The Washington herald., 1920-02-24
MUST IMPOSE
GOLD EXCISE
Fund to Be Used as Pre-
MUM to Stimulate Pro-
duction.
PRACTICAL SOLUTION
Would Insure Sufficient
Supply and Protect
Gold Reserve.

i N0Olu INCSCINC
This paper, by John Clapsen. Vice Presi-
dent Of the Chemical National Bank. New
York, was read before the I'd Annual Con-
yention Of the American Mining Congress.
A great man once said. Necessity
opens our eyes to the advan-
ltage Of fresh principles" This
is now the position in which we
as other nations find ourselves. The
greatest war the world has ever
seen has so altered conditions that
methods and customs different from
those heretofore known or used nee
Iessarily must take the place OF the
old in order to keep abreast of the
new order of things. In reality, a
very important issue is presented as
to whether the standard of value of
1.-THE world will in future be gold or
become a combination of silver and
tgold. and IL so, what effect such
Ichanges would have on the trading
lpowers of nations. 1t is obvious
that IL a bi-metallic standard were
adopted as media. the question of
the value between the metals them
selves would become one of vital
lconcern. Then again. for the actual
needs of people there may be a
scarcity of gold circulating as
money for trading purposes. or as
affecting the position OF govern
Iments and banks and the availability
of that precious metal in proper
tion to liabilities.
Financial Status After Civil War.
There are many interesting angles
from which to view this important
subject, but it may be of general
benefit here to recount what happen
ed in this country during and after
our civil war.
AS an inevitable result of gov
Iernment policy which had placed
upon the banks a burden too heavy
for them to carry. the financial in
stitutions in New York and other
sections were. during the civil war.
forced to discontinue specie pay
ments, which subsequently, brought
about the suspension of the ma
tional Treasury.
At the beginning OF 1856. a bill
was introduced which had for its
purpose the making Of government
notes legal tender. and although the
measure was considered unconstitu-
tional. ii became law in February of
the same year. The issue of green
backs payable to bearer, after several
amendments OF the bill was author
lied up to a maximum of 1900, 600
When the greenbacks were put out It
was expected that they would circulate
at par with the gold dollar. containing
23.2 grains of pure metal, but a year
after the first Legal Tender Act had
been passed. paper money had an
Exchange value equal to only 145
grains of gold. Its value rose in
August. 1853, to 1s.4 grains, but fell
in July, 1854, to 9 grains. which ap-
pears to have been it's lowest point.
THE premium on gold was then such
that dollar in paper money was
not worth more than Sc cents in
gold coin.
The most striking example Of
profiteering during that period was
the Black Friday conspiracy of Sep
tember "a. 1869. when a group of
spectators bought up large quanti-
ties of gold-creating an artificial
scarcity-and as a result that COM
modify could only be obtained from
this clique at ruinous terms. This
brought about many failures. and to
check gambling in gold and reduce
the premium on 1t, the Anti-Gold
Law was passed, but as it did not
materially bring the premium on
gold to lower level, it was very
soon repealed.
In June, 1862, Congress author
lied the use of Postage and other
lat <f
money because of the demand for
small currency. Notwithstanding the
circulation OF the so-called Shin
; plasters." which were issued in de-
nominations of 5, 10, 20, Is and so
cents.
In some of the Western States at
Itempts were made to maintain specie
psyments-after they had in the
main been given up In the Eastern
States-but California alone had the
distinction Of remaining on a sound
metallic basis during the civil war.
In New York some of the banks felt
confident of ability to continue pay
ing cash, but none did-if the rec
ords are complete-with the excep-
tion Of the Chemical National Bank.
The fact that this bank did not sus-
pend specie payments either in the
panic of 1857 or in the general dis
aster of 1861, and that it continued
to redeem its pledges in gold for
twelve years after the government
had begun to dishonor the demand
notes of the nation is a fact well
worth recording. 1t was not until
1876 that gold again sold at par
Throughout the United States.
The Panic of 1898.
Since that period the more notable
event was the panic of 1893, which
was followed by depression
throughout the nation, with the re-
suit that a large amount of gold
was drained from this country to
Europe. The Treasury's reserve be-
came so low in November. 1894, that
sale Of government bonds was re-
sorted to;'in fact, the stock of coin
was reduced to such an extent that
there were outstanding more gold
notes than coin, leaving a part of
the certificates represented by bull
ion in the form of bars. Again, dur
ing February, 1895, and also in July
of the following year. strong syn
dicates headed by leading bankers
in New York accomplished the Diff
cult task of bolstering up the f.
nances of the United States Govern
fment and 1t was largely due to their
activities that the United States re-