Our Nation's Credit
( Originally Published Early 1900's )
REGARDING the credit of our nation there seems to have been a great deal of misconception and loose thinking in the past. I here reproduce a few points which I published some time ago on this and kindred subjects, viewing them from that common-sense point of view which everybody —the ordinary business man, the farmer, and the mechanic can understand as easily as the professional financier. There may be, however, certain college and other financial professors, men who have been in the habit of bending and torturing statistics to dovetail with preconceived opinions and theories, who will not understand the subject from my point of view. Though I am an uncompromising advocate of the gold standard under existing conditions, yet I am not afraid to do justice to silver and silver legislation internationally considered, through fear that some cranky critic, who looks superficially on financial subjects, should charge me with inconsistency. The Sherman Silver Law, for instance, served an excellent purpose that could probably not have been achieved at the time by any other instrumentality, but it was right to repeal an objectionable part of it when through altered circumstances and the march of events it became really objectionable. Whether the time of repeal was exactly opportune or not is a point which has afforded scope for controversy, and which I have discussed in another chapter and need not therefore refer to further; but the law was justifiable in itself and exhibited great legislative wisdom in its author. The highest credit nations of Europe are England and France. They have never issued promise-to-pay obligations bearing less than 3 per cent. interest, except when England, years ago, reduced the rate on a part of her consols to 24 per cent., which was the initial cause of the Baring failure. Almost everything that has gone wrong financially on this side since that memorable failure of the Barings has been charged to the Sherman Silver Law, especially so as to the return of our securities and the large shipments of gold. The charge is far from being well founded. The Sherman Law certainly did not have anything to do with the Barings' disaster, and it was that catastrophe which sent our stocks and bonds back, for money had to be raised in England by the holders of these properties, because they were almost the only ones that could find a ready market. The Silver Law did not enter into the question; it was simply a matter of raising money. These people had Argentine, Brazilian, Turkish, Spanish, Russian, Egyptian, and numerous other securities of like character, but they were unsalable, so there was no alternative but to sell their American stocks and bonds; therefore the gold that went to pay for them did not go because of the Sherman Silver Law or from the fear of its consequences at that time. No one will say that the Sherman Silver Law had anything to do with the Panama swindle and scandal, which came so near creating a revolution in France. The fear of this caused the French people to draw their money from the banking institutions and hoard it, the Bank of France being compelled thereby to recuperate her gold reserve by buying gold from America and drawing vast sums from us in consequence. Who can possibly charge that the Sherman Silver Law was the incentive to Austria for selling her 4 per cent. bonds, and with the proceeds buying our gold at a premium, and in that way taking it from us as so much merchandise to be bought by weight? Having given the causes as above for our gold shipments, namely, the natural sequence and after effect of the Baring failure panic, the threatened revolution in France growing out of the Panama scandal, and last but not least, the Austrian scheme for placing that nation on a gold basis, I unhesitatingly assert that these were legitimate and substantial reasons to account for the departure of the yellow metal, and not the Sherman Law. What, then, are the actual facts? When summed up, they are these: the Sherman Silver Law, as a matter of fact, did excellent service, and without it an immense number of banking institutions, railroad companies, and merchants in this country would have come to grief; in other words, the credit is due to the Sherman Silver Law for not only carrying us through trouble, but for helping England, France, and Austria. The new money created by the sanction of the 1890 Silver Law made it possible for this country to sustain itself, and at the same time to send gold to foreign countries. Notwithstanding, however, that the Sherman Silver Law has done so much for us as a nation, I am of the opinion that it was wise legislation to repeal the purchasing clause of the said law, for we have enough of that kind of money in circulation now. The leading nations have come down to a business basis, requiring international action as the remedy for their difficulties. It has become necessary to utilize their resources in the best possible way, and money as a power is now recognized as the most potential influence in connection with national alliances. Every country has its own products, some more or less than others, the surplus or deficit of which is destined at no distant day to be regulated by commercial reciprocal treaties. Such interests will be more influential and powerful in cementing friendships between nations than are armies and navies, the change being from one of force to that of mutual interests. War methods belong to the past, and after present troubles are adjusted, will soon, by common consent, be relegated to the rear to make way for offensive and defensive reciprocity commercial treaties, which will insure prolonged peace and prosperity. The true spirit between nations should be to exchange commodities with each other, and not bullets; and not to engage in the endeavor to grab each other's gold by its purchase or other sharp methods. There is gold enough for all if mutual consideration and forbearance are exercised. Mutual confidence and a fair spirit of reciprocity between nations will make the world's supply of gold ample to provide for all legitimate exchanges, internally and externally, with the nations now on the single standard basis; but not to provide for a selfish spirit of hoarding at the same time. To prevent the excessive shipments of gold periodically, the five great nations - England, France, Germany, Russia, and the United States - should adopt an international note currency or a 1 per cent. gold bond issue, not to exceed say $500,000,000, each to issue $100,000,000, the five nations to be equally responsible for the principal and interest by a mutual agreement. These obligations, backed by such high credit, would take the place of gold exports and imports. Gold would be no better as a remittance -as a matter of fact, not nearly as desirable. The notes or bonds would be an international currency, and would provide a substitute for gold in a settlement of balances between nations. It would do away almost altogether with the present clumsy method of shipping gold from one country to another, and a few weeks afterward bringing it back again, as is now the usual practice. It has really come to be a matter of dollars and cents with nations, especially with those that are overburdened with debt, which includes most of them. These increasing burdens must eventually make it imperative to abandon the large standing armies and navies, and to substitute commercial treaties.