ii
All other business having come to a stop while this matter was at an impasse, a truce was effected in this wise by law: Gold should remain paramount, nominally, but the Treasury should buy each month a great quantity of silver bullion, turn it into white money, force the white money into circulation and then keep it equal to gold in value. Now, the amount of precious metal in a silver dollar was worth only half as much as the amount of precious metal in a gold dollar. Yet Congress decreed that gold and silver dollars should be interchangeable and put upon the Treasury a mandate to keep them equal in value. How? By what magic? Why, by the magic of a phrase. The phrase was: “It is the established policy of the United States to maintain the two metals at a parity with each other by law.”
Naïve trust in the power of words to command reality is found in all mass delusions.
The Coxeyites were laughed at for thinking that prosperity could be created by phrases written in the form of law. Congress thought the same thing. It supposed that the economic distress in the country could be cured by making fifty cents’ worth of silver equal to one hundred cents’ worth of gold, and that this miracle of parity could be achieved by decree.
Anyone would know what to expect. The gold people ran with white dollars to the Treasury and exchanged them for gold and either hoarded the gold or sold it in Europe. In this way the government’s gold fund was continually depleted, and this was disastrous because its credit, the nation’s credit in the world at large, rested on that gold fund. It sold bonds to buy more gold, but no matter how fast it got more gold into the Treasury even faster came people with white money to be redeemed in money the color of red inclining to yellow, and all the time the Treasury was obliged by law to buy each month a great quantity of silver bullion and turn it into white money, so that the supply of white money to be exchanged for gold was inexhaustible.
Wall Street was the stronghold of the gold people. It was to Wall Street that the government came to sell bonds for the gold it required to replenish its gold fund. The spectacle of the Secretary of the Treasury standing there with his hat out, like a Turkish beggar, was viewed exultingly by the gold people. “Carlisle’s Bonds Won’t Go,” said the New York Sun in a front page headline, on one of these occasions. Carlisle was the Secretary of the United States Treasury, entreating the gold people to buy the government’s bonds with gold. They did it each time, but no sooner was the gold in the Treasury than they exchanged it out again with white money.
This could not go on without wrecking the country’s financial system. That would mean disaster for everyone, silver and gold people alike; yet nobody knew how to stop. The silver people said the solution was to dethrone the gold token and make white money paramount; the others said the only way was to cast the white money fetich into the nearest ash heap and worship exclusively money of the color red inclining to yellow.