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About The Conservative (Nebraska City, Neb.) 1898-1902 | View Entire Issue (Oct. 20, 1898)
T3be Conservative * money is bad and dangerous , nnd more expensive to the community than properly secured bank paper. Such unanimity on the parfc of men of special training in economic science , who have no private interests to servo , ought surely to count for something in this dispute. WHAT A DOLLAR CONSISTS OF. What is a greenback ? Hero is one. It says : "The United States will pay the bearer one dollar. " It does not say that this piece of paper is a dollar lar , but that the government will pay a dollar on its presentation at the treasury. The next question is , What is a dollar ? It is 25 8-10 grains of gold , 9-10 flue. This is declared by law to bo tlie unit of value. No other thing is so declared by law. The supreme court has decided in the case of Bank vs. Supervisors (7 ( Wallace , 2G ) that the greenback is a promise to pay coined dollars. Although the government of the United States has created for its own be hoof , out of the bullion bought by itself , u limited number of silver dollars , which it has declared its intention to keep at par with gold , the promise inscribed on the greenbacks is a promise to pay gold. It has been so understood by every ad ministration we have had since specie payments were restored , and that is what I mean when I speak of redemption of greenbacks by the treasury. Still , the point I am now considering does not turn on the particular metal that the greenback calls for. The point is merely that the government promises to pay a coined dollar and that the value of the paper rests upon the fulfillment of the promise. WHAT THE GOVERN KENT'S CREDIT CONSISTS OF. Wo are often told that the greenback circulates on the credit of the govern ment. Yes , but what does the govern ment's credit consist of ? The word "credit" is derived from the Latin credo , "I believe. " What do I believe when I read the words on the greenback : "The United States will pay the bearer one dollar ? " I believe it will do exactly what it promises , not that it will tender mo something different , or ask mo to wait till a more convenient season. If the government lacks either the means or the inclination to fulfill the promise , then its credit is impaired , and the greenback will no longer circulate at par. I can remember a time when the greenback dollar would bring no more than forty cents in either silver or gold. Therefore , when we say that the greenback circulates on the govern , , / < t ment's credit , wo mean that a general belief exists not that the government will redeem the greenback some time on something , but that it will redeem it on demand in coin. Wo do not mean that the government is eventually good for the thing promised , but that it is good now , or whenever the holder of the greenback wants it. There are other things that are ultimately good. Wo are sometimes asked why may not paper money bo issued against real estate ? Is not real estate eventually good ? The answer is that real estate is not money , and that what is wanted is not eventual payment , but present payment. If you issue paper , which promises to pay real estate , or wheat , or cotton , and people take it with that understanding , well and good. They know what to expect. They can have whatever they bargain for , but if they want money , the paper must bo isstied on the money basis , and not on the real estate basis. There have been a great many attempts to issue money on the basis of land , from John Law's famous experiment in France down to the great spawn of land banlcs in our southern states in the ' 20s and ' 30s , but they have all ended in disaster. So the essence of the greenback is that it circulates in place of the coined dollar lar because the government agrees to , and actually does , redeem it in coined dollars on demand. It follows that if any doubt is cast upon its redemption if the public apprehend that the govern ment cannot or will not redeem it on de mand uncertainty will ensue in every department of business and this uncer tainty may reach the dimensions of a panic. Now I shall recall some recent events in our financial history. THE TREASURY'S GOLD RESERVE IN 1892-93. During the latter part of President Harrison's administration the gold in the treasury began to run down in a rather alarming manner. It consisted of two parts , namely , a fixed sum of $100,000,000 , known as the greenback redemption fund derived from the sale of bonds in 1878 , and a variable sum de rived from other sources. At the begin ning of December , 1892 , this latter fund amounted to $33,000,000. There was a demand for gold for export and this de mand fell upon the treasury. That is to say , the exporters of gold were present ing legal-tender notes at the treasury for redemption. As the movement seemed likely to continue for a consider able time , the secretary of the treasury began to grow uneasy , and ho cast about to see how he could replenish his stock. I remember that ho came to New York about that time and attended a dinner of the Chamber of Commerce , and , be ing called on for a speech , he said , among other things , that the govern ment intended to maintain gold pay ments oven if it should become necessary to sell government bonds to obtain the means. This announcement was quite vigorously applauded. I romembei thinking at the time that probably Mr. Foster had made his speech in order to sound public sentiment , to feel the pub lic pulse , to find out whether the people would sustain him in selling govern ment bonds in time of peace ; for you must remember there had been no in crease of the government's interest- bearing debt since the obligations in curred in the civil war had been funded. Some persons denied that there was any .egal authority to issue now bonds , al though the specie-resumption act ro- qtiired the secretary to redeem the gov ernment's demand notes "on and after January 1 , 1879 , " and authorized him to sell bonds of a certain description as might bo necessary for that , purpose. Apparently Mr. Foster was satisfied with the response of the people and the press to his Chamber of Commerce speech , for he went back to Washington and issued an order to the bureau of engraving and printing * prepare the new bonds. This was on the 20th of February , 1893 , and Mr. Foster was to go out of office on the 4th of March. Naturally , he preferred to put upon his successor the onus of issuing the bonds if he could. So he came to Now York and pursuaded the banks to give him a few millions of gold in exchange for legal-tender notes , enough to carry him along until the 4th of March. This en abled Mr. Foster to slide out of office , leaving the $100,000,000 greenback re demption fund intact , but his surplus over that sum was only § 987,000. EXPORTATION OF GOLD CAUSES 1'UULIC ALARM. For our present purposes it makes no difference what was the cause of this drain of gold on the Treasury. It may have been an adverse balance of trade. It may have been a shortage of revenue. It may have been both of these causes. The question is sometimes asked , Why did the banks , prior to 1892 , fur nish all the gold that was needed for export , and why did they then cease to do so , and put that burden on the gov ernment ? I am not in the confidence of the banks. I never owned a share of bank stock in my life. I cannot an swer for them , but I can toll you what I should have done if I had been in their place. As long as there was no doubt about the redemption of the legal-tender notes in gold I should have supplied gold to such of my customers as wanted it. It is the business of a bank to give its customers the kind of money they want. But if I found doubts arising in my mind whether the govern ment would or could continue the re demption of its notes , I should have kept my own gold , and paid my cus tomers legal-tender notes , leaving them to got the gold whore they could. I as sume that the banks of the United States took this view of the situation. They saw the government buying 4,500- 000 ounces of silver each month and is suing its demand notes therefor. They saw the government's income declining and its outgo increasing. They knew what was the amount of the govern ment's gold reserve at the close of each day. They could not know whether
