Year: 1875

The fear is very generally expressed that
the failures and suspensions of the banks in
San Francisco will have very hurtful influ-
ence upon the political campaign in Ohio, con-
verting thousands of persons to the belief that
rag money is the only safe currency with
which to transact business. 1t is quite likely
that there may be some conversions of this
sort, but we dOno apprehend any very con-
siderable secession of hard money men from
the Republican ranks. Any man who is
frightened away from sound financial princi-
pies by the construction that is placed upon
the California panic by the infationists, is a
very weak sort of a person who is not capable
of entertaining serious convictions of any kind.
Those whose faith in hard money theories has
been shaken by the occurrence of crisis in
community which employs gold for its cur.
currency, may perhaps be strengthened if we
inquire why, if this disaster is attributable to
the use of specie, the use of greenbacks did
not prevent the grand crash which occurred
in this city and throughout the East in 1878?
If there is any special virtue in paper money
as preventive of panics, we should have had
no panic, for we were using paper money alone
at that time; and although the government
issued S26,0OO,OOO additional greenbacks after
the crisis, and although there are nearly $780,
600 900 more currency in circulation now than
there was in 1866, matters have not improved
in any respect. In 1878 when the panic oc-
nurrad bora r1aop1a iboor5ad II,
California to-day they are boarding gold. In
both cases the motive of such action is want of
confidence, and in neither case was the exist
ing supply of money insufficient for the re-
quirements of business under ordinary circum-
stances


The panic here was produced by overtrad-
ing, reckless speculation, and the investment
of vast sums of money in wholly improbable
enterprises; and precisely the same causes
have produced ruin in California. The broken
bank in San Francisco engaged in undertake
ings which were outside of its legitimate bust
ness and which did not succeed. People sus-
pected the true condition of things, and when
they called for their money the bank had moth
ing to show for it but whorthless paper. If it
could have shown value for value there would
have been no serious trouble. The folly which
produced ruin there, where coin circulates,
produced it here, where notes are the currency
and it would produce the same result under
any condition of things that the ingenuity of
man can devise. To charge the trouble, there
fore, upon the use of specie basis is as ri
diculous as it would be to assert that compress
ed air is the only safe motor, because some
foolish man may have permitted steam to ac-
quire such pressure that it bust boiler. There
are laws of finance which operate without
reference to the character of the medium of
exchange; and one of these is that when a
man invests all the money that he can earn or
borrow in schemes which will not earn an
amount at least equal to the investment, he is
certain to come to grief sooner or later,
whether he CANDLES with coin, currency or
kowrie shells.


Those who entertain the idea that there
would be the smallest safeguard agaisnt such
crises in the extinction of the coin circulation
and in the introduction of such n device rs
Kelley's patent 1865 interconvertible bond
scheme, simply deceive themselves. If that
scheme were in operation, with greenbacks
having an equal value with gold, the first eff
feet of any disturbance of confidence would
be the sudden withdrawal of vast amounts of
currency from circulation and its investment
in bonds at Washington. That would make as
great stringency as if it were boarded by the
people, and nobody would have the where
withal to meet his obligations. When conf
dence was restored, the currency would be
/ taken out rapidly and violent initiation would
follow, with its usual unhealthy consequences.
And there are other good reasons for opposing
the rag money scheme which nothing should
induce honest men to forget. That policy in