ment levied a tax of 8 per cent upon their export, there was every reason to believe that the new American coins, which could be freely exported, and which would be more accurate in mintage and superior in bullion value to the Mexican dollars, would meet a real demand in the East, and might even supersede the Mexican coins in those parts. The ordinary American dollar, containing 371 grains of pure silver, had never been well received in China on account of its inferior content. So the new coins were to contain 378 grains, or of a grain more than the standard of the Mexican dollar. This would make them worth, at the ratio of exchange prevailing when the act was passed, a little more than $1.04 in gold, and would have the double advantage, it was thought, of rendering them acceptable in the Orient without danger of their invading the circulation at home.

The new trade dollars, as had been expected, found a ready market in the East. At Hong Kong and the Straits Settlements, in French Indo-China, and at several Chinese ports they were made a legal tender along with the Mexican dollars; and the California mint soon found difficulty in turning them out fast enough to meet requirements. Within six years after the commencement of their coinage nearly 36 millions had been struck, and in January, 1877, the leading bankers in China reported that there was "evidence powerful enough to convince the most skeptical" that the United States trade dollar has been a success, predicting that "ultimately it will be current all over China." The American dollar was thus making rapid inroads upon the territory of the Mexican dollar and threatening it with very serious competition in the Far East, when unanticipated conditions in America resulted in the abrupt cessation of its coinage and its ultimate withdrawal from the field.

The decline in the price of silver reached such a point in 1877 that the silver in a trade dollar was worth not only less than a gold dollar, but also less than the depreciated paper dollars which constituted the circulating medium of almost the entire country. As a consequence, large numbers of trade dollars began to appear in circulation. These trade coins really had no legal standing in the country, being neither an authorized tender for debts nor receivable at the public treasury. In the eyes of the law they were only discs of metal assayed and stamped at the government mint for foreign use; but they bore on their face the words "trade dollar" and "United States of America," and it was not strange, therefore, that they were frequently given and taken at home at their face value. The

confusion was aggravated in the following year, when Congress ordered the renewed coinage of the old standard silver dollar under the BlandAllison act (February 25, 1878); for this meant that dollar pieces of even less intrinsic value were to circulate at par under governmental authority. If these smaller silver coins were to be everywhere receivable as equivalent to the gold dollar, it appeared but logical that the larger coins issued from the same mint should not be worth less.

Apprehending the increasing misuse of the trade dollar, the Secretary of the Treasury therefore ordered the discontinuance of its coinage on October 15, 1877; and the ban was lifted upon only a few occasions after that date, when small amounts were coined expressly for exportation. The trade dollars still outstanding in the country continued, however, to be a source of embarrassment, until finally, in 1887, Congress decided to get rid of the anomalous pieces altogether. An act was passed on March 3 of that year authorizing the redemption and recoinage into standard silver dollars of all trade dollars presented during the succeeding six months. The government had coined in all 35,965,924 of them, of which 7,689,036 were withdrawn under the provisions of the act, a considerable number having been reimported after the passage of the act. The vast majority, however, seem destined to remain in the Orient, unrepaired and unreinforced until time and use have accomplished their decay or the melting-pot has consumed them.

124. THE BLAND-ALLISON ACT OF 1878

As early as July, 1876, bills were introduced into Congress for the recoinage of silver, but it was not until 1878 that sufficient strength could be gained to enact a law. The Bland bill, providing for unrestricted coinage of silver at the ratio of 16 to 1, passed the House without debate November 5, 1877, by a vote of 163 to 34. In the Senate there was an extended debate resulting in the Allison amendment, which limited the purchase of silver bullion for coinage to "not less than two million dollars worth per month, nor more than four million dollars worth per month."

The amended bill was unsatisfactory to the silver party in the House, but was finally supported by the silver people in the belief that something was better than nothing, and with the hope that it would be speedily followed by complete bimetallism. On the other hand, it was supported, also, by many of the opposition, who believed that it would be repealed after a short trial. At the same time it appeared a satisfactory solution to those legislators who were anxious

to appease all parties. The measure was thus a welcome compromise all around. President Hayes, however, vetoed the bill, whereupon it was promptly passed over his veto by a vote of 196 to 73 in the House and 46 to 19 in the Senate.

125. THE SHERMAN ACT OF 18901

BY HORACE WHITE

On July 14, 1890, Congress passed an act for the issue of an indefinite amount of legal-tender notes for the purchase of silver bullion. This is commonly called the Sherman Act. The notes were to be redeemed on demand in "coin," either gold or silver, at the discretion of the Secretary of the Treasury, but it was declared in the words of the act to be "the established policy of the United States to maintain the two metals on a parity with each other upon the present legal ratio or such ratio as may be established by law." This was a hint rather than a command to the Secretary in favor of gold redemption. The notes were declared in the act to be "legal tender in payment of all debts, public and private, except where otherwise expressly stipulated in the contract." In practical effect this was a fresh issue of greenbacks in time of peace, and of unlimited amount. The only restriction was as to the rate of issue, which was to be the sum necessary to pay for 4,500,000 ounces of silver bullion each month at the market price.

The act of 1890 was not grounded upon financial considerations. It was a part of a political trade. In the Senate, April 29, 1896, Senator Teller of Colorado gave what he called the "unvarnished history" of the Sherman Act, which has never been contradicted. He said that the Republicans desired to pass the McKinley tariff bill. The silver men desired to pass a free-coinage bill. The latter had a majority in the Senate, with power to adopt a free-coinage clause as an amendment to the tariff bill and thus compel the House to adopt it or lose the latter bill altogether. They did not follow that plan because they knew that President Harrison would veto a free-coinage bill, even if, in doing this, he should kill the tariff bill. So the silver senators 'determined to adopt, not a free-coinage measure, which would certainly be vetoed, but the nearest approach to it, and put this measure on its passage ahead of the tariff bill. The Sherman silver bill was then passed by the Republicans as the price for securing the passage of the McKinley tariff bill.

I

Adapted from Money and Banking, pp. 159–60. (Ginn & Co., 1895.)

126. THE SILVER DEBATE OF 1890'

BY ROBERT F. HOXIE

The typical advocate of free coinage of silver logically began his discussion with a résumé of the present economic conditions. Hẹ found a marked depression in agricultural interests, a vast accumulation of debts and mortgages, a depression of mining interests, an era of falling prices, and a widespread feeling of discontent among the masses. He assumed this era of business depression accompanied by falling profits, falling wages, and enforced idleness to be permanent under the present conditions and to be due to certain general causes: (1) a lack of confidence and business enterprise; (2) a low range of prices; (3) increasing indebtedness; (4) the depression of our great silver-mining industry. There were developed four trains of reasoning, more or less dependent, yet quite distinct, to prove in general that the demonetization of silver did actually produce these effects. and that its remonetization would remedy these evils.

The first of these may be called reasoning for National Bimetallism; the second, reasoning for Currency Inflation; the third, reasoning in the interest of the Debtor Class; the fourth, reasoning in the interest of a Special Industry. These lines of reasoning will now be examined in order.

A. THE REASONING IN FAVOR OF BIMETALLISM

The reasoning in favor of national bimetallism assumed that the currency laws of 1873 induced the present industrial evils by cutting the nation off from certain benefits and safeguards of the double monetary standard, and that the establishment by law of free silver coinage within the United States alone would restore and maintain the double standard for the nation, with all its assumed benefits. The first step in this reasoning was the proof of the virtues of bimetallism. The arguments advanced were: (1) arguments of sentiment; and (2) arguments of theory. The arguments of sentiment were those most frequently advanced in this debate by all classes of silver advocates. They may be called the universal free-coinage arguments. They are easily understood and appreciated, and may be used effectively by Congressmen to catch the popular ear, though having no economic bearing. In the line of sentimental argument, it was urged that the two metals were made money by the "fiat" of the Almighty.

'Adapted from "The Silver Debate of 1890,” Journal of Political Economy, I (1892-93), 545-73.

Said Senator Teller: "Mr. President, the question presented, not for the American people alone, but for the entire world, is whether we shall do business in the future as we have done business in the past, or until within the last seventeen years, by the use of the two precious metals, not made money by law, not made money metals by the edict of legislative minds, not by the consent of the merchants, but by the fiat of the Almighty, when he created these two metals."

The age and honor of the bimetallic system were frequently brought forward. A striking example is from the speech of Congressman Lane: "Gold and silver should be equally valuable as money. They were so used for over three thousand years and down to 1873. They served together as the money of ancient and modern civilization. They were good enough for Abraham in his day, and Christ himself used coins, not silver certificates, to pay taxes when he was on earth. Gold and silver adorned the Temple of Solomon, and for centuries they have sustained commerce and navigation."

The most effective of these arguments, however, appealed to patriotism. Gold and silver were the money of our fathers, for the bimetallic system was adopted by our first financier, and sanctioned by the framers of the Constitution, as the American currency system. These appeals to sentiment, however, deserve only a passing notice.

Of more weight, but less frequently urged, were the theoretic arguments in favor of bimetallism. It was asserted that this system exerted a powerful influence in keeping steady the value of the monetary unit: first, through the power given to both metals of entering or retiring from the circulation freely; secondly, by making it less possible to manipulate the currency; and thirdly, by giving free play to an automatic adjustment of metallic production to the needs of increasing business; a further argument, on which much stress was laid, assumed that a bimetallic currency is a safeguard against panics, providing adequate means of metallic liquidation in a time of failing confidence, one metal at the present rate of production and growth of business being inadequate as a credit basis. These arguments, with perhaps a single exception in either House, were not combated. by the opponents of free coinage.

Another argument in this connection assumed, in direct opposition to the known fact as demonstrated by our failure to secure international co-operation, that the commercial world is eager for the reinstatement of silver and that only the courageous effort of one nation is necessary to enlist world-wide assistance. Senator Vance