The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1856-1888, 1875-11-13
THE PACIFIC
Commercial
SATURDAY. NO EMBER I3.
Paper vs.. Coin-Letter from Wendell
Phillips on Currency.

III lOTCiDEe tduRudBc tu8t gentleman . Views Oh
the delicate question of a circulating medium,
and will he read with interest by al who have
money or want it:
AUGUST %, 1875.
Mr.. Eugene Beetle, Secretary Of The Legal Tender
Club.
DEAR Sal appreciate the great importance
of your agitation TO prevent further contraction
of the currency, and am sorry | shall not be able
to attend your meeting in September. Il seems
to me there are but two questions TO be considered
touching the currency
FIrS-Upon what basis shall it rest? .,
Second-How much Of it shall we have?
a long time ago there might have been a third
of what shall it be made, gold and silver or
paper? But the experience of businessmen long
ago answered that Inquiry and settled it beyond
recall, that throughout Christendom the currency
must be paper. 1t is idle to talk to-day of a
specie basis. That gentle hallucination has been
encouraged TO quiet timid men and delude the
masses. But the thing itself has not really ex-
listed for fifty or a hundred years. Great Britain,
where, if anywhere, such a basis could be main
tanned, has to-day fifty cents of coin to 800 of
paper. Patterson, Science Of Finance, DID. 5, 6,
q, %, 81, 3S. Edinburgh, 1861
Any individual may have that fifty cents, pro-
yided he does not need it, and provided there is
no special reason why he should have it. If at
any time his business absolutely requires that he
should have that fifty cents OF coin, at that time
he cannot have it. A specie basis of fifty cents
coin to support 800 paper 1t reminds me of
LUdL IEiSH slA-DOLtN6 lopez HQO diWdyS sat u0W0
to drink with a small bit of a strawberry at the
bottom of his wine glass and kept it there through
the evening" 1t gave 80 fine a flavor to the
wine!" Doubtless that fifty cents coin gives a
strong flavor to the vast system of British paper
and makes Bull feel warm and comfortable.
Political economy settles very few points by
theorizing. Now and then experience decides a
question, and it passes into accepted and undeni-
able truth. In this way business experience has
decided that currency in civilized and commercial
nations must rest on credit and consist of paper.
Thus experience answers our first question. The
currency does rest and must rest on credit.
Whose shall that credit be? Shall it be the credit
of banks and their customers or the credit of the
nation ? This question also experience has an
swered. Before the war we had banks resting
each one on its own credit. We all remember
the result. The bills of a bank ceased generally
to be current a hundred miles from its own
counter. You lost ten per cent. in changing
those Of the South and West for eastern bills
and Horace Greeley demurely told the committee
who paid him a handful of western bills, 81 If
convenient l should much prefer a well executed
counterfeit on some eastern bank" What makes
our national bank bills good, and equally good,
everywhere to-day? The nation stands behind
them. Such notes pass everywhere, and every
where at the same value, because the nation qua
rantees them. All the note currency we have
rests on national credit, directly or indirectly.
Bagehot, the highest authority in England,
says the public takes bank of England bills with
out inquiry or hesitation, because it knows that
in any emergency the Government will sustain
the bank. Here our bills pass because the Gov
eminent is distinctly pledged to do so. The two
great commercial centres have drifted into a cur
rency based, in fact. on Government credit, and
they deliberately accept the situation.
Our first question, On what shall our Currency
rest, is fully answered by facts. In commercial
nations 1t rests, and must rest, on Government
credit.
Second-How much currency shall we have?
No single man, officer, or institution can de-
eide, or ever did decide, this question. Currency
made up of bank-bills, deposits, notes, bills of
exchange, &C., is like any other article of manu-
facture-we make as much of it as we need.
The business of q country, when not i~nterfered
with, always settles the amount OF its currency.
Business creates, everywhere and at all times,
just such and just so much currency as it needs.
Banks and secretaries of treasures imagine they
determine the amount of the currency. AS well
might Old Probability claim that he determined
the weather. He and they only record what
mightier forces do. Hats, shoes, wagons, rails,
cloths, cotton, wheat-one year we want more,
the next year less-who decides? The dealers in
the article and the users of it. Does anybody
advise going back t. other DAYS and having some
board of wiseacres decide how much wheat shall
be planted and how much cotton, how many
loaves or wagons made? No such dreamer OBJ
trudes himself on the public. But thousands
clamor for allowing bank directors, and them
Alone, TO settle the amount OF the currency. And
they are allowed more control than any other
agency. The New York city banks alone in
creased the currency S., 900 900 (S2, 957 ,20O) in
one month, September, 1874, and decreased it
SIS, 900 900 in one week Of March, 1875. This
aristocracy in the money manufacture is an odious
monopoly, alien to our institutions, and harmful
to our prosperity. What should we say if FIVE
hundred men, and such friends as they chose,
were allowed to plant wheat and mine iron while
every one else was forbidden?
Yet this is but another name for our present
bank system. Let US cease, then, to have any
plan either to enlarge or contract the currency.
Let the Government stand ready to issue all the
currency any business man wishes and can give
good security for, at low interest and convertible
into long bonds. If necessary, in order to con-
ciliate existing prejudice, let the capital of these
bonds, having long terms to run, be payable in
gold. Make greenbacks legal tender for all pur-
poses, customs and all Government dues included.
There is every reason why this should be done.
History is repeating itself. England never knew
more prosperous years than from 1900 to 1920,
during which she neither bad gold. nor wished to
have it, nor promised to pay gold to any one
whatever. All that while she extended and con-
tracted her currency without any regard what
ever to gold. Her enormous trade and expendi-
lures were all paper and only paper, resting on
credit and nothing else. We had similar pros
perity during the war and after, on the same
terms. In 1890 England, yielding to theorists
and dreamers, tried to put this new wine into old
DOtllee8 duu uId&SCu nSf oucLLcoe Udck u metuOus
a century old-to specie. Bankruptcy. the very
history of which makes the blood cold to-day,
bIighted the Empire. 1t took half a generation
to recover from the mistake. No man can to-day
begin to show that such suffering was necessary;
that it achieved any good or that it effected any
changes which could not have been as well made
without it. We entered that same valley of the
shadow of death when, in 1865, McCulloch began
contraction. We are hurrying fast to England's
1920; property sunk to half its former value
the streets crowded with unemployed men fast
rotting into criminals; grass growing on the
wharves, machinery rusting, wealth alarmed,
poverty starving. Woe to the political party
which the nation shall finally pronounce respon-
sible for this fatal mistake ! No previous merits
will avail for its pardon. Its leaders will be
buried in curses, as men whom neither history
nnr their own exrerience could make wise