Oh no? Why not, it's happened before on more than two occasions. You think Hankie-Pankie Paulson

is endowed with more power than any other Treasury Secretary in the past? Maybe so, but for the period

Secretary Hugh McCulloch was riding high!

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William Berkey
The Money Question, 1876

PAPER
MONETARY SYSTEM

CHAPTER I
THE WEALTH AND RESOURCES OF THE UNITED STATES.—
WHY THE AMERICAN PEOPLE DO NOT ENJOY
GENERAL PROSPERITY.

The prosperity of a people depends chiefly on the use which they are enabled to make of their natural resources.  It frequently happens that nations possessing great natural advantages fail, through want of properly directed industry or defective laws, to attain even a reasonable degree of prosperity ;  and, on the other hand, that nations possessing but limited resources succeed, under wise laws and by means of well directed energy, in achieving great wealth.  History abounds in instances illustrating the truth of this statement.  At the present time Ireland and Holland may be cited as cages in point.  Ireland possesses a fertile soil, salubrious climate, fine harbors, noble rivers, and a population naturally brave, quick and capable of great labor ;  but her people, by reason of unequal laws and bad government, are chained to poverty and ignorance.  Holland, a land reclaimed from the ocean and held only by sleepless vigilance, was originally destitute of even ordinary advantages ;  but under enlightened laws, industry and art have accomplished the most marvelous results.  “ Below the level of the sea, and the surface of adjacent rivers and canals, have been created by human art, fat pastures teeming with flocks and herds rich artificial garden land, nourishing the industrious and thriving population of innumerable cities, towns and villages.  The very coast is an artificial fortification against the ocean, the ancient and natural monarch of the country.  Here he is defied by leagues of artificial sea banks—there by miles of granite masonry.  Rivers and canals are made to run many feet above the level of the country.  Armies of indefatigable wind mills are perpetually pumping and draining.  Amsterdam and Rotterdam, populous, opulent and splendid cities, rest on piles driven into the mud.”  Thus, by well directed industry, under wise laws, have the people of Holland been enabled to achieve a wonderful victory over the forces of nature, and to clothe themselves with general prosperity.

The people of the United States are peculiarly rich in all the bounties of nature.  They possess a land whose area exceeds 4,000,000 of square miles.  Within its boundaries are embraced every variety of soil and climate ;  inexhaustible mines of iron, coal, copper, lead, zinc, gold and silver ;  immense forests ;  grand lakes and mighty rivers.  A better idea of its great extent may be formed by comparing some of the States of the Union with the kingdoms of Europe.  California, for example, is equal in size to England, Scotland, Ireland, Wales, Belgium, Holland and Portugal ;  and Texas is equal to France, Holland, Belgium and Denmark.  The mineral resources of the country are almost beyond computation.  For example, it is estimated that coal enough has already been discovered to supply a population of 1,000,000,000 for 60,000 years.  Other minerals, comparatively speaking, are equally abundant.  The gold producing region of the country covers an area of over 1,000,000 of square miles.  Prior to the discovery of gold in California in 1849, the gold yield of the world did not exceed $20,000,000 a year.  Now the United States alone produce annually over $75,000,000 worth of bullion.

The agricultural resources of the country are equally boundless.  In almost every section the soil yields bountifully, while in some regions, as in the great States of the West, its fertility is unsurpassed.  The agricultural productions of that region alone have reached an almost fabulous amount.

The great natural advantages possessed by the country have enabled its manufacturing interests to make great progress, in spite of the ever changing and illy devised tariff laws, which, for the greater part of the time, have disfigured the statute books of the nation.  While agriculture and manufactures flourish side by side, in all parts of the country, greatly to the advantage of both, it happens that the peculiar facilities and advantages enjoyed by different sections of the country have caused their industries to vary greatly in character.  Thus, the people of the Eastern States are devoted chiefly to manufactures and commerce ;  the people of the Middle States, although engaged largely in commerce, manufactures and agriculture, are also occupied extensively in dealing in iron, coal, lumber, salt, petroleum, etc.;  the people of the Western and South Western States, while possessed of large mineral and other interests, as yet find their chief profits in the vast agricultural resources which they enjoy ;  the people of the Southern States are engaged principally in the production of the of the valuable staples common to that section, such as cotton, rice, sugar, tobacco, etc.; and the people of the Pacific States, besides their immense agricultural and commercial interests, find a wide field for employment in developing the rich mines of gold, silver, etc., which have rendered that region famous throughout the world.

To glance briefly at a few details, the assessed value of the farms and stock in the United States in 1870 was nearly $11,000,000,000, and this sum did not cover one-half their actual value.  The following statement, gathered from the Census Report of 1870, gives a partial view of the agricultural operations of the country during the preceding year :

Farm products, including additions to stock. $2,500,000,000
Farm wages, including value of board ...... 310,000,000

And the following statement presents a general view of the manufacturing interests of the country in 1870 :

Number of manufacturing establishments ... 252,148
Number of operatives.......................2,053,997
Capital invested ...........................$2,118,000,000
Annual salaries paid ....................... 776,000,000
Raw material used........................ 2,488,000,000
Products .........................................4,232,000,000

In considering the resources and advantages of the country, it is proper to notice the labor saving machinery, largely the result of American ingenuity, which now performs such an important part in all the departments of labor.  In Great Britain the power of the machinery of that country is estimated as equal to that of 600,000,000 of men.  In this country it probably does not reach that amount, but it is sufficiently large to add enormously to the productions of the country.  In many sections one thousand acres of land can now be cultivated with no more cost than was formerly required to cultivate one hundred.

The great and varied industries of the country are rendered vastly more useful and profitable by reason of the channels of communication, natural and artificial, which extend in every possible direction.  In addition to the many lakes and rivers, which traverse the country, it is covered with a network of railroads from ocean to ocean, affording ample means of transportation to gather and distribute the products of the nation.

From this outline of the wealth and resources of the United States, it is apparent that the American people are possessed of vast advantages, such as are hardly possessed by any other nation on the globe.  It is estimated that the United States are capable of sustaining a population of upwards of 350,000,000, while the population of the country now scarcely exceeds 40,000,000.  If enabled by wise laws and well directed industry to make a proper use of their advantages, the people of the United States ought to enjoy general and uninterrupted prosperity.  And, as the government of the United States is republican in form—based upon the theory that all power emanates from the people, the responsibility of any failure on their part to attain wealth and prosperity must rest with the people themselves.

DO THE AMERICAN PEOPLE ENJOY GENERAL PROSPERITY ?

Notwithstanding their boasted industry, intelligence and enterprise, and the vast resources which they possess, the people of the United States, as a nation, have failed, utterly and disgracefully, to attain anything like a reasonable degree of general prosperity.  We shall not resort to any elaborately prepared statistics to establish the truth of the assertion, but will simply call attention to a few important facts, the consideration of which, we believe, cannot fail to produce conviction.

TEN TIMES within the past sixty years has the country been visited by commercial crashes and money panics, accompanied or followed by general stagnation of business, ruin and bankruptcy.  From 1814 to 1861 the country suffered NINE TIMES in this way, and only once, from 1841 to 1857, did it escape a financial crash for a longer period than ten years.  At the present time the country is suffering from the crash of 1873, or rather from the same causes that produced that crash.  These commercial crashes have invariably paralyzed all forms of productive industry, bankrupted business men, stripped the debtor class of their property, and occasioned want and distress amongst nearly all classes of people.  When we look back over the past half century, we find that, as a matter of fact, the people at large have never had an opportunity, even between these seasons of financial disturbance, to enjoy more than a glimpse of prosperity.  They have been kept busy, either struggling to avoid impending ruin, in view of a commercial crash, or laboring to rebuild their shattered fortunes, after the panic had subsided.  And now, the CENTENNIAL YEAR, 1876, soon to be celebrated with great pomp on the banks of the Schuylkill, under the auspices of a great city writhing under the heel of a corrupt Ring, finds the people, in the midst of plenty, distressed, exhausted and poor.  And how does this happen ?  Has nature frowned upon the husbandman and refused to respond to his toil ?  Has the earth declined to yield up her precious stores ?  Has the hand of the artisan or mechanic lost its cunning, or the arm of the laborer its strength ?  Not at all.  The granaries of the West are bursting with the products of the soil ;  the valuable staples of the South are as ready as ever to respond to the touch of labor ;  the mineral wealth of the earth lies exposed on every hand ;  the wheels of the workshop and the factory are faithful as ever ;  and the mechanic and laborer are not only able and willing, but anxious to work.  The cause of the whole trouble lies concealed in the simple word—MONEY.

In civilized nations at the present day a circulating medium of exchange, called money, is as essential to the production and distribution of wealth in all its forms as railroads and wagons are to its transportation.  In 1873 an epidemic among the horses, for a few weeks, seriously interfered with trade and travel.  Were all the railroads and canals of the country to suspend operations for a single season, it is not difficult to surmise the amount of disaster and distress that would ensue.  And the public might as well try to conduct the affairs of life without railroads and wagons, or the farmer try to cultivate the soil without implements, as for a nation to attempt to develop its producing forces, or carry on successfully the operations of trade, without an adequate amount of money in the channels of circulation.

The business affairs of the country during and after the late war increased largely.  The wealth of the nation, in spite of the ravages of war, increased from $16,000,000,000 in 1860 to $30,000,000,000 in 1870.  All the money and evidences of indebtedness of the government, which could be used as a circulating medium of exchange, were actively employed.  The people, for the first time in their history, had an abundance of money in circulation and were enabled to develop the resources of the country and add to its wealth in a corresponding degree.  The increased production in every department of labor rendered the burdens of taxation light, and, at the same time, increased the revenues of the government to an enormous extent.  The government, in consequence of its largely increased revenue, was enabled, at the close of the war, to begin the reduction of the public debt at a rapid rate.  The people, notwithstanding the burden of taxation which they were compelled to bear, were, individually, out of debt.  But matters began to change.  The channels of trade became stagnant or sluggish, business began to languish, factories and workshops were obliged to suspend or reduce labor and wages, real estate fell in value, and enforced idleness began to grow common ;  and, as in times prior to the war, the climax was capped by a financial panic.  The cause of this astonishing change in the condition of the country—from activity and prosperity to inactivity and distress—will be found in the following statement, taken from the books of the Treasury Department by Hon. Moses W. Field, which exhibits the contraction of the circulating medium of the country that took place from September 1, 1865, to December 1, 1873 :

Amount of money, currency, and circulating medium,
September 1, 1865, (exclusive of coin:)

From the foregoing statement it appears that the circulating medium of the country (or evidences of indebtedness of the government used as such) was contracted over $1,200,000,000 in eight years.  The greater part of this amount consisted of the Three year Treasury Notes ($830,000,000.)  These notes were called in and bonds substituted in their stead prior to 1868.  The crash of 1873 followed as an inevitable consequence.  It won’t do to say that it was the result of the tear, or of extravagance, or of over production, or of anything of the kind.  Crashes and money panics just like it occurred before the war, on an average, every five years, and this crash did not occur until eight years after the war.  The periodical money panics, which occurred before the war, were the natural results of the specie basis system of money ;  and the panic of 1873 was caused by enforcing the policy of contraction, which was planned at the same time that the National Banking system was projected, in order that the specie basis system might be re-established.  The act of Congress of April 12, 1866, authorizing a contraction of the currency, was adopted on the recommendation of Hugh McCulloch, Secretary of the Treasury.  It gave him unlimited control over the finances of the country, and he did not fail to use the power placed in his hands, to the fullest extent, in aiding the money power, with which he was in league, to rob the country and the people.  When McCulloch’s infamous betrayal of the high trust reposed in him becomes fully understood, his name will be used as a by-word and reproach throughout the nation.

Apart from commercial crashes, or money panics, it is evident that there is something radically wrong in the monetary system of the country—that there is some constantly operating cause, which tends “to fertilize the rich man’s field by the sweat of the poor man’s brow.”  The masses toil, day after day and year after year, seeking to secure a competency and scarcely succeed in obtaining a subsistence.  The better classes may succeed in building up homes, but they are never secure in their possession, until they have amassed sufficient property to at least enable them to outlive a season of financial depression.  The profits of labor flow in a steady stream into the hands of non-producers, who are engaged in manipulating money.  It is not difficult to discover the reason.  Money is essential to the development of the producing forces of the country, and to the distribution of its products.  It is far more necessary that money should be abundant and cheap, than that there should be abundant and cheap means of transportation.  The contrary, however, has been the general rule since the American people have constituted a nation.  They unfortunately inherited the British system of banks of issue, which clothes the moneyed classes with unlimited control over the circulating medium of a country.  Money should be the servant and not the master of wealth, and then it will flow in the channels of trade, in obedience to the natural laws of supply and demand ;  but the people have permitted the power to furnish the circulating medium of the country to be filched from the nation and given over to individuals and corporations to be used as a monopoly.  At present money has ceased to fill the channels of trade, and, refusing to perform its offices, has taken refuge in the banks in the commercial centers.  Statesmen, like Senator Christiancy, may tell the people “to go to work in any and every form of productive industries,” and command it to return, and imagine that they are uttering a great deal of wisdom, but where are the productive industries ?  If Senator Christiancy had been in Moses’s place, the Jews, possibly, would have, been at no loss how to “ make bricks without straw;” but as such wisdom is not available in this country, it is to be regretted that he did not turn up in Egypt a few thousand years ago, instead of in the United States Senate at the present time.

It is of course mere matter of speculation as to what would be the condition of the country now if gold and silver had been its circulating medium in fact as well as theory, or if a legal tender paper money had been adopted at an early period, as urged by Franklin, Jefferson, Calhoun and others.  With nothing but gold and silver the progress of the country would undoubtedly have been slow, but the people generally would doubtless be better off than they are now.  With a legal tender paper money, in the light of late experience, it is more than probable that the United States would to-day be the richest, most powerful and most prosperous nation on the globe.  Neither system of money, however, was adopted.  The government allowed the circulating medium to be taken out of its hands and erected into a gigantic monopoly in the hands of individuals and corporations.  The gold and silver of the country were locked up in bank vaults, as the pretended basis of bank notes, and the people were compelled to pay an exorbitant price for a false, fluctuating and unsafe currency, subject to the entire control of those who issued it.

Banks of issue have been a fruitful source of disaster, both in Great Britain and in the United States.  By encouraging discounts and inflating their circulation they greatly stimulate business of all kinds.  As the process goes on, credit becomes inflated to an unlimited extent, until a turning point, beyond which inflation cannot go without bursting, is reached.  Whilst the process of inflating the currency and credit of the country is going on, great activity prevails in all departments of industry, and everybody seems to be on the high road to wealth and prosperity.  But it becomes necessary or desirable for the banks to put themselves in funds, and they begin to convert their discounted bills into money as rapidly as possible.  They cease discounting and call in their loans.  “If by such means they do not actually obtain specie, they redeem their notes, which might otherwise be presented for redemption in coin.  Prices begin to fall.  Merchants, deprived of their accustomed facility for borrowing, and with obligations coming round every day, upon which they are liable as principals or endorsers, are anxious to sell, while none of them want to buy.  The pressure begins in the great marts of foreign trade, and extends from them to the dealers in the interior.  The latter are crowded for payment by their distressed creditors, and crowd their debtors in turn.  Property of all kinds depreciates and becomes difficult to sell, when every body wants to sell, and is anxious to restrict his purchases to the lowest practicable amount.  Sales, nevertheless, are made upon credit, for the purpose of obtaining contracts to deliver money at a future day, which can be sold to usurers, who riot in their harvest.  Collections are enforced by suits at law, and effected at the expense of a heavy toll to attorneys and Sheriffs’ officers, out of the proceeds of forced sales.  Persons whose property is adequate, even at the depreciated rates, to the payment of their debts, become bankrupt from the failure of their debtors to pay promptly.  When the doors of a banking house are closed in the afternoon, and a merchant’s obligation is protested, his credit is gone, and he ceases the effort to maintain it by ruinous sacrifices.  The failure of one increases the embarrassment of his creditors, and repeated failures spread general distrust.  As one after another goes down, however, there is one less engaged in the scramble for money, and the survivors experience the same sort of relief as men in a crowd do when some of them faint and are carried out.”*  These financial crises invariably involve a general suspension of specie payments.  The suspension is charged up to the people, who are told that they have been “producing too much,” or “living too extravagantly;”  and the banks are enabled to retain their reserve of gold and silver, to repeat the operation as soon as the Sheriff’s services are no longer required, and “confidence has been restored.”

The power which such a system confers upon those, to whom the right to furnish the circulating medium of the country has been delegated, is immense.  The price which the people are compelled to pay for their circulating medium of exchange is of itself sufficient to rob labor and industry of their profits.  The wealth of the country increases, as statistics show, a little over three per cent. a year, and with money in circulation that costs from 6 to 25 per cent.;  it is not difficult to see how it is that the wealth of the country has a constant tendency to accumulate in the hands of the few.  The profits of industry are eaten up by interest on the circulating medium of exchange—if not entirely, a commercial crash will take what is left.  How seldom do people, when handling money, think of the great difference which exists between a United States legal tender note (greenback) and a National bank bill.  The greenback represents the property of the people, on which it is a lien, and in the performance of its mission of usefulness, as it flies from hand to hand, feeding the hungry, clothing the naked, ministering to the sick or distressed, or furthering the operations of industry and trade, no keen eyed usurer marks its flight ;  it is not burdened with interest.  But it is otherwise with the National bank bill.  Whether serving the purposes of money in the channels of trade, or stowed away in the recesses of a bank vault, it is perpetually drawing interest.  That interest, although paid by individuals, is a tax upon the community at large.  No one can hope to escape his share of tile tax by “keeping out of bank.”  General laws in the economical world are as universal and constant in their effect as the law of gravitation is in the natural world.

The specie basis system of money has existed in Great Britain for nearly two hundred years, and the result of its workings there can be seen at a glance.  The bulk of the wealth and property of the kingdom is held by a small and constantly decreasing class, whilst the masses are steeped in poverty and ignorance.  During the wars with France, from 1797 to 1823, the people of Great Britain had an irredeemable paper currency.  For twenty five years, notwithstanding the drain of a great war, they enjoyed unparalleled prosperity, by reason of the abundance of money in circulation.  But the money power demanded a return to specie payments, and in 1819 in act of Parliament was passed decreeing a return to specie payments in 1823.  England possessed abundance of gold, had no foreign debt, the balance of trade was in her favor, and the difference between gold and paper money was only three per cent.  Notwithstanding all these favorable circumstances, the enforced return to specie payments prostrated the industries of the kingdom, ruined the farming, manufacturing and business interests, and plunged the entire nation into bankruptcy.  The masses of Great Britain, whose labor and valor had just enabled the British government to prosecute to a successful termination one of the most gigantic wars of modern times, were hurled by an act of Parliament, at the instance of the money power of the kingdom, in the most heartless manner and without the slightest grounds of excuse, from a state of prosperity into the depths of ruin and poverty.

At the demands of the same power the people of the United States are now being subjected to like treatment.  With but little gold, scarcely $100,000,000, in the country, with the balance of trade against the nation, with a large public debt mostly held abroad, and with a difference between gold and paper money of over twelve per cent., enforced resumption of specie payments has been decreed to take place in 1879.  In the light of English experience under vastly more favorable circumstances, the people of the United States can look forward to nothing else but continued and increasing prostration of all forms of industry, and, when the fatal hour for resumption arrives, a general crash, burying the entire nation in its ruins.

The people of the United States are a forbearing and long suffering people, but it is scarcely possible that they would continue to submit in silence to the exactions of the money power, if they were fully apprised of the nature and extent of the robbery to which they have been, and are still, subjected, by reason of a false and corrupt monetary system.  The public debt of the United States in 1865 was $2,682,593,026 ;  on September 1, 1875, it was $2,127,393,836, showing a reduction of $555,199,190.  Besides this $555,199,190, the people have paid in the past TEN YEARS, for interest on the public debt, navy, war, civil service, pensions and Indians, $3,324,560,785, or in all the enormous sum of $3,879,159,975, which is one-half more than the original amount of the national debt, or a sum greater than the national debt of Great Britain.  This vast sum has been paid principally by the producing classes, for the bondholder and money power generally bear no part of the expenses of government.  It is high time that the burdens of taxation should be more equally distributed.  This can be done only by the imposition of a graduated income tax, than which nothing can be more just.

President Grant suggested in his last annual message that the Centennial year would be a fit time to inaugurate reforms.  We agree with him.  Let the people take a lesson from experience and reform their monetary system.  As it is the year for the general elections, something might also be done in the way of purifying the administration of public affairs.  The Centennial year can thus be rendered doubly memorable in the annals of the country.

The celebrated Junius said :  “ The rain or prosperity of a State depends so much on the administration of the government, that to be acquainted with the merit of a ministry we need only observe the condition of the people.  If we see them obedient to the laws, prosperous in their industry, united at home and respected abroad, we may reasonably presume that their affairs are conducted by men of experience, ability and virtue.  If on the contrary we see a universal spirit of distrust and dissatisfaction, a rapid decay of trade, dissensions in all parts of the empire, and a total loss of respect in the eyes of foreign powers, we may pronounce, without hesitation, that the government of that country is WEAK, DISTRACTED AND CORRUPT.”

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