January 20, 1871 (vol 16, p. 399 ibid). These "securities" amounted on April 30, 1878, in the aggregate to $1,262,765,350.

The Navy Pension fund (13) represents the proceeds of a certain class of forfeitures, prize money, etc., which stand to the credit of this fund on the Treasury books, amounted on April 30, 1878, to $14,000,000, and bears three per cent. currency interest; such interest is applied annually in the payment of navy pensions or for the relief of disabled naval officers, seamen or marines (vide p. 932, Rev. Stat. of 1875).

The little items of "16. Mexican Indemnity Stock" ($1,104.91), of "18. Bounty Land Scrip" ($3,400), and of "38. 3 per cent. certificates ($5,000)," represent outstanding issues of Government paper (presumably destroyed) which are of too slight importance to justify occupying space with detailing their history.

None of the foregoing items will be claimed by any one as belonging in any table of "currency."

41. THE CERTIFICATES OF DEPOSIT-$28,315,000.

are issued under the law of June 8, 1872 (vol. 17, p. 336, Stat. at Large), which authorizes national banks to deposit United States notes in sums of not less than $10,000 with the Secretary of the Treasury, and receive therefor non-interest bearing certificates, which may count in lieu of said notes as part of the bank's reserve, and may be accepted in the settlement of clearing house deposits. The law further provides that said certificates shall not be so used as "to create any expansion or contraction of the currency," and that the notes deposited shall be held in the Treasury as "special deposits" for the redemption of the certificates issued, and not as part of the available "cash on hand." Plainly these certificates are a piece of financial machinery devised for the accommodation of the banks, and do not belong in a "currency" table.

43. THE COIN CERTIFICATES,

Provided for by the act of March 3, 1863 (Vol. 12, page 709, Stat. at Large), represent gold coin and bullion deposited in the Treasury (to the amount of $54,981,500, on April 30, 1878), and are receivable for all public and private payments exactly as is gold. 44. The silver certificates" ($63,000, on April 30, 1878), represent in precisely the same way silver coin and bullion, and were provided for by the act of February 28, 1878, remonetizing the silver dollar. Both these certificates must be considered as part of "the currency"

whenever the premium on coin ceases to exist, as their relations (in value, etc.) to the circulating medium of the country are precisely those of the metallic money or the bullion which they respectively represent. The silver certificates were therefore a currency" item on April 30, 1878, but the gold "coin certificates ' were not.

ADDITIONAL "CURRENCY."

These public debt statements do not cover two items which belong in any table of "currency," viz: (1.) Bank notes and (2) coin when it is not at such a premium as to make it a commodity. The latter was the condition of all coin above the nickel grade in 1865; therefore no such item belongs in that year's table of "currency." The bank notes of all kinds outstanding in 1865 (the date was October 31, but there was no important change in their aggregate total between June 30 and that day) were thus estimated in the Secretary of the Treasury's report for that year (p. 9):

Notes of National Banks..............
Notes of State Banks..

.$185,000,000 65,000,000

The amount of national bank notes outstanding on April 30, 1878, was $321,709,559. (See Senator Ferry's speech, based on official tables.) The Director of the Mint, in his official report, prepared on April 3, 1878, (appendix 9, p. 70, Secretary Sherman's conference with the House Committee on Currency), estimated the amount of gold coin and bullion in the country then at $200,000,000, and of silver coin and bullion at $65,000,000. Of these sums, none of the gold could be said to belong to the "currency," although the premium was so small that it was on the very verge of being added thereto, but about $50,000,000 of the silver (fractional coins, trade dollars, Mexican coins, and the remonetized dollar) was in "circulation" and therefore part of the " currency" of that date.

A COMPARATIVE STATEMENT.

From the foregoing it appears that the undisputed items making up the tables of "currency" in 1865 and in 1878 are as follows:

The second table will not be questioned by any one, and is complete. To the first one should be added more or less of the "temporary loan certificates," "certificates of indebtedness," "one and two year five per cents," "compound interest notes," and "seven thirties." The question is, How much? The men who are industriously at work seeking to create a popular belief that there has been "an enormous contraction of the currency," claim that all those items should be added bodily. By this process of computation, they figure up the magnificent total of $1,960,043,696.16—their two "billions of currency!" It remains to examine into the admissibility of these calculations with the light cast upon this point by official and 'unofficial documents, dealing with the subject at the time, and published years before the present controversy arose. The question is,

WHAT PERCENTAGE OF THE SEVEN-THIRTIES, THE INTEREST BEARING LEGAL TENDERS, AND THE CERTIFICATES DID IN 1865 CIRCULATE AS CURRENCY? It is certainly clear that the natural probabilities are all against the circulation of such issues of Government paper. Gold ceases to remain in "the currency" when it rises to one or two per cent. premium; by 1865 the compound interest notes, with their accrued interest, must have been worth at least six per cent. premium. The seven-thirties" (bearing 7 3-10 interest) were certainly no more liable to be used as currency "than are the four, four and a half, and five per cent. bonds now outstanding. Even the legal tender attribute does.not offset these natural tendencies of such issues; gold has always been a legal tender, and yet it will not act as "currency" when it commands a premium in the money market. Two causes in 1865 disturbed somewhat the normal operations of these fundamental laws of "currency," viz:

1. The banks were allowed to hold these interest-bearing legal tenders as part of their reserves, and this circumstance undoubtedly released for general circulation an equal amount of the "greenbacks.'

2. The tremendous industrial activity due to the war and the enormous disbursements of the Government did give to part of such

issues something of an ephemeral and forced circulation, of which the general history was this: They were paid out to the Government creditors, and after two or three exchanges (at the most), and as soon as the interest began to accrue upon them, went into the possession of bankers, capitalists, and investors, to be soon funded into long term bonds.

From these two sources came all the contributions made by the interest bearing issues of the Government to the volume of the war currency. After full allowance is made for these disturbing elements (as will be done hereafter), it can justly be said that there is as much ground, and no more, for including the interest-bearing issues of 1865 in a table of "the currency" for that year as for putting the present fivetwenties, ten-forties, and funded loan bonds in a table of the currency for 1878. On such an absurd basis of computation the volume of money now in existence is also over "two billions." And on this theory there can be no demonstration of any "contraction" what

ever.

THESE ISSUES MADE INTEREST-BEARING SO THAT THEY SHOULD NOT CIRCULATE.

The records of the Government clearly show that the legislators of the war era fully understood "the laws of currency" above set forth, and made these various issues interest-bearing for the express purpose of removing them promptly from the "circulation" and checking the already rapid progress of inflation. A little cool reflection must suffice to convince any man that the Government would not have paid out any interest-bearing legal tenders or certificates, except from a wish to avoid unduly increasing the volume of the paper circulating medium. Had this consideration not prevailed, certainly the Treasury would have printed and disbursed more "greenbacks" and not have burdened itself with an unnecessary interest charge. The reason, and the only reason, for making these issues interest-bearing was to keep them by that means out of ordinary circulation. This is evident on the face of the subject, but for the benefit of the sceptical, proof can be added. In 1862 (in the debate on the legal tender bill-vide Globe of February 6, 1862, p. 689), Thaddeus Stevens sneered at—

a kind of currency never before known, a' circulation bearing interest. Bonds or notes intended for investment bear interest, but no one expects they will be used as currency; whether in the shape of bonds or notes they will be used only as investments, or as pledges on which to procure loans."

The following is a quotation from the report of the Secretary of the Treasury for 1864 (p. 3):

It will be seen that, by the several acts of Congress referred to, Government paper as a substitute for coin, under the respective designations of the United States notes and Treasury notes, might be issued to the amount of $850,000,000, viz: United States notes, not bearing interest to the amount of $450,000,000, * * and $400,000,000 of Treasury notes, bearing interest, and which it was hoped and believed would not remain in circulation, as they could be made a legal tender only for their face value without interest.

In the report of the Secretary for 1865 is this statement (p. 3):

"The interest bearing notes, which were a legal tender for their face value, were intended to be a security rather than a circulating medium."

These quotations certainly sustain the assertions which preceded them, and they could be materially amplified if that were necessary.

CHARACTER OF THE EVIDENCE ADDUCED TO SHOW THAT THESE ISSUES WERE CURRENCY.

The men who insist that all these issues should be treated as "currency items" rely chiefly upon sheer assertion to counterbalance the weight of all the natural probabilities of the case and the manifest and expressed intention of the law-makers of that period. By way of "proof" but little is advanced by them; what there is of it (as far as could be ascertained by several months watching of the speeches and papers published in the Northwest by these advocates of an irredeemable currency), can be briefly stated and readily shown to be without force :

I. References are frequently made to Mr. E. G. Spaulding's valuable "Financial History of the War" (published in 1869), as justifying the treatment of the entire volume of the issues now under consideration as part of the currency. A careful examination of his work will show how utterly without foundation is such a claim. instance of the temporary loan certificates it says (page 153):

For

"The certificates circulated to some extent at the clearing houses and among individuals, which was one mode of increasing the credit circulation of the country and thereby aiding the general inflation.

Of the certificates of indebtedness the work says (p. 153):

"The certificates were in the similitude of bank notes fitted for circulation as money, and did circulate to a considerable extent as currency until there was such an accumulation of interest upon them as to make it an object for capitalists to hold them as an investment.

It will be seen that the Spaulding history clearly asserts the limited character of the circulation of these issues. It also speaks (pages 195 and 196) of the issue of the one and two year five per cents in such terms as to show that their circulation was only a partial one. In describing the condition of the currency just after Lee's surrender, in April, 1865, the work says (page 188):