Discarding theories, however ingenious, and following Nature, I call attention to a few practical points, before reverting to those cardinal principles applicable to this subject, from which there can be no appeal.
First. The present proposition for funding is an excellent measure for this purpose, being at once simple and practical: not that it contains any direct promise for the redemption of our currency, but because it places the national debt on a permanent footing at a smaller interest than is now paid. By this change three things essential to financial reconstruction are promoted: economy, stability, and national credit. With these once established, specie payments cannot be long postponed.
Secondly. Another measure of immediate value is the legalization of contracts in coin, so that henceforth all agreements made in coin may be legally enforced in coin or its equivalent. This would establish specie payments wherever parties desired, and to this extent begin the much-desired change. Contracts in coin would increase and multiply, until the exception became the rule. There would for a time be two currencies; but the better must gradually prevail. The essential equity of the new system would be apparent, while there would be a charm in once more looking upon familiar faces long hidden from sight, as the hoarded coin came forth. Nor can any possible injury ensue. The legalization is applicable only to future contracts, as the parties mutually agree. Every citizen in this respect would be a law to himself. If he chose in his own business to resume specie payments, he could do so. There would be a voluntary resumption by the people, one by one. But this influence could not be confined to the immediate parties. Beyond the contagion of its example, there would be a positive necessity on the part of the banks that they should adapt themselves to the exigency by the substitution of proper commercial equivalents; and thus again we take another step in specie payments.
Thirdly. Another measure of practical value is the contraction of the existing currency, so as to bring it on a par with coin, dollar for dollar. Before alluding to any of the expedients to accomplish this precious object, it is important to arrive at some idea of the amount of currency of all kinds required for the business of the country. To do this, we may look at the currency before the Rebellion, when business was in its normal condition. I shall not occupy space with tables, although they are now before me, but content myself with results. From the official report of the Treasury it appears that on the 1st of January, 1860, the whole active circulation of the country, including bank circulation, bank deposits available as currency, specie in bank, specie in Treasury, estimated specie in circulation, and deducting reserves, amounted to $542,097,264. It may be assumed that this sum-total was the amount of currency required at the time. From the same official tables it appears that on the 1st of October, 1867, the whole active circulation of the country, beginning with greenbacks and fractional currency, and including all the items in the other account, amounted to $1,245,138,193. Thus from 1860, when the currency was normal, to 1867, some time after the suspension of specie payments, there was an increase of one hundred and thirty per cent. Omitting bank deposits for both years, the increase was one hundred and forty-six per cent. Making due allowance for the increase of population, business, and Government transactions, there remains a considerable portion of this advance which must be attributed to the abnormal condition of the currency. I follow various estimates in putting this at sixty or seventy per cent., representing the difference of prices at the two different periods, and the corresponding excess of currency above the requirements of the country. Therefore, for the reduction of prices, there must be a reduction of the currency; and this must be to the amount of $300,000,000. So it seems, unless these figures err.
Against the movement for contraction, which is commended by its simplicity and its tendency to a normal condition of things, we have two adverse policies,—one, the stand-still policy, and the other, worse yet, the policy of inflation. By the first the currency is left in statu quo,—stationary,—subject to the influence of other conditions, which may operate to reduce it. Better stand still than move in a wrong direction. By the latter the currency is enlarged at the expense of the people,—being at once a tax and a derangement of values. You pamper the morbid appetite for paper money, and play the discarded part of John Law. You blow up a bladder, without thinking that it is nothing but a bladder, ready to burst. As the volume of currency is increased, the purchasing power of each dollar is reduced in proportion. As you add to the currency, you take from the dollar. You do little more than mark your goods at higher prices, and imagine that they have increased in value. Already the price is too high. Do not make it higher. Already the currency is corrupted. Do not corrupt it more. The cream has been reduced to skimmed milk. Do not let it be reduced to chalk and water. Let there be national cream for all the people.
Obviously any contraction of the currency must be conducted with caution, so as to interfere as little as possible with existing interests. It should be understood in advance, so that business may adapt itself to the change. Once understood, it must be pursued wisely to the end. I call attention to a few of the expedients by which this contraction may be made.
1. Any holder may have liberty to fund his greenbacks in bonds, as he may desire; so that, as coin increases, they will be merged in the funded debt, and the currency be reduced in corresponding proportion.
2. Greenbacks, when received at the Treasury, may be cancelled, or they may be redeemed directly, so far as the coin on hand will permit.
3. Greenbacks may be converted into compound-interest notes, to be funded in monthly instalments, running over a term of years, thus reaching specie payments within a brief period.
4. Another expedient, more active still, is the application of the coin on hand to the payment of greenbacks at a given rate,—say $6,000,000 a month,—selecting for payment those holders who present the largest amount of five-twenties for conversion into the long bonds at a low rate of interest, or shall pay the highest premium on such bonds.