The absorption of one hundred and fifty or two hundred millions cannot fail to enhance the remaining legal-tender nearly, if not quite, to par with gold. The volume of currency in the channels of trade and in the hands of the people will be about the same as now. The aggregate of United States notes and national bank-notes outstanding will be precisely the same. Therefore the indirect contraction so much dwelt upon will scarcely be felt. The volume of greenbacks will be ample for the reserves of the banks, and their growing scarcity will cause them to become more and more valuable; and as they approach the standard of gold, so will they sustain with golden support the bank-notes into which they are convertible.
The demand by the people for legal-tender will not be appreciably increased, as the bank-note is receivable by the Government for all dues except customs, and those demands are necessarily localized. While the growing scarcity of greenbacks, because of their replacement by bank-notes fulfilling all the requirements of general trade, will not be noticed by the people, the banks will take heed lest they fall, and at an early day begin to strengthen themselves. Legal-tender reserves they must have, and, with the honest eyes of our Secretary of the Treasury to detect any deficiency, they will begin their strengthening policy at once. Instead of putting gold received as interest forthwith on the market for sale, they will put it snugly away in their vaults. The gold which comes to them in the course of banking operations will be added thereto; and almost imperceptibly the country banks will arrive at the condition of the city banks, whose reserves in coin and legal-tender notes are now far beyond the requirements of law. In the mean time, and without derangement of business, the Treasury may strengthen its reserve,—while, on the other hand, the quiet reduction of its liabilities advances the percentage of the reserve to the whole amount of liabilities in almost a compound ratio. With this strengthening of the condition of the Treasury, made manifest to all the world by its monthly publications, the mistrust of the people will be gradually, but surely, dissipated, and as surely be replaced by confidence that all demand obligations will be redeemed at an early day,—a confidence as wide-spread and deep-seated as is that now prevailing in relation to our bonded debt, that it will be paid according to the spirit as well as the letter of the law.
It will thus be seen that just in proportion to the strengthening of the legal-tender do we strengthen the bank-note. Strike out of existence in a single day the legal-tender notes, and I fear that the bank-note would for a time fall in comparative value: so would everything else. But I advocate no such violent measure.
The Senator from Indiana in his remarks appeared to forget that we have in the country two or three hundred millions of another legal-tender,—being coin, now displaced, of which no legitimate use is made in connection with the currency,—that should resume its proper position in the paper circulation of the country. Here are two or three hundred millions of money, now by force of law demonetized, which I would have relieved of its disabilities. I would change the relation of master it now occupies to that of servant, where it properly belongs; and I would inflate the currency with it to the extent that we possess it. Inflation by coin is simply specie payment, or very near it.
I have endeavored, Mr. President, thus briefly to respond to the questions propounded to me. I do not know that I have entered sufficiently into detail to explain clearly my convictions as to the necessity for reducing the volume of legal-tender obligations, and to prove, as I desire to prove, that their gradual withdrawal will enhance not only the value of the remainder, but also the value of the bank-note. Both will ascend in the scale. This enhancement of the whole paper currency will tend to draw the coin of the country from its seclusion. As in the early period of the war, before the present currency was created, we were astonished at the positive, but hidden, money resources of the people, so will the outflow of hidden coin confound the calculations of those who suppose that its volume is to be measured by the amount in the Treasury and in the New York banks.
Mr. President, I am not alone in asking for the reformation of our currency as the first stage of our financial efforts. I read from the “Commercial and Financial Chronicle”[221] of New York, an authoritative paper on this subject, as follows:—
“In any practical scheme to improve the Government finances and credit, or to restore prosperous activities, or both at once, the first thing to be done must be the restoration of a sound currency. That done or provided for, all the rest will be easy; the best credit and the lowest rates of interest will follow.”
To this end our greenbacks must be absorbed or paid, and my proposition provides a way. As the greenbacks are withdrawn, coin will reappear to take their place in the banks and the business of the country. This will be specie payments.