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 government is in a position precisely similar. In its relation to capital, it is subject, like individuals, to all the laws that control it or 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

risen to a premium, payable in them, of 37 per cent. The 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....

"Thirdly. It is perhaps still more conclusive against the theory of great redundancy, that, on the 15th day of October, when the aggregate actual circulation, national and corporate, was about $360,000,000, the premium on gold was 37; whereas, on the 29th of November, when the circulation had increased by more than twenty millions, the premium on gold was 20 to 30 per cent." "1

An inflated currency, no matter by whom issued, is that which has no proper constituent in merchandise for its conversion. This covers the whole ground. Such was Mr. Chase's currency. Instead of there being, as he stated, no inflation, on or near the 1st of November, 1862, it is demonstrable that it was inflated to the extent of nearly $250,000,000. The liabilities of the Banks, their notes and deposits, increased from November, 1861, to November, 1862, from $480,114,487 to $632,363,444; the amount of increase being $152,248,957. The increase of government notes during the year equalled $194,964,000; the total increase of paper money being $347,212,957. The amount of coin in the country on the 1st of November, 1861, was estimated by Mr. Chase at $210,000,000. Of this sum, $102,146,215 were held by the Banks as reserves. The amount of coin held in reserve on November 1, 1862, equalled $101,227,369. Mr. Chase claimed that the whole amount of coin in the country on the 1st of November, 1861, had been demonetized previous to the 1st of November, 1862. But the coin held by the Banks in 1861 was no more in circulation at that time than that held by them in 1862. It was no more demonetized at one period than another. In every return which the Banks have made, from suspension of specie payments to the present time, all the specie held by them has been claimed, and allowed by the government, as a part of their reserves. Deducting the difference between Mr. Chase's estimate (which was merely conjectural) of the amount in circulation, and that held as reserves by the Banks, the amount demonetized during the year equalled $108,772,631; the increase of the currency, consequently, equalled $238,440,326. As it is demonstrable that it was inflated to that degree, it is useless to follow out Mr. Chase's explanation, when the cause can be referred to its proper law, which he wholly ignored.

1 Report of the Secretary of the Treasury, for 1863.

MR. CHASE DECLARES THE NOTES UNCONSTITUTIONAL. 577

A suspension of Banks, when they have no relation to governments, is always a temporary expedient or measure. The strong resume as speedily as possible, for the purpose of selfprotection. The weak have at once to go into liquidation. In this way the ground is soon cleared. The strong Banks well know that the only way in which they can preserve themselves from loss is to compel the payment of their bills in coin or its equivalent. To do this, they must set the example. Banks can no more carry on their operations without paying their liabilities than can merchants. A merchant, temporarily embarrassed, may be allowed to remain in the management of his affairs, as the best means of securing the most favorable results. If, however, it be feared that he is neither capable nor upright, he has speedily to give place to his creditors. So with Banks. If it be assumed that they will speedily get out of their difficulties, they are allowed to do so, as the most competent for the management of their own affairs. There is nothing that a well-managed Bank dreads so much as prolonged suspension. This resorted to, it is compelled for the future to sail without compass or chart, in constant fear of making shipwreck. Upon suspension, its first thought is resumption. It never dreams that such a measure is to become permanent. The Bank of England, after its suspension in 1797, restored its affairs with such wonderful celerity as to be able to resume within three years; and would have resumed, could permission have been obtained from the government.

Mr. Chase claimed the issue of the government notes to be among the most brilliant and successful acts of his administration. He pointed with pride to the decision of the Supreme Court of the State of New York, the leading State of the Union, affirming its constitutionality. After leaving the department of the Treasury, he was made Chief Justice of the Supreme Court of the United States. He had not been long in his new place before the question of the constitutionality of the notes issued by him came before him for adjudication. He now believed that they were likely to become as unpopular as they had been popular; and he washed his hands of all connection with them, denying that he ever even suggested the expediency of their issue.

"It was," he said, "my fortune at the time that the United States legal-tender clause was inserted in the bill to authorize the issue of United States notes, and received the sanction of Congress, to be charged with the anxious and responsible duties of procuring funds for the prosecution of the war. In no report made by me to Congress was the expedient of making the notes of the United States a legal tender suggested." 1

There have been a plenty of corrupt and servile judges; but it is doubtful whether history affords another example of such absurd untruthfulness. Congress passed three bills authorizing the issue of plain legal-tender notes. Of these, Mr. Chase certainly drew one with his own hand. In the decision in the case referred to, he speaks of the legal-tender clause as a sort of accident, "inserted in the bill to authorize the issue of United States notes." There was no "insertion," for the reason that the sole object of all the bills was to create an irredeemable legal-tender currency; and Mr. Chase urged the passage of all, from their alleged necessity, with all the force of which he was capable. The facility with which, in this country, such men reach the most exalted and responsible stations, is little fitted to excite our national pride.

One advantage of a currency of depreciated bank-notes over the depreciated notes of a government is the uniformity in value of the former. The "books" of a Bank tell what its notes are worth, and at that price they remain. Those familiar with its affairs are always ready to take them at their value. All understand that a Bank whose notes are depreciated will either speedily resume or be wound up; and that in either case the holders of its notes will soon receive their value in coin. By what book is the value of the depreciated notes of a government to be ascertained, and who is to administer upon and wind up its affairs? In the month of September, 1864, the price of those of the United States fluctuated between 187 and 2541; a difference of 67 per cent in a few days, due almost wholly to the varying fortunes of the war. A great disaster would send up the price of gold all the way from 10 to 20 per cent. A great victory would reduce its price in equal ratio. The crowning attribute of a competent currency is that its value is wholly independent of

1 Knox v. Lee, 12 Wallace's Reports.