what I would do. I would sell 5 per cent, bonds, if necessary, in an
Mr.- EWING. In such a contingency the banks would naturally con-
tract their currency also.
Secretary SHERMAN. In case of a panic which would threaten to
break the government, or to break the banks, as a matter of course the
instinct is one of self-preservation ; but that is so whether you have
coin payments or currency payments.
Mr. EWING. I am not speaking of a panic, but of the state of the
Treasury from time to time. If you find your gold running out, would
you not hoard the greenbacks'?
Secretary SHERMAN. Naturally ; if I found the greenbacks coming in,
I would hold on to them until they are called out again in the natural
course of business.
Mr. EwiNGr. For the purpose of diminishing the drain on the Treas-
ury of gold ?
Secretary SHERMAN. I might temporarily, until that drain passed ;
but ordinarily 1 would use them to redeem 6 per cent, bonds.
Mr. EWING. After the drain passed, what would you do ?
Secretary SHERMAN. I would pay them out again.
Mr. EWING. That is, you would do very much as the Bank of England
does you would stop the movement of the currency out of the Treas-
ury, as far as practicable ?
Secretary SHERMAN. Yes, sir; and, as a matter of course, Congress
would be in session from time to time and could be applied to. It may
be that Congress may, by future legislation, provide for that contin-
Mr. EWING. Have you any apprehension that the banks, before re-
sumption day, will present their gold-certificates '?
Secretary SHERMAN. I wish they would.
Mr. EWING. That would put a stop to your power to issue certificates
to the amount of 20 per cent, beyond the gold on hand.
Secretary SHERMAN. It might, but there is no prospect of that. The
power to issue certificates to the extent of 20 per cent, is a power which,
up to this time, has not been exercised, and which would not be exer-
cised except in an extreme case. But what motive would the banks
have to withdraw the money deposited with us? It is deposited with
us for safe keeping, and they would only withdraw it from a fear that
it was not safe.
Mr. EWING. Might not the fact that there is a contingency in which
RESUMPTION OF SPECIE PAYMENTS. 55
you might issue coin-certificates in excess of the coin in the Treasury
lead the banks to feel that they had better get their .gold ?
Secretary SHERMAN. I do not think so; but at any rate it is safe to
say that that thing has not been done, and probably would not be done,
except in an extreme emergency, such as would justify the Bank of Eng-
land in issuing notes when it would not pay gold.
Mr. EWING. Is there not a further reason why the banks would take
possession of their gold, when you reach specie payments, which is that
they must pay gold when the gold is asked for ?
Secretary SHERMAN. No.
Mr. EWING. Otherwise they will receive no deposits in gold.
Secretary SHERMAN. The banks under the law can always redeem in
Mr. EWING. I know that, but if they are to receive deposits in gold
they certainly must pay their depositors in gold where the depositors
want it. They must treat gold and paper as equivalent exactly, and,
therefore, they must have gold on hand to pay those who want gold,
otherwise they will not receive a dollar in gold deposits except as special
Secretary SHERMAN. The fact is that but little gold is paid even on
Mr. EWING. But, as a matter of fact, must not the "banks have the
gold to pay whenever it is demanded ?
Secretary SHERMAN. Yes, sir ; on deposits they agree to pay in gold.
As a matter of fact, they have some gold to pay now. They have gold
in all the city banks, and the reserve of gold in the New York banks is
very large; but there is no gold needed in Lancaster or Mansfield, Ohio,
where you and I live ; what do they need it for ?
Mr. EWING. When you get to specie payments plenty of people will
want to hoard it.
Secretary SHERMAN. No ; they will hoard silver dollars. The class
of people who hoard- money are those to whom small sums are great
Mr. EWING. The amount of gold in the banks now is very small, be-
cause there is a very small amount of obligations payable in gold; but
after resumption day, when you establish that paper and gold and silver
are equivalents, a large body of the bank depositors may want gold,
and the banks must give gold to their customers who want it. Do you
think it necessary to get the amount of legal-tender notes down to
$300,000,01)0 before the 1st of January, 1879, in order to resume with
Secretary SHERMAN. I would like to have it so, but even if I do not
succeed, I would not postpone resumption on that account.
Mr. EWING. In the three and a quarter years since the resumption
law was enacted, $35,000,000 of legal-tenders have been drawn in and
canceled; is there any probability that, in the time left between now
and resumption day, the remaining $47,000,000 can be retired?
Secretary SHERMAN. No ; I think not.
Mr. EWING. Do you anticipate any considerable reduction of legal-
tender notes by the increase of bank currency by next January?
Secretary SHERMAN. Yes, sir ; last month there was ti reduction of
f 1,000,000. I think that the amount will depend very much on the degree
of confidence in the future which prevails in banking circles.
Mr. EWING. That is as to maintaining resumption ?
Secretary SHERMAN. Yes, sir; that estimate of the amount will be
reduced, probably, $1,000,000 a month.
56 RESUMPTION OF SPECIE PAYMENTS.
Mr. EWING. That would leave you with $340,000,000 of legal-tender
Secretary SHERMAN. Then I think we can fairly state that this money
in the Treasury (that is, the balances held by disbursing officers, the
$10,000,000 fund for the redemption of fractional currency, and the
money held for the redemption of bank-notes on failed banks) will prob-
ably reduce it to the neighborhood of $300,000,000, nominally.
Mr. EWING. Still that $16,000,000 to disbursing officers goes out.
Secretary SHERMAN. But there is always about that much on hand.
Mr. EWING. But I understand that yon want to reduce the total volume
of legal-tender currency to $300,000,000.
Secretary SHERMAN. I do.
Mr. EWING. It is obvious that it cannot be reduced to $300,000,000 on
the 1st of January, 1879.
Secretary SHERMAN. I say it would be better if it could be done ; but
if it cannot, I would not postpone resumption for that reason, because I
think that with this large reserve which I mention we can maintain
resumption on the full amount with the advantage we have of having
thirty or forty millions locked up in the Treasury not likely to be used.
Mr. EWING. Do you think that the balance of trade can be kept in our
favor for the next few years f
Secretary SHERMAN. That is an uncertain problem.
Mr. EWING. You say, in your Senate interview, that the balance of
trade brings us gold and silver and bonds. Has it brought us, in the
past few years, gold and silver in excess of the gold and silver exported ?
Secretary SHERMAN. No ; you see heretofore silver has been largely
exported as bullion, but we received gold, last season, in pretty large
sums in this country precisely how much, I am not prepared to say.
Mr. EWING. I have here, from the Bureau of Statistics, a statement
of the imports and exports of coin and bullion, from 1865 to 1877, which
shows a total, for the 13 years, of exports over imports of $092,000,000.
(See appendix No. 10.)
Secretary SHERMAN. Yes, sir ; that is so.
Mr. EWING. That is an average of exports over imports of gold and
silver of $53,264,000 a year.
Secretary SHERMAN. That was at a time when paper money was in
universal use, and there was no demand here for silver or gold ; but
now that we are to have specie payments, that course of things will be
naturally expected to cease. You will find it easier to send off the pro-
ducts of our soil than the products of our mines, if we give the same
use to the precious metals that is given in other countries.
Mr. EWING. For the past three years the average excess of the ex-
ports of gold and silver, over the imports (the balance of trade being
in our favor) has been $42,396,000 a year j and that average is still
Secretary SHERMAN. Yes, sir. At this season of the year gold is
shipped abroad, and at other seasons of the year it comes back. Some-
times the same gold will flow backward and forward two or three times
in the year. After the cotton crop is marketed, and before June, when
the canals are open, and products can be moved on the canals, is the
time when gold naturally flows abroad, and it comes back in the fall.
Mr. EWING. Have you any reason to expect that the average exports
of bullion, over imports, will not be in excess for the next two or three
years as it has been for 17 years past ?
Secretary SHERMAN. I would expect more exports, because of our
home products of gold and silver, which may be stated, in round num-
RESUMPTION CF SPECIE PAYMENTS. 57
bers, at $85,000,000. If we can hold two-thirds of it in this country, it
is as much as we can expect. That would leave a balance of thirty or
forty millions to go abroad. And suppose it does go abroad? We
can stand the drain of thirty or forty millions a year, and still have a
large amount of gold and silver in this country. (See Appendix No. 12.)
Mr. EWING. Do you not anticipate that drain ?
Secretary SHERMAN. I would expect it. Our production of gold and
silver is greater than is necessary to maintain resumption in this coun-
try, and it will go to help other countries.
'Mr. EWING. Will it not go abroad irrespective 01 our demand for it
Secretary SHERMAN. It depends upon whichever demand is the great-
Mr. EWING. And upon whoever has the most ability to keep it?
Secretary SHERMAN. Yes, sir.
Mr. EWING. We being the debtor nation, and the people of Europe
holding our debts, can they not attract gold from us at present ?
Secretary SHERMAN. If we are a debtor nation we are also a nation
which the European nations like to have for a debtor. Oar nation luis
been a productive, active nation, and foreign capital seeks a favorite in-
Mr. EWING. Still, in case of a want of gold abroad they have it in
their power to get it at any time by the sale of our securities.
Secretary SHERMAN. Yes ; they can recall it if they want to do so,
but the chances are that they will be more likely to invest in our securi-
ties in the future than they have been in the past, because this country
is a stable country. It has gone through a great civil war, and it has
elements of strength and stability which no European country pos-
Mr. EWING. Our ability to keep gold practically depends upon this,
whether our creditors abroad prefer to hold our bonds or to take our
Secretary SPERMAN. Certainly.
Mr. EWING. If they prefer to take our gold they can get it by send-
ing their bonds here and selling them.
Secretary SHERMAN. Yes.
Mr. EWING. And in the past three years, with the balance of trade
largely in our favor, the excess of exports of specie over imports'has
been forty-two millions a year.
Secretary SHERMAN. That is because until last year we have never
shown a determination to accumulate coin.
Mr. EWING. Our determination to accumulate coin was as strong in
the month of January last as it ever has been, and yet the balance
against us in that mouth was over two million dollars.
Secretary SHERMAN. The cause of the bonds flowing back was the
fear of unfriendly legislation. The truth is, that (whether the fear was
well or ill founded) a very large amount of our bonds came back which
had to be paid in gold or silver because of pending legislation, but that
movement has ceased. I got a letter yesterday from the highest au-
thority, stating that that movement of bonds has gradually diminished.
Mr. EWING. Still the export of gold last Saturday was a million and
a half of dollars.
Secretary SHERMAN. It always is large at this season of the year.
This same gentleman tells me that he does not think that the export of
gold this year will be greater than in former years, but that it com-
menced earlier, caused by the exportation of these bonds from abroad.
58 RESUMPTION OF SPECIE PAYMENTS.
Mr. EWING. Bat the indications are that the excess of shipment of
coin will be kept up as compared with the last three years.
Secretary SHERMAN. I hope not at anything like tiie same rate.
Mr. PHILLIPS. You have stated that you have not been able to ac-
cumulate gold at all this year.
Secretary SHERMAN. Yes ; because I would not come into competition
with the bonds which came back from abroad caused by the agitation
of the silver question.
Mr. PHILLIPS. Can you get coin from 4 per cent, bonds?
Secretary SHERMAN. Not just now to any great extent, but I hope
that it will be better, and that I will be able to sell 4 per cent, bonds.
Mr. CHITTENDEN. Will not the mixed condition of the national bank
currency be an element of strength in facilitating resumption? For
example, if you were to present national bank currency to a bank for
redemption, you must separate the notes. If you take any given amount
of national bank currency which you find on deposit anywhere, you will
be surprised to find how it represents banks from all sections of the
country. I take it that no bank can be called upon to redeem any but
its own issue.
Secretary SHERMAN. That is so; it is almost impossible to sort
national bank bills.
Mr. CHITTENDEN. Will that be for you an element of strength or of
Secretary SHERMAN. It will be an element of strength. The difficulty
of sorting national bank bills is very great. When they come to sort
them in the Treasury the bills have to pass through four or five skilled
bauds. First, they are sorted into States, then into denominations, and
then into banks. , If you were to try and make a run on any particular
bank in this country, as they used to do twenty or thirty years ago, it-
would be impossible to do so from the difficulty of assorting notes of
Mr. EwiNGr. The balance of trade in our favor in the past three years
has been due not so much to our largely increased exports as to our
diminished imports, resulting from diminishing purchasing power.
The total exports for the three years ending June 30, 1874, were $1, 550, 939, 000
The total exports for the three years ending June 30, 1877, were 1, 656, 201, 000
Excess of latter over former period 105, 362, 000
The total imports for three years ending June 30, 1874, were $1, 836, 137, 000
The total imports for three years ending June 30, 1877, were 1, 445, 069, 000
Excess of former over latter period 391,063,000
Now I wish to ask you whether with the removal of the pressure
from the country of the threat and preparation for resumption on
the 1st of January, 1879, we may not expect that the imports will in-
crease, and that we will go back to the old condition of importing more
than we export, and in that way increase this drain of gold and silver 1
Secretary SHERMAN. I think that the 'excessive imports for several
years before the panic were evidence of the greatest extravagance and
disregard of expenditure.- People went into debt recklessty. That
state of mind is always induced by a superabundance of paper money.
I think that one of the best results of the panic (which was bad enough
in depressing industry) was in stopping this extravagant and reckless
importation of foreign goods. That is an element of real good which
has come out of the evil which we have suffered from the past.
Mr.ySwiNG. But you expect to maintain the same volume of paper
RESUMPTION OF SPECIE PAYMENTS. 59
money, and you expect to add to that volume a considerable amount of
specie. That is, you expect to increase the currency as a result of re-
sumption. Certainly, if this condition of extravagance arises from a
superabundance of money, that extravagance will be increased very
largely after resumption, if your theory be correct.
Secretary SHERMAN. There is a great deal of difference between irre-
deemable paper money, which fluctuates in value day by day, and re-
deemable money which always has a coin standard, and is measured by
the values of the world. It is not a question of abundance of money
so much as it is a question of fluctuations of value. A paper which is
irredeemable and fluctuating always induces speculation. For instance,
if a man sees that his neighbor has bought a piece of land on which he
Las made a large profit, he goes into speculation himself; and one man
embarks in a hazardous enterprise because another man has done so
and has succeeded. Now a redeemable paper money which is always at
a fixed standard is less likely to produce that kind of speculative fever-
ish adventure, even although it may be larger in volume.
Mr. EWING. So you understand that with inflation of currency after the
1st of January, 1879, there will not be inflation of values?
Secretary SHERMAN. No ; values will be more stable.
Mr. EwiNGr. As a matter of fact, did the greenback currency vary so
greatly in purchasing power for the three years before the passage of
the act of 1873 !
Secretary SHERMAN. O, yes. The purchasing power of the green-
back to-day is at least 60 per cent, more than it was before the panic.
Mr. EWINO. Undoubtedly, because of the threatened contraction un-
der the operation of the resumption law.
Secretary SHERMAN. No ; but because of our getting back to a cain
Mr. SWING. It is because the opinion of the country is that we must
submit to an enormous contraction of our paper money, which is the
currency with which business i,s done, in order to reach and maintain
Secretary SHERMAN. You and I differ about that. I have given you
ray view. I tell you that I think the falling off of importations is not
an unfavorable sign. Every man knows now that money is money, and
that he has to earn it. It is an evidence of more stable and economical
management of affairs.
Mr. EwiNGr. Do you expect the business of the country to revive after
Secretary SHERMAN. I think so.
Mr. EwiNGf. Will not the imports increase largely as a necessary re-
sult of that revival, and will not, therefore, the balance of trade more
likely turn against us by the increase of imports, the present favorable
balance being due chiefly to the falling off of imports!
Secretary SHERMAN. I doubt very much whether the importations to
this country for many years will equal what they were for the three or
four years before the panic. The whole course of our industry has
changed within the last three or four years. We are manufacturing
now a great many things which we did not manufacture then. We are
embarking in a great many industries which did not exist here before
the panic. Prices have been reduced so that we can almost compete
with any nation, and we export now many articles which we did not
think of making until the last few years. When we manufacture upon
the basis of a coin standard, like Great Britain and France, we can
compete with those nations, because we have over them the great ad-
60 RESUMPTION OF SPECIE PAYMENTS.
vantage of raw products. To be sure we have the .disadvantage of
higher-priced labor. Oar labor is more intelligent and higher-priced.
The CHAIRMAN. And the disadvantage of higher priced money.
Secretary SHERMAN. Yes; but when we get down to compete with
them on the same money, our natural advantages would countervaluo
the difference in wages and the difference in interest of money. We
are now manufacturing a great variety of articles which were never
manufactured in this country before. Values now even gold values
are lower than they were before the panic all over the country. The
same amount of money represents now a greater amount of either im-
ports or exports than it did then, because nothing is truer than the fact
than that that general revulsion which overcame us like a cloud extends
all over the civilized world.
Mr. EWING. My belief is that on any revival, any letting up of the
pressure caused by the resumption law, the imports will increase rela-
tively to exports, and the old balance of trade will be re established
against us, and the drain of gold will return in its full force. (See Ap-
pendix No. 13.)
Mr. PHILLIPS. Will not the coin certificates become a part of the cur-
rency, when specie payment comes, and so fill up the void made by the
retirement of the legal tenders, and probably neutralize the effect of the
retirement of the legal-tenders ?
Secretary SHERMAN. I think they will ; but these coin-certificates are
now represented by actual money on hand.
Mr. PHILLIPS. They increase the responsibility of the Treasury just
in proportion. They will go into circulation, will they not "?
Secretary SHERMAN. Yes. It does not make any difference whether
currency is represented by coin -certificates or by actual coin. If they
draw out coin, that coin goes into a general circulation, and if they
leave it with us, then the certificates go into circulation.
Mr. PHILLIPS. But these coin-certificates will then go into general
circulation as they do not go now.
Secretary SHERMAN. Coin-certificates do go into the general circula-
tion for coin purposes now. They are largely used.
Mr. PHILLIPS. But will they not go in for general purposes as circula-
Secretary SHERMAN. Perhaps they will.
Mr. PHILLIPS. Tnere has been $35,000,000 of legal- tender notes re-
tired under the resumption act ?
Secretary SHERMAN. Yes.
Mr. PHILLIPS. Of that amount I have been informed that $15,000,000
has been in small notes ; what rule have you to govern the Treasury in
Secretary SHERMAN. I am glad you mentioned that, because I would
like to correct a misapprehension on that point. We always give to
every man who makes a demand upon the Treasury any kind of bills
he wants. We do not seek to force one-dollar, two-dollar, five-dollar,
twenty-dollar, or one hundred-dollar bills. Every person who presents a
draft at the Treasury gets the paper money he wants.
Mr. PHILLIPS. But the practical result is that some $15,000,000 of
small bills have been retired, to the detriment of small change.
Secretary SHERMAN. Our impression is that that is a mistake.
Mr. PHILLIPS. It has been so stated to me/
Secretary SHERMAN. I can give you the fact exactly. I suppose it is
because the banks, to whom the great body of the paper money is paid
out, do not wish to handle small bills, and require large ones ; but any-
RESUMPTION OF SPECIE PAYMENTS 61
body who wants the small bills can have them. I will give the exact
amount at different dates, so that you will see how much the circulation
of small bills has fallen off. *
Mr. PHILLIPS. Do you think that the proportion of small bills retired
has not been much greater than the proportion of large bills retired?
Secretary SHERMAN. I do not know. I would rather give you the exact
figures. General Butler talked to me yesterday about it, and I told him
what I say to you. We never have attempted to withdraw the ones and
twos from circulation.
Mr. PHILLIPS. But have they not gone out of circulation under the
resumption act ?
Secretary SHERMAN. Not to any very great extent. They do not go
out simply because the banks and others who draw large amounts do
not take them as freely as the people wish to have them. The banks do
not wish to handle them.
The CHAIRMAN. It seems to me that upon your theory, on resumption,
it would be very important that greenbacks should be used for our four
per cent, bonds?
Secretary SHERMAN. Yes, sir.
The CHAIRMAN. And that if they can be also received for duties at
the custom-house it would help you in resumption.
Secretary SHERMAN. Yes. As soon as we resume, or are ready to
resume, we ought to receive greenbacks for customs-duties.
The CHAIRMAN. And bring them on a par with gold also by making
them exchangeable for bonds.
Secretary SHERMAN. Yes ; or redeem such as are presented in coin.
The CHAIRMAN. On that theory of resumption you would, resume
already, in order to have practical resumption.
Secretary SHERMAN. Yes; that is resumption, and we would not
know about it. Within a year we have seen a decline of nine per cent,
between greenbacks and gold. In December, 1876, gold was 110 per
cent., and we have since had that decline and nobody has been hurt
Mr. BELL. Suppose the greenbacks were to obtain an equality in
value with gold, how would the repeal of the resumption act then aifect