Year: 1873




the country from the products of our mines.
The development of mines of precious metals
during the past year, and the prospective de-
velopment of them for years to come, are
gratifying in the extreme; could but one-half
of the gold extracted from the mines be re-
tanned at home, our advance toward specie
payments would be rapid. To increase our
exports, sufficient currency is required to keep
all the industries of the country employed
Without this national as we'll as Individual
bankruptcy must ensue. Undue infation, on
the other hands, while it might give temporary
relief, would only lead to an initiation of prices.
The impossibility of competing in our
own markets for the products OF home
skill and labor, and the repeated re-
newals of experiences give elasticity OF
our specializing medium therefore and
just enough of it to transact the legitimate
business of the country and to keep all the
industries employed, is what is desired. The
exact medium is specie, the recognized me-
dunn of exchange, the world over. That OBJ
tanned, we shall have currency of an exact
degree of elasticity. If there be too much of
it for the legitimate purposes of trade and
commerce, it will flow out of the country if
too little of it, the reverse will be the result.
To hold what we have, and to appreciate our
currency to that standard, is problem de-
serving of the most serious consideration of
Congress-


The experience of the present panic has
proven that the currency of the country, based
as it is upon the credit of the country, is the
best that has ever been devised. Usually, in





worthless, much deprecated in value as
to initiate the value of all the necessaries of
life, as compared with the currency. Every
one holding it has been anxious to dispose of
it on any terms. Now we witness the reverse.
Holders of the currency hoard it they did
gold in former experiences of a like nature
1t is patent to the most casual observer that
much more currency or money is required
to transact the legitimate trade of the
country during the fall and winter months,
when the vast crops are being removed, than
lT1Tir kt-I Ia1n o0f3 3ho ITy,10 tT,a
present system the amount in the country re-
mains the same throughout the year, result
ing in the accumulation of all the surplus
capital of the country when not employed in
the moving of crops, tempted there by offers
of interest being paid. This surplus capital
must earn this interest paid with p1 oft.
Being subject to call, it cannot be loaned only
in part, at best, to the merchant or manufac-
turer for a fixed term. Hence, no matter
how much currency there might be in the
country, it would be absorbed, prices keeping
and disasters would ever be recurring with
the elasticity in our money system. There is
this object to be obtained first, and next, as
far as possible, prevention of the use of
money in stock and other species ef specula-
ton. To prevent the latter it seems to me
that one great step would be taken by pro-
hibiting the national banks from paying
interest on deposits by requiring
them to hold their reserves in their
own vaults. and by forcing them into resump
ton, though it would be only in legal tender
notes. For this purpose would suggest the
establishment of clearIng-houses for your
consideration. To secure the former, many
plans have been suggested, most of which
look to me like imitation on one hand, or COM
pellIng the Government on the ther to pay
interest, without corresponding enefits, upon
the surplus funds of the COUNT V during the
seasons when otherwise unemployed. sub
NIT for your consideration whe her this diff
Guilty might not be overcome Y authorizing
the Secretary of the Treasury to issue, at any
nominal banks amount
of their notes below fixed percentage of
their issue, say 40 per cent, upon the banks
depositing with the Treasurer of the United
States an amount of Government bonds
equal to the amount Of notes demanded, the
banks to forfeit to the Government, say, per
cent. on the interest accruing on the bonds so
pledged during the time that they remain with
the Treasury as security for the increase of
circulation, the bonds so pledged to be re-
deemable by the banks at their pleasure,
either in whole or IN part, by returning their
own bills for cancellation to an amount equal
to the face of the bonds withdrawn. I would
further suggest for your consideration the
propriety of authorizing national banks to
diminish their standing issue at pleasure by
returning for cancellation their own
bills and withdrawing SO many United
States bonds as are pledged for the
bills returned. In view of the great actual
contraction that has taken place in the cur
rency, and the comparative contraction con-
stantly going on, due to the increase of popu-
lation, increase of manufactures and all the
industries, do not believe that there is too
much of it now for the dullest period of the
year. Indeed, if clearing houses should be
established, thus forcing redemption, it is a
question for consideration whether banking
should not be made free, retaining all the
safeguards now required to secure bill-hold-
ers. In any modification of the present laws
regulating national banks and a further step
toward the resumption of specie payment, L
invite your attention to consideration of the
propriety of exacting from them the retention,
as a part of their reserve, of either the whole
or a part of the gold interest accruing
upon the bonds pledged as security for their
issue. I have not reflected enough on the
bearing this might have in producing a
scarcity of coin with which to pay duties on
imports, to give it my positive recon-,
mendaton but Your attention is is invited fte
years the currency has been con
| tracted directly by the withdrawal of pei
| cent. certificates composed of interest notes
and 7-30 bonds outstanding on the 4th OF
March, 1869, all of which took the place OF
| legal tenders in the bank reserves to the ex
tent of sixty-three millions of dollars. Dur
| ing the same period there has been a mucl
| larger comparative contraction OF the cur
rency. The population of the country hal
| largely increased; more than 25, 600 miles o
railroad have been built, requiring the activ'
| use of capital to operate them; millions o
acres of land have been opened to cultivation
requiring capital to remove the products
manufactures have multiplied beyond all pre-
| cedent III the same period of time, requirln;
| capital weekly 1Or the payment OF WdSeS
for the purchase of material, and, probabl
the largest of all, the comparative contraction
arising from the organizing of free labor i
the South. Now, every laborer there receive
his wages, and, for want of savings banks
the greater part of such wages is cal
ried in the pocket or boarded tt
required for use. These suggestions al
thrown out for your consideration, withou
any recommendation that they shall be adopt
ed literally, but hoping that the best metho
may be arrived at to secure such an elastlcit
of the currency as will keep employed all th
industries of the country, and prevent sue
an imitation as will put off indefinitely the II


sumption of specie payment an object devou


" to be wished for by all, and by none mol


earnestly than the class of people most direc
| " interested-those who earn their bread


the sweat of the brow. The decision of Coz
gress on this subject will have the hearty SUI


port of the Executive.


In previous messages, 1 have called attel
| ton to the decline in American ship-buildln
| [ recommend such legislation would secu
| to the United States our portion of the carr


ing trade Stimulated by higher rates and tt


abundance of freight, the progress for the la
year in shipbuilding has been very satisfactor
There has been an increase of about 3 p
cent. in the amount transported in Americi
vessels over the amount of last yea
| With the reduced cost of materi
| which has taken place, it may reasonab
r be hoped that this change will be mai
} tanned and even increased. However, as '
Y pay about $50, ,OOO, 600 per annum in foreit
| fo, tho TRANSFORMATION of Ol11 G11TD