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Ch. VIII. „The Theory of Greenbacks.“
Issue of government paper to circulate as money nothwendige Folge der Situation, worin die Banks bei Ausbruch der Revolution (nämlich ihr suspension of specie payments). Gvt. hatte nur Wahl to borrow the bills (i. e. notes) of suspended banks – es that so während des Kriegs v. 1812; gvt. damals sold its bonds at 20% discount, taking for them inconvertible bank paper at par – od. to issue circulating treasury notes, wie geschah 1862. (147) Paper money war damals a political necessity. The loan without interest, and the illusive prosperity, which resulted from ascending prices, they found a strong assistance at the polls. (148)
Erstes internal revenue law ⦗womit Steuer zur Kriegführung Anfang gemacht⦘ kam in Operation 1 Oct. 1862, an welchem Tag Gold sold at 123¾ u. das Premium had reached 70% before the effect of the law in producing revenue was fully felt. (149)
While in the beginning it was claimed that a dollar is whatever the law makes a dollar, now it is attempted to transmute paper into gold by insisting that a dollar is 25 8/10 grains of gold of 9/10 fineness. (153) A greenback purports on its face to be a promise of the U. St. to pay to the bearer a dollar. It also purports on its back to be, and by law is, made a legal tender to pay all debts, public and private, within the U. St. … The U. St. are under no legal obligation whatsoever to redeem these promises to pay a dollar by the payment of a coined dollar. The dollar … intended is a dollar of account. (Sieh auch die legal opinion p. 154) ⦗Ein distinguished jurist, sagt in dem Process Metropolitan Bank vs Van Dyck: „By the arrangements of the legal-tender-act, the notes are not payable in coin, for the quality which makes them receivable for all public and private debts authorizes the government to redeem them in other notes of the same kind, so that they are to constitute a medium of payment and exchange, which is to be quite distinct from gold and silver money, and not convertible into it.“ (l. c.)
Was greenback sonst sein may, as a government security, in seinem character of money ist es nur a stamped counter. (l. c.) Gerichte entscheiden demgemäss by »invalidating specific contracts to pay in coin.« (l. c.) A debtor can agree to pay coin, and the law will none the less uphold him in paying legal-tender notes. For the latter (heisst in Urtheil) „are lawful money, and have a legal value equal to that of coin in the cancellation of debts.“ (155)
⦗Aus den Citaten der richterlichen Urtheile, die er giebt p. 156–158 klar, dass diese Juristen verstanden unter the Constitutional power of Congress „to regulate the value of money“ – a power to debase the coin after the manner of Henry VIII )⦘ ⦗In einem dieser Urtheile heisst: „All that the debtor contracts to do, is to return to his creditor in dollars and cents as much as he received, and the advance and repayment are alike to be made in that which by competent and valid authority is made the medium of account and payment.“⦘ ⦗Heisst in andrem judgment: „A treasury note of the denomination of 10$ is legally as valuable for the purposes of money as a coined eagle. The value of each is fixed at 10 dollars money of account. If a gold eagle be worth more in the market than a ten dollar legal-tender note, it is because it is wanted to pay duties and settle balances abroad. The market value of gold is therefore regulated by the demand and supply. This demand for gold may be for legitimate purposes, as suggested, and it may be for speculative or illegitimate purposes; and, unfortunately, at the present time, most of the difference in value of gold coin and legaltender notes is the result of a species of gambling in the metallic medium of circulation as private or publick stocks are gambled with. It cannot be said that a measure of value thus affected by extraneous causes, fluctuating in its character, which may be more to-day and less to-morrow, can be any just criterion of what a creditor loses or gains.“ Danach the rise and fall in the premium on gold measure fluctuations in the value of gold, instead of greenback p. 158.⦘ ⦗Diese Urtheile datiren von 1863.⦘ Dies die Ansichten der Gesetzgeber welche den legal tender act passirten; hence their subsequent attempt to keep down the premium on gold by act of Congress. Nach ihnen the law had made a bit of paper a dollar, recognized no difference in value between such a dollar and any other dollar, therefore there was no such difference; the apparent difference „had no legitimate bearing on the question“, being „created by brokers and speculators“. By suppressing speculation, then, the premium would be kept down. Hence speculation in gold was forbidden; the whole supply of that commodity was driven out of the market, while the demand for it remained constant, and the premium advanced 60% in a few days. (158, 59) Die judges, who sustained the power of Congress to issue legal-tender notes, getrieben zur Position that Congress has despotic power to debase the coinage, and to make the debased coin tenderable in payment of debts contracted in coin of full weight. Sie citirten in support davon »the decisions made in the time of Edward VI and Elizabeth , affirming the validity of the payment in debased coin of a debt contracted in good coin … to show that the law recognizes in money only the name and not the substance.« (160, 161)
Elizabeth v. England „in order to pay the royal army which was maintained in Ireland for several years to suppress the rebellion of Tyrone, caused a great quantity of mixed money, with the usual stamps of the arms of the Crown and inscription of her royal style, to be coined in the tower of London, and transmitted that money to that kingdom, with a proclamation dated May 24, in the 43rd year of her reign, by which she declared and established this mixed money, immediately after the said proclamation, to be lawful and current money of the kingdom of Ireland; and expressly commanded that this money should be used, accepted and reputed by all her subjects and others using any traffic or commerce within the kingdom.“ In April, before the proclamation was issued, and when the pure coin of England was current in Ireland, a merchant of that country bought goods of a London merchant and agreed to pay him therefore 100£ ‚current and lawful money of England‘. When the debt became due, he tendered the mixed money. The tender was held good on appeal to the Privy Council, the judges so advising, on the ground that the mixed money was ‚current money‘.“ (Note 161, 62).
Ueber Article 1895 des Code Napoleon sieh Troplong, treatise „Du Prêt“ Art. 236. Paris. 1845.
ch. IX. The Premium on Gold.
Premium on gold bezeugt Thatsache dass die currency depreciated; keineswegs aber dass dies premium correct measure of the value of the depreciated currency. (165)
Der exchange-value od. purchasing power of our present paper-money is not now, and never has been, accurat gemessen durch den price of gold. Steigen od. Fallen des value of money gemessen durch general prices; gold selbst figurirt hier nur als ein article of merchandise; u. wie bei jeder bes. Waare, ihr Preis bestimmt durch andre causes als currency – durch special causes peculiar to itself. Dies gilt auch f. die precious metals. Indeed, the causes which determine their price, in paper, are more peculiar, than die welche den paper price irgend eines andern Handelsartikels afficiren. (166)
Eine special cause, seit Ausgabe des inconvertible Papiergeld – government meddling. So z. B. nach passage v. „the Stevens’ Gold Bill“. Jeder inquiring through Wall Street found a difference v. 15–20 dollars on a hundred between the prices for gold demanded by separate retail brokers. (166, 67) Dann wieder das gvt. accumulated enormous hoards of the precious metals in the vaults of the treasury, in order to depress the premium by holding those sums in terrorem over the market, and by disposing of a portion of them whenever the premium tends to rise. Diese efforts partially successful; price of gold manchmal so low depressed as to make it the cheapest commodity in the country. (167)
the value der Greenbacks as securities, though not their purchasing power as money, has always been measured by gold, the true standard of value. The premium on gold repräsentirte daher häufig wenigstens ebensoviel den Credit der Regierung als den exchange value or purchasing power des lawful money. (l. c.) ⦗Einfluss daher der victories, defeats, etc⦘
Während des Kriegs inflation in progress, price of gold stieg viel rascher als der der grossen mass v. Waaren of domestic origin; Resultat des Kriegs noch ungewiss; andre Waaren stiegen in Preis, nicht weil Gold had risen, sondern weil supply of money had become excessive. Nur imported articles u. certain articles of export followed gold closely. Die prices of the rest were slower in rising, and were less rapid in their fluctuations. (168)
Nach close des war umgekehrter Process: Ausgabe der treasury notes hörte auf; ihr Werth as government securities war assured by success; confidence in their ultimate redemption; Glaube dass sie bald wieder at par, cash payments resumed; dies allein sufficient to depress the premium. (168)
Während Gold so fluctuirte mit dem state of national credit, participirten die prices of commodities nur zum Theil u. langsam in diesen fluctuations. The moral cause affects general prices less directly; it operates by increasing or diminishing the rapidity of the circulation of money. (168)
Jezt der Credit des government marked by the prices of its bonds, which are securities only, viel mehr als durch its treasury notes, which are both securities u. money; während des Kriegs die gold quotations of bonds of minor importance; die gvt. securities had not been exported in large amounts, u. their Goldpreis abroad did not affect their price in paper at home; das wild fluctuirende Premium on gold afficirte nicht materiell the current quotations of bonds at our stock exchange; the gold prices of bonds then varied with the premium on gold; it was the price of teasury notes which marked the state of the gvt. credit. Aber seit ½ der public debt transferred to foreign owners, ist es der European price of bonds which denotes the gvt. credit, and which steadies the premium on gold; kann nicht advance ohne a decline in the gold quotations of bonds abroad, or a rise in their currency quotations at home; daher seit 1869 the controlling influence in determining the premium on gold war the European prices of bonds; diese advanced to within a fraction of par, u. being steady at that price the premium on gold represents the difference in value in our markets between the two kinds of securities, bonds yielding 6% in gold, and treasury notes yielding no interest, but in anticipation soon to be redeemed at par. So lang aber das Praemium on gold depends on the quotations for bonds, it is determined by the state of the loan market u. has little or no connection mit dem Werth der treasury notes as money. ([168,] 169) Z. B. ohne decline of prices der commodities in general, the bonds könnten (u. würden) steigen über Par in fremden Märkten, wenn nicht verhindert durch die option retained by government of redeeming the bonds at their face (170)
Die einzige sichtbare relation zwischen general prices u. Premium on Gold vermittelst the foreign exchanges. Fällt Preis des Goldes mehr als die Preise der Waare, so increased profit for importer of foreign merchandise u. reduced profit für home producer of merchandise for export; imports so stimulirt, exports deprimirt, adverse balance of trade created to be liquidated mit specie; exchange on London advances; shipments of gold increase accordingly, u. die diminution of the supply of that article tends to enhance its price in paper. (170)
Wäre dies alles, so a depression of the price of gold below the general level could not be long maintained; the resulting scarcity of it would cause its price to advance; aber andre influences. Während die supply of gold in this country has been lessened, so auch die demand for it; wird fast nur gebraucht to pay duties; amount dafür nöthig nicht gross, as the same gold is paid in and out of the subtreasury over and over again. Daher f. die immense production of the precious metals in our mining States kein employment at home; it goes through our ports on its way to a market, leaving enough only for our limited wants, but tending to depress the paper price of the whole stock. (170, 171)
Ferner to take into consideration the movements of capital for investments. Durch Hohe Zinsraten angezogen haben Foreign investors gekauft largely of our government u. railway securities (u. dies immer noch fortdauernd); hence creating in the transfer of capital a balance in our favor, greater at times than the adverse balance in the merchandise account. Aber auch ohne actual shipment of bonds, the portion of them on our markets equivalent to a supply of gold; so lange die europäischen quotations of our securities remain constant, kann das Gold prämium nicht steigen ohne carrying bonds with it, or leaving an excessive profit in shipping them. Their effect on the gold market, daher, equivalent to an equal amount of gold. Aber der amount unsrer government securities a known quantity u. das interest on the portion held abroad must be paid mit specie, or by continued shipments of bonds. Here … lurks the possible cause of a future rise in the gold premium. When the supply of bonds in our markets is materially lessened, and the interest on them and on our railway indebtedness is called for by the foreign holders in cash, instead of credit, and the balance of trade on the merchandise account still goes against us, a scarcity of gold and of bonds may put up the currency prices of both. 1866 u. 1870 (preuss. östreichischer u. preuss. französischer Krieg Ausbruch), a panic in London depressed securities, and compelled large shipments of specie from this country, gold damals rose independent of our home markets. In the case above referred to, the rise would take place from purely domestic causes, independent of the foreign markets. (171, 72)
Das Praemium on gold also depressed u. enhanced ohne close dependence on the quantity of paper money in circulation; but im Mass wie general prices tend to increase above a specie level, in a ratio with the increase of the currency above its natural metallic proportions, they cannot be permanently depressed ohne a decrease der currency. The surplus money must be absorbed in price; dies gilt ganz besonders v. prices at retail. Wird durch diese, wie nöthig, statt durch wholesale prices, die purchasing power of money gemessen, so das premium on gold is found a still more unreliable test of the depreciation of the currency. Die quotations of gold, which govern its price throughout the land, ganz derived von transactions at wholesale in one market; there is no separate retail price of gold which does not daily or hourly follow the regular quotation within a fraction; aber retail prices of commodities gemacht in jedem shop throughout the land, ohne regard to the price of gold, u. die nature einer inconvertiblen currency macht den percentage by which retail prices are advanced over wholesale grösser als wenn das circulating medium nur metallic. Retailers brauchen a greater rate of profit to cover the increased risks and expenses of doing business, während they do not lower their prices to correspond with a decline of gold. Having established the custom of high prices, they maintain them to the last. It is in the prices of the things we buy to supply our daily wants, that the surplus currency is absorbed. (172, 173) Während so die prices of the great mass of commodities of domestic production do not vary with the premium on gold, the prices of those articles of export and import whose values are determined in foreign markets necessarily follow its fluctuations. But this is at wholesale only. At retail, their prices follow gold at a most respectful distance. General prices throughout the whole land cannot vibrate with the varying transactions of the gold room. An increase or diminution of the currency raises or lowers them. But a real or expected change in the volume of the circulation that would effect the gold market immediately, might not be felt for weeks or months in the general markets, and in the retail markets later still. (173)
The gold prices of commodities, obtained by converting paper into gold at the current premium, have fluctuated widely, während ihre currency quotations remained nearly stationary. Wenn das Goldpremium rapidly fluctuirt, variiren die Goldpreise der Waaren mehr als ihre Papierpreise. Der Preis der treasury notes as government securities vibrates, während ihr Werth as money ist nur wenig afficirt. Those using paper money only, thus acquire the mental habit of looking upon it as the standard, and gold as fluctuating. (173, 74)
Man schwatzt v. changes in the value of gold itself, welche z. Th. die fluctuations in the premium on Gold verursacht hätten. Spricht man v. temporary changes, herrührend [von] den fluctuations in Nachfrage u. Zufuhr, so sind sie nicht grösser bei inconvertible currency als bei einer v. normal value u. sind schon veranschlagt in den Diskussionen über den effect der exportation of specie. Ist dagegen a permanent decline in the value of gold referred to, so würde solcher nur effect haben in depressing the premium, nicht in causing it to fluctuate. Die general decline in the value of money, ascribed der enormous production der edlen Metalle während der letzten Jahre, nicht bewiesen. Der excessive use of paper in U. St., Brasilien, Frankreich, Italien, Oestreich, Russland, Turkey is sufficient to depress the value of money, gold included, ohne Ueberproduktion des letzteren. Wenn alle diese nations should resume the use of specie, so würde man in der Depression der Preise, welche dies verursachen würde, bald bemerken that the value of precious metals nicht abgenommen in the last decade. (174)
Report des Secretary of the Treasury in his Report of Dec. 1865 that „rents and the prices of most articles for which there has been a demand, have been, with slight fluctuations, constantly advancing from the commencement of the war, and are higher now, with gold at 47% premium, than they were when it was at 185.“
Comparison of the prices of commodities at the beginning v. 1868 in Hunt’s Merchant’s Magazine f. Januar u. Mai desselben Jahres zeigen ditto average advance v. about 75%, während das Premium on gold war nur at about 40%.
In Commissioner Wells’ Report f. 1868 ähnliches result; 1870 [das]selbe bemerkt bei Amasa Walker u. Prof. Bowen ; in fact jeder weiss aus Erfahrung, dass die expenses of living viel langsamer gefallen als price of gold u. have never fluctuated with it. Retail prices speciell in Stadt New York are as high as when gold was „in the nineties.“ (175)
Das wahre Mass der depreciation der currency zu einer gegebnen Zeit ist its loss of purchasing power, nicht when laid out for any single commodity, wie die precious metals, sondern der loss resultirend v. Steigen in Preisen aller things bought u. sold; also die »increase« der »general prices« über den range den sie einnehmen würden wenn nur specie current. Diese Depreciation daher nie exact bestimmbar; to strike a general average of prices, excluding all causes affecting them but the excessive issues of paper money, would be wellnigh impossible. „General prices“ cannot be used as a mathematical quantity. (175, 76)
Als während des Kriegs Theil der Arbeit des Landes withdrawn in die Armee, die supplies v. agricultural u. manufactured products were curtailed; als natürliche Consequenz: war prices. Nach Herstellung des Friedens labour returned to its employments, supplies der commodities increased; South reopened to commerce, required a supply of the circulating medium; the amount of exchanges to be effected with our paper money increased vastly, while by its partial contraction the supply was diminished. Accordingly, there was a general decline of prices. (176)
In allen diesen changes gold was one of the commodities whose price varied; its price wie bei allen andren Waaren – affected by causes peculiar to itself, and by the general cause affecting all prices, nämlich variations in the supply of the circulating medium compared mit dem amount of the exchanges to be effected with it. Neither gold nor any other commodity can be selected as a measure of the effect of this general cause. (176, 177)
Irrthümer entspringend daher dass premium on gold betrachtet als the sole and precise test of the depreciation of the currency. Das Treasury department glaubt, that the lower the premium, the nearer the approach to specie payments; versucht daher forced depression, driving specie out of the country, thus rendering specie payments more remote (177) Am directesten injured by the undue depression of the premium on gold, the producers of petroleum, cotton, breadstuffs, and the like, and the manufacturers of such articles as are subject to foreign competition. (178)
Populus schreibt den speculators in gold zu immense power over its price. Dies Irrthum; die grosse Masse ihrer transactions are mere bets, settled by paying differences, with but little effect on prices; die who attempt to control the supply of gold, do not buy it in order to put up the price, but because they think it is going up. They buy in anticipation of a rise, that they may sell at a profit. Andrerseits, when they anticipate a decline, they sell that which they have, or that which they borrow, in order to buy it again at a lower figure. They sometimes stay temporarily the natural course of the market, and are crushed by it. Sie haben stets as much power, and exercise as much influence, in putting the price down as in putting it up. They equalize prices as much in the gold market as in any other. (178, 179) Ferner: Da premium on gold kein correct measure of the purchasing power of the current money, so giebts keine Methode of obtaining accurate statistics of the prices in gold of commodities which have been bought and sold for paper only. To turn paper prices into gold, at the current rate of premium, does not furnish an accurate test of what gold prices would have been if treasury notes had never been issued. (179)
⦗»money has no price.« p. 181⦘
In den U. St. the supply des circulating medium greatly increased ohne corresponding increase des amount of work to be effected with it, or any foreign outlet for it. (181) Die treasury notes »without a sufficient restriction of their quantity … were consigned to certain depreciation, whether a legal tender or not.« (181, 182) Ohne ihre quality of legal tender, würden die treasury notes »have circulated equally well with the bills of suspended banks.« (183) When the Rebellion broke out, specie dropped out of circulation. The whole business of the country was transacted with „current funds“ ⦗i. e. inconvertiblen notes⦘ before treasury notes were issued. (182) In den Southern States, während der Rebellion: Confederate Treasury Notes were never a legal tender; yet they passed current as money, and depreciated in a ratio with the increase of their quantity and the disasters of the Rebellion. The currencies of the two combatants went through almost precisely the same phases, differing in degree, obgleich das eine »was not by law a legal tender«. (183) Im Norden, auch ohne legal tender quality, »to have objected to receiving treasury notes when inconvertible banknotes were the only alternative, would never have ocurred« to the Northern People. (184)
The money paid out by government in purchase of supplies and in wages to soldiers would, by the vast majority of people, have been received without hesitation or question. But, when money is once in circulation, no hostile minority can impede its circulation. The poorer currency supersedes the better. Every man keeps the better and parts with the poorer. If a currency circulates at all, the poorer it is, the more rapidly it circulates. All that the disaffected minority could have done them, would have been to have made greenbacks circulate more rapidly, exactly what the legislators attempted to do, who passed the legal-tender act. (184)
Das Wahre war to have taxed banknotes out of existence, leaving treasury notes to have filled the whole circulation … nie war da »necessity of issuing inconvertible paper in excess of the mixed currency prevalent before the war«. War zu jener Zeit, including Banknotes u. Specie, in den Northern States »not far from $350,000,000«. Hätte man alle banknotes summarisch unterdrückt, soweit sie aufhörten to be convertible into specie on demand, u. treasury notes issued, so weit als grad nöthig zu füllen die natural circulation des Landes, Gold would never have risen above a moderate premium, Kriegskosten vermindert um viele Millionen, even though bonds had been sold at a discount. Mindestens ¼ unsrer (amerikanischen) present national debt to be traced to that financiering which encouraged the issue of banknotes convertible only in inconvertible paper. ([184,] 185)
Practical effects des legal tender act: 1) By a most immoral and illogical decision of the courts, it (the act) was held to apply to debts contracted before its passage. So Theil des Eigenthums der creditors transferred to their debtors; letzte, »to realize the gift« begannen sofort Schulden, contrahirt in Gold, mit depreciirtem paper zu zahlen; so large sums loaned on mortgage security auf den Markt geworfen für reinvestment, wahrscheinlich altogether 3–4 [hundred] Mill. $. Da unter dem legal-tender act, a loan on mortgage nichts ist als an investment in government securities, zogen investors vor the higher form of security, nämlich bonds bearing gold interest den treasury notes yielding, when loaned on mortgage under the usury laws, a less rate. So die negotiation of government loans was facilitated. (185)
- effect of the legal-tender act on the construction of contracts made under it (l. c.) (will be considered later on.)
Text nach MEGAdigital (Berlin-Brandenburgische Akademie der Wissenschaften), MEGA² IV/25, Lizenz CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/); der editorische Apparat der MEGA ist nicht wiedergegeben. ↩