"I agree that a currency strictly limited in amount so as not to exceed, but rather to be less, than the effective demand for necessary public use, may be kept in circulation at a rate higher than its intrinsic value. But that is true only on very stringent conditions.
"As to making a market for silver coin by withdrawing bank-notes and treasury notes of less denomination than five dollars—and ultimately of less denomination than ten dollars—there are grave difficulties. In your letter it is remarked:
"'You say that fifty millions of silver is about all that the country can absorb. This is true; and it is true simply because we keep in circulation upwards of fifty millions of one and two dollar notes. If these notes were withdrawn, their place would immediately be filled with silver and gold. If the five-dollar notes were also retired, all of the silver dollars now in the Treasury vaults would be in circulation, as they ought to be. On this point, permit me to call your attention to page 34 of my report. I wish you could see your way clear to use your great influence in favor of the retiring of the one and two dollar United States notes, to be followed in due time by the retirement of all notes below ten dollars.'
"The habits of the people, and their unanimous and strong preference for the portable currency of paper over the cumbrous currency of silver, interpose an almost insurmountable obstacle to such a measure. Borrowing the idea from the practice of England, and supported by most economical writers, that measure has been often advocated, and sometimes attempted to be put in practice. But the expedient has never made much progress, and it has been resisted and rejected by the people at every opportunity.
"About fifty years ago a law was passed, by the State of New York, suppressing bank-notes of a less denomination than five dollars. Although in my general views friendly to free banking, I justified myself in supporting the measures on the ground that it was legitimate to apply an artificial restraint to an artificial system. Enclosed is a copy of the resolutions drawn by myself, opposing the repeal of that law.
"On that issue, more than on any other single question, the party of Jackson and Van Buren was overthrown in the State of New York in the election of 1838. William L. Marcy was defeated as a candidate for re-election as Governor, and 'Small-Bill' Seward was elected in his place. The law was immediately repealed. The question had some special disadvantages at that time; but the indications of the popular wishes were unquestionable.
"I understand from members of my family, that ladies shopping at retail stores in New York city almost universally refuse to take silver dollars. Even one silver dollar is considered an incumbrance, is, in fact, too large to be carried in a ladies porte-monnaie, while several of them are quite out of the question.
"I understand, also, that our small notes are very popular in Canada, and in the Bahama Island, being preferred to silver coin.
"I think that the best way of making a market for silver through the small circulation, is for the government to receive the silver at its intrinsic value, and to issue certificates against it dollar for dollar.
"Among your observations on the question of the expediency of making the nominal value of the silver dollar correspond to its intrinsic value, it is suggested: