uncle sam: when we parted last wednesday night, we all agreed to make our experiences in government issues of money the subject of inquiry tonight, and i presume you have all been spending your days and nights in studying american history, that is, in studying me.

mr. merchant: i have put more work into the question of our government issues of money than into any subject in my life in the same length of time, principally because i knew mr. farmer used to be what we called a green-backer some years ago and i wanted to be ready if he happened to still entertain those ideas and was still subject to those fits of madness that came over him before he paid off the mortgage on his farm. but that's ancient history now, and he's holding the mortgage on the other fellow's farm. now, mr. farmer, don't get hot, for i don't mean any disrespect to you, but only to recall that craze for fiat money when you and i were much younger than we are now. then again, you seem to have had a real revelation during our last talk, and to have been converted to the principle that there could be too much paper money.

mr. farmer: that's all right, mr. merchant, but i well remember that i was not alone when i used to advocate greenbacks without limit. mr. banker over there was in the same boat with me.

mr. banker: right you are, mr. farmer, and there was not a man in this immediate neighborhood then except old judge jones who did not agree with us, but we've traveled some since then.

mr. lawyer: well, gentlemen, i am a little surprised to find you all so completely convinced that government[pg 145] issues of money are to be condemned before a fair trial. i half imagine that mr. manufacturer over there will sympathize with me in my contention for the constitutional power, and the wisdom of issuing united states notes.

mr. manufacturer: you are very sadly mistaken about me; i am ready to prove that you are mistaken, both as to the wisdom and constitutional right of the government to issue money even if you are a lawyer, and ought to know all about the constitution. i don't claim to know very much about the money question, generally speaking, but like mr. merchant i have made a special study of this particular feature of it. i am convinced there is only one side to this question, however many sides there may be to some other phases of it, and we do not have to leave the history of our own country for overwhelming proof of the folly of it. i for one do not believe that the government has any constitutional right to issue money.

mr. lawyer: well, well!

mr. merchant: we'll make you say "well, well" before we get through with you, if it takes till morning.

mr. manufacturer: it won't take until morning and when we get through with him, he will be finished for fair, i think.

mr. laboringman: we are evidently going to have some fun tonight. you seem to think that you have mr. lawyer in chancery. now, blaze away. i want you to nail mr. lawyer on the greenback question, if you can; for he has been getting the best of you on several occasions; personally, i hope i will never get any less of the greenbacks as they are good enough for me.

mr. merchant: but they are not good enough for you, mr. laboringman, nor for anyone else, if they are not worth one hundred cents on the dollar; or if they are ever liable to be worth less than one hundred cents on the dollar; or if they are teaching an economic falsehood, so long as they remain in existence; or if they are posi[pg 146]tively doing the business interests of the country actual harm by excluding a corresponding amount of gold, and finally, if they have no legal right for existence today, even though one may admit for the sake of the argument that it was necessary to issue them to save the nation, an admission which i will not make.

mr. manufacturer: good for you, mr. merchant, that statement has the right ring to it. the greenback is guilty of every one of the charges that you make from my point of view, and so it must always be with every government issue of money.

you may go back to the very first government issue of paper money in this country, and follow the practice down to this very hour, and it has left a trail of dishonesty, disaster, ruin and misery unmatched by any other single cause. in my contention for this statement i am going to rely for my historical facts upon george bancroft, the greatest american historian of our earlier period.

in the fall of 1690, upon the return of an unsuccessful expedition which massachusetts had sent out to capture quebec, the general court, the then legislative power, ordered an issue of "￡7,000 ($35,000) of printed bills of equal value with money." and the balance of the cost which was ￡40,000 or $200,000 was issued the following day.

in july, 1692, within nineteen months of the earliest emission, the first legislature under the new charter which transformed the self-governing colony of massachusetts bay into a direct dependency of great britain, made "all these bills of public credit current within this province in all payments equivalent to money, excepting specialties and contracts made before the publication" of this new law. their credit was supported by receiving them in all public payments at a premium of 5 per cent.

immediately all the coins then in massachusetts were exported to england and the new stock followed as fast as it came in from abroad. the vain sorrow of the province expressed itself in 1697 by the prohibition of "the export[pg 147] of coin, silver money or bullion." in june, a joint committee of the council and representatives, to be aided by the advice of merchants and others, was appointed to consider how to revive trade, and find out some suitable medium to supply the scarcity of "money"; and it is to be noted that the word "money" in all colonial legislation was used exclusively for gold and silver coin.

the first issue of bills of credit of massachusetts, after it became a royal province, was in november, 1702, for ￡10,000 in value "equal to money," but to be accepted in all public payments at the advance of 5 per cent.

the passion for borrowing spread like flame on the dry prairie. in november, 1714, massachusetts ordered ￡50,000 to be let out by trustees to the inhabitants of the province for five years on real security, at 5 per cent per annum, to be paid back in five annual installments. the act was a sacrifice of the public interests to borrowers, who were to return their loan only after a lapse of time, sufficient to insure the very great depreciation of the paper in which it was to be paid. moreover, the borrowers needed an enforcement by law of the circulation of the paper which they borrowed: swiftly, therefore, in december, 1715, under a pretext "to prevent the oppression of debtors" a stringent statute made the bills legal tender for all debts that had been, or should be contracted, between the 30th of october, 1705, and the 30th of october, 1722.

the loan of bills of credit by massachusetts in 1714 was managed at the seat of government. but why should boston be favored? "that the husbandry, fishery and other trades of the province might be encouraged and promoted," bills of credit on the province to the amount of ￡100,000 were in 1716 ordered to be distributed to a loan office in each county. but why should borrowers in the smaller townships be forced to travel to their shire towns? let a public money lender be near every man's door. by the statute of march, 1721, ￡50,000 were distributed among borrowers in each of the several towns[pg 148] according to its proportion in the last province tax. again in 1728, ￡60,000 in bills of credit were proportionately loaned among the several towns, even on personal security, at the rate of 6 per cent for six years, after which repayment was to be made in five yearly installments. of course, "money" disappeared; not even a single penny was to be had; the small change became of paper.

the next development of the colonial system of paper money was a partial repudiation, so far as massachusetts was concerned. in february, 1737, less than forty-seven years after the first emission of bills of credit by massachusetts, that colony issued ￡9,000 of a new tenor of which one dollar was to be equal to three of the old, and which, after five years, was to be redeemed at par in silver and gold. when the time of redemption came around they were not paid off, but by a further repudiation four pounds for one was made the rate in exchanging the old tenor for the new.

on the 9th of january, 1739, the general court in massachusetts made this confession: "the emissions of great quantities of bills of public credit, without certain provision for their redemption by lawful money in convenient time, have already stripped us of all our money and brought them into contempt to the great scandal of the government; for the remedy thereof this province hath fixed the value of their bills in lawful money, and the time of their redemption in 1742 new style."

but that year went by and relief had not been found. in 1744, james allen, the preacher of the annual election sermon, from the pulpit, addressed the governor in this wise: "be the means of delivering us from the perplexing difficulties we are involved in by an unhappy medium, uncertain as the wind and fluctuating like the waves of the sea, through the unrighteousness thereof the land mourneth, and the cries of many are going up into the ears of the lord of sabaoth."

in 1745, people of massachusetts took the largest part in the brilliant enterprise which ended in the louisburg[pg 149] campaign, and were to receive from the british parliament some payment for their extraordinary expenses in the expedition.

in february, 1748, massachusetts, while awaiting its share of this remuneration, invited the governments of connecticut, new hampshire and rhode island to join in abolishing the use of bills of credit; but as no one of the three gave effectual heed to the summons, the people of massachusetts proceeded alone. it was estimated that about ￡2,200,000 of their bills of credit would be outstanding in the year 1749, that is, $11,000,000. in january of that year an act was passed redeeming the bills of the old issue or tenor at the rate of 45 shillings, those of the new issue or tenor at the rate of 11s. and 3d. for one spanish dollar; a rate which somewhat exceeded their market value at the time.

the bills of credit of new hampshire, rhode island and connecticut were excluded by most stringent laws, and massachusetts, with its quickened industry and established credit, "sat as a queen among the provinces."

mr. merchant: mr. manufacturer, you must have gotten your information from the same source that i obtained mine; all that you've said sounds very much like george bancroft, whose history of this question i've just read. since my ancestors came from connecticut, i am going to tell her tale of woe.

in june, 1709, connecticut put forth ￡8,000 of bills, or $40,000; then soon followed that by ￡11,000 more, which were "to be in value equal to money, and to be accordingly accepted in all public payments."

in october, 1718, connecticut, to prevent oppression by the rigorous exaction of money, declared its bills of credit legal tender for debt contracted between the 12th day of july, 1709, and the 12th day of july, 1727. the time for the operation of the law was afterwards extended to 1735.

in the year 1733 connecticut loaned interest-bearing bills for nearly ￡50,000. in may, 1740, it issued ￡30,000[pg 150] of a new issue of which ￡22,000 were to be loaned to freeholders of the colony on mortgage, or personal security, to be repaid one half in four years, the other half in eight years in current bills, or hemp, or duck, or canvas at their current market price. these bills were made legal tender in all payments. but this provision was censured by the lords of trade in england, and in the following november it was repealed.

roger sherman, the greatest statesman of connecticut, gave his mind to the questions about money and mediums, commerce and exchanges, and having mastered them in 1752, under the name of philoeuonomos, "the lover of just laws," he addressed to the men of connecticut "a caveat" against injustice or an inquiry into the evil consequences of a fluctuating medium of exchange. these are some of his words: "the legislature of connecticut have at length taken effectual care to prevent a further depreciation of the bills of this colony; the other governments (meaning new hampshire and rhode island) not having taken the like prudent care, their bills of credit are still sinking in their value...." "money ought to be something of certain value it being that whereby other things are to be valued ..." and this i would lay down as a principle that can't be denied that a debtor ought not to pay any debts with less value that what was contracted for, without the consent of, or against the will of the creditor.... "if what is used as a medium of exchange is fluctuating in its value, it is no better than unjust weights and measures, both of which are condemned by the law of god and man; and, therefore, the longest and most universal custom could never make the use of such a medium either lawful or reasonable.

"we in this colony are seated on a very fruitful soil, the product whereof with our labor and industry and the divine blessing thereon, would sufficiently furnish us with and procure us all the necessaries of life and as good a medium of exchange as any people in the world[pg 151] have or can desire. but so long as we part with our most valuable commodities for such bills of credit, as are no profit, we shall spend a great part of our labor and substance for that which will not profit us; whereas, if these things were reformed we might be as independent, flourishing and happy a colony as any in the british dominion."

in may of the same year, the famous traveler, john ledyard, and twenty-five other merchants of connecticut caught up the theme, and in a petition to their legislature said: "the medium of trade whereby our dealings are valued and weighed, ought to be esteemed as sacred as any weights and measures whatever, and, to maintain justice, must be kept as stable, for as a false weight and a false dollar is an abomination to the lord, a false and unstable medium is equally so, as it occasions as much iniquity, and is at least as injurious."

the connecticut assembly supported these memorialists, excluded the bills of paper money of rhode island, and overcoming every embarrassment, at last, like massachusetts, redeemed every nine shillings of its paper money with one shilling in specie. after the first day of november, 1756, all accounts in connecticut were kept in lawful money.

mr. manufacturer: the experience of the other new england states is practically the same as that you have just recited in connecticut. in 1717 the council of new hampshire was zealous to follow the fashion of issuing paper money by loan and issued ￡15,000.

rhode island, also, in july, 1710, on its first emission of bills of credit, declared them equal in value to "money," and made them receivable in all public payments. in november, 1711, rhode island discharged a claim by a loan of its bills of credit to the amount of ￡300 for four years free of interest.

new jersey, too, tried its hand at the same scheme, following the lead of pennsylvania. in december, 1783, it issued ￡31,250, and in 1786, it struggled hard to issue[pg 152] a larger amount, but william patterson, who was afterwards a member of the supreme court, resisted the proposal with inflexible courage, and here are some of the words which he employed: "an increase of paper money, especially if it be a tender, will destroy what little credit is left, will bewilder conscience in the mazes of dishonest speculations, will allure some and constrain others into the perpetration of knavish acts, will turn vice into a legal virtue, and sanctify iniquity by law. men have, in the ordinary transactions of life, temptations enough to lead them from the path of rectitude; why then pass laws for the purpose, or give legislative sanction to positive acts of iniquity? lead us not into temptation is a part of our lord's prayer worthy of attention at all times, and especially at the present."

in march, 1723, when there was universal peace, borrowers undermined the scruples of pennsylvania, and that colony issued bills of credit for loans to individuals, and not only compelled creditors to receive the bills at par, or "lose their debts," but ordered sellers to receive them at their nominal value in the sale of goods, or lands, or tenements or "forfeit a sum from 30 shillings to ￡50."

again, on march 21, 1783, pennsylvania, which hardly knew what it was doing and had not yet gathered up the strength of its will, was the first to renew in peace the evil usage of the times of war, and issued $300,000 in what was called treasury notes, the lowest of one-quarter of a dollar, the highest at twenty dollars. two years later, but after great resistance, its legislature issued ￡150,000, the lowest note of 3 pence. but in the decisive hour pennsylvania, too, proved the implacable foe of paper money.

in 1733, ￡90,000 in its bills of credit were brought into circulation by loans of 4 per cent by the legislature of maryland.

virginia was involved from may, 1755, in measures of war, and immediate and increasing issues of paper bills[pg 153] were made which from the beginning were a lawful tender for private debts. for the new "notes" of april, 1757, it was further ordered that any seller who should demand more for his goods in notes than in gold or silver coin, should "forfeit 20 per cent of their value." ... in 1781, in the month of march, virginia directed the emission of ￡10,000,000 and authorized ￡5,000,000 more; and the continental paper currency and its own were made a legal tender in discharge of all debts and contracts, except contracts which expressly promised the contrary.

in 1780 north carolina directed the emission of more than ￡1,000,000, and such further sums as the exigencies of the state might require; in the next year gave authority at one dash to issue $26,250,000 of paper dollars bearing 6 per cent interest. again in 1783, north carolina emitted ￡100,000, declaring each pound of the emission equal to two and one-half spanish milled dollars, and a tender in all payments whatever. in 1785, the state emitted ￡100,000 more.

south carolina, too, as late as 1785, permitted itself to be persuaded to lend among the constituents of its legislature ￡100,000 in paper bills of the state, which were to pass in payments to the treasury of the state but were not otherwise made legal tender. the state soon perceived that the paper banished more gold and silver than the amount of the bills which were to take their place.... this was done, although its legislature on the pretext of creating a fund to sink former bills of credit, and to encourage trade and commerce in july, 1712, had ordered ￡52,000 in new bills of credit to be stamped and put out at interest in loans. in december, 1717, they passed this statute: "it is found by experience that the multiplicity of the bills of credit hath been the cause of the ruin of our trade and commerce, and hath been the great evil of this province, and that it ought with all expedition to be remedied."

finally, the great empire state, with all the rest, en[pg 154]tered eagerly into the defense of its northern frontier, and in november, 1709, for the first time involved itself in the use of bills of credit. in 1770, the legislature of new york passed an act for emitting ￡120,000 in bills of credit to be put out on loan. again in april, 1786, the opening year of the final great movement for a closer union of the state, it placed an emission of ￡200,000 in bills of credit with loan officers, to be loaned on mortgage security; and they were made a legal tender in any suit for debt or damages, and the costs of suit. the bills were further to be received for duties to be collected at the port of new york by the state. gen. macdougal, the brave soldier and patriot, though sick unto death, insisted upon being carried to the senate, that, as the last act of his public life, he might give his voice against the proposal to emit paper money.

in 1780, the united states began repudiation by issuing a new paper dollar equal to forty of their previous issues. after their new constitution was established, all that remained of the bills of the continental congress were called in at the rate of one dollar in silver for one hundred dollars impressed on paper.

mr. farmer: while you gentlemen were studying bancroft, i have been reading horace white upon this question of government issues of money, and thought i would not give myself away until after you exposed your hands. you've piled up facts, but you've given us a very slight impression of the effect that these money issues had, and therefore i am going to give you the benefit of my explanation which i think throws another and very important light upon the subject.

mr. white refers to a pamphlet circulated in 1743, which speaks of the bills of credit in new england issued on loan "to themselves, members of the legislature and to other borrowers, their friends, at easy and fallaceous lays, to be repaid at very long periods; and by their provincial laws made a tender in all contracts, trade and business, whereby currencies, various and illegal,[pg 155] have been introduced which from their continued and depreciated nature in the course of many years, have much oppressed widows and orphans and all other creditors."

the same writer gives special attention to the colony of rhode island, which had "defrauded more in a few years than any of the most wicked administrations in the several nations of europe have done in several centuries. a contract made thirty years ago for ￡100,000 sterling in value is at present reduced to a nominal 32 shillings."

white says that in addition to legal tender acts there was a great variety of laws to compel people to sell their property at the same price for bills of credit as for silver. the debtor class was not satisfied with forcing depreciated paper upon creditors for past obligations, but insisted that they ought to be able to buy as much property with the paper as with specie. those who had been forced to take the paper for past debts naturally joined in this demand, and the legislatures agreed with them. hence we find in nearly all the colonies severe penalties on those who charged more for their goods, lands or services in bills of credit than in money. in some cases the penalty was a fine, in others imprisonment, in others confiscation of property offered.

the usual course of events where bills of credit were issued was as follows: (1) emission; (2) disappearance of specie; (3) counterfeiting; (4) wearing out of bills; (5) calling in and replacing worn and counterfeited issues with new ones; (6) extending the time for old ones to run, especially those which had been placed on loan; (7) depreciation; (8) repudiation of early issues in part and the emissions of others called "new tenor."

dr. douglas says that massachusetts had at one time "old tenor, middle tenor, new tenor first, new tenor second." rhode island had an indefinite number of tenors.

all sorts of opprobrious epithets were heaped upon them. they were called invidious statutes, old, worn,[pg 156] torn, tattered, shattered, ragged, mutilated, defaced, obliterated, illegible and "unfit to pass."

the depreciation of the colonial bills varied in the different colonies. in massachusetts the maximum depreciation was 11 for 1 (the standard being "proclamation money"). in connecticut it was 8 for 1. in 1763, the value of the new hampshire shilling was a little less than a half penny; in 1771, it vanished altogether. rhode island owed tenor bills in 1770 that were worth 26 to 1. those of north carolina were 10 for 1; of south carolina 7 for 1.

here is mr. white's graphic description of the times: "the pamphlets and records of the colonial period are filled with accounts of the distress and demoralization caused by depreciated paper made legal tender. as all loans were so payable, the accumulations of age, and the inheritance of orphans dwindled. so, too, did the earnings of the wageworker. in order to avoid the losses from a depreciating standard of value, resort was had by working men to 'store pay,' and here they were generally cheated. trustees and executors, who had money in their hands which belonged to other people, and who saw how things were going, often postponed the payment on frivolous pretext, since each delay enabled them to settle their accounts with less value, thus devouring widows' houses. not only was bad blood stirred up by the resistance of the royal governors, but a spirit of lawlessness was engendered against the local assemblies, if they showed a disposition to resist the demands of the green-backers of that day. even after the revolution the legislature of new hampshire was mobbed because it refused to legal tender bills. one of the demands of shays' rebellion in massachusetts was for more paper money. in rhode island, after the revolution, a general system of repudiation of debts, public and private, was undertaken, and carried through by means of legal tender paper in spite of the decisions of her courts."

however bad these colonial bills of credit proved to[pg 157] be, if it were possible those of the revolutionary period were still worse.

even before the continental congress assembled the separate colonies began to issue bills of credit. when the continental congress met in june, 1775, franklin urged that the bills should bear interest, in order to prevent depreciation. he even urged that the interests should be payable in "hard dollars," but this was voted impracticable.

all seemed to be in confusion, and in this unsettled state it was voted in july, 1775, to issue due bills for 2,000,000 spanish milled dollars, to be sunk by taxes in four successive years, beginning november 30, 1779, the taxes to be levied and collected by the states in proportion to their population. these bills were not legal tender at the time of their issue. the congress had no power to make them so, but in january, 1777, it was recommended that the states should do so, and this they did, one after another, in one way or another. before the two millions were issued, another million was wanted, and was authorized with three million more, before the end of the year; and still they came nine millions more, or until fifteen in all were out, before independence was declared. this was called continental currency to distinguish it from the issues of the separate states. mr. white says from this time the demon of "fiat money" had possession of the country, and worked its will on the inhabitants. the issues ran on in an increasing volume till they amounted to $240,000,000 in the year 1779. in 1781 the whole mass became worthless. on this subject the essays of pelatiah webster have become classic. mr. webster, it is thought by some, was the author of the constitution. he was a merchant of philadelphia and an ardent patriot. he wrote "we have suffered more from this than from every cause of calamity; it has killed more men, pervaded and corrupted the choicest interests of our country more and done more injustice than even the arms and artifices of our enemies."

[pg 158]

professor sumner says that when the depreciation was going on rapidly a man might lose his whole wages while earning them.

naturally, the next thing in order was the establishment of prices, for which purpose conventions were called. the first one held at providence was composed of delegates from the four new england states. it fixed the prices at which imported goods might be sold, but an exception was made of arms and ammunition in order to encourage their importation.

of course the proceedings in connecticut were substantially the same. this state, however, had a law to prohibit persons from buying any more goods than the select men, or county commissioners, should judge to be necessary for the use of their respective families. anything like prudence in laying in supplies was thus forbidden.

a price convention of the six middle states was held at york, pa., in march, 1777, but was unable to agree upon a single point.

when the price conventions failed of their object, new ones were held fixing new limits, for example fourfold the prices of 1774, then eightfold, then tenfold, then twentyfold—terrorism being applied in each case to enforce the decrees. country folks accused town folks of extortion, and threatened to come in and take what they wanted by force. town folks accused country folks of withholding their produce, and so laws were enacted against withholders. anonymous hand bills and broad-sides were circulated threatening vengeance on merchants.

as a result of such irrational business disturbances, boston was, in october, 1779, on the verge of starvation; money transactions had nearly ceased and business was done by barter.

a soldier's pay had dropped by depreciation from $7.00 per month to 33 cents, although it had been twice raised by congress. washington could not move his sol[pg 159]diers to yorktown till robert morris had borrowed hard money from rochambeau for their back pay.

in march, 1780, congress tried the colonial experiment of "new tenor" in a very awkward and roundabout way, and declared that "old tenor" to be worth 40 to 1; the actual depreciation being 60 for 1. as it was supposed that $200,000,000 of continental money was out, this was a repudiation of all but $5,000,000 of it. the depreciation then went on more rapidly than before. the "new tenor" bills started at a depreciation of 2 for 1, which became 3 for 1, even before they reached the army, and dropped to 6 to 1 in a few months. old tenor went at a galloping pace at 500 for 1 in philadelphia, when it ceased to circulate. in the remoter districts of the south, it continued in circulation nearly a year longer, and until the depreciation had reached 1,000 to 1. the southern people, when they learned that they had been using the stuff long after it had become worthless in the north, thought that they had been cheated by the yankees, thus intensifying the sectional distrust which was already so dangerous.

continental money was now an object of execration and afterwards of derision. "not worth a continental" became a synonym for absolute worthlessness, and remains an axiom to this day. in the act of congress approved august 4, 1790, authority was granted for funding the bills in 6 per cent bonds "at the rate of $100 in the said bill for $1.00 in specie." only $7,000,000 turned up to take advantage of this provision.

mr. banker: i want to be perfectly frank with the rest of you men. last thursday i was over at mr. lawyer's office and we got into a discussion about this matter. i was literally astounded to find him in favor of government issues of money, and that he actually thought such issues were constitutional. i knew how mr. merchant and mr. manufacturer stood, for we had talked the matter over some time ago. so we got together and di[pg 160]vided up the work we should each of us do in order to convince mr. lawyer that he was wrong on both points.

from what has been shown with respect to the facts i am sure that mr. lawyer must be convinced that the principle at least of government issues of legal tender paper money is unsound; for all the evidence, as we have seen for 100 years, from 1690 to 1790, is all on one side. indeed not a single exception can be found anywhere. you will remember that everyone of the thirteen original states tried fiat legal tender paper money, and then when they all united under the continental congress, they tried it altogether; but the result was precisely the same.

first: you will remember, came the issuance of the bills of credit, as they called them, or greenbacks, as we call them, paper money.

second: and immediately all the gold and silver disappeared because driven from the channels of trade, with something cheaper with which the debtor could cancel his obligations.

third: dishonesty, dishonor, fraud, disaster, ruin and repudiation followed each other in quick succession.

fourth: then came the return to sound conditions when paper issues were discarded and the effort to make something out of nothing was abandoned.

mr. lawyer, i want to ask you now whether you do not think we have made a case against you so far as the unwisdom and utter folly of government issues of paper money is concerned.

mr. lawyer: i must admit that the facts are overwhelming. i had never taken the time nor trouble to investigate the subject, but had assumed that one of the functions of our government was the issuance of money, even paper money, if you like. it seems from what has been shown here and last wednesday night as well that this scheme of issuing paper money has been tried, not only by everyone of our thirteen colonies and the continental congress, but by practically every country of the world at some time or other. it was tried in austria,[pg 161] england, france, germany, italy, russia and is now going on in nearly every one of the south american countries with the same experience, i am informed, that other countries have suffered. now, so far as the facts have been disclosed, there is not a single instance in which the scheme has been tried that has not resulted in precisely the same way—complete failure and ultimate dishonor and repudiation if persisted in as a principle.

under the circumstances i must say, as every fair-minded man must, that the practice has been an absolute failure, and therefore it must be admitted that the principle must be unsound, for it seems to have worked nowhere, although tried under every conceivable condition. of course i am compelled to give in on the unsoundness of the scheme. now, you understand, that my admission as to the unsoundness and unwisdom of the practice does not carry with it my admission that the united states government has no constitutional right or authority to issue paper money if it chooses to do so.

mr. banker: i understand perfectly well that your admission of the one point has nothing whatever to do with the constitutional question, but i wanted to know your conclusion after a consideration of the facts as presented first.

i think everyone here will agree that the disastrous experiences of the colonies and of the continental congress in issuing paper money must have forced this question upon the minds of the framers of the constitution, as one of the very greatest importance to be settled by them. certainly what they thought about it would indicate what they intended to do. i will first show this by what they said, and then i will demonstrate what they intended to do by what they actually did do in the constitutional convention.

alexander hamilton, in june, 1783, set forth explicitly in a resolution for a new constitution of the united states of america his deliberate opinion in these words: "to emit an unfunded paper as the sign of value ought not to[pg 162] continue a formal part in the constitution, nor ever hereafter to be employed; being in its nature pregnant with abuses and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of government and to the morals of the people."

in 1786, thomas paine, the author of "common sense," in an opinion on paper money used this language: "the laws of the country ought to be the standard of equity and calculated to impress on the minds of the people the moral as well as the legal obligation of political justice. but tender laws of any kind operate to destroy morality and to dissolve by the pretence of law what ought to be the principle of law to support, reciprocal justice between man and man; and the punishment of a member who should move for such a law ought to be death."

in the summer of 1785 richard henry lee, then president of congress, warned washington of a plan formed for issuing a large sum of paper money in the next assembly of their state, adding as his opinion: "the greatest foes in the world could not devise a more effectual plan for ruining virginia. i should suppose every friend to his country, every honest and sober man, would join heartily to reprobate so nefarious a plan of speculation."

washington replied to lee in these words: "i never have heard, and i hope i never shall hear, any serious mention of a paper emission in this state. yet ignorance is the tool of design and is often set to work suddenly and unexpectedly."

in 1787, on the 9th day of january, washington wrote to jabes bowen as follows: "paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice."

to mr. stone, a member of the senate of maryland, who appealed to washington to allow his opinion on this subject to be made publicly known, washington wrote[pg 163] just three months before the opening of the constitutional convention, as follows: "as my sentiments thereon have been fully and decidedly expressed long before the assembly either of maryland or of this state was convened, i do not scruple to declare, that if i had had a voice in your legislature, it would have been given decidedly against a paper emission upon the general principles of its utility, as a representative and the necessity of it as a medium.

"to assign reasons for this opinion would be as unnecessary as tedious. the ground has been so often trod that a place hardly remains untouched. in a word the necessity arising from the want of specie is represented as greater than it really is. i contend that it is by the substance, not with the shadow of a thing, we are to be benefited. the wisdom of man, in my humble opinion, cannot at this time devise a plan, by which the credit of paper money would be long supported; consequently, depreciation keeps pace with the quantity of the emission, and articles for which it is exchanged rise in a greater ratio than the sinking value of the money. wherein then is the farmer, the planter, the artisan benefited? an evil equally great is the door it immediately opens for speculation, by which the least designing, and perhaps most valuable part of the community are preyed upon by the more knowing and crafty speculators."

in 1785, george mason wrote "they may pass a law to issue paper money, but twenty laws will not make the people receive it. paper money is founded upon fraud and knavery."

on the first day of august, 1786, washington wrote to jefferson: "other states are falling into the very foolish and wicked plans of emitting paper money."

in may, 1788, charles pinckney, in a speech in the convention of south carolina, said: "i apprehend these general reasons will be found true with respect to paper money; that experience has shown that in every state[pg 164] where it has been practiced since the revolution, it always carries the gold and silver out of the country, and impoverishes it."

john marshall, the greatest of all our chief justices, the man who breathed into the dry bones of a constitutional contract, the soul of nationality, expressed himself at various times in these words: "he had 'an unabated zeal for the exact observance of public and private engagements.' he rightly insisted that the only ways of relief for pecuniary 'distresses' were 'industry and frugality'; he condemned 'all the wild projects of the moment; he rejected as a delusion every attempt at relief from pecuniary distresses' by the emission of 'paper money' or by 'a depreciated medium of commerce.'" george bancroft said: "these were his opinions through life. he gave them to the public in 1807, and twenty-four years later in a revised edition of his 'life of washington,' he confirmed his early convictions by the authority of his maturest life."

james madison, who was probably more responsible for the constitution than any other single individual, used these words in addressing the delegates of virginia in the year 1786: "paper money is unjust; to creditors, if a legal tender; to debtors, if not legal tender, by increasing the difficulty of getting specie. it is unconstitutional, for it affects the rights of property, as much as taking away equal value in land. it is pernicious, destroying confidence between individuals; discouraging commerce; enriching sharpers; vitiating morals; reversing the end of government, and conspiring with the examples of other states to disgrace republican government in the eyes of mankind." as the result of his words and the well-known opinions of washington, lee and mason, the house of delegates of virginia on the first day of november resolved by a vote of 85 against 17 that an emission of paper money would be "unjust, impolitic and destructive of public and private confidence, and of[pg 165] that virtue which is the basis of republican government."

disquieting symptoms having appeared in virginia, madison, in april, enjoined monroe, a member of its assembly, to battle paper money.

madison enumerated among the evils for which the new constitution should provide a remedy, the "familiar violation of contracts in the form of depreciated paper, made a legal tender." in his notes for his own guidance in the federal convention, he laid down the principle that "paper money may be deemed an aggression on the rights of other states," and just five weeks before the time for the meeting of the convention, he wrote from congress, then sitting in new york, to edmund randolph, as follows: "there has never been a moment since the peace, at which the federal assent would have been given to paper money."

in conclusion, mr. lawyer, i want you, because you are a particularly good reader, and ought to be more interested in this subject than anybody else, if you are wrong, to read the story of the constitutional convention as related by george bancroft.

mr. lawyer: i will very gladly do so.

"the convention of the states for the reform of the confederacy organized itself by electing as its president george washington, who of all the public men in his day was the most decided in his convictions and the most outspoken in his words on the inherent dishonesty of irredeemable paper bills.

"virginia took the lead, and randolph, its governor, in his opening speech drew attention to paper money by reminding its hearers that the patriotic authors of the confederation did their work 'in the infancy of the science of constitutions and of confederacies, when the havoc of paper money had not been foreseen.'

"among the delegates from connecticut were oliver ellsworth, who in the federal congress had repeatedly served on committees for the reform of the federal con[pg 166]stitution, and roger sherman, who, in 1752, had published his conviction that good laws and poor money are irreconcilable. they agreed to insist in the convention 'that the legislatures of the individual states ought not to possess a right to emit bills of credit for a currency, or in any manner to obstruct the recovery of debts, whereby the interests of foreigners or the citizens of any other state may be affected.'

"the refusal of the convention to confer on the legislature of the united states the power to emit bills of credit or irredeemable paper money in any form is so complete that, according to all rules by which public documents are interpreted, it should not be treated as questionable; but as the truth in this case is of infinite importance, and has been questioned by those in authority, the wrong done to the constitution may justify a simple narrative of the facts, which ample and indisputable records establish, and which no power can alter.

"the journal of the convention for framing the constitution was kept under the supervision of its members, and its authority is vouched for by washington, not only as the presiding officer of the convention, but as president of the united states in a special message to congress.

"by a clause in the ninth article of confederation of the united states of america, and only by that clause, the confederated states had authority 'to emit bills on the credit of the united states.'

"of the legislature of the united states, under our present constitution, the court insists that 'congress is clearly authorized to emit bills of credit.' but is it so?

"the eighth clause of the seventh article, in the first draft of the constitution, was as follows: 'the legislature of the united states shall have the power to borrow money and emit bills on the credit of the united states.' the journal of the convention for august 16th makes this record: 'it was moved and seconded to strike out the words "and emit bills," and the motion to strike out these words "passed in the affirmative. yeas: new[pg 167] hampshire, massachusetts, connecticut, pennsylvania, delaware, virginia, north carolina, south carolina, georgia—9. nays: new jersey, maryland—2." so the convention by a vote of more than four to one, refused to grant to the legislature of the united states the power "to emit bills on the credit of the united states."'

"for the interpretation of this record, madison, the best possible witness, has left this note: 'striking out the words cut off the pretext for a paper currency, and particularly for making the bills a tender either for public or private debts.'

"madison was the chief author of the new constitution. its opponent, luther martin, the attorney-general of maryland, a delegate to the federal convention and present at the debate, read to the maryland house of delegates a paper, in which he gave his account of the purpose of the convention; his evidence agrees exactly with that of madison, and for nearly a hundred years his fidelity as a witness was as little questioned as that of madison. here are two witnesses: madison, who approved the prohibition, and martin, who condemned it; the court pushes the testimony of madison aside as if he had 'not explained himself,' though on the point in question his words are as clear as sunlight. the address of martin the court rejects as a 'philippic,' though it contains not a word of invective against any individual, and does contain the clearly expressed wish of its author 'not to wound the feelings of any person.'

"we have a record of what was spoken and of what was done in the federal convention kept by madison, who took upon himself the most solemn engagement to preserve the truth for the instruction of coming generations, and whose opportunity, capacity, and integrity no one questions. his report of what was said and done on the 16th of august in the federal convention preserves the testimony of many witnesses, taken down as it were by the most capable notary.

"the question before the convention was: shall power[pg 168] be granted to the legislature of the united states 'to emit bills of credit'? the first witness is gouverneur morris, a man free from illusions; a delegate from the state which contained philadelphia, then the most opulent city in the thirteen states; and as by its interests he was nearly connected with the city and state of new york, he thoroughly represented the interests of commerce. he moved to strike out the grant of power to 'emit bills on the credit of the united states,' saying: 'if the united states have credit, such bills will be unnecessary; if they have not, will be unjust and useless.' the seconder of gouverneur morris was pierce butler, a delegate from south carolina, then the richest commercial state in the south. he remarked in the course of debate that 'paper is a legal tender in no country in europe,' and he was urgent to withhold from the government of the united states the power to make it so.

"madison interposed: 'will it not be sufficient to prohibit the making' the bills 'a tender'? gorham, in reply to madison, held that no accompanying prohibition was sufficient to make it safe to grant to the legislature of the united states the power to emit bills of credit. he spoke absolutely 'for striking the words out,' saying: 'if the words stand, they may suggest and lead to the measure.'

"the words of oliver ellsworth, our third chief justice, were: 'this is a favorable moment to shut and bar the door against paper money. the mischiefs of the various experiments which have been made are now fresh in the public mind, and have excited the disgust of all the respectable part of america.'

"randolph expresses 'his antipathy to paper money'; but, 'could not agree to strike out the words, as he could not foresee all the occasions that might arise.'

"james wilson, in concurrence with ellsworth, said: 'it will have a most salutary influence on the credit of the united states to remove the possibility of paper money. this expedition can never succeed whilst its[pg 169] mischiefs are remembered; and, as long as it can be resorted to, it will be a bar to other resources.'

"george reed spoke for delaware: 'the words, if not struck out, would be as alarming as the mark of the beast in revelation.'

"john langdon, of new hampshire, conforming to the wise instructions of the towns of his state, said: 'i had rather reject the whole plan than retain the three words "and emit bills."'

"madison, agreeing with the journal of the convention, records that the grant of power to emit bills of credit was refused by a majority of more than four to one. eleven men took part in the discussion; and every one of the eleven whether he spoke for or against the grant of the power, gouverneur morris, pierce butler, james madison, nathaniel gorham, george mason, john f. mercer, oliver ellsworth, edmund randolph, james wilson, george reed and john langdon, each and all, understood the vote to be a denial to the legislature of the united states of the power to emit paper money. take the men, one by one, and see how weighty is the witness of each individual; take them together and add the consideration that they, every one of them, unanimously support each other and are contradicted by no one, and who shall dare question their testimony? the evidence is perfect; no power to emit paper money was granted to the legislature of the united states.

"by refusing to the united states the power of issuing bills of credit, the victory over paper money was but half complete. the same james wilson, who twelve days before, with oliver ellsworth, had taken a chief part in refusing to the united states the power to emit paper money, and the same roger sherman, who in 1752 had put forth all his energy to break up paper money in connecticut, jointly took the lead. the first draft of the constitution had forbidden the states to emit bills of credit without the consent of the legislature of the united states; on the 28th of august they jointly offered[pg 170] this motion: 'no state shall coin money, nor emit bills of credit, nor make anything but gold and silver coin a tender in payment of debts,' making the prohibition absolute. roger sherman, animated by zeal for the welfare of the coming republic of countless millions, exclaims in the debate: 'this is the favorable crisis for crushing paper money.' his word was the will of the convention, and the states, by a majority of eight and a half against one and a half—that is, by more than five to one—forbade the states, under any circumstances, to emit bills of credit. this is the way in which our constitution 'shut and barred the door against paper money' and 'crushed' it.

"nothing is wanted to the perfect strength of the truth, that the constitution put an end to paper money in all the united states and in all the several states.... 'no suggestion of the existence of a power to make paper a legal tender can be found in the legislative history of the country. had such a power lurked in the constitution, as constructed by those who ordained and administered it, we should find it so recorded. the occasion for referring to it has repeatedly arisen; and had such a power existed, it would have been recognized and acted on. it is hardly too much to say, therefore, that the uniform and universal judgment of statesmen, jurists, and lawyers has denied the constitutional right of congress to make paper a legal tender for debts to any extent whatever.'"

thomas jefferson's opinion: "the federal government—i deny their power to make paper a legal tender."

mr. banker: now, mr. lawyer, you undoubtedly with all your profession will recognize daniel webster as the greatest expounder of the constitution. i want you to read what he says and then my case will be closed on the constitutional right and authority of the government to issue paper money.

mr. lawyer: i will gladly do so. "most unquestionably there is no legal tender, and there can be no legal[pg 171] tender, in this country, under the authority of this government or any other, but gold and silver, either the coinage of our own mints, or foreign coins, at rates regulated by congress. this is a constitutional principle, perfectly plain, and of the very highest importance. the states are expressly prohibited from making anything but gold and silver a tender in payment of debts; and although no such express prohibition is applied to congress, yet as congress has no power granted to it, in this respect, but to coin money and to regulate the value of foreign coins, it clearly has no power to substitute paper, or anything else, for coin, as a tender in payment of debts and in discharge of contracts. congress has exercised this power, fully, in both its branches. it has coined money, and still coins it; it has regulated the value of foreign coins, and still regulates their value. the legal tender, therefore, the constitutional standard of value is established and cannot be overthrown. to overthrow it would shake the whole system. the constitutional tender is the thing to be preserved, and it ought to be preserved sacredly, under all circumstances."

mr. merchant: well, mr. lawyer, what do you really think about the constitutional question now?

mr. lawyer: in the light of the facts preceding the constitutional convention, the personal opinions of those who framed it, and what they actually did in the convention, i will admit i have not a leg to stand on. the story of our experience so well told by you gentlemen demonstrating the utter unwisdom of government issues of money, and the overwhelming evidence on the constitutional question has completely converted me to your contention. but i was relying in a sort of a blind way upon the fact that our supreme court has held that the united states notes were lawfully issued. how about that? have you investigated it?

mr. banker: i have, but the story of the greenback will take the best part of another night. therefore, i move we adjourn. it is enough glory for one night to[pg 172] have a layman knock out a lawyer upon a constitutional question.

mr. lawyer: there is no humiliation in being shown that you are wrong upon so great a question; i regard it as a piece of disgraceful cowardice for a man to persist in holding to a position when he is clearly wrong.

uncle sam: that is the way i like to hear my boys talk. this is really the longest siege we have had, and you all look as though you had been undermined, and so we had better say good night.