If the Treasury notes of the United States were at this moment convertible into coin, there would be no occasion to declare them a tender; for they would be everywhere, at least in our own country, as good as coin. But the suspension of the banks was followed by suspension of the Treasury, and its notes are now inconvertible paper, which it is proposed to sustain artificially by declaring them a tender. If this proposition be adopted, the Treasury will be enabled to substitute bits of engraved paper for money. Of course, such a proposition, on its face, is obnoxious to objections that make upon me an impression not to be disguised.
Looking at the history of paper money, especially in our own country, we find no encouragement. Its evils were vividly portrayed by the “Federalist,”[179] and have been powerfully presented in this debate by the Senator from Vermont [Mr. Collamer]. Congress, during the Revolution, began, as early as 1775, with bills to the amount of $3,000,000, on their face declaring the bearer entitled to receive the sum specified in “Spanish milled dollars, or the value thereof in gold or silver,” according to a certain resolution of Congress. The bills were receivable for taxes, and the thirteen colonies were pledged for their redemption. Other emissions followed, and, as their credit began to fail, Congress went so far as to declare that whoever refused to receive this paper in payment should “be deemed, published, and treated as an enemy of his country.”[180] As the paper continued to depreciate, Congress became more violent in its support, and even ventured to recommend it as of peculiar value. “Let it be remembered,” said Congress, “that paper money is the only kind of money which cannot ‘make unto itself wings and fly away.’”[181] The sum-total of these bills at last reached upwards of three hundred millions, which in 1780 became so utterly worthless in the hands of their possessors that they ceased to circulate, and have ever since been treated only as curiosities, without positive value. No serious proposition for their redemption has ever been made.
The French assignats, amounting to the enormous sum-total of nine thousand million dollars,[182] issued during the fiery excitements of the Great Revolution, shared the fortunes of American Continental money, passing into the limbo of “things transitory and vain.” Perhaps there is not a country on the European continent, which, during the fearful wars that followed, did not encounter the same experience. I have heard it said that old soldiers in Denmark lighted their pipes with paper money, which had become to them only the record of a broken promise.
Power of all kinds is liable to abuse, and experience shows that the power to issue inconvertible paper is no exception to this prevailing law. The issue may be moderate at first, and sustained by plausible reasons, but it breaks soon into excess. Of course, actual value, or its equivalent, is the life of money, giving to it a circulating quality; and when money begins to be suspected, it loses its circulating quality. But inconvertible paper, even when made a tender, has no actual value, and circulates only because Government commands its circulation. It has no present worth beyond the engraving; therefore all ordinary checks to undue issue of money are wanting. Nothing exists to prevent excess and consequent depreciation; and this danger is verified by history. I refer to it now that I may not seem indifferent to any of the perplexities which surround us.
In some countries a legal tender is gold and silver; in others it is gold alone. In England, since 1816, gold, and not silver, has been the tender for sums of forty shillings and upwards; and since 1833 the notes of the Bank have been a tender for sums over five pounds, everywhere except at the Bank itself and its branches. But it is to be borne in mind that both these metals have positive value in the market equivalent to that of coin; so that coin is value itself. But convertible paper is not value itself; it is only the representative of value; while it is doubtful if inconvertible paper can be called the representative of anything in particular. These considerations are not decisive of the policy now proposed, but they justly incline us to a prudent hesitation.
If we are not deterred by the bad examples of history, or by the acknowledged danger of excess and consequent depreciation,—if we are willing to take the chance of seeing Treasury notes in the same list with Continental money and French assignats, and of having returned soldiers in old age light their pipes with the worthless paper,—if these suggestions are put aside as exaggerated or irrelevant, I ask you not to forget that a constant aim of good government is to secure the immediate convertibility of paper into coin. But, instead of securing such immediate convertibility, or taking any steps towards it, you will for the present renounce it.
Pardon my frankness, Sir, if I declare that the present proposition, when examined carefully, seems too much like bad faith. I say it seems: I would not speak too strongly. Is there not bad faith towards creditors, who are compelled to receive what is due in a depreciated currency? Is there not bad faith towards all abroad, who, putting trust in our integrity, national and personal, have sent their money to this country in gold or its equivalent? And just in proportion as this is so, you cannot doubt that we shall suffer alike in character and resources too; for what resource is greater to a nation or to an individual than a character for integrity? The present proposition must be followed soon by others,—even to the extent of $1,000,000,000. But where shall this vast amount be obtained, and at what cost, when it is seen that we have already undertaken to authorize inconvertible paper as a tender? Credit is volatile and sensitive, and will not yield to force. Do you propose the right way to win the delicate possession? It will not come to you from abroad, where money usually abounds. Will it salute you here at home? And is it good economy to obtain the amount you seek by a policy which will create a disturbing impediment to all your efforts for the larger amounts soon to be required? I put these questions without answering them. It is sufficient for me that I open the difficulties before us; and here I follow the Senator from Maine [Mr. Fessenden], Chairman of the Committee on Finance, who commenced this debate.
In courts of law, experts are summoned to testify on questions of science or art within their special knowledge. If, on this occasion, experts in finance or currency were summoned, I do not know that we should be much enlightened; for, according to my observation, there are such differences among them, and, as the Senator from Maine [Mr. Fessenden] has pleasantly told us, such differences even in the same person, one day and the day after, that it is difficult to place reliance in their counsels. Some tell us that making Treasury notes a tender will be most beneficent; others insist that it will be dishonorable and pernicious. On each side strong words are employed. Which shall we follow?
Crossing the sea, we find similar differences, not, of course, with regard to the present proposition, which is not yet known there, but with regard to the principles entering into this debate. In England the general subject has occupied much attention. As late as 1857 it was brought before a distinguished Parliamentary Committee, and their Report is remarkable for the testimony of numerous witnesses whose experience and knowledge give authority to their opinions. The Report is a financial monument. But among these witnesses are some who were little disturbed by an inconvertible currency, although the weight of testimony was the other way.
Nobody was more positive than Nathaniel Alexander, Esq., head of the firm of Alexander & Co., India merchants. His attention being called to the proper means against the effects of panic on the Bank of England, he proposed, as an assistance to the Bank, another currency, inconvertible, and a tender for Government dues, under Act of Parliament. From its inconvertible character, such a currency, he said, would not be reached by panic, and would therefore contribute to the security of the Bank.[183] This testimony seems to maintain the principle of the present proposition; and I quote it, as showing that the proposition is not entirely without practical authority.