The effect of the recommendation (to issue $300,000,000 of "legal tender" notes) has been most disastrous. The mere recommendation, without any action of Congress on the subject, has created such a panic, and has so convinced the moneyed centers of the world that we are to be flooded with this paper, that gold has risen in price from two and three-quarters to seven per cent. premium. National credit is precisely like individual credit. It is based, first, on the ability to pay; and, second, upon the high and honorable principle which would induce the payment of a liability. When the proposition to issue treasury notes was first made, it was received with great apprehension by Congress and by the nation.... There was at that time a vacuum for $50,000,000 that must be filled from some source.... I then believed that $100,000,000 was requisite, and that $100,000,000 was enough. I believe so now. When you issue $100,000,000 of currency you must either find a vacuum or you must create one for it. A hundred millions in addition to the existing circulation would at any time create great disturbance in the financial condition of this country.... The moment you authorize the issue of $300,000,000 your coin will rise to ten or twelve per cent., and your notes will full to 90 or 85. The result will be that the government will be paying just so much more for every article it purchases than it would if you kept your circulating notes at or about the value of coin.
Again, the moment you reduce the value of these notes, even to the point at which they now stand, even to seven per cent. discount, you drive out of circulation the coin of the country. The temptation is too strong to be resisted to use something else besides coin for change and for small circulation. Are we to be reduced to a shin-plaster circulation, as is the case to-day all through the South? That will be the result if you force upon the country an amount of circulating notes beyond its requirements.... I consider it a duty we owe to the country, a duty we owe to ourselves, to proclaim that under no circumstances shall a currency, irredeemable in coin, beyond the present issue of $150,000,000, be thrust upon the money markets of the country.
But the pressure toward a reckless currency expansion was irresistible, and the pending bill passed. Mr. Chandler's prophecies were promptly verified, for the gold premium rose and the "shin-plaster currency" made its appearance with but little delay. Moreover, these issues only stimulated the thirst they were intended to quench, and the general inflation of prices soon again produced an apparent scarcity of currency. Early in 1863 a demand came from Mr. Chase for authority to increase the "greenback" circulation to $400,000,000. Congress granted this application, but Mr. Chandler opposed it, saying in the Senate:
When the first proposition was made to issue $150,000,000 of treasury notes, I favored it; but when the proposition was made to increase that to $300,000,000, I opposed it.... I prophesied what the result of thus thrusting $300,000,000 of irredeemable paper upon an already overstocked market would be. I said it would carry up coin to an unlimited extent. The result has proved that my predictions were true. Now it is proposed to issue $400,000,000; we propose to thrust them upon an already over-supplied market.... It is our duty to protect the people, so far as in our power, from this great depreciation in the specie value of the circulating medium, and this we can only do by decreasing its volume.
The general positions which he stated thus early Mr. Chandler firmly held throughout every stage of the subsequent contest over the "currency question." He believed that irredeemable paper money, although issued by the government itself and made a "legal tender" by supreme authority, was an unmixed evil; that only the most imminent peril could justify an even temporary resort to its use; that it ought never to be employed except within narrow limits; that any excessive issues, if made, should be promptly called in; that it should be made redeemable on demand in coin, "the money of the world," at the earliest possible moment; and that ultimately it should be wholly withdrawn from circulation by the issuing power. Accordingly, he opposed the propositions to still further increase (to $450,000,000) the issue of "greenbacks," supported the principle (while objecting to some of the details) of the act of April 12, 1866, ordering their steady contraction, and was opposed to the act of Feb. 4, 1868, stopping such contraction. The reduction in the volume of the "greenbacks" he believed to be an indispensable preliminary to the resumption of specie payments, saying in the Senate: "The government will never resume so long as it has $400,000,000 of outstanding demand notes." As he opposed during the war excessive issues of the "greenbacks," so after it closed he steadily favored the reduction of their volume with the view to the early restoration of their convertibility and their final redemption and canceling. The hesitating and halting policy, which perpetuated all the unwholesome influences of inflation and added to the severity of the inevitable collapse, was followed against his protest and in the face of predictions, which were inspired by his intimate knowledge of natural commercial laws, and were verified by the event.
In the constant discussions of financial measures during the war, Mr. Chandler did not earnestly oppose the frequent resort to the issue of irredeemable paper without offering as a substitute policies which he believed would yield relief, equally adequate, much less costly, and far less unwholesome in tendency. He proposed to provide the means for meeting the enormous expenditures required of the government by more thorough direct taxation and by larger loans; and he believed that increased imposts, by strengthening the credit of the government, would greatly improve its standing as a borrower in the money markets of the world. Briefly, the policy which he favored, in lieu of the mass of temporary expedients which were adopted, was this: (1.) Declare that the issue of "legal tender" treasury notes should not exceed $150,000,000, and thus stop their depreciation by ending all fear of their inflation. (2.) Tax freely, and by this means convince the world that the United States could and would redeem its treasury notes and pay the interest and principal of its bonds. (3.) Use the credit thus created to borrow on the most advantageous terms, and avoid all measures that might in any way tend to impair the negotiable value of, or the general confidence in, the national securities. He developed these general ideas repeatedly in his speeches and votes, while questions relating to them were before Congress. On May 30, 1862, he said in the Senate:
We voted at an early day in the session that we would raise a tax of $150,000,000 from all sources.... What was the result of that vote? On the very day that that solemn pledge was given to the country and the world ... the six per cent. bonds of the United States stood at 90 cents on the dollar in the city of New York. To-day with an expenditure of more than a million dollars a day, ... under this simple pledge in advance, of what you would do, your bonds have gone up from 90 cents to above par, and are now sought for, not only at home but abroad. If you violate that solemn pledge given to your country and to the world, what will be the effect on your securities? Let Congress violate that pledge, and you will see your bonds not only not worth 104½ but you will see them below 85.... The world abroad does not believe your simple asseveration that you would impose a tax, but the people of this Union do and consequently they themselves have carried your bonds from 90 to 104½. But the world does not take them. Impose your tax; carry out your solemn pledges, and you will see your bonds eagerly sought for in the moneyed centers of the world.... I hope we shall not only carry out this pledge which we have given, but I care not if we exceed it.... Under this pledge ... you are now able to borrow money at six per cent. instead of seven and three-tenths, and you are to-day reaping the reward of your pledge of good faith.
All just tax measures Mr. Chandler vigorously supported, as furnishing the solid basis of national credit and public integrity, and time established the ability and the willingness of the people to sustain this war burden. Had the heavy taxation been accompanied by an adherence to sound principles in the management of the currency and a resort to borrowing when needed, it would have reduced the cost of conquering the rebellion by at least $1,000,000,000, probably by nearly one-half.
The maintenance of the public credit at a high standard was exceedingly important during the war, but it was of no less moment after the collapse of the rebellion, and is as great to-day as it has ever been. On no public question was Mr. Chandler more vigilant and outspoken than on this. Any attack on the integrity of the national promise represented by the bonds of the United States he denounced vigorously, whether it took on the form of the taxation of these securities, or of propositions to pay them in depreciated currency, or of bald repudiation. On May 20, 1862, he said, upon the proposition to tax the bonds:
I believe it to be for the best interest of the government—not for the benefit of moneyed men, not for the benefit of moneyed institutions, but for the benefit of this government—to proclaim in advance that we will never tax these bonds. I believe we shall receive the quid pro quo now, to-day, or whenever we negotiate. It is for our interest, not for the interest of moneyed institutions, to offer these bonds. Here is the best security in the world, and we proclaim to the world, if you take these bonds they shall never be taxed. I believe we shall realize more to-day, or to-morrow, or this year, or next year, for these bonds by that course, than if we were to impose a tax of one and a-half, or three, or five, or any other per cent. These bonds are negotiable. We are the negotiators. They are not in the hands of third parties. We are to borrow for our daily wants, ... and I believe it to be for the interest of the government to declare in advance that there shall never be a tax of any sort, kind or description upon these bonds which we are now offering to the world in such enormous quantities.
Mr. Chandler said, in 1868, in a public address at Battle Creek, Mich., (on August 24):