Fifty years in Wall Street

silver circulation of the Latin nations, that it seems certain they would soon become willing to assume their share in restoring silver. At any rate, it is a proper and necessary compulsion for us to apply. 5. The Government is very closely threatened with a suspension of gold payments, if the coinage is continued. We have already seen a point at which the Treasury had to negotiate with the banks for six millions of gold to avert that catastrophe; and it is only a thin margin of a very few millions that separates us from such a condition all the time. Of course, if the Government suspended coin payments, gold would be apt to go to an indefinite premium; with the consequence of a rush of greenbacks into the Treasury for redemption and a depreciation of such paper as is redeemable in silver to the purchasing power of that coin. In my view, these dangers are much nearer than is generally supposed; and it is a most unjustifiable policy that needlessly perpetuates this state of things. 6. For the reasons assigned in my other answers to your inquiries, I regard the suspension of the coinage of the the silver dollars as to the last degree imperative. And the suspension should be both total and unconditional. Either a partial or a temporary suspension would fail equally to avert the home dangers with which we are threatened, and to bring about that European action which is indispensable to a sound and permanent settlement of the question. So long as there was no efficient conventional arrangement for maintaining the value of silver, no nation can safely continue its coinage, because, in so doing, it was increasing its stock of currency, the future value of which could not be depended upon, and which might easily become a source of embarrassment and injustice between citizen and citizen, between debtor and creditor. In our country, however, such was the political influence of the silver-producing States that they easily induced Congress to order the coinage of not less than $24,000,000 per annum of standard silver dollars. The effect of this has been, undoubtedly, to somewhat check the decline in silver bullion; but at the expense of the artificial addition already of $230,000,000 of badly depreciated legal tender to our circulating medium. Our whole currency system has thus been vitiated; for our $680,000,000 of paper money may be redeemed in silver; and we are thus exposed to the very gravest dangers, in the event of anything causing an important drain of gold to Europe. That the coin thus issued was not really needed for the purposes of circulation is demonstrated by the fact that it has been found impossible to get more than one-third of it into circulation. In order to obviate this difficulty, various devices have been introduced for keeping the coin in the Treasury and issuing against it paper certificates of small denominations. The most ingenious of these contrivances was the one proposed by Hon. A. J. Warner, of Ohio, and pressed on the Government for its endorsement. In September last I took occasion to publish certain objections to Mr. Warner’s scheme, which was finally rejected by the Silver party; and, with that rejection, there is probably an end to all proposals for creating a purely silver paper currency. As a brief exposition of one phase of this controversy, it may perhaps be permissible to reproduce here the views then expressed: Mr. Warner’s measure virtually concedes that the coinage of the silver dollar has already been carried to a point that threatens serious danger to the currency system of the country, and, consequently, to the just relations between the creditor and debtor classes. This confession from a representative of the Silver party does not come a day too soon; and it would be welcome, were it not accompanied with proposals that would aggravate the evils which need to be remedied. Let us briefly examine Mr. Warner’s plan. First, it discontinues the current monthly coinage of silver dollars required under the existing “Bland Act.” 2. It provides that, in lieu of this current coinage, holders of silver bullion may deposit any amount thereof in the United States Treasury. 3. It requires that, against such unrestricted deposits of bullion, the Government shall issue to the depositors “bullion certificates,” expressing an amount of money equal to the market value of the bullion at the time of its deposit. 4. These certificates are to act as a new form of currency. The Government could use them in liquidation of all its debts not made expressly payable in gold; and it would be required to accept them in payment of customs duties, taxes and public dues generally. The national banks would be required to accept them in payments between themselves. And, 5, the certificates are made redeemable in lawful money, (i. e., either gold, silver or U. S. notes), or at the option of the Treasury in silver bullion at its current value at the time of redemption. These are the more vital provisions of the scheme. Let us see what they involve. Against the whole plan there lies a very positive doubt of its constitutionality. The Constitution empowers Congress to authorize the coinage of gold and silver, and to make such coins a legal tender; but there is nothing in the powers thus conferred, nor in any powers conveyed by that instrument, that can be construed into a right of the Government to receive silver bullion on deposit. The Government can have no interest, duty or function in connection with bullion, except so far as it may be procured for the express purpose of coinage. It can have no more power to assume the custody of bullion for the accommodation of its producers than it has to store cotton, iron or wheat for the convenience of the dealers in those commodities. And when, in addition to assuming the grave responsibilities of custodian, the Government undertakes to issue receipts endowed with special privileges and attributes, calculated to incorporate those receipts as an important part of the currency system, it commits a breach of the true functions of government and of the true constitutional limitations of federal authority, which, it would seem, the Supreme Court should unqualifiedly prohibit. The provision made for the redemption of these proposed certificates would be to the last degree objectionable. They are payable in legal tender money, or, at the option of the Government, in an equivalent value of silver bullion at its current market price. If the Government chooses to redeem them in lawful money, it exposes itself to a new and important demand upon its legal tender notes or its gold: and as the amount of greenbacks owned by the Treasury now runs so low as to prohibit those notes being used for the purpose, it follows that the redemption of the certificates would have to be made from the Treasury stock of gold. Thus the operation of the scheme would be to exchange the Government gold for silver bullion. What could the silver men desire better? What could all other interests dread more? It would be a direct step towards incapacitating the Government for maintaining gold payments; and, as such, would go far towards dissipating that broad substratum of gold which is the sole means of preventing our entire paper currency from depreciating to a level with the bullion value of the silver dollar. It is thus clear that the Government would be ultimately driven to redeem the certificates in silver bullion. What does that imply? First, that the Treasury would have to stand the loss upon the deposits of bullion that might arise from a fall in its value. Take a case for illustration. A deposit is made of 1,000,000 ounces of gold at the current price of $1.10 per ounce, the Treasury being required to issue against it $1,100,000 of certificates. Later, when the price of silver has fallen to say $1.05, the $1,100,000 of certificates is presented for redemption, and 1,047,619 ounces of silver have to be delivered, as the bullion equivalent at the current market value. The Government thus loses 47,619 ounces of silver by the transaction. Now, seeing what a handsome profit can be made by thus depositing bullion at a higher price and withdrawing it at a lower, are men so virtuous that we can depend on their not working this Treasury silver mine to the utmost possible advantage? With the hands of the Government thus tied, it would be at the mercy of unprincipled speculators and could not escape being mulcted to the extent of millions of dollars. The moment such a bill was signed by the President, speculative combinations would be formed with London bullion dealers; the European stocks would be secured, and, after advancing the price, would be sent to the United States Treasury. The next step would be to force down the price; and then the certificates would be presented to be redeemed by a much larger quantity of silver than had been deposited against them. And thus the game would go on continuously, the Government being the loser in every transaction. A finer scheme for the benefit of speculators could not have been conceived; but for legitimate interests, in many ways dependent on the value of silver, nothing could be more serious. There is nothing in Mr. Warner’s measure to prevent the United States Treasury from being saddled with as much of the European stocks of silver as speculators find it to their interest to send here, in addition to the product of our own mines; and for such deposits the Treasury would be compelled to pay whatever artificial price it suited the operators to determine. And what does such a transfer involve? First, that we should have to ship so much more gold to Europe, making the operation a virtual exchange of Europe’s silver for America’s gold; next, that the United States Government would thus be made to bear the sole weight and responsibility of carrying the WORLD’S surplus of silver; next, that, as a consequence, England, Germany, and other nations would become still more reluctant than they now are to negotiate for an international settlement of the silver question; next, that the Government would be so handicapped with its enormous load of silver as to place it at an utter disadvantage in such negotiations; next, that the Government would be exposed to immense losses in assuming such vast responsibilities; and, next, that the large issues of certificates to be made against this mass of bullion would be a forcible and artificial inflation of the currency, which could not fail to produce disaster to all the material interests of the country. Of course, such an arrangement would be all that the silver interests could desire. For them, indeed, it would be a far better protection than the Bland Act. But this advantage would be only temporary; for when the scheme broke down of its own weight, as sooner or later it must, the miners would be exposed to ruin from the consequent derangements. The only wholesome treatment of this question is to repeal the Silver Coinage Act. That done, we should add $25,000,000 to our yearly exports, instead of locking up so much of our national product as dead capital in the Treasury; while that increase of exports would give us a greater command of European gold and