Edward Kellogg
A New Monetary System

A. — Page 65.

A railroad stock that brings in an income of six percent per annum is certainly worth only one-half as much as one that brings in twelve percent.  If the income of the one that brings in six percent could be let for six percent only after it was received, and the one that brings in twelve percent could be let at twelve, the stock bringing the latter price would be worth vastly more than double the one that brings but six percent per annum.  But suppose one of these stocks should bring in one year six percent, the next eighteen, the next five, the next twenty-four, the next seven, the next four, and the next seventeen percent, and each year the income uncertain, no one would pretend to say there was a fixed value to this stock, or that it would be a just measure of value, although they now say of the dollar, that it is a dollar all the world over, and its value is always the same.  They might as justly assert of this railroad stock, that stock is stock all the world over, and always of the same value.  But, if the income on this stock were precisely the same, not only every year but every day in each year, and would continue so without fluctuation, other things might vary, but the stock would always be of uniform value.  And especially if it were made the standard by which every other species of property were valued, it being the foundation of all value and always producing the same income—stock producing stock as money at interest produces money, the thing produced being precisely like the thing that produced it, the stock could not possibly vary in value.  Suppose a man to have one hundred shares of this stock, which was yearly producing six dollars on each share (amounting to $600), the interest or dividend ($300) being paid every six months, should the stock and road cease to exist, but the dividend be regularly paid, the non-existence of the road and stock would in no manner affect its value.  But let the dividend or interest cease to be paid, and forever cease, and the road continue, the stock would not be worth one cent.  Should a farm cease to produce, it would be worthless for agriculture;  so, should the interest on money forever cease, I doubt whether any nation, with all the laws it might make, could ever maintain it as a currency.  Therefore, money loaned should bear an interest fixed at such rates as never to be oppressive.  We might better vary the length of the yard than the interest on money-better allow all the other measures to vary than this, because it measures the value of every species of property, all government expenses, all official salaries, and everything that is sold by the piece, bulk, or quantity.  How important is it then that it should be just.  A man might as well be allowed to change his neighbor’s landmark as to increase the interest on his debtor: he would as much augment the debt, to the injury of his debtor, as he would enlarge his farm to the loss of his neighbor.  If the one is just, the other must be so too.

Congress has coined money, but has not determined its value because it has left its use or interest unsettled.  It might as well have said that yard-sticks should contain thirty cubic inches and allow them to be made to slide out to any length from two to fifteen feet, and then permit a few people to monopolize them when buying, to slide out the stick to any length, and when selling, to reduce it two or three feet and call the length of the stick, a yard, however long or short it might be.  It would no more vary the yard when its length was increased from three to fifteen feet than the dollar is changed when the interest is altered from six percent per annum to thirty percent or two and a half percent a month. (Currency, the Evil and the Remedy.)

B. — Page 154.

I think none will deny that labor earns the wealth of all nations;  yet the laboring classes often suffer for the necessaries of life, and are in distress for the want of employment.  For example: take England, the wealthiest nation in the world, and contemplate the state of the laborer.  Instead of receiving an equivalent for his labor, he is clothed in rags, lives on scanty, miserable food, and many times finds great difficulty in keeping himself from starving.  The manufacturer who employs hundreds of these laborers finds his goods, when manufactured, sell below their cost, because the interest on money is raised.  He naturally endeavors to lessen his expenses, and, cotton having fallen, buys his materials a little cheaper.  Though he very much dislikes to reduce the wages of his workmen, and continues for a time to pay the same price, his losses compel him to diminish them one-eighth.  The manufacturer, still losing, buys cotton a little lower, and takes another eighth from the wages of his workmen, which distresses them very much.  Goods fall again, and he is obliged to give the men employment half the time only at this low price.  He would certainly stop his factory, but he knows the workmen would suffer still more should he do so;  at last his losses compel him to do it;  the laborers are thrown out of employment and cannot get sufficient food to eat.  The manufacturer cannot feed them;  for a long time he has been losing on the goods, his business is stopped, and he is earning nothing.  He feels for his workmen, but cannot help them;  the market is glutted with goods, and they will not sell.  The fault of this change in the price of goods may not be in the least owing to the manufacturer.  It lies beyond all the useful business of the nation — in the money capital.

If the interest of money rise from three percent per annum to four percent, it is equal to a change or fall in the goods of twenty-five percent;  the measure is just one quarter more than it was.  The income of one hundred dollars in a year is four dollars instead of three, hence a person buying its use has to pay tour dollars where before he paid but three.  The use is .all the person buys;  he rents the money as he would rent any other property the money belongs to the party lending or renting out its use, and, at a given period, is to be returned to its owner, its use only being paid for.  But if the interest have risen from three to four dollars, the dollar itself is worth one hundred thirty-three and a third cents, and as well worth that as it was before worth one hundred cents.  It is the same to the manufacturer as if he should be compelled when he sells his goods, to increase the length of his yard-stick to four feet and sell his goods at the same price he did when his yard-stick was but three feet long.  He cannot do this unless his workmen will make four yards of cloth at the same rate that they before made three;  he must also buy as much cotton now for three dollars as formerly for four, and curtail every other expense in the same proportion, or his business will not be as good as when money was at three percent interest.  The interest on money continues to rise until it gets to five percent per annum;  now his yard-stick must be five feet long and his workmen must make five yards of cloth for the same price they before made three.  Where the manufacturer bought a bale of cotton at fifty dollars, he must now pay but thirty and diminish every other expense in proportion.  The interest on money still increases to six percent per annum, and the use of a dollar having doubled, the dollar itself is just doubled in value.  Now his yard-stick must be six feet long and his workmen make two yards of cloth for the same price they before made one: he must buy a bale of cotton for twenty-five instead of fifty dollars, and lessen all other expenses in proportion.  Add to this, he is in debt when the change in the interest takes place, although the debt against him is permanent and bears but three percent he is obliged to reduce everything in this ratio, i.e., buy the cotton, reduce the wages of his workmen, have just as ready sales and collections as formerly, or his interest will be burdensome to him, for it takes just double the quantity that it formerly did to pay the three percent interest, and he must sell double the quantity of cloth to obtain the same money.  But suppose the property on which the debt is a lien is forced on sale, what will it bring.  Certainly if it rented as well as it did before when money was but three percent it would not now be worth more than half its former value.  Thus the manufacturer is broken up, and every branch of useful business checked, laborers cannot find employment;  and all this trouble is attributed to the people who have made the goods and every other useful article: the capital takes nearly all the earnings, allowing the people who have earned the whole wealth of the nation to starve, and this is called "financiering," getting things down to the specie or real value.  When this process is over, and the wealth concentrated in the hands of the few, money is offered to the business people at a somewhat reasonable interest;  business again goes on for a few years, when the same scene is reacted and the same result produced.

All laws are made for the government of man.  Each nation enacts them for itself, and every citizen within their jurisdiction is bound to obey them.  These laws are intended to protect the rights of property, to shield the weak from the strong, allowing no one by oppression or injustice to take property from another without returning an equivalent.  Stealing, is appropriating property without the consent of its owner.  One who steals is not only bound by law to return the thing stolen, but is also obnoxious to imprisonment.

The laws also protect against gambling.  Gambling consists in two or more individuals posting up any sum of money, to which all parties agree, then playing some game, after which, the one who beats takes all the money.  This is gambling, because one man takes from others money or property without rendering ally equivalent.  The others have lost just what the winner has gained, yet it was all done voluntarily, without the slightest necessity for it, so there was no oppression on the part of the winner;  the hope of gain prompted each, yet they knew before they played all but one must lose, still each hoped to be the fortunate one.  This is fair gambling, but should those who had lost their money discover that the winner had prepared the cards by a private mark on the back of each, and thus had won the game, it would be called unfair gambling, and the persons losing would say they had been cheated out of their money.

The laws prohibit these transactions because they are injurious to the parties concerned, their families and the public;  corrupting the morals of the community by the pernicious practice of taking from one his property and giving it to another without any equivalent.  A gambler is not generally considered a businessman.  If it were asked in what business such a man is, the answer would be, "None;  he is nothing but a gambler."  I wish now to speak of other things in the community called business, and ascertain whether the term be more properly applied to them than it is to the gambler.  I mean the stockjobbing business.  A person buying stock to hold for a time, expects to sell it for a higher price than he pays for it.  If it be State stock bearing interest at six percent he intends to buy it at such rates that he shall not only receive six percent interest, but a profit beside.  Let us see whether, if he buys the stock below its par value, others will not lose all he gains.  Suppose it to be issued by the State and bear six percent interest . Some individual who has taken it at par is compelled, by misfortune, to sell it for fifty percent discount, thus losing one half the amount for which he has received no equivalent, while the person buying it has gained precisely what the other has lost, and given nothing for it.

Again, if the State itself be obliged to sell its own bonds bearing the legal interest of the State at twenty, twenty-five or any other percent, below par value, it loses all the difference between the par value and the amount for which they are sold, and the person buying obtains precisely what the State loses, and this loss must be paid by taxing, directly or indirectly, the citizens of the State.  These State stocks bear a certain rate of interest, and both principal and interest are as definite as the pound weight or the yard.  The interest is daily going on at a certain rate, and the stock varies from day to day exactly the amount of the accruing interest and no more.  But in the stock market one day it is up one;  two or three percent;  the next, down one, two, three, four or five percent., and then again up.  In all these transactions, one party gains precisely what the other loses, as much as if one man should measure the pieces of cloth he bought of another with a yard-stick four feet long, and when he sells measure with one three feet long.  He has taken precisely as much cloth from the first man without giving any equivalent, as he has gained from the person to whom he has sold it.  The stocks rise and fall daily, because some few individuals combine and run them up by falsely selling to each other without any intention of delivering the stock, or if delivered there is an understanding that it shall be rebought by the person who sold it.  This is done to "corner" some other persons who have sold stock on time and have to deliver it within a certain period, which, if they cannot do, they must pay the difference or be disgraced by this very respectable Board of Brokers.  In this way, combining to run up and run down the stocks, they try to induce innocent people to partake in the same business.  It is often the case that sundry individuals combine on certain bank and railroad stocks, and agree not to sell the stocks which they own or control, knowing they have a large majority of that in which they are operators.  These same men then go forward and buy, to be delivered in a certain time, a far greater amount of the same stock than there is outstanding, and run it up to double its former price.  When the time arrives for it to be delivered, they know it cannot be done unless it is bought directly or indirectly from themselves, and they charge whatever they please for it, or else they take the difference, and the stock is not delivered at all.  This is done under pretence that there is some real cause for this great advance, and those unskilled in financial operations are often "cornered" in this way, or in some other quite as unsatisfactory.

Now are these transactions any more fair than a private mark upon the cards before gambling?  In all these do not some of the parties lose precisely what the others gain.  In all this there has been nothing done to increase the wealth of the nation or the comfort of man;  neither has it bettered the morals of anyone.  No transaction of this kind deserves the name of business;  and here let me explain what business is.

Take, for instance, a farmer who has an extensive business in wool, and suppose him to have two thousand sheep.  He must provide hay and grain to keep them during the winter;  he also raises grain to sell.  To cultivate so large, a farm, he must employ a number of laborers, whom he boards and pays sufficient wages to furnish themselves with good clothing, and enable them at the end of the year to have a handsome surplus.  When the wool is ready for market, the farmer sells to the manufacturer for a price which will pay for the labor devoted to the sheep, a reasonable compensation for the use of the part of the farm allotted to them, and a small profit besides.  The manufacturer converts the wool into cloth and sends it to a commission merchant in New York to sell, limiting him to such prices as will enable him to pay all his workmen well.  The manufacturer also demands a price sufficient to pay himself for his own labor, for the use of his machinery and manufactory, and to insure a small profit.  The commission merchant sells these cloths to the wholesale merchant or jobber, and receives his commission, which gives him a good living and a handsome surplus.  The jobber again sells the cloths to the country merchant, and receives enough to give him a good living and a reasonable profit. The country merchant sells them to the farmers, mechanics, and various individuals who need them, and they wear them out.

Everyone of these persons is making a living and saving a surplus;  the people who buy these cloths and wear them out are raising grain, beef, pork, etc., supplying the various manufacturers and mechanics with food, and they also make a good living and some profit.  No one has lost what the other has gained, but each and everyone of them is gaining.  This is business: each one is adding to his own comfort, while at the same time he contributes to that of all the others.  The same happy result would attend every branch of useful business in our land, if business were pursued and not gambling.

If this gambling in stocks and money affected those only who are in that "business," as it is called, the evil would be comparatively small, but it does not stop there.  This article, money, is the measure of value of all the productions of the country, and no matter where the farmer, mechanic, laborer, merchant, or any producer may be situated, if he be in debt, the rise of interest from six to twelve percent per annum, doubles his debt upon him although he may be paying but six percent interest upon it.  It will take double the produce to pay six percent because it will fall in about that proportion, but at the same time it will take the same labor that it always did to raise a pound of cotton, a bushel of wheat or to make a yard of cloth, and one half the money will pay for it, hence it is doubled in favor of the money capital.  To illustrate this, I will suppose: A. who is clear of debt, owns a farm, but it is not as large as he wishes it.  B., another farmer, offers for this $4,000, paying $2,000, and giving a bond and mortgage on the farm purchased for the remaining $2,000, payable in instalments of $300 a year, interest at six percent.  He expects, with the assistance of his family, to do all the work on the farm, and thinks he can easily clear $300, as produce commands good prices.  A. purchases another farm for $6,000, paying $2,000 in cash, and giving his mortgage for $4,000 at six percent interest on the farm purchased.  He agrees to pay $500 a year and the interest.  He expects to receive $300 a year from B., and to make clear at least $200 besides the interest.  But before the year rolls round, the interest on money rises in the Atlantic cities from six to twelve percent.  He sees the newspapers stating the fact, but thinks it has little to do with his farming as he is paying no such interest, his mortgage bearing but six percent.  By the time he gets his crops to market, he finds produce has fallen, and even at lower prices does not sell readily.  His neighbor B. does not receive as high a price for his produce as he expected, and is able to pay the interest and $200 only on his mortgage, instead of $300 as he agreed.  A, with difficulty makes his interest and $300 beside.  He takes the $200 collected from B. and the $200 he has made from his own farm, reduces his mortgage to $3,600, and pays the interest.  Still in the Atlantic cities interest continues high, and money has become scarce in the country, the interest rising to twelve percent, though the farmers are paying but six percent interest on the mortgages.  When the crops are ready for market, they have fallen one-third from the last year’s price: the cost of transporting to the market is the same as formerly, and when expenses are deducted they find they have cleared but half as much money as in the year previous.  B. is able to pay his interest and $100 only on the principal.  A can pay the interest on his mortgage and $200.  The mortgage is now reduced to $3,400;  the person holding it insists upon the amount due being paid and forecloses the mortgage.  The farm for which A. paid $6,000 brings but $2,000, and money, by this time, is so scarce that few people have sufficient to purchase it.  As A is pushed, he sues B., and B.’s farm brings but $1,200, leaving B. insolvent and owing $500, which must be paid from his future earnings.  When the $1,200 are added to the $2,000 A.’s farm brought, it would still leave A. indebted $200 besides interest and costs.  Now what evil have these two farmers done?  They and their families have worked hard, and raised from their farms provisions for themselves and a large surplus for the food of others;  and who has reaped the fruit of their toil.  The moneyed capitalist, and without rendering the slightest equivalent.  I appeal to persons in all sections of our country if cases quite as hard as these have not occurred within the limits of their observation.  These farmers paid but six percent interest, and yet lost, because the measure of value has affected the produce of their farms and tested them by a different measure from the one by which they bought, and therefore they fall short in paying their debts.

For further illustration, suppose the State of New Jersey, during the whole time that the rates of interest were fluctuating in all the other States, had maintained hers at six percent and retained all the money that generally circulates in the State, so that any citizen could as easily obtain the money at this rate, as at any period of her existence.  Under these circumstances there would have been no complaint of a scarcity of money, and if any one unable to pay his debts had attributed it to usury he would have been called a madman.  But look at the facts.  The surplus produce of New Jersey, and most of the goods manufactured there find their market in New York and Philadelphia.  These productions are tested by the measure of value in these two cities, and they fall off in price from one-third to one-half, while those consumed in the State fall about as much;  for the prices at home are governed by the prices in market.  This increases the amount of labor to be performed by every debtor to pay his debts, for it requires the same labor as at any previous time to produce a bushel of grain, or any other article, the result of labor.

Farms, manufactured goods, machinery, all fall in price, and this operates against the producers and in favor of the money capital.  The citizens of the State may be great sufferers, and many of them entirely broken up, although not one of them has directly paid more than six percent interest for money borrowed or previously owed, and not one has been troubled to borrow what he needed for his use.  It is as if a planter should agree to deliver, at a given time, a certain number of pounds of cotton, and the man purchasing should put, to balance the cotton, double the weight he formerly did, still calling each a pound.  He doubles the pound weight and the cotton falls short one half.  The pound weight tests or measures the weight, but not more than money tests or measures the value.  If the value of money be doubled, the debt of every debtor is doubled, and he falls short in payment for the same reason that the cotton falls short in weighing.  In weighing cotton, doubling the pound would be considered fraudulent, but doubling the value of money is only "financiering." . . .

When grain is sold, the size of the bushel with which it shall be measured is not considered a matter of bargain;  nor when cotton is sold, the kind of weight that shall be used;  but it is taken for granted that these are determined and fixed by law.  Were it not thus, there would probably be a street in each of our large cities devoted to the business of changing the weights and measures, especially if a few individuals were allowed by law to engross them, (as the banks, brokers and rich men now engross the money).  The one who could increase and shorten the measures most would have the most business.  These people would congregate in groups or on the corners of the streets, (as brokers now do,) with their sliding yards, skilfully made, and all sorts of measures with ingenious and false bottoms moved by springs invisible to the common people;  and thus the measuring and weighing would be the most difficult thing to accomplish, in the same manner that "financiering" is now the most difficult business in the exchange of property.  But it would be impossible to commit so great a fraud in these measures of quantity as is now and has ever been committed in finance by changing the value of the dollar. — Currency, the Evil and the Remedy.

C. — Page 241.

But again let us look at the money market in the city of New York, say this 24th day of June, 1843.  Money is now said to be very plentiful, and is loaned with much difficulty for good security.  A rich man may now borrow at from three to four percent on good notes not having more than six or eight months to run;  yet another, who has not all these advantages, although just as good for all his obligations as the richest, will in the same bank be charged six, or even seven percent interest.  Even now it is difficult to procure money for a term of years on bond and mortgage at six percent interest, and often at seven percent, because the security is not that on which capitalists wish to loan money.  They wish to loan money in such a way that it can at any time be recalled if there is a change in the money market.  They hope business will soon start, for when it again prospers they will get seven percent interest;  and when it is quite flourishing they can, by suddenly calling in their money, get the rates of interest up to twelve, eighteen or twenty-four percent per annum.  If they do loan on bond and mortgage, they require it to be secured by the property on which it is loaned that it will be sure to bring enough to pay the bond and mortgage, costs, etc.  When the time arrives that money will bring eighteen or twenty-four percent per annum, if they buy the property under foreclosure they get it for one-half or one-third Its value;  hence the difficulty of borrowing money on bond and mortgage;  they are not willing to loan on mortgage more than half the present estimated value of property, which is now extremely reduced in value.  The man who borrows money at three percent and lends it at six makes a hundred percent profit, just as much as the man who buys a barrel of flour at three dollars and sells it at six.  We might as well make laws which, in their operation, would compel the producing classes that were not rich to pay double price when they bought, and when they sold to the rich to receive but half what they gave: it would not be more certain to operate against the producers and in favor of the capitalists.

I will give an example of the operation of money at the present time.  A. being a rich broker in Wall Street, finds that, by borrowing ten thousand dollars from a bank for ninety days, there is a good opportunity for him to make money on State stock.  He borrows of a bank the ten thousand, at the rate of three and a half percent interest per annum, pledging stock for security.  The interest on the $10,000 for ninety days is $87.50.  B., a Pearl street merchant, needing a discount for $10,000, applies to the same bank the same day, and gets his paper discounted: the bank charges him six percent interest;  that is $150.  C., a mechanic who has just finished a steam engine and boiler, and has taken a note in payment for $10,000, applies to the same bank, which discounts the note for him, charging him seven percent interest;  that is, $1.75.  Each of the three has bought the use of the same sum of money for ninety days: the money all belongs to the bank and at the end of ninety days must be returned to it.  One has paid at the same bank, on the same day, for the use of the same article, $87.50;  the next has paid $150;  and the third, 175.  The bank, we all know, would not have discounted any of these notes unless perfectly satisfied that they were good.

Let us apply the same to merchandise.  A. buys of a merchant a package of goods on three months’ credit for $87 50;  B. buys the same day of the same merchant a second package exactly like A.’s, and is charged $150 on the same credit;  C. the same day buys the third package, and is charged $175.  Or, suppose A. needs a barrel of flour;  he pays for it $3 50;  B. buys the same day and hour another barrel of the same quality, and pays $6;  and C. buying another of the same man, is charged $7.  A. is richer than B. and B. is richer than C.;  and of course the richer the man the cheaper he must buy, and the poorer the man the more he must pay to increase his poverty.

But suppose these three should come to a ferry which they wished to cross, and the ferry-master should say to the rich broker, "Sir, what is your business?"  "I am a very rich man;  I deal in measures of value, and change these measures as much as it is in my power.  I borrow money out of bank for three and sometimes three and a half or four percent interest, and I buy good business notes, well indorsed, for six and seven percent, or even more, as good notes can be had in New York;  and for several years past, when money has been scarce, I have been borrowing money out of bank, paying six or seven percent interest;  and when I have paid these rates at bank, I have usually received from one to two and sometimes three percent a month for the same money that I borrowed at six percent a year;  and I have made a great deal of money by this, for the merchants have been hard run."  "Sir," says the ferry-master, "you may have the use of our boat for twelve and a half cents."  Next comes the Pearl street merchant.  "And what is your business, sir?"  "I am a merchant, but business is very bad, money is scarce with me."  "Your fare for the use of the boat to go over the ferry will be twenty-five cents."  Next comes the steam-engine maker.  "What is your business?"  "Why, I am a hard-working man,"  "Your ferriage, sir."  "What is it?"  "Why, sir, as you are a hard-working man, I shall charge you thirty-seven and a half cents, sir;  our ferry is a great accommodation to the public, and we wish to do all we can to promote industry;  step on board the boat and take that seat where there is no cushion;  the cushioned seat, sir, is reserved for the gentleman broker."  Why not as well pay the difference for the use of the boat to cross the ferry as to pay the difference to bank for the use of money ?  Currency, the Evil and the Remedy.

D. — Page 244.*

To the Editor of the New York Tribune.

Sir :

A few months ago this country was enjoying a prosperity unsurpassed in its history.  The crops, more abundant than ever before, were sufficient to supply not only our own wants, but to admit of large exportations.  Manufacturing establishments and railroads employed a great number of persons.  The merchants were conducting their business with as much prudence as at any former period.  Houses were being built in the cities and villages, and in the farming districts, and labor was in good demand.

Now affairs are in a very different condition.  The business of the merchants is broken up;  the manufacturers have suspended their operations;  hundreds of thousands of laborers are thrown out of employment and are in danger of starvation;  the farmers cannot get their abundant crops to market, and if they could, they would be obliged to sell them at greatly reduced prices.  Business stands still.

This great change is rightly said to be owing to the difficulties in finance, to the crisis in the money market.  All the money of the nation, banknotes included, amounts to about five hundred millions of dollars.  Probably when the circulation of the banks has been the most expanded the whole currency has never reached six hundred millions.  But the productions of labor for the last year are estimated at three billions five hundred millions of dollars — about seven times as much as all the currency of the nation, and these productions or a large proportion of them will change hands through the process of manufacture, and otherwise, from three to eight or ten times before they reach the actual consumers.  Now, this comparatively small sum of money must pay for every one of these exchanges, or for every debt contracted in making these exchanges.  The same money must also pay all the debts contracted by borrowing money from banks or upon bond and mortgage or otherwise.  It must pay for all the lands that are sold by the government and by individuals;  for all the bonds issued by railroads, cities, States, and by the United States;  for all the stocks and securities that are sold at private sale, at auction and by the various boards of brokers, and for all the bills of exchange sold from one part of the country to another, as well as for all bills of exchange upon foreign nations.  It is evident that this comparatively small sum of money must change hands a great number of times to effect the needful exchanges of this immense amount of property, and that any obstruction to its movement or withdrawal of a portion of it from circulation must seriously embarrass the business of the whole country.  The importance of this free circulation or money may perhaps be more fully appreciated when we state that all the money we possess — gold, silver and paper — would not suffice to pay the board of this nation for four months, at $1 per week for each individual.

The city of New York is the financial centre or the country.  If the banks in this city keep up their lines of discount so as to supply the business community with money, the banks in all other parts of the country will also discount and supply the people in their neighborhoods.  Of course there must be at times, balances greater or less against one part of the country in favor of another, but all these will be easily adjusted, and business will go on prosperously.

In the latter part of August last, the Ohio Life and Trust Company, with a capital of two millions of dollars, suspended payment, with debts against the Company to the amount of six or seven millions of dollars.  This failure was the apparent occasion of distrust, and of contraction in bank issues to the amount of some eight millions of dollars in the course of two weeks;  and to the 24th of October of about twenty-six millions.  This contraction of discounts for the first two weeks only was doubtless a much greater loss to the businessmen of this city than the entire capital and liabilities of the Ohio Life and Trust Company.  The news of this curtailment rushed with lightning speed to all parts of the country, and carried consternation into every city and town where a bank existed;  and the banks in this city and throughout the country called upon each other to pay up their balances in specie.  Many of the banks in this State were obliged not only to stop discounting, but had to send their State stocks to this city, and sell them at from 15 to 30 percent loss to redeem their bank notes and take them out of circulation in order to save themselves from suspension.  But this was not the worst of the evil.  Merchants, unable to get their notes discounted at bank, were driven into Wall Street, and compelled to borrow at exorbitant rates of interest to meet their payments, thus rapidly increasing their indebtedness, and rendering it inevitable that in the end a large proportion of them should be made bankrupt.  Many of them paid to usurers for the use of money, one, two, three, four, five and six percent a month, and from these rates to a quarter, a half and sometimes one percent or more a day, and were compelled to leave double, treble and quadruple securities to obtain the money if at all.  The banks by curtailing their discounts so that money is not to be had to meet the mercantile engagements, remove the foundation upon which the contracts were based;  and the merchants can no more stand up under such an event than a house can stand supported by the air if the foundation be removed from under it.  Money is the only thing recognized by our laws as a tender, and all the property of debtors becomes mere collateral security for the payment of money for their obligations.  Hence, in a crisis like this, the great wealth of the nation seems to be concentrated in the money.

The banks hold on deposit millions of dollars belonging to the public on which they are paying no interest.  If the tables were turned and the public should make the banks pay five percent a month on these deposits in advance until they could pay them all off in specie, the banks would soon be as insolvent as the merchants;  yet it would be quite as just and more so than for the banks to force this necessity upon the merchants and others.  The banks are public institutions, and are authorized by law to furnish the currency.  It is a penal offence for individuals to circulate their own notes as money.  Labor;  bills receivable, goods, wares and merchandise are not money: all of these must be exchanged for money in order to pay debts.  The public is entirely dependent upon the banks for this money, and if they do not furnish it, the people must borrow of usurers at rates of interest which are certain to eat up their assets, and in many instances to leave them, after a long life of toil, in absolute poverty.

Our merchants have sold many millions of dollars’ worth of their best paper at from three to six percent a month discount.  From a six months’ note for $1,000 take five percent a month, and the borrower will get only $700.  The discount on the same note at seven percent per annum would be $35.  In this one transaction this usury increases the borrower’s indebtedness $265.  If the merchants, manufacturers and mechanics of the city of New York would come out and frankly state, under their own signatures, what rates percent interest they have paid for the use of money during the last three months, giving the names of the parties from whom they have borrowed it, and the securities they have pledged to secure the payment of the money borrowed, hundreds, yes, thousands of extortions would be revealed which would greatly astonish the public.  Could these transactions be further traced, we think it would be found that a very large amount of the loans of the banks are made to brokers and other usurers, and even to the officers and directors of banks themselves;  many of whom would not borrow from bank at all when the street rates of interest were not above seven percent per annum. Let us look at the gain a usurer could make on but $100,000.  Three months’ discount at bank would be $1,750, leaving to his credit $98,250.  This sum will buy paper at six percent a month to the amount of $119,817.07, and the paper would mature in time to meet his note at bank.  Should the usurer renew his note for another three months, he would have $19,817.07 more to invest than he had before, amounting with the $98,250 to $118,067.07.  This sum, at six percent a month, would buy $143,984.23 worth of notes.  Thus the usurer would gain $43,984.23, on six months’ investment of $100,000;  and this too, without using a dollar of his own money and without having performed any productive labor.  The men who sell this paper are indebted $43,984.23 more than they would have been had the banks discounted their notes at the usual rates, instead of driving them to borrow of the usurer.  This is the usurer’s harvest, when he is reaping what others have sowed and gathering what others have strewed.

How can our merchants pay these exorbitant rates of interest when they sell their goods for a profit of from five to fifteen percent at most, averaging probably not more than nine percent, and then trust them out all over the southern and western states.  And this is not all they have to encounter.  In consequence of the usurious rates of interest, the exchanges between New York and the South and West are on the average nearly as much as they made profits on their goods when they sold them.  A merchant holding a note due the 1st of November at bank in a western city, may be compelled to wait twenty or thirty days after the note is paid before a bill of exchange can be bought on New York.  Interest on money being at from three to six percent a month, the buyer of the note would take off the face of it this percentage, in addition to the rate that must be paid for the bill of exchange.

We think we have not overstated the rates of interest that have been paid during this crisis.  Things have now reached such a state that usurers have lost nearly all confidence in the ability of debtors to discharge their obligations;  for they make close calculations, and readily perceive that the above rates of exchange alone would about eat up all the profits made on goods sold during the last year, even if every debt were promptly paid at maturity.  Add to this the depreciation of the goods they have on hand, and it is evident that these roust rapidly consume all their former earnings.  The indebtedness of the people has doubtless been increased several hundred millions of dollars by this crisis.  If business could have taken its usual course the merchants in the city of New York would probably have collected fifty millions of dollars more from the country than they have now been able to do.  Had they made these collections and paid debts to this amount, the indebtedness of the people would have been diminished one hundred millions of dollars;  for these fifty millions are still owing to the city merchants, and the city merchants owe the fifty millions to others.

Is not the country rapidly sinking, instead of increasing in wealth ?  We think we shall not over estimate the number, if we say, there will be one million of people thrown out of employment for at least six months by this unnecessary financial crisis.

If this million of mechanics and others could be employed at one dollar per day each, their earnings would be six millions a week, and in twenty-six weeks they would enhance the valuation of the country one hundred and fifty-six millions of dollars, which would amount to about as much as one half the banking capital of the whole United States.  These persons who are thrown out of employment must subsist on previous earnings or on the charity or others, so that, instead of being any longer producers, they are compelled to be simply consumers of wealth.

All this comes upon us in addition to the diminution of the value of our merchants’ assets, railroad assets, and that of all other property in the country. Nor will our grain and cotton crops command the same prices abroad that they would have done if this money crisis had not been brought upon us, hence our debts to foreign nations will be needlessly increased.

The remedy proposed for our financial difficulties is the accumulation of specie;  but the people do not want specie;  they have never wanted it when banknotes would pay their debts and make their purchases.  We have not a doubt that more than nineteen-twentieths of our debts are paid with paper money;  and paper money is, therefore, practically the money of this nation.  If the public did not prefer to use it rather than coin, paper money could not be established and made to transact the business.  A run for specie has never been made on the banks except when they have been so managed as to throw the business community into the hands of usurers and stock-jobbers — which is only another name for the same class of individuals.  Whenever the banks have maintained their lines of discount so as to furnish the community with money, there has been little demand for specie, and the gold and silver coins have, for the most part, lain idle in the vaults of the banks.

When the Ohio Life and Trust Company’ suspended payment, had the banks in the city of New York discounted every note offered that was considered safe, in less than three weeks, and probably in one week, money would have been as plenty in the city of New York and throughout the country as it has been at any time during the past ten years;  and all undoubted securities that were bearing 7 percent interest would have commanded money at their par value.  The business of the whole nation would doubtless have been as prosperous as it has been at any time during the last ten years.  The agricultural productions of the South and West would have been rapidly sent to market, and would have sold at prices that would have remunerated the producer.  Now if they are freely sent into the market they will be sold at ruinous sacrifices.  Men will not pay 4 or 5 percent a month for money to buy produce unless they feel sure they shall realize a good profit over the 4 or 5 percent by the investment.  The banks will tell the people that they could not have gone on safely and discounted all the well-secured paper offered;  that the specie in their vaults had been considerably diminished by being drawn for exportation, and was liable to be diminished to a still greater extent.  But why, when the specie was called for to subserve its proper uses of paying balances that occurred in trade, should it have been necessary to deprive the people of paper money, for which the security is in State stocks, and not in specie?  Several times within the last ten years the banks have sought for and have been glad to discount paper at the rate of five percent per annum, even when it had seven and eight months to run;  and no good reason has appeared why they were not as in good condition to make money plenty and discount freely in August last as they were at any previous time whatever.

The banks are professedly established for the good of the public, but they are often so conducted as to break down the business of the country and enrich usurers.  The capital stock of the banks in all the States of the Union would not exceed one-half of that invested in railroads, yet all the railroads are prostrated before the all-absorbing power of the banks.  The prostration of business on these railroads, the usurious interest they have paid for money, and the depreciation of their stocks and bonds in market, are doubtless a greater loss to those interested in railroads alone than if they had lost one half of all the banking capital in the Union.  Besides this, many of these railroads will doubtless go into the hands of the first and second bond-holders;  and thousands of the stock-holders, who have taken the stock hoping to benefit the public, will be turned out of their farms and homesteads, penniless.  Is it not strange that these little round pieces of metal and these little pieces of paper in the form of banknotes, both of which look to be as powerless and harm less as the toys of children, should be clothed with such power as to baffle the minds of the most sagacious men and paralyse the business of the nation ?

Now, to show what measures would in reality afford relief to the public, we will state what measures have afforded relief in similar financial crises, both in this country and in England, and the propriety of the immediate application of the remedy will, we think, be apparent to every business man.

In 1834, large contractions were made both by the United States and the State banks, and for a few weeks there was nearly as great a panic in the money market as there was in August last, and quite a large number of merchants failed.  But when the offerings for discount at the banks had become very large, the United States Branch Bank in the City of New York, unexpectedly to the public, discounted every piece of paper offered that was deemed good.  The other banks immediately followed this example, and in a very short time the rates of interest went down from two, three and four percent a month to five, six and seven percent per annum, and business at once revived and went on prosperously.

In 1847 (I quote from memory) there was a great financial crisis in England, the issues of the Bank of England having been limited by the financial bill of Sir Robert Peel, passed in 1844.  The rates of interest rose from 3, 4 and 5 percent per annum to 1, 2, 3 and even higher rates per month, and thousands of merchants and manufacturers were bankrupted and had to suspend payment.  A meeting was called in London, and a committee was appointed to wait on Lord John Russell and request that the Bank of England should extend her discounts so as to make money plenty.  Lord John replied that it was contrary to the laws of England to increase the circulation beyond the fourteen millions of pounds sterling secured by government stock;  that the issues above this sum must be governed by the amount of bullion in the bank;  that he had no authority to exceed this amount, and that the people must take care of their own financial affairs."  The committee retired without obtaining any relief.  A few days or weeks after, the committee waited again upon Lord John Russell, with a similar request, and met with a similar refusal.  But before retiring they remarked that they should break the bank.  Lord John Russell asked them if they could do it, and the committee informed him that the gentlemen whom they represented had a much larger amount on deposit than all the bullion in the bank;  that they should draw what there was and take their chances for the balance.  This strong argument had its effect on the mind of Lord John Russell, for the bank at once began to discount liberally.  Money became very plenty at very low rates of interest, and business revived.

In the present crisis, the same means must be used to relieve us from our financial difficulties that ought to have been used to prevent their occurrence.  Let the banks in the city of New York discount every piece of paper offered which they consider safe and good, and let them adjust their balances among themselves and with other banks throughout the Union as they have hitherto done when money was plenty.  Let them discount paper that has four, five and six months to run as well as short paper.  They can do this as well now as they ever could at any previous time.  Let them discount thus liberally and the business of the nation will revive;  the products of the South and West will find their way to market, and command much better prices both at home and abroad than they possibly can so long as this contraction of bank issues continues.  Many of our railroads may yet go on and prosper.

But let the banks continue their present course and they will continue to throw the money into the hands of the usurers, and the usurers will stand between the banks and the business public.  Many more of our merchants will be broken, and those who have suspended will be obliged to renew their extensions.  There will be hundreds and thousands of starving laborers in our streets, while this year’s abundant crops will be stored away in granaries for want of money to get them to market.  The property of debtors will be exhausted and thrown into the hands of creditors, and there will be few securities remaining to offer for the loan of money.  The usurers will themselves cease to borrow largely at bank, for there will be few left to borrow of them.  The banks, then, finding their business falling off, will begin to discount freely, and money will be seeking investment at low rates of interest and the useful business of the nation will gradually revive.  Whether business shall revive now, our manufacturers resume their operations, our laborers be employed;  or whether the present condition of the money market shall continue until the country is completely prostrate, and the wealth of the nation, for the greater part, accumulated in the hands of the usurers, is at the option of the banks in the city of New York.

Edward Kellogg
Brooklyn, Nov, 13th, 1857.

* [338/*]  Published in the New York Daily Tribune, Nov. 27, 1867.

E. — Page 245.

When we read of our ancestors in ages long past carving out of wood some strange and grotesque image, and then falling down in adoration before it, as though it had some mysterious power by which the heavens and earth were brought forth and sustained in their orbits;  and to which the nations of the earth were bound to offer up not only the choicest fruits of their labor, but also their own lives and those of their children in order to appease this deity, and that even kings and the chief rulers of nations bowed down in worship before the power of a wooden or brazen god, we look back with astonishment at the ignorance and superstition that prevailed, and congratulate ourselves that these have disappeared in the sunshine of an enlightened age.  But the time is not distant when people will look back on this gold-ridden age with as much wonder at our ignorance, and at the superstition that now attaches to the power and worth of the gold, as we do at the power and worth which our ancestors gave or attached to the wooden god.  Their wooden gods had as much power to create and sustain the world, as the gold has to nourish the human body, or bring out and sustain the virtues of the human mind.  We sacrifice the choicest fruits of our labor upon the altar of this golden god.  We sacrifice to it in wars and tumults the property and lives of our own citizens, and those of the men, women, and children of neighboring nations.  Even the rulers of nations must bow down before the "almighty dollar."  If these golden images are hidden in vaults under the earth, and the rulers want to carry on wars, they must make sacrifices of the fruits of the labor of future generations, that they may he brought forth to sustain the slaughter.  If these mighty coins should move off, and cease to be seen in our land, we should have to bow down our heads in the dust, and clothe ourselves in sackcloth and ashes until they were returned to us;  the laboring poor would die of hunger in the streets of our cities, and desolation and gloom would spread over the country.  But how does it happen that these gold and silver dollars could cause all this?  Is it because the metals have any more sustenance for man than the carved images which ruled over our fathers?  Have we not as much made and formed these gold and silver images with our hands as they did the images that they carved out for themselves with their hands?  Has the gold or silver a single more element for human support than their carved images;  and if they have, are the inherent qualities of these metals any more used while they form a currency than the inherent qualities of the wood when it was formed into an image and daubed over with pitch and paint?  Or would the earth cease to bring forth her increase because the gold and silver had absented themselves from the land, more than if these carved images should have been removed from the land of our fathers?  No doubt the removal of the images would have been thought a great calamity, but not more so than the removal of the gold and silver money in our day;  and they would have had as much reason for their distress as we should for ours.  The removal now of a few tons of gold and silver coins from our country to a foreign one, or even from one part of our country to another, causes great agitation and consternation;  but the time is not far distant when the removal of a few tons of these metals will have no more influence upon the happiness and welfare of the people than the removal of a few hundred tons of iron or lead. — MSS.

F. — Page 247.

The most fundamental and important truths in relation to the nature of money, have always been so covered up by the technicalities of law as completely to deceive the people respecting its true character, although they have always known and felt that there was something wrong in its power.  Writers upon political economy as well as the public in general, have taken it for granted that the laws of nations were right in founding the value of money in the innate value of the gold and silver metals out of which it was coined: hence the conclusions at which they must all arrive, are just as false as the premises upon which they start.  And political economists may continue to write and the public may continue to argue upon these premises for centuries to come, and be just as far from the truth as when money was instituted upon this basis.  Notwithstanding this mystification about money, its true character and power are very simple, and need only to be clearly and fairly stated to meet the approval of the common mind;  and then the public must know that the present centralizing power of money is as gross an imposition upon the common sense of man, as it is upon the common rights of labor and property.  For if the material of neither gold, silver nor paper money can in itself be used as food, clothing or shelter, then certainly the scarcity or abundance of money, or the scarcity or abundance of the materials of money, ought never in the least to interfere with a general and full supply of all the necessaries of life.  For these necessaries of life are evidently the product of labor, and not the product of money.  Yet the present power of money is such that the people are compelled first to work for money, and then to depend upon the power of money to supply the necessaries of life.  Thus the power of money is first, and the power of labor is second.  The money commands the labor instead of labor commanding the money.  This is exactly reversing the true order of things, for it is making a dead centralizing power to rule and tyrannize over the living, productive power, whereas the productive ought always to command the unproductive power.  If any writers upon political economy, or any financiers, have discovered the true nature, power and use of money, they have not made such discovery manifest to the understanding of the public.  For the laws of nations as well as the newspapers and other publications of the day, are still carrying forward and enforcing the idea that money is a productive, living power. Yet the power of money is entirely a dead power, and totally unproductive, notwithstanding its legal, accumulative powers. — MSS.

G. — Page 253.

Let me illustrate the effects of "free trade" in the use or interest on money loaned — a plan which is advocated by many people in our cities, and doubtless by many in the country.  They say, Make merchandise of money, let the man who will give the most for its use borrow the money, and allow no laws to interfere between the parties contracting — if A. has money and B. wants it, let B. buy its use as cheap as he can from A., and, if he is not suited with the price A. demands for it, let him  borrow of some other person: he is not obliged to take A.’s money any more than he is compelled to buy A.’s potatoes;  has not a man a right to do what he will with his own ?  A captain of a ship at sea might see on fire near him another ship, full of people, and say to the passengers and crew of the burning vessel, "If you will give me all your possessions in money, goods and chattels, I will take you on my ship: but, if you do not wish to comply with my terms, I shall not take you on board;  this ship is mine, and I have a right to do what I will with my own.  I shall not urge you to come on my vessel on the terms I propose;  you had no business to place yourselves in such a situation;  it is your own fault, not mine;  therefore if you do come it is because I like to help people out of difficulties.  My humanity prompts me to make this offer."  Do you not think the passengers and all would accede to the terms, and be glad to get on board of the ship of this humane man ?  If this benevolent captain had secretly, by the aid of ship-brokers, set the vessel on fire with a slow-match, and then happened to be near and proposed these terms to those in distress, he would be in principle much like our modern usurers, who hoard the public measure of value when they very well know that it is impossible for the public — either individuals, States, or the United States — to fulfil their contracts without the money, and they can make any terms they please with those in distress.  The captain of the ship would have about as much good feeling for the passengers and crew of the burning vessel, as these men have who hold the money to extort the last farthing from the producers.

Suppose a surveyor owns his chain to measure land, and, when appointed by government a public measurer of land, should say to one needing his service, "The chain is mine, and I will stretch it out to double its legal length if you will give me so much for measuring;" to another, "I will contract so much if you will pay me for it;  the chain is mine;  and have I not a right to use it as I please ?  Who has any right to dictate to me what I shall do with my property."  Now, the length of the chain being altered one-third, does not more effectually alter the quantity of land measured, than adding one-third to the interest on money alters every contract based on money, and the public measurers would have as good right to use their chains in this way as a man loaning money has to alter the interest on the money.  No matter in whose hands money may be, it is a definite thing, and the only public measure and base of value of everything in all nations.  Free trade in the use in loaning money is as certain to prove destructive to the debtor’s property as a free right, because you own your knife, to plunge it into your neighbor’s breast would be certain to endanger his life.  We are as much in duty bound to protect our citizens by law from these depredations upon their property, as we are to protect them by law against the assassin’s knife.  For many a man who through a long life has been able to support his family comfortably, has not been able to bear up under these sudden and unexpected robberies, generally called misfortunes, and aberration of mind or death has been the consequence, and he has left his family to the cold charities of the world.

H. — Page 282.

If the Safety Fund should lend its money at six percent interest, and Richard Roe should borrow $1,000 on mortgage of his farm that rents for $120 a year, every year he would have to pay to the Safety Fund $60 interest or one half the rent of his farm.  The $1,000 in money would represent the first half of the value of the farm;  and Richard Roe would have to lose all the second half before the Safety Fund could lose any portion of the half on which it had lent him the money.  The Safety Fund money being always the representative of the first half of the value of productive property the second half of the value must entirely sink before the first half could be at all deteriorated.

The lower the interest on the Safety Fund money, the greater would be the certainty of its perfect security and goodness.  For, if Richard Roe should borrow from the Fund the $1,000 at six percent interest yearly, in less than twelve years he would have to pay over to the Safety Fund in interest a sum equal to the principal that he borrowed;  that is, one half the entire value of his farm.  But suppose the interest should be fixed at one and one tenth-percent per annum, and he should borrow the $1,000 at this rate on mortgage of his farm, he would have but $11 a year to pay instead of $60, and it would be above sixty years before he would have to pay back to the Safety Fund in interest a sum equal to the principal borrowed, that is one half of the value of his farm.

If the percentage interest be regular, the producer cannot be made to pay a sum in rent or interest equal to the principal in any shorter time whether you call a given lump of gold or a certain farm worth $100 or $1,000.  If John Doe owns this lump of gold or this farm, and rent either to Richard Roe at ten percent per annum without compounding the interest, in ten years the latter must pay a sum in interest equal to the principal borrowed.  If the lump of gold or the farm were called worth only $100, and were rented at the same rate of ten percent, Richard Roe would still pay back in ten years a sum in interest equal to the principal borrowed.  But if he borrowed the same lump of gold or the same farm at one percent without compounding the interest, it would be a hundred years before he would have to pay to John Doe a sum in interest equal to the principal.

The interest on money is the standard, and the rents of all property must conform to its governing power.  Although this principle has been repeatedly stated, as it is important that it should be clearly understood in connection with the Safety Fund, we will offer another simple illustration.  Suppose John Doe’ farm, in consequence of the reduction of interest on the establishment of the Safety Fund, to rise in value from $2,000 to $10,000, and the Fund to lend him on mortgage of it $5,000 at one and one-tenth percent interest.  The yearly interest on the $5,000 would be but $55, and before John Doe must return to the Safety Fund a sum in interest equal to the principal borrowed, the same number of years would elapse as if the farm had not risen in price in consequence of the reduction of the rate of interest.  John Doe need not pay to the Fund a sum in interest equal to one-half the value of his farm in less than sixty years, but if the interest were at six percent he would have to pay a sum in interest equal to the principal borrowed in less than twelve years.  It must be borne in mind that the value is in John Doe’s farm and not in the money: the money merely represents the value or the farm.  The interest that accrues on the money borrowed is a representative of production, but it is not production.  The production is made by labor upon the farm;  the interest that accrues upon the money is an arbitrary, legal, balancing power against a certain part of the products of the farm.  The money merely helps the people to exchange one commodity for another;  and the rate of interest decides what proportion of the products of labor shall be awarded to those who perform the labor and what proportion shall go to those who receive the income without labor. — MSS.

I will examine a little further the operations of money upon our commerce and foreign trade.  In order to explain I will suppose a case:  It is known to our government and citizens that very many wealthy houses of Europe have agents or bankers in our large commercial cities.  The Rothschilds, Barings, and many others of this class wield an immense capital, and are able to raise almost any sum of money which can be advantageously invested.  The very purpose for which these houses are established here is to make money by buying stocks, advancing on securities and drawing bills of exchange on foreign nations, etc.

The general business of these bankers is dealing in money, not in merchandise;  they may make advances on cotton, but this is not dealing in cotton — it is simply holding the pledge of cotton as collateral security for the payment of money loaned.  These houses are in the habit of drawing bills of exchange on England, Germany, France and other countries, for large sums, and it is in their power at any time to derange our whole monetary system and disturb our domestic trade throughout the country.  Thus they could make great profit, but it would be by robbing us of our just rights;  and the consequent fluctuations would put it in the power of creditors throughout the nation to take undue advantage of debtors.  I will merely state the case, and I think no business man can fail to see the practicability of such an operation.  These bankers in the different Atlantic cities have wealth and credit sufficient to draw bills of exchange on England, France and Germany, dispose of and get the money for them in the course of one or two months to the amount of five, six, seven or more millions of dollars, as our foreign trade amounts to about one hundred millions a year, which are paid by bills of exchange;  thus the drafts to pay this sum would average over eight millions a month, and when the largest amount is required to be remitted, it would be an easy matter for these bankers through their agents, to sell in two months seven or eight millions of exchange on the various countries before mentioned.  Several houses have agents in a number of our Atlantic cities and whether they sold bills of exchange on England or France at New York, New Orleans, Baltimore, Philadelphia or Boston, they could easily concentrate all the funds in New York, and as the money came in for the bills of exchange gold, they could draw the amount from the New York banks in specie, and ship it to England or any other country to meet the drafts.  The drafts being drawn as usual, payable sixty days after sight, they would have sixty days to prepare and ship the specie to meet the drafts at maturity.  If they have the credit to draw and sell the drafts, all these operations could take place with little or no capital.  If even three or four millions in specie in the course of one or two months were drawn from the New York banks, it would curtail their discounts and probably raise the rates of interest in Wall Street to one, one and a half or more percent a month.  Should it be attempted to draw suddenly seven or eight millions, no doubt a suspension of specie payment by the banks throughout the Union would be the result;  exchange on England would rise to fifteen or twenty percent above par, and a general scarcity of money would ensue;  cotton would fall to half its former price, and as it fell in our market it would also fall in England;  exchange on England being very high, the cotton at greatly reduced prices would be hurried forward to pay debts in England, and we should be compelled to send double the quantity of cotton or any other product to pay our debt abroad (or again to import the same amount of specie) that we should if our currency had not been deranged.  Thus we should be robbed of nearly one half of our products without receiving for them the slightest equivalent;  and the debtors in our own country, by the rise of interest and the scarcity of money, would be obliged to give double the labor or property to meet their engagements at home.  The exchanges would be deranged throughout the country, the banks would curtail their discounts, and distress and ruin ensue.  Such operations as these, impairing the ability of producers and consumers to buy, by causing a fall in the price of cotton and other products, would in turn destroy the market for goods manufactured, and cause goods and labor to fall in England, and the laboring poor would be impoverished there;  the capital or wealth of both nations would be concentrated in the hands of a few without rendering the least equivalent to those who earned it. Now, to what would all these troubles be attributed, and to what have like revulsions been always attributed.  Why, to over-production, over-trading, too much credit, etc.  These disasters are laid at the door of the honest producer and trader, while the real cause is either concealed, or at all events is not understood.  Suppose one hundred of the richest men in the city of New York should agree to draw specie from the banks and hold it themselves for a given time — say one, two, or three months — keeping the engagement to themselves, so that the public would be unacquainted with their intentions: less than eighty-five thousand dollars for each individual would draw every dollar of specie from every bank in the State, and some of these men could easily furnish several times the sum allotted to each.  All who would make these drafts are the actual owners of the money they would draw from the banks;  and as they owe no one, they could keep it as long as they pleased, whether one, two, or three months or longer.  I presume no one acquainted in New York would doubt the ability of one hundred of our citizens to command this money without being indebted to anyone for a dollar;  but should this be questioned, it would only be necessary to add a few to the number to accomplish it.  Should this be done, every bank in the city must stop specie payment;  and this would probably cause a run on the banks in all the Atlantic cities, and another suspension throughout the United States would be the consequence.  This would at once occasion a great scarcity of money, and would reduce property much below its present price;  then suppose the men who held this specie should denounce banks and State stock, saying all this kind of paper is worth next to nothing, and that all sorts of property ought to be sold for specie, as there is certainly no dependence to be placed In banks.  Let these men still hold the specie, and not buy a dollar’s worth of property themselves for six months — I ask what would property bring, provided a mortgage, or one hundred mortgages, were foreclosed in New York, and the property sold for specie.  If a bank should be sued, and it held State stock as collateral security, and should sell it for specie, in what would the stores, houses, and State stock bring in specie?  Who would have the specie to buy them.  The property would not sell for more than a quarter of its present estimated value;  yet these men have a right-by law to do all this, and the State: and the United States Government would be utterly powerless in the matter, and could not help themselves nor the citizens.  These hundred men would hold nearly all the legal tender of the State, and the citizens are bound by law to pay their debts in this tender, which it would be impossible for them to procure;  they could no more pay them than the children of Israel could make brick without straw;  they could neither get the money from abroad nor at home: credit would be entirely prostrated and the laborer beg from door to door.  Yet such are our laws on this all-important subject: our citizens are absolutely legally robbed by their own neighbors and before their own eyes, but have no power to prevent it.

It will be said that these hundred men would lose the interest on their money, and therefore there would be no inducement to this;  but I answer specie would bring a much greater premium than all the loss of interest, or they could buy good bonds and mortgages at an enormous sacrifice, or property for less than half its value.  If they chose, before they made the run on the banks, they could sell State or bank stock, to be delivered at a certain time within three or six months, and calculate with a moral certainty that the stock would fall in price so that they could take the difference without buying the stock at all;  and if they should buy it, they could have it delivered the same;  day, and draw the money they pay for the stock from the persons to whom they sold, without encroaching on one dollar of the specie drawn from the banks.  These hundred men by;  this means would doubtless more than double their money.  The public have nothing to guard them against this but the tender consciences of these men, and the people who have within a few years past paid to them from one to four percent a month for the interest or the use of money, with every pledge which the parties could possibly give to secure the safe return of the money, can pretty well judge as to the conscientious scruples of our most wealthy moneyed men in the city.

When hard times begin, the merchants, who are the first to feel the pressure, look about to see what expenses they can avoid.  They dismiss some of their clerks and cut down the salaries of others;  for their families they procure houses of which the rent is low, or else get their landlords to reduce the rent of those they occupy, and the same with stores.  The clerks find a cheaper place to board, or reduce the price at their present places.  The manufacturers dismiss some of their hands, and cut down the wages of those whom they continue to employ, and all mechanics do the same.  Cotton falls in price, and those producing it must buy fewer goods and pay less for the production of the cotton.  All articles for food fall in price, and of course the farmers raising them must pay less for the labor they employ, and buy less clothing for their families, and all those who work for them must do the same;  hence people consume more of articles produced with little labor and less of those which require more.  Many without employment are unable to buy even the cheapest food and clothing at these low rates, and all lands, tenements, everything in the country produced by labor, falls in price.  When this occurs, it is said that it makes no difference if you receive low wages, you buy all those things at a proportionably low rate, so one thing balances another.  They do not even consider that all these things are in the same end of the scale, and bear the same way;  they do not perceive that little devil-money-in the other end of the scale, and his imps (the usurers) laughing in their sleeves at the folly of the producers, and saying, "With six cents we can now weigh in this balance as much as we did before with twelve, eighteen, or twenty-five.  However divisible this labor may be, whether large or small, from a penny to the sale of the Exchange in New York for over eight hundred thousand dollars, we are so divisible that we can at all times fix an exact balance, and by a sort of magic can expand ten or twenty cents to a dollar, and again contract to ten or fifteen cents.  I and my imps never want a balance for all or any of the bounties of Providence:  I can, by my imps, draw myself up into a nut-shell, and I and my possessors as much balance all these things when so drawn up as when I by them expand over the world.  When I through them expand, the people think less of me;  when I by them contract myself, I draw the nation with me, government and all;  they feel my power, and reverence my authority, and they are as much compelled to bow before me as the people of Babylon were to the golden image set up by Nebuchadnezzar." — Currency, the Evil and the Remedy.

J. — Page 302.

Again, in regard to the amount of currency which would be required for the business of the nation, I think it would be less than has generally been in circulation.  The currency being at par in every section of the country, no delay in procuring drafts for remittance, or any holding on for higher rates of interest, money would circulate with great rapidity, and consequently for the same amount of business a less quantity would be necessary;  and, as to wild speculation, there would be less danger from that than there ever has been in any country.  The great speculations which make so much noise, in building-lots, houses, lands, etc., would never very materially interfere with the general business of the nation;  the business of a few individuals might be broken up where they bought on credit and agreed to pay for property a larger sum than they could make the property pay interest on;  but this would never interrupt the general prosperity of a people.  We never hear of hard times in any country except when the interest on money advances;  the first complaint is always of a scarcity of money, want of what is necessary to do business;  not only a scarcity of money to pay for building-lots, but a scarcity for all business purposes.  From great abundance, we are suddenly in great want, and the rates of interest have increased double, treble or quadruple.

One now borrows money at six percent interest at bank because he is among the favored;  another pays in the same street the same day twelve percent, another twenty-four, and another, who is "cornered," thirty-six;  the last buys the use of the same article, in the same street, on the same day, and pays six times as much as the first;  he does this from necessity.  Why is not one person obliged to pay on the same day in the same market, for a barrel of flour or a bushel of potatoes, six times as much as another individual who may happen to be in better credit or greater favor?  Is there not as great a risk in selling these articles as in lending money?  Do people give better security when they buy merchandise than when they borrow money?  What would be said of a grocer who made as much difference in the price of a pound of sugar a quart of molasses, charging those who were in the greatest need the most exorbitant prices ?  Those who can buy almost any quantity of goods at the usual market prices in their own names without giving any security, pay these enormous prices for money.  Goods, wares and merchandise, which are the products of labor, we trust out on a single name, without requiring any security for the payment of the debt.  We do not expect the persons buying these goods to be impoverished by the purchase;  if we anticipated any such result, we should certainly demand security, as we should know we were injuring our customers.  But, as a general thing, we should not sell to them at all, for if it were usual for people to lose by the purchase of goods, wares or merchandise, or any property whatever, the product of labor, none of these things would be sold without security, and all confidence between individuals would be lost.  Society could scarcely exist in this state;  it would indeed be in a wretched condition.  We may discourse about a cash system without credit as much as we please, but it is an impossibility;  it never did and never can exist.

Why is it necessary that in lending money it should be hedged about with so many securities, and these securities so often suffer by it ?  The only reason which can be assigned for it is that people are compelled to pay more for the use of money than the use of money is worth.  If this were not the case, to loan money would not be hazardous.  All the debts contracted by the purchase of goods, wares and merchandise, are payable in money as much as debts contracted by borrowing money.  Why should not a debt be as sacred where a shoemaker has bought his leather and given his note or paid the money on it, and spent his labor in making the shoes, as a debt for money loaned?  May not a man as well lose his money as his labor and leather, when he depends upon these for his bread, as much as the other does upon his money for his subsistence.  I believe more than nine-tenths, and probably more than ninety-nine hundredths, of these debts in both cases are lost in consequence of unjust laws in the monetary system.  The interest on money in all countries is far higher than the producers can afford to pay, and not only so but interest has never been regulated in any nation.  Money being the base of all contracts, the change in the rates of interest, and the monopoly of money change the case of every contract in the nation after the contract is made, and then the producing classes are blamed for over-production and extravagance, while those who have done the evil are esteemed for their wisdom and prudence.

There are few people who contract debts without intending to pay them, and no one except a thief at heart would do it unless compelled to it by actual want.  But thousands by expecting to obtain work and being disappointed in this become discouraged arid broken down by the hardships they endure.  These men are to be pitied instead of being blamed, as they now are by the community — they need encouragement instead of condemnation and imprisonment;  no man should seek for employment and be unable to get it.

Until there is a radical change in the monetary system, these evils must and will continue as certainly as cause will produce effect.  No remedy which does not strike at the root of the evil can remove it, and the power to do this is in the hands of the nation.

The sudden scarcity of money does not depend on the showers of the heavens or on an abundant crop, but upon the will of a few moneyed men, Wall Street brokers and petty banks, who determine when it shall be scarce and when plenty, and when the rate of interest shall be high or low.  When they have, by sudden curtailment, after a prosperous season of business, concentrated in their hands a large portion of the earnings of the people, it is for their interest again to lend money at low rates of interest, that the people may earn more property to be again taken from them by the same unjust means. —Currency, the Evil and the Remedy.

K. — Page 313.

The avarice that pervades the civilized world has been ingrafted upon society by the too great power of money.  In most countries it has made production by labor degrading to the child whose necessity compels him to perform it.  The skill to gain by lending money, and by taking advantage of others in bargaining, has been, and is taken as evidence of superior talent, until, by example and precept, avarice has been instilled into the minds of children.  It has grown with their growth and strengthened with their strength until it has corrupted the very foundations of society.  The percentage incomes on bank, railroad, State, and other stocks, and the rates at which money can be borrowed and lent, are the great leading topics of a business community.  The topics are not, How shall we contrive to produce by our labor the greatest supply of all the necessaries of life for the general good? but, on the contrary, How shall we contrive to get the largest possible percentage income with the least possible production on our part?  This state of society is directly at variance with such a one as a just monetary system would naturally induce.  It is as much opposed to the natural rights of society as falsehood is to truth;  and no continuance of competition in production or distribution, under the present monetary laws, will be any more likely to remedy the evils of this debasing system, than competition in falsehood would be likely to produce and sustain truth.  We must begin improvement by doing away the great gain by unrighteous percentage interest on money;  and then the wealth will naturally be widely distributed among those who do the most for the good of man, instead of being gathered by a few, who thus become the great oppressors of the human family. — MSS.

L. — Page 314.

As the present monetary laws have adjusted society, what prospect is there before a young man starting in life ?  Is there any reasonable encouragement for him to produce the means of subsistence as God has ordained — that is, by his daily labor?  If he sells only his own labor, or the articles which his own daily labor will produce, without any other traffic, trade, or speculation by which he may gain undue advantage from the labor of others, he is doomed to the severest toil for his whole life, especially if he marries and maintains a family.  Should he be disabled for a season by sickness or other misfortune, or in a money crisis happen to be thrown out of work, then he and his family are compelled to be solicitors of public or private charity, or else they must suffer for the want of food, clothing, and shelter.  Thousands in the cities of New York and Brooklyn are now: (on this fifteenth day of February, 1855) in this sad predicament.  Yet these evils and sufferings are very often attributed to the mysterious workings of the law’s of God, while they are evidently owing to the mysterious magical working of the monetary laws of man;  and are as much in opposition to the righteous laws of God as the acts of an individual who commits arson or murder, and are as much more aggravated in their character, and effects upon the welfare of the public, as a national transgression is greater than an individual one.

Mr. R.W. Emerson, in one of his lectures, speaks of judges or governments acting in their official capacity as the brains of the nation.  If the brains of this nation cannot make laws that will govern the dollar, then the dollar is greater than the government brains that made it;  for if two great powers meet in competition with each other, the greater will rule the lesser power;  and in this, as well as in other civilized nations, the dollar is the greater power, and rules the brains.  Governments both theoretically and practically admit, that they have not brains enough to govern the use of the dollar, and so they bow down in submission to the gold and silver idols which they have set up;  and by and through the use of these idols the nation is governed in opposition to every just law of God and man.  The dollar not only governs the brains of the nation, but it also comes into competition with the physical and muscular powers of the laboring classes;  and though their brains direct how they shall perform their manual labor in production, yet all the machinery brought into use, and all the labor that man can perform, have no power at all to stand in competition with the centralizing power of money.

What does the Government of the State of New York say in relation to this important matter?  It says that borrowed money is worth seven percent interest per annum, which means just this: that the producing classes are bound by law first to support themselves, and in addition to this, that they shall by their labor, every ten years and three months, make all the improvements that have been made in this State from its first settlement down to the present day, and also produce all the machinery, goods, wares and merchandise which are now on hand, or which they may use in making these improvements and give all these Improvements to the capitalists who now own the property, for the ten years and three months’ rent of this property.  If all the inhabitants of the State were now to engage in active production, it is doubtful whether they could support themselves, and make all the improvements that now exist in this State even in fifty years: for the inhabitants of this State have been at work nearly two hundred and fifty years to produce these improvements;  yet the monetary laws of this State require those who are engaged in production and distribution to perform all this in ten years and three months.  The laws require of the laboring classes that which they cannot possibly perform, and then cast censure upon them for not performing impossibilities.  These remarks upon the centralizing power of money are no fictions, but are truths susceptible of the clearest mathematical demonstration, and under such impositions upon the producing classes, is it any wonder that people should seek for some profession, or engage in traffic, trade, and speculation, or almost any other calling, rather than that of productive labor ? — MSS.

M. — Page 320.

The rights of property in a nation cannot be protected except by general laws;  for it would be impossible for the Government to see that every individual in making his bargains with others got the exact value of what he sold, and that the purchaser got the exact worth of his money.  The Government could not fix a price for the daily labor of each individual, and compel others to employ him at this price, unless it should also compel others to buy the products of labor at remunerating prices.  It is utterly impracticable for the Government to have a supervision over the individual agreements in the nation, and superintend the business transactions of the public.  All that it can or ought to do in this important matter, is to make such general laws for the government of the property as will naturally tend to effect its equitable distribution.  Money holds a legal position in regard to other things which gives to it a controlling power.  It is the legal standard by which all values are determined, and the medium by and through which the exchange of all valuable things is effected.  It is by and through the power of money that the individual rights of property in every nation are awarded and protected.  The laws sustain the money in its position and protect its power while it is performing its functions in making the distribution of wealth.  The laws protect the rights of property by enforcing the fulfilment of agreements, so that each shall receive what the power of the money has distributed to him as his share of the wealth. Hence the protection of the rights of property must depend entirely upon the just power of the money;  if the power of the money be unjust, it will be certain to make an unjust distribution of the property, and the laws will protect the unjust distribution, for they must support the power of the money and enforce the fulfilment of individual agreements made in conformity with its legal standard power, otherwise they would be totally inconsistent in themselves.

Governments establish and sustain money, and make it the basis upon which individual agreements must be founded, and then leave individuals free to make their own agreements one with another, in exchanging their land, labor and commodities.  This is the way in which all civilized nations protect the legal rights of property;  and there is no other practicable way in which they can be protected.  There is an exception to this in countries where the laws recognize a privileged class, and landed property held by this class is protected by special laws, and is not liable to be sold to pay their debts.  By thus exempting their property from execution, it is not under the controlling power of money;  but all the other property in the country is governed by this power.

Money holds a legal position as totally different from that held by labor and property as the position held by the helm of a ship is different from that held by the ship and its cargo.  It is its position that gives to the helm the power to govern and direct the destiny of the ship;  and it is the legal position of money that gives to it the power to govern the value of all property, and control the distribution of wealth.  If the helm were removed from the ship’s stern and placed in the hold, it would be as powerless to control the direction of the ship as any other part of the cargo;  and the ship and cargo, helm and all, would be at the mercy of the winds and waves.  If all the gold and silver coins in the Sub-Treasury and banks were made into plate for private use, they would be as powerless to govern the value of property and the distribution of wealth as the helm of the ship when stowed in the hold to direct the course of the vessel.  They would both have lost their position to govern.  The money might be recoined, and it would be restored to its former position and power;  and the helm might be again attached to the stern of the ship, and thus be restored to its former position and power.  The helm of a ship made of wood, iron and copper is better and more convenient for use than it would be if it were made of solid gold;  and money when made of paper is far more convenient for use than when it is made of gold and silver.  If the National Government will institute good paper money, and by making it the legal tender, place it in its true position, it will save an immense amount of labor, besides being a far safer currency for public use.  When the Government shall institute paper money secured by landed estate, and then found its value upon a just rate percent interest instead of upon its material, and shall make it a tender in payment of debts, it will rightly govern the value and distribution of property, for it will be sure to distribute the wealth according to the earnings of labor;  whereas it is now sure to help a few to monopolize the wealth that the many produce by their labor.  If the money be thus instituted, and a rate percent interest be established sufficient only to pay the expense of furnishing it, the money will form a just foundation upon which to build contracts.

We are aware that the financiers of this and other nations will tell the public, and endeavor to persuade the governments that this is impossible — that since it never has been done, it never can be done.  They will be just as positive in relation to this all-important matter as kings and despots are that they have a divine right to reign, and that a democratic or republican government is a trespass against Divine authority, and never will be permitted to stand except for a brief period of time.  To fix and maintain aright rate percent interest for the use of money is striking at the very root of despotic power;  and the producing public must expect to have it called impracticable, and to have a strong opposition to its adoption.  Yet we do know that it is as practicable for the Government to supply the necessary quantity of money that shall be permanently safe, and regulate the rate percent interest as to fix and regulate the a length of the yard.  The Government can do this so effectually that any person can as readily tell what the rate of interest will be in every part of this nation for five or ten years to come as to tell what will be the length of the yard.  Money is as much a standard of value as the yard is of length, and it should and can be so instituted and governed that anyone may as readily tell the value of money as the length of the yard. — MSS.

"Ye shall not fail nor be discouraged, till ye have set judgement in the earth."