“I am astonished at nothing in our business life so much as the absence of an earnest, determined endeavor on the part of our men of brains to find the cause of these chronic crises and hard times and then set upon the track of some remedy therefor.”—Rev. Heber Newton.
WHAT may well be called the American system of money has been gradually evolved, during three hundred years, from the bitter experiences of the most practical people that ever trod this globe. Franklin, Jefferson, Jackson, Calhoun, Clay, Gallatin and Benton were its prophets. But it first began to take definite shape during our civil war under such men as Edward Kellogg, Thaddeus Stevens, Henry C. Carey, Stephen Colwell, Pliny Freeman, Ben Wade, Oliver P. Morton, Henry Wilson and John Thompson; and later, Warwick Martin, Peter Cooper, Thomas Ewing, Wendell Phillips, John E. Williams, George Opdyke, John G. Drew, John P. Jones, William D. Kelley, B. F. Butler and others.
What first strikes the observer in a bird’s-eye view is that the whole modern movement toward a rational money system was started by that much-maligned genius, John Law, in France, in 1715. His system was one of the first recent revolts against the tyranny of metal money. He was the real founder of the Bank of France and the present French system. The Encyclopedia Britannica calls him an “unequaled financier.” His great thought was plenty of government paper money, and France has kept that thought. Law was finally beaten by politicians and the King’s mistresses when he tried to improve his system.
Turning homeward, we find the first American coin money, succeeding the wonderfully useful wampum, came very curiously—coin usually does. In 1652 a mint was set up in Boston to coin silver into “pine tree” money. The silver came mostly from the West Indian trade. Our rulers in England then, as now, only busied themselves in stealing from us any good money we could get hold of. Singularly enough we depended largely then upon another class of pirates—the buccaneers of the Spanish main, who spent most of their plunder on our shores, where were the nearest civilized ports. This was a great blessing—“a blessed providence”—to our Puritan ancestors and the coin money economists of those days.
In 1745 we had another blessed influx of silver. Governor Shirley, of Massachusetts, and his pious Puritans, went over and captured Louisburg, Cape Breton, from the French, with fire and sword, and made a big loot. This so tickled Mother Britain that, for once, she sent us a lot of silver to “ransom” Louisburg. This enabled Massachusetts to steal away the trade of Rhode Island.
In 1690 the first issue of paper money was made in Massachusetts. This was before the establishment of the Bank of England. It was for £7,000. In 1703 £15,000 was issued, which was made a legal tender for private debts. In 1716 another issue to the amount of £150,000 was authorized. Mark the style of it, as compared with the wild-cat projects of the present Congress, and see which is the most reasonable and conservative, and then inquire if the Farmers’ Alliance plan is so foolish: “The bills were to be distributed among the different counties of the province, and to be put into the hands of five trustees in each county, to be appointed by the legislature, to be let out on real estate security in the county, in specific sums, for the space of ten years, at five per cent. per annum.” Another act for £50,000 in bills was passed in 1720, “which resulted in clearing Massachusetts[Massachusetts] of debt in 1773.”
In 1723 Pennsylvania led a number of States in issuing paper money. In this year a great crisis occurred in England and the Bank was suspended. The coin of the American colonies was required, and drawn over, in England’s selfish and peremptory way, to prepare the bank for resumption. All coin left Pennsylvania, though the State possessed laws raising its value. Then the State issued treasury notes, and kept them in use until 1773, when English jealousy caused Parliament to make all such issues void. Some of the money was issued, says Adam Smith, on land security of double the value, and redeemed in fifteen years. It was made legal tender and remained at par with coin for forty years. The necessary notes were redeemed, by their payment for taxes, without loss to any one. This is the familiar history of Pennsylvania and the statement of Franklin. The cutting off of this money was the chief cause of the Revolution. The tea-party in Boston harbor was only a side-show.
Continental money was issued by Congress when we had no government—no power to tax. Yet if made full legal tender, with no mad promise of coin, fifty million dollars might have been enough. Gallatin says: “It saved the country.” Jefferson: “It expired without a groan.” Calhoun: “It is the ghost conjured up by all who wish to give private banks control of government credit.” It was used in place of a war tax, and the people so regarded it.
French assignats broke the spell of royal tyranny in Europe. Such is the power of a live nation to use and absorb money that nine billion dollars’ worth of it was issued before it broke down. Even then the cause of the tumble was that it had no suitable foundation. It was founded on land taken from the priests, and naturally fell when that land was returned to the churches.