89.32 in gold was worth only 86 in gold. Gradually the price rose to 94 for stock and par for the bonds, while gold, after rising to 5 per cent. premium, fell back to 1 and 1. Hence the banks could make a profit by selling their stock for gold, and they could discount paper by paying out the 3 year bonds to be sold by the borrower. The securities disposed of by the banks were, to some extent, purchased by the public. The Government which had obtained such large supplies of capital from the public in various shapes, ships, steamboats, clothing, food, munition, &c., was now ready to pay out the paper for them, and the payments took place as fast as the printers could deliver the money. The paper so poured upon the market began at once to inflate the currency. The creditors who received it discharged their debts with it, and it accumulated with the banks, which freely offered to loan it, at lower rates of interest. The Treasury was

the reservoir that received it from the public at 5 per cent. interest, and this fact made 5 per cent. the minimum price of money, since no one would take less than he could get from the Government. The legal limit of $50,000,000 was thus rapidly filling up, and on the 26th of April the Secretary ordered the rate of interest to be reduced to 4 per cent., except for banks, which were still allowed 5 per cent. interest. The limit of $50,000,000 was completed by the close of April, and the Assistant Treasurer determined on paying off all 5 per cent. deposit certificates, and allowing only 4 per cent. for new deposits. He refrained from this, however, and only received deposits at 4 per cent., as the old ones were voluntarily withdrawn.

The issues of these various descriptions of government paper continued, and at the close of May an official report of the public debt was made by the Secretary, showing the following results as compared with Dec. 1st:

Thus in six months the debt had been actually increased $220,628,366.56, and there had in addition been converted $19,082,600 treasury notes into paper payable on demand. The whole amount raised was in demand loans, of which $117,000,000 was in paper money, $47,000,000 in one year certificates, and nearly $51,000,000 in deposits. The appeal of the Secretary for conversion into the 5-20 bonds had been productive of only $2,699,400. It might therefore be said that there were during that period absolutely no loans of capital to the Government. The 3 year bonds had been paid out to creditors, with the exception of the $3,000,000 negotiated at par at the close of March. The Secretary had extended the note circulation by $57,000,000, and the amount outstanding was now equal to the whole circulation of the banks. The whole paper currency had therefore been doubled, but there was no manifestation of any desire on the part of the public to convert notes into stock. It is true that the old notes making one half the amount of Government notes outstanding were withdrawn from circulation, and held for the use of importers in their payments to the custom house, at continually rising prices, marked by the depreciation of the Government currency, which was now 7 per cent. discount for gold. The point of "extended circulation" which the Secretary supposed

$19,082,600 00

$289.710.966 56

would bring with it "increased facilities to con tract loans," was not yet reached. The public did not take the 5-20 stock. The Secretary ascribed the failure of the loan to the terms of the law, which make the bonds convertible at par, and permit the Secretary to sell them at the market value. He objected to the first provision that while the bonds were convertible at par to all the world, the brokers and speculators, who might otherwise "take considerable amounts," could make no profit, since the price could not rise above par, when everybody had a right to take them at par from the Treasury. The provision to sell only at "market value" was objectionable in his view for the same reason, since it gave no advantage to large operators. He therefore desired the repeal of those provisions, and the granting of a "discretionary power" to the Secretary in the making of these loans. Meantime he was again destitute of resources. The deposits and 1 year certificates did not suffice to meet current expenditures, and he again appealed to Congress for an issue of paper money.

The approach of the month of July, when more than $4,000,000 of specie were due the holders of United States stocks for interest, rendered some effort necessary to obtain it without coming into the market as a purchaser, as that would act upon the premium on gold in

the market; an exchange was made of 3 year 7 bonds for the gold, both gold and bonds bearing the same price in the market. This operation was the same as compounding the interest at 7.30 per cent.

A considerable portion of the $50,000,000 deposits on hand, and for which 5 per cent. certificates were outstanding, was payable in the old issue of demand notes, which bore a premium in the market proportionate to that of gold, for which they were substitutes at the custom house. Thus there were two kinds of certificates out one payable in legal tender notes not receivable for customs, and one payable in the old or "gold notes." On the 5th of May the Sub-Treasurer issued the annexed circular:

UNITED STATES TREASURY, NEW YORK, May 5, 1862.

Under instructions from the Secretary of the Treasury, I hereby give notice to all holders of certificates of deposit bearing interest, issued prior to the 14th day of March ultimo, and payable in "United States notes issued under acts prior to February 25, 1862," that they are required to present such certificates within ten days from the date hereof for payment of principal and interest, or for exchange for certificates payable in "lawful money of the United States." Any such certificates not so presented, will, after said ten days, be payable in such lawful money as the Government may be usually paying out to the public creditors.

JOHN J. CISCO, Assist, Treas. United States. This had a twofold operation; it cleared the Treasury of the obligation of paying out the gold notes, and it enabled it to take new deposits payable in "lawful currency" at 4 per cent. instead of 5 per cent. The notes were withdrawn, and by the 22d of May the limit of deposits was again full. A new difficulty now presented itself. On the entry of goods at the custom house the complications of the new tariff had made it requisite that the merchant should deposit an estimate of "gold notes" to cover the duties. When these were accurately adjusted the amount, if any, overpaid, was returned to him. The Secretary directed that these amounts should be returned in new notes, which were less valuable than those which had been deposited. The merchants demurred to this, claiming that they had a right to receive back the same kind of money that they deposited, since that money was not currency but a special medium, which they were obliged to buy at a premium for custom house purposes. In answer to these complaints the Secretary issued the following order:

TREASURY DEPARTMENT, May 21, 1862. SIR: I am in receipt of your letter of the 19th instant, inclosing a petition from the prominent importing merchants of the city of New York, asking that your instructions relative to the payment of all dues except interest and duties be so far modified as to permit the payment of all checks drawn by the Collector of Customs for "excess of unascertained duties" in

notes of the first issue or coin.

Their request is deemed reasonable and just, and You are hereby authorized to pay all checks drawn by the Collector which shall contain the words "for excess of deposits for unascertained duties" in such money as is receivable for duties at the custom-house. I am very respectfully,

S. P. CHASE, Sec. of the Treasury. JOHN J. CISCO, Esq., Assistant Treasurer, New York.

The trouble of paper money seemed to multiply at every turn. It was discovered that a very ingenious fraud was perpetrated to a considerable extent on the Government notes. It was found that nine $10 notes might be so mutilated and rejoined that 10 complete notes could be formed to the great profit of the operator. As a consequence of the discovery, all mutilated notes, and they had become very numerous, were refused; but the evil was very great, subjecting innocent holders to loss, and the following circular was issued as a corrective:

TREASURY DEPARTMENT, WASHINGTON, May 18, 1862.

To guard against frauds upon the Government, and to secure the just rights of holders, the following rules, for the redemption of mutilated United States, are hereby established:

RULES.

First. Mutilated notes, which have been torn, no matter how much, but of which it is evident that all the fragments are returned; or defaced, no matter how badly, but certainly satisfactorily genuine, will be redeemed at their full face value on presentation.

Second. Fragments of notes will be redeemed in full only when accompanied by an affidavit, stating the cause and manner of the mutilation, and that the missing part of the note is totally destroyed. The good character of the affiant must also be fully vouched by the officer before whom the affidavit is taken.

Third. In the absence of such affidavit, fragments of notes will not be paid in full, but the parts represented will be redeemed in their proportion to the whole note; reckoning, as a general rule, by twentieths.

Fourth. Less than half of a note will not be redeem

ed, except by payment of the full value of the note under the second rule; or by payment of the propor tional value of the missing part, when presented under

the fifth rule.

Fifth. Fragments of notes, for which less than the full face value has been paid, will be retained for a less than the value of a full note, may have opportunity year, to the end that the owners, who have received to return the missing part, and receive the amount previously withheld.

Sixth. Until further order, mutilated notes and fragments will be redeemed only at the Treasury of the United States, at Washington; whither they can be sent, addressed to the "Treasurer of the United States," by mail, free of postage. A draft on the Assistant Treasurer, at New York, for the amount allowed, will be returned in the same way, to the address of the person remitting the same. S. P. CHASE,

Secretary of the Treasury.

An extraordinary negotiation was now entered into by the Secretary of the Treasury, and one which produced much feeling among capitalists. The limit of demand notes, old and new, that might be issued under the loan was $150,000,000. Of these $60,000,000 were the old notes, receivable for customs, and which could not be reissued. There remained then authority to issue $90,000,000 of new legal tender notes. As fast, however, as the old notes were paid in for customs, new ones might be issued in their place, and when the old notes should all be paid in the customs would be paid in gold only. These custom house notes were at 1 per cent. premium, and the 3 year bonds, of which there remained $29,000,000 still to issue, were at 3 per cent. premium. Under

these circumstances the Secretary, June 9th, being pressed for money, exchanged $3,000,000 3 year bonds for $3,000,000 old demand notes at 3 per cent. premium. In other words, he funded the old notes in 7,3 3 year bonds. This transaction was a private one, and it was asserted that had it been public the Secretary could have obtained a much better bargain.

While these issues of paper had been pushed to such an extent in the service of the Government, the utmost reluctance existed on the part of Congress to impose necessary taxes, on the ground of such impositions being injurious to the political party making them. The tax law that had been levied, August 5th, 1861, and which was estimated to yield $20,000,000, was repealed July 1st, 1862, in the following terms: "And be it further enacted, That so much of an act entitled an act to provide increased revenue from imports to pay interest on the public debt, and for other purposes,' approved August 5, 1861, as imposes a direct tax of twenty million dollars on the United States, shall be held to authorize the levy and collection of one tax to that amount; and no other tax shall be levied under and by virtue thereof until the 1st day of April, 1865, when the same shall be in full force and effect."

The objections to the tax were, that it would weigh heavily upon the western farmers. It was, however, evident that some tax must be imposed in order to maintain the credit of the Federal Government, and that tax was devised so as to give an apparent revente to sustain the credit of the Government, while really it exacted nothing directly from agriculturists. The bill that with this object was introduced into the House, provided for taxes upon the profits of trade and industry, and upon the incomes of individuals. The profits are reached by stamps upon each transaction as expressed in any description of paper used in the transfer, and by a tax of 3 per cent. on all manufactures. The act imposing the taxes was very long and minute in its details. It was carefully reviewed and amended by the House in Committee of the Whole after it had been reported from the Committee of Ways and Means, and was first passed by that body on Friday, April 4th, 1862. It was then sent to the Senate, where it was referred to the Finance Committee, by whom it was in due time reported, with many amendments. The Senate, after long consideration, passed the act on Friday, June 6th, 1862, after having rejected two substitutes, offered respectively by Senators Simmons and McDougall. The act was then returned to the House for concurrence in the amendments made by the Senate, and referred to a conference committee of both houses.

On

their report it was finally passed June 23d, and received the signature of the President, July 1st, 1862.

The law by its terms was to go into operation on the 1st of September, but in consequence of the unavoidable delay in preparing

the

stamps, and the details of the inspector,ut did not go fully into operation until tow close of the year. As a consequence, te penalties in respect to legal and other do uments were remitted until after a suitable time. On the 17th of November the Commissioner issued the following notice:

TTEASURY DEPARTMENT, OFFICE OF INTERNAL REVENUE WASHINGTON, D. C., Nov. 17, 1862. The Commissioner of Internal Revenue is prepared to supply the following stamps in quantities sufficient for the use of the people of the District of Columbia, and of the States east of the Rocky Mountains, viz.: 'Playing Cards," "proprietary", "express," "telegraph," "insurance," "life insurance," "fire and marine," "passage tickets," and "protest."

66

The use of the stamps herein specified is hereby required in the District and States above described, on and after the first day of December next; and persons guilty of wilfully neglecting to use said stamps will be subject to the penalty provided in the law.

GEO. S. BOUTWELL, Commissioner of Internal Revenue. The following table shows the number and value of revenue stamps sold during the week ending Nov. 21st, by the Commissioner of Internal Revenue:

1,870 18,561,045 $2,817,178 70

These of course do not represent the number used in the week, but the supplies purchased for distribution and future use. The Assistant Treasurer of New York reported for the three last months of 1862 the receipts from internal revenues at that port. These were for October $435,101, for November $751,286, for December $1,539,525; together $2,725,912. These payments embraced the taxes, licenses, &c., payable under the law by dealers and professions in New York.

The principle of the law seems to be to tax capitalists, traders, and manufacturers, and as far as possible exempt agriculturists. This is, however, fallacious, since all the taxes, no matter by whom paid, fall ultimately fully upon producers. The heads of taxation under the law are: stamps upon every species of paper

the

used taa epresent or transfer property; licenses for the ractice of professions and commerce; taxes dividends and profits; on incomes over $60; on manufactures an ad valorem duty of 3 per cent., and a specific duty on others. In the imposition of this duty many exceptions in favor of agriculture are made. Thus cheese is not considered a manufacture; sugar from sorghum is not taxed, while sugar from cane is taxed. Under these various forms many persons are required to pay several taxes. Raw material, after leaving the hands of the farmer, is taxed at every new form it assumes until it gets back to him manufactured for consumption, charged with all the taxes with which it has been loaded on the way. Thus a cattle broker pays $10 license and a stamp upon the receipt of sales. A calf slaughtered is taxed 5 cents, the skin is taxed 6 cents. The tanner pays 3 per cent. tax, and a stamp upon receipt of payment and upon check paid for skins. The leather dealer pays $50 license, and for stamps upon receipts and checks. The shoemaker pays 3 per cent. tax, and for stamps upon receipts and checks. The wholesale shoedealer $50 license and for stamps. The retail dealer $10 license and for stamps, and the skins have come back to the farmer in the shape of a pair of boots loaded with 20 taxes besides his own income tax and those of the seven leading persons concerned in transforming the calf skin into boots, and returning it to the producer. All articles produced are loaded in the same way as they pass from hand to hand, and it results that the consumers of all products pay the whole of the tax accumulated upon them. The majority of consumers are agriculturists, and their productions are far in advance of the consumption of the Northern States. As a consequence they cannot charge upon their productions the weight of the taxes. The value of their crops, as a general thing, is governed by the markets abroad. The weight of the taxes has therefore a continued tendency to discourage consumption, and consequently production. This tendency is increased by the mode of levying; for example, some manufacturers are sworn 48 times in a month in relation to this operation. The whole amount of taxes advanced to the Government by employing manufacturers, is so much money directly abstracted from the capital required to prosecute industry. The census for 1860 states that in the Northern States the capital so employed is in round numbers $900,000,000, and that it produces a value of $1,700,000,000 per The three per cent. charged upon this is $51,000,000 per annum; but the stamps, licenses, income tax, &c., it is estimated, will raise the tax to be paid by those employers to 6 per cent., or over 100 million dollars-a sum drawn directly from their cash capital, which in this country has always been inadequate to the demand. The sum so withdrawn from the employment of industry is used by the Government in supporting troops who no longer

annum.

produce, but waste and destroy. The income tax is imposed for the year ending December 31st, 1862, and is charged upon all profits of business less $600. Many sources of income, such as insurance, bank, and railroad stocks, bonds, &c., that pay the tax otherwise, are not included in the income charge. The tax is assessed May 1st in each year, ending December 31st previous, and is due and payable June 30th in each year until 1866, that is, for 5 years. This tax, it will be observed, is on profits of business, while the manufacturing tax of 3 per cent. is on gross production, irrespective of profits. The profits are deemed to be the actual net profits of the business, irrespective of individual or family expenses; but it does not necessarily follow that all business is conducted at a profit, and the means of evading this law are numerous. Nevertheless the Secretary estimated that it would yield $150,000,000 per annum, and that with customs the amount would reach a sum equal to the ordinary expenditure, the interest on the debt, and a surplus for a sinking fund. The actual receipts from the taxes, except from corporations, salaries, and stamps, was, to January 3d, 1863, or five months, $9,067,000 from twenty-four States.

The tariff was also deemed capable, notwithstanding the three revisions that it underwent in 1861, of yielding a larger revenue by raising the rates upon some articles; and it underwent such a modification as, it was estimated, would give $100,000,000, which, added to the estimated $150,000,000 to be derived from the internal taxes, would afford a sum sufficient to meet the ordinary expenses of the Government, the interest on the national debt, and afford a sinking fund for the ultimate redemption of the principal. This bill was passed and approved July 11th, 1862.

The expansion of the irredeemable paper currency produced its usual effect in causing coin to disappear altogether from circulation. The rise in the value of gold was followed by that of silver in proportion to its relative value as established by the law of 1852. That law grew out of the effects of the gold discoveries in California, which, at that time, it was apprehended would cause a depreciation of gold as compared with silver, and that as a consequence, in order to preserve the uniformity of values, and retain silver in the country, gold alone should be the legal standard, and the quantity of silver in the coins should be reduced. Accordingly the quantity of pure silver in the half and smaller fractions of the dollar was reduced nearly 10 per cent. below the standard, and silver was made a legal tender only to the extent of $5. Under the operation of this law the Spanish fractions, which had formed the small currency since the settlement of the country, disappeared almost altogether, and the American coins became very abundant. Of these there had been coined nearly $50,000,000 worth since 1852, and this amount circulated as well South and in California as North.

When the Government paper began to depreciate as compared with gold, silver also deteriorated, but in a lesser degree. The apparent premium on silver caused it to flow into the hands of the brokers, who were the reservoirs whence the exporters drew it to send out of the country. The express companies alone carried to Canada nearly $4,000,000 within the year, and the people of Canada were sorely oppressed with the superabundance of this coin. The banks would not take it on deposit, nor would dealers receive it except at a discount of 24 to 3 per cent. Thus south of the St. Lawrence a dollar bill was 20 per cent. discount for silver, and north of it a paper dollar bore 8 per cent. premium for silver. The swelling flood of paper in the States gave an increased impulse to the premium on silver. The profit so produced at once stopped the circulation of the coin. No one that received it paid it away, but hoarded it until a sufficient sum was accumulated to sell for the profit. The inconvenience was very great, and induced numbers of persons to buy change as high as 12 to 16 per cent. to pay out. This for a time retarded the depreciation of paper. Very many persons, however, availed themselves of the opportunity to issue small notes or "shinplasters," as they were popularly called. This custom had been very prevalent during the bank suspension of the years 1837-'8, when the same cause depreciated paper and drove out the specie. The manifold evils that flowed from that

custom had caused in New York an enactment of which the following are sections, page 118, Revised Statutes, fourth edition, volume 2:

SEC. 6. No person, association of persons, or body corporate, except such bodies corporate as are expressly authorized by law, shall keep any office for the purpose of issuing any evidences of debt to be loaned or put in circulation as money; nor shall they issue any bills or promissory notes, or other evidences of debt as private bankers, for the purpose of loaning them or putting them in circulation as money, unless thereto specially authorized by law.

SEC. 7. Every person, and every corporation, and every member of a corporation, who shall contravene either of the provisions in the last section, or directly or indirectly assent to such violation, shall forfeit $1,000.

Section 11, on page 119 of the same volume, forbids any person to pay, give, or receive in payment any bank notes issued by any banking company in this State of a less denomination than one dollar; and section 12 provides that the penalty for the violation of this provision shall be the forfeiture of the nominal amount of the note so received or paid.

This law being called to mind stopped the new issues of individual fractional notes, and there was a prospect that silver would be recalled.

In an evil hour, however, it was suggested that postage stamps might be used as a currency. The suggestion was promptly acted upon to the extent of many millions, and silver entirely disappeared. Those who had occasion purchased the stamps of the Post Office depart

ment, and paid them out as change. An effort was made to restrain the use of them by selling only limited amounts to each individual. Congress then passed a law, in which stamps were prescribed as a medium of exchange in a great variety of transactions.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury be, and he is hereby directed to furnish to the Assistant Treas urers, and such designated depositories of the United States as may be by him selected, in such sums as be may deem expedient, the postage and other stamps of the United States, to be exchanged by them, on application, for United States notes; and from and after ceivable in payment of all dues to the United States the first day of August next, such stamps shall be reless than five dollars, and shall be received in exchange for United States notes when presented to any Assistant Treasurer or any designated depository selected as aforesaid, in sums not less than five dollars. ter the first day of August, eighteen hundred and sixtySEC. 2. And be it further enacted, That from and af two, no private corporation, banking association, firm or individual, shall make, issue, circulate, or pay any note, check, memoradum, token, or other obligation, for a less sum than one dollar, intended to circulate as money, or to receive or use in lieu of lawful money of the United States; and every person so offending shall, on conviction thereof in any district or circuit court of the United States, be punished by fine not exexceeding six months, or by both, at the option of the ceeding five hundred dollars, or by imprisonment not

court.

Approved July 17, 1862.

In order to extend the small currency, which of this act, the following notice was issued: was popular for the moment, on the passage

The undersigned respectfully inform the public that after the 1st of August, motives of commercial expediency, as well as of official duty, will compel prompt prosecutions for any issue of paper commonly called Shinplasters"-should such an issue exist, after the recent Act of Congress shall have afforded an uniform substitute for "small change."

The collection of the State penalties or the Federal fines can be rigidly enforced by due process of arrest. E. DELAFIELD SMITH, United States District Attorney. A. OAKEY HALL,

District Attorney City and County of New York.

The Supreme Court of the State of New York, however, in the month of October, pronounced this law of Congress in relation to "shinplasters," unconstitutional.

This act of Congress simply allowed the stamps, both internal tax and those for postage, to be used as a currency, directing the Secretary of the Treasury to furnish them for that purpose, and directing the "Assistant Treasurer," irrespective of the Secretary, to redeem them in sums of $5 when presented, after August 1, 1862. The stamp currency is not a legal tender between individuals, but only for Government-dues, and is convertible into legal tender money. On the 1st of December $3,884,800 of this new currency had been issued. Instead of following the law, the Secretary of the Treasury caused to be prepared a new small currency, in no way like the stamps authorized, and caused them to be issued without any limit as to amount, at the same time directing the