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them redeemed. Let the government say to the people, We will redeem the currency whenever you wish, and nobody except a few timid and unpatriotic people will care to change their convenient for an inconvenient money. The gold which the government holds will suffice to satisfy these timid ones, and there will be an end of high prices and depreciated currency. The government can then issue as much more currency as circumstances may make necessary, and strong in our confidence in ourselves we shall be the richest people on earth; we shall have created the untold wealth which our currency represents.

The suspension of specie payments by the New York banks on December 30, 1861, was immediately followed, of necessity, by the suspension of like payments by the national treasury, and on the very day that the New York banks suspended specie payments, a proposal was made in Congress that the United States resort to the issue of an irredeemable paper currency of legal-tender notes.

The opposition to the bill called attention prominently to the lessons of experience. Could it be shown that the resort to an inconvertible paper currency had always been attended in the past with evil results, a strong presumption would be created against the wis

Adapted from A History of the Greenbacks, pp. 44-66. (The University of Chicago Press, 1903.)

dom of a repetition of the experiment. Consequently rhetoric was employed to picture in vivid colors the unhappy consequences that had followed the issue of paper money by France during the Revolution, by England in the Napoleonic wars, by Austria, and Turkey, by Rhode Island in colonial days, by the Continental Congress in the War of Independence, and finally by the Confederate States, then fairly launched upon the paper-money policy.

To break the force of these historical parallels, which told so heavily against the bill, its supporters sought to show that causes, which under different conditions had led to depreciation, would not be operative in the case of the United States in 1862. Thus, it was said, the continental notes of the American Revolution depreciated because of the poverty of the country, which offered no security for their redemption; the vastly greater wealth of the nation in 1862 would prevent a repetition of the experience. The depreciation of the issues of Louis XIV was explained on the ground that France was then exhausted by heavy taxation to maintain a profligate court. The cases of the French Revolution and the Confederate States were accounted for by the fact that these governments were revolutionary. Some gentlemen even denied that depreciated currencies had proved evils. "It would be far from a blunder," said Senator Howe, "to say that the 'golden age' of England was during that long period when the only currency she knew was one of irredeemable paper"; and Mr. Kellogg declared the paper issues of the Revolution had increased confidence, clothed the army, and revived commerce. Another supporter of the bill tried to evade the historical argument by maintaining that the true lesson of experience was that of moderate issues. But no one seems to have taken these ingenious pleas very seriously, for it was easy to show that one of the striking lessons of experiments with paper money is that such moderation, which the issuer at first intends to observe, has almost invariably been soon forgotten.

If the argument from experience was strongly against the bill, the cognate economic argument was hardly less so. The opponents of paper issues assumed the offensive, declaring emphatically that the proposed legal-tender notes were certain to depreciate in value. Mr. Lovejoy said: "It is not in the power of this Congress

to accomplish an impossibility in making something out of nothing. The piece of paper you stamp as five dollars is not five dollars, and it never will be, unless it is convertible into a five dollar gold piece; and to profess that it is, is simply a delusion and a fallacy."

Various shifts were tried to meet this attack. Mr. Kellogg boldly asserted that the legal-tender quality of the notes would prevent fluctuation of their value; but more faith was put in the reply that the total wealth of the country was security for the notes, and this security being ample the value of the paper would not decline. The rejoinder to this was first, that the security for the notes was not the total wealth of the people, but only such part of it as the government could obtain by taxation; and second, that though the security for ultimate redemption might be ample, the notes would nevertheless depreciate in value, if the holders were unable to secure immediate payment.

A different argument to show the improbability of depreciation was based by Thaddeus Stevens upon the quantity theory of money as expounded by McCulloch. "The value of legal-tender notes," said he, "depends on the amount issued compared with the business of the country. If a less quantity were issued than the usual and needed circulation, they would be more valuable than gold." The opponents of the bill replied, not by attacking the quantity theory, but by insisting that all experience showed that, after one issue of paper money had been made, other issues were sure to follow, until the currency became redundant and depreciated. "The experience of mankind," said Mr. Thomas, "shows the danger of entering upon this path; that boundaries are fixed only to be overrun; promises made only to be broken." "The same necessity," added Mr. Pomeroy, "which now requires the amount of inconvertible paper now authorized, will require sixty days hence a similar issue, and then another, each one requiring a larger nominal amount to represent the same intrinsic value." To such assertions, backed by the weight of historical evidence, the supporters of the bill could respond only that the case of the United States would be an exception; the American government would not yield, as other governments had done, to the temptation to make further issues.

Not content with showing the economic evils of a depreciated. paper currency, the opponents of the bill denounced it roundly as immoral. To pay contractors and soldiers in depreciated money, they declared, was dishonorable. "The bill says to the world," asserted Mr. Horton, "that we are bankrupt, and we are not only weak, but we are not honest." The injustice, however, extended not only to creditors of the government, but to all persons who would be compelled to accept in payment money of less value than that

which they had contracted to receive. And by thus encouraging the debtor to defraud his creditor, urged Senator Fessenden, the bill would lower the moral standards of the people. To these charges, also, the promoters of the bill had little to say.

Upon the fiscal aspect of the bill the case of the opposition was hardly less clear. First, they declared, the resort to an irredeemable paper currency was a practical confession of bankruptcy, and would therefore injure the credit of the government, and make less favorable the conditions on which it could borrow. "We . . . . go out to the country," said Fessenden, "with the declaration that we are unable to pay or borrow at the present time, and such a confession is not likely to increase our credit." Second, it was pointed out that the depreciation of the currency would cause the prices of everything which the government had to buy to rise, and thus would vastly increase the cost of the war. As Senator Cowan put it, the government "might as well lose 25 per cent on the sale of her bonds, as to be obliged, in avoiding it, to pay 25 per cent more for everything she buys."

This discussion of the legal-tender paper currency produced in Congress the feeling that under ordinary circumstances such a proposal would be indefensible. The vigor with which the opposition had presented the case against the bill made a deep impression. On the other hand, the reasoning by which the supporters of the bill had sought to establish the constitutional power of Congress to make treasury notes a legal tender was felt to be inconclusive. The force of the telling argument from experience had not been broken; the probability of depreciation had not been disproved; no adequate reply had been found to the indictment of the bill on moral grounds; and, finally, it had not been denied that resort to paper issues would injure the credit of the government and increase the cost of the war. So generally was the objectionable character of the measure realized that Senator Fessenden could say: "All the opinions that I have heard expressed agree in this: that only with extreme reluctance, only with fear and trembling as to the consequences, can we have recourse to a measure like this of making our paper a legal tender in payment of debts."

And yet an argument was found that overcame the "extreme reluctance" of a majority of the members and induced them to vote for the bill. This argument was the plea of absolute necessity. It was to necessity that Mr. Spaulding had appealed in justification of his first draft of the legal-tender bill. In opening the debate in Congress

he repeated the argument with emphasis. "The bill before us," he said, “is a war measure, a measure of necessity and not of choice, presented. to meet the most pressing demands upon the Treasury." The cry of necessity was taken up by the other supporters of the bill, who relied upon it to meet all the objections urged by the opposition.

That the assertion of necessity might carry the added force of official sanction, Secretary Chase was induced to send a note to the chairman of the Committee on Ways and Means to be read to the House. He wrote: "I have felt, nor do I wish to conceal that I now feel, a great aversion to making anything but coin a legal tender in payment of debts. It has been my anxious wish to avoid the necessity of such legislation. It is, however, at present impossible, in consequence of the large expenditures entailed by the war, and the suspension of the banks, to procure sufficient coin for disbursements, and it has therefore become indispensably necessary that we should resort to the issue of United States notes."

This letter made the bill an "administration measure," and so was an important factor in its success.

In replying to the plea of necessity, the opposition candidly admitted it would be better to issue a forced currency than to stop payment, provided there were no alternative. "If the necessity exists," said Senator Fessenden, "I have no hesitation upon the subject and shall have none. If there is nothing left for us to do but that, and that will effect the object, I am perfectly willing to do that." But that such was the case was emphatically denied. "It has been asserted. . . . with the utmost apparent sincerity," said Mr. Horton, "that this is a measure not of choice, but of necessity. But Mr. Chairman, that assertion is only reiterated, not proved. the proof that this is a matter of necessity? There may be proofs abundant, but they have not been produced."

Where is

Not only did the opposition deny the necessity, but they were ready also with suggestions of other means of securing the needed funds. One suggestion was adequate war taxation. "Not a dollar of tax has been raised," said Mr. Thomas, "and yet we are talking of national bankruptcy, and launching upon a paper currency. I may be very dull, but I cannot see the necessity, or the wisdom, of such a course." It was by this time generally acknowledged that the omission to impose heavy taxes at the extra session of July, 1861, was a serious blunder which Congress should repair as soon as possible.