Year: 1877




serving and timid act is a principal link in
the chain which has brought on all our sub
sequent evils We may say OF every act OF q
government or individual, that 1T in
wolves and is founded upon some principle
and some general rule of conduct. In many
cases the principles involved in the act are
really of much more Importance than the
act itself because they may be the occasion
of long series OF analogous acts. So 1t was
with the legal tender act. Its evil
lay not in the inception of TACT
but in the establishment of prin-
ciple 1t was not that we declared
paper bearing an indefinite promise legal
tender, but that we adopted rule of action
under the operation of which public credit
was but empty sound. 1t was not that
the treasury of the nation happened TO be I'D
a strait for money, but that it pretended to
pay when 1t did not. No man who believes
that honesty is the best policy; that a nation
as we'll as an individual in search OF credit
should exhibit the most scrupulous honor IN
fulfilling all obligations, can doubt that the
counsels which suggested this course were
the very worst that could be adopted. Had
the treasury allied itseaf with the side OF con-
fidence by resolutely continuing. specie pay
ments, it might have prevailed. The sus-
pension, except during the short time neces-
sary to negotiate a temporary loan, was
as unnecessary and unjustiiable as it
was weak. A heavy tax, say six per cent.
per annum on the repudiated bank circula-
ton would of itself have stopped the run on
the treasury in 48 hours after it was imposed.
The banks would then have called in their
notes as rapidly as possible, and there would
have been a positive necessity for either
gold, silver, demand notes, or other govern
ment money to fill the vacuum. No doubt
| such a measure would have caused much
complaint on the part of the banks. But
| which is of the most importance, the honor
| of the government and moral standing of the
nation, or the interest of those corporations7
1t must be remembered that such tax
would only have deprived the banks of
source of profit to which the governments
has far better right than they: namely,
the interest the money circulating
| through the channels of business. Indeed,
| as the future will prove, the course actually
| pursued will be more disastrous to the bank
interests than compulsory prohibition of all
their business would have BEEN" Page 1O3.
| Regarding the state OF public sentiment
| which led the nation to look upon the sus-
pension of specie payment and the legal
| tender paper with so little dissatisfaction, ne
continues:


'The general complacence with which our
mercantile community look upon the failure
of house to make good its obligations; the
| frequency of such failures, and the circum-
stance that they are not considered as COM
| promising the honor of the defaulters in any
4
faces by our transatlantic brethren as indlca-
| tive of our very lax notions of public moral
ity. But the imputation is neither just nor
reasonable, so long as good faith Is kept be-
| tween the parties. When one merchant
gives credit to another or furnishes young
man with stock in trade, it is done with the
tacit understanding that the obligation of
the debtor ceases, it, through losses in
business he becomes unable to pay.
The creditor of course charges a
little more on account OF the risk
| insuring the debt as an insurance company
insures house, and it may be that this
system of debt insurance is as beneficial to
| the community as fire insurance. 1t GER
tainly is as honest.


But when we extend this system OF debt
| insurance into transactions OF a public
character we start on the road to infinite
evil The frequency with which our banks
have for longer or shorter period suspended
specie payments has habituated the public
TO read every bank note, with the mental
reservation, "If We don't suspend" just as
every promissory note contained the under
stood proviso, "If am ablep


THE QUESTION.


Now the question arises: Ought this or
any other proyiso 10 be understood as quail
flying the promises to pay OF the govern
ment? Most certainly not except as cir
cumstances absolutely beyond the control Of
the treasury might temporarily COM
pei it. Absolute inability of the ma
ton to redeem its obligations to its own cit
izens is almost a physical impossibility.
For paying such obligations is nothing more
than equalizing the unequal contributions
or taxes of individual citizens so that each
one shall have contributed his just share OF
tax to sustain his government. The evils OF
the suspension of specie payments by the
national treasury were greater than those in
volved in the suspension of the banks, owing
to the different conditions of the two insti-
tutions. A well managed bank always holds
in its vaults either coin or promissory notes
of responsible persons sufficient to pay all
demands upon it, and to make good its capi-
tai beside. All these notes would be due in
less than 90, perhaps 60 days according to
the time of discount. The government. on
the contrary, held no such notes, and pay
ment would have 10 be left entirely TO its
sense of good faith. Hence the more disas-
trous consequences of its refusal to pay as
promised. But the government had power
which no bank has. that OF levying taxes to
any extent on the whole country, SO chat its
failure to pay could be due to its Incidence
or to moral c0wardlce." Page 105.


Mr. Newcomb gives the following table
showing (1) the average price of gold in legal
tender notes; (2) the value in gold of 500 in
legal tender notes; (8) the market value, In
gold. of $40 per cent. bonds-accrued in.
terest for the half year taken off:


Gold value Gold value
of sl00in OF 500 SD
| Price of legal tender 6per cent


1852. gold. notes. bonds.


March l02 B ~