Bearing these things in mind, Financial Reconstruction is relieved of its difficulties. It only remains to find the proper machinery or process. And here we encounter the propositions of the Secretary of the Treasury in his Annual Report,[209] which are threefold:—
1. To refund twelve hundred millions of six per cent. Five-Twenty bonds in four and a half per cent. Fifteen-Twenties, Twenty-Twenty-Fives, and Twenty-Five-Thirties.
2. To make our exports equal in value with our imports, and to restore our commercial marine.
3. To regard these as essential conditions of reduced taxation and specie payments.
Considering these propositions with the best attention I could give to them, I have been impressed by their inadequacy as a system at the present moment. I cannot easily consent to the postponement which they imply. They hand over to the future what I wish to see accomplished at once, and what I cannot doubt with a firm will can be accomplished at an early day. But besides this capital defect, apparent on the face, I find in the system proposed no assurance of success. Will it work? I doubt. Here I wish to be understood as expressing myself with proper caution; and I wish further to declare my anxiety to obtain the substituted loans at the smallest rate of interest, and also my conviction that within a short time, at some slight present cost, this may be accomplished.
Looking at this question in the light of business, I am driven to the conclusion that twelve hundred millions of six per cents. cannot be refunded either now or hereafter in four or four and a half per cents. without offering compensation in an additional running period of the bonds which is not found in the Fifteen-Twenties nor in the Twenty-Five-Thirties proposed by the Secretary. With such bonds there would be a practical difficulty in the way of any such refunding to any considerable amount, from the inability to command a sufficient amount of coin under the “option of coin,” which must accompany the offer; nor is there any fund applicable to the purchase of coin in open market, were such a course desirable. Obviously, to induce the voluntary relinquishment of bonds at a high rate of interest for other bonds at a less rate, the holders must be offered something preferable to the coin tendered as an alternative.
The time has passed when holders can be menaced with payment in greenbacks. Whatever we do must be in coin, or in some bond which will be taken rather than coin. The attempt at too low a rate of interest would cause the coin to be taken rather than the bond, if we had the article at command,—and would end in a deluge of coin, sweeping away the premium on gold. A return to specie payments, thus precipitated, would be of doubtful value, if not illusive, without other and sustaining measures.
In the suggestion that our exports must be augmented, and our commercial marine restored, I sympathize cordially; but I do not see how this can be accomplished so long as the present taxation is maintained, exercising such a depressing influence on all industry, making the necessaries of life dearer, adding to the cost of raw material, and generally enhancing the price of our products so as to prevent them from competing in foreign markets with the products of other nations.
The proposition to make the interest on the new bonds payable at various points in Europe, at the option of the holder, seems unnecessary, while it is open to objections. Such agencies would be onerous and cumbersome. At London, Paris, Frankfort, and Berlin, there must be a machinery, with constant complications, continuing through the lifetime of the bonds, to secure the transfers from point to point and the obligatory remittances in gold; nor am I sure that in this way foreign powers might not obtain a certain jurisdiction over our monetary transactions. But I confess that the ruling objection with me is of a different character. New York is our commercial centre, designated by Providence and confirmed by man. Already it has made a great advance, but it is not yet quoted abroad as one of the clearing points of the world. At New York quotations are obtained daily on London and Paris; but in these places no such recognized quotations can be now obtained on New York. That the agencies proposed will tend to postpone this condition is a sufficient objection.