GREENBACKS AS GOOD AS COIN
__________________________
S P E E C H
of
HON. THOMAS W. FERRY,
of Michigan,
in the
SENATE OF THE UNITED STATES,
Thursday, May 2, 1878.
The Senate having under consideration the bill (H.R. No. 805) to repeal all that part of the act approved January 14, 1875, known as the resumption act, which authorized the Secretary of the Treasury to dispose of United States bonds and redeem and cancel the greenback currency —
Mr. FERRY said :
[voted for radical reconstruction and centralized government; voted against reduction of currency, voted (twice) for credit strengthening; never supported any measure which would have solved the currency and financial problems]
Mr. President : Admonished by the lateness of the session and the pending resolution fixing the day of final adjournment, I shall forego what I intended at more length to say, and content myself with a brief statement of the reasons which dissuade concurrence in the present repeal of the resumption act as the importance of the subject will allow.
After full consideration of House bill No. 805, which proposes “to repeal all that part of the act approved January 14, 1875, known as the resumption act, which authorized the Secretary of the Treasury to dispose of United States bonds and redeem and cancel the greenback currency,” your Committee on Finance have deemed it inexpedient to commend such repeal, and instead have recommended to the Senate the adoption of an amendment as a substitute for the bill which embraces three propositions :
First. That United States notes shall at once be receivable, the same as coin, in purchase of the 4 per cent. Government bonds.
Second. That on and after October 1, 1878, United States notes shall be receivable, the same as coin, for duties and imports.
Third. That United States notes outstanding and in the Treasury on the 1st day of October, 1878, shall not be retired and canceled, but be re-issued from time to time and form part of the permanent volume of the currency of the country.
The inexpediency of now repealing so much of the act of January 14, 1875, as provides for the resumption of specie payments on the 1st day of January 1879, is supported by the fact that United States notes are to-day within three-eighths of 1 per cent. of gold, and reached under the act now sought to be repealed ; hastened no doubt by the beneficial effects of the act to authorize the coinage of the standard silver dollar and to restore its legal-tender character, which passed at this session. The resumption act was the result of mutual concession of antagonizing opinions and substantially a compromise measure. Gold on the day the act passed held a premium of 113/8 per cent. Public opinion was then the more or less divided upon the best method to bring gold and currency together in value. Fixing an early day for resumption and preparing for specie payments by a rapid contraction of the currency and the accumulation of gold by the sale of bonds was the method pressed by those who considered less the distress and disaster of such means than the assurance of an end which should base the measure of commercial values upon gold at whatever cost to the people. This was antagonized by others, who protested against forced resumption on any day fixed by statute, and contended that it could sooner and easier be reached by the laws of trade—the forces of supply and demand. Against contraction of the currency and the hoarding of gold at the expense of an increase of the interest-bearing debt of the nation, they contended. To longer discredit United States notes by refusing to receive them for duties on imports, they urged, was a serious obstacle in the way of the restoration of the currency to par with gold.
I confess, Mr. President, that as an early advocate of the receivability of United States notes for duties and against contraction and forced-resumption, as the safest, speediest method of arriving at resumption, rather than by naming a day when specie payments should be enforced, I reluctantly joined in the compromise measure of 1875, which I feared would entail upon the business and toiling community incalculable woe. The universal distress and unparalleled failures which have followed these past years of trial must sadly record the severity of the process which has brought the country so near resumption and so close to financial ruin. The remonetization of silver was a tardy step in the right direction, and, though taken in the face of the protests and forebodings of its opponents, the measure has partly lifted the burden and extorted the confession that its aid to a return of commercial confidence and national prosperity has been, and is, undeniable.
The provision for the coinage of from two to four millions of silver dollars monthly, to swell the circulating medium of the country, has become an efficient agent of relief in the currency stringency. It is gratifying to notice how promptly the Secretary of the Treasury has provided for the execution of this remedy by having at this early day all the Government mints at work coining the silver dollar. Over two and a half millions have already been coined. That the financial condition of the country favorable to early resumption may not be underrated, it may be well to consider, by comparison, the monetary standing of the country at the passage of the resumption act and now, when a proposition is pending for its repeal.
On the 14th of January, 1875, the day the resumption act was approved, the amount of United States notes
outstanding and in the Treasury was ........... $382,000,000
Amount of gold in the Treasury was ................ 67,236,360
Amount of silver coin and bullion was ............ 3,668,675
Amount of national-bank notes outstanding ....... 351,861,450
Making a total of ....................... $804,766,485
Gold was then at a premium of 123/8 per cent.
In this and other statements I make no mention of the fractional currency nor subsidiary silver.
The amount of United States notes outstanding and in the Treasury May 1, 1878, was .... $346,681,016
Amount of gold in the Treasury ................ 137,045,240
Amount of silver coin and bullion ............. 14,743,898
Amount of national-bank notes outstanding ....... 321,709,559
Making a total of ............................... $820,179,713
Gold to-day is at a premium of 3/8 of 1 per cent., with $15,413,228 more of currency and coin than on January 14, 1875. To repeal the resumption act would leave as the volume of circulating medium for the country, the United States notes outstanding and in the Treasury at present of $346,681,016. The outstanding national-bank notes $312,709,559. A total of $668,390,575.
To leave the resumption act operative, as proposed to be amended by the Committee on Finance, would give the country an the 1st day of January, 1879, when specie payments would be resumed—
The amount of United States notes then outstanding and in the Treasury, say ..... $340,000,000
National-bank notes outstanding then ......... 325,000,000
Gold in the Treasury ......................... 180,000,000
Silver in the treasury ....................... 25,000,000
A total of ........................ 870,000,000
And the national banks will hold then of coin, (not counting their own Treasury certificates,) at least .... 15,000,000
Amount of gold in the country besides ......... 70,000,000
Amount of silver in the country besides ....... 35,000,000
Making a total of ................. 990,000,000
Under a repeal of resumption the available volume of circulating medium would be on the first day of January, 1879, six hundred and sixty-five millions, and gold necessarily advanced in premium, while simply amending the resumption act as proposed by your committee would give the country then as its available volume of circulating medium, composed of gold, silver, and currency at equivalent value with gold, a total of $990,000,000.
The quickest and doubtless the surest way to bring about an increase of the circulating medium, equal to the wants of the people, and ample to impart life to the now prostrate energies of the nation, and to restore commercial confidence to every avenue of industry and trade, is to provide for such increase as the pending amendment will ; and, as auxiliary, for the further advance of value of United States notes, to place them at par with gold at the earliest practicable moment.
This desideratum is sought by the measure proposed by your committee. One feature looks at once to this. The exchange at par, as it provides, of these notes for 4 per cent. bonds which are purchasable only in coin, and are to-day in market above par in coin, will immediately advance their value. These notes then re-issued in retiring bonds bearing 5 and 6 per cent. interest, will lessen to that extent the interest-bearing obligations of the nation, and measurably strengthen the public credit. The amount of 4 per cent. bonds authorized is ten hundred millions, leaving still issuable over nine hundred millions. Funding a like amount of ten hundred millions equally of 5 and 6 per cent. outstanding bonds into these four percents, will be a saving to the Government of fifteen millions of interest annually. Besides, the 4 per cent. bonds, taken at home and in denominations of $50 and multiplies, will not only enter into current exchanges but enrich rather than impoverish the nation to the extent of the accruing interest paid to our own people, instead of to holders abroad. This desirable object will be hastened by making these bonds exchangeable for United States notes, for their sale is less rapid in coin. This process of exchange will quicken as soon as the right is given, and the authorized issue of these bonds ere long be exhausted. It will become the people’s loan to the Government, and be so popular that authority for additional issues will be demanded, until our own people instead of foreigners shall hold the public-debt, and the interest wholly be drawn at home rather than shared abroad.
The late sale of fifty millions of 4½ per cent. bonds by the Secretary of the Treasury at a premium of 1½ per cent. in gold, with accrued interest, is an assurance of this as well as evidence of an advancing public credit. The remarkable financial condition of France, so recently emerging from a disastrous war, is largely attributable to her public debt being held by her own people. A measure which provides for the exchangeability for non-interest for low-interest bearing obligations of the Government upholds the value of the one and strengthens the holders of the other. This feature of the amendment proposed, must commend itself to general support.
I may now consider the second feature of the amendment, that United States notes shall, on and after the 1st day of October next, be receivable for duties on imports. By the act approved February 25, 1862, it was provided “that all duties on imported goods shall be paid in coin or in notes payable on demand heretofore authorized to be issued, and by law receivable in payment of public dues.” These notes referred to were Treasury notes payable on demand to the amount of sixty millions, issued and made receivable in payment of public dues under the acts approved July 17 and August 5, 1861, and February 12, 1862. It was a fatal mistake that the policy of receiving United States notes was not continued under subsequent statues, that the country might have escaped the misfortune which has followed its denial. It was, however, the judgement of our lawmakers in the midst of a civil war, when eleven States in rebellion threatened the dismemberment of the Union and the national credit, as a consequence, had suffered so that our bonds were negotiated with difficulty, that it was essential to assure their interest paid in coin to induce capitalists to take them, and this was done by requiring duties to be paid in coin, and by making subsequent issues of United States notes not receivable for that purpose. Sixteen years of unflinching adherence to this statutory pledge has witnessed United States bonds gradually rise from fifty-five cents to one hundred and eight, the market value of six percent to-day.
The original creditors of the nation, who staked their capital on the issue of fratricidal war, have been well paid for the faith they place in the final triumph of a just cause. They loaned their money to the imperilled Government with low credit ; they gather their reward of large premiums from an impregnable nation with high credit. Tested in civil war and fiscal panic, with gold reaching as high as 285 on the 11th day of July, 1864, and falling to its present paltry premium of 3/8 of 1 per cent., and through this ordeal with an unwavering fidelity ; good faith ends now to foreign holders of our bonds at 108, and duty to our citizens demands that they shall no longer suffer with forced use of paper driven below par by Government discredit. Long years of stagnation in all branches of business, entailing loss of fortunes and casting dismay into thousands of households, visiting want to countless laborer, whose cry for work and bread the golden seats of customs answer, with the remorseless siren, “Keep sacred the national faith,” has no longer plea or defense. With bonds at a premium of 8 per cent. and United States notes but 3/8 of 1 per cent. below gold, where is the man so fastidious as to further insist that payment of customs dues in gold is longer necessary to maintain the public faith. Our obligations to holders abroad having ceased, duty to citizens at home requires that the Government they periled and sacrificed life to perpetuate shall now turn its attention to upholding its credit with its own people. The Government should now provide for receiving for all public purposes what it obliges individuals to take for all private transactions. While gold was at a large premium, nearly if not quite equal to that on bonds, there was force in the argument that there should be some certain, reliable source of supply to the Treasury of coin to pay the interest on the public debt ; for without it the Government might find itself embarrassed to meet express obligations ; but with United States notes nearly equal to gold the argument falls and the disparity should end. The people have been willing to bear with patient fidelity a discrimination against themselves for the public faith, but they will no longer brook a discriminating burden when it antagonizes the public welfare. The plea, moreover, cannot be urged that if customs dues are not paid in coin the Government will be compelled to buy at disadvantage in open market to provide for coin obligations. At what disadvantage, then, I ask ? The competition in market of thousands of importers daily bidding for coin to pay the duties on their invoices, which of itself kept up and active the premium, would end by liberty to pay in United States notes. There would then be but one competitor. The Government would be the sole purchaser and substantially dictate its own terms, and premium, if any, would be nominal.
The nation cannot longer with credit forego removal of discredit on all of its legal-tender notes for the paltry saving of three-eighths of 1 per cent. on the amount required to pay the interest on the public debt, and hope to escape general reproach. No fears need be apprehended that the Government may have to seek supply of coin abroad. The annual product of coin in the country is $84,000,000. The annual interest on the public debt is $91,674,544. Under the provisions of the act remonetizing silver there will soon be an average outstanding of silver certificates in circulation more than equal to the interest due to holders of bonds by our citizens, and sufficient of these could readily be secured for such semi-annual interest obligations ; so that, in every conceivable aspect, the necessity for denying United States notes their rightful place in circulation has departed and it is proposed now that full value to them shall be imparted.
I will now briefly consider the last feature of the amendment reported by your committee, that all United States notes in existence October 1, 1878, whether in the treasury or outstanding, shall thenceforth become a permanent portion of the money of the country and to be re-issued from time to time as received, so as not to be withdrawn from exchanges and trade nor permanently hoarded by the Treasury. This repeals so much of the resumption act as requires the Secretary of the Treasury to redeem of United States notes 80 per cent. of the sum of national-bank notes issued to old or new banking associations, and leaves whatever amount of greenbacks there may then be in the Treasury and outside, a permanent part of the total currency of the country.
The remedy for the evils and distress growing out of the sudden financial collapse of 1873 was the subject of general discussion and congressional debate, which finally crystallized in the passage of a bill by Congress providing for a moderate and fixed increase of national-bank notes to the volume of greenbacks and national-bank currency then in existence, which bill failed to receive the approval of President Grant.
The law of January 14, 1875, followed as a compromise between the contending advocates of expansion and contraction, and as the way devised for a return to commercial restoration through eventual resumption. This compromise measure, requiring a redemption of United States notes to the amount of 80 per cent. of the sum of national-bank notes as fast as thereafter issued, authorized an expansion of 20 per cent. to the volume of both forms of currency as fast as national-bank notes were issued in supplying the demands of the people. The measure repealed the monopoly of national banking by making it free to all. It provided for the use of silver for fractional currency, and fixed the day for final resumption of specie payments on the 1st day of January, 1879.
As an advocate in 1873 of a moderate increase of the currency, the utilization of silver, free banking, United States notes receivable for duties, preference for United States notes in place of national-bank notes for our currency, and against contraction of these greenbacks, and opposed to fixing any day for forced resumption, I notwithstanding gave my aid in framing and support in passing that compromise measure. It was the best then obtainable and as fair a concession of antagonizing opinions as was practicable, and as the exigency of national condition demanded should be met by patriotic legislators who could rise above individual preference to enact some provision, rather than none, for the common weal.
Whatever may be respective opinions now of the wisdom of that measure, it afforded benefits which the people will not undervalue. It ended what they regarded an odious monopoly of banking and opened the best system ever devised by man to universal participation. It provided for the circulation of silver for fractional uses which served as the forerunner of the final restoration of silver to former equality with its more favored ally, gold. It also named a day in the future when the Government would add another evidence of its time-honored purpose, in peace as in war, even at great sacrifice, to maintain the public credit inviolate.
When the act passed, the amount of outstanding United States notes was $382,000,000; the amount of national-bank notes was $351,861,450; and gold stood in the market at 1123/8. To-day the amount of outstanding United States notes is $346,681,016, and national-bank notes $321,709,559, with old at 1003/8.
The whole amount of United States notes redeemed by the measure is $35,318,984, and the whole amount of national-bank notes issued since its passage is $44,148,730. During twelve months past the redemption of United States notes has been $14,813,388, and national-bank notes issued during the same time $18,516,735. Upon this basis between this and October next, say five months, there would be $7,723,635 of national-bank notes issued, and $6,172,245 of United States notes redeemed, leaving as the fixed volume of currency thereafter in United States notes and national-bank notes $669,942,865 against $733,861,450, the volume when the resumption act was passed.
Resumption of specie payments on the 1st day of January, 1879, three months thereafter, will unlock and render available to the country —
United States Treasury notes ........... $340,000,000
national-bank notes .................... 325,000,000
Gold in the Treasury ................... 180,000,000
Silver in the treasury ................. 25,000,000
Coin in banks and country .............. 120,000,000
making an aggregate volume of nine hundred and ninety millions of different forms of money of equivalent value available for the business needs of the country ; and this amount instead of $733,861,450 greenbacks and national-bank notes which made up the volume of a depreciated currency at the date of the passage of the resumption act ; and $321,609,425 more than the volume of Treasury and national-bank currency to-day.
On the threshold of such relief, and with its welcome benefits already animating the heart and invigorating the body of the nation, why cast our woeful faces over the past, which now cannot be changed, and why turn our backs upon the future, which now can be shaped, in a reversal of present light, and hope, and help, by repeal of the measure under which we have been led so nearly out of our sea of trouble ? Pass this complemental aid to the resumption law, and the remedy for our commercial paralysis and financial distress will be at hand.
Already its anticipated force is felt in the livelier step of toil and busier mart of traffic. Make it authoritative and real, and the rock will be struck that shall gratefully supply a languishing people. Mr. President, it may be said, if this remedy is to be found through the aid of the amendment, why not make it sooner effectual by fixing an earlier day than October 1 next for it to be operative ? Why not fix it July 1, instead of October 1, or even at the passage of the pending measure, as already suggested by the amendment submitted by the Senator from Indiana ? July 1 would be a very natural period to fix upon, as it is the beginning of the fiscal year. My individual choice would be then rather than any period later. There are, however, reasons for choosing October which are entitled to much consideration. The argument that there would be less contraction of United States notes, if July instead of October was chosen, has force. The estimated contraction based on past twelve months’ redemption would be to July, say two months, $2,468,898, and to October, say five months, $6,172,295. This comparatively small reduction of the volume of greenbacks is hardly to be considered, in the light of the effect for resumption purposes it might have upon the considered resources of the treasury. To receive greenbacks for duties three months earlier, would not only make it easier and cheaper for the syndicate to supply the fifty millions of gold recently contracted for by the Secretary of the Treasury, but be to that extent a check upon the flow of gold from customs into the Treasury. United States notes would in that event be paid for duties during the three months, and lessen, by that amount, the gold that would otherwise be accumulated. This would apply with greater force to any period earlier even than July.
The ability with actual means to resume specie payments is of far more significance than a question of three months’ time, and the small resultant reduction of the currency, when viewed in the light of the release by resumption of all the gold of the country to form a part of and swell the volume of the circulating medium. The question narrows down to one simply of policy, not of principle ; it is an item of time, in place of a surety against disability. Practically, I question if there will be any difference whether United States notes are made receivable for duties October 1, or July 1, for I believe that on the passage of this measure greenbacks and coin will be at par before July 1 next, and the matter of difference of time as to value of notes be disposed of in advance. At the same time prudence and wise forethought demand that reasonable precaution be observed, when a period is to be ushered that is to make all forms of money of equivalent and permanent value.
That I do not overdraw this effect of what seems already to have influenced the public mind, I have but to refer to successive notices in the public prints of business firms and banking associations in various localities and States, acting upon what appears to them the inevitable, by announcing that they have resumed specie payments in advance of the time fixed for resumption by the Government. It is a gratifying concession to this auspicious event, that moneyed circles of the West and South, which sections were the early and persistent advocates of what eastern centers termed “irredeemable paper,” “rag money,” and “debased coin,” are the first to vindicate their faith by acts, and are unfurling in the face of Wall street’s bated breeze the nation’s financial banner, inscribed “greenbacks as good as coin.” Wall street growls and halts at the advancing era, borne aloft by berated “lunatics” and “idiots,” but it must learn the irrevocable lesson that all knowledge on finance does not dwell solely with the wise men of Gotham. The country is acting upon the conviction that on money questions all sections as well, are wiser than one center, and that all men, know more than any one corner of men. New York City, so clamorous during the many dreary years of perplexity and loss, for early resumption, seems the last to respond to the welcome advent. The city of Albany and others which adorn that empire State are promptly meeting the inevitable by exchanging currency at par for coin. How long will our metropolitan city cling to her 3/8 per cent.? New Orleans, Mobile, Atlanta, Louisville, Indianapolis, Cincinnati, Detroit, Saint Louis, and other cities feel the impulse to break down the barrier by treating the currency equal to coin.
This early movement of individuals and associations to resume springs from the conviction, which is becoming wide-spread, that the Government will on the 1st day of January next be abundantly able to resume, and to maintain resumption thereafter. Forty per cent. of coin to the volume of currency is an average of reserve considered by wisest financiers as sufficient to maintain specie payments, and the Treasury will have on the day of resumption over two hundred millions of coin to maintain its three hundred and forty millions of Treasury notes, while the banks will hold sufficient of Treasury notes and coin, with which to maintain their three hundred and twenty-five millions of bank-notes.
With an annual product of eighty-four millions of coin and a balance of trade in our favor of $151,152,094, for the year ending June 30, 1877, and for the last nine months ending April 1, 1878, $203,229,501, being $48,453,509 more than the corresponding months ending April 1, 1877, who will hesitate to resume, and who can fear resumption ? In the presence these favoring facts, that assure ample resources with which to warrant a return to specie payments and our ability to maintain them, there can be no reasonable nor financial grounds for now taking any backward step.
Every principle of sound policy invites the intelligent reviewer of our financial condition to move in hand with these facts, by approving a measure which will settle our finances upon such a substantial basis as shall relegate the money question from the Halls of Congress to the marts of commerce.
It is far from wise to halt now, to recount and arraign what has been done, or to restate what might have been done. It is with the present we have to deal. like the evils of the war, the results of the panic will gradually disappear. It were as profitless to dwell upon the sacrifices of the one, as to recall the misfortunes of the other, for a panacea to cure the ills of the present. How much soever we may differ as to what might have been, we certainly should agree upon what is to be. The past we cannot unmake, but the future is ours to shape. Disagreement now upon comparatively non-essentials, when agreement is so vital in fixing at this opportune moment what shall be permanent relief to the people, will be well-nigh criminal indifference to the prostrate appeal of a suffering nation. Union of moderate views when extremes are nearly met, is safer than to divide upon points which under other condition it might be duty to maintain. The silver bill is an instance of extreme views harmonizing upon a moderate basis. It is now accepted with grateful testimony of approval by many who feared its passage would widen the breach of our difficulties. Its salutary effects are seen on every hand in the confidence it inspires as an efficient factor in the final solution. Silver certificates—the most beautiful specimens of note-engraving art, are to permeate our countless exchanges and become the favorite token of our restoration. The greenback advancing so nearly in value to coin will yet distance its silver companion and command a premium for portable convenience over ponderous coin. I cite as proof from the New York Times of the 26th of last month this paragraph :
PAYING A PREMIUM FOR GREENBACKS.
San Francisco, April 25.—In this city recently small sums of greenbacks have been purchased for gold coin at a premium of fifty cents for over $1,000 in notes.
The greenbacks will then, if not before, put to blush such as have aimed to disparage those who have long plead for their placement in the honored paths of trade. No one then, as heretofore, will seriously doubt the feasibility and safety of allowing greenbacks to be received for duties.
To make doubly certain a sufficient supply of coin in the Treasury to meet accruing interest on the public debt, there are still some who are indifferent to the act of discredit upon these notes, by refusal to receive them for all public as well as private uses. It seems to matter but little to them that between citizens they are made to serve every moneyed purpose, while between citizens and Government, they are denied for certain uses, validity and value. No individual upholds his commercial standing who impairs any way his own promissory paper ; nor can a Government keep its financial honor unsullied by discrediting in any manner its obligations. The time is propitious, and the opportunity rare, for every Senator to record his disapproval of this financial anomaly, by the support of a measure which looks to early release from this national dishonor. This amendment may not be just what each Senator would frame, but may it not be such a one as most can unite upon and support ? It leans not to either extreme of financial opinion, but is poised on moderate views, and framed by mutual concession. It breathes the spirit of our institutions, for it is the growth of compromise. It deals with a question affecting every fiber of commercial and industrial life. It is more or less vital to every citizen. It concerns the rich and the poor, the high and the low, the idler and the toiler. It touches the relations of capital and labor. It advances or retards the prosperity of the nation, and strengthens or relaxes the bonds of the Union. Your committee therefore invite the Senate to consider and concur in the amendment submitted.