The Sun.
London, England, 1867-12-25 00:00:00

THE SECRETARY'S VIEWS ON CONTRACTION.

In his report to Congress, under date of the 4th of
December, 1865, the Secretary presented, as fully and as
clearly as he was able to do, his views upon the subject of
the currency, and the necessity of action for the purpose
of bringing about a return to specie paytn3nts. The views
thus presented by him were approved by the House of
Representatives on the Bth December, 1865, by the adop-
tion of the following resolution, by th -‘ decisive vote of
144 to 6:— _ _

"Resolved, That this House cordially concurs in the
views of the Secretary of the Treasury in relation to the
necessity of a contraction of the currency, with a view to
as early a resumption of specie payments as the business
interests of the country will permit, and we hereby pledge
co-operative action to this end as speedily as practicable."
Among the views thus emphatbally endorsed were the

" The right of Congress, at all times, to borrow money,
and to issue obligations for loans in such form as may be
convenient is unquestionable ; but their authority to issue
obligations for circulating medium as money, and to make
these obligations a legal tender, can only be found in the
unwritten law which sanctions whatever the representa-
tives of tho people, whose duty it is to maintain the Go-
vernment against its enemies, may consider in a great
emergency necessary to be done. The present legal-ten-
der acts were war measures, and, while the repeal of those
provisions which made the United States notes lawful
money is not recommended, the Secretary is of the opin-
ion that they ought not to remain in force one day longer
than shall be necessary to enable the people to prepare
for a return to the constitutional currency.
After discussing this subject at considerable length, sus-
taining his views by a reference to the experience of the
country under previous inflations of the currency, the
Secretary concludes his remarks as follows :

" Every conEideration, therefore, that has been brought
to the mind of the Secretary confirms the correctness of
the views he has presented. If the business of the coun-
try rested upon a stable basis, or if credits could be kept
from being still further increased, there would be less occa-
sion for solicitude on this subject. But such is not the
fact. Business is not in a healthy condition ; it is specu-
lative, feverish, and uncertain. Every day that contrac-
tion is deferred increases the difficulty of preventing a
financial collapse. Prices and credits will not remain as
they are. The tide will either recede or advance, and it
will not recede without the exorcise of the controlling
power of Congress."
These views were not only approved by the House of
Representatives, but they seemed at the time to be heartily
responded to by the people. By the Act of April 12, 1866,
the Secretary was authorised to receive Treasury notes
and other obligations of the Government, whether bearing
interest or not, in exchange for bonds, with a proviso that
of United States notes not more than ten millions of dollars
should be cancelled within six months from the passage
of the Act, and thereafter not more than four millions of
dollars in any one month.

This proviso, while it fixed a limit to the amount of notes
which should be retired per month, so far from indicating an
abandonment of the policy of contraction, confirmed and
established it. To this policy (although for reasons that
seemed to him to bo judicious the regular monthly reduc-
tion has not always boon made) the action of tho Secretary
has been conformed, and the effect has been so salutary,
and the continuation of it would be so obviously wise,
that he would not consider it necessary to say one word
in its favour wore there not indications that, under the
teachings of the advocates of a largo and consequently a
depreciated currency, such views are being inculcated as,
if not corrected, may lend to its abandonment.
Money is simply a medium of exchange and measure of
value. As a medium it facilitates exchanges, and by doing
this necessarily stimulates its production. It does not
follow, however, that exchanges are facilitated and pro-
duction stimulated in proportion to its increase. It is
a measure of value, but it does not necessarily create
values.

It is an indispensable agent in trade between individuals,
and in commerce between nations ; the groat incentive to
enterprise and labour in the wide range of human energy
and skill ; but, great as is its power, and essential as it is
to the progress of the race in civilisation and refinement,
there are limits beyond which its volume cannot be ex-
tended without a diminution of its usefulness. A certain
amount is required for facilitating exchanges and determin-
ing values. The exact amount required cannot, of course,
be accurately determined, but the excess or deficiency of
money in a country is always pretty accurately indicated
by the condition of its industry and trade. In all countries
there is just as much money needed as will encourage en-
terprise, give employment to labour and furni.,h the means
for a ready exchange of property, and no more. When-
ever the amount in circulation exceeds the amount re-
quired for these purposes, the fact will become apparent by
a decline of industry, an advance of prices, and a tendency
to speculation.
- • -

Especially will this be the case when an irredeemable
currency becomes the standard of value by being made a
legal tender. Coin, being the circulating medium of the
world, flows from one country to another in obedience to
the law of trade, which prevents it from becoming any-
where, for any considerable period, excessive in amount ;
when this law is not interfered with by legislation, the
evils of an excessive currency are corrected by the law it-
self. An increase of money beyond what is needed for the
purposes above named, according to all experience not
only inflates prices, but diminishes labour; and coin, as a
consequence, flows from the country in which the excess
exists to some other where labour is more active and prices
are lower, to flow back again when the loss by one coun-
try and the gain by another produce the natural results
upon industry and production. Thus, coin is not only the
regulator of commerce, but the great stimulator of indus-
try and enterprise.
The United States notes were made a legal tender and