January 7, 1873.

Mr. Buckingham asked and, by unanimous consent, obtained leave to bring in the following bill [Senate bill 1313];  which was read twice and ordered to be printed.

Supplementary to an act entitled "An act to provide a national currency secured by a pledge of the United States bonds, and to provide for the circulation and redemption thereof," approved June 3, 1864, and to secure an elastic currency, to appreciate national obligations, and to reach specie payments without commercial embarrassments.

Be it enacted by the Senate and the House of representatives of the United States of America in Congress assembled,
That the act entitled "An act to provide a national currency secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof," approved June third, eighteen hundred and sixty-four, be, and the same is hereby declared to be, open and free for banking, and any and all persons are at liberty to organize banking associations at such places as they shall judge proper in accordance with the provisions of said act, and of other acts relating to national banking associations.

---[
Tomorrow, by hook and crook, Sherman will push through the Senate the bill that demonetized silver and omitted from coinage the $1 silver coin.  That bill retained the coinage charge for gold coins.  This charge encouraged gold-miners to sell their gold to English agents, instead of taking the gold to the Mint and have it formed into dollar pieces.  Between 1865 and 1873 the yearly U.S. gold production was $60 million, meaning in six years every United States note could have been replaced by a gold coin --for the mere cost to the government of minting.  There was, of course, plenty of silver, too, which could also have been turned into coins.
Sherman is highly opposed to silver, and doesn't want gold circulation, either;  he wants this fictitious specie payment of banks issuing 10-50 notes for each coin they have, and this figment of gold standard which demands only the interest and the repayment of the loan in gold alone, never the lending of it.
between 1865 and 1873 the United States borrowed from London banks 2,700 million gold bonds, while shipping at least half of the yearly american gold production to London !!!?!?
]

The Currency -- Specie Payments.

The Vice President.  If there be no further morning business the Senate resumes the consideration of the Calendar under the Anthony rule;  but the Senator from Ohio [Mr. Sherman] had unanimous consent at one o'clock to day to present a report of the Committee on Finance on the subject of a bill in regard to specie payments, and to address the Senate thereon.  The Calendar, therefore, will be informally, passed over.

Mr. Sherman.  The Committee on Finance, to whom was referred the bill (S. No. 1313) supplemental to "an act to provide a national currency secured by a pledge of the United States bonds, and to provide for the circulation and redemption thereof," approved June 3, 1864, and to secure an elastic currency, to appreciate national obligations, and to reach specie payments without commercial embarrassments, have agreed, I may say unanimously, on a substitute which they offer as an amendment to the bill introduced by the Senator from Connecticut, [Mr. Buckingham;  tomorrow will vote with Sherman on the coinage bill.]  The substitute of the committee proposes free banking after the 1st of July next and specie payments or qualified specie payments after the 1st of January next, and is the result of the most careful consideration given to this whole class of subjects, embracing all the topics connected with our currency and the resumption of specie payments.  In order that the general views of the committee, so far as they can be given by one member, may go out with this proposition, I have condensed, as far as I could, in the fewest words the general reasons which control the action of the committee.

The restoration of our currency to a specie standard is an object of primary importance.  The present condition of our currency governs and controls all other questions of political economy, and until we make it conform to and be the equivalent of money --of gold coin, the recognized standard of money among all civilized nations-- we cannot rest upon a solid basis for any kind of business or for public or private credit.  Every man now buys or sells upon a fluctuating standard of measurement.  Every man who borrows feels that he may be compelled to pay in a different money than he receives.  Every producer feels that to the uncertainty of supply and demand he must also speculate upon the uncertainty of the kind and value of money with which he is to be paid.  The merchant must not only guard against dangers by fire and water, but against "corners" or artificial stringency of money.  The people at large, while boasting of their restored credit, of vast payments on their public debt, yet must feel that the public debt, held by them in the form of United States notes, is less valuable than gold, which it promises to pay;  it is less valuable than any other form of public debt, and forces by its own depreciation the depreciation of the notes of banks able to pay specie.  It is a currency rigid, inflexible in amount, and therefore of variable value --to-day worth four per cent. a year and to-morrow worth two per cent. a month.

It is the basis for a banking circulation that is practically irredeemable because the United States notes are themselves irredeemable.

Now it is the government's fault and the fault of the greenbacks that bank notes are irredeemable (false) promises.  It was the exact same John Sherman who ten years ago was instrumental in passing the greenback bill and the national currency bank bill.

In 1861 one of the aims of Rothschilds was to neutralize State banks and eliminate their notes.  The greenbacks were a means to that end, so in February 1862 John Sherman vigorously advocated for the issue of legal-tender U.S. notes.  Then, on July 2nd, 1862, the same Sherman spoke against the notes of the old state banks:  they were bad and an inflationary danger, and good greenbacks should take their place:---

"I believe the time has arrived when it is an imperative necessity for the Government of the United States to gradually drive out of circulation the local bank paper.

"We have then but one kind of paper money --that issued directly by the United States, and based upon the public credit.  It would be of uniform value throughout the United States.  Exchanges between different parts would never exceed the cost of transferring the paper;  a cost very trifling with our excellent system of transportation by express companies.  The amount might be limited by the national Legislature so as to prevent the danger of expansion and contraction.  Such a currency would then be invaluable as a medium in war of borrowing money on the bonds of the United States, and in time of peace of paying the public debts.  All loss from counterfeiting could be carefully guarded against;  broken and depreciated bank paper, defaced and worthless rags, would no longer inflict a severe loss upon those who are compelled by the usages of trade to take it or get nothing.  A national currency based upon all the property of the United States would give security and uniformity to the circulating medium of the country.

"But if, on the other hand, you continue to issue United States demand notes, without taking measures to retire the bank paper in circulation, you will find that the banks, no longer restrained by the necessity of paying gold and silver, will make your issues the basis of the issue of at least as much more bank paper.  The rivalry for two systems not connected with each other will produce inflation and derangement in all the business relations of the country.  A system of finance like this must in the end produce disaster and ruin."

After the State banks were dealt with, Sherman, on February 10, 1863, used his lawyerly vindication for the real course of policy: a new banking system, a nation-wide network of currency-issuing banks that should be joined at the hip to the Federal government and the credit of the United States, and the notes of these banks we should have as national currency:---

"The practical difficulty is, how to check inflation by banks.

"There is but one other mode proposed to check this increase, but I would not assent to it because it is too harsh.  Under the provisions of our laws, United States notes are made a legal tender in the payment of debts.  We might, if we chose, except banks from the operation of that provision;  but I believe that would be harsh and unjust, because, as we require them to receive these notes in payment of debts due to them, it would be very unjust for us to require them to pay out anything else but United States notes for their own notes, so that the issue of United States notes by the Government and making them a legal tender, both of which measures were clearly necessary, have been the encouragement and basis of an inflated bank circulation in the country, and there is no way to check this except by uniting the interest of the Government and the banks and the people together by one uniform, common system."

and now, ten years later, the greenbacks are bad and we should get rid of them, and we should bondage ourselves to Rothschild's gold standard and gold bonds and gold payment

And yet, with all these defects, the currency of the United States is so much better, safer, and more satisfactory than any we have had before that our constituents dread when we deal with acknowledged defects lest in curing these defects we deprive them of a currency under which they have made greater progress than ever before in our national history.  It is the fear that in some way we may impair the vast benefits we have gained from our national currency that so many oppose raising it to a specie standard.  While they acknowledge that paper money that is irredeemable, that on its face falsely promises what it does not perform, that is subject to artificial speculative fluctuations in value, that lacks flexibility in amount to meet the changing wants of commerce, yet they fear that to correct these evils by making it equivalent to gold coin will produce other evils of greater injury to trade, and especially burdensome to the debtor class.  It is feared that specie payments will produce a contraction of the currency and those kindred panics which in our past history caused widespread ruin and disaster.  It is for Congress to determine whether it is possible while maintaining our present system of national currency to bring it by wise legislation to the standard of gold without producing the evil results anticipated from a resumption of specie payments.

No one in dealing with such a question on which there is so great a diversity of opinion, and so varied an interest, should speak with assured confidence.  The only safe way is to proceed slowly and take no step that will not tend in the right direction, and to reject all measures the practical results of which cannot be clearly marked by experience.

I propose first to show that we are bound by every obligation of law, of promise, of judicial authority and of public policy to make the United States notes equivalent in value to gold coin.

United States notes were issued under the authority of the acts of Congress passed February 25, 1862, July 11, 1862, and March 3, 1863.  Other acts somewhat modified their conditions, but these were the governing acts.  They were issued during a time of war, when all the existing banks had suspended and when coin was inadequate to meet the enormous wants of the Government.  They were made lawful money and a legal tender in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt.  During the entire war they were practically receivable at par in payment for all bonds offered by the United States, and for a part of the time they were in terms convertible into bonds at the pleasure of the holder.  They are made the basis of the entire system of national banks, whose notes are payable in United States notes.  The amount is carefully limited, the highest limit being 450 millions by the act of March 3, 1863, somewhat restricted by the act of June 30, 1864, which declared that the total amount of United States notes issued or to be issued should never exceed 400 million dollars and such further sum not exceeding 50 millions when temporarily required for the redemption of temporary loans.  They were still further restricted by virtue of the act of April 12, 1866, under which all the temporary loan was funded into bonds, and 44 millions of the notes were retired and canceled.  By the act of February, 1868, the amount of United States notes was fixed at 356 millions, that being the sum then outstanding, and there is now no authority in law for their increase, or reduction.

Under the law as it now stands we have three hundred and fifty-six millions of "lawful money" which measures all values except of imported goods.  It measures the value of all other currency except coin, and including bank notes and fractional notes.  It is payable in coin, but the time of payment is not fixed.  It is inflexible in amount and irredeemable except as Congress may provide for its future redemption.

Aside from its value to pay internal taxes and as a legal tender for debts it has the promise of the United States to pay it in coin.

By the first act of General Grant's administration, to wit, the act of March 18, 1869, it is enacted:

"And the United States also solemnly pledges its faith to make provision at the earliest practicable period for the redemption of the United States notes in coin."

This act, entitled "An act to strengthen the public credit," gave the first specific pledge to redeem their notes in coin.  But the several acts under which the notes were issued authorized the promise of the United States to pay so many dollars, and the law in force declared that a dollar should consist of twenty-five and eight tenths grains of standard gold nine tenths fine.  The notes on their face contain the promise of the United States to pay so many dollars to the bearer payable at the Treasury of the United States in New York.  The Supreme Court of the United States have, in two cases, held that these notes are valid obligations of the United States to pay in coin.  In the case of the Bank of New York vs. Supervisors, (7 Wallace Rep., p. 30,) the Chief Justice says of the United States notes:

"Every one of them expresses upon its face an engagement of the nation to pay to the bearer a certain sum.  The dollar note is an engagement to pay a dollar, and the dollar intended is the coin dollar of the United States, a certain quantity in weight and fineness of gold or silver authenticated as such by the stamps of the Government.  No other dollars had before been recognized by the Legislature of the national Government as lawful money."

Every United States note is, then, a promise to pay gold.  No time is fixed for the payment, and no provision is made.  A promise to pay with no time fixed is a promise to pay on demand.  Such an obligation would be enforced against any citizen by any court in the United States of competent jurisdiction.  Every United States note, then, is a dishonored obligation, a promise to pay, but with no payment or provision for payment.  It is also a depreciated promise;  it is a promise to pay gold, and yet no one will pay gold for it;  and it is daily sold at a discount of ten to fifteen per cent.  Tested by the rules of law between individuals it would be enforced by sale on execution and by process of compulsory bankruptcy.  Yet it is the promise of the United States.  Surely the dishonor of this broken promise can have no longer an excuse in the necessity of war.  That has passed away.  Nor in want of ability, for a single year's surplus revenue would restore these notes to par in coin.  It is now four years since we solemnly pledged the national faith to redeem them in coin at the earliest practicable period.  Can any man say that this has not been practicable at any time within four years ?

Not only do the act of Congress and the Supreme Court define our obligation, but the organized action, of both the great parties have promised specie payments.  The Republican party in national convention expressed the hope and promise of perfecting our currency by a speedy resumption of specie payments, and the Democratic party indorsed and approved the promise of the Cincinnati convention of a speedy resumption of specie payments.

While no doubt some of our constituents shrink from the apparent fall of prices that will probably flow from resumption, yet, it is manifest that we cannot longer postpone a fulfillment of all the promises that have been made.  To delay longer is to tamper with the public honor and familiarize our people with an open, palpable, long-continued breach of the public faith.  We have now for near eight years since the close of the war approached resumption in gradual stages by the growth of our industry, the improvement of our credit, and new demands for our currency.  We have placed our debt where it will melt away by the silent operation of a sinking fund;  we have largely reduced its volume;  we have repealed more than one half the taxes levied by the United States;  we have adjusted those that remain so that they fall as lightly as possible upon the people, and are now in a position of such strength and credit that we can, if we will, redeem the only broken promise of the United States by a resumption of specie payments.

I have presented the argument of public faith in the foreground, for it is the first to be considered;  but specie payment is not only required by public faith, but it is now demanded by public policy;  or, to use a narrower phrase, it is wise political economy.

Experience has established that every nation using a depreciated currency loses in exchanges with a nation having a better currency.  If we buy abroad specie is the standard of value, and the cost of the article, too, is at once increased by an addition of the depreciation of our money and a percentage for exchange and risk.  What we sell abroad is also measured by the specie standard, and the loss by exchange, whether we buy or sell, is paid by us.  This loss is more severe when applied to contracts to be paid in the future, and especially to railroad and other bonds payable after a period of years.  These bonds must be paid in gold, whether the gold is stipulated for or not, and yet the price paid for them is usually in currency.  We pay in gold and receive in currency, and thus at the outset submit to a loss of the entire depreciation of our currency.  The interest paid on this discount of our bonds would in many cases if applied as a sinking fund pay off the whole of the principal before it accrues.

That a depreciation of the currency always injuriously affects a community in which it exists was shown by the experience of the Colonies before the war of independence.  In each of them some form of depreciated money was used.  The value of the pound and shilling in current use was only from one half to par of the value of the standard coin of Great Britain;  and this depreciation often measured the poverty or necessity of the Colony using it.  With the currency in common use before the late war, and which depended entirely upon the law of the State authorizing it, the notes of the western States were as a rule depreciated and those States suffered the loss, while in the eastern States, in which a better banking system prevailed, the notes were maintained at the specie standard, and great profits and accumulations were made by their practical monopoly of the banking business.  The great body of our people do not pause to consider their loss by the use of depreciated money.  It is lawful money, it buys all the necessaries of life, it pays debts, it is convenient to carry, and is of uniform value throughout the United States and is amply secured.  Their advantages are obvious and satisfactory, but all of them can be better secured with a currency that will purchase as much food or clothing as the same sum in gold coin;  that will measure the products of all other nations as well as our own, and is not subject to the fluctuations and speculative changes of our present currency.

Again, it is impossible to give to a depreciated currency the quality of "flexibility."  A suspension of specie payments necessarily suspends all redemptions of paper money.  The United States notes being irredeemable, the national bank notes are irredeemable.  All of them being now paid out, there is no object to return them, and thus not only the United States gets the benefits of a forced loan from the people without interest and without the burden of redemption, but the banks also get the benefit of a forced loan from the people without interest and without the burden of redemption.

It is true that the banks are required to maintain a certain reserve of United States notes to secure a redemption of their notes, but practically we know that no notes are presented for redemption.  It is on this ground they apply to us to relieve them from the burden of maintaining a reserve.

We are told that we require them to keep idle in their vaults currency sorely needed by the business community merely to secure the redemption of notes that are never presented for redemption.  It is true that a bank reserve is unnecessary and indefeasible unless for the redemption of their notes.  If the idea of redemption is abandoned or indefinitely postponed, then all reserves should be dispensed with.  If the only object is to make currency abundant without regard to its value compared with coin, then any reserve is a folly.  Indeed, the whole national banking system would be indefensible.  If our currency is to be permanently irredeemable it is impossible to state a reason why the whole of it should not be issued by the United States, or why any of it should be issued by a bank.  The only benefit the public derive from a bank of issue as distinguished from the private interest of its stockholders is that the bank note is the convenient representative of coin;  that its capital resources and reserve furnish a security for the redemption of its notes in coin, and that it is a convenient agency to distribute its notes by loans to those engaged in producing and transporting property.

Any policy that abandons the redemption of bank notes in coin will inevitably lead to the abandonment of banks of issue, for the public will not long allow the banks to derive a profit from issuing notes unless they assume the burdens of redeeming them.  This is understood by the national banks.  They do not shrink from the duty of redeeming their notes, but say that while the notes of the United States are lawful money and a legal tender, and are both depreciated and irredeemable, the banks cannot redeem except with United States notes.  It is the United States notes that stand in the way of specie payments.  If in any way they were maintained at par with coin the obligations of the banks to maintain their notes in coin would be easily enforced.  Then the superior excellence of the national banking system would be demonstrated.  It would no longer be a monopoly, but under the law as it now stands would be free to all who chose to engage in the business.  The plethora of money at one time and its stringency at another would be regulated by the redemption of notes when abundant and their increased issue when required by new demands.  Any attempt to make a "corner" by locking up currency in one bank would be met by its issue by another.  The corresponding privileges and burdens of a bank of issue would relieve them from prejudice.  The maintenance of these notes at par with gold, together with their absolute security, as now, would be recognized as an equivalent for the privileges they enjoy.

Again, all the existing laws authorizing United States notes and bank notes are based upon the theory of specie payments.  The notes were only issued, however, during war, under a suspension of specie payments;  there was no medium of payment except the public credit.  We could not utilize the public credit in borrowing money until we had provided a medium of payment.  For that purpose we coined the public credit into a limited amount of lawful money;  but promised to pay this money in coin.  When the lawful money was issued we did not anticipate the extent of its depreciation, and constantly kept in view its speedy redemption.  Ordinarily the functions of a Government in furnishing money is limited to stamping upon gold and silver of certain weight and fineness its intrinsic value.  Here its duty ends.  But in war this process of coining did not meet the public necessities, and the United States coined its credit into money, and this process has been upheld by all Departments of the Government.  Still, this money is but another form of public debt, a promise to pay specific quantities of gold and silver.  In the national banking act Congress assumed that the United States would maintain its paper money at par with coin as soon as its necessities would allow.  It provided for an auxiliary currency also to be at par in gold and to be issued by banks.  Every provision of that act contemplates that both United States notes and bank bills should be equal to gold and to each other.  This is the reason for the provisions for redemption, for centers of redemption, and for a large reserve.

The banking act also anticipated that the United States might withdraw its notes, and then that bank notes were directly to be redeemed with coin.  Still the bank act provided for the common existence of both kinds of notes, and experience shows that both may be maintained in circulation with profit to the United States.  While no provision is made for the redemption of United States notes, the provision for the redemption of bank notes is nullified.  Our whole system of currency becomes incongruous by our failure to provide for the redemption of United States notes.

If, then, public faith, public policy, and the spirit of our laws demand that our currency be restored to the specie standard, it would seem that the only remaining inquiry should be, what is the best way to resume ?  But here we meet the objections of many business men, the most active and enterprising of our people, who tell us that specie payments with them adds largely to the burden of their debts;  that upon the basis of existing law and the condition of inflation always produced by depreciated money they have made contracts, contracted debts payable in currency, and that now to add to the value of that currency is to embarrass, cripple, or ruin them.  Some tell us they are prepared to meet the gradual approach to specie payments caused by the increased business and credit of the country, while others tell us that the country needs more currency;  that its growth in population, expansion in business and new enterprises, render an increase of currency indispensable.  The effect of any measure upon the interests of active business men should be carefully studied, but individual hardship is not sufficient reason for a violation of public faith, or a disregard of the general interests or policy of the whole country.  All our citizens have had full notice of the policy of the Government.  The acts of Congress already cited, the decisions of the Supreme Court, and the promises of opposing parties are well known to all intelligent men.

And the effect of specie payments is greatly exaggerated as to the persons it will injure.  Our business men are not only debtors but they are creditors.  If they are injured by adding to the burden of their debts, they are benefited by the increased value of their credits.  No one engaged in production merely, whether as a farmer, a manufacturer, a mechanic, or a laborer, is injured;  for if the nominal value of his production is diminished, the cost of living and all that enters into the cost of production is diminished in the same degree.  Experience has shown that depreciated money is most injurious to laboring men, because it produces a false standard of value, the effect of which is not noted by a laboring man as by a trader or merchant.  Even upon current debts and credits the effect of a specie standard will scarcely be appreciable, for the nominal loss will be discounted in advance or be divided during the gradual appreciation of paper money.  The greater burden will fall upon debts running a long period of time, as upon corporation bonds and mortgages.  As to those in existence before the legal-tender act took effect, it is but right that they be paid in specie, while those contracted since have been issued in expectancy of specie payments before this time.  Still, while the effect of a specie standard upon debtors is greatly exaggerated, it cannot be denied that if it is followed by a contraction of the currency it will create distress and embarrassment to very many who have contracted debts on a currency basis.  But this argument of hardship will apply forever.  If we are controlled by it we can never pay our promises.  The lapse of time will not make it easier.  Our financial condition is now as strong that we can afford to do right, and yet in such a way as to injure in the least possible degree those who contracted debts on a currency basis.

Again, the effect of a specie standard in producing a contraction of the currency is greatly exaggerated.  A contraction of the currency is not necessarily a result of specie payments.  Undoubtedly a contraction of the currency would produce specie payments.  It is the most direct road to specie payments, and if the paper money in circulation is in excess of the wants of the community it is the only road.  We in 1866 and 1867 greatly contracted the currency by funding over three hundred million dollars of compound interest and other notes, most of which were a part of the currency.  If in 1868 we had, as we proposed in the Senate, authorized United States notes to be received for five per cent. bonds at par, we would have long since been at specie payments.  The notes when received could have been paid out again for the payment of current expenses and the purchase of bonds, precisely as now when gold is sold for notes and notes applied to the purchase of bonds.  In this way we would have reached a specie standard the moment our five per cent. bonds were worth par in gold.  The advancing credit of the nation would have lifted our currency to par in gold precisely as it lifted all forms of bonds to par or above par in gold.  And now when our credit is greatly improved by the rapid payment of the debt, as evidenced by the advanced value of our notes in gold, we can raise their value to the specie standard much more readily than four years ago.

One fallacy lies at the foundation of the common objection to a specie standard, that it necessarily compels a withdrawal of paper currency.  This depends entirely upon the amount necessary to conduct the business of the country and the degree of public confidence in its redemption.  Mr. Knox, Comptroller of the Currency, in his last annual report shows that in January, 1862, when specie payments were suspended, the aggregate circulation of coin and paper was $448,671,218, or a ratio of 2.71% of the wealth of the United States, and that the circulation in the United States in 1870, including United States notes, bank notes, fractional currency, and specie, was $790,000,000, or 2.62% on our wealth.  The circulation in the United States per capita is now less than in France and greater than in Great Britain, but greater than in either in proportion to wealth.  When we consider the vast extent of our country, its rapid growth, the value of our productions, and the general use of paper money, is it not reasonable to suppose that all of it now outstanding can be maintained in circulation on a specie standard ?

It must be remembered that the total amount of United States notes is now $356,000,000;  that very large sums must be retained by the banks as their reserve;  that large gold reserves are now held in the Treasury;  that the notes are widely circulated, have the confidence of the people, and can be supported by the public credit.  Under these circumstances it is scarcely probable that any considerable sum will be presented for redemption.  If presented they can again be paid out in the course of the public disbursements.  Specie payments can thus be resumed without a contraction of the currency and with only the change of nominal values for the real standard of value the world over.

The chief requisite is that the public have assured confidence in our ability to maintain resumption.  This is indispensible, and when it exists actual redemption by payment of coin is comparatively rare.  This confidence or credit can be given by either of three expedients:

1. The maintenance in the Treasury of a large reserve in coin.

2. The authority in the Secretary of the Treasury to sell bonds for coin to maintain redemption.

3. To authorize an alternative redemption, either in coin or bonds.

The first is subject to the objection that it keeps idle a vast sum only needed in case of a panic, when it will be insufficient.  The second is subject to a greater objection, that as the power could only be used in a stringent money market, it would lead to great sacrifices of public securities and add fuel to the existing panic.  The third mode requires no reserve;  it could operate only while, from panic or unforeseen causes, our bonds are below par in coin, and as a temporary suspension of specie payments, alike beneficial to the United States and to the business community.  This plan implies that the United States will make its provisional redemption in a bond so intrinsically valuable that it will be generally at par in gold.

I do not overlook the fact that resumption by the United States will test the strength of the national banks and prove whether or not they are entitled to public confidence.  But their present condition, with an aggregate surplus fund far beyond the difference between currency and coin, justifies the conviction that they will meet the public expectations.  With specie redemption the system becomes free.  The fluctuations of their currency will be but the healthy ebb and flow of commerce.  Redemption will then become a fact, and will check the tendency of the country banks to employ their currency in Wall street speculations.  As they may redeem in coin or United States notes, they will have the benefit of the alternative redemption provided as to United States notes, so that the sacrifice of these securities that generally follows specie payments during a panic can go no further than the payment of their bonds for their notes, par for par.

Again, a specie standard will also bring gold and silver coin into actual use.  The amount now hoarded has been variously estimated, and, with that deposited in the Treasury and in circulation in California, cannot be less than two hundred millions.  This will probably take the place of legal tenders as bank reserves, and thus add to the present volume of currency.  Even if specie payments should cause the retirement or funding of fifty millions of United States notes, their place will more than be filled by the coin let loose from its present banishment.  I therefore conclude that fears of evil results from a specie standard are greatly exaggerated;  that there will be no contraction of the currency, no disturbance of real values, no suspension of business, but that our present United States and bank notes will pass as usual in the ordinary exchanges of life, measuring the value of all property, whether produced here or abroad, equal to the real money of the world, and with no taint of dishonor or depreciation about it.

There is one incident to a specie standard that must not be overlooked.  It is the widespread injury produced by a sudden panic, when confidence ---[because banking is a confidence game] is temporarily dethroned and all demand specie at once.  With the paper currency in use in the United States before the war such a panic was ruin and bankruptcy.  In such a time the right to demand specie created evils and disasters which with irredeemable and depreciated paper money would only cause a further depreciation until general causes restored confidence.  It is commonly said that with specie payments we had the panics of 1837, 1847, and 1857, while with irredeemable greenbacks we have met a war, the fire at Chicago, and other calamities without a panic:  ergo, a specie standard is a fallacy.  To express it as the English did when specie payments were suspended, guineas are a useless incumbrance.

This reasoning only proves that when by war or panic specie payments are suspended a nation may, by the use of paper money alone, develop its resources and attain high financial prosperity.  But it is also true that history furnishes but two examples of such success, and in both cases specie payments were constantly promised and kept in view, while the public credit was maintained by collecting its revenue and paying its debt in coin.  In Great Britain during her wars with Napoleon the Bank of England notes were a depreciated, irredeemable paper currency, but they were never made a legal tender and their credit was supported not only by promises of but by attempts at resumption.  In the United States the secret of our success with paper money was the careful limitation of its amount, the payment of our interest in coin, the collection of our customs duties in coin, and the promise of the United States to redeem all its notes in coin with the confidence of our people that this would be done.

Not only the United States, but other nations who conducted war with paper money alone, without an expectation of coin redemption, met with disastrous financial ruin.  Such was the experience of France with her assignats and mandats, of the American Colonies with continental money, and of the southern confederacy with their confederate notes.  Most of the modern nations of Europe have attempted, at some period of their history to bridge over their difficulties with Government paper money, and with disastrous results.  Great corporations with the power of the Government behind them have furnished man with examples of the folly of sustaining paper money except by specie redemption.  The South Sea scheme in England, the Mississippi Company of George Law in France, the Bank of the United States, and the "pet banks" are striking examples.

If any one fact is proven by the experience of mankind it is that gold and silver are the best possible standards of value.  They have been so recognized by every nation from the earliest period of recorded time.  However much nations might differ in religion, habits, production or climate, they have not differed in this primary axiom of exchange or barter.  Experiments have been tried with other standards from the iron of Lycurgus to the finest bank-note engraving of modern times, but all have resulted in the conviction that gold and silver is the only true standard.  Paper money supported by the credit of a Government is a convenient substitute greatly facilitating exchanges by the ease and safety of handling and transmitting it, but it is not real money;  it is only a promise to pay money, and the only test of its character as false or true money is its capacity to be converted into gold or silver of prescribed weight and fineness.

The effort to continue the use of gold as the standard and paper money as the representative of gold has been for two hundred years the most difficult problem of political economy.  Our own system, though the outgrowth of the war, is believed to combine some advantages superior to any now in use in the world.  It rests upon the credit of the Government.  The Government promises to pay not only United States notes but the bank notes, and holds security for the payment of the latter.  It combines the interests of the Government with the interests of private persons, the owners of the banks.  It is as well distributed as the nature of the case will allow.  The United States prints the bills of uniform style and guards them against counterfeiting.  Worn or mutilated notes are at once replaced.  The notes must be of uniform value throughout the United States.  All that is needed to complete the system is general specie redemption, but with provision for temporarily suspending specie payments in case of extreme necessity.

It was the want of some power legally to suspend specie payments that led to the evil results of the panics of 1837, 1847, and 1867, and probably might have led to temporary suspension on "black Friday" or after the Chicago fire.
---[No, it was the irredeemable notes, the false promises, and the credit bubble of private banks that caused those money panics;  Treasury notes of the previous 80 years never caused a money panic, in fact treasury notes came to the rescue when banks declared bankruptcy and refused to pay what they promised.]

In such cases a temporary suspension or some substitute for specie payments is indispensably necessary unless paper currency is so restricted and limited in amount as to be insufficient for the ordinary exchanges of the country.  All paper money must rest to some extent upon confidence.
---[and which paper rests on more confidence, banknote or treasury note ?

When a panic arises by some unforeseen event which destroys confidence, the instinct of every holder of a bill or depositor in a bank is to convert his money into gold.  This feeling if widespread and long-continued will break any bank, however abundant its assets, and will necessarily lead to the enforcement of debts and general distress.  Our national banking system amply protects the note-holder, but it does not in a time of specie payments sufficiently protect a bank from an enforced sacrifice of its assets to maintain specie payments at a time when the public good as well as the existence of the bank demand a temporary suspension.  The same difficulty might arise on the part of the United States in maintaining specie payments on United States notes.  The reserve of gold in the Treasury might be exhausted by a sudden demand.  A war or panic might cause such a demand for coin that the United States might be unable to redeem in coin.  Such a contingency ought to be provided for in advance.
---[It is not the general population that runs to the Treasury to redeem government notes;  it is bankers, who would never redeem their own notes, who run to the Government and demand.]

The expedient adopted in England of allowing the Bank of England to raise the rate of interest on its loans, and thus drawing in its assets to meet anticipated dangers or demands, is not consistent with our public policy.  A discretionary power in private persons or public officers over so delicate a subject as the national currency ought to be avoided.  The national banks already possess, in the custody of the Government, the means to meet this difficulty.  The best substitute for specie payment, when from exceptional causes it cannot be maintained, is the public credit.  If the United States cannot pay its note in coin, or any national bank cannot pay its note in coin or in United States notes, then a payment in a bond of the United States, bearing interest at such rate and upon such terms as ordinarily to be above par in gold, would provide for an alternative redemption.  It would satisfy the public creditor, and prevent even for a time any considerable depreciation of the notes.  In the meantime the notes are a legal tender among our citizens, will pay debts and fulfill contracts, and will, the moment that exceptional causes pass by, be at par in coin.  With authority in the Secretary of the Treasury to redeem United States notes either with coin or with the class of five per cent. bonds now offered for sale, and with like authority to redeem bank bills protested for non-payment in specie, with the bonds of the bank deposited with the Treasurer at par, we would have specie payments except when bonds of the character named are worth less than par in specie.

With the advancing credit of the United States we may safely affirm that such bonds will always be at par in gold, except at such times as it would be ruinous to maintain specie payments.  And with such provision for the redemption of United States and bank notes, no large reserve of gold, either in the Treasury or in the bank, will be required.  Such a provision would guard against the sacrifices which banks and people alike must suffer when compelled to redeem their notes or pay their debts in coin, made exceptionally scarce by panic or war.  It would reconcile many persons to a specie standard who dread that an artificial or temporary scarcity of specie may require them to fulfill their contracts with money impossible to be obtained.  Banks who now fear that under a panic their bonds and securities may be sacrificed for specie will feel that their securities deposited with the Treasurer will at least pay their bills.  It is in harmony with the banking system and all our early loan laws during the war, which provided for a voluntary conversion of notes into bonds.  I do not claim that this is the only expedient against a panic and for temporary suspension, but I do claim it will secure us against the widespread bankruptcy that in times past resulted from the compulsory suspension of specie payments in the United States.

Having thus shown the obligation and necessity of specie payments, and how the anticipated evils of resumption may be avoided, it remains to examine the means best adapted to bring it about.  Among the innumerable schemes proposed there are several that are practicable.

1. To authorize legal-tender notes to be receivable in payment for bonds of the United States.

2. To authorize them to be receivable in payment of duties.

3. To authorize them to be converted into demand notes bearing interest, or into compound interest notes.

4. A direct resumption of specie payments on a day in the future to be fixed by law.

5. A graduated scale of rates at which they will be redeemed in coin, advancing to par in coin at a prescribed day.

The examination of these plans would lead me more into detail than I propose to go at this time.  Each of them would immediately advance our notes toward a specie standard.  The second only is subject to the objection that it would violate the public faith, now pledged to maintain the customs revenue in coin as a special fund for the payment of interest on the public debt.  A careful consideration of the whole subject leads me to the conviction that the simplest and most expedient measure is to declare by law that on and after the 1st day of January next the United States will redeem its notes either with coin or, at the option of the Secretary of the Treasury, with its bonds of convenient denominations bearing five per cent. interest in coin.  This will be a recognition by the United States of its solemn pledge, made on March 18, 1868, that it will at the earliest practicable period redeem its notes in coin.  It will provide also for the possible but not probable contingency that more notes will be presented than can conveniently be paid in coin.  In that event the United States will redeem its notes in a character of bonds now worth par in gold in the money market of the world.  The objections that may be made and its effect upon the national banks have already been anticipated in what I have said.  It is founded upon the plain equity that if we cannot literally perform our promise by payment in coin, we will at least give to the public creditor who holds the notes of the nited States, a bond bearing a commercial value equal to gold.  If, then, these notes are in excess of the wants of the people for a currency, they will be presented for redemption, and ought to be redeemed, if not, their value will be appreciated to the gold standard, and this is specie payments.  The necessary modifications of the banking act can properly be postponed until a future time, when the practical effect of a specie standard upon United States notes will test the ability of the banks to maintain their notes at par with United States notes.  Whether they should be relieved from maintaining so large a reserve, whether there should be one center of redemption, these are the of practical legislation for the future.  The moment the notes are redeemable in coin the banking system ceases to be limited in number and distribution of banks, and will stand like all other business pursuits, open to all who will give the requisite security for their notes and will obey the general law.

In submitting these remarks at this time I feel like apologizing for passing by arguments worthy of consideration;  but my only purpose now was to present, with the substitute reported by the Committee of Finance, the leading reasons in favor of it.  My hope is, and it is a reasonable one, that neither Senators nor the public will confine their arguments to critical objections, but will suggest some plan better suited to the objects we have in view.  I, for one, while honestly supporting this plan, will readily adopt any better one that will make the now broken promise of the United States to pay one dollar equal to the best gold dollar of the mint.

Mr. President, I move that the amendments be printed, and that the bill take its place on the Calendar, and on some convenient day, when the Senate are ready to consider a question like this, I shall move to take up the bill.

The Vice President.  The bill and amendments will be printed, of course, under the rule.