The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1877-06-18


is called to deal. 1t is objected, for exam
pie, that Secretary Sherman is pulling down
with one hand what he is trying to build up
with the other by curtailing the greenback
circulation ut the same time that he is put
ting large amount Of new bonds on the
market The argument is that he can float
the proposed loans only in an easy
money market, and that he is con-
tracing the currency precisely when he
needs to have it abundant in order to
get his new loans taken. This reasoning
rests on false analogy drawn from the ex-
perience of the government in the original
funding of the national debt Aredundance
of money was needed then because it was
only by the investment of money that the
bonds of the government could be obtained.
Every million of bonds had then to be paid
for with million dollars of greenbacks.'
But the reiunding Of the national debt is q
process which has very different relation
to the money market. 1t consists in an ex-
change, not of money for bonds, but of one
class Of bonds for another. The refunding
is, in substance, a mere exchange by
process more or less direct of bonds
for bonds and the little money
that may be required for effecting
this exchange is not legal tender notes, but
gold. The abundance or scarcity of green
backs is not An element of the problem. A
moderate amount of gold is necessary, but
only as an instrument Tor forcing the
holders Of the old bonds to exchange them
for the new. The five-twenty bonds, as
their name implies, are payable at the pleas
ure of the government after five years from
the date of their issue, although it is not
obliged to pay them until the expiration of
the twenty years. The government cannot
compel their holders to exchange them, but
it can call the bonds in and stop the interest
on them by giving notice that it is ready to
pay them in coin. Twenty or thirty mill
ions of gold would probably suffice to
complete the whole work of refunding the
fve-twenties. When the government, with
thirty millions of gold in the Treasury,
offers to pay that amount of designated six
per cent bonds, the holders have to consider
how they will invest this gold Finding no
other investment so safe and valuable as the
new bonds, most Of them prefer these, and
the government retains in its hands the
greater part OF the gold TO renew the opera
ton, which may be repeated again and again
until all the fye-twenty bonds have been
converted. This being the process it is evil
dent that the amount of greenbacks in circu-
lation has little to do with it, and that the
criticism we have noticed is irrelevant.
Another objection which has been made
to the policy of Secretary Sherman is that
he is attempting to do too much at ouce, and
that he ought to suspend his efforts to refund
the public debt and use the whole proceeds
of the sale of the new bonds as a prepara-
ton for specie payments. This criticism is
ounded on the same misconception as the
one already noticed It overlooks the car
dinal fact that the refunding is, in the main,
not an exchange Of bonds for gold. but Of
bonds for bonds, and that such exchanges
may proceed to any extent without interfer-
ing. with the accumulation Of gold
reserve for redeeming the greenbacks.
The mere exchange Of bonds for
other bonds has no bearing on the
question of resumption. 1t is only the
new money invested in bonds that can be
made available as reserve in the Treasury,
and spare capital will be more likely to be
invested in this way when it is seen that the
supply of bonds may be exhausted and
that capitalists must embrace their chance
for desirable investment before it passes.
There is every year a considerable amount Of
new capital seeking permanent investment,
and the government will get share of this
at the same time that it is refunding the
national debt The bonds we exchange
bring no money into the Treasury and take
none out it is only the excess of bonds
which we sell for actual money over those
which we exchange for other bonds
that can contribute to the reserve
needed for redeeming the greenbacks
The more successfully and rapidly
the refundlng goes on the greater will be
the amount Of new capital that will seek
this form Of investment. The objection
that Mr.. Sherman is trying to do two
things when he should attempt only one is
therefore weak and untenable.
Another and more plausible objection to
Secretary Sherman's policy is his supposed
intention to remonetize silver and make it
n legal tender The real force of this objec-
! ton depends on the extent to which the
silver project is to be carried. II is incred-
IDLE that the Secretary Of the Treasury
favors payment Of the national bonds,
either interest or principal, in anything
but gold coin. From the moment it should
be even suspected that he would favor
paying the bonds in silver it would be
out Of his power either to sell new bond
or to exchange an old one. His fiscalpolicy
would be q felo de Sc if he should take up the
silver policy in that shape. Of course he