Simultaneous with the decision of the court declaring treasury notes legal tender, the quantity of coin in the treasury began to decrease, and one year's experience has sufficed to reduce the amount from one-third to one-half, and in proportion the amount controlled by Wall street has increased. The secretary of the treasury is now obliged to have recourse to the $44,000,000 of treasury notes held as a reserve to prevent panic and disaster. This decision does not benefit the importing merchant, who must pay in coin; it does not benefit the legitimate business of the country; it does not benefit the farmer, or any of the industrial interests of the country, because in buying and selling, if payments are made in paper (legal tender) the prices of the articles bought and sold are fixed by a gold or coin standard. Coin is, in all dealings, the measure of values. The decision of the court does not and cannot change these facts. The only parties who derive any real benefit from it are corporations and brokers, who can save large amounts by being released from their contracts. Another argument used by the court in favor of the decision is, that every independent nation possesses the power to make paper a legal tender, and that it must be possessed by our government. The answer to this is, that the constitution does not confer upon congress, or the courts, even by implication, any such power. And if we admit that other nations possess it, we conclude it is because the fundamental law recognizes it, or because the government is of unlimited power.
The court decides that "legal tender notes have become the universal measure of values." This is simply untrue. In all quotations of values, the measure is fixed by gold, and then legal tender notes are quoted as being worth such per cent less (or what amounts to the same thing); gold is quoted as being worth ten, fifteen, twenty, or more cents to the dollar more than paper, and while the value of gold is fixed, that of treasury notes is constantly fluctuating. Under this decision railroad companies, and their associates, the Wall street gamblers, control the finances, while all the honest and legitimate business of the country languishes. Had the court designed to place the whole interests of the government and the people in the power of these corrupt rings and dishonest brokers, no more effectual means could have been devised or adopted. Justice Bradley, in his opinion concurring with the opinion of Justice Strong, makes use of the following bold and dangerous language: "It is absolutely essential to independent national existence that government should have a firm hold in the two great sovereign instrumentalities of the Sword and the Purse, and the right to wield them on occasions of national peril." Let this pernicious doctrine be accepted as the law of the land; let the purse and the sword be placed in the hands of government officials without restrictions, and what vestige of republican institutions is left? What difference is there between our government and absolute despotism? But more than this, let the highest court of a nation, by a partisan decision, place the purse of the nation in the hands of a gigantic monopoly, banded together for the purpose of plundering the public, and what vestige of independence is left the people? Reader, look carefully at the almost unlimited power the corporations of the country have obtained over each department of the government; at the legal tender decision and its effect upon the people of the country, and then ask yourself if we, as a nation, are not nearing the point where we cease to be a republic, save in name. This decision impairs the obligation of contracts, in violation of the letter and spirit of the constitution. It compels the creditor to take from the debtor irredeemable paper at par, on a contract payable in money. It says that a mere promise to pay is a legal tender. It makes it absolutely impossible to resume specie payment because it withdraws all coin from circulation, and does away with the necessity for its use in domestic transactions. The coin of the country is shipped to foreign countries to meet demands against us in those countries, and to pay for such commodities as we purchase from them. Credit currency, no matter whether it is issued by the general or state government is not, nor can it under the the constitution, be made a legal tender by act of congress or by a decision of any court in the land, because the laws of trade will control the whole matter, being stronger than legal enactments or judicial decisions. Money is the universal medium or common standard which fixes the value of all other things that can be sold or bartered, and neither the congress of the nation, by the passage of a law declaring that paper shall be a legal tender, nor the supreme court deciding that such law is constitutional, can impart an actual value to such paper, because it is but a promise to pay money. They can no more accomplish this object than can the alchemist convert iron into gold. The only effect of this decision, as we have attempted to demonstrate, is to place the people more completely in the power of corporations. If the reader has followed us he will not fail to perceive that all the departments of the government are virtually controlled by the great anti-republican corporate interests now overshadowing and cursing the land; and that the supreme court of the United States, originally intended to be a check upon unconstitutional legislation, and to guard with jealous care the rights of the people, has become an instrument to aid this great power in its war upon the rights of the citizen; that by judicial construction of statutes involving the rights of corporations and the people, such decisions have been made as leave the people but little to hope for in the future, and induce the belief that the will of the court, and not constitutional law, is to be the "supreme law of the land."
CHAPTER XXIII.
BANK MONOPOLISTS—THEIR CONTROL OF THE CURRENCY. A BANKRUPT FINANCIAL POLICY.
Gold and silver are and must remain the standard of values. This being true, any attempt to substitute any other standard unsettles values, and opens avenues for reckless speculation. Bank bills, or other promises to pay, are and always will remain unsafe as a money standard; especially when they cannot be exchanged for specie, save at large discounts. The policy of the government, of substituting treasury notes for coin, as legal tender, and then issuing national currency for general circulation by the banks of the country, has been effectual in preventing the circulation of coin, as well as the resumption of specie payment. No good reason can be given for issuing two kinds of currency, or for providing that one kind (treasury notes) shall be legal tender, and the other (national currency) shall be of less value, good in ordinary circumstances, but which no one is obliged to accept in payment of debts.
The present banking law provides that any five or more persons may form a private corporation or banking association, and upon compliance with the provisions of the law, transact all business usually transacted by banking associations. As a condition to the issuing of bank notes, the company, after it has organized according to law, must deposit with the proper officer in Washington, in government bonds, an amount greater by ten per cent than the amount of bank notes it receives for circulation. If it deposit $100,000 in bonds, it receives from the comptroller of the currency, $90,000 in national currency, which it can issue, and as occasion requires, must redeem in treasury notes. The government bonds are held by the department as security for the redemption of the bank notes received for circulation, and the government pays to the different banking companies semi-annual interest at the rate specified in the bonds deposited by the companies respectively. The amount of tax annually collected from the people to pay this interest to bankers is between $18,000,000 and $20,000,000. All that the people receive in return for this sum is the privilege of borrowing national currency from banks at legal rates of interest. The banking companies receive from government their six per cent annually in gold on their bonds deposited with the department at Washington, and the lawful rates fixed by the states respectfully upon loans and discounts with such other profits usual among bankers.
We cannot discover the wisdom of the law which provides that a banking company shall buy an amount of government bonds equal to its capital stock, paying government therefor, and after depositing it with the proper government officials, receive interest on it. If a man pay his note or bond, and gets it in his own possession, he would lack wisdom if he were to continue the payment of semi-annual interest on it after that time. Government is doing this with only this difference: It says to the banking company: "Buy my bonds, pay for them, and then I will hold them in trust, and pay you the interest on them." We can see no good reason for this provision of the law. If the object were to borrow money, it could have been accomplished by receiving it directly from the banking company, and then issuing to such company legal tender notes in payment therefor, and by so doing government would have saved the large amount of interest now being collected from the people. If the object were to furnish a circulating medium, the legal tender treasury notes would have been a preferable currency. The government would have hazarded nothing, because it would have had possession of the full value of the notes or bank bills furnished the company. But if the object were to foster and fatten corporations, then the law, as passed, has fully accomplished its purpose. The law provides for a general system of banking, without requiring the bankers to keep one dollar of coin for the redemption of their issues. It provides for the redemption of currency with currency, thus making the resumption of specie payment impossible, so long as legal tender notes are in circulation. It locks up from one-tenth to four-tenths of all the capital invested in banking, and compels the people to pay interest on this amount without receiving any equivalent. It fixes arbitrarily the amount of circulating medium for the whole country; the amount being $356,000,000 in legal tender notes, and about the same amount in national currency; and of this last amount the banks are compelled to keep on hand a reserve of from fifteen to twenty-five per cent on all their bills and deposits, thus leaving for circulation, throughout the entire country, not more than $550,000,000, the whole of which is irredeemable in coin. It places the finance of the whole country under the control of one man—the secretary of the treasury. The amount of currency being fixed by law, and apportioned throughout the country, with no means for its increase, it is not difficult for speculators to withdraw sufficient from circulation to affect injuriously the commerce of the country. The combined corporate interest of the country can, at pleasure, corner such amounts as to create a stringency, and if desired, a panic. We have shown in a former chapter the combination existing between railroad corporations and Wall street brokers, and their control of the finances of the country. We have also shown the effect of the legal tender decision upon the financial interests of the country, and the large benefits the railroad corporations are deriving from it; and that they controlled to a great and dangerous extent all departments of the government. Under the present financial and banking system they hold the whole country at their mercy. They fix prices upon all the farm products of the country. Having full knowledge of the amount of currency in the banks of the great commercial centers, as well as the amounts in the different parts of the country, with the means in their own hands of controlling and expanding these amounts at pleasure, by withdrawing, or as it is termed "cornering" the necessary sum, they fix the price of all articles of commerce, and stocks, and gold. The government, under the present financial policy, cannot prevent this state of things. It has no reserve with which to aid the people. Nor can the banks, if they had the inclination, remedy this evil. The business interests of the country require more money. The government, as well as the banks, are prohibited from issuing more. Because of the lack of quantity required by commerce, the banks are, as a general thing, without any considerable surplus on hand. When these corporations and brokers desire a stringency in the market, they withdraw from the banks a few millions of dollars and lock it up. It is withdrawn from the already insufficient amount in circulation, and legitimate business languishes. Having their vast corporate stock and bond interest to protect, being engaged in constructing railroads, having created large debts upon their roads by reckless and dishonest watering of stock and loose issuing of bonds, they seek to compel all commercial and industrial pursuits to pay tribute to them, and they accomplish this object by controlling the currency of the country. A financial system that can be controlled by one interest, or in the interest of one class of men, is bad. When, as is now the case, that interest is a combination and consolidation of the greatest monopolies that ever cursed a country, the system should be changed.
Under our present system, no matter how evenly the currency was originally distributed over the country, the larger portion of it finds its way to the great commercial centers. The merchant must carry his money to his place of purchase, or what is the same thing, buy an eastern draft from his local bank, which bank, in order to command eastern exchange, must have deposits in eastern banks. The farmer who ships his produce to the east, must pay the charges for transportation, which are usually collected at its place of destination; and these charges being much more than one-half the entire value of the shipment, are retained in the east, or if charges are paid to local agents, they are forwarded to the principal office in the east. Nearly all the great railroad companies having their principal offices in the large eastern cities, their earnings are forwarded to those offices. By these means, the currency of the country is concentrated in the larger commercial cities of the country, mainly in New York, where it is in the absolute custody of these great railroad corporations and brokers; and the financial and banking system of the country, designed to meet the wants of the people, has become, in the hands of these giant monopolies, a principal agency in their oppression. The produce of the farm, and of the entire industrial pursuits of the country, are being swallowed by this huge monopoly, and those others created by our tariff. For this state of things there is no relief without a change of policy on the part of the government. An increase of irredeemable paper will not afford relief. Already there is a wide margin between coin and currency. An increase of the latter would increase that margin, and lessen values. With a fixed amount of increase, the same interest that now controls the finances would, in a short time after its issue, obtain the same control, and this would demand another issue; the same process to be repeated until our currency would be of little or no value, the unlimited increase of irredeemable currency would in the end inflict upon the country absolute ruin. We are now traveling in that direction. Currency is only of value as the representative of money. Now (April, 1873) a dollar in paper represents but eighty-two cents in money. Our government has adopted the Utopian idea of making small strips of paper, with certain printed promises thereon, legal tender. This kind of paper has been decided by the supreme court to be money, the "measure of values." Notwithstanding the laws of congress and the decisions of the supreme court, this measure of values will not become or remain stable; it is gradually shrinking, while gold, the money of the country, is disappearing. Unfortunately for us, our strips of paper will not pass for money, or legal tender, with other nations. For this reason, the coin of the country has to be used in our commerce with foreign nations. Within the last year, the amount of coin in this country has decreased over $38,000,000. The balance against us in our dealings with other countries is the above named amount. Unless some course is adopted that will prevent this large export of gold, it is only a question of time when we shall have no gold in the country, and the only representative of values left us will be paper money without any intrinsic value. Under the present financial policy of the government, and the unlimited control that corporations and rings, with their power all centered in Wall street, have over the finances, we need not hope that the agricultural products of the country can be transported to the seaboard at rates that will enable us to export the same to foreign countries in any considerable amount. We cannot pay inland and ocean transportation, and compete with other grain-producing countries. The markets of the outside world are practically closed against us. With our high protective tariffs, extortionate charges for inland transportation, lack of ocean commerce, and immense foreign debts, public and private, absolute financial ruin must overtake us, unless a different policy is adopted. The amount of currency being fixed by law, the government has in effect declared that the people of this country shall have but this fixed amount for all the purposes for which money is used. The effect of this arbitrary law, followed and supported by the legal tender decision of the supreme court, is to prevent any increase of the currency or money. The control of the currency being placed in the hands of one man, the whole financial interests of the country are dependent upon his will. No matter how great the wants of the country may be, or how inadequate the supply, no departure is allowed from the inflexible rule as to reserves that the banks are required to hold. If the secretary of the treasury conclude to sell gold to ease the market, he does so; if he decide to issue a half million treasury notes, they are allowed to go into the hands of the people, and withdrawn, when in his judgment, he deems it advisable. His acts create a feverish excitement in the money market and derange business, carrying loss to everybody, except Wall street brokers. That power, so necessary to a despotism, and so destructive to republican institutions—the control of the purse of the people, and of the government, has fully obtained in this country. The whole people of the land are as completely under the control of the secretary of the treasury (and he in turn ruled by these powerful combinations) as a ward is ruled by his guardian. The system is bad, and should be changed at once. The government should control its own finances, and the people should be permitted to provide for themselves without asking the permission of the government. We subjoin the following expression of views of one of the ablest and most experienced of the bank officers in this country: