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Mr. Bisser. But I am speaking not of the freight alone but of the money that comes out of the pocket of the English manufacturer. I got these figures from the message of the President of the United States a few years ago; perhaps, he was not a good authority.

The CHAIRMAN. I do not think he was on that subject; but whatever the figures may be, unless the foreign carriers make money out of that transportation, of course they do it at cost or less than cost.

Mr. Busser. Well, they do not give it up, at any rate.

The CHAIRMAN. No; because they are in it and they propose to do it for a certain number of years, but it has been very unprofitable for some years.

Mr. BUSSEY. They started out to run those lines from Liverpool to New York with a subsidy of $900,000 a year to begin with, and they have gone on until they can do the business for nothing. I do not see why the same policy pursued by our own country, to a certain extent, should not enable us to establish commercial relations with a country with which we ought to have a large trade. If the English have continued in that business for 40 years, as they have done, it must pay.

England sells annually tó South America $125,000,000; France about $75,000,000 worth; while the United States sells those countries but $33,000,000.

The value of the trade of some of the countries named can be better appreciated when we take the figures for a series of years. In the last seven years we bought of China and Japan of their products

$195, 000,000 And sold them

65,000,000 Mexico

95, 000, 000 Sold Mexico...

30,000,000 Brazil and South America....

336,000,000 Sold Brazil and South America..

78,000,000 Cuba and Porto Rico ..

575,000,000 Sold Cuba and Porto Rico......

125,000,000 These figures show that from these countries alone in seven years we have purchased $1,201,000,000, and sold of our products only $298,000,000, showing a balance against us of $903,000,000. Their products are no more indispensable to us than our own to them, but as they can purchase manufactured goods in foreign countries, and have the facilities for securing them, and as we do not grant the necessary communication, they cannot buy of us.

This country has reached the position as a producer which European nations have attained after centuries of effort, and we shall not maintain the ground we have reached and continue to prosper without wise legislation. The measures which, in my opinion, are most important I have presented to-day,

When we consider the commerce of the world and realize the insignificance of our share of it, we are forced to the conclusion that our statesmen have neglected our interests. We should become the leading commercial nation of the world. We produce the breadstuffs and provisions to supply the nations of Europe, and we have the soil to meet the wants of the world.

Our cotton crop supplies the clothes to cover their nakedness, and its production will increase as the demand increases. The world is lighted and lubricated by Ameri can oils. Our mines have furnished more of the precious metals than all the rest of the world. Our inventive genius has given the world the greatest discoveries which have blessed mankind. In every essential we have demonstrated our superiority, while we have rested on our natural advantages. England has acted and is to-day enjoying a monopoly of the commerce of the world.

I am indebted for the statistics here quoted to the Bureau of Statistics of our gov: ernment, and to many able writers and journals whose efforts in behalf of an extended commerce the country should appreciate. I thank your comınittee for the opportunity afforded me to express these views.


Mr. Potter appeared before the committee on its invitation, and, iu reply to questions by the chairman, stated that he was a merchant, residing in Brookiyn, and doing business in New York.

The CHAIRMAN. Have you studied questions of finance and trade with some attention, Mr. Potter?

Mr. POTTER. Yes, sir; I have studied the scientific side of the question of finance for twenty years. That is the reason for my being here now. I read Professor Sumner's evidence the other day, in which he substantially gave up the case so far as regards relief from political economy, and I thought the cause of science had suffered reproach, and I felt indignant and determined to come here and tell you that political economy can offer relief, complete relief.

The CHAIRMAN. Then please be good enough to state what solace political economy does afford.

Mr. POTTER. I will. I did it ten years ago. I want to state first the causes of our troubles. The first cause is economic ignorance, ignorance of political economy and of its applications. Sin is the parent of all evil, and there can be no social evil without the antecedent violation of social law. Economic ignorance, aggravated by the prostitution of the legislative power to the rapacity of class interests, that is what has brought us where we are. That is a general statement. Specifically, there has been excessive consumption and diminished production of circulating, capital, with excessive conversion of circulating into fixed capital, which is the inevitable effect of a depreciated currency. These fatal consequences have been aggravated by unequal distribution, resulting partly from a depreciated currency and partly from the inequality of the assessment and the incidence of excessive taxation, and these effects have in turn been aggravated by the constantly increasing burden of taxation, as our international interest-bearing debts have increased, and as the prices of commodities and wages of labor have declined, thus requiring a greater quantity of each to produce a given amount of taxes in money. I reaffirm the declaration of the late Professor Cairnes (who was at the time of his death perhaps the leading mind that economic science could boast in England): “Economic ignorance when it has conceived brings forth socialism, and socialism breeds despotism, and despotism, when it is finished, issues in war, misery, and ruin.” Now I propose to state what a depreciated currency is. I have charged all these results to depreciated currency. What is that

The ČHAIRMAN. That is to say, your diagnosis of the disease is, depreciated currency.

Mř. POTTER. Depreciated currency and bad legislation. A depreciated currency is any currency, whether of gold or paper, the metallic equivalent of which is in excess of the amount allotted to us by the law of distribution of precious metals throughout the commercial world.

The CHAIRMAN. Then you hold that you can have a depreciation in gold currency just as well as in paper!

Mr. POTTER. Unquestionably.
The CHAIRMAN. When there is a depreciation in gold currency what happens ?
Mr. Porter. Metallic currency flows out.
The CHAIRMAN. And goes to some other place were it is wanted!
Mr. POTTER. Yes, sir.
The CHAIRMAN. When the depreciation takes place in paper what happens then?
dir. POTTER. The paper stays at home permanently.
The CHAIRMAN. It cannot go out.
Mr. POTTER. No, sir.
The CHAIRMAN. It is not wanted anywhere else.
Mr. POTTER. No, sir.
The CHAIRMAN. It is non-exportable.
Mr. POTTER. Yes, sir.

The CHAIRMAN. It is that kind of currency which is advocated quite extensively now in this country.

Mr. POTTER. Yes. Now science deals with facts. We must reach the causes and remedies of disease by induction. When we cut adrift from our moorings in 1862–1 will take the last decade-up to that time the circulation in this country had not averaged two hundred millions of dollars of coin of the present standard, or its equivalent in paper. The note circulation of this country was less than two hundred millions. That I know from a very careful examination of the subject.

The CHAIRMAN. When it went much above that what happened !

Mr. POTTER. The banks suspended in 1857 on less than $215,000,000. That showed that the amount allotted to us was less than $215,000,000, and that we could not issue that amount of paper with safety.

The CHAIRMAN. What fixed the limit of paper that would circulate without depreciation ?

Mr. POTTER. It was the law of distribution of precious metals throughout the commercial world. When we got too much paper it became inconvertible.

The CHAIRMAN. If we had had more gold and silver than we had, could we have carried more paper ?

Mr. POTTER. No, sir; the total circulation, whether of metal or paper, or both together, could not exceed the equivalent of about $200,000,000.

The CHAIRMAN. It would not have made any difference? Mr. POTTER. Not a particle. The CHAIRMAN. In other words, you cannot use more paper than the current operations of society demand without its depreciating. Suppose you have $200,000,000 circulating and somebody puts out $28,000,000 more!

Mr. POTTER. I will state it just as John Adams stated it a century ago. Ho said that up to a certain point you may issue paper and it will remain at par. So it will. The issue department of the Bank of England is regulated upon that principle. Up to a certain point you may issue paper and it will remain at par; if the issue is below that point the paper may be at a premium. I mean that for its superior convenience the paper may be worth a small premium, and if you go beyond that and issue paper forever, the whole mass, by the natural law of trade, when gold is in a state of freedom (to nise Mill's expression), is only worth this limit.

The CHAIRMAN. Then, if you added gold pari passu with the paper you would bave a depreciation of gold as well as of paper!

MF. POTTER. You would aggravate the trouble; the whole mass of the circulation would depreciate in proportion as you added gold.

The CHAIRMAN. And the evidence would be that the paper wond go into gold, and the gold would leave the country because there was a depreciation ?

Mr. POTTER. Yes, sir.

The CHAIRMAN. You could increase the paper circulation to-day, could not you, by issuing fractional currency in hieu of silver 9

Mr. POTTER. Yes, sir.
The CHAIRMAN. That would drive so much silver out of circulation !
Mr. POTTER. Precisely. It would drive out all silver of the same denomination.

The CHAIRMAN. And you would increase the paper up to the point where there was too much of it, and then you would have depreciation

Mr. POTTER. Yes. That is what France did when she paid her indemnity to Germany. She had a metallic currency which she supplanted with paper, and now she is supplanting the paper with metal. I do not mean that France issued an excess of paper; she only issued enough to displace her coin. She sent her metallic currency, or a great portion of it, into Germany, partly by actual coin payment and partly by bills of exchange on London, and gave them a metallic intiation there, and then sold them goods and got the money back again.

To resume the argument, what has occurred since our circulation was at the point I have stated! Our population has increased say fifty per cent. Now, other things equal, the limit allowed to us would be increased fifty per cent. But other things are not equal. You know that the proportion of money to commerce decreases where there is an advancing civilization. The actual circulation of England has not increased, except in speculative periods, beyond £40,000,000 for a century (during the restriction upon cash payments from 1797 to 1821 the combined circulation of the Bank of England and the country banks never reached £50,000,000, and a good deal of that was one-pound notes); proving the law that the proportion borne by money to commerce decreases as civilization advances.

The CHAIRMAN. In other words, the other instruments of exchange are improved and take the place of money to a certain extent.

Mr. POTTER. Yes; an improvement in the mechanism of exchange, as Jevous says. That influence is always at work. In 1837, paper became inconvertible here on a per capita rate of over nine dollars; in 1857, it became inconvertible on a per capita rate of seven dollars. So far as that fact is of value, it goes to show that the per capita rate is constantly decreasing. Among the causes of that decrease are payments by telegraph and by postal money-orders, the substitution of checks for money in retail payments, and the general machinery of more rapid circulation, including a more rapid transmission of the mails.

The CHAIRMAN. But as you depreciate the currency the per capita rate goes up, does it not! When the currency becomes depreciated does not the community use a larger per capita amount?

Mr. POTTER. Certainly, that is depreciation. There is no end to it. It is like rum; when your system is thoroughly debauched you have to keep drinking till you die. The abolition of slavery, some people think, demanded an increase of currency. That is a mistake, because the circulation is the instrument which circulates the commodities of the country. The abolition of slavery altered the distribution, but it has not changed the volume unless to diminish the quantity. Although the per capita rate was a little over six dollars during the last decade, it is less than that now. Then there is another influence at work which no writer except John Stuart Mill and myself, so far as I have been able to discover, has ever noticed, and it is very important. When we began to export interest-bearing bonds in 1865, the question suggested itself to my mind-What effect is this going to have on the currency and on the limitation of it I thought over it a great deal, as it was a subject that required thought, and I finally reached my conclusion, and afterwards in reading John Stuart Mill's Principles I accidentally found that he had reached the same conclusion upon the same point. (See Mill's Principles, Book III, chap. xxi, section 4.)

The CHAIRMAN. What was it, please 1

Mr. POTTER. I will say that with $200,000,000 circulation before the war, the equation of international demand, as Mill calls it, was maintained by exportation of our bullion product. Under that quantity of paper, we exported the products of our mines. But we had theu no interest debt, or a small one. We have now a very large interest

debt. According to Mr. Sherman, it does not amount to much, but Mr. Sherinan cannot tell us what it is. We know, upon principles of political economy, that it must be very large and, at irregular intervals, increasing all the time. Snppose now that instead of having no interest account in 1860, we had had an interest account of $100,000,000, what then! Why, under the then existing condition of things, we should have had to pay $100,000,000 of bullion more than we did pay. But we did not have it. What then? Why, then we should have had to reduce the prices of our goods.

The CHAIRMAN. That is, we would have had to induce them to take something else besides.

Mr. POTTER. Yes, sir; we would have had to make our metallic prices lower by reducing the volume of our circulation, or by exporting bonds and going, consequently, into bankruptcy; or by being thrown into suspension, so that the price of gold would advance, thus reducing the metallic equivalent of the paper circulation so that our creditors would take more commodities from us and we should take less from them.

The CHAIRMAN. You are talking now about a circulation that is on a par with gold 1 Mr. POTTER. Yes, sir.

The CHAIRMAN. If it had been a depreciated circulation that would not bave happened ?

Mr. POTTER. We would have paid in bonds then.
The CHAIRMAN. That is, in an evidence of debt!

Mr. POTTER. Yes, sir. Now, political economy is an inductive science, and all we say is that these influences that have been in operation are still in operation, and have an effect, but nobody can measure that effect. I think, however, it is perfectly safe to say that, taking all these things together, the limitation is quite as low as it was, and we cannot carry now more than $200,000,000 in paper convertible into coin

of the present standard, dollar for dollar, and have prosperity in this country, and still bave our metallic prices on a level with the international prices.

The CHAIRMAN. I want to get that clearly understood. You have given the example of Great Britain, as evidence that the circulating medium does not increase, although her business has enormously increased within the past forty years.

Mr. POTTER. Yes, and I have given examples of suspensions in this country on a per capita rate of nine dollars (in 1837) and seven dollars (in 1857).

The CHAIRMAN. And I understand you to say that the law which has produced that state of things in Great Britain is the same law that is operating in every other country where specie payment exists.

Mr. POTTER. Yes, wherever civilization is advancing, wherever telegraphs and railroads are being built (and they have been built here more rapidly than anywhere else in the world), that law operates.

The CHAIRMAN. And, therefore, you do not think we can maintain a larger volume of redeemable paper inoney now than we did before the war.

Mr. POTTER. If I correctly measure the extent and power of those influences, I know it.

Mr. HENRY KEMP (an anditor in the committee-room). Mr. Chairman, with your permission, I should like to correct Mr. Potter on one point. The British circulation has increased six millions in paper, and I suppose the gold circulation has increased from 30 to 80 millions; and the Scotch circulation, which is paper alone, has increased from four millions to six.

Mr. POTTER. You suppose that the gold circulation bas increased; how do you know Mr. KEMP. The paper has increased six millions, any way.

Mr. POTTER. Well, it has driven out the coiu probably. How do you know that the gold has increased ?

Mr. KEMP. You won't accept my estimate of the gold increase, and now I give you the paper increase.

Mr. POTTER. But I want to know how you know that there is more golà in circulation now.

Mr. KEMP. I will give you another reason, because the Bank of England before 1845 never held more than $22,000,000 in gold, and now it holds $35,000,000. Everybody estimates the quantity of gold at more than double what it was at that time.

Mr. POTTER. John Stuart Mill is my authority.
Mr. KEMP. Jevons is mine.
Mr. POTTER. How much did you say it was!
Mr. KEMP. From 80 to 100 millions in gold circulate in England.
Mr. POTTER. And how much paper circulation ?

Mr. KEMP. About forty-six millions. It was not over thirteen millions twenty years ago.

Mr. POTTER. Well, call it forty-six. It does not make any difference. I think I know what I am talking about.

The CHAIRMAN. I see that you do.

Mr. POTTER. Yon know, Mr. Chairman, that by virtue of the act of 1844, the circulation of the private and joint-stock banks in England was gradually being retired.

The CHAIRMAN. Certainly; I think this gentleman's statement of the Scotch circulation is right, but whatever it is we know that the paper circulation of Great Britain is not increasing in the same proportion that her business is increasing.

Mr. KEMP. The reason why the bank-note circulation does not increase is because checks come in for a five-pound note but they cannot come in for a sovereign, but the prosperity of England makes her circulation of sovereigns increase, and no economist puts it at less than seventy or eighty millions.

Mr. POTTER. I say that no human being knows how much gold coin there is in circulation in Great Britain, and you cannot find it out unless you seize every man at a certain hour on a particular day and search his pockets, and even then you could only approximate it. The British sovereign is in circulation all the way to the Indies. I have passed it myself in Gibraltar, Malta, Alexandria, Cairo, Suez, Aden, Galle, Penang, Singapore, Java, and China; it circulates all over the globe.

The CHAIRMAN. Yes; I have passed it myself all over the continent. Mr. POTTER. Certainly, it circulates everywhere. No human being can know just how much of that coin there is in circulation in or out of England, and therefore there is no use in talking about it. Let us talk about what we know; that is a big enough thing for us to handle. I wish to say that I am discussing a question of principle rather than of fact to show that the volume of circulation does not and need not increase in a country whose civilization is advancing. On the contrary, it may be actually diminishing while consumption, production, and exchange, and population also, are at the same moment increasing, owing to refinements in the mechanism of exchange. Mill says, “ The bank-note circulation of Great Britain and Ireland seldom exceeds forty millions, and the increase in speculative periods at most two or three." Jevons in 1875 put the issues of private and joint stock banks of England at about £6,460,000, Scotch banks, £2,750,000; Irish banks, £6,350,000; making in all about 304 millions; to which must be added about 144 millions issued by the Bank of England upon the security of government stock-total about £45,000,000. But although the combined issues of the United Kingdom at that time reached this amount, it by no means follows that the circulation exceeded or even touched £40,000,000. The reserve of notes held by the numerous newly created private banks, and the conservative action of the Bank of England in recent years with reference to her reserve of notes, and the fact that Bank of England notes circulate to a considerable extent on the continent, and may be found in different parts of the world as well as in New York, shows that the circulation of Great Britain might be less than £40,000,000, though the issues reached even £50,000,000. All estimates as to the amount of coin in circulation in Great Britain are illusory and vain. If the actual circulation increased materially it would become depreciated at once. It should be understood that there has been a universal monetary disturbance during the last fifteen years. There is another law to be considered in reference to circulation. Adam Smith laid it down, and it is a most remarkable fact that no writer, so far as I have been able to discover, has ever noticed it excepting Professor Rogers in his edition of the Wealth of Nations. Even Mr. Mill did not understand this principle. The law is, that the circulation in every country is divided into two great branches, namely, the circulation between the dealers themselves (i. e., checks) and the circulation between the dealers and the consumers (i. e., notes and coin), and Adam Smith says, what is very obvious, that the value (price) of the goods circulated between the dealers cannot exceed the value (price) of the goods circulated between the dealers and the consumers.

The wholesale prices of merchandise cannot permanently rise above the retail prices of merchandise, and the retail prices are governed by the quantity and activity of the circulation. So that the limitation finally comes upon the money. The mechanism of exchange is modifying this to a certain extent, so far as checks are passed in retail payments, but we cannot ignore the great and important fact that the currency of a country is divided into two distinct branches moving in two distinct circuits. John Law started an abstract currency, a currency without any specific standard, based on confidence, based on an idea ; you could issue what Montesquieu called "ideal money" ad infinitum if you had confidence; but the trouble is you cannot keep house on coufidence, and confidence has to give way at a certain point to the cry of saure qui peut; you must have the concrete money somewhere, the hard fact, metal, which is the money of the world, and the money of God, too.

The CHAIRMAN. I asked a previous witness what authority he had to speak for the Almighty, and I think I shall have to ask you what evidence you have that gold and silver alone are God's money.

Mr. POTTER. Evidence that God created gold and silver for money! Just the same evidence of it as that he created the atmosphere to breathe and water to drink, and wheat as material for the food of civilized man.

* J. S. Mill's Principles, edition 1867, Book III, Chapter XII, section 5.
+ Money and the Mechanism of Exchange, by Jevons. Appleton's edition, p. 313.

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