March 10, 1863, The New York Herald
The bill passed by Congress to tax speculators in gold and silver coin upon purchase to deliver on time, and to prevent banks loaning them money upon the security of specie beyond its par value, has only partially checked the operations of the tribe. The first consequence of the measure was a panic and a general desire to get rid of gold and invest capital in something else. Such was the rush that it caused the price of specie rapidly to fall, the supply being so much greater than the demand. But now that this rush is over, gold does not continue to fall; but, on the contrary, after remaining for several days in the vicinity of 150 has gone up again to the neighborhood of 157, and yesterday fluctuated above and below 156. The bill meditated in our Legislature to prevent the banks loaning any money upon the security of gold and silver coin goes beyond the act of Congress, and would have a similar effect in repressing the rage for speculation in the precious metals till the panic passed off or the sharpers discovered some method by which they might evade the law.
But no enactments can permanently prevent the rise of gold or the depreciation of inconvertible paper currency, unless an act compelling payment in specie; and, after all, probably it was a presentiment of something of this kind being done by Mr. Chase, in pursuance of the discretionary powers invested in him by Congress, that had most influence in giving a temporary check to the speculators. The idea had been set afloat in this journal the day before the sudden descent. The speculators began to doubt about the course they ought to pursue. The very thought of specie payments had scared them; but when they found Mr. Chase was not acting on the suggestion, they rallied and somewhat resumed their composure. Only let him, however, now make the announcement that he intends to restore the currency to its normal condition, and gold will soon go down to a much lower figure than it has recently fallen to, or rather the currency will immediately go up, and when specie payment is actually begun, greenbacks will rise to par; and, though the gold on hand to redeem the notes might not be equal to one-eighth of the circulation, it would be sufficient, because everybody would be satisfied he could get specie for the bills he held when he wanted it, and therefore would be careless about it. At the same time the necessity of making specie payments when demanded would check over- issues of paper either on the part of the banks or the government, and this is the only cure of preventing the depreciation of the currency and speculation in gold.
That gold rises or falls is a popular error, caused by the jargon of Wall street. It is not gold that rises or falls, but the paper currency. Gold is the standard of value agreed upon by all nations, and owing to its scarcity its value does not alter. Hence it is a medium of universal exchange. It is like a yard in superficial measure, a pint in liquid measure, or a pound weight; and it determines all other values, including stocks and paper currency. Strictly speaking, therefore, gold is not bought and sold for greenbacks, but greenbacks are bought and sold for gold. If gold really rose seventy above par, it must necessarily rise to the same figure in England and France; otherwise all that it would be necessary to do to make an enormous fortune from it would be to ship it to the United States. It has not risen in value in those countries, neither has it done so here; but our paper currency has fallen, through the financial mismanagement of Congress and the Secretary of the Treasury, so that a hundred dollars in gold a few days ago could purchase one hundred and seventy dollars in greenbacks, and even now upwards of one hundred and fifty dollars. If the same system is pursued hereafter the currency will continue to fall in spite of all legislative enactments. Congress may make a hundred dollar greenback a legal tender for a debt nominally one hundred dollars; but it is beyond the power of Congress or Mr. Chase to make the greenback equal in value to one hundred dollars in gold, unless by being always prepared to pay on demand that amount of specie for it.
The speculators do not want the resumption of specie payment, because it would interfere with their game. But the people desire it, for they are the victims of the inflated currency which causes the most exorbitant prices, while wages are either not raised at all or not in proportion. It is pretended that it would be impracticable for Mr. Chase to resume specie payment and compel the banks to do it in the midst of such a tremendous war. Perhaps these financial wiseacres can explain how it was Napoleon was able to do it after France was flooded with irredeemable paper money, and how he continued to pay gold through all his great wars. To this day gold coin is the currency of that country. Mr. Chase has the power to do what Bonaparte did. It remains to be seen whether he has the sagacity and the nerve. If he continues to issue irredeemable currency it need no ghost to tell what must be the result. Independently of all speculation, very soon one hundred dollars in gold, instead of being worth one hundred and seventy dollars in paper, will be worth two hundred dollars, and the evil will go on increasing ad infinitum. For what is it that causes depreciation? It is excess of issues, and consequently the greater the excess the greater the depreciation. Why is it that the cereals and all kinds of provisions are so cheap in the West? It is because they are greatly in excess of the wants of the community, and the cost of railroad transportation is too great to send the surplus away. It is the same with paper money.
In the South, though gold is comparatively abundant, there being little or no opportunity of sending it out of the country, it is three hundred per cent as compared with the Confederate currency. Why? Because the issues of paper so greatly exceed business requirements, and there is a moral certainty of those issues being vastly increases, while there is no provision for specie payment. The natural law which regulates the currency is as unalterable as the law of gravitation.
In England, during her wars with Napoleon, the currency depreciated but little after the first issues; but when those paper issues were repeated again and again, then the depreciation became so great that it was necessary to withdraw some of them to prevent universal ruin. In France the assignats, at first though issued by a revolutionary government, were good for their nominal value; but they became so numerous at last as to be almost worthless, and a thousand francs in paper were not worth one franc in coin; and this in the face of penalties of all kinds to prevent depreciation, and though the assignats were secured by the public lands. The paper money issued in our own Revolutionary war shared a similar fate when the quantity of it became extremely excessive. Though it was secured by the public faith and the public land was pledged for its payment, and though Washington, Franklin and the other statesmen of the time did their utmost to prevent the catastrophe, it fell so low in value that it required a bushel basket full of the[…..] money,” as it was called, to pay for a pair of boots.
If, with these examples before him, Mr. Chase persists in making fresh issues of paper, without making provision for specie payment on demand, his greenbacks will inevitably go the way of all such money, and the sufferings of the people will equal the calamities endured by the French till Napoleon provided the sovereign remedy.