TO THE HON. B. H. BRISTOW,

SECRETARY OF THE TREASURY:

SIR:—

The schemes now before the public, having in view an amelioration of the condition of our monetary affairs, are in number almost legion, and yet, among their authors there are very few who seem even to have desired to ascertain the real causes of disease preparatory to prescribing the remedy by means of which, as they believed, health might be restored. They it is which I propose now to exhibit, and to that end beg to ask your attention to a brief statement of facts occurring in the years immediately preceding the outbreak of the rebellion, and in the years which have since succeeded, as follows:—

Writing two years before the attack on Fort Sumter Mr. Edward Everett was led, after careful inquiry, to estimate the private debt of the country, apart from that of trade, manufactures, or agriculture, at 1500 millions of dollars—"a mountain load," as he described it, "more deadly than fever or plague, more destructive than the frosts of spring, or the blights of summer;" and yet, multifarious as were the evils then so clearly presenting themselves to him as resulting from so sad a state of things, he had evidently failed to appreciate, to even a tithe of its real extent, the power thereby given to capital in its contest with labor, as it will be now exhibited.

Every one who parts with property payment for which is to be made at any future time, by so doing constitutes himself a moneylender to the extent of the amount whose payment is thus postponed. If the property be purely personal, he adds to what would otherwise be the price as much as will cover the charge for time and for risk to be incurred. The borrower being regarded as a thoroughly responsible man, the interest thus charged may not exceed ten or twelve per cent. per annum; but passing downward in the society scale the charge rises in the direct ratio of the poverty of the party borrowing, until at length we find the very poor, and the very weak, paying interest at the rate of sixty, eighty, a hundred, and perhaps even, as now in England, almost five hundred per cent. At the date at which Mr. Everett wrote, the Union exhibited more than 15,000,000 of persons capable, more or less, of contracting debts, large or small; nine-tenths of whom, as there is reason for believing, were paying interest at rates varying from ten to two hundred per cent. Had each one of these been required, daily or weekly, to

4

give his note for the debt thus incurred, there would have been ex-
hibited, to the extent of several thousand millions, uncurrent money
as perfectly dead, so far as regarded all performance of exchanges,
as if it had been buried in the earth. As a consequence of this the
societary movement, in the first year of the war, was paralyzed to a
degree greatly exceeding anything the country had ever known.
What then was needed was live money to take the place of the dead
that was being hourly created. To the end that this might be sup-
plied, the nation, through its finance minister, proclaimed to all its
members that it needed labor and labor's products in their various
forms, and would give in exchange live money to the extent of
$400,000,000; or, in other words, money of such character as fitted
it to be used for effecting exchanges of any and every kind what-
soever. At once the scene was changed, the employer being now
enabled to pay cash for all the service, and all the materials of
which he stood in need; and the workman, in like manner, enabled
to pay in cash for the food and clothing required by his family and
himself. The farmer, now selling his crops for live money, was thus
enabled to place the storekeeper in a position to buy for cash in
the distant cities. Almost at once, and as if by magic, the usurious
charges disappeared, thereby lightening the burdens of workingmen,
farmers, mechanics, and laborers, to an annual extent thrice exceed-
ing the amount of greenbacks issued. Of all financial measures on
record there has been none which has so much tended toward eleva-
tion of the laborer, and toward establishing harmony in the relations
of labor and capital, as has been the case with that by which
$400,000,000 of live money, free of interest, were made to take the
place of thousands of millions of dead money for whose use our
people had been paying interest at twice, thrice, and even twenty
times the legal rates. Had the war given us nothing but this, it
would be well worth to the nation, leaving out of view the waste of
life, far more than all its cost. Nevertheless, we have among us
financiers, so called, busily engaged in denouncing, as "a forced loan,"
the admirable machinery that has thus been given to our people, and
insisting that we shall now discard it with the certainty before us of
being thereby compelled to return to the dead-money system with its
usurious rates.

With the close of the war the work of destruction ceased. The
soldier resumed his work in factory and field. The sailor, ceasing
to aid in blockading southern ports, engaged himself in aiding the
transport of southern cotton. Under such circumstances, production
rapidly and largely increased, and with every step in that direction
labor should have grown in power to command the use of machinery
of exchange. Directly the reverse, however, from year to year the
charge for the use of money has risen, and with such increase in the
power of those who control the sources of supply that they are now
being everywhere enabled to command the aid of traders, manufac-
turers, miners, and stock gamblers, in their effort at obtaining the
passage of laws legalizing contracts at rates by means of which the

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burdens of laborers in the factory and the field must be much increased. Inquiring now of these men, or of their victims, the cause of the extraordinary change thus exhibited, we find ourselves assured that it is due to the immense extent to which circulating capital has become fixed in buildings, factories, railroads, bridges, and other of the machinery required for the maintenance of commerce, and for the comfort and convenience of those engaged in the work. We are thus presented with the extraordinary fact that, while waste of labor and materials—to the extent of thousands of millions—had been attended by an actual decline in the price of money, an application of other thousands of millions to the work of production has caused, and is causing, such an increase in the power of money monopolists as to threaten ruin to some of the most important industries for which so many and so important works have been constructed.

That the cause thus alleged for the existence of the present extraordinary state of things has no foundation in fact will be obvious to those who reflect that, whatever may be the uses to which it is applied, money never diminishes in quantity by reason of such application. Let a railroad company call for a million of dollars to-day and let it forthwith distribute the same among laborers, mechanics, landowners, and rolling-mill proprietors, it will at once again present itself in the pockets of the former, and in the bank accounts of the latter, no change in the quantity having taken place. The more instant the exchange of money for labor and materials the less is the quantity of money used; and hence it is that with every stage of growth in the rapidity of the societary circulation, the need for it in any material form, whether that of notes or coin, tends to diminish with diminution in the power of the money lender to compel payment for its use. This, precisely, is what took place throughout the war, and hence it was that the rate of interest declined at the moment when national bonds were being issued to the extent of thousand of millions of dollars.

The currency, however, was then, as we are now constantly assured, greatly depreciated, gold having commanded heavy premiums, as certainly had been the case. How little, nevertheless, had been the connection between the supply of circulating notes and those premiums it is proposed now to show, as follows:—

At the close of 1862 the government circulation amounted to little less than $300,000,000. As yet, the state bank circulation remained undisturbed, and to obtain the actual quantity of circulating notes, it is needed now to add to the above the sum of $180,000,000, giving a total of $480,000,000. We have here a prodigious, and most rapid increase, and yet the gold premium had scarcely passed beyond 33.

Two months later, in February, 1863, it stood at 71, with scarcely any perceptible increase in the circulating medium. In July, the greenbacks had largely increased, their amount having reached $400,000,000, the premium meanwhile falling to 24. At the close of that year, the legal tenders in circulation had reached $500,000,000,

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exhibiting an increase of $200,000,000, attended with a decline of premium to the extent of 20 per cent.: the February premium of 71 having been replaced by the December one of 51.

The following year, 1864, exhibits in June an emission of compound interest legal tender notes attended with a rise in the price of gold from 190 in May to 257 in August, and a decline to 218 in December.

Five months later, in May, the premium had fallen to 28, and this without even the slightest reduction in the quantity of circulating notes in use. In the following October, although the quantity of notes on hand, and therefore out of circulation, had become, as then stated by the Comptroller of the Currency, very large, the premium had risen to 46. In view of all these facts there is, as I conceive, no possibility of exhibiting any necessary connection between the price of gold and the circulating note.

As difficult would it be to exhibit any such connection with the prices of commodities of home production, all the changes in these latter having resulted from circumstances wholly apart from the supply of notes. Cotton and woollen goods were high, for the reason that a cotton and wool famine had been brought about. Labor was high because of the rapid extension of manufactures consequent upon the adoption of a protective policy, and upon the demands of the government for service in the field. Meat of every kind was higher because of the vast demand caused by millions of men in arms. Horses were higher because of army demands, and so was it with hundreds of other commodities that could be named. Real estate, however, remained unaffected, land in Pennsylvania, and houses in Philadelpia, having been purchased as cheaply as could have been the case before the greenback idea had first been started.

In another letter I propose to exhibit the movements since the close of the war, meanwhile remaining,

Yours very respectfully,
HENRY C. CAREY.

PHILADELPHIA, Sept. 12, 1874.

## LETTER SECOND.

SIR: The amount of legal tenders, bank notes, and fractional currency, as authorized by law in October, 1865, somewhat exceeded $1,000,000,000. From this, as then was shown by the Comptroller, there needed to be made so many and so heavy deductions that the actual amount of the circulating medium at that moment was shown to be but $460,000,000, or perhaps $200,000,000 more than it had been in the years immediately preceding the rebellion, when, in default of machinery of exchange, our people constituted a nation of

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debtors the like of which could scarcely be found in any civilized
country of the world.*

Trivial as was this excess when compared with the wonderful
growth of the domestic commerce, the increase of population and its
dissemination throughout the regions of the West, and the increased
need of currency consequent upon the conversion of millions of slaves
into receivers of wages, the then finance minister, Mr. Hugh
McCulloch, not content with a reduction, within less than a year, of
the gold premium from 250 to 28, at this moment fulminated his
Fort Wayne decree, announcing contraction as the order of the day,
thus counselling all, in view of the reduction of prices that was to be
brought about, to sell, while admonishing all to refrain from buying,
thereby producing a paralysis of the society movement that has
cost the country far more than the war had cost. A more expensive
finance minister has scarcely ever been inflicted upon a nation †

From that day to the present there has been an incessant war upon
the money of the many, the circulating note, leaving wholly out of
view the action of money known by the name of "deposits" by means
of which the few are enabled to profit at the expense of the many
who need to live by exercise of their physical and mental powers. ‡

* After careful examination, Mr. George Walker, President of the Bank of Springfield, Massachusetts, and a fierce opponent of the greenback, arrived at the conclusion that the currency in 1862 amounted to $11 49 per head, giving $350,000,000 for the Union. Deducting $80,000,000 for the States in rebellion, we should have $270,000,000 for the loyal States, or within $190,000,000 of the amount existing at the close of a war the most remarkable that the world had seen.

† This gentleman having become a London banker, and being thus largely interested in perpetuating our dependence on Britain, has just now volunteered to advise our people in relation to free trade and specie payments, thus giving warrant for making public some facts in reference to his opinions, and the changes they have undergone, as follows: In May 1865, very shortly after his accession to the post of Secretary, I had a conversation with him in the course of which he declared himself a disciple of Mr. Clay, and thorough believer in his protective doctrines. Regarding him as sincere in this expression of opinion, I said, that in view of the great changes now to be met, millions of men North and South returning from the field and needing to seek employment at a time when the Government must not only cease to be a purchaser, but must, on the contrary, become a seller of commodities it had already purchased, it was most desirable that all our measures should tend in the direction of stimulating production and making demand for labor; and that, if I had my will, gold should be at 200 for the next seven years, as the premium afforded a protection that even false invoices would not enable the foreigner to avoid. Fully coinciding in the view thus suggested, the Secretary answered, "That is too much, but I should gladly see it at 175." Three months later, he was instructing his representative abroad to give assurance that we should have resumed specie payments before the first 7-30s became due. Two months yet later came the destructive Fort Wayne decree, and from that hour did the Secretary persist in the absurd and injurious course of policy therein announced. But few months later he presented himself as an opponent of those doctrines of Mr. Clay of which he had been before the advocate. What is the value to be attached to his present opinions may be judged from this exhibit now for the first time put on paper, although fully authorized by him on the day succeeding the conversation above described. He is, as I believe, the only one of our Finance Ministers who has ever retired with the reputation of a large fortune accumulated during his term of office. His immediate successor retired from office as poor as when he entered it.

‡ Of the $396,000,000 of government issues outstanding in September, 1873, almost

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