H4.3 COPYRIGHT, 1903 AND 1915. BY THE MACMILLAN COMPANY. Set up and electrotyped. Published September, 1903. Revised and rewritten edition September, 1915. Econ. Dept. Ecorn. /A MAIN LIBRARY Norisach Press PREFACE FOR three centuries this continent has been inhabited by white men. The financial experience that accompanied the development of the territory now comprised within the United States, from an aboriginal wilderness to its present proud position in the sisterhood of nations, contains much that is crucial and many severe lessons. In the beginning there was a period of barter and trade during which commodity paid for commodity. It frequently happened, however, that a man wishing to purchase goods did not have for exchange anything which the vendor desired; this, and the difficulty of making change, inspired the colonial governments to provide a currency and to give it a fixed value in trade and taxes. At first articles of real value that would go without a government fiat were selected, such as beaver skins, musket balls, corn, etc.; later, printed money with government fiat was resorted to, in many cases with unfortunate results. At the very threshold of our existence our forebears, crudely, but nevertheless conclusively, illustrated the superiority of a currency unit which possessed commercial value and would circulate because people wanted it, over a currency which represented the ipse dixit of government. All of the original thirteen colonies had the same environment and the same experience. Printing money was very easy and seemingly inexpensive, since it avoided taxes at the moment. It was in consequence carried to extremes, depreciated and was largely repudiated when it came to final redemption. This currency suffered the vicissitudes inherent in its nature, precisely as did the French assignats under John Law. The Continental Congress duplicated the experience of the colonies with 309694 fiat money, not because they did not realize the danger, but because the Congress had no power to levy taxes and hence no power to borrow money. Apparently no other resources were available, coherent action by the separate colonies, with the imperfect means of communication, being impossible. Again the same issue was raised, following the Civil War; the greenback party, which favored paying the national debt in legal tender paper money,-compelling the holders of interest-bearing obligations of the United States to accept non-interest-bearing obligations in full payment and satisfaction, — obtained a very general support and threatened the honor of the government. The same principles, or want of principles, were presented in the free-silver campaign that followed the greenback craze; the purpose was to take silver and coin it into dollars whose face value was largely in excess of its commercial value, the difference, or seigniorage, so called, representing the fiat of the gov ernment. This issue was settled by the gold standard act of 1900. Fortunately, all the schemes of dishonest finance have been signally defeated by the people and now we are reaping our reward. We stand forth preeminently as a nation whose credit firmly based upon the gold standard is unimpaired, whose exchange is at a premium the world over, presaging a period of a world-wide financial growth and development. The story of our financial history, from the early beginnings to the very superior Federal Reserve system upon which we have just entered, has all the quality and charm of romance, alike interesting and instructive. This experience should be of great value as a guiding influence in aiding us to fortify our present commercial standing and banking power. This country is governed by public sentiment, which, when properly informed, may be trusted to reach a wise conclusion, as clearly shown in the defeat of greenbackism and the freecoinage-of-silver propaganda. My aim is to place before the public all the essential facts as to currency, coinage, and banking, from the wampumpeage currency of the colonies to the notes of our Federal Reserve Banks, together with the indispensable political history connected therewith. I have indulged in no attempt at fine writing, but have endeavored to recite the facts clearly and succinctly in proper sequence. Few have access to economic libraries covering the period and the subjects treated in this volume, and few could conveniently make use of such libraries even if at hand. This volume is a busy man's library, each subject being fairly treated, while the Bibliography points the way to further and more extended research. In the chapter on Colonial Currency I have made use of the experience of Pennsylvania, because accurate data was easily obtainable, and also because Pennsylvania's experience covered all phases of the subject. I have also made large use of the experience of Massachusetts, and to a lesser extent Virginia, Rhode Island, New Jersey, and the other colonies, thereby fairly covering the subject and bringing out its obvious lessons. The chapter on Continental Currency, from the confederation until the retirement of this currency in 1793, is very complete. The basis of this book is "The Contest for Sound Money," published in 1903; but that earlier work has been rewritten and supplemented so that as now issued it covers the period from the adoption of the United States Constitution down to the present time. It deals fully and explicitly with our coinage laws and coinage by our mints; it gives the complete history of the national banking system, and contrasts and compares the banking systems of the various states; it relates the history of the legal tender notes and discusses them as a substitute for taxation, touching upon the political history of the period inasmuch as the question of the legality of these notes was made a political issue; the history of the silver controversy is fully told, especially from the so-called "crime of 1873," when the silver dollar was demonetized, down to the gold standard act of 1900; the various international efforts in favor of the bimetallic standard are likewise set forth. རིན་་ ན་ The panic of 1907 showed the imperative necessity of improving our credit and currency systems. The National Monetary Commission-Aldrich Commission — dealt with the subject exhaustively and procured, reported to Congress and published to the country full data of the laws and practices of other nations as well as our own, and laid the foundation for action. The last Congress, under President Wilson, acted, and the result is the very satisfactory Federal Reserve Law. Our national experience leading up to this law and the influence which focalized in its enactment are fully treated, as well as the abnormal conditions presented by the European cataclysm in 1914, and the problems and opportunities offered to the United States. There is an introductory chapter describing the Currency Systems of all the principal commercial nations and explaining the emergency measures adopted by European nations to meet the exigencies of the war of 1914. This chapter will enable the reader to contrast or compare the currency and credit facilities of other nations with those of the United States, and for that reason seems to be pertinent and to give added value to this volume. |