Belmont chronicle. [volume] (St. Clairsville, Ohio) 1855-1973, 1865-12-21
Currency Contraction.
From Harpers wreLlxl

Speech. He still holds that the only way
Of bringing down the price Of gold and COM
moditles rs by calling 10 aud canceling por-
ton Of the legal tender money now afloat.
And this he proposes to do, first, by declar-
ing the compound.interest notes no longer a
legal tender after their maturity and, sec.
ondly, BY exchanging, from time to time,
long six per cent. bonds for United States
notes to the extent Of from $lUO,00O, GOO to
5000, ,000, 600. the notes to be cancelled rs
fast as received. Many of the arguments
which have been urged against currency
contraction he undertakes to refute. He
says that his plan will involve no CONNER
cial crisis, because the currency contraction
will naturally be gradual; that no serious dim
mutton Of the public revenues need be ap- |
pretended, as, 10 fact, the public revenue
depends on the productiveness of labor, |
which will be enhanced by raising the in
trinsic value OF the currency that, so far as |
the national banks ae concerned, "it is bet |
ter they should be embarrassed now than
bankrupted hereafter. Should no con.
traction be inaugurated, he predicts that
the imitation now In progress will continue
steadily until it eliminates, within two years,
in crash far more terrible than the revul-
sions Of 1857 or 1887.
This is excellent doctrine, and docs credit
to Mr.. M M'Culough's skill as political econ
omist. Nothing is clearer than that gold
can not fall to par or commodities to their
old prices so long as we have $734, 2l8, 900
Of irredeemable paper-money in crcula-
don. Nothing is more certain than that if
this volume ofpaper-money could, by pro-
cess Of funding or by any other process, he
reduced one half, Or even one-third, gold
would fall the currency would improve, liv.
! sav uO,,II ho nho vNnr lnts Il
cline, and industry and trade would be
placed upon stable basis.
But in real life it is not always of as much
consequence to discover what is theoretically
right rs what is practically feasible. Alb
stract principles are very well indeed and
we should always conform to them as nearly
as we can !; but they can only be adopted as
an absolute rule Of conduct when they are
susceptible Of practical application. Before
the country acquiesces 10 Mr. NJ Uullough's
plan for contracting the currency to the ex.
tent of one third within three years people
will naturally like to have some assurance
that such contraction can be effected and
that it will not, il attempted and subsequent.
ly abandoned as failure, involve us 10
greater evils than now surround US. 1t is
hardly necessary to demonstrate, For in
stance, that policy which might compel
the Government either to break faith with
its creditors or to issue more legal tenders
than can be wrought by the present depre~
citation of the currency. And if there be
reasonable ground for appreheDding that
such might be the ultimate effect of the
adoption of system of contraction at the
present time the public will be slow to sp-
prove it, strongly as it may recommend itself
to their judgment as matter of theory
Let us look at the facts. A few weeks
ago Five-Twenty bonds were selling at l03,
and gold was l44 Mr.. NJ Cullough under
u. ok to fund $50 600, OOO of compoundin-
teres' notes which had passed out Of fcrcula,
tiou by the effect ofthe interest accumulated
on them. The consequence was decline
in Fve-Twentics to so. They have since re
covered onehalf Of one per cent. Gold,
which was l47 when the negotiation was
c,mplcted, is now in the neighborhood Of
I45 Now. according to the estimates con
tanned in This Report. the income for the
fiscal year 1866 will fall sbart Of the ex
pendituro by Sll2 1884, 900. This snn viii
have to be btrrTWed-on htye lwsn,y
bonds, Of course. There would be no d'ih
Guilty in borrowing tbls s''m on Flye-lwenty
bonds at or above par "a "rng the period
were no currency contrsctl. Impending
rosals is uncertain. People cert. 'nly VIII
OF give par for naw Five-Twenties when
they can buy the issue of Novemhet, L. 40
with six weeks gold interest accrued, at
99A 1t may be said that the Secretary need
not insist on getting par for his loan. He
may accept 81, for instance, as Mr.. hase
did on memorable occasion. This is not
Mr.. MCullouGh's view. He says IN his
Report that the United States ought not to
pay over 6 per cent for money. If he be
gan tn borrow at figure equal to per cent.
in gold he would have to pay 8 per cent. for
the next loan, 10 per cent. for the next, and
so on By submitting to such shaves the
Secretary would increase the debt about as
rapidly as the War and Navy departments
decreased their expenditures. We take for
granted that so far as this $ll2, $4,000 is
concerned, the Secretary will not otter hi.
bonds below par. Nothing can prevent their
being subscribed for except the dread of
coming contraction That may Ifit does,
there is an end. of course. to all hopes of
further sales of bonds with a view to the re-
duction Of the currency during the year
1866. f'
During the fiscal year 1867 the Secre-
tary figures balance Of 81 ,6S2. 900 excess
of income over expenditure. But before
December 81, 1865, $lS7, $40, GAG of debt
certificates and other short securities will
mature. To pay these will require not only
tho whole estimated surplus, but $40. 80.
0O0-to be borrowed as befare on Five
Twenty bonds. This amount of money must
be raised before one dollar Of currency can
be cancelled.
In 1867 and 1868 not less than $s4S 323,.
SOL Of Seven-Thirty notes and other sccuri.
ties mature as wellas $l73,O00 900 ofcom.
pound interest notes-say in all 81 ,02l $685.
SOL. The holders of these various securi-
ties are entitled to demand the currency for
them. On the days on which they severally
mature Government must stand ready to
do one Of three things--either to pay one
hundred cents on the dollar forits maturing
obligations, or to give the holders new
security at least equivalent in value in the
open market to tho old one or to confess
itself bankrupt, aud to let its liabilities 90
by default.
1t does not need much financial experience
to discern the fact that il, in the year 1866,
there has been any material curtailment of
the currency, Five.Tweuty bouds will not
command par in the year 1867. As we
have mentioned above, the first attempt at
contraction-which applied exclusively to
inert compound notes clogged With large
amounts Of accumulated interest--caused |