government issues as proposed would not be sufficient to preserve the currency at par with gold?

Mr. BEARD. I do not say that. I think the preserving it at par with gold would depend on the good faith of the country, up to that time when the expansion was so great that they could not redeem. The tendency would be to too great expansion. The CHAIRMAN. And you think it would sooner or later get beyond the power of the government to redeem in gold?

Mr. BEARD. That would depend on the wisdom of Congress.

The CHAIRMAN. It would be left to the wisdom of Congress, and if the people who wanted more money, as they say, were able to elect their Representatives, the thing would be done.

Mr. BEARD. Yes; there would be no restriction as there is to-day on individuals in issuing currency.

The CHAIRMAN. Banking then would rest upon popular suffrage?

Mr. BEARD. It would rest upon the will of Congress.

The CHAIRMAN. That is the result of popular suffrage?

Mr. BEARD. It might be the result of misdirected popular suffrage.

The CHAIRMAN. Yes; but directed wrongly or rightly we have to go according to the will of the majority.

Mr. BEARD. We have the silver legislation by the will of Congress and it does not show the results that were expected. It is found impossible to circulate that silver among the people, and if it does get paid out it immediately comes back for customs; all of it that is legal tender for customs goes back into the vaults.

The CHAIRMAN. Then that is an illustration of the effect of yielding to the popular demand, because there was undoubtedly an overwhelming popular demand for that silver legislation (I suppose every member of Congress was conscious of that fact), but the popular judgment is not always sound about matters of finance.

Mr. BEARD. Now, with regard to the national-bank system, there is another point which comes in, which tends to regulate it. The system is called the national-bank system, but there is no national bank. It is open competition, the same as in my own business, the boot and shoe business, or any other. The price of money is regulated by the competition between the men who have money to lend. To-day the borrower who has good security has the advantage, as you know, in all the mercantile centers. The supply is greater than the demand. That point would be in a measure met in case the government furnished the currency and redeemed it, because banking of deposit and discount would be carried on the same as it is now. But here another view comes in. Supposing that the national banks do find it profitable to have the security which they put up for the redemption of their notes drawing interest, that it is a source of profit and helps to pay expenses; if that source of profit is taken away from them the borrower has to make it up in an increased rate of interest. Capital never furnished itself to the community without getting fully paid excepting in times when there is an excess of capital over the demand. My idea is that a bank must have a certain amount of profit to pay expenses and to pay for the use of its money. Now if it gets 1 or 2 per cent. from the legitimate employment of its security pledged as collateral for the redemption of its notes, that has a tendency to increase the competition in banking and to reduce the rate of interest to the general public, and if you cut off that source of profit the banks will look for it somewhere else.

Mr. RICE. It is constantly asserted in the newspapers and in other publications, and even before this committee, that the banks have derived enormous profits out of special privileges; for instance, as high as 60 per cent. per annum. Is there any conceivable method of banking except speculation with capital that could bring about such results as that?

Mr. BEARD. You know that free banking was established when everything was so expanded in price that it required a great deal more money than it does now, and the banking system was, till then, a monopoly, but now it is not.

The CHAIRMAN. There was a limit to the amount.

Mr. BEARD. There was a limit, and the country banks did not have the check of redemption upon them that they had under the old State-bank system. I know when I was conducting business in Vermont, before I came to Boston, the competition among the banks to keep their bills in circulation (which they had to redeem at the Suffolk Bank in Boston) was such that it made them very obliging to the public. After the establishment of the national-bank system, and before free banking was established, there was a while when the country banks had things all their own way. They absorbed all the loose capital of the community and named their own prices for money, or rather, their own rate of exchange, and it was very oppressive to the people, and there was legitimate cause of complaint for some years before free banking was established.

The CHAIRMAN. But you think free banking has remedied that, by promoting competition. Mr. BEARD. Yes.

The CHAIRMAN. Then that grievance belonged to a system that has been perfected by legislation?

Mr. BEARD. Yes.

Mr. THOMPSON. Since you have spoken of what you call the immorality of paying bonds in greenbacks, will you explain, if you please, in what the immorality consists in paying a bond that simply calls for current funds in the currency of the country?

Mr. BEARD. That would necessitate going into the argument of the whole question, which has been argued over and over again.

it.

Mr. THOMPSON. I do not speak about the policy of it, I speak about the morality of

Mr. BEARD. The question, you know, was argued fully, and Congress, by a solemn vote, in 1869, decided what the bonds should be paid in, and no matter what the understanding was in the first place, a new obligation was created at that time.

The CHAIRMAN. And a large amount of the bonds have changed hands since then on the faith of that renewed obligation.

Mr. BEARD. And the new bonds which have been issued have certainly been issued with the understanding that they were not to be paid in greenbacks.

Mr. THOMPSON. Of course I mean keeping the volume of currency within the limit established when the law was passed. But suppose the government has greenbacks to-day in the Treasury to redeem a bond that calls for a thousand dollars, without saying whether it shall be gold, silver, or greenbacks, where is the immorality in redeeming that bond in greenbacks?

Mr. BEARD. If I owed you a note to-day for $500, and offered you in payment a multitude of smaller notes of $10 each, you would not think that I had paid my note for $500.

Mr. THOMPSON. Why not?

Mr. BEARD. Because I would not be giving you anything but my paper.

Mr. THOMPSON. If I owed you a thousand-dollar bond, dated since the passage of the greenback law (or before it, which makes the case stronger), couldn't I pay it to-day legally in greenbacks?

Mr. BEARD. Provided you gave that bond to be paid in greenbacks.

Mr. THOMPSON. Provided that was the law. An individual can pay his debts in greenbacks where the contract does not specify the kind of money. Why shall not the government be allowed to do the same?

Mr. BEARD. The government does not accept greenbacks for its customs duties. Mг. THOMPSON. I am not speaking of the customs. I am speaking of the government redeeming its debts or changing the form of its debts.

Mr. BEARD. I cannot go into that question at this time, because it is one that has been thoroughly argued, and Congress has decided it. Every man who invested in those bonds expected that they would be paid in gold.

Mr. THOMPSON. What right had he to expect that?

Mr. BEARD. It was the universally accepted feeling of the people and the declaration of Congress.

Mr. THOMPSON. That declaration was long afterward.

Mr. BEARD. Yes; after the people had had time to reflect.

Mr. THOMPSON. Yes; but in the bond itself, is there any guarantee that it shall be in gold?

Mr. BEARD. If I give a note to pay so many dollars, I do not guarantee to pay it in gold.

Mr. THOMPSON. No; and that is my point. Where the government gives a bond to be paid in "lawful money" at a certain time, without specifying the kind of money, and when in fact, at the time the bond was issued, legal-tender was money, where would be the immorality in redeeming that bond in legal-tender?

Mr. BEARD. Legal-tender was made money only partially. The government discredited it as money for its own purposes, the payment of duties.

Mr. THOMPSON. It was made money for all purposes except for the payment of duties on importations.

Mr. BEARD. The government has never passed a solemn act saying that legal-tender is money and shall be considered as money. It has only said-and that is a point of doubtful constitutionality, and it requires, report says, the reorganization of the Supreme Court to secure the decision-that it is legal tender for debt.

Mr. THOMPSON. After all, doesn't it become a judicial question and not a legislative one, what kind of currency the bond is payable in?

Mr. BEARD. The common honesty of the country found voice in the declaration of Congress in 1869, that it was payable in coin, and that the public faith required it to be paid in coin; and the sentiment of the country, just so far as it argues the other way, becomes demoralized, and some of our legislators, I am sorry to say, have lent their aid to demoralize the country upon this question.

Mr. THOMPSON. Then you look upon it not as a legal obligation but as a moral one? Mr. BEARD. I look upon it as a legal obligation because it is a moral one.

Mr. THOMPSON. But there is nothing in the bond about gold, greenbacks, or currency. Mr. BEARD. I speak of the common understanding.

Mr. THOMPSON. But the common understanding is not the contract. The written paper is the contract.

Mr. BEARD. Well, that looks to me a good deal more like a quibble than a sound argument.

Mr. THOMPSON. Don't you know the other fact, that those bonds were purchased with greenbacks in ninety-nine cases out of a hundred?

The CHAIRMAN. They were issued sometimes for iron.

Mr. THOMPSON. Now, why should not it work both ways? If a greenback will buy a government bond why shouldn't it redeem a government bond?

Mr. BEARD. When the greenbacks were issued the people believed that ultimately the government would redeem them. When the bonds were issued the people believed that they would be like the bonds of other countries, redeemable in what was considered money throughout the commercial world, and not in something which, by a forced interpretation that dishonesty might suggest, might be called money. That was the understanding, and the common honesty of the people found expression in the act of Congress passed afterward, and the issuing of new bonds and the pledging of the public revenue in gold for the payment of interest.

Mr. THOMPSON. I admit that whenever the bond recites the kind of money it is to be paid in it ought to be paid in that money, but I understood you to go a little further and to intimate that silver should not be introduced as currency.

The CHAIRMAN. He did not intimate that. He simply stated, as a matter of fact, that the silver has not been able to get into general circulation.

Mr. BEARD. I do not object to silver as currency. I simply say that silver worth 90 or 88 cents on the dollar does not circulate among the people.

The CHAIRMAN. The bond is made payable in "lawful money." I take that bond to the Treasury and ask its redemption, and they give me a thousand dollars in greenbacks and say, "That is lawful money." I say, "All right." I take my greenback, and I find upon it, "The United States will pay to bearer $1,000," and I go back to the Treasury and say, "Pay me $1,000." What was meant then, and now, and all the time by the words "one thousand dollars" printed on that greenback?

Mr. BEARD. The common interpretation of that would be that it meant a thousand dollars according to the commercial standard of the civilized world.

The CHAIRMAN. It could not have meant a piece of paper which merely had that promise on its face, because if it did mean that the paper would have said "This is one thousand dollars," which it does not say. It says the government will pay one thousand dollars. Now what were the only dollars known to the Constitution? Mr. THOMPSON. Greenbacks.

The CHAIRMAN. That was the promise the first time that the greenbacks appeared. The first greenback ever issued had on it a promise to pay one thousand dollars. What dollars must have been contemplated?

Mr. THOMPSON. Does not that show that it is a legal question and not a legislative question at all?

Mr. BEARD. It is a political question.

Mr. THOMPSON. You told us awhile ago that the popular will ran counter to morality?

Mr. BEARD. Questions between the government and the people as to the good faith of the government in dealing with the holders of its obligations must be political questions. The holder of an obligation of the government stands an unequal chance. The government has all the power in its own hands, and the question whether it shall treat him fairly must be a political question. My definition of a political question would be that which Charles Sumner gave years ago in accepting the election for United States Senator, namely, that politics is simply morals applied to public affairs. Now is it right or honest for the government, because it has the power, to seek to evade its obligations?

Mr. THOMPSON. You assent to the proposition of the chairman that a bond which calls for $1,000 in lawful money can be paid, or may be paid, in the greenback, which promises to pay $1,000, omitting the phrase "in lawful money." Now, do you mean to say that the contract of the government was that a bond might be paid in greenbacks, and then a man might turn around at the same counter and insist that that greenback must be redeemed in gold--that that change in the form of the indebtedness carried with it such a change in the mode of payment?

The CHAIRMAN. How can you pay a man with a promise to pay? How can you pay a debt with a debt?

Mr. BEARD. What has been the practice of the government?

Mr. THOMPSON. I am not inquiring about the practice of the government; I am speaking of the morality of the question.

Mr. BEARD. I never owned a government bond in my life, and I don't know that I ever read one. I don't know whether they read "in lawful money or not. Mr. THOMPSON. Where they say "coin" they ought be paid in coin, of course; where they say "gold," in gold they must be paid. But are the obligations of the government any more sacred than the obligations of any honorable man?

Mr. BEARD. That is just the point I made in the first place, that the obligations the government should be as sacred as those of an honorable man, and so far as the issue of the bonds is concerned, I say that every holder of them expected that they would eventually be redeemned in gold or its equivalent, and the government has no right to pay off its bonds in greenbacks any faster than the people are willing to accept those greenbacks for bonds; and when the government will honor its own promise-when it will make its dollar a dollar-then it makes no difference what it pays the bond in, because greenbacks will bring the gold.

Mr. THOMPSON. These bonds had about twenty years to run when they were issued. Now, was there any sane man in the United States who believed that the government at the end of twenty years would be able to redeem all those bonds in gold?

Mr. BEARD. Sane men expected that they would do just what they have done.

Mr. THOMPSON. That is not the point. Did any sane man believe that the government had or would have the ability to pay, dollar for dollar, those bonds in gold at any time within twenty years, or even within forty years?

Mr. BEARD. There is many a manufacturer in business who cannot redeem his obligations all at once, but he does redeem them gradually as they mature, and his credit is so good that if he does not wish to redeem them all at that time he can make new

ones.

Mr. THOMPSON. That is not the point. You insist that the government must redeem according to the understanding. Now, I ask you, did any man who bought a government bond when they were issued, believe for a single moment that the government would be able to redeem all its bonds in gold at the expiration of the limit fixed in the bond?

Mr. BEARD. Men believed that if the government was preserved it would be able to redeem its bonds as fast as anybody would call to have them redeemed.

Mr. THOMPSON. Yes; but the government might not care to wait until people called for the redemption of the bonds.

Mr. BEARD. And as no necessity exists for the redemption of the whole, there is no plea of necessity to be made as to the right to pay in greenbacks. If it did not apply in the one case it does not in the other. If it does not do to say that everybody expected to be paid in gold, it will not do to say that the bonds must be paid in greenbacks, because the government could not redeem all in gold when due.

Mr. THOMPSON. The government agreed to pay a thousand dollars in lawful money, or legal tender, within twenty years, and the man who took the bond expected it would be paid in that way. Otherwise the government promised to do what it knew it could not do, because no man believed that the government could pay those bonds in gold in twenty years.

Mr. BEARD. Do you mean to have it understood that the government has a right to force me, holding a government bond, to take pay for that bond in greenbacks. Mr. THOMPSON. Where the bond does not specify that it is to be paid in coin? Mr. BEARD. Yes.

Mr. THOMPSON. Undoubtedly.

Mr. BEARD. Whether it is due or not?

Mr. THOMPSON. No; but where it is due. Assuming that greenbacks are lawful money, the government has clearly the right to pay that bond at the expiration of five years if it chooses to do it, and it is not a question of morality or a legislative question; it is a question for judicial power.

Mr. BEARD. I don't see that judicial power comes in at all. It is a question of the popular will expressed through the national government.

Mr. THOMPSON. No. I am trying to ascertain what the contract is.

Mr. BEARD. If the government chooses to take that ground I do not see that the bondholder has any remedy.

Mr. THOMPSON. You are assuming that the government would be both tyrannical and unjust; I am assuming that the government is seeking to determine what the contract is, and then to carry it out faithfully; and I say that the question what was the contract is a question for judicial determination.

Mr. BEARD. How many people would have taken those bonds with any such idea of the contract?

Mr. THOMPSON. Every man that did take them.

The CHAIRMAN. Suppose the bond paid off in that way, hasn't the bondholder received a promise of the government to pay him $1,000?

Mr. BEARD. But it is the promise of a government that has dishonored itself.
The CHAIRMAN. I understand that, but has not the bondholder a right to go to the

Treasury and claim $1,000 in gold? And, if so, did not that "dollar" mean a gold dollar at the time the bond was issued?

Mr. BEARD. Mr. Thompson's argument carried further would be that it meant a new promise which was to be paid by another promise, and so on ad infinitum.

The CHAIRMAN. That, of course, would be the reductio ad absurdum. What is the use of paying a debt with a piece of paper which means merely the same thing as the obligation that it pays off? Therefore, if Mr. Thompson's view is correct, and the government does pay bonds in greenbacks, it merely gives the man an obligation which entitles him to demand $1,000 in coin.

Mr. THOMPSON. Then what was the use of the act of 1875, which provided that greenbacks should be redeemed in gold after 1879?

The CHAIRMAN. For the purpose of fixing a time when the government would fulfill its obligation, which had been under protest all that time. They could not do it sooner, but they thought they could do it then. That seems to me the reason. Government said, "On that day we will pay you the gold and silver dollar that we were unable to pay when we were in trouble."

Adjourned to August 28.

VIEWS OF CHARLES WYLLIS ELLIOTT.

NEW YORK, August 28, 1878.

Mr. CHARLES W. ELLIOTT appeared before the committee, and stated, in answer to questions by the chairman, that he had been living for the past ten years in Boston, but is now a resident of Nebraska. While in Boston he was engaged in business for quite a number of years. He had established what was called the Household Art Company. He had also been engaged in manufacturing and importing a finer quality of household articles from Europe, and making them in this country. He was now raising horned cattle in the State of Nebraska. He was an agriculturist.

The CHAIRMAN. Have you had occasion, either as a matter of business, or of taste and inclination, to study the question of the depression in business and the causes which have brought it about, and the remedies which may be applied to restore a condition of prosperity?

Mr. ELLIOTT. That is precisely what I have been doing to a considerable extent, both in this country and Europe; and it is for that purpose that I ask the attention of the committee this morning for half an hour.

The CHAIRMAN. You may proceed in your own way.

Mr. ELLIOTT. The evidence which comes before the committee seems to vary very much according to the persons who give it, whether they are among the prosperous classes, or among the unprosperous classes. Just now the committee has been getting the evidence of the prosperous classes, and that evidence is much more favorable than it had been getting. If we are in a good state at present and moving forward to prosperity, that is one thing. If we are not, and if there is a great depression in business and in the labor maket, that is another question, and between these two, seems to me probably to lie something of the truth.

Mr. Elliott proceeded to read his views from a manuscript, which he failed to leave with the cominittee, but of which the following are the points:

1. Machinery and steam have worked an industrial revolution not less important than that worked by the overthrow of the feudal system. Society has not adapted itself to this revolution.

2. The productions of machinery being now more than the consumption, profits have ceased, and one of three things is inevitable; either part of this machinery must be stopped, or the hours of labor must he reduced; or, third, the production of a few laborers must be divided in some way among all those who do not work, as well as those who do labor.

3. Can any of these things be done except by society, acting through its legislatures?

4. As there is now a surplus population in most cities and towns, it is plainly desirable that this surplus shall be got upon the surplus lands, where they can at least get their own food.

5. If this is so, then it is plain that no more public lands should be given to railroads or to other corporations, as they have been so given to the amount of some hundreds of millions of acres.

6. As a railroad is practically a monopoly, is it not plain that the rates of carriage should be fixed by the capitalist, the producer, and the consumer, and not by any one of these classes? Is this not absolutely necessary to secure the public good? And can it be done except by legislative action?

7. As we have already a surplus of laborers in many parts of the country, is it wise to encourage a rapid immigration into the country? Is it not wise to discourage it?