Uncle Sam: When we parted last Wednesday night, we all agreed to make our experiences in Government issues of money the subject of inquiry tonight, and I presume you have all been spending your days and nights in studying American history, that is, in studying me.  
Mr. Merchant: I have put more work into the question of our Government issues of money than into any subject in my life in the same length of time, principally because I knew Mr. Farmer used to be what we called a Green-backer some years ago and I wanted to be ready if he happened to still entertain those ideas and was still subject to those fits of madness that came over him before he paid off the mortgage on his farm. But that's ancient history now, and he's holding the mortgage on the other fellow's farm. Now, Mr. Farmer, don't get hot, for I don't mean any disrespect to you, but only to recall that craze for fiat money when you and I were much younger than we are now. Then again, you seem to have had a real revelation during our last talk, and to have been converted to the principle that there could be too much paper money.
 
Mr. Farmer: That's all right, Mr. Merchant, but I well remember that I was not alone when I used to advocate greenbacks without limit. Mr. Banker over there was in the same boat with me.
 
Mr. Banker: Right you are, Mr. Farmer, and there was not a man in this immediate neighborhood then except old Judge Jones who did not agree with us, but we've traveled some since then.
 
Mr. Lawyer: Well, gentlemen, I am a little surprised to find you all so completely convinced that Government[Pg 145] issues of money are to be condemned before a fair trial. I half imagine that Mr. Manufacturer over there will sympathize with me in my contention for the constitutional power, and the wisdom of issuing United States Notes.
 
Mr. Manufacturer: You are very sadly mistaken about me; I am ready to prove that you are mistaken, both as to the wisdom and constitutional right of the Government to issue money even if you are a lawyer, and ought to know all about the constitution. I don't claim to know very much about the money question, generally speaking, but like Mr. Merchant I have made a special study of this particular feature of it. I am convinced there is only one side to this question, however many sides there may be to some other phases of it, and we do not have to leave the history of our own country for overwhelming proof of the folly of it. I for one do not believe that the Government has any constitutional right to issue money.
 
Mr. Lawyer: Well, Well!
 
Mr. Merchant: We'll make you say "well, well" before we get through with you, if it takes till morning.
 
Mr. Manufacturer: It won't take until morning and when we get through with him, he will be finished for fair, I think.
 
Mr. Laboringman: We are evidently going to have some fun tonight. You seem to think that you have Mr. Lawyer in chancery. Now, blaze away. I want you to nail Mr. Lawyer on the greenback question, if you can; for he has been getting the best of you on several occasions; personally, I hope I will never get any less of the greenbacks as they are good enough for me.
 
Mr. Merchant: But they are not good enough for you, Mr. Laboringman, nor for anyone else, if they are not worth one hundred cents on the dollar; or if they are ever liable to be worth less than one hundred cents on the dollar; or if they are teaching an economic falsehood, so long as they remain in existence; or if they are posi[Pg 146]tively doing the business interests of the country actual harm by excluding a corresponding amount of gold, and finally, if they have no legal right for existence today, even though one may admit for the sake of the argument that it was necessary to issue them to save the nation, an admission which I will not make.
 
Mr. Manufacturer: Good for you, Mr. Merchant, that statement has the right ring to it. The greenback is guilty of every one of the charges that you make from my point of view, and so it must always be with every Government issue of money.
 
You may go back to the very first Government issue of paper money in this country, and follow the practice down to this very hour, and it has left a trail of dishonesty, disaster, ruin and misery unmatched by any other single cause. In my contention for this statement I am going to rely for my historical facts upon George Bancroft, the greatest American historian of our earlier period.
 
In the fall of 1690, upon the return of an unsuccessful expedition which Massachusetts had sent out to capture Quebec, the general court, the then legislative power, ordered an issue of "￡7,000 ($35,000) of printed bills of equal value with money." And the balance of the cost which was ￡40,000 or $200,000 was issued the following day.
 
In July, 1692, within nineteen months of the earliest emission, the first legislature under the new charter which transformed the self-governing colony of Massachusetts Bay into a direct dependency of Great Britain, made "all these bills of public credit current within this province in all payments equivalent to money, excepting specialties and contracts made before the publication" of this new law. Their credit was supported by receiving them in all public payments at a premium of 5 per cent.
 
Immediately all the coins then in Massachusetts were exported to England and the new stock followed as fast as it came in from abroad. The vain sorrow of the province expressed itself in 1697 by the prohibition of "the export[Pg 147] of coin, silver money or bullion." In June, a joint committee of the Council and representatives, to be aided by the advice of merchants and others, was appointed to consider how to revive trade, and find out some suitable medium to supply the scarcity of "money"; and it is to be noted that the word "money" in all colonial legislation was used exclusively for gold and silver coin.
 
The first issue of Bills of Credit of Massachusetts, after it became a Royal Province, was in November, 1702, for ￡10,000 in value "equal to money," but to be accepted in all public payments at the advance of 5 per cent.
 
The passion for borrowing spread like flame on the dry prairie. In November, 1714, Massachusetts ordered ￡50,000 to be let out by trustees to the inhabitants of the province for five years on real security, at 5 per cent per annum, to be paid back in five annual installments. The Act was a sacrifice of the public interests to borrowers, who were to return their loan only after a lapse of time, sufficient to insure the very great depreciation of the paper in which it was to be paid. Moreover, the borrowers needed an enforcement by law of the circulation of the paper which they borrowed: swiftly, therefore, in December, 1715, under a pretext "to prevent the oppression of debtors" a stringent statute made the bills legal tender for all debts that had been, or should be contracted, between the 30th of October, 1705, and the 30th of October, 1722.
 
The loan of Bills of Credit by Massachusetts in 1714 was managed at the seat of Government. But why should Boston be favored? "That the husbandry, fishery and other trades of the province might be encouraged and promoted," Bills of Credit on the province to the amount of ￡100,000 were in 1716 ordered to be distributed to a loan office in each county. But why should borrowers in the smaller townships be forced to travel to their shire towns? Let a public money lender be near every man's door. By the statute of March, 1721, ￡50,000 were distributed among borrowers in each of the several towns[Pg 148] according to its proportion in the last province tax. Again in 1728, ￡60,000 in Bills of Credit were proportionately loaned among the several towns, even on personal security, at the rate of 6 per cent for six years, after which repayment was to be made in five yearly installments. Of course, "money" disappeared; not even a single penny was to be had; the small change became of paper.
 
The next development of the colonial system of paper money was a partial repudiation, so far as Massachusetts was concerned. In February, 1737, less than forty-seven years after the first emission of Bills of Credit by Massachusetts, that colony issued ￡9,000 of a new tenor of which one dollar was to be equal to three of the old, and which, after five years, was to be redeemed at par in silver and gold. When the time of redemption came around they were not paid off, but by a further repudiation four pounds for one was made the rate in exchanging the old tenor for the new.
 
On the 9th of January, 1739, the general court in Massachusetts made this confession: "The emissions of great quantities of bills of public credit, without certain provision for their redemption by lawful money in convenient time, have already stripped us of all our money and brought them into contempt to the great scandal of the government; for the remedy thereof this province hath fixed the value of their bills in lawful money, and the time of their redemption in 1742 new style."
 
But that year went by and relief had not been found. In 1744, James Allen, the preacher of the annual election sermon, from the pulpit, addressed the Governor in this wise: "Be the means of delivering us from the perplexing difficulties we are involved in by an unhappy medium, uncertain as the wind and fluctuating like the waves of the sea, through the unrighteousness thereof the land mourneth, and the cries of many are going up into the ears of the Lord of Sabaoth."
 
In 1745, people of Massachusetts took the largest part in the brilliant enterprise which ended in the Louisburg[Pg 149] campaign, and were to receive from the British Parliament some payment for their extraordinary expenses in the expedition.
 
In February, 1748, Massachusetts, while awaiting its share of this remuneration, invited the governments of Connecticut, New Hampshire and Rhode Island to join in abolishing the use of Bills of Credit; but as no one of the three gave effectual heed to the summons, the people of Massachusetts proceeded alone. It was estimated that about ￡2,200,000 of their Bills of Credit would be outstanding in the year 1749, that is, $11,000,000. In January of that year an act was passed redeeming the bills of the old issue or tenor at the rate of 45 shillings, those of the new issue or tenor at the rate of 11s. and 3d. for one Spanish dollar; a rate which somewhat exceeded their market value at the time.
 
The Bills of Credit of New Hampshire, Rhode Island and Connecticut were excluded by most stringent laws, and Massachusetts, with its quickened industry and established credit, "sat as a Queen among the Provinces."
 
Mr. Merchant: Mr. Manufacturer, you must have gotten your information from the same source that I obtained mine; all that you've said sounds very much like George Bancroft, whose history of this question I've just read. Since my ancestors came from Connecticut, I am going to tell her tale of woe.
 
In June, 1709, Connecticut put forth ￡8,000 of bills, or $40,000; then soon followed that by ￡11,000 more, which were "to be in value equal to money, and to be accordingly accepted in all public payments."
 
In October, 1718, Connecticut, to prevent oppression by the rigorous exaction of money, declared its Bills of Credit legal tender for debt contracted between the 12th day of July, 1709, and the 12th day of July, 1727. The time for the operation of the law was afterwards extended to 1735.
 
In the year 1733 Connecticut loaned interest-bearing bills for nearly ￡50,000. In May, 1740, it issued ￡30,000[Pg 150] of a new issue of which ￡22,000 were to be loaned to freeholders of the colony on mortgage, or personal security, to be repaid one half in four years, the other half in eight years in current bills, or hemp, or duck, or canvas at their current market price. These bills were made legal tender in all payments. But this provision was censured by the lords of trade in England, and in the following November it was repealed.
 
Roger Sherman, the greatest statesman of Connecticut, gave his mind to the questions about money and mediums, commerce and exchanges, and having mastered them in 1752, under the name of Philoeuonomos, "the lover of just laws," he addressed to the men of Connecticut "a caveat" against injustice or an inquiry into the evil consequences of a fluctuating medium of exchange. These are some of his words: "The Legislature of Connecticut have at length taken effectual care to prevent a further depreciation of the Bills of this colony; the other Governments (meaning New Hampshire and Rhode Island) not having taken the like prudent care, their Bills of Credit are still sinking in their value...." "Money ought to be something of certain value it being that whereby other things are to be valued ..." and this I would lay down as a principle that can't be denied that a debtor ought not to pay any debts with less value that what was contracted for, without the consent of, or against the will of the creditor.... "If what is used as a medium of exchange is fluctuating in its value, it is no better than unjust weights and measures, both of which are condemned by the law of God and man; and, therefore, the longest and most universal custom could never make the use of such a medium either lawful or reasonable.
 
"We in this Colony are seated on a very fruitful soil, the product whereof with our labor and industry and the divine blessing thereon, would sufficiently furnish us with and procure us all the necessaries of life and as good a medium of exchange as any people in the world[Pg 151] have or can desire. But so long as we part with our most valuable commodities for such Bills of Credit, as are no profit, we shall spend a great part of our labor and substance for that which will not profit us; whereas, if these things were reformed we might be as independent, flourishing and happy a colony as any in the British Dominion."
 
In May of the same year, the famous traveler, John Ledyard, and twenty-five other merchants of Connecticut caught up the theme, and in a petition to their legislature said: "The medium of trade whereby our dealings are valued and weighed, ought to be esteemed as sacred as any weights and measures whatever, and, to maintain justice, must be kept as stable, for as a false weight and a false dollar is an abomination to the Lord, a false and unstable medium is equally so, as it occasions as much iniquity, and is at least as injurious."
 
The Connecticut Assembly supported these memorialists, excluded the bills of paper money of Rhode Island, and overcoming every embarrassment, at last, like Massachusetts, redeemed every nine shillings of its paper money with one shilling in specie. After the first day of November, 1756, all accounts in Connecticut were kept in lawful money.
 
Mr. Manufacturer: The experience of the other New England States is practically the same as that you have just recited in Connecticut. In 1717 the Council of New Hampshire was zealous to follow the fashion of issuing paper money by loan and issued ￡15,000.
 
Rhode Island, also, in July, 1710, on its first emission of Bills of Credit, declared them equal in value to "money," and made them receivable in all public payments. In November, 1711, Rhode Island discharged a claim by a loan of its Bills of Credit to the amount of ￡300 for four years free of interest.
 
New Jersey, too, tried its hand at the same scheme, following the lead of Pennsylvania. In December, 1783, it issued ￡31,250, and in 1786, it struggled hard to issue[Pg 152] a larger amount, but William Patterson, who was afterwards a member of the Supreme Court, resisted the proposal with inflexible courage, and here are some of the words which he employed: "An increase of paper money, especially if it be a tender, will destroy what little credit is left, will bewilder conscience in the mazes of dishonest speculations, will allure some and constrain others into the perpetration of knavish acts, will turn vice into a legal virtue, and sanctify iniquity by law. Men have, in the ordinary transactions of life, temptations enough to lead them from the path of rectitude; why then pass laws for the purpose, or give legislative sanction to positive acts of iniquity? Lead us not into temptation is a part of our Lord's prayer worthy of attention at all times, and especially at the present."
 
In March, 1723, when there was universal peace, borrowers undermined the scruples of Pennsylvania, and that colony issued bills of credit for loans to individuals, and not only compelled creditors to receive the bills at par, or "lose their debts," but ordered sellers to receive them at their nominal value in the sale of goods, or lands, or tenements or "forfeit a sum from 30 shillings to ￡50."
 
Again, on March 21, 1783, Pennsylvania, which hardly knew what it was doing and had not yet gathered up the strength of its will, was the first to renew in peace the evil usage of the times of war, and issued $300,000 in what was called Treasury Notes, the lowest of one-quarter of a dollar, the highest at twenty dollars. Two years later, but after great resistance, its legislature issued ￡150,000, the lowest note of 3 pence. But in the decisive hour Pennsylvania, too, proved the implacable foe of paper money.
 
In 1733, ￡90,000 in its bills of credit were brought into circulation by loans of 4 per cent by the legislature of Maryland.
 
Virginia was involved from May, 1755, in measures of war, and immediate and increasing issues of paper bills[Pg 153] were made which from the beginning were a lawful tender for private debts. For the new "notes" of April, 1757, it was further ordered that any seller who should demand more for his goods in notes than in gold or silver coin, should "forfeit 20 per cent of their value." ... In 1781, in the month of March, Virginia directed the emission of ￡10,000,000 and authorized ￡5,000,000 more; and the Continental paper currency and its own were made a legal tender in discharge of all debts and contracts, except contracts which expressly promised the contrary.
 
In 1780 North Carolina directed the emission of more than ￡1,000,000, and such further sums as the exigencies of the state might require; in the next year gave authority at one dash to issue $26,250,000 of paper dollars bearing 6 per cent interest. Again in 1783, North Carolina emitted ￡100,000, declaring each pound of the emission equal to two and one-half Spanish milled dollars, and a tender in all payments whatever. In 1785, the state emitted ￡100,000 more.
 
South Carolina, too, as late as 1785, permitted itself to be persuaded to lend among the constituents of its legislature ￡100,000 in paper bills of the state, which were to pass in payments to the treasury of the state but were not otherwise made legal tender. The state soon perceived that the paper banished more gold and silver than the amount of the bills which were to take their place.... This was done, although its legislature on the pretext of creating a fund to sink former Bills of Credit, and to encourage trade and commerce in July, 1712, had ordered ￡52,000 in new bills of credit to be stamped and put out at interest in loans. In December, 1717, they passed this statute: "It is found by experience that the multiplicity of the Bills of Credit hath been the cause of the ruin of our trade and commerce, and hath been the great evil of this province, and that it ought with all expedition to be remedied."
 
Finally, the great Empire State, with all the rest, en[Pg 154]tered eagerly into the defense of its northern frontier, and in November, 1709, for the first time involved itself in the use of Bills of Credit. In 1770, the legislature of New York passed an Act for emitting ￡120,000 in Bills of Credit to be put out on loan. Again in April, 1786, the opening year of the final great movement for a closer union of the state, it placed an emission of ￡200,000 in Bills of Credit with loan officers, to be loaned on mortgage security; and they were made a legal tender in any suit for debt or damages, and the costs of suit. The bills were further to be received for duties to be collected at the Port of New York by the state. Gen. MacDougal, the brave soldier and patriot, though sick unto death, insisted upon being carried to the Senate, that, as the last act of his public life, he might give his voice against the proposal to emit paper money.
 
In 1780, the United States began repudiation by issuing a new paper dollar equal to forty of their previous issues. After their new constitution was established, all that remained of the bills of the Continental Congress were called in at the rate of one dollar in silver for one hundred dollars impressed on paper.
 
Mr. Farmer: While you gentlemen were studying Bancroft, I have been reading Horace White upon this question of Government issues of money, and thought I would not give myself away until after you exposed your hands. You've piled up facts, but you've given us a very slight impression of the effect that these money issues had, and therefore I am going to give you the benefit of my explanation which I think throws another and very important light upon the subject.
 
Mr. White refers to a pamphlet circulated in 1743, which speaks of the Bills of Credit in New England issued on loan "to themselves, members of the legislature and to other borrowers, their friends, at easy and fallaceous Lays, to be repaid at very long Periods; and by their provincial laws made a tender in all contracts, trade and business, whereby currencies, various and illegal,[Pg 155] have been introduced which from their continued and depreciated nature in the course of many years, have much oppressed widows and orphans and all other creditors."
 
The same writer gives special attention to the colony of Rhode Island, which had "defrauded more in a few years than any of the most wicked administrations in the several nations of Europe have done in several centuries. A contract made thirty years ago for ￡100,000 sterling in value is at present reduced to a nominal 32 shillings."
 
White says that in addition to legal tender acts there was a great variety of laws to compel people to sell their property at the same price for bills of credit as for silver. The debtor class was not satisfied with forcing depreciated paper upon creditors for past obligations, but insisted that they ought to be able to buy as much property with the paper as with specie. Those who had been forced to take the paper for past debts naturally joined in this demand, and the legislatures agreed with them. Hence we find in nearly all the colonies severe penalties on those who charged more for their goods, lands or services in Bills of Credit than in money. In some cases the penalty was a fine, in others imprisonment, in others confiscation of property offered.
 
The usual course of events where Bills of Credit were issued was as follows: (1) emission; (2) disappearance of specie; (3) counterfeiting; (4) wearing out of bills; (5) calling in and replacing worn and counterfeited issues with new ones; (6) extending the time for old ones to run, especially those which had been placed on loan; (7) depreciation; (8) repudiation of early issues in part and the emissions of others called "New Tenor."
 
Dr. Douglas says that Massachusetts had at one time "old tenor, middle tenor, new tenor first, new tenor second." Rhode Island had an indefinite number of tenors.
 
All sorts of opprobrious epithets were heaped upon them. They were called invidious statutes, old, worn,[Pg 156] torn, tattered, shattered, ragged, mutilated, defaced, obliterated, illegible and "unfit to pass."
 
The depreciation of the Colonial bills varied in the different colonies. In Massachusetts the maximum depreciation was 11 for 1 (the standard being "proclamation money"). In Connecticut it was 8 for 1. In 1763, the value of the New Hampshire shilling was a little less than a half penny; in 1771, it vanished altogether. Rhode Island owed tenor bills in 1770 that were worth 26 to 1. Those of North Carolina were 10 for 1; of South Carolina 7 for 1.
 
Here is Mr. White's graphic description of the times: "The pamphlets and records of the colonial period are filled with accounts of the distress and demoralization caused by depreciated paper made legal tender. As all loans were so payable, the accumulations of age, and the inheritance of orphans dwindled. So, too, did the earnings of the wageworker. In order to avoid the losses from a depreciating standard of value, resort was had by working men to 'store pay,' and here they were generally cheated. Trustees and executors, who had money in their hands which belonged to other people, and who saw how things were going, often postponed the payment on frivolous pretext, since each delay enabled them to settle their accounts with less value, thus devouring widows' houses. Not only was bad blood stirred up by the resistance of the Royal Governors, but a spirit of lawlessness was engendered against the local assemblies, if they showed a disposition to resist the demands of the green-backers of that day. Even after the revolution the legislature of New Hampshire was mobbed because it refused to legal tender bills. One of the demands of Shays' rebellion in Massachusetts was for more paper money. In Rhode Island, after the revolution, a general system of repudiation of debts, public and private, was undertaken, and carried through by means of legal tender paper in spite of the decisions of her courts."
 
However bad these colonial bills of credit proved to[Pg 157] be, if it were possible those of the revolutionary period were still worse.
 
Even before the Continental Congress assembled the separate colonies began to issue Bills of Credit. When the Continental Congress met in June, 1775, Franklin urged that the bills should bear interest, in order to prevent depreciation. He even urged that the interests should be payable in "hard dollars," but this was voted impracticable.
 
All seemed to be in confusion, and in this unsettled state it was voted in July, 1775, to issue due bills for 2,000,000 Spanish milled dollars, to be sunk by taxes in four successive years, beginning November 30, 1779, the taxes to be levied and collected by the states in proportion to their population. These bills were not legal tender at the time of their issue. The Congress had no power to make them so, but in January, 1777, it was recommended that the States should do so, and this they did, one after another, in one way or another. Before the two millions were issued, another million was wanted, and was authorized with three million more, before the end of the year; and still they came nine millions more, or until fifteen in all were out, before independence was declared. This was called Continental Currency to distinguish it from the issues of the separate states. Mr. White says from this time the demon of "fiat money" had possession of the country, and worked its will on the inhabitants. The issues ran on in an increasing volume till they amounted to $240,000,000 in the year 1779. In 1781 the whole mass became worthless. On this subject the essays of Pelatiah Webster have become classic. Mr. Webster, it is thought by some, was the author of the Constitution. He was a merchant of Philadelphia and an ardent patriot. He wrote "we have suffered more from this than from every cause of calamity; it has killed more men, pervaded and corrupted the choicest interests of our country more and done more injustice than even the arms and artifices of our enemies."
 
[Pg 158]
 
Professor Sumner says that when the depreciation was going on rapidly a man might lose his whole wages while earning them.
 
Naturally, the next thing in order was the establishment of prices, for which purpose conventions were called. The first one held at Providence was............