Seventeen Talks on the Banking Question / Between Uncle Sam and Mr. Farmer, Mr. Banker, Mr. Lawyer, Mr. Laboringman, Mr. Merchant, Mr. Manufacturer

by Charles N. Fowler

Fourth: Then came the return to sound conditions when paper issues were discarded and the effort to make something out of nothing was abandoned.

Mr. Lawyer, I want to ask you now whether you do not think we have made a case against you so far as the unwisdom and utter folly of Government issues of paper money is concerned.

Mr. Lawyer: I must admit that the facts are overwhelming. I had never taken the time nor trouble to investigate the subject, but had assumed that one of the functions of our Government was the issuance of money, even paper money, if you like. It seems from what has been shown here and last Wednesday night as well that this scheme of issuing paper money has been tried, not only by everyone of our thirteen Colonies and the Continental Congress, but by practically every country of the world at some time or other. It was tried in Austria, England, France, Germany, Italy, Russia and is now going on in nearly every one of the South American countries with the same experience, I am informed, that other countries have suffered. Now, so far as the facts have been disclosed, there is not a single instance in which the scheme has been tried that has not resulted in precisely the same way—complete failure and ultimate dishonor and repudiation if persisted in as a principle.

Under the circumstances I must say, as every fair-minded man must, that the practice has been an absolute failure, and therefore it must be admitted that the principle must be unsound, for it seems to have worked nowhere, although tried under every conceivable condition. Of course I am compelled to give in on the unsoundness of the scheme. Now, you understand, that my admission as to the unsoundness and unwisdom of the practice does not carry with it my admission that the United States Government has no constitutional right or authority to issue paper money if it chooses to do so.

Mr. Banker: I understand perfectly well that your admission of the one point has nothing whatever to do with the constitutional question, but I wanted to know your conclusion after a consideration of the facts as presented first.

I think everyone here will agree that the disastrous experiences of the colonies and of the Continental Congress in issuing paper money must have forced this question upon the minds of the framers of the Constitution, as one of the very greatest importance to be settled by them. Certainly what they thought about it would indicate what they intended to do. I will first show this by what they said, and then I will demonstrate what they intended to do by what they actually did do in the Constitutional Convention.

Alexander Hamilton, in June, 1783, set forth explicitly in a resolution for a new Constitution of the United States of America his deliberate opinion in these words: "To emit an unfunded paper as the sign of value ought not to continue a formal part in the Constitution, nor ever hereafter to be employed; being in its nature pregnant with abuses and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of Government and to the morals of the people."

In 1786, Thomas Paine, the author of "Common Sense," in an opinion on Paper Money used this language: "The laws of the country ought to be the standard of equity and calculated to impress on the minds of the people the moral as well as the legal obligation of political justice. But tender laws of any kind operate to destroy morality and to dissolve by the pretence of law what ought to be the principle of law to support, reciprocal justice between man and man; and the punishment of a member who should move for such a law ought to be death."

In the summer of 1785 Richard Henry Lee, then president of Congress, warned Washington of a plan formed for issuing a large sum of paper money in the next assembly of their state, adding as his opinion: "The greatest foes in the world could not devise a more effectual plan for ruining Virginia. I should suppose every friend to his country, every honest and sober man, would join heartily to reprobate so nefarious a plan of speculation."

Washington replied to Lee in these words: "I never have heard, and I hope I never shall hear, any serious mention of a paper emission in this state. Yet ignorance is the tool of design and is often set to work suddenly and unexpectedly."