William Martin Dickson.

Some aspects of the money question online

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Introduction 5

Inflation 7

The Policy of a Gradual Rktukn to Specie Payments 13

A Money Panic when Irredeemable Paper is the Money 21

Matthews on Money 24

Taft and Groesbeck on Silteb 29



The worst legacy of modern war is the debt which it leaves.
The horrors of the stricken field are soon effaced; the wasted
places bloom again ; the mourners cease to mourn, and the
reproductive powers of nature fill up the gaps made by the
sword ; but the debt is abiding. The destruction of life and
property to Prussia in the seven years' war has hardly been
exceeded, yet in the life of the great Frederic she became more
prosperous than ever. He made no debt. The losses of our war
have in great measure been repaired ; even the passions which
produced it and which it augmented are almost still ; but the
debt it caused presses upon us with increasing weight.

It is not surprising then that there is a growing desire to
be relieved from it — a disposition upon the part of many to
catch at any device or shift which may be suggested to lessen
its weight. Men greedily avail themselves of a legal quibljle
to escape the obligation who would be shocked at a suggestion
of open repudiation.

Soon after the close of the war it was proposed to pay off
the bonded debt with greenbacks. The law of the greenback
made it a legal tender for all purposes except payment of
customs ; therefore, it might be used in payment of the
bonded debt. The absurdity that a promise to pay, with in-
terest, may be paid by another promise of the debtor to pay,
without interest, without the consent of tlie creditor, is
apparent ; yet men who consider themselves honorable advo-
cated this wretched quibble.

Again, an indefinite further issue of greenbacks was pressed,
in the hope, doubtless, that the bond would be swamped in
the inevitable financial collapse that would come. And last,
the fall of silver gives opportunity to cavil with the cred-
itor ; the quibble being that the bonds are, by the law of their


creation, payable in coin, that is, gold or silver, at the op-
tion of Government. The fact that Government has exercised
this option, in the act demonetizing silver, is shoved aside, as is
also the fact that immense credits have been made upon the
faith of this demonetization, as to which the remonetizing of
silver on the old basis would act as a partial repudiation.

The letters herewith republished, were originally published
in the Cincinnati Commercial^ from time to time, as the
matters of which they treat occupied the public attention.

The Congress noAv in session is likely to be beset with these
schemes, and hence, the present issue of these letters may be
opportune — if happily they may contribute something toward
arresting the present fatal downward tendency. The motive is
not to serve the creditor but the maintenance of plighted faith,
yet this, secure, in the end best serves both debtor and creditor.
Much less is the motive, the vain desire of obtaining " the inter-
ested and insincere applause of the creditor;"* still, as we are
seeking to reduce the burden of our debt by funding it at re-
duced rates of interest, homely thrift would seem to suggest the
propriety of our doing those things, which would advance our
credit. The frothy rhetoric of the report of the Silver Commis-
sion about our good faith heretofore is hardly becoming iu so
grave a state paper. If it be made the excuse for a lapse at this
time from that good faith, it is also offensive to good morals.

Of the same character is the covert allusion to possible worse
consequences to the creditor if he does not yield, because the
original debt was contracted upon terms hard upon the Govern-
ment. For £600,000,000 of the debt of Great Britain, she origin-
ally received only 60 or 70 per cent, thereof, yet she has never
made use of this fact as a threat of evil consequences if the
creditor did not yield to some proposed adjustment of the

♦Silver Commission Rei:)ort.






April 18, 1874.

Gentlemen — You have given the public the benefit of your
opinion in behalf of inflation. You assign no reason for the
faith that is in you. Yet you advise the public that you are
manufacturers, numbering more than fifty, and representing
a capital of $10,000,000 and more than 5,000 em[>loyes. We
will admit that all this may be true, and yet 3^our opinion be
wholly erroneous. You only mean to intimate that in your
opinion inflation is a necessity at this time to your capital,
your employment and your employes. You thus invite the
inquiry how can inflation serve you, circumstanced as you are ?

You will admit that an increase of currency depreciates the
purchasing power of its unit, that if there be at a certain time
a hundred millions of money in the country and there be
added to this another hundred millions, the dollar will not
buy as much after this increase as it did before. In other
words, money, like any other commodity, follows the law of
sup[»ly and demand.

All this is true of actual money, gold and silver, and is
likewise true of fictitious money, paper credit. But with
this latter there enters in another element, causing greater de-
preciation. The value of paper money rests upon the expec-
tation that it will some day be paid with actufil money ; but
whether this will ever take place depends upon the ability
and honesty of him who issues.- Every addition to the paper
of an individual or of a nation, makes an additional tax upon

* Certain citizens of Cincinnati.



his or its resources, and increases the uncertainty as to the
payment of what he or it owes. "When the issue of paper be-
comes reckless, there arises the apprehension that there
is no purpose to pay. All this combines to produce a rapid
depreciation of paper when its volume is increased.

You must then admit that when you vote for inflation you
deliberately ask that the i)urchasing capacity of our paper
dollar shall be decreased ; you ask the Government so to act
as to make the dollar you give your employe for his hard
work buy less bread and meat than it does at this time.

Now, why do you want the purchasing capacity of the dol-
lar decreased? In what way will this benetit your business,
your capital or your employes ?

Let us suppose your request granted, and that inflation
takes place to-morrow. What effect will it have upon your
wares? You will rise up to-morrow morning and proceed to
your business knowing that the inflated dollar is not worth
what it was the daybefoi'e; how much less you are hardly
able to tell. Eut one thing you will not do : you will not sell
your wares at the same price you did the day before. You
will want more dollars for them. Thus there is an apparent
rise in the price of your wares, and this is gratifying.

But how will this beneflt you?

If you are in debt the benetit is quite obvious. Let us sup-
pose an extreme case of inflation — of an increase of the money
so great that a dollar of the inflated currency sinks to tifty
cents of its value before inflation, or which is the same thing,
let us suppose that you can readily sell a stove for fifty dol- .
lars, which before inflation you were glad to sell for twenty-
five dollars. You thus gain by inflation twenty-tive dollars
on your stove. Your stove now pays your creditor fifty dol-
lars of your debt to him, while before inflation it only paid
him twenty-five dollars — a clear gain to you of twenty-five
dollars, and a clear loss to him of a like sum. For, before in-
flation, the fifty dollars you owed him would buy two stoves ;
now, after inflation, it will buy only one stove. By inflation
you have cheated him out of one stove.

Gentlemen, manufacturers, if you are heavily in debt, and
want to defraud your creditors, it is obvious your nefarious


purpose will be aided by iufhitioii, Now, is this tlie case?
Are you in debt, and do you want to rob your creditors?
We do not believe this. We believe neither proposition.
We believe you are solid and honest.

But do you not see that your action throws a suspicion
on you ?

You must admit that inflation depreciates the value of
the dollar, and that to the extent of that depreciation the
creditor is defrauded. As honest men, is it morally right
for you to ask for inflation wiien you know the effect
of it will be to rob 3'our creditor neighbor of his property?
Assume for a moment that the inflation does benefit your
business, is it right for you to seek this benefit by the rob-
ing of your neighbor ?

Kernember that every time you cry for inflation you are
lending your voice to the robbery of another. It is admitted
even with hesitation that the Government may under the
dire necessity caused by war, to save the life of the Nation,
make its promise to pay a legal-tender, inflate the currency
and thus permit the debtor to rob his creditor. But never
before in the history of a civilized Nation, in a time of pro-
found peace, did a Government commit this crime, merely
because one class of the community thought that it could
thereby better itself at the expense of another. The very
thought is shocking to the moral sense. Yet, gentlemen,
this is precisely what you are requesting our Government to do.

Pray in what way do you reconcile your conduct to your
conscience! Will you say that inflation will benefit the
country; that it will make things lively and business brisk?
Well, is it right to make your business brisk by the robbery ot
anotiier ? But will it make business brisk, and to what extent
and with what result? All this is very vague. Yet let us
fairly analyze the matter. Let us return to our illustration.
Let us assume that inflation will take })lace to-nu)rrow.
You will then, as we have seen, ask more for your wares
than you do to-day. Just how much you can not tell. You
know there will be an advjince, but to what extent you can
not precisely tell. You do not know the level of prices ad-
justed to the inflated currency, but you know there will be


lui advance and yon increase yonr prices for yonr wares can-
tionsly at first. Your customer admits there must be an in-
crease, concedes the point to you, pays your advance — and in
turn advances upon Lis customer in the same way you do,
and so on with each successive exchange. Each one of you
has realized an advance, and if you use it to pay your debts
you have made a gain and robbed your creditor.

If you have many debts to pay, and can, by a twenty-live-
dollar stove, pay a fifty-dollar debt, no doubt you will be brisk
in your business; but we assume you are honest, and that the
brisk trade you refer to is not of this character. Each one of
you has realized an advance, and apparently made money,
but when you come to replace your stock you find that it has
advanced too, that labor has advanced, so that the increased
amount of money you have got buys no more than the less
amount before inflation. It is quite true that all these ad-
vances do not take place at once. You will continue to pay
your employes at the same wages for some time after you
have increased your prices. It will be some time before they
will strike, and to that extent you are a gainer. But you
have to that same extent robbed your employes. As honest
men, would you do that, and if not as honest men, would you
recommend a line of policy which would enable dishonest
men to do it? But if you do not, where is your gain by a
brisk business? You sell your wares at higher prices and
you pay correspondingly higher prices for everything you
buy. Yet it is true that while you do not gain anything,
business is brisker. While you are selling at an advance to
your customer, and so on, A, standing by, sees these profits
and inquires, " May I not make something?" He goes to his
banker, borrows money, now" abundant, and buys and sells ;
and when he sells at an advance and pays his borrowed
money, the margin left, after payment of interest, he has
made. This everybody sees and everybody borrows money
and buys and sells. Prices keep on swelling, naturally, until
the level in the depreciated currency is reached, but it does
not stop there ; the impetus of speculation carries it far be-
yond that. But at last the maximum is reached and prices
swell no more. Those who have last bought can not sell, and


speculation suddenly comes to a standstill. Those who are
caught hope against hope, hold on in the face of a declining
market, and seek renewals of their paper. But now the
bankers take the alarm, call in their loans and sacrifice the
unfortunate operators. ]>ankru[)tcics take place right and
left. Prices sink lower and lower, far below the level of the
depreciated currency, confidence is gone, banks and everybody
hoard the money; there becomes a tight money market; the
cry goes out : We want more money ; business lias increased,
more money is wanted. Demagogues take it up, Congress
will be appealed to, another inflation takes place, with a like
result, and the thing is repeated until the volume of the Gov-
ernment currency has become so great that it can not be
paid, is repudiated in some form or other, and the country,
through dishonor and business convulsions, comes back to
gold and silver.

But, to return, what have you gained by the operation?
There are three ways in which you may have gained :

You may have paid your creditors in depreciated money,
and defrauded them to the extent of the depreciation. You
may have replaced your stock at a less price than it was
worth in the depreciated money, and you may have for a time
paid your emploj^es at the old }>riees, and to the extent of the
depreciation defrauded them. You may have adroitly or
luckily borrowed and bought at the right time, and sold out
at the right time, in which event you have gained at the ex-
pense of your less war}- or less fortunate neighbors. Some
one at last is caught. In each and every event your gain has
produced no new value, and has been solely at tlie expense
and to the undoing of others. Now, gentlemen, is this
honest? Is this a form of gain in which you can delight?

Perhaps, however, you may turn up in the outcome among
the unwary or the unlucky, then you will have the conscious-
ness that your own evil action has wrought your own undoing.
Labor alone creates values. Neither the Government nor yoi^
can do this by shams and false pretenses — and the attempt
brings onlv dishonor and ruin. Times are dull: business is
depressed; we have been for 3'ears in a declining market j


we are slowly approaching specie payments, and that road
leads to no gambling s[)eculation, l)ut to sober industry.

Without interference we Avould soon reach the solid rock
of gold. Once tiiere from the throng of uncertainties that
crowd upon the merchant, one at least would be removed.
The measure of values would be stable and lixed, and which
is of almost equal importance, our currency would be that of
the rest of the world. Now we are atloat upon a side eddy,
stagnant and foul, while the great and pure stream of cur-
rency flows by us around the world. The world's currency
has, in a certain and valualjle sense, elasticity. It obeys the
laws of trade. It goes from where it is not wanted to where
it is wanted. It is in restless motion. If from local causes
there is a financial crisis in a country, witli loss of confidence,
hoarding and high rates of interest, it flows there and brings
relief. No such relief can come to ns now. During the re-
cent panic gold and silver came, but brought no relief. They
were not our currency, and added nothing to it. They were
only an additional commodity. Our only relief was to await
the slow return of confidence or to issue more greenbacks — a
remedy %vorse than the evil.

Gentlemen, our country is threatened with dire calamity ;
its honor is imperiled ; its plighted faith is about to be broken.
Your felloW'-citizens have spoken bmve words for the true
cause, and you throw the weight of your names into the op-
posing scale for dishonesty. Pause ! think !



September 3, 1875.

There is an aspect of tlie financial (juestion not much dis-
cussed, yet perhaps it is the most important. The Democratic
party proclaiming inflation, the Republican party deems it ex-
pedient to confine itself to a simple negative.

This, however, may not be either politic or wise. The
country is confessedly suffering from wide-spread business
depression ; many laborers are out of employment ; others are
working at reduced wages, and there is much dii^tress. Trade
is stagnant. There is no new venture, no enterprise. All
seem to be waiting and longing for relief. Whatever else
maybe said, the Democratic party meets this condition of the
country with a plan of relief, immediate in its action — the in-
flation of the currency. This is delusive and destructive, yet
it is heralded with high-sounding phrases, and, at least, holds
the word of promise to the ear.

The Republican party proposes no ])lan of immediate relief.
It has "set its face toward specie resumption," and indicates
when that is reached relief will come. But it takes no step
to bring this about, and hesitates to declare for the only pol-
icy which will bring about and maintain specie resumption;
the withdrawal of the greenback. We grew away from spe-
cie payments Avith the issue of the greenback, and we can not
grow back again except by the retirement of the greenback.
This seems a.xiomatical.

I discard the thought as absurd that this Government
should become a great banking institution, holding a reserve
of three or four hundred millions of gold, issuing and redeem-
ing the greenback. Still, the "gradual return to specie" is
a favorite phrase with the Republican orators; it is supposed
to be conservative and safe, and taking with prudent people.
Just how this is to l»e aceom[)lished is not set forth, or is
clouded in the still more vague phi-ase of "growing up" to


Specie payments. There are those who believe we may " grow
up " to gold without doing anything, or retiring the green-
back. Mr. Pendleton is enamored of this idea, and thinks
that we may again and again, as the " wants of trade require,"
issue more and more greenbacks, and yet all the while be
growing up to specie. That is, when we have made a new
issue of greenbacks and prices have adjusted themselves to
the inflated currency, and stagnation again occurs, we may
again relieve it by another issue, with its new disturbance of
prices, and so on. That is what is meant by the phrase "the
wants of trade." Inflate the currency, stimulate trade and
expansion of credit ; when yiay day comes issue more money
and enable the debtor to cheat his creditor. Yet Mr. Pendle-
ton, in a certain sense, is right; in this way we may "grow
up " to gold, and with a rapidity unthought of by him.
American credit is tainted in the markets of the world — the
odor of repudiation hangs about it. This taint costs us two
per cent, interest on all our vast debt. That is, if the confl-
dence of the world in our integrity was equal to their conti-
dence in our ability, we could get money at two per cent, less
than we now do.* To this taint let us add the breach of faith
of issuing greenbacks in excess of $400,000,000 ; of doing
this in a time of profound peace, to meet no public exigency,
but sup[)0sed private interests — accompanying all this with
the public declaration that the promises to pay thus issued do
not mean what they say, but are themselves money, made so
by the stamp of Government, never to be redeemed, but to
be added to from timie to time as the wants of trade require.
Let all this be done, where would American credit stand in
the presence of an enlightened Avorld? Would not such
an act shock the common sense and moral sense of
mankind ? Soon our bonds would be hurried home,
and sold for whatever they would bring ; the American
holder would catch the alarm and he too would sell, the
panic would spread, the greenback would be rejected between
man and man, and would become like the French Assignat
and the Confederate note; and thus on the Pendleton theory




we would " grow up" to a gold basis over prostrate National
honor and amid the wrecks of a fearful financial convulsion.
This is one way of reaching a gold basis. The Republican
I)arty does not propose to do this ; its face is set toward
specie resumption, but it would gradually reach that end.

Let us fully and fairly examine this i)lan ; let us look it in
the face and ask if it is an adequate or any relief to the
present distress.

I do not stop to in(piire into all the causes of this distress;
there are two, however, conceded, and these maiidy hold and
promise to hold in the future upon us the business depression.

There can be no prosperous trade in the presence of a de-
clining market; men will not buy to sell when they must sell
at a less price than they paid. There will be no production
when the thing produced must sell for less than the cost of
production. Prudent traders wait until the bottom is reached.
Now, a gradual return to a gold basis means a gradual appre-
ciation of the greenback and a falling market. For years
past we have had a declining market, caused by the gradual
appreciation of the greenback. It is true that in the last two
or three years this appreciation of the greenback has been
less apparent ;* yet during all this time men's faces were
turned toward specie resumption, and this has had the same
effect as an actual appreciation of the greenback. We dis-
count the effects we anticipate. It thus appears that the
gradual appreciation of the greenback — that is, a gradual re-
turn to specie payments — has produced a continuous declining
market, and is thus a jiotent cause of the present distress, and
one that will maintain that distress as long as the cause con-
tinues to act — that is, until actual return to a gold basis.

Thus the boasted remedy of a gradual return to specie
payments is not only no remedy at all, but is the continuance
of the very cause which, has contributed so largely to the ex-
isting business depression.

It is quite true that upon a return to a gold basis this will
cease to act; and, if we can endure the suffering meanwhile,
all may yet be right.. But, ah! here is the rub. Can the



laborer, with liunger at his door, wait? Can the thousands
who depend upon the wheels of industry being kept in motion
wait? And how h)ng, oh, how long shall they wait? If the
return to gold is to be through a gradual rctiiienient of the
greenback, the length of time may be readil}- estimated.
But if we are to grow up to specie payments, with an irre-
deemable currency of seven hundred millions, who can tell
when we shall reach it ? Shall the paralysis of business re-
main until that takes place? For the last three years we
have made no progress in that direction, and there is no evi-
dence that we are now making any progress.* Surely we can
not make any while there is a large party clamoring for in-
flation. Is it wise statesmanship that postpones relief to that
distant time ? May not a sorely distressed i)COple, meanwhile,
through sheer despair, Hy to inflation, as the fevered patient
long disappointed with regular medicine seeks the quack.

We have from the Republican speakers able expositions of
the folly and wickedness of inflation; but these speeches
ignore the fact that a gradual return to gold means a declin-
ing market, stagnant trade, laborers without emploj'ment,
and that a continnance,of this policy, indeflnitely means an in-
definite prolongation of these evils. Yet this fact is " the dead
point of danger ;" the fuel wliich the clamorous oratory of Gary
fans into a flame. In vain cry demagogue, demagogue, when
you furnish him the material for his incendiary harangues.
Gradual return to specie payments is a slow, wasting disease;
it is the mercy of the boy who cut oft' each morning an inch
of his dog's tail rather than cut oft' the whole at a single

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Online LibraryWilliam Martin DicksonSome aspects of the money question → online text (page 1 of 3)