March 2, 1863, The New York Herald
The passage in Congress on Saturday last of the bill taxing banks concludes the series of financial measures urged by the administration, and invests Secretary Chase with more power than was ever possessed by any other Secretary of the Treasury. He is now authorized to sell, at whatever price he may choose, nine hundred millions of dollars worth of bonds, to run not less than ten or nor more than forty years. He is permitted to issue four hundred millions of dollars in Treasury notes, to run not more than three years, to bear any interest he pleases, under six per cent, and to be a legal tender or exchangeable for legal tender notes on presentation, as he may desire. He is allowed to issue one hundred and fifty millions of dollars more in legal tender notes (including the one hundred millions lately authorized by joint resolution) if he deems it necessary. In other words, Congress has placed the finances of the country entirely in the hands of Secretary Chase, and, through him, under the control of President Lincoln. The following table will show the amount of paper money we are about to have, without including the one hundred and fifty millions of new legal tender authorized to be used in converting the Treasury notes: –
AMOUNT OF PAPER MONEY AFLOAT AND AUTHORIZED.
Bank currency now afloat……………………………..$167,000,000
New bank currency under Chase’s act………….. 300,000,000
Legal tender, under acts of 1862………………….. 300,000,000
Legal tender, under act of 1863…………………….150,000,000
Treasury notes convertible into legal tender…400,000,000
Postal currency……………………………………………… 50,000,000
…………………………………………………………………….. __________
Total amount of paper money……………………..$1,367,000,000
The best thing which can be said of this record is that we could not do otherwise under the circumstances. Secretary Chase started our finances upon the wrong tack, and we had no choice but to go ahead or back out of the war. That an unparalleled expansion of credit and inflation of prices must soon ensue it is useless to deny. Instead of wasting time in grumbling at this state of affairs, let us consider how we can make the best of our bad bargain. Much depends upon Secretary Chase, and it would be well for the country if a more sensible, circumspect and sagacious statesmen were in his place during this crisis. If he remains at his post, however, we advise him to proceed with his labors most discreetly. A panic will ruin both himself and the country. Should he attempt to float any of his bonds at present he would fail. Government receives nothing but legal tender notes for bonds, and these are now too scarce to be collected in sufficient quantities by our bankers. Let the Secretary issue a few millions more of legal tender, and then he may float a few bonds. Then let us have more paper and then more bonds. If a few victories can be immediately thrown in the effect will be advantageous. Thus by discreet and careful management the Secretary of the Treasury may be able to negotiate a considerable quantity of his bonds during this financial year. By so doing he will relieve the currency proportionately. But to achieve anything of real importance we must have military and naval successes. The sword must sustain the purse. Money used to be the sinews of war; but now the war is the basis of the currency. Push on the war, bring it to a triumphant conclusion, and our finances will be healthy. Permit the war to languish, and the currency will depreciate. President Lincoln is not only our Commander-in-Chief, but he is also the real Secretary of the Treasury. Congress has given him complete control both of the sword and the purse. He can call every man in the country, Jew or Gentile, bond or free, into his army, and his treasury is like the portemonnaie of Fortunatus, which a wish will fill. Let him use this power rightly, and all is well.
When this war called for increased financial resources Secretary Chase had two schemes before him, both sanctioned by high precedent. These schemes were the plan of Napoleon and that of Pitt. Napoleon raised all his money by taxation. He issued no legal tender paper to pay his military debts. He taxed his own people and levied upon the provinces he conquered. In this way he generally managed to make war pay its own expenses as he went along. Pitt taxed the English for half the amount he required and issued legal tender for the other half. By this means he carried England through a long war without raising gold to so great premium as it had reached now, in this country, before our war has lasted two years. Secretary Chase might have adopted either of these plans. The people were clamorous to be taxed, and were rich enough to be taxed heavily. But Mr. Chase chose to be original. Napoleon and Pitt were deemed old fogies, and Chase began by issuing legal tender, and ends by taxation; for, singularly enough, the very last of his measures is the one taxing local currency. This idea reminds us of the madman who wanted to build a house upside down, with its foundation in the air. The foundation of Mr. Chase’s currency should have been taxation; it was legal tender notes. Taxation comes like an after thought. If we had begun by passing the tax bills, followed this up by bonds, and then issued legal tender for the deficiency, the bonds would have kept legal tender at par, or nearly so, and the taxes would have sustained the bonds. Now we have legal tender, bonds and taxes all in a jumble, and it will require a very shrewd financier to bring order out of this chaos. For such a financier we must look to our armies. A touch of electricity often restores a conglomeration of atoms to symmetrical form. The world is supposed to have been shaped from chaotic gases by a flash of electric power. We have the electricity which will reorganize our currency in one simple word – victory. Let us have victories, and gold will fall, in spite of the grasping, greedy, unpatriotic speculators of Wall Street. Let us have victories, and our taxes will be cheerfully paid, bonds will be easily negotiated, and legal tender money will be eagerly received in preference to local bank bills. Napoleon and Pitt prepared their finances to endure either triumph or disaster. Secretary Chase has given us a system which is adapted only to success. Failure is ruin, and there must be no such word as fail. Let the President remember that with a dictator’s powers goes a dictator’s responsibility, and that the only way to retrieve the finances of the country is to urge on the war. Our army is our treasury, and we must never draw upon it for a victory and have our draft unhonored.