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Vol. II. No. 8.
January, 1889.


The patience with which mankind submits to the demands of tyrants
has been the wonder of each succeeding age, and heroes are made of
those who break one yoke only to bow with servility to a greater. The
Roman soldier, returning from wars in which his valor had won wealth
and empire for his rulers, was easily content to become first a
tenant, and then a serf, upon the very lands he had tilled as owner
before his voluntary exile as his country's defender, kissing the hand
that oppressed, so long as it dispensed, as charity, a portion of his
tithes and rentals in sports and food. And now, after ages of
wonder and criticism, the soldiers of our nineteenth-century
civilization outvie their Roman prototypes in submitting to exactions
and injustice of which Nero was incapable either of imagining or
executing, bowing subserviently to the more ingenious tyrant of an
advanced civilization, if but his hand drop farthings of pensions in
return for talents of extortion. It may not be that the soldiers
and citizens of America shall become so thoroughly debauched and
degraded, nor that the consequences of their revolt shall be a
burning capitol and a terrified monopolist; but if these evils are
to be averted, it will be only because fearless hands tear the
mask from our modern Neros, and tireless arms hold up to popular
view the naked picture of national disgrace.

Twenty-eight years ago the first step had been taken towards the final
overthrow of the objective form of human slavery. There were, even in
those days, cranks who were dreaming of new harmonies in the songs of
liberty; and when tyranny opposed force to the righteous demands of
constitutional government, ploughshares rusted in the neglected
fields, workshops looked to alien lands for toilers, while patriots
answered the bugle-call, and a nation was freed from an eating cancer.
But what was the return for such sacrifices? Surely, if ever were
soldiers entitled to fair and full reward, it was those who responded
to the repeated call of Lincoln for aid in suppressing the most
gigantic rebellion of history - not in the form of driblets of charity,
doled with cunning arts to secure their submission to extortions, not
offered as a bribe to unblushing perjury and denied to honest
suffering, but simple and exact justice, involving a full performance
of national obligation in return for the stipulated discharge of the
duty of citizenship. The simple statement of facts of history will
serve to expose the methods of those who pose as _par excellence_ the
soldiers' friends and the defenders of national faith.

The soldiers who enlisted in the war of the rebellion were promised by
the government, in addition to varying bounties, a stipulated sum of
money per month. It requires no argument to prove that the faith of
the government was as much pledged to the citizen who risked his life,
as to him who merely risked a portion of his wealth in a secured loan
to the government. But the record shows that the pay of the former was
reduced by nearly sixty per cent, while the returns of the latter were
doubled, trebled, and quadrupled; that in many cases government
obligations were closed by the erection of a cheap cast-iron tablet
over a dead hero, while the descendants of bondholders were guarded in
an undisturbed enjoyment of the fruits of their ancestors' greed. For,
after the armies were in the field, the same legislative enactment
that reduced the value of the soldier's pay increased that of the
creditor's bond, by providing that the money of the soldier should be
rapidly depreciated in value, while the interest upon bonds should be
payable in coin; and then, after the war was over, another and more
valuable bond was prepared, that should relieve the favored creditor
of all fear of losing his hold upon the treasury by the payment of his
debt. That the purpose of the lawmakers was deliberate, was exposed in
a speech by Senator Sherman, who was Chairman of the Finance Committee
of the Senate while the soldiers in the trenches were being robbed in
the interest of the creditors at home. In reviewing the financial
policy of his party during the war, Mr. Sherman said, in a speech in
the Senate, July 14th, 1868 [Footnote: Congressional Record, page

"It was, then, our policy during the war, to depreciate the value
of United States notes, so that they would come into the Treasury
more freely for our bonds. Why, sir, we did a very natural thing
for us to do, we increased the amount to $300,000,000, then to
$450,000,000, and we took away the important privilege of
converting them into bonds on the ground that, while this
privilege remained, the people would not subscribe for the bonds,
and the notes would not be converted; that the right a man might
exercise at any time, he would not exercise at all."

No page of our national history contains a more damning record of
injustice than this. Mr. Sherman recognizes and admits that the notes,
as issued and paid to the soldiers and producers of the country, were
fundable at the holder's option in a government interest-bearing bond.
He confesses to the foreknowledge that in nullifying this right the
value of the notes would be decreased and to that extent the soldiers'
pay be diminished. No organ of public opinion raised the cry of
breaking the plighted faith of the nation. The soldier had no organ
then; but years after the wrong had been perpetrated, there appeared
in Spaulding's "History of the Currency" the na√ѓve statement, "It
never seemed quite right to take away this important privilege while
the notes were outstanding with this endorsement upon them." By a law,
passed against the protests of the wisest and most patriotic members
of the popular branch of Congress, it had been provided that these
government notes, so soon to be further depreciated in value, should
be a full legal tender to the nation's defenders, but only rags in the
hands of the fortunate holder of interest-bearing obligations of the
government, upon which they were based, and into which they were
fundable at the option of the holder. In one of his reports while
Secretary of the Treasury, Hon. Hugh McCulloch showed that fully
thirty per cent of the cost of supplies furnished the government was
due to the depreciation of the currency, the initial step in such
depreciation being the placing of the words "Except duties on imports
and interest on the public debt" in the law and upon the back of the
notes. But, having provided that one class of the government creditors
should be secured against the evil effects of a depreciated currency,
those friends of the soldiers and defenders of the nation's honor
proceeded to a systematic course of depreciation of the currency,
while the soldiers were too busy fighting, and the citizens too
earnest in their support of the government, to criticize its acts.
During the war the sentiment was carefully inculcated, that opposition
to the Republican party or its acts was disloyalty to the government,
copperheadism, treason; and protests against any of its legislation
were answered with an epithet. It so happened that very little
contemporary criticism was indulged in, from a wholesome fear of
social or business ostracism, or the frowning portals of Fort

But from the very commencement of the war there had been felt at
Washington a strong controlling influence emanating from the money
centres. The issue of the demand notes of the government during
the first year had furnished a portion of the revenues required,
and had served to recall the teachings of the earlier statesmen
and the demonstrations of history - that paper money bottomed on
taxes would prove a great blessing to the people, and a just
exercise of governmental functions. This was only too evident to
those controlling financial operations at the great money centres. The
nation was alive to the necessities of the government; the people
answered the calls for troops with such promptness as to block the
channels of transportation, often drilling in camp, without arms,
awaiting production from the constantly running armories. Those
camps represented the people. From them all eyes were bound to the
source of supply of the munitions of war; in them all hearts burned
for the time for action, even though that meant danger and death.
There were other camps from which gray-eyed greed looked with far
different motives. The issue of their own promissory notes, based
upon a possibility of substituting confidence for coin, had proven
in the past of vast profit to the note-issuers of the great money
centres. The exercise of that power by the government would
inevitably destroy one great source of their profits, and transfer it
to the people. Sixty millions of the people's own notes, circulating
among them as money, withstanding the effect of the suspension of
specie payments by both the banks and the national Treasury, was a
forceful object-lesson to all classes. To the people, it brought a
strong ray of hope to brighten the darkness of the war cloud. To some
among the metropolitan bankers who in after years prated so loudly of
their patriotism and financial sagacity, it brought to view only
the danger of curtailed profits. The government Treasury was empty;
troops in the field were unpaid and uncomplaining; merchants
furnishing supplies, seriously embarrassed for the lack of money in
the channels of trade. The sixty millions of demand notes were
absorbed by the nation's commerce like a summer storm on parched
soil. Under such circumstances, at the urgent request of the
Secretary of the Treasury, the Ways and Means Committee of the House
of Representatives framed a bill authorizing the issue of one
hundred and fifty millions of bonds, and the same amount of Treasury
notes, the latter to be a full legal tender, and fundable in an
interest-bearing bond at the option of the holder. The contest between
the popular branch of the government and the Senate, upon this
measure, forms one of the most interesting and instructive lessons
of the financial legislation of the nation. In the Senate, a
bitter and determined opposition to the legal-tender clause was
developed. The associated banks of New York had adopted a resolution
that the Treasury notes of the government should only be received
by the different banks from their customers as "a special deposit to
be paid in kind;" and it was one of the lessons of the war, that
notices containing the announcement above quoted remained posted in
the New York banks until a high premium on those very notes, over
the dishonored greenbacks, caused a shrewd depositor to demand of
the bank his deposits in kind. The demand was settled by a delivery
of greenbacks, which were a full legal tender for the purpose, and
the notices suddenly disappeared. The compromise effected between
the two Houses resulted in the issue of the emasculated greenback,
and it also led the way to the establishment of the National Banking
system, and the issue of the promissory notes of the banks to be
used as money.

Much of the force of all criticism of the system so devised has been
weakened by the fact that the attack has been aimed at the banks
themselves, and not against one special feature of the system. In
explanation, though not in excuse for this, should be stated the fact
that every issue of the annual finance report of the government
contained the special pleadings of the comptrollers of the currency,
concealing some facts, misstating others, and creating thereby the
impression that they were endeavoring to win the favor of the banking
institutions. Added to this were the efforts of those controlling the
national bank in the great money centres to secure a permanency of the
note-issuing feature of their system, after a very general public
sentiment against it had been aroused, and even after its evil effects
had been felt by smaller banks located among, and supported more
directly by, the producing classes. But now, when the discussion is
removed from the arena of politics, when the volume of the bank-note
system is rapidly disappearing, and when many of the best and
strongest banks are seeking to be relieved from the burden of
note-issuance, it is opportune to discuss calmly and without prejudice
the wisdom of the original acts and their effects upon the country.

It has been claimed that by the organization of the national banks
the government was enabled to dispose of its bonds and aided in
carrying on the war. Do the facts warrant the claim? All national bank
notes have been redeemable solely in Treasury notes. They do not
possess the legal-tender qualification equal to the Treasury note, and
cannot therefore be considered any better than the currency in which
they are alone redeemable, and in comparison with which they have less
uses. These are truths that were just as palpable twenty-five years
ago as to-day. It follows that the issue of the bank notes did not
furnish any better form of currency than that which came directly from
the government to the people. Every dollar of such notes issued
contributed just as much towards an inflation of the currency as the
issue of an equal amount of Treasury notes. With these facts in mind,
a review of the organization of the banks and their issue of notes
will reveal the effect of such acts.

In 1864 the notes of the government had been depreciated to such an
extent that coin was quoted at a premium ranging from 80 per cent to
150 per cent. The record of a single bank organized and issuing notes
under such circumstances is illustrative of the whole system.

Take a bank with one hundred thousand dollars to invest in government
bonds as a basis for its issuance of currency. The bonds were bought
with the depreciated Treasury notes. Deposited with the Comptroller of
the Currency at Washington, the bank received ninety thousand dollars
of notes to issue as money. It also received six thousand dollars in
coin as one year's advance interest upon its deposited bonds, under
the law of March 17, 1884. This coin, not being available for use as
money, was sold or converted into Treasury notes at a ratio of from
two to two and a half for one. The bank, therefore, had received, as a
working cash capital, a sum in excess of the money invested in its
bonds. The transaction stands as follows:

Invested in bonds $100,000
Received notes to issue $90,000
Received coin equal to, say 12,000 - 102,000
- - -
Bank gains by transaction $2,000

From this it will appear that the bank has the use, as currency, of
more than the amount of its bonds, while the government is to pay, in
addition, six per cent per annum on the full amount of bonds so long
as the relations thus created continue. Surely no argument is needed
to prove that, if the government had issued the $90,000 in the form
of Treasury notes, and had paid out the interest money for its current
obligations, there would have been no greater inflation of the
currency, a more uniform currency would have been maintained, and a
saving effected of the entire amount of interest paid on bonds held
for security of national bank notes, which at this date would amount
to a sum nearly representing the total bonded debt of the country.

But there remains a still more serious charge to be made against this
system. Defended as a war measure by which the banks were to aid the
government in conquering the rebellion, the fact remains that at the
date of Lee's surrender only about $100,000,000 of bonds had been
accepted by the banks, even though they received a bonus for the act.
But, after the war had closed, and the government was with one hand
contracting the volume of its own circulating notes by funding them
into interest-bearing bonds, the banks were allowed to inflate the
currency by the further issue of over $200,000,000 of their notes.
Time may produce a sophist cunning enough to devise an adequate
defence or apology for such legislation. His work will only be saved
from public indignation and rebuke when a continued series of outrages
shall have dulled the national intelligence and destroyed the national

But there came a time when the policy of the government was radically
changed. The soldiers had conquered a peace, - or thought they
had, - and, as they marched in review before their commander-in-chief,
had been paid off in crisp notes of the government - legal tender to
the soldier, but not to the bondholder; the time for government to pay
the soldiers had ceased; the national banks had been allowed to show
their patriotism and their willingness to aid the government overthrow
a rebellion already conquered, by the issuance of their notes to add
to an inflated and depreciated currency; the soldiers had returned to
the arts of peace, and had taken their places as producers of the
nation's wealth and taxpayers to the national Treasury. Then Mr.
Sherman, with his brother patriots and statesmen, discovered that the
country (meaning, of course, the bondholders) was suffering under the
evils of a depreciated currency. Their tender consciences had never
suffered a twinge while the soldiers were receiving from the
government a currency depreciated in value as the result of its own
acts. But when the soldier became the taxpayer, and from his toil was
to be obliged to pay the bondholder, then the patriotic hearts of Mr.
Sherman and his co-conspirators in the dominant political party
trembled at the thought of a soldier being allowed to discharge his
obligations in the same kind of money he had received for his
services. As a recipient of the government dole, paper money,
purposely depreciated, was quite sufficient. From the citizen by the
product of whose toil a bonded interest-bearing debt was to be paid,
"honest money" was to be demanded. It required no argument to convince
the government creditor that this was a step in his interest, and
public clamor was hushed with the catchwords of "honest money" and
"national honor," while driblets of pensions were allowed to trickle
from rivers of revenue. The Nero of Rome had been excelled by his
Christian successor, and the dumb submission of ancient slaves became
manly independence in contrast with modern stupidity.

By the passage of the so-called "Credit-strengthening Act," in March,
1869, it was provided that all bonds of the government, except in
cases where the law authorizing the issue of any such obligation has
expressly provided that the same may be paid in lawful money, or other
currency than gold and silver, should be payable in coin. This act was
denounced by both Morton and Stevens, as a fraud upon the people, in
that it made a new contract for the benefit of the bondholder. The
injustice of the act could have been determined upon the plainest
principles of equity: if the bonds were payable in coin, there was no
need for its passage; if they were not so payable, there could be no
excuse for it. If there existed a doubt sufficiently strong to require
such an act, it was clearly an injustice to ignore the rights of the
many in the interests of the few. But the men who had not scrupled to
send rag-money to the soldiers in the trenches, and coin to the
plotters in the rear, had no consciences to be troubled. They had
dared to pay to the soldiers the money of the nation, and then rob
them of two-thirds of it under color of law, and now needed only to
search for methods, not for excuses. Political exigencies must be
guarded against. The public must be hoodwinked, the soldier element
placated with pension doles.

The first essential was to stifle public discussion. Some fool-friends
of the money power had introduced and pressed the bill early in 1868.
There were still a few Representatives in Congress who had not bowed
the knee to Baal, and they raised a vigorous protest against the
iniquitous proposal. Discussion then might be fatal to both the scheme
and the party, and Simon Cameron supplemented an already inodorous
career by warning the Senate that this bill would seriously injure
the Republican party, and that it should be laid aside until the
excitement of a political campaign had subsided, and it could be
discussed with the calmness with which we should view all great
financial questions.

Here was the art of the demagogue, blinding the eyes of the people with
sophistry and false pretences in order to secure by indirection that
which could not be obtained by fair discussion. A Presidential election
was approaching. An honest Chief Executive had rebelled against the
attempt to nullify the results of the war by converting the Southern
States into conquered territories, in order that party supremacy should
be secured, even at the expense of national unity and harmony. Any
discussion of a proposition to burden the victorious soldier with
greater debt, in the interest of a class of stay-at-homes, would have
caused vigorous protests from the men whose aid was necessary for party
success. Thaddeus Stevens had announced that if he thought "that the
Republican party would vote to pay, in coin, bonds that were payable
in greenbacks, thus making a new contract for the benefit of the
bondholders, he would vote for Frank Blair, even if a worse man than
Horatio Seymour was at the head of the ticket." Oliver P. Morton, the
war-Governor of Indiana, had been equally vigorous in his language;
and practical politicians foresaw that even Pennsylvania and Indiana
might be lost to the Republican party with these men arrayed against
it. Therefore the cunning proposal to postpone this discussion "until
after the excitement of a Presidential election was over, and we could
discuss this with the calmness with which we should view all great
financial questions." The hint was taken, the contest of 1868 was fought
under a seeming acquiescence in the views of Stevens and Morton; the
dear people were hoodwinked with catch-phrases coined to deceive, and a
new lease of power was secured by false pretence. But when the
excitement of the election had passed, and there was no longer any
danger of "injuring the Republican party," all discussion was stifled;
and the first act signed by the newly elected President was that which
had been laid aside for that season of "calmness with which we
should view all great financial questions."

The next step in the conspiracy was a logical sequence to all that had
preceded. Having secured coin payment of interest and principal of all
bonds, it was now in order to still further increase the value of the
one and to perpetuate the payment of the other. To this end, silver
was demonetized by a trick in the revision of the Statutes, reducing
the volume of coin one-half, and decreasing the probability of rapid
bond payments. Then the volume of the paper currency was contracted by
a systematic course of substituting interest-bearing bonds for
non-interest-bearing currency, and the first chapter of financial
blunders and crimes of the Wall Street servants ended in a panic,
revealing, in its first wild terror, the disgraceful connection of
high public officials with the worst elements of stock-jobbery.

It is possible that a direct proposition in 1865, to double the amount
of the public debt as a free gift to the creditor-class, might have
caused such a clamor as would have forever driven from power its
authors, and have silenced the claims of modern Republicans that they
were the sole friends of the soldier, and defenders of national honor.
But the financial legislation of the Republican party has done more
and worse than this. Its every act has been in the interest of a
favored class, and a direct and flagrant robbery of the producing
masses. It has won the support of corporate monopoly by blind
submission to its demands, and, with brazen audacity, sought and
obtained the co-operation of the survivors of the army by doling out
pensions and promises. And yet, with a record that would have
crimsoned the cheek of a Nero or Caligula, its leaders are posing as
critics of honest statesmen, and the only friends and defenders of the
soldier and laborer. The leaders of its earlier and better days have
been ostracised and silenced in party councils, while audacious
demagogues have used its places of trust as a means of casting anchors

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Online LibraryVariousBelford's Magazine, Volume II, No. 8, January, 1889 → online text (page 1 of 19)