Harper's/Obstacles to Currency Reform

main obstacle in the way of an effective currency reform is the cowardice of the politicians.

There is hardly any authority on financial science outside of political circles that does not insist upon the withdrawal of our government paper money, or at least upon a gradual diminution of it, as a prerequisite of the establishment of a currency system which is to furnish a trustworthy guarantee of the maintenance of the gold standard, and thus to insure the confidence of the business community. Various plans are now and then proposed by such authorities which are designed to accomplish this object in a circuitous way and call it by different names, while, as to the greenbacks, substantially aiming at the same thing. The accumulation of silver in the Treasury, the dangers threatened by the free-silver movement, and the alarms we have already experienced, have in this respect created necessities which otherwise might not exist, at least not in the same imperative form.

On the other hand, there are multitudes of men in active politics who, while honestly wishing to maintain the gold standard, and while painfully sensible of the perils caused in the past by the pouring of greenbacks into the Treasury for redemption in gold, as well as of the possibility of the recurrence in the future of such perils in times of business distrust, still nervously recoil from any remedy of which anything looking to the direct or indirect retirement of the government paper money or the substitution of bank-notes for Treasury paper forms part.

Why is this? Because there is an apprehension prevalent among the politicians that the people are fond of the greenbacks; that they see in the retirement of the government paper money a substitution of an interest-bearing for a non-interest-bearing debt, and thus an increase of the public burden; that they dislike the banks, anyhow; and that they abhor anything that looks like contraction. And because they believe the people to entertain such notions, politicians, especially members of Congress, in most instances anxiously accommodate themselves to the popular prejudice or even foster it, lest they lose their popularity and their chances of preferment, or lest their party be weakened in popular favor.

It is this timidity in the assertion of personal convictions running against strong adverse opinions, this craven cowering before prejudices thought to be popular, this pusillanimous selfishness which will rather compromise with error than run a risk in fighting for the truth, that makes so many leading politicians of the ruling party shrink from looking the currency question manfully in the face, and put off the day for taking hold of it as if it were a surgical operation involving, as to themselves, a question of life or death. It is this moral poltroonery that inspires &mdash; of course not all &mdash; but very many of the arguments advanced by sound-money Republicans in favor of maintaining the greenback circulation in any event &mdash; arguments sometimes so piteously illogical that they can be explained only on the hypothesis of nervous agitation.

That a good many &ldquo;people&rdquo; do entertain a certain traditional fondness for the greenbacks, or do dislike banks, or do fear contraction, or do disapprove of the retirement of the government paper money on the ground that it would mean the substitution of an interest-bearing for a non-interest-bearing debt, is unquestionably true. But are these notions stronger or more popular than was during the first years after the civil war the notion that the government bonds should be paid off in depreciated greenbacks? Are they stronger or more popular than was during the early seventies the notion that the people could be made rich by multiplying the issues of irredeemable paper money, that the resumption of specie payments meant contraction of the currency, that this contraction by way of resuming specie payments would ruin the debtor class, and that it must therefore be prevented at any cost?

It is well remembered that a very large number of the politicians of both parties, and among them men of very prominent standing, fell in with the demand for the paying off of the national bonds in depreciated greenbacks for no other reason than

that they were afraid to confront what they believed to be a powerful current of popular sentiment, which it would be dangerous to resist. And it was a pitiable spectacle to see such public men invent all sorts of specious arguments to justify that kind of repudiation. It is also remembered that wherever that repudiation scheme was boldly put in the true light before the people, the people were found to be far more honest and wise than the pusillanimous politicians had believed them to be, and that the supposed irresistible current of popular sentiment for the payment of the bonds with depreciated paper money dissolved like a mist in the sunlight; whereupon most of the public men who had been weak enough to advocate it against their true convictions grew heartily ashamed of what they had done and devoutly wished to have it forgotten. It is likewise remembered that when the time for the resumption of specie payments had come, ever so many politicians of both parties, and again many in high public place, vociferously protested against it on the ground that the people fondly clung to the blood-stained irredeemable greenback, that they were fiercely opposed to any sort of contraction, and believed the resumption of specie payments to be the most oppressive kind of contraction. Again those politicians devised all sorts of artful pleas and indulged in high-sounding figures of speech in aid of what they believed to be an overwhelming current of popular opinion; and again, when more courageous men frankly advocated sound financial principles before the people, the people turned out to be far more intelligent and far more desirous of doing right than the politicians had given them credit for. Again the people put the politicians to shame.

Has not the free silver coinage movement taught us the same lesson? Who can doubt now that the silver craze would never have appeared so formidable had not the politicians, and among them influential party leaders, who ought to have known better and many of whom did know better, tried to propitiate what they believed to be an overwhelming popular sentiment by &ldquo;doing something for silver,&rdquo; thus creating the impression that they believed the silver men to be substantially right? Did they not thus greatly strengthen the silver craze? Would not that craze have been confined to narrow limits from the beginning if the politicians who knew better had at once confronted it with sound arguments and straightforward appeals to the good sense and the honest instincts of the masses? And were not such arguments and such appeals crowned with success as soon as they were vigorously tried, in spite of the awkward fact that most of those who at last made them had to eat their own words in doing so?

What reason, then, is there for fearing that an open, bold, and energetic advocacy of a sound currency reform before the people would be less successful? Can it not be conclusively shown by facts and figures that the legal-tender notes, such as they are, have cost the people infinitely more by the commotions, and uncertainties, and distrusts, and disasters their relation to the Treasury has caused, than the interest on the same amount of bonds would have cost; that they have thus proved an immensely expensive sort of currency; that contraction is not hurtful but beneficial when it consists in the retirement of redundant currency not needed by the business of the country; that the banks are, in our economic organism, not only a useful but an indispensable agency of exchange; and that by a well-devised system of government regulation and supervision bank currency can be made and kept quite as safe as greenbacks, and far more elastic, that is, far more responsive to the needs of business? If members of Congress, instead of timidly taking it for granted that the people will never consent to any currency reform involving the withdrawal or curtailment of the greenback circulation or an enlargement of the facilities of the banks, would manfully go among their constituents, candidly explaining and arguing the utility of such measures, and sturdily fighting adverse prejudices, they would in most cases soon find that the people are as sensible and upright with regard to this matter as they have proved to be with regard to the maintenance of the national honor in the payment of government bonds, the resumption of specie payments, and the repulse of the silver craze. Thus the terrifying bugaboo would disappear, and the main obstacle to a sound currency reform would disappear with it.

What is needed in this instance, as in many others, is a leadership that does not with nervous trepidation bend to every breeze, and obsequiously run alongside of every current of erroneous opinion showing any signs of strength, but a leadership that leads, a leadership that has faith in the intelligence and virtue of the people, and courage to appeal to them.



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