i
Conservative
MONEY AN1) THE CONSTITUTION.
[ The following letter wns written to Colonel
A. B. Fimiulmr of York , Pft. ]
Your compreheiiBivc statement of the
economic principles which underlie the
practical use of money is admirable.
Your qualified adoption of the national
bank system is conservative , and your
statement of the evils which grew out
of the state bank system is fair. Yet I
do not think that you have stated all
which can be said upon the subject , and
that you omitted some evils of the na
tional bank system which have been felt
before and which will be felt again , and
may result in the termination of that
system.
1. The only basis of that system un
der our government , as declared by the
supreme court , is that under proper con
ditions it may be a necessary instrument
to borrow money , power for which is
granted under the constitution , with
such additional powers as are necessary
to carry that power into effect , of which
congress is made the judge , when they
tend toward that end. It is obvious ,
therefore , that the system can exist only
under temporary and extraordinary con
tingencies. It has been the unwritten
law of this country that the government
shall pay its debts which in the case of
banks are the bonds under which the
currency is issued and for which they
are the security. If the debt is paid ,
that form of currency must terminate
and a consequent shrinkage of one kind
of money , or what is used as money ,
must ensue. That was one of the diffi
culties with which Mr. Cleveland's ad
ministration had to contend ; and if we
continue to pay debts , some future
administration will have to meet the
same difficulty.
Power Too In The Constitution.
2. Although such a power was never
contemplated by its framers , and under
a just construction does not exist in the
constitution , we cannot escape the fact
that under the stress of a war involving
the existence of the government , a par
tisan supreme court decided that the
government had the power to issue legal
tender notes. I do not believe that at
the present day such a decision could
have been rendered ; but the fact re
mains , that not once , but several times ,
the supreme court has committed itself
to this unfortunate doctrine , and that it
has permeated the financial ideas of the
country. The question then naturally
arises , and is based upon sound reason :
Why pay interest on bonds and allow
banks to issue currency for which the
government is ultimately liable , when
the government can save the interest by
directly issuing the currency ?
Paper Money Tlio llasls of The Populist
Party.
The facts are that legal tender paper
money and the alleged unnecessary
issue of bank notes are the true basis of
the populist party , which has swallowed
up and adopted the name of the demo
cratic party ; that neither legal tenders
nor national banks were contemplated
in the constitution ; that they exist for
temporary contingencies by construc
tion , under implied powers , and should
naturally pass out of our systems with
the contingencies which brought them
into existence ; that our systems , both
state and national , are permeated by the
philosophic idea that they should not
engage in any undertaking or business
which the people can carry on for them
selves , and that particularly the national
government is one of limited powers
comprising such only as are necessary
for its own existence , and such as are
necessary for the whole union and can
not , therefore , bo exercised by the
states.
Government Taper Simply Demand Notrs.
U. Bank paper and government paper
are simply demand notes and have no
element of money except that of circu
lating on the credit behind them. They
were invented in ancient times by usur
ers , and in the niedhcval ages were
adopted by the goldsmiths in connection
with their loans. Under natural condi
tions , private individuals , therefore ,
have as good a right to issue them as
governments or banks. In fact , while a
natural incident of banking , they have
no necessary connection therewith. I
have sometimes thought , that under the
present development of banking , it
would be wise for both the national and
state governments to remove their hands
from the business , and permit this
branch to take the same course as all
other branches of the credit system ; we
would have a natural use of this form of
credit when needed ; it would be local
as it should be ; would be thoroughly
elastic ; and abuses could be prevented
or punished under the police power of
government , as other wrongs are pre
vented and punished. After the demand
notes were invented , it did not take
long for ambitious governments to dis
cover how valuable an instrument it
would be under their exclusive control ,
to consolidate their power and advance
their interests at the expense of the
people. It has consequently been a
more potent instrument in the promotion
of war , increasing taxation , and aiding
unrighteous schemes , than any other
auxiliary. Our fathers were , therefore ,
wise in not comprehending this power
in the national government. It is pos
sible that they were also wise in taking
the power from the state governments ,
and leaving it in the hands of banks
and individuals subject to the police
regulation of the states in which the
notes were issues. If they were really
money , perhaps your contention in
favor of national banks would have
more weight ; but they are not money ,
and should be treated as money in no
other sense than bonds or checks or
time notes are treated as money.
Canadian System nil Ideal One.
4. Sometimes the evils of a system
appear negatively in the obstacle it pre
sents to the adoption of a better system.
You and I believe that the Canadian
laws , in most respects , furnished an
almost ideal system of paper currency.
It is based upon credit , and the credit is
based upon actual assets. Under our
constitution , in which the power to or
ganize national banks , is limited to the
single condition of enabling the govern
ment to borrow money , this system
could not be adopted as a national sys
tem ; while under state la\\s and subject
to both national and state police regula
tions , it can be carried into successful
operation. The reason is , that while
the general government posseses only
limited powers , there are 110 limits to
the powers of the state except such as
they have imposed upon themselves.
I think that I know your answer to all
this line of thought. You have already
given it in your address. The national
bank currency has proved to bo the best
and most convenient we have ever had ,
let us therefore retain it. It is the old
maxim , ( jnicla non movcrc. Do not dis
turb quiet content. I admit that under
the present chaos of political thought it
is a valid argument , and that it is the
safest political position to take until
events indicate the necessity for a better
one. Nevertheless it is the highest
evidence of statesmanship to forecast
the future , to foresee portending evils ,
and by simple and unnoticed remedies
to prevent them in advance ; or if you
cannot do that , have the cure ready
when the emergency shall arise , to per
mit its application. This brings me to
the real subject of this letter.
Societies as well as individuals must
have standards. Under the evolution
of growth these standards are constantly
changing. The standards of the six
teenth were different from those of the
fifteenth century ; those of the seven
teenth were different from those of the
sixteenth century , and so on from cen
tury to century ; and doubtless the
standards of the twentieth century will
be greatly modified from those of the
nineteenth century.
The Fallacy of Vex Popull Vex Dei.
The constitution of the United States
is not only the framework of our govern
ment , but the standard of our political
morals. The late Mr. Gladstone said
that it was'the most perfect code of
government ever framed by the hand of
man. So it should have been. Its
framers were permitted to draw upon
the whole past experience of the race
under peculiarly favorable conditions ;
and perhaps if its framers had drawn it
a century later it would have been a
still more perfect instrument. It is just
this purpose for which constitutions