terest and certain to be paid, for the debts of a multitude of corporations, bearing no interest, and certain, in part, never to be paid."

As Mr. Chase assumed that he could borrow neither coin nor bank-notes, and as he could not, without full provision for their payment, make plain notes circulate as money, he bent all his energies, as the only alternative, to secure an issue of legal-tender notes. In a letter addressed, under date of Jan. 29, 1862, to Mr. Stevens, Chairman of the Committee of Ways and Means of the House, he said:

"The provision making United States notes a legal tender has doubtless been well considered by the Committee, and their conclusion needs no support from any observations of mine. I think it my duty, however, to say that, in respect to this provision, my reflections have conducted me to the same conclusions they have reached." 2

On the 7th of June, 1862, Mr. Chase addressed a communication to the Committee of Ways and Means (accompanied by a bill of his own drafting providing therefor), asking for a further issue of $150,000,000 of legal-tender notes. communication he said:

"He proposed that authority be given to the Secretary of the Treasury to issue $150,000,000 in United States notes, in addition to the issue already authorized, and that these be a made legal tender for debts." s

In reference to the issue of notes after it was made, he said:

"No other mode of providing, with any tolerable degree of promptitude, for the wants of the army and the necessities of other branches of the public service, seemed likely to effect the object with so little public inconvenience and so considerable public advantage as the issue of United States notes, adapted to circulation as money, and available therefor immediately in government payments.... The choice was now to be made between a currency furnished by numerous and unconnected Banks, in various States, and a currency furnished by the government, which the government could and would, except in a very improbable, not to say impossible, contingency, amply provide for and protect. With these alternatives before him, the Secretary had already declared his unhesitating preference for a circulation authorized and issued by national authority.

"The recommendations now submitted, of a limited" (further)

1 Report of the Sectretary of the Treasury, for 1862, pp. 7, 8.

2 Spaulding's Financial History of the War of the Rebellion, p. 45.

3 Ibid. p. 155.

Report of the Secretary of the Treasury, for 1862, pp. 8, 9.

"issue of United States notes, as a wise expedient for the present time, and as an occasional expedient in future times, ... are prompted by no favor to excessive issues of any description of credit money."

"In former reports, the Secretary has stated his convictions, and the grounds of them, respecting the necessity and the utility of putting a large part of the debt in the form of United States notes, without interest, and adapted to circulation as money. These convictions remain unchanged, and seem now to be shared by the people. For the first time in our history has a real approach to a uniform currency been made; and the benefits of it, though still far from the best attainable condition, are felt by all. The circulation has been distributed throughout the country, and is everywhere acceptable. It is a gratification to know that a tribunal so distinguished by the learning and virtues of its members as the Supreme Court of New York has given the sanction of its judgment to the constitutional validity of the law." 2

Upon the suspension of the Banks due solely to his folly and obstinacy, and that of the government, which necessarily followed in their train, Mr. Chase could see but one course open for him. The government suspended upon its demand notes, equalling in amount only $33,460,000; although these were equally receivable with coin in payment of the rev enues. What folly could have been greater than to allow government to break for such a paltry sum? As the notes were receivable, and were constantly being paid into the Treasury, in the collection of the revenues, a few millions of dollars would have been sufficient to have maintained them at par,-to have taken in such as were not returned through the revenues. What was the result, at least in Mr. Chase's estimation? That its suspension had so far destroyed the credit of the government that he could not hope to borrow from the public, coin which the Banks had paid him in exchange for its securities at par, on any better terms than 100 of the former to 80 of the latter; and at this rate, for only $60,000,000, to be supplied in sixty days. For the second $60,000,000, to be supplied within four months, he would have to give $90,000,000 in bonds; and for the third, $120,000,000. Certainly, money was not to be borrowed on such terms as these! He forced the government to suspend, and then proclaimed to the world that no one would trust it. In turning in the direction of the

1 Report of the Secretary of the Treasury, for 1862, p. 21.
2 Report of the Secretary of the Treasury, for 1863, p. 15.

Banks, the prospect was equally discouraging. The circulation of those of the Northern States had fallen from $150,000,000, at the beginning of the year, to $130,000,000 near its close; and this, he said, was so distributed in the channels of commerce, that it could not be reached on any better terms than coin, if an attempt were made. If it were made, the notes would be supplied in such abundance as to very speedily become worthless; so that the process of borrowing would be simply an exchange of the debts of the nation, bearing interest and certain to be paid, for debts of a multitude of corporations, bearing no interest, and certain, in part, never to be paid. Mr. Chase held Banks to be a sort of "confidence" concerns, and their managers a set of shysters, always seeking to impose their worthless issues upon every feeble and derelict subject with whom they came in contact. It is to be remembered, that he dealt only with those of New York, Boston, and Philadelphia: it was not necessary, nor was it proposed, that he should deal with any others. The former had rela

tions with all the other Banks in the United States, and could avail themselves of all the aid these could furnish. Had he been told that they dealt in solid capital, supplying to every borrower the full amount of his loan, either in coin or its equivalent, he would have been as incredulous as if he had been told that money grew on trees.

The statement was omitted in its proper place, that, immediately upon the passage of the first legal-tender Act, this paving the way, Congress, upon the application of Mr. Chase, passed a bill making the notes issued under that of July, 1861, and the amended Act of February 12, 1862, legal tender in the discharge of all contracts; the professed object being to raise their value by enlarging the sphere of their use. They were previously at a considerable discount, as they would only pay debts due to the government. The Banks in the leading cities would not receive them as money. Their value was raised by their being made receivable in the payment of debts to individuals as well as to the government. They still remained at a discount from gold, for the reason that they could not, as legal tender, serve all the uses of gold. The whole question of value was one of uses. The law which regulated their value could have been comprehended by a child. Its simple statement, properly attended to, would have unlocked to Mr. Chase all the mysteries of money. That neither he nor

those who followed him should have made so simple a discovery, is another evidence of the complete mastery which the groundless dogmas laid down in the books have obtained over the public mind.

Mr. Chase would not attempt to borrow coin or bank-notes, from the excessive rate of interest he would be compelled to pay, by the low price of government bonds. But did an issue of his own notes enable him to come at that which he wished to purchase, at any more favorable rate? He had already asserted government to be unworthy of credit; that, should he attempt to borrow on its bonds, they would not bring fifty cents on the dollar. He now demonstrated his assertion by issuing a forced loan. Could he resort to such an extraordinary expedient without paying a higher rate of interest, or. what is the same thing, a higher rate for what he wished to purchase, than he would have been compelled to pay by borrowing in the ordinary mode? The legal-tender notes gave him no authority to seize what he wanted at his own price. He must still go into the market with a broken credit, and with expedients the last resort of imbecility and exhaustion. and sell them for what they would bring. What would be thought of a merchant who should resort to similar, or to any extraordinary expedients for the purpose of supporting his credit, and of supplying himself with means? Would not such action wholly destroy what little he had remaining? A gover ment is in a position precisely similar. In its relation to capital. it is subject, like individuals, to all the laws that control it ar its use. It has indeed, or is assumed to have, a power not possessed by individuals, that of giving to its promises, payable at its pleasure and perhaps never to be paid, a competency to discharge debts at the value of coin. No sooner, therefore, does it issue its notes, than it finds plenty of parties eager to accept them, and supply it with whatever it wants, provided they can use such promises as a means of paying their own debts at the value of coin. From the first, however, the holders of merchandise have the government in their power, as it must always yield to them in the matter of price. But as soon as contracts in existence at the time of the issue of government notes, are discharged, these will speedily fall in price to their estimated value. This was not long in happening to the United States notes. By the 15th of October, 1862, when the second batch began to get into circulation, gold had

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DECLINE IN VALUE OF THE GOVERNMENT NOTES.

575

The

risen to a premium, payable in them, of 37 per cent. public ascribed this advance to an inflation of the currency. Mr. Chase denied the assertion. The currency was not inflated. To use his own language,

"It is true that gold commands a premium in notes; in other words, that to purchase a given amount of gold a greater amount in notes is required. But it is also true that, on the suspension of specie payments and the substitution for coin of United States notes, convertible into six per cent specie bonds as the legal standard of value, gold became an article of merchandise, subject to the ordinary fluctuations of supply and demand, and to the extraordinary fluctuations of mere speculation. The ignorant fears of foreign investers in national and State bonds and other American securities, and the timid alarms of numerous nervous individuals in our own country, prompted large sacrifices upon evidences of public and corporate indebtedness in our markets, and large purchases of coin for remittance abroad or hoarding at home. Taking advantage of these and other circumstances tending to an advance of gold, speculators employed all the arts of the market to stimulate that tendency and carry it to the highest point. This point was reached on the 15th day of October. Gold sold in the market at a premium of 37 per cent.

"That this remarkable rise is not due wholly, or even in greatest part, to the increase of the currency, is established beyond reasonable doubt by considerations now to be stated:

"First. The whole quantity of circulation did not, at the time, greatly if at all exceed the legitimate demands of payments. On the 1st day of November, 1861, the circulation of United States notes, including credits to disbursing officers and to the Treasurer of the United States, was $15,140,000. On the 1st day of November, 1862, it was, with like inclusions, $210,104,000. Of corporate notes, on the 1st of November, 1861, the circulation in the loyal States was, according to the best estimates, $130,000,000; on the 1st of November, 1862, it was $167,000,000. The coin in circulation, including the coin in Banks, was probably not less on the 1st of November, 1861, than $210,000,000. On the 1st of November, 1862, the coin had been practically demonetized and withdrawn from use as currency, or as a basis for currency, and is therefore not estimated. The aggregate circulation of the loyal States, therefore, was, at the first date, $355,140,000; and at the second, only $377,104,000.

Secondly. The whole, or nearly the whole, increase in the volume of the currency which has taken place was, it is believed, legitimately demanded by the changed condition of the country in the year between the two dates. The activity in business which, at the close of that year, had taken the place of the general stagnation which marked its beginning; and the military and naval preparations and movements which had vastly augmented the number and amounts of payments to be made in money, have, it is believed, legitimately demanded nearly or quite the whole of it. . . .