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not to pledge speedy action. Mr. M'Culloch, however, having carried his point, probably troubled himself very little about the grammatical peculiarities of his friends. He waited for them to redeem their promise of speedy action,' and four months later, on the 12th of April 1868, just a year after the close of the war, Congress passed an Act authorizing the Secretary to withdraw 2,000,000l. of the legal-tender currency within the next six months, after which he was at liberty to withdraw 800,000l. a month. During the first year, therefore, the extreme contraction could not exceed 6,800,000l. in a total of 80,000, 0002.

no Government has ever succeeded in carrying it out, although nearly every Government in the history of the world has at one time or another degraded its standard, as the mere names of coins so commonly show. The example of England in 1819 served only to mislead public opinion in America. Mr. Tooke, in his History of Prices,' has sufficiently proved that the Bank of England note between 1797 and 1819 belonged to a different class of currency from that in which assignats and green-backs and other forced issues are to be placed. We must go back to the famous episode in English history of which Locke and Montagu were the heroes, before we can find an example A member of the House ventured to of a forcible elevation of the standard; but trifle with its dignity, by comparing this so far as Government paper-money is conpolicy of piecemeal contraction to the un-cerned, issued not in bank-discounts but by wise philosophy of a humane man who was too kind-hearted to cut off his dog's tail at one stroke, and accordingly took only a little piece each day. The member who made this criticism had humour, if he wanted refinement. The illustration smells a little of the kennel, but there was force in it. The process chosen by the House was calculated to excite the greatest possible amount of resistance and to prolong the struggle for years, with almost a certainty that popular clamour would force Congress to abandon the effort long before the result was reached. Mr. M'Culloch had not asked for this measure, and only resigned himself to it as being better than no measure at all. He had asked for absolute discretionary power over the whole ground, to contract rapidly or slowly according to the condition of the country; and he believed that this contraction could be so skilfully managed as to save credit and society any severe shock. Congress can scarcely be blamed for refusing to place such a power in the hands of a single man who was not responsible to it for his ac- The result of the act of April 12, 1866. tion; but if Congress was determined to was precisely what one might have predicted rely on its own judgment, success should without laying any claim to peculiar forehave justified such an interference. We sight. During the year 1866, and a part of believe Mr. M'Culloch to have been too 1867, Mr. M'Čulloch was allowed to exersanguine, but he would probably have been cise his right of contraction until in Novemmore successful than Congress. To ele- ber the amount of legal-tender currency vate the standard of value from 72 to 100 was reduced from 80,000,000l. to about 73,is a task which becomes exclusively diffi- 000,000l. The year 1867 was everywhere cult if prices have settled at the former one of severe depression; prices and wages point; it implies a great pressure on values fell in the United States as they fell in and an entire overthrow of a corrupt sys- Europe, and a cry was immediately raised tem which in the United States had already against contraction. Mr. Mc Culloch yielded taken deep root. Mr. M'Culloch believed to the popular demand, and stopped conthat the effect on prices would be merely tracting, in the hope of quieting complaint. nominal, and we will not undertake to say In his annual Report of December he made that he was mistaken; but whether nomi- an earnest appeal to Congress to persevere nal or not, the process is so difficult that in its policy; and when it became evident

force, not regulated by public demand, nor liable to be thrown off the market if superfluous, there has been, we believe, no single instance in history where such a currency, once depreciated, to any considerable extent, has ever been redeemed at its par value. Two methods of restoring a fixed standard have been tried; the barbarous method of permanently degrading the standard itself; and the civilized method of redeeming the paper at its supposed market value, or repudiating it altogether. The United States Government has pledged itself not to repudiate its obligations either in one way or the other. It has promised redemption in full, and if it succeeds, it will offer an example to the many nations now suffering under the same difficulties, which they will be glad to follow. If it fails, Europe will have the satisfaction of knowing that no new principle of finance has yet been discovered beyond the Atlantic, and that there is no danger threatened to European pride from the superior honesty of the United States.


that Congress was panic-stricken, he even pledged himself to withdraw no more paper paid out of surplus revenue on debts due at more than 125,000,0007. had actually been until better times should return; but all his the close of the war. entreaties were absolutely thrown away, been funded for the most part in so-called The remainder had and almost the first act of Congress was to 5-20 bonds which could not be touched unhurry a bill through both Houses with til five years had expired, and which the scarcely a pretence of opposition, by which Government was pledged to pay in full at the policy of contraction abandoned, after an experiment of eighteen 000l., or three-fifths of the entire debt, exwas finally the end of twenty years. About 320,000,months and the withdrawal of about 7,000,- isted in this form, bearing interest at 6 per 0007. in legal-tender notes. The whole cent. subject has remained a mere topic of empty discussion since the passage of this law in January 1868.

from an English point of view is most open The part of Mr. M'Culloch's policy which In the meanwhile, although the Secretary vote so large a sum to the mere discharge to attack, is that which allowed him to dewas not permitted to exercise his own dis- of debt at a time when relief of industry cretion in funding legal-tender notes, no from destructive taxation was a matter alopposition was offered to his other funding most of life and death, as we shall presently operations which were on a scale such as show. Mr. M'Culloch firmly believes that very few financial ministers have ever he is in the right, while all England would known. Within three years after the close probably agree in pronouncing him to be of hostilities, Mr. Mc Culloch was obliged wrong. In adopting his course, however, to dispose of a floating debt equal to about he was only following out the traditional 260,000,000l., and this operation, which policy of the United States Government even in the quietest time would have given the which has been always based on the princistrongest Government good cause for anxi-ple that a permanent debt is a permanent ety, had to be effected on the unsteady danger, a source of corruption to republican basis of a depreciated currency, the daily institutions, pressing unequally on the peovalue of which depended on a thousand ple, creating discontent at home and weakchances, with society and industry still dis-ness abroad. organized, and in the face of a threatened some illustrations of the American arguWe shall show presently financial crisis which was generally expected ment drawn from the effects, of high taxaas a necessary result of reckless national tion on public prosperity and morals. expenditure and of an inflated and unsound Another illustration, still more significant, condition of trade. far as he could, against the dangers he which, on one ground or another, insists In order to guard, so is supplied by the immediate rise of a party foresaw, the Secretary accumulated a large upon a forcible interference with the rights gold reserve in the Treasury which he held of creditors. as an encouragement to regular trade, and as a threat over the heads of speculators. No act of Mr. M'Culloch's has been more sharply criticized than this, and we are inclined to think that in no other act did his peculiar training and ability show themselves in so strong a light, or, taking everything into consideration, did they deserve more applause; but, whether we are right or wrong in this opinion, Mr. M'Culloch at least has against all criticism the triumphant answer of success. been closed, large loans have been effected, A great war has heavy revenues have been collected, and some 260,000,000l. of temporary obligations have been paid or funded, and a great debt brought into manageable shape, not only without a financial crisis, but without any disturbance to the ordinary business of the country. Meanwhile, if allowance is made for the reserve fund in the Treasury, the debt on the 1st of July, 1868, had been reduced from 600,000,000l. to 500,000,000l. According to the Secretary's last Report,

been suggested. The point, as put by its Simple repudiation has of course never supporters, has been one of the equitable rights of the debtor as opposed to the strict claim of the creditor. which, as we have already said, form the The 5-20 bonds, bulk of American indebtedness, were 6 per cent. bonds issued partly in 1862 and partly in subsequent years, which the Government pledged itself not to redeem until five years had elapsed after their date, but which must years. The five years' grace has already be redeemed in full at the end of twenty expired so far as a portion of these bonds is concerned, and the Government is at liberty to pay them off and reduce the interest if it can obtain the money, but unfortunately the market value of the bonds is only about 80 per cent. of their nominal value, and the operation would be a difficult one. Meanwhile the creditor who bought five-twenties at prices ranging from 40 to 80, has received from 8 to 15 per cent. per annum on his investment ever since the purchase.

and, while disclaiming the idea of employ ing a threat, Mr. Sherman added that if this offer were rejected, he should himself vote in favor of redeeming the bonds in currency. The proposition was not in itself unreasonable. The creditor might very possibly consider ten years' undisturbed possession of his 5 per cent. interest as a fair equiva

The law authorizing the issue of 5-20 | finally payable in gold, in place of his 6 per bonds, did not in words pledge payment in cent. bond which was now payable at will; coin merely for the reason that the legal-tender paper had at the time only just been invented, and no one as yet conceived the idea that it was to become a permanent standard of value. There is no question that the bonds were sold on the understanding that they were to be paid in coin when due, and that they could not have been sold at all, at least during the war, except on this under-lent for the 6 per cent. bond with its liabilstanding. But for anything that appears on the bonds itself, there is no reason why it may not be paid in lawful money,' or, in other words, legal-tender paper. In this particular the advocates of repudiation have possibly the strict law on their side, while equity is on the side of the creditors, but this point could only be determined by the Supreme Court.

ity to immediate redemption, and it is not unlikely that he would ultimately have been a gainer by the bargain; but the threat of compulsion alarmed the public and tainted the whole measure. The republican party refused to follow Mr. Sherman, whose position among his friends was gravely compromised, and the democratic party, with Mr. Pendleton at its head, demanded of Mr. Apparently this right of redemption in Sherman the reason why, if he thought so paper would seem to imply a corresponding well of its policy as a means of compulsion, right to issue an indefinite amount of green- he did not adopt it as a principle. If the backs for the purpose of effecting the re-bonds were payable in paper, why not pay demption, and such no doubt was the first them in paper? idea of its inventors. But when it became Another proposition was now introduced evident that public opinion was firm against as a political bribe in the election, and the any further inflation, a more moderate idea protection of this was assumed by General was suggested. The bonds, it is said, were Butler of Massachusetts, a member of Corlawfully payable only in the same currency gress better known in England for his miliin which they were issued, and this was le-tary notoriety. With his usual ingenuity gal-tender paper, it is true, but paper which Mr. Butler advanced his measure as one by the solemn pledge of the Government, never could be issued to a greater amount than 80,000,000l. With this limitation no injury could be done to the creditor, who would receive all the value to which he was legally or equitably entitled. This is the ground which seems to have been finally taken by Mr. Pendleton, the leader of the so-called greenback party,' and it is not materially different from the scheme so strongly pressed in England at the time of resuming specie payments, which was sum-vidual for a correct return. marily rejected by Parliament.

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In the early part of 1868, before the general election, this doctrine seemed to be making great headway both in the democratic and in the republican parties which are outbidding each other in their local organizations for the popular vote. Some of the republican leaders in Congress began to waver, and John Sherman, senator from Ohio, Chairman of the Committee on Finance, and one of the most cautious and respected among the republican chiefs, undertook to effect a compromise which should finally dispose of the controversy. He brought in a bill, not from his committee, but on his own responsibility, offering the public creditor a 5 per cent. bond secured from redemption for ten years, and

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framed upon English law. The interest upon national securities pays income-tax in America as well as in England. Nay! said General Butler; England, whose example is so loudly vaunted for financial integrity, taxes the principal as well as the interest of her debt in the case of her terminable annuities, whereas we only propose to imitate the English practice so far as to collect the income-tax at the Treasury instead of trusting the honesty of each indi

At first sight the suggestion seemed innocent enough, and the House was so well pleased with it, that without allowing debate, it adopted a resolution instructing its Committee of Ways and Means at once to report a bill for levying a10 per cent. tax at the Treasury on the interest of the United States securities. The instruction revealed the true nature of the project by dropping the whole pretext of income-tax, and directing the imposition of a new tax in addition to the old one, unaffected by its exemptions and striking especially at foreigners. The members of the Ways and Means Committee, whose chairman is leader of the House, after trying in vain to stop the Resolution, were obliged to submit in silence while the House passed it over their heads by a vote of 92


to 54. A very amusing, but rather undig-|
nified, contest then ensued between the
House and its Committee. On the 2nd of
July, three days after this scene, Mr. Hoo-
per of Massachusetts reported a bill from
the Committee, accompanying it with the
following extraordinary defiance: -

The Committee repeat that in reporting the
bill they act in obedience to the positive direc-
tions of the House, and contrary to their own
best judgment.
their rights as members of the House to oppose
They reserve to themselves
in every possible way the adoption of a measure
which they regard as hostile to the public in-
terest, and injurious to the national character.'

schemes, had the honour of being defeated by General Grant in his stead. Mr. Sherman, as Senator, held his office without reelection, but his influence was greatly shaken. General Butler was subjected to an extremely bitter contest on the ground of his financial heresies, and although he carried were not so fortunate. Very few of them the day, his republican allies in Congress

were returned.

that repudiation had no friends, and that, The election of November 1868 was therefore supposed to have decided the point whatever happened, the public debt would be paid in full, in coin, when due. The House, whose duty it was to take Johnson, in his December message to Consurprise was, therefore felt when President Much offence at this unceremonious lecture, did gress, suggested the idea of repudiating the nothing of the sort, and left to General whole debt in eighteen years and a-half. Butler the task of vindicating its dignity as The President's influence was so totally dewell as the honesty of his own measure, stroyed that no proposition made by him both of which duties Mr. Butler performed would have had the least chance of considwith his usual boldness, indulging at the eration, and in this case he only succeeded same time in many energetic and spiteful in giving to his enemies in Congress the sallies against the Committee and the bill opportunity of making easily a reputation itself, which he declared had been carefully for superior virtue by condemning his framed for the purpose of making the House scheme. In point of fact, Mr. Johnson's odious and ridiculous. retaliated by charging General Butler with his own character and faculties; for, strange General Garfield suggestion was only a curious indication of having attempted to deceive the House in as it may seem, this proposal was made by regard to his measure, and with having suc-him in good faith as one to which the pubceeded. The bill itself was buried under lic creditor other pressing business, and could not possibly come up for action until the next session of Congress; but its supporters, determined to obtain a vote on the direct principle, offered, by way of amendment to a funding bill then before the House, another proposition, much more cautiously framed and very moderate in character. The tax was reduced to 5 per cent.; all income-tax exemptions were allowed in deduction; and the amount levied at the Treasury was to be considered as a full discharge of all income-tax so far as national securities were concerned. The member who offered this measure declared his only object to be the exact reproduction of the English law. As such the House divided on the amendment, and rejected it by a vote of 73 to 38, thus sustaining its Committee against its own previous vote of instructions.

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seriously expected that the bond-holders might not be averse.' might be persuaded to accept the offer, not because it was their interest, but merely because in view of their past profits their sense of justice would acknowledge that the arrangement was equitable. His meaning was that they should convert their bonds into a terminable annuity having eighteen and a half years to run, which would have been equivalent to a perpetual annuity at about 2 per cent. interest. however, distrusting him personally, and unable to conceive the simplicity of a President who really imagined that creditors were influenced by ideas of abstract justice, set Mr. Johnson down as the worst repudiator of all, and rejoiced in the consciousness that he had at last destroyed with his own hands the little respect which had still been preserved for him.

The public,

The shrewdest politicians were entirely deceived as to the popularity of attacks on ficit in the peace hudget seems the natural At the close of an exhausting war, a dethe national credit, and when the elections condition of nations. We have already came, this issue, which the republican party mentioned that the United States Governhad feared and evaded, and which the dem- ment had not to suffer this last and worst of ocratic party had tried to press, seemed to financial annoyances, but has on the conexercise a disastrous influence on its friends. trary devoted 125,000,000l. of surplus revMr. Pendleton failed to obtain the demo-enue to the reduction of the debt since Sepcratic nomination as President, and Mr.tember, 1865. The true difficulty has here Seymour, who was opposed to all these not been a want of money, for the country

is very wealthy, and its resources, at least An effective collection of such taxes, in the Northern States, were untouched by both internal and import, was of course imthe war, but how best to collect the needed possible, and indeed had they been rigorrevenue has proved an unexpectedly awk- ously collected, the country could scarcely ward problem. Under the pressure of have stood under their pressure. In a sinnecessity Congress had imposed excessive gle year 115,000,000l. in currency, equivataxes which produced large sums of money lent to 80,000,000l. in coin, was paid in but were destructive to healthy industry, taxes to the national Government, and yet and violated every economical law. The the Commissioner of Internal Revenue estimerest necessities of life and the simplest mated that the laws were enforced with so materials of labour were taxed and taxed little vigour that half the taxes were again. Clothing, boots and shoes, cotton evaded. Four years of reckless national fabrics, raw cotton, leather, coal, and expenditure, followed by such a system of woollens, furnished several million pounds taxation, and based on such a currency, to the internal revenue; iron in every had changed materially for the worse the shape, pig and bar, sheet and castings, all habits and moral standard of the commanufactures of iron and of steel, lead, machinery and similar agents in productive industry, furnished millions more; and these duties being collected in the form of a tax on the sales of each manufacturer, not only caused an excessive duplication of taxes, each new process counting as a new manufacture, but increased the cost of the finished product to a far greater extent than was represented by the amount of the tax, heavy as it often was. Railways, steamers, and companies which forwarded merchandise, and telegraph companies, all modes of conveyance and intercommunication, were heavily taxed. Repairs of engines, carriages, ships were burdened with a penalty. Insurance companies paid on their gross receipts, and joint-stock banks on their capital, circulation, and deposits. Finally, a heavy income-tax crowned this tremendous scheme, but did not tell the whole story of the unfortunate consumer. Perhaps the most mischievous tax of all, which eat into the heart of society like a cancer, was that which resulted from the additional profit charged by every tradesman or manufacturer as a compensation for the risks to which he was subjected by the daily fluctuations of the currency.

munity. Productive pursuits, especially in the eastern States, unless artificially stimulated, ceased to yield any return nearly equivalent to the rapid gains of trade and of speculation, with their additional chances for successful fraud. The rural districts threw a greater proportion than ever of their surplus population into the great cities, which grew with rapidity in spite of the rise in rents and in the cost of living; while everyone whose occupation or condition of life precluded the chance that he might cheat his neighbour as his neighbour cheated him, was ground into the dust. Slight symptoms indicated the tendency of society. The stock-exchange, for example, has as a rule been in no country a fashionable or an honoured field of activity, and America in former days offered no exception to this ordinary law; yet it had now become in the great cities a favourite career. The same young men who in 1861 had sacrificed income, health, family, and, during four years, from motives as purely patriotic as human nature on its great scale is capable of producing, had endured every hardship that war could inflict, now returned as colonels and generals, with their honours and their wounds, fresh from the Partly in order to furnish artificial pro- famous armies of Virginia and Tennessee, tection for native industry, partly also to glorying in their military career, fairly compensate for the effect of these internal adored by the nation, proud in the contaxes which gave artificial protection to for-sciousness that Europe had watched their eign industry, Congress thought proper to raise the Customs' duties to a point which at first sight seems inconsistent with international trade. The average rates were increased until they reached nearly 50 per cent. on the invoiced value of all dutiable articles. No description can present the condition of American industry in a more painful light than the bald fact that these enormous duties are universally agreed to have failed in giving the protection intended.

campaigns with partisan eagerness — and returned to job merchandise or to plunge into the profligate and swindling transactions of the stock-exchange and the goldroom. Mr. Wells's first annual Report, made in December 1866, nearly two years after hostilities had ceased, described a condition of things which seemed to offer all the signs of an imminent convulsion. The discharged soldiers seemed not to have returned to their old occupations; they had sought new homes and new interests. The

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