Silver dollars were not in circulation in 1861. Their issue was provided for at the beginning of our government, but, as they were most of the time more valuable than gold coin of like face value, they were hoarded or exported. Their coinage was suspended by an order of President Jefferson in 1805, and after this order only 1,300 silver dollars were coined by the United States prior to 1836. From 1836 to 1861 silver dollars were coined in small quantities, the aggregate being less than one and one-half million, and they were generally exported. It is probable that when Mr. Chase became Secretary of the Treasury, there was not in the United States one thousand silver dollars. In 1853, and prior to that year, fractional silver coins were worth for bullion more than their face value, and, therefore, did not circulate. Small change was scarce, and fractional notes, called "shinplasters," were issued in many parts of the United States. Mexican coin, debased and worn, was in circulation. To remedy this evil Congress, by the act of February 21, 1853, during Pierce's administration, prescribed the weight of the silver half dollar as 192 grains instead of 206¼ grains, fixed by the coinage act of 1792, and the weight of the quarter, dime and half dime of silver was reduced in the same proportion. As these new coins were less valuable than gold at the rate coined, they were made a legal tender in payment of debts only for sums not exceeding five dollars. The silver bullion for these coins was purchased at market value, and the privilege theretofore granted to a depositor of silver bullion to have it coined for him was repealed. This law had the beneficial effect of driving out of circulation "shinplasters" and worn coins, and supplied in ample quantity new full weight silver coins of handsome device, the government receiving the profit of the difference between the market value of the silver and its coinage value. Under this law the coinage of silver rapidly increased, so that, within two years after the passage of the act of 1853, more silver was converted into fractional coins and was in active use among the people than was contained in all the silver dollars coined under "free coinage" from the beginning of the government to 1878.
While silver was thus made useful to the fullest extent possible, it was, from its weight and bulk, inadequate and inconvenient for the vast demands of the government during the war. Silver and gold together could not meet this demand. There was known to be in the country at that time, of specie in circulation, $250,000,000, of state bank notes, $180,000,000, in all $430,000,000. This amount, experience had shown, was necessary to meet exchanges in ordinary times of peace. The disturbance of a civil war would likely stimulate production for a time and require even more circulation for current business. This circulation, if drawn from its ordinary channels, would bring no end of confusion and distress to the people, and the government, to meet the demand occasioned by carrying on a war, must look elsewhere for a circulating medium with which to meet its enormous disbursements which must necessarily be made almost wholly in actual cash—checks being, from the character of payments, of little avail.
There was no escaping the issue of credit money in some form, and of whatever form adopted we knew that gold and silver would soon disappear under the shadow of war—that they would be hoarded or exported.
This is the universal result of great wars long protracted. It was our experience during our Revolution and the War of 1812, and of Great Britain and all European nations during the Napoleonic wars. What should take the place of gold and silver for currency? The only answer was to substitute for the time the notes of the United States, with all the sanction and credit which the republic could confer, in the place of coin. We could not, with safety, accept bank notes issued by state corporations, varying in terms and credit according to the laws of twenty-three separate states.
To establish a credit of our bonds and notes these measures at least were necessary: First, to increase largely the revenues from customs duties to be paid in coin; second, impose all forms of internal taxes authorized by the constitution; third, create a national currency redeemable in coin, with no fixed time for redemption, but made a legal tender for all debts, public and private, except customs duties; fourth, borrow any moneys needed on the most favorable terms possible.
On the 4th of July, 1861, the Senate convened in compliance with the proclamation of the President, from whom it received a message containing a clear statement of the events that followed his inaugural address. He described the attack upon Fort Sumter and said:
"By the affair at Fort Sumter, with its surrounding circumstances, that point was reached. Then and thereby the assailants of the government began the conflict of arms, without a gun in sight or in expectancy to return their fire, save only the few in the fort, sent to that harbor years before for their own protection, and still ready to give that protection in whatever was lawful. In this act, discarding all else, they have forced upon the country the distinct issue, 'immediate dissolution or blood.'
"And this issue embraces more than the fate of these United States. It presents to the whole family of man the question, whether a constitutional republic, or democracy—a government of the people by the same people—can or cannot maintain its territorial integrity against its own domestic foes. It presents the question, whether discontented individuals, too few in number to control administration according to organic law in any case, can always, upon the pretenses made in this case, or on any other pretenses, or arbitrarily, without any pretense, break up their government, and thus practically put an end to free government upon the earth. It forces us to ask: 'Is there, in all republics, this inherent and fatal weakness?' 'Must a government, of necessity, be too strong for the liberties of its own people, or too weak to maintain its own existence?'
"So viewing the issue, no choice was left but to call out the war power of the government; and so to resist force employed for its destruction, by force for its preservation."
He closed with this appeal to the people: