“The demand notes, being receivable for customs the same as coin, kept pace with the advance in the price of coin.”
All of the greenbacks except the first $60,000,000 were purposely depreciated by the “exception clause;” that is, they were made a legal tender for all debts, public and private, except duties on imports and interest on the public debt, which latter were required to be paid in coin. This exception clause created a special demand for coin, and as a consequence metallic money rose to a great premium, at one time (July, 1864) being at a premium of $2.85 in greenbacks to $1 in coin. That these greenbacks were purposely depreciated stands upon the evidence of Hon. John Sherman, who, in a report as chairman of the Senate Finance Committee, made on the 12th of November, 1867, said: “But it was found that with such a restriction upon the notes the bonds could not be negotiated, and it became necessary to depreciate the notes in order to make a market for the bonds.”
Speaking of the amendment by which the “exception clause” was passed, Hon. Thaddeus Stevens, said in a speech delivered in the House, February 20th, 1862:
“It has all the bad qualities that its enemies charged in the original bill and none of its benefits. It now creates money and by its very terms declares it a depreciated currency. It makes two classes of money—one for the banks and brokers, and another for the people. It discriminates between the rights of different classes of creditors, allowing the rich capitalists to demand gold, and compelling the ordinary lender of money on individual security to receive notes which the government had purposely discredited.... But now comes the main clause. All classes of people shall take these notes at par for every article of trade or contract unless they have money enough to buy United States bonds, and then they shall be paid in gold. Who is that favored class? The bankers and brokers, and nobody else.”
This conspiracy of the lawmakers, by which the soldier in the field was paid in depreciated greenbacks while the Wall Street usurer received gold, did not deprive the paper money of its splendid functions. While coin rose to a great premium, owing to the special use made of it in payment of customs and interest on the public debt, the legal-tender money carried on the great war and conducted the business of the most prolific and prosperous epoch in the history of the United States.
As a matter of fact the greenbacks, discredited by legislation as they were, did not depreciate in comparison with commodities, but gold appreciated owing to the special demand created for it by law. The people never lost confidence in the government paper money, even in the darkest hours of the panic of 1873, as shown by the language of President Grant. He said:
“The experience of the present panic has proven that the currency of the country, based, as it is, upon the credit of the country, is the best that has ever been devised. Usually, in times of such trials, currency has become worthless or so much depreciated in value as to inflate the values of all necessaries of life as compared with currency. Every one holding it has been anxious to dispose of it on any terms. Now we witness the reverse. Holders of currency hoard it as they did gold in former experiences of like nature.”—Message, December 1, 1873.
The Functions of Money.
The functions or uses of money are three-fold:
It is a measure of value.