New-York tribune., 1918-03-04

country was apparently prosperous.
Prices were advancing, business was
active, enterprise was abounding, as is
always the case when property will sell
Tor more money each month than IT
would bring month before Such is
not real or substantial prosperity, but
1T Is always deceptive at the time. and
IS the secret of paper money popular
ity. AS is usual under such conditions,
the people went heavily into debt on
the strength of these apparent values,
and the whole financial structure was
weakened. After the war was over pub
lie men like Mr. Spaulding, who had
regarded the paper money issues as
temporary and considered the faith of
the country pledged to their redemp-
ton at par, began to take steps for so
DONG; but of course raising the value
OF the paper currency from Al cents in
gold in Decem Der. 1864 to 100 cents
gold meant that the value Of all prop
erty, stated in terms OF currency,
which was the common medium in
winch prices were made, must shrink in
corresponding ratio, while on the other
hand the Indebtedness of property own
ers did not shrink at all. This was the
other side of the fictitious prosperity.
OF which Roscoe Conkling and others
had given warning
As soon as the logic of the situation
was realized there arose a great pro-
test against any further efforts to
pfing the paper currency to par and
put for the firm stand of President
Hrant TINS opposition would have been
SuGcess1ul. AS 1t was resumption was
delayed until 1879. and the complete
retirement of the notes was defeated.
Nevertheless. with the volume of notes
definitely restricted and the country
growing and looking eventually to re
sumption, an appreciation of the notes
was inevitable and the effect upon
property values in currency was very
uhfavorable. Moreover, with the re-
turh or the soldiers to industry. and
p:fliculariy to the farms, The opening
vi new lands by the extension of rail
Ways and an increasing tide Of imm
grafton. farm products fell to unrenu-
herative prices. 1t was all laid by agi
oacofs TO the efforts to resume specie
payments
Panic of 1873
The elimination came iii the panic
OF 1878. one of the worst the country
mad ever known. which left a trail OF
oankruptcies. and was followed bv a
long period of depression, lasting until
lne last vestige of difference between
lne paper dollar and the gold dollar
dlsappeared, on January I, 1879. The
iteWIy quit railways went into the
hands OF Seceivers, the late booming
was dead building operations were
suspended, industry was stagnant,
furnaces were cold, workmen walked
lhe streets in vain for employ
ment, and mobs in Pittsburgh and
other centres caused the most serious
disturbances growing out of indus stri a |
CONDITIONS ever known up to that time
IN TINS country. Foreclosure proceed
lngs made the business OF the sheriff
among the most prosperous in the
country During that long Grawn-out
peflod OF distress the country was suf-
ferlng IN eXpiation of its violation of
sound principles Of finance, and it is
not toe much to say that the losses in
those SIX months from the prostration
OF industry amounted to more than the
direct costs of the war.
Lessons From Civil War Experience
The fallacy Of supposing that a gov
ernment can save anything by using
Its non-lnterest- bearing obligations as
a means of purchases, even by making
them legal tender. is the most obvious
lesson OF the Civil War experience, but
~ IS not the most important lesson
Inc most important warning is that
the government cannot be safely
financed by simply creating credit ia
cllities: The greenbacks were form
OF credit and enabled the government
to enter the markets and make pur-
chases required, and bank credit will
90 the same, but there are after-re-
suits which follow the expansion of
credit by either of these methods.
These are simply facilities for max
lng payments, and it is doubtless true
that IN some degree production is af-
tected by the facilities for handling or
paying for the products If transpor-
tatlon facilities were lacking for NOV
ing wheat from Kansas, wheat growing
there would be discouraged; but, aft.r
all, there is a limit to the influence oF
transportation facilities upon the
wheat crop. When the population Of
Kansas has done its best at wheat
growing, the addition of transportation
facilities will not enlarge the crop.
And so when the industrial forces of
country are already working to ca
paclty, the output cannot be increased
by enlarging the credit facilities BY
which purchases are made.