St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1894-01-22
THOUGHTS ON CURRENCY.
Written for the Globe.]
CHAPTER ".
LEGAL TENDER LAWS.

/ shall t., to show that this idea is
partly true and partly fallacous.
Let US first consider the truth that
lies in the notion. If the government
will accept anything for all public dues,
then there can be no doubt that the
value of that thing will be the value
| fixed by government. When cows were
| received at n certain amount per head
| for taxes in Massachusetts, it is hard to
| understand how cows could decline in
| price below that amount OF course,
| there is always this limitation, that the
number of cows shall not be greater
than the requirements of the people for
| cOws-to pay taxes with, 10 supply
milk, AMI for such other purposes as
| cows are used for.
1t is just the same with the green
back. Since 1879 they have been re-
ceived by the government at a fixed
value in payment for all public dues.
In other words any one could "tender"
greenbacks to pay his taxes and the
officials would take them.
If. however, greenbacks were issued
in very great quantities. it is plain that
there might be more of them than
could be used as medium of exchange
and to pay public dues. Then their
| value could not be maintained. but
might fall very considerably. or sink to
almost nothing. depending wholly on
| the excess OF volume.
The government now provides what
is known as the gold reserve for the
| purpose of redeamng this excess of
volume whenever it may occur If the
/ excess is so redeemed and thus got out
| of the way, of course the remaining
greenbacks that are outstanding will
| not depreciate.
Many people think that all the green
| backs are supported and kept in circu-
lation by the gold reserve. but they are
| probably mistaken. If we stop and
! think moment we will see that if we
never got more greenbacks out than
would be needed 10 do business and pay
taxes with, none would ever be sent to
the treasury TO get gold, and then there
| would be no need of a gold reserve at
| all. Thus we see that it is only the SUI
| plus greenbacks-that is, the green
backs that the people have no present
hoO Ia LhoG 0LC OdSClt VII InC SOlu ICs
serve. As the amount of greenbackS
| that tine people can use is always vary
| ing. being much more at some seasons
| of the year than at others. small gold
reserve Is probably good thing to have.
but to keep hundred millions is pretty
expensive. another chapter l shall
| try TO show how this possible surplus of
| greenbacks can be taken care of with
| less expense.
Now. let us see about the fallacies of
the legal tender notion. Before 1879
the greenback was legal tender for all
private debts, but not for public A
man could legally pay his debts with
greenbacks, and the creditor had to
take them. no matter how much they
might be deprecia cd.Of course this often
| greatly wr0nged the creditor. Here is an
| Illustration. A widow in 1860 lent a
money broker $1,000 in gold: In about
| three years the broker paid the debt,
but he paid her $1,000 of greenbacks.
| At this time it took :, ore than 50 of
greenbacks to buy 81 of gold, but the
widow had to take the greenbackS; the
law compelled her to, and the supreme
| court decided that the law was all right.
Of course the law enabled the broker to
rob the widow of more than half of all
| she lent him, but little matters of that
kind did not count. Every person who
had any money in the bank was obliged
TO lose considerable part Of its value
for the benefit of bankers and money
sharks" because the law made the
| greenback legal tender for private
| debts.
This law did not and could not help
the value of the greenback at all. Its
value, except to pay existing debts,
went up and down from week to week.
or even from day to day. Every South
ern victory sent the value OF the green
back down; every Northern victory sent
it up. Every time it went down debtors
could rob creditors; when it went up
| creditors robbed debtors; and all the
while business was in feverish conui-
ton. Every one was obliged to guess
on the probable value of the greenback.
| All Business became gambling. The
| shrewd and the INSCRIPTIONS made
large fortunes. The plain people were
| robbed. All because the greenback
was made legal tender for private debts,
while the government that issued it re-
fused to take it for public dues, and by
| thus redeeming 1t, render it stable and
safe.
The public policy as to the greenback
was exactly wrong side up. As soon as
the government began to receive it at
| fixed value for all public dues, its fluctu-
| ationS ceased. 1t was no longer an in
strument of evil and injustice, of wrong
ard robbery.
There is grave doubt whether any,
thing should ever be made legal tender
for private debts. If any currency is
| sound and good the people will take it
without legal tender act If it is not
| cnn.,6 IL &c RI f.
it.
Before leaving this part of the subject
l desire to call attention to the relation
! of legal tender acts to the so-ealled
LAW of Gresham" Somewhat more
than 500 years ago Sir Thomas Gresham
announced what has since been almost
universally accepted as a fundamental
truth. that bad money will always drive
out good money, but that good money
can never drive out bad money For
800 years. among writer's on CURRENCY.
this proposition has been accepted as
law of nature.
Instead of stating law of nature.
Gresham's so-called theorem depends
for its truthfulnesS on the statutory law
of legal tender. OF course every debtor
will try to pay in the cheapest money
possible, while creditors will try to get
the best money possible. If good and
bad money are both legal tender, of
course the bad will drive out the good:
but suppose neither was legal tender,
| then every seller for cash would con-
tend for the best money. In all con-
tracts the money would be specified,
and here, too, the contention would be
for the best money.
Thus, if there were no legal tender
acts. Gresham's law would he reversed,
That money whose value was most
stable would drive out the money whose
| value was less certain.
This principle was forcibly illustrated
In the fall Of 1893 at Ada. MINI. All the
elevator companies were paying for
wheat with certified checks. Such checks
were, of course, not legal tender, but the
farmers could not get anything better.
| so they took them. One daY one nf the