The New York Sun Inconsistent 295 ,

Trust Company Profits 296

Silver Bugaboos 298

The Silver Bill of July 14, 1890 300

Pensions Furnish Currency 302

Senator Jones on Intrinsic Value 302

Beecher's Deacon White ' 303

Panic of November, 1S90 304

Review of 1891 306

Do you Think, O Fools ? 307

After the St. Louis Convention 310

Inductive Method with Silver 313

So Stupid 314

Gold Imports, 1878-1892 316

The Panic of May, 1S93 317

India and America 317



OUR MONEY WARS.



CHAPTER I.
1600 to 1700.

The First American Money. — Indian money or wampum
was used, in New England almost universally, as late as
1635. For a long- time, the intercourse between the Indians
and the colonists was more important, in an economic
sense, than has commonly been supposed. The native
was a producer, not only for himself, but, through his sur-
plus, for the white settler. In his furs he furnished the
chief staple of exchange with Europe. But he did more
than this, he supplied corn and other food products to the
colonists, he labored for the planters on the latters' farms —
unsteadily, it is true, but such help as he was willing to
give was indispensable. It is also to be noted that at the
first, contact with the colonists benefited the Indian from
an industrial point of view. A Sachem would sell a tract
of land for a certain number of hoes, and, according to
Governor Bradford, these iron implements, substituted for
the wooden spade, or clam shell of the squaws, pro-
duced more corn on an acre, and yielded a surplus for
sale. Thus the Narragansetts were enabled to sell from
500 to 1,000 bushels at a time.

But for the trade which soon opened up, a medium of
exchange was needed ; and the relative importance of the
parties to the commercial transactions, is indicated by the
fact that it was the money not of the colonists, but of
the Indians, which became the common currency. The
aborigines of New England had a true money in wampum.



2 OUR MONEY WARS.

This name was given to the white beads made from
the stems or inner whorls of a sea-shell found on all the
south coast of New England. When strung they were
called wampum-peage, meaning strings of white beads.
Color was the basis of nomenclature, as well as of differ-
ence in value. The black beads, which were called Sacki
and were made from the dark part of the common quahog,
or round clam shell, were generally worth twice as much
as the white.

What at first especially contributed to recommend wam-
pum as a currency to the colonists, was the fact that it
was exchangeable, or, so to speak, redeemable in furs,
and above all, in the highly-prized skins of the beaver.
Wampum was the magnet which drew the beaver out of
interior forests, and sent it to Europe, thus starting the
revolving commerce between the New and the Old World.
In calculating wampum, the unit of measure was theo-
retically a string of beads a fathom long, but in practice
the length varied. After 1643 a fathom was always
worth sixty pence; but as the colonists received beads
sometimes at four, and sometimes six a penny, the num-
ber of beads in a fathom would vary from 240 to 360. We
refer, of course, to white beads ; the black beads were rated
by colonial statutes at twice the value. The strong hold
^upon colonial life secured by wampum, is shown by a long
course of colonial legislation respecting it. In 1641 Mas-
sachusetts made the shell beads a legal tender at six a penny
up to ^10, a large sum in the transactions of that date. Two
years later the legal tender limit was reduced to 40 shillings.
At that time wampum was a universal currency, exchange-
able for merchandise, for labor and for taxes. In 1641,
when the trade in wampum was farmed out in Massachusetts,
the lessees stipulated to redeem from Harvard College all the
accumulations of peage or string beads, in its treasury, under
£2$. By 1645 the inventories of deceased colonists com-
monly contained items of peage, and frequently there was
no other money. Judgments of the courts were made pay-
able in strings of beads. It is interesting to learn that in
1648 a process analogous to coinage was applied to wam-
pum in Massachusetts. At President Dunster's suggestion
it was enacted that the beads should be strung in eight
different parcels; id., 3d., izd., in white beads; 2d., 6d.,



OUR MONEY WARS. 3

2S. 6d., and 10s. in b.lack. Taken together, these parcels
formed a complete assortment of change or small coin.

About the date last mentioned, however, the circulation
of wampum began to decline. In 1649, a Massachusetts
statute prohibiting the receipt of beads for taxes — a statute
which before had been inoperative, was re-enacted and en-
forced. There were several causes for the decline ; for
instance, labor had become better organized, and coin was
more abundant among the colonists ; but the main cause
was the falling off in the supply of beavers. The colonists
would have received the beads as readily in 1660 as 1640,
if the same facility-of redemption in beaver had existed ; for
the continued use of wampum as an accessory currency
shows that it was convenient and desirable. In the remote
districts of New England, wampum still circulated in the be-
ginning of the eighteenth century. Madam Knight found
wampum classed as currency on the southern shore of Con-
necticut in 1704. In 1693 the shell beads were recognized
in the definite rates of the Brooklyn ferry.

In 1652 a mint was set up in Boston to coin silver into
what was called " Pine Tree " money. Considerable silver
was then coming from the West India trade — our rulers in
England only busying themselves in stealing from us any
good money we could get hold of. Singularly enough, we
depended for coin, then, largely upon another class of pirates
— the Buccaneers of the Spanish Main — who spent most of
their plunder on our shores, where were the nearest civilized
ports. This was a great blessing — " a blessed providence "
— to our Puritan ancestors, and the gold-bug economists of
that time.

Yet barter prevailed generally, on account of the scarcity
of money. An act of 1654 provides that all contracts in
kind shall be so satisfied.

In 1655, a constable brought cattle to the treasurer for
taxes, which were so poor that the latter would not receive
them.

In 1657, another constable prayed for relief because,
having taken boards for taxes, the treasurer would not
allow him as much as he allowed for them.

In 1658, it was ordered that no man should pay taxes in
" lank " cattle.

" In fact the barter continued general," says Prof. Wm. G,



4 OUR MONEY WARS.

Sumner of Yale College, in his " History of American
Currency." And yet this same learned pundit, who is one of
those who never let conditions or facts bother them when " a
theory is confronting them," says, in the first page of his
first chapter : " Every community will have so much of the
precious metals as it needs for its exchanges." This sub-
lime British Bullion-Report dogma he calmly maintains
throughout his book.

The First Bank-notes. — It will not seem surprising that
money was scarce, at this period, when we consider that it
was about 1660 when the first regular bank-note was printed
by Palmstruck of Sweden. He met the usual fate of great
inventors, and reformers. He became so unpopular, that he
got into difficulties ; and was finally obliged to leave his
country. But soon afterward, the Government of Sweden
decided that, after all, the bank-note was not such a very
bad thing. So they took possession of the bank which
Palmstruck had abandoned ; and that bank, to-day, is the
great central bank of Sweden.

The British Debt. — Foreign facts that have a special
bearing upon American finance will be presented here in
chronological order. For instance, we are informed by
Hume, the historian, that the British public debt had reached
only the small sum of ,£1,054,925 on March 20, 16S9. But
the rulers found making public debts " a great scheme";
and by 1697 the French war had raised the debt to .£50,-
000,000. The French war, before our Revolution, raised
it to ^"140,000,000; our Revolution to ^"240,000,000, and
the Napoleonic war to ^"800,000,000, in 1815, where it has
stuck ever since.

First American Paper Monev. — In 1690 the first issue
of paper money was made by Massachusetts. This was the
year before the establishment of the Bank of England. An
expedition had been sent out against the French in Canada ;
and returning without the hoped-for plunder, and in a state
of misery, the soldiers were clamorous for their pay. So
,£7,000 were issued, in notes from 5 shillings to £$. The
form of these notes or bills was as follows : " This in-
dentured bill, of ten shillings, due from the Massachusetts
colony to the possessor shall be in value equal to money ;
and shall be accordingly accepted by the treasurer and
receivers subordinate to him, in all public payments, for any



OUR MONEY WARS. 5

stock at any time in the Treasury." They circulated at par
with coin for 20 years until _ redeem ecL _

The " Century Magazine," in 1 891, is printing a lot of false
statements about money to tickle its monopoly readers. Here
is what the "Twentieth Century," said about one of its
screeds. — In " Topics of the Time " we are treated to a re-
view of the " Century's " own tirades against " cheap
mo'ney." The land bank of 1696 failed. The land bank of
Rhode Island failed. John Law's bank failed. The notes
of the Argentine republic failed. Argae, all cheap money
schemes must fail. The series is liable to several criticisms.
Imprimis, it does not embody half the cheap money experi-
ments which have been made. The " Century " is aware of
this, and though it says it has not noticed numerous criti-
cisms because they were answered in subsequent papers,
threatens a fresh series to fill up the voids. The statement,
quoted this month from the Buenos Ayres " Standard," that
John Law lived to see his error, is false. But, passing over
these minor points — the land bank of 1696 failed — that is, it
never came into working existence, not as the "Century"
man says, because the capitalists, those gods of the bour-
geois idolatry, would not buy the stock of an institution
avowedly intended to break them down, but because the rate
at which it could lend was arbitrarily fixed at 3 y 2 per cent.,
while the current rate was 6 per cent., an arrangement which
could only have been intended to defeat the scheme (Macau-
lay " History of England," vol. iv., pp. 553, 560, Boston edi-
tion, 1856). John Law's bank did not fail until the Missis-
sippi scheme was added to it. That there ever was a
Mississippi scheme was due to the plethora of capital seek-
ing investment, which in turn was due to Law's success.



OUR MONEY WARS.



CHAPTER II.

1700 to 1776.

More Paper Money. — In 1703, South Carolina began to
issue paper money. In that year, also, Massachusetts made
a second issue of ,£15,000 ; which was made & legal tender
for private debts.

In 1 7 16, another issue to the amount of ;£i 50,000 was au-
thorized to be distributed among the different counties of
the province ; and to be put into the hands of five trustees
in each county, to be appointed by the Legislature ; to be let
out 071 real estate security in the county, in specific sums, for
the space of ten years, at five per cent, per annum. Another
act for ,£50,000 in bills was passed in 1720, which resulted
in clearing Massachusetts of debt in 1773; though the cur-
rency was usually much below par in coin.

In 1709, Connecticut began to issue bills. We must here
diverge to get some facts from Europe.

The Truth about John Law. — In answer to questions, I
printed in the Chicago Express, in August, 1891, the following :
" The History of John Law. Law, a Scotchman, Was King
of French Finance for Many Years. Made Mistakes, but
Was ' a Financier Without a Parallel.' "

We are asked about John Law, the noted financier, and
reply: He was born in Scotland in 1671. His father was
a goldsmith and banker. The son was a brilliant scholar
with a great head for finance. After some years spent in



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