DRAFT OF A LETTER TO THE HONORABLE HUGH MCCULLOCH, SECRETARY OF THE TREASURY
"Greystone, Yonkers, N. Y., February 11, 1885.
"Dear Mr. McCulloch,—I am much obliged for the kind attention you gave to my inquiries. I have been delayed in writing to you my acknowledgments, from the lack of leisure to add some observations which I desired to make. And if compelled to differ with you in any respect, I need not say that it is with a high and respectful appreciation of your opinions and abilities in finance.
"I agree that a currency strictly limited in amount so as not to exceed, but rather to be less, than the effective demand for necessary public use, may be kept in circulation at a rate higher than its intrinsic value. But that is true only on very stringent conditions.
"As to making a market for silver coin by withdrawing bank-notes and treasury notes of less denomination than five dollars—and ultimately of less denomination than ten dollars—there are grave difficulties. In your letter it is remarked:
"'You say that fifty millions of silver is about all that the country can absorb. This is true; and it is true simply because we keep in circulation upwards of fifty millions of one and two dollar notes. If these notes were withdrawn, their place would immediately be filled with silver and gold. If the five-dollar notes were also retired, all of the silver dollars now in the Treasury vaults would be in circulation, as they ought to be. On this point, permit me to call your attention to page 34 of my report. I wish you could see your way clear to use your great influence in favor of the retiring of the one and two dollar United States notes, to be followed in due time by the retirement of all notes below ten dollars.'
"The habits of the people, and their unanimous and strong preference for the portable currency of paper over the cumbrous currency of silver, interpose an almost insurmountable obstacle to such a measure. Borrowing the idea from the practice of England, and supported by most economical writers, that measure has been often advocated, and sometimes attempted to be put in practice. But the expedient has never made much progress, and it has been resisted and rejected by the people at every opportunity.
"About fifty years ago a law was passed, by the State of New York, suppressing bank-notes of a less denomination than five dollars. Although in my general views friendly to free banking, I justified myself in supporting the measures on the ground that it was legitimate to apply an artificial restraint to an artificial system. Enclosed is a copy of the resolutions drawn by myself, opposing the repeal of that law.
"On that issue, more than on any other single question, the party of Jackson and Van Buren was overthrown in the State of New York in the election of 1838. William L. Marcy was defeated as a candidate for re-election as Governor, and 'Small-Bill' Seward was elected in his place. The law was immediately repealed. The question had some special disadvantages at that time; but the indications of the popular wishes were unquestionable.
"I understand from members of my family, that ladies shopping at retail stores in New York city almost universally refuse to take silver dollars. Even one silver dollar is considered an incumbrance, is, in fact, too large to be carried in a ladies porte-monnaie, while several of them are quite out of the question.
"I understand, also, that our small notes are very popular in Canada, and in the Bahama Island, being preferred to silver coin.
"I think that the best way of making a market for silver through the small circulation, is for the government to receive the silver at its intrinsic value, and to issue certificates against it dollar for dollar.
"Among your observations on the question of the expediency of making the nominal value of the silver dollar correspond to its intrinsic value, it is suggested:
"'Another objection might be that the adoption of this standard would probably operate to prevent joint action, by the leading commercial nations, in fixing a ratio of silver to gold which would be concurred in by all nations; and, perhaps, thus delay or frustrate that which would seem to be very desirable. No legislation by the United States alone, would be effectual in fixing the rules of silver outside of its own boundaries. Joint action of the principal powers appears to be the only mode through which a satisfactory solution of the question can be reached.
"'If there is no hope that such an arrangement can be made, it would be desirable that the intrinsic value of the silver dollar should be brought so nearly as possible to its nominal value.'
"After looking over the discussions of the last two International Conferences, I cannot avoid the conclusion that it is hopeless to make any further attempt to obtain the co-operation of the leading commercial powers in fixing a ratio between gold and silver coins, and that the contingency in which you would deem it 'desirable that the intrinsic value of the silver dollar shall be brought as nearly as possible to its nominal value,' has already occurred.
"The statement of the Treasurer accompanying your letter for January 26, 1885, is as follows:
| Gold coin | $172,439,478 |
| Gold bullion | 64,195,150 |
| Total gold assets | $236,634,628 |
| Gold certificates outstanding | 107,917,890 |
| Amount of gold actually owned | $128,716,738 |
| By the statement of the Treasurer for January 31st, it appears that United States notes on hand were $43,958,468 83, against which were certificates of deposit, $30,130,000, leaving a balance of | $13,818,468 83 |
| National bank notes | 13,880,647 67 |
| Deposits in nat. banks | 13,491,186 39 |
| Gold actually owned | 128,716,738 00 |
| Total gold assets | $169,917,040 89 |
Trust Funds:
| Five per cent. nat. bank | $12,980,825 43 |
| Fund for redemption of notes of nat. banks "failed in | |
| liquidation" and reducing circulation | 39,671,925 54 |
| Undistributed assets of failed nat. bank | 416,131 41 |
| Amount forward | 53,068,882 38 |
| Brought forward | $53,068,882 38 | |
| Agency for paying D. C. bonds | 444,161 55 | |
| Treasury transfer checks and drafts outstanding | 2,490,273 13 | |
| Interest due and unpaid | 1,966,923 86 | |
| Matured bonds and interest | 250,148 90 | |
| Called bonds and interest | 5,203,077 78 | |
| Old debt | 756,188 31 | |
| P. O. Department acct | 2,712,968 02 | |
| Disbursing officers' balances | 25,298,865 44 | |
| Fund for redemption of nat. gold notes | 146,774 09 | |
| Miscellaneous | 86,681 64 | |
| $92,424,945 10 | ||
| $169,917,040 89 | ||
| 92,424,945 10 | ||
| Balance gold assets | $77,492,095 79 |
"These two statements are for different periods. The results, therefore, are not exact. They afford, however, the basis of a conjecture as to the actual condition of the Treasury. Although the amount really belonging to the Treasury, and over which it has permanent control, is very much reduced, I presume it ventures to use, for temporary purposes, temporary balances liable to be drawn at the will of other parties and trust funds, upon the assumption that the balances are likely to remain about the same, as a bank uses its deposits.
"Renewing the assurance of my high consideration and best wishes, I remain,
"Very truly yours."