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