“I have not been ambitious to add another to the many financial plans proposed to this Congress, much less have I sought to introduce a new and untried scheme. On the contrary, I regard it a strong commendation of this measure, that it is substantially the same as that by which Great Britain resumed specie payments, after a suspension of nearly a quarter of a century.
“The situation of England at that time was strikingly similar to our present situation. She had just emerged from a great war in which her resources had been taxed to the utmost. Business had been expanded, and high prices prevailed. Paper money had been issued in unusual volume, was virtually a legal-tender, and had depreciated to the extent of twenty-five per cent. Every financial evil from which we now suffer prevailed there, and was aggravated by having been longer in operation. Plans and theories without end were proposed to meet the many difficulties of the case. For ten years the Bank of England and the majority in Parliament vehemently denied that paper money had depreciated, notwithstanding the unanswerable report of the Bullion Committee of 1810, and the undeniable fact that it took twenty-five per cent. more of notes than of coin to buy an ounce of gold.
“Many insisted that paper was a better standard of value than coin. Some denounced the attempt to return to specie as unwise, others as impossible. William Cobbett, the famous pamphleteer, announced that he would give himself up to be broiled on a gridiron whenever the bank should resume cash payments; and for many years kept the picture of a gridiron at the head of his Political Register, to remind his readers of his prophecy. Every phase of the question was discussed by the best minds of the kingdom, in and out of Parliament, for more than ten years; and in May, 1819, under the lead of Robert Peel, a law was passed fixing the time and mode of resumption.
“It provided that on the 1st of February, 1820, the bank should give, in exchange for its notes, gold bullion in quantities not less than sixty ounces, at the rate of 81s. per ounce; that, from the 1st of October, 1820, the rates should be 79s. 6d.; from the 1st of May, 1822, 79s. 10½d.; and on the 1st of May, 1823, the bank should redeem all its notes in coin, whatever the amount presented. The passage of the act gave once more a fixed and certain value to money; and business so soon adjusted itself to the measure in anticipation, that specie payments were fully resumed on the 1st of May, 1821, two years before the time fixed by the law. Forty-seven years have elapsed since then, and the verdict of history has approved the wisdom of the act, notwithstanding the clamor and outcry which at first assailed it. So plainly does this lesson apply to us, that in the preface to one of the best histories of England, recently published, the author, who is an earnest friend of the United States, says:
“‘It seems to me that no thoughtful citizen of any nation can read the story of the years before and after Peel’s bill of 1819, extending over the crash of 1825–’26, without the strongest desire that such risks and calamities may be avoided in his own country at any sacrifice. There are several countries under the doom of retribution for the license of an inconvertible paper currency, and of these the United States are unhappily one. This passage of English history may possibly help to check the levity with which the inevitable ‘crash’ is spoken of by some, who little dream what the horrors and griefs of such a convulsion are. It may do more if it should show any considerable number of observers that the affairs of the economic world are as truly and certainly under the control of natural laws as the world of matter without and that of mind within.’”
This speech is remarkable. It is wonderful. Had that resumption bill become a law, it is possible and probable that the panic of 1873, and the long years of distress might have been, if not avoided, at least greatly shortened and alleviated. The argument never was and never could be improved upon by any one. In the light of history that speech was a prophecy. Congress procrastinated a return to specie payment. Finally the crash came, as he had foretold. Garfield once said, “After the battle of arms comes the battle of history.” In writing a historical estimate of the leaders of the epoch which closed with the consummation of specie payments, the critical historian would rightly claim that this speech of General Garfield, in the spring of 1868, five and a-half years before the panic, must take rank as a triumph of statesmanship above every argument, no matter how able or eloquent, made after the panic. In this speech Garfield showed his conservatism again in favoring the continuation of greenbacks in circulation, the very thing which was done over the bitter opposition of resumptionists seven years before.
In the earlier part of the speech he showed the necessity of an adjustable volume of currency. With specie this was easy. With paper currency the volume could be made adjustable through banks. They were the institutions to ease us through the straits to resumption. Their mission was more fully elaborated in a speech of June 7, 1870. The West and South having an insufficient number of banks, and, consequently, lacking the currency of checks, drafts, etc., were suffering. To meet this, he presented a bill redistributing the banks. His views are what most concern us.
CURRENCY AND THE BANKS.
“I wish first to state a few general propositions touching the subjects of trade and its instruments. A few simple principles form the foundation on which rests the whole superstructure of money, currency, and trade. They may be thus briefly stated: