Great Leaders and National Issues of 1896/Chapter 6

VI. Hon. John Sherman on the Currency of the Future
 * Checks, Clearing Houses and Paper Notes
 * A Safe But Expensive Policy
 * “One-half of Gold and One-half of Silver”

Hon. John Sherman on the Currency of the Future
One-half Gold and One-half Silver

The previous chapter was prepared by Mr. Upton upon the recommendation of Senator John Sherman, whose hand has shaped the financial legislation of the country for the last quarter of a century, and upon its being submitted to him he stated that he found it very interesting and deserving of wide circulation, as no other measure before Congress could compare with that of the currency in its effects upon the business interests of the country; that it affected every man, woman and child in our broad land, the rich with his investments, the poor with his labor.

At the same time he made the following statement of his views as to the future currency of the country.

Checks, Clearing Houses and Paper Notes
The employment of either silver or gold for general purposes of circulation is growing relatively less every year in all civilized nations. The use of checks in transferring credits from one party to another, the employment of clearing-houses in commercial centers to offset the checks against each other, to save the labor and risk of individual collections, and lastly, the employment of paper notes payable on demand in specie, in lieu of actual specie itself, are modern inventions for facilitating exchanges, and they are the greatest labor-saving machines ever brought to human aid. Their use is not yet fully understood or appreciated, but they are rapidly revolutionizing all methods of exchanges, and this country cannot refuse to recognize their superiority over the clumsy machinery of the last century. The expansion of the use of checks and clearing-houses may be left to the education which our rapidly increasing commerce affords. As to the issue of paper notes, it is generally admitted that the metals should be supplemented by some kind of credit money, to avoid absorbing too much of the actual wealth of the country in the machinery of circulation, and the question arises, under what authority, in what manner, and to what extent these issues shall be made.

The commerce between the several States is of enormous and unrestricted amount, and demands the issue to be uniform in value throughout the country. The policy of removing the tax upon the issue of States banks, and allowing variegated bills of that character, at best never at par, except in the immediate vicinity of their issue, to again flood the country, meets with little favor in any section. There is, also, a general feeling that when the option on the four per cent. bonds expires, the government should not issue in their place bonds of a lower rate on which national banks may continue their circulation.

If there is any gain in issuing notes, there is a demand, not without justice, that it should be shared in by all the citizens of the Republic, not exclusively by the holders of State or National bank stocks.

A Safe But Expensive Policy
To purchase gold or silver bullion and to issue certificates thereon, dollar for dollar, would not obviate the great objection to a large part of the present circulation, viz.: the useless storing away of too much of the wealth of the country in the vaults of the Treasury, a policy, however safe it may be, which is expensive, as taking out of productive enterprises a needless amount of capital.

The employment of the greenback currency as part of the paper currency since 1879, based upon about thirty per cent. of gold coin or bullion, and the pledge of the faith of the nation to its maintenance at par, has proved satisfactory and economical. By its issue the government has had the use of $246,000,000, the excess of the issue over the reserve, for thirteen years, with no charge except the insignificant appropriation for the manufacture of new notes to take the place of those worn or mutilated. Had the greenbacks been converted at that time into four per cent. bonds and other forms of currency substituted as demanded by many high in authority, the government would already have paid on such bonds to date about $125,000,000 in interest. At present there is outstanding of silver certificates, Treasury notes, gold certificates and national bank notes, $770,000,000, and the query arises, why cannot the issue of the greenbacks be extended so as to take the place of these issues, a reserve in specie to be maintained equal to two-thirds of the entire paper circulation, and the faith of the nation to be pledged to keep the notes at par by the sale of bonds, the proceeds to be applied to such maintenance whenever necessary. For thirteen years greenbacks have maintained a specie value, nobody desiring coin for the notes as soon as it was known it could be had upon demand, and there is no reason to suppose that a parity of value cannot be maintained for all the paper circulation, though sustained in part only by the pledged faith of the nation. The amount of circulation needed can be determined only by the necessities of business, but with the privileges of redemption at sight an over-issue of paper would not long remain.

“One-half of Gold and One-half of Silver”
The metallic reserve might with safety consist of one-half of gold and one-half of silver, the latter at its market value, and the notes be redeemed either in gold or its equivalent in silver, under such regulations as may be deemed necessary to keep them at par and to give no advantage to either metal.

Any loss the government might sustain therefrom by a depreciation in the value of either metal would probably be made more than good from the profit in issuing the remaining one-third part of the notes upon the credit of the country as represented by bonds, of which the Secretary should have unquestioned power to sell a sufficient amount at his discretion.

A circulation issued by the General Government and thus secured would be uniform in value throughout the country; its notes, alike in design, would soon become well known and much preferred to the many kinds now in circulation, of which each has a different appearance, a different basis of redemption, and of debt-paying power. Such a policy is nothing new. It is only the extension of one already tried and which has proved successful, and which can be easily expanded to afford all the circulation which the rapidly growing needs of the country may require.