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Prophetic Views On Silver

( Originally Published Early 1900's )



SENATOR STEWART is reputed to be the principal author of the bill which is said to have demonetized silver, by providing for the coinage of the trade dollar which Mr. Stewart imagined would create an immense foreign demand for silver in China, Japan, and India. It did not, however, and Senator Stewart has been unhappy ever since for being chiefly instrumental in the passage of that bill, and has tried very hard to fasten the responsibility for it upon the wicked and avaricious gold monometallists. This piece of legislation in 1873-74 opened the door for further action on the part of Congress, and accordingly that honorable body, on July 22, 1876, framed a measure in the shape of a joint resolution of both Houses, limiting the coinage of the trade dollar to export demand, and repealing its legal tender quality in the United States. It never was demonetized, except in this sense and until the time here stated, which was three years after the alleged "crime of 1873." Provision was made by the act of February 19, 1887, to receive the trade dollar, " if not defaced, mutilated, or stamped," at the office of the Treasurer or any Assistant Treasurer of the United States, in exchange for a like amount, dollar for dollar, of standard silver dollars, or of subsidiary coin of the United States, to be melted and recoined. There were 35,965,924 of the trade dollars coined in all, but I have no account of the number returned to the Treasury; and I should state that these trade dollars were not counted in the silver purchased by provision of the Bland and Sherman Acts. This is the history, in brief, of what is indignantly called the "crime of 1873 " by the silverites, but which was not consummated until I876, and for which eminent silverites were themselves mainly responsible, being accessory to the " crime " both before and after the fact. The " crime " was really a free-coinage act and remained so until 1876, so there was no intermission authorized by law in the free coinage of silver from the establishment of the mint in 1792 until I876; and from the former period up to 1873, an interval of eighty-one years, under this free-coinage law, there were only 8,ooo,ooo silver dollars coined in the United States. It must be admitted that during this time the silver dollars of several other nations, notably those of Mexico and Spain, were freely circulated in the United States; but there is no means of procuring statistics as to the volume of the foreign currency. It is said, though history is not very clear about it, that by order of President Jefferson silver coinage was discontinued for many years; but Jefferson never had any authority to issue such a mandate, and, if it ever was issued, it was a dead letter. The total number of silver dollars coined up to December, 1893, the Limited Coinage Act having been in existence from the passage of the Bland Bill in I878, was 427,304,000. So, if it is volume of money that is required, it would appear that the restricted coinage of silver is better adapted to reach that end than free coinage. In the same connection, and as a vital part of this subject, it is necessary to refer to the lady who, while an employee in the Treasury, wrote a book in which she charged Ernest Seyd of London, an agent of the Rothschilds, of having been in this country at the time the "crime of 1873 "was committed, and that he touched the "itching palms" of some of the assassins of free silver with a liberal amount of Rothschild's gold. It is well authenticated that Mr. Seyd was in London at the time and had not been in this country for more than a dozen years prior to the agitation over the silver question, and there are letters of his on record advising certain statesmen on this side not to think of demonetizing silver. Seyd was an uncompromising bimetallist, and an able writer and author on the subject. Yet, with all this evidence easily procurable, the silverite orators took as their text the error in that lady's book and were particularly noisy on the strength of it, and they will, I have no doubt, do so again. That author is dead, I believe. She wrote simply from hearsay evidence. Let us now go to Chicago and pay our respects to Mr. Bryan and a few of his political friends. As I have already intimated, the doleful state of the country arising from the Cleveland panics had caused the people to look around for a change in the Executive as well as in the party of which he was the chosen chief; and thus Mr. Bryan and his colleagues were enabled to capture the Democratic machine at Chicago in I896. The fiery eloquence of the " Boy Orator," coupled with the revolutionary enthusiasm of a number of his followers, took the convention by storm, when the machine politicians were off their guard. It was a kind of historic repetition of a scene in English politics, of which Disraeli said in his epigrammatic way that Sir Robert Peel and his party caught the Whigs bathing and stole their clothes. But the "smartest" thing that Bryan did at Chicago was at the close of his peroration, when he delivered with intense fervor and deep emotion, as if it were the inspiration of the moment, a portion of the metaphorical speech of an English low comedian in the old play of "Jack Cade, or The Bondman of Kent," which drew vociferous applause at Chicago, almost as loud as that from the "gods" in Drury Lane and Sadler's Wells, generations ago. I quote verbatim from both the modern and the ancient actor, and leave the inference to the reader in the discovery of resemblance. I quote the last paragraph of Bryan's peroration in full, so that his masterly art can be the better appreciated. After making the modest claim that the issue of 1896 was the issue of 1776, he concluded as follows: - "Therefore we care not upon what lines the battle is fought. If they say bimetallism is good, but that we cannot have it till some nation helps us, we reply that instead of having a gold standard because England has, we shall restore bimetallism, and then let England have bimetallism because the United States has. (Applause.) If they dare to come out in the open and defend the gold standard as a good thing, we shall fight them to the uttermost, having behind us the producing masses of this nation and the world. Having behind us the commercial interests and the laboring interests, and all the toiling masses, we shall answer their demands for a gold standard by saying to them: ' You shall not press down upon the brow of labor this crown of thorns. You shall not crucify mankind upon a cross of gold.'" The words in italics are dovetailed in the end of that peroration like a piece of mosaic, and do great credit to Mr. Bryan's editorial capacity. Uttered with dramatic effect, they were madly and unanimously cheered, the convention went wild, and nothing could restrain it until it nominated the orator by unanimous acclamation. It was difficult to succeed in obtaining even a complimentary mention for other prominent members of the party. The convention had no ears for any name but that of Bryan. Now let us examine the "crown of thorns" and "mammon's cross" in "Jack Cade." The dramatist puts the following language into the mouth of the hero of the comedy, just as Bryan made himself the hero of the serio-comic drama at Chicago: - "Upon the brow of toil thou shalt not place the crown of thorns, and the bondman of the soil shall not be crucified upon mammon's cross." The resemblance is too striking to have been the result, as sometimes happens, of two men of similar modes of thought, thinking alike and using similar language. The only material changes made by the modern speaker are that he uses the word " gold " instead of " mammon," and the word " mankind " instead of the words " bondman of the soil." The construction of the clause in which the words " crown of thorns " occur is simply changed by transposition, but the plagiarism is manifest. One moral to be drawn from this is, - Never despise an old play. It may make your fortune. Wherever you see one on a second-hand book stall, pick it up and drop your five cents for it, even if it should be the price of your car-fare home. It may not enable you to reach the presidential chair, but the old play, if it contains a good stock of epigrams, may obtain for you a lecturing engagement for a year at $1000 a lecture. I do not take any credit to myself for being somewhat prophetic on the result of the silver agitation as it happened in the change of national administration in November, I896, for I believe the consequence was easily foreseen by all persons familiar with the general principles of finance and currency and unbiased by political affiliations. It may not be uninteresting, however, to those of my readers who followed up the great discussion on that subject, to know what I thought about the matter at the period prior to the time when the disputations had arisen to fever heat. In September, 1892, I wrote the following, which was published in The Independent: - "The outworking of the world's pregnant silver problem is rapidly nearing the phase of finality. All nations are agreed as to the transcendent importance of the question, and that assent finds a fitting expression in the prospective assembling of representatives of the leading governments to consider whether any concerted means can be devised to stay the drift toward the common demonetization of the white metal. Nothing short of an international treatment can effectually deal with the question; and if the conference to assemble next month closes without devising radical remedial measures, the rehabilitation of silver may be abandoned as a hopeless case, and a currency revolution the world over may prove to be the result. " Any expedient short of a compact between a majority of the leading nations to coin, upon a common valuation and without restriction, all silver brought to their mints, must fail to accomplish anything beyond a paltry and transient alleviation of the depreciation of silver bullion. It would be premature to prophesy, in advance of the conference, whether any such radical conclusion will issue from its deliberations. It appears, however, entirely safe to assume that neither England nor Germany will commit themselves to free coinage; and the chances of any hopeful results, therefore, narrow down to the possibilities of the old Latin Union nations combining with the United States and British India to maintain the unrestricted coinage of silver, either on the basis of the present valuation of I15 to I, or upon some lower valuation. It would not be easy to overestimate the force and influence of such a combination; and considering the extreme gravity of the alternative course of allowing silver to drift without any regulating force, many practical observers are likely to regard such an expedient as well deserving an earnest trial. So deeply, however, has confidence in the possible stability of silver been shaken, and so impressed are European statesmen with the expediency of evading all the risks attending silver money by putting their respective countries upon the exclusive gold basis, that there is little probability that a limited international agreement of this nature may be realized. "With so much uncertainty about the outcome of the forthcoming conference, it may not be deemed premature to consider what course should be taken in the event of a barren issue of its deliberations. Few practical financiers would be disposed to encourage further tinkering and delay. With very good reason it would be argued that, if the dangers attending the present position of silver are not sufficient to alarm Europe into undertaking its treatment in earnest, it is hopeless to dream that the great powers will at some future time come to appreciate the necessity for action. The failure of the conference would most probably be followed by a further depreciation of silver. That debasement might but too easily produce world-wide despair of the metal being retained in use for any function beyond that of a subsidiary currency; and it is not difficult to foresee what would be the result of such a surrender of hope. The disposition to discard silver would become almost universal. The metal that, under wiser counsels, might have been restored to coordinancy with gold, would be thrown upon the market while governments, banks, and individuals were shunning it; and what, under such conditions, might be the extent of its further depreciation? "In such a crisis, the United States could have but one safe alternative. To continue the coinage of silver would be the wildest insanity. Fortunately our stock of the nobler metal is large enough to enable us to put our currency system upon the simple gold basis, and that should be our first and instant duty. Our silver should be withdrawn as fast as the public convenience might permit, and its place filled by correspondingly augmented issues of bank notes; but, so long as our silver was kept in circulation, it should be held equal to gold in the payment of debts. Any policy short of this would expose us to the loss of our gold and to consequent drifting into an exclusively silver currency. For in the contingency supposed, every European nation, and most probably India also, would seek to protect itself by accumulating the yellow metal. "However impossible it might be to get gold enough to put the world at large upon the gold basis, yet every nation would not the less become a competitor for that metal, and all sorts of means would be employed to deplete our large stock and to control our current production. Moreover, it is never to be forgotten that we stand exposed to such a drain beyond all other countries, from the circumstance of our immense foreign indebtedness. Probably two billions of our securities are held in Great Britain and on the Continent; and to allow room for any doubt of our ability to pay those obligations in gold or its equivalent, would be to invite a return of these foreign-held stocks and bonds to an extent sufficient to transfer to Europe the bulk of our supply of gold. " It is impossible to exaggerate the great gravity of this factor in the situation. It is not easy to say what is impossible in the way of financial disaster when the sensitive fears of a large mass of investors are aroused. Our past trifling with silver - though but a transient incident of debased politics - has proved sufficient to bring home some $I50,000,000 of securities, thereby causing an export of over $100,000,000 of gold which otherwise would have been kept in the country. What, then, might be expected if we showed any inclination toward a policy that seemed to threaten the payment of hundreds of millions of our foreign debts in silver instead of gold? In view of this danger, it is to the last degree imperative that, in the event of the failure of the conference to provide for international free coinage, the most prompt and positive steps should be taken to afford universal assurance that the United States would discard silver, conserve gold, and adopt the single gold standard. That being done, we could have nothing serious to fear from the failure of the conference; but any course short of that would invite the most serious forms of financial disaster. "The situation created by the position of silver very directly suggests the question whether something cannot be done toward economizing the use of gold in international intercourse. The extensive use of that metal in the settlement of foreign balances is an anomalous waste of the utility of the most potent force of finance. It has no justification in necessity; it is a useless relic of a bygone age. The internal exchanges of the several nations are settled without the intervention of money, and why should the same kind of economy be impracticable in the adjustment of international balances? The nation that is debtor this month is creditor next, and we send millions of gold to England to pay our debts maturing in September, when the same cash may have to be reshipped in October to settle England's debts to the United States. As the whole commerce between the two nations is conducted by means of credits, why should it be difficult to adjust these oscillating balances of trade through the use of a suitable form of credit instrument? Gold settlement is so obviously needless, so costly and so deranging to the world's money markets, that the only question to be seriously considered is, -What form of instrument would be best adapted to supersede cash settlements? "In other references to this matter, I have suggested that the leading governments might issue a bond bearing a low rate of interest and possessing qualities specifically adapting it for international transfer. If it should be found impracticable to induce national governments to undertake such an arrangement, or if it were objected that political contingencies would make the value of a government obligation fluctuating and uncertain, is there any valid obstacle to the issue of a suitable credit under other entirely safe and feasible auspices? Every financial center of the world has its clearing house, or national bank, or community of resourceful bankers, any of which contains the raw material from which this international currency might be formed. In some countries one of these forms of organization might be found most available, and in others another. In England, France, and Germany, it would probably be found most feasible to invest the respective national banks with the needful powers of issue, whilst in the United States, the New York Clearing House might be induced to perform the function under due authorization. The issuers should occupy a status that would enable them to command confidence under all possible contingencies, and should be required to deposit unquestionable guaranties against the issues. The notes should bear a low rate of interest and be payable on demand upon the makers. The issuer would receive cash for the notes, which would constitute an important banking resource the use of which would enable the issuer to pay the interest carried on the notes. This interest-bearing quality would prevent the notes from being immediately sent home for redemption; and thus, at all the centers of foreign finance, there would always be an accumulation of this international currency issued in the various nations; and that fund would be available in lieu of so much gold for the settlement of interstate balances." Again, in September of I898, I wrote the following: " Some unwelcome surprise is felt at the silver issue again raising its head in Western politics. The politicians of that section feel impelled to take up the old fad in the absence of other policies that would attract public interest. The money conference recently held at Omaha showed by the composition and the spirit of its speakers that there is still enough of the old free-coinage spirit among the politicians to keep up a certain amount of agitation; and this is unfortunate in view of the distrust which the past excitement has created in European investment circles. " It is well that this foreign jealousy about our money standard is so vigilant, for it is precisely at that point that any attempt to force the adoption of free coinage would meet its first check. We may prostitute the force of law by compelling our own citizens to accept an unstable or depreciated form of money, but we can apply no such compulsion to foreign countries. For all that we buy from them, they would demand settlement in gold; and if we should drive our gold out of the country, then our settlements must be made in silver, not at its fictitious face value, but at its true bullion value. On the other hand, our exports would be paid for not in gold, but in silver at its current rate of depreciation. No country so situated can successfully compete in foreign commerce with nations which pay and receive payments in the most stable form of money. "To meet this pregnant fact with the empty assertion that we can afford to assume a position of independence of foreign commerce is merely to substitute braggadocio and falsehood where honest argument fails. Even before this revolution could get under headway it would be self-overthrown. Before the mania had run its course for one month the consequences would be upon us in all their force. And what then? Would the country supinely permit the ruin to run its unchecked course and wait for the worst possible culminations of disaster? Not for a moment. There are some follies so monstrous as to be impossible even at the hands of mad men. There is always a limit somewhere to the freaks of political lunacy; and, in this case, the strait-jacket would be put in use before the precipice was reached. The men who control finance would see the consequences before the consummation of the act, and a clear prospect of the enactment of a free-coinage law would produce anticipatory effects which would either prevent the passage of the law or bring about its repeal quickly upon its enactment. "Men who scientifically and practically understand the destructiveness of this scheme, and the effects which the approach of its consummation must have upon public feeling, have no fear about the agitation beyond the possibility of its bringing us near to the verge of an appalling catastrophe. They are satisfied beyond question that, if free coinage could be enacted at all, its duration would be but momentary. This view is now so generally understood that the silver mania affects but a small minority, consisting largely of fanatics."



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