CHAPTER XV SILVER QUESTION 1861-1878 THE demand for more money seems to be ever popular with the general public; at least such is the view of politicians. The vacillating course of the leaders of both of the great political parties, evidenced by their votes, diverse in character, at different stages of the silver controversy, indicates plainly that they were seeking to follow public sentiment and insure their own continuance in office, rather than seeking to furnish the best currency system for the promotion of commerce and trade, and a system which would best serve the interest of labor and the small trader as well. So many and such flagrant misstatements were made as to the demonetization of silver in 1873, that I have deemed it well to give the history of silver legislation in great detail. "Capital is that portion of all the previous product of a nation which at any given time is available for new production. This will be a certain amount of tilled land, houses, buildings, stock, tools, food, clothing, roads, bridges, etc., which have been made and are ready for use in producing, transporting, and exchanging new products. These things are all the product of labor, and require time for their production. Nothing but labor spent upon them can produce others, and time is required for this labor to issue in new and increased possessions. Currency only serves to distribute this capital into the proper hands for its most efficient application to new production. Banks, it must be repeated, only facilitate the transfer of capital from hands where it is idle into hands by which it will be usefully employed. Currency, therefore, is not capital, any more than ships are freight; it is only a labor-saving machine for making easy transfers. Banks do not create wealth, they only facilitate its creation by distributing capital in the most advantageous manner. If, therefore, currency is multiplied, it is a delusion to suppose that capital is multiplied, or, if 'money is plenty,' by artificial increase of its representatives, it is only like increasing the number of tickets which give a claim on a specific stock of goods — the ticket-holders would be deceived and could, in the end, only get a proportional dividend out of the stock."1 For a quarter of a century the standard of value was imperilled, business disturbed, and the value of all property subjected to uncertainty by a propaganda on the part of a large portion of our people laboring under the conviction that currency was capital and that the free coinage of the silver product of our mines, at the behest of any one choosing to present the same at the mints, would add that vast sum to the capital of the country in form adapted to current use. The fiat of the government can impart legal tender quality to currency, either coin or paper, but its value as expressed in articles of commerce what it will buy is determined by its commercial value or by its convertibility into money whose commerical value is equal to its nominal currency value. During the Civil War the coins of the United States disappeared from circulation owing to the premium thereon following the suspension of coin payments in December, 1861. The only exception was in the country west of the Rocky Mountains, where the gold product of California assisted the people there, so far away from the seat of war and possessing but indifferent means of communication with the rest of the country, to maintain the coin standard. The specie in the rest of the country was in the Treasury, in banks or in private hoards, there being no substantial amount of coin in circulation outside the Treasury after 1863-1864. The country exported the greater part of its estimated stock of coin, $250,000,000 (1861), and its annual product besides. 1 1 Sumner, A History of American Currency. The mints coined from 1861 to 1867 the following amounts: Gold coin Minor coin $230,358,000 306,000 8,731,000 5,638,000 The commercial ratio of silver to gold fluctuated between 15.35 and 15.57 to 1, indicating a value for the silver dollar of from $1.04 to $1.02. In 1867 an international monetary conference met in Paris at which this country was represented. This body among other things recommended the adoption of the single gold standard and an international coin. The latter proposition was favorably received. The Senate Finance Committee (June 9, 1868) made a report recommending the coinage of a dollar 3 cents less in value than the existing one, thus making it equal to 5 francs. It was expected also that the British sovereign would be so modified as to make it exactly 25 francs or five of the proposed dollars. Nothing further was done in the matter. The production of silver in the United States, which in 1861 was estimated at $2,000,000, steadily increased, chiefly due to the rich discoveries in Nevada; by 1868 the product was $12,000,000, in 1872 $28,750,000. The coinage of silver dollars increased at once, and from 1868 to 1872 over 3,200,000 of them were struck, and practically all were exported. The Franco-German War at this time (1870-1871) had a most important and far-reaching effect upon the monetary standards of the world. The brilliancy of the German campaign and the triumph of her arms placed the new empire in the front rank of military powers. She received an enormous war indemnity from France, 5,000,000,000 francs ($965,000,000), all of which was paid in a comparatively short time after the conclusion of peace. The prestige of her arms and the condition of her treasury greatly facilitated the work of welding together the separate states, commercially as well as politically, into one harmonious whole. The dream of the Hohenzollern was realized and a unified Germany was the result. The commercial aspirations of the German Empire proved equal to its military ambition, and turning to Great Britain, the chief commercial nation, as an exemplar, its banking system was copied largely and the gold standard adopted. The coinage of the country, which differed in the separate states, was unified, and the sale of the greater part of the old silver pieces was determined upon. France, in order not to be swamped with the white metal at its open mints, suspended silver coinage for the public, and the other nations belonging to the Latin Union followed her example. The action of these nations in suspending the free coinage of silver has been held by many to be the principal cause of the fall in its commercial value. Contemporaneously with these events Congress was at work upon the revision of the mint laws, and its labors resulted in what is known as the coinage law of 1873. This revision was the result of several years of work and discussion, begun in 1869 by John Jay Knox under the direction of Secretary Boutwell. The report and draft of the bill were transmitted to the Senate early in 1870, referred to its Finance Committee, and ordered printed. The House received the documents in June, 1870. The original bill made the gold dollar the unit of value, discontinued the coinage of the silver dollar, the half dime and threecent piece, and the report not only called attention to the proposed discontinuance, but discussed the reasons for doing so. It had been proposed to have a dollar, subsidiary in character, of 384 instead of 412 grains, with legal tender power the same as subsidiary pieces, but this was finally eliminated from the bill. Obviously the reason for recommending the discontinuance of the old dollar of 412 grains was that its value (some 7 per cent. greater than that of the subsidiary silver) was then $1.02 in the world's markets. It was not provided for in any draft of the 1 The Latin Union consists of France, Italy, Switzerland, Belgium, and Greece. bill from the first to the passage thereof in 1873. The section omitting it (15th, afterward 16th) never mentioned it at any stage. The bill was reported, with amendments, to the Senate, December, 1870, debated and passed by a vote of 36 to 14 on January 10, 1871. Senator Sherman voted against, and Senator Stewart of Nevada for, the bill, but there was no division on the question of omitting the silver dollar and no amendment was offered to restore the same. The bill reached the House January 13 and went to the Coinage Committee. It was not acted upon in that Congress, however, and in the next Representative Kelley (Rep., Pa.) reported the same bill from the committee after it had, as he said, "received as careful attention as I have ever known a committee to bestow on any measure." Subsequently it was amended to include a 384-grain dollar; on April 9, 1872, it was debated and every section discussed. The fact that the bill made gold the sole standard was also debated, Kelley stating that it was "impossible to retain the double standard." He called attention to the fact that the old silver dollar was worth more than the gold dollar, remarking also that "every coin that is not gold is subsidiary." On May 27, 1872, it passed by a vote of 110 to 13; the negative vote was not due to the omission of the silver dollar. The Senate amended the bill January 17, 1873, with a provision for the unlimited coinage of a "trade dollar" of 420 grains, commercially worth more than the Mexican dollar, to compete with the latter in the Oriental trade. Thus amended it became a law on February 12, 1873.1 It was therefore before Congress nearly three years, printed at least ten times, debated on several occasions, and attention was directed to the omission of the old silver dollar. Nevertheless Kelley, a few years later, said that 1 History of the Coinage Act of 1873, being a complete record of all documents issued and all legislative proceedings concerning the act. Public document printed in 1900. |