The Pamphlet Collection of Sir Robert Stout: Volume 4
Only within the past three hundred years have paper notes, secured by gold, been used as money; and within the past fifty years banking, under this system, has become one of the "fine arts." Expert financiers frequently balance twenty dollars in paper with one in gold; occasionally they fail to maintain a balance, and when they do the paper always falls to their creditors—for an expert financier never looses his grasp on gold.
Financial feats in balancing paper and gold were practiced in this country extensively previous to our late war; and it is being practiced largely in England at the present time. In 1857 there were two hundred and sixty-three banks in the New England states, not including those in Boston, circulating $24,880,000 in their own notes, with only $2,110,000 in specie, held for redemption; twelve dollars in paper to one in gold! The same year New York State banks were circulating seven dollars in paper to one in specie, held for redemption. March 27, '57, the Clearing House transactions, for fifty-four New York city banks, amounted, in round numbers, to $40,500,000 in paper, balanced by $1,500,000 in gold; twenty-seven dollars in paper to one in gold!
This was on the eve of the great financial panic, and the inflation bubble was rapidly approaching a collapse; but the fifty-four city banks were sound, as far as their own notes were concerned, for their circulation was less in amount than the specie held in their vaults for redemption; but they were floating large amounts of doubtful paper hypothecated by stock jobbers and other speculators. August 8th, '57, the loans of those fifty-four banks amounted to $122,000,000, their circulation $9,000,000, and the specie in their vaults amounted to $12,000,000. October 8th, '57,—the blackest day of the panic—their loans amounted to $97,000,000, their circulation to $8,000,000, and their specie to page 21 $8,000,000. From August 8th, to Oct. 8th, '57, those fifty-four banks reduced their loans only $25,000,000; thus leaving $97,000,000 in the hands of speculators, which they were unable to call in in time to save their depositors from bankruptcy. It is plainly evident that the panic of 1857 was not caused by an over-issue of bank notes, or in other words by an inflation of bank notes. It was caused wholly by the banks loaning their deposits to speculators without proper securities. The banks had, for a long time, been loaning deposits at a high rate of interest, on very poor securities; consequently the banks became inflated with worthless securities, and when the people called for their deposits, instead of receiving bank notes, they were invited to examine the worthless assets held as securities for their money. The Ohio Life Insurance and Trust Co., at that time supposed to be the corner-stone of the financial system of Ohio, went into bankruptcy; and the grand inflation scheme of 1857, which was reared upon a gold basis, collapsed, with a heavy balance in favor of the speculators. Panics will occur under any financial system where gold is the standard of values, and a high rate of interest is allowed on the currency of the country. A high rate of interest is the talisman that draws money from legitimate trade into wild speculations.
For fourteen years our currency has been government notes, secured by the whole material wealth of this great nation. No juggling device of a gold standard has interfered with its free circulation, and, therefore, it has worked admirably. There never has been any system of currency to equal it, in convenience, economy and security; and if it is abolished, it will be the most gigantic fraud that was ever perpetrated upon a free people.
England claims that her currency is founded upon a gold basis: let us see if that is so. The first issue of $75,000,000 in Bank of England notes is secured by Bills of Exchequer, and the law requires that the balance of its issue shall be secured by gold held in its vaults; but when there is any extraordinary demand for money, parliament conveniently suspends that portion of the bank act requiring gold securities, and the bank is allowed to issue notes on government securities, until the demand for money is fully supplied.
There. are thirteen banks in England that are floating $500,000,000 in paper, with $10,000,000 in gold to secure their page 22 loans and indorsements; fifty dollars in paper to one in gold! Such is England's boasted financial policy, established on a gold basis. Cannot hard-money advocates discover inflation in this system of banking? There is one creditor of the English government that could collapse that gigantic financial bubble and beggar the nation! And yet we are told, by some of our senators, that unless our financial policy is established upon the English basis our foreign credit will be destroyed. "What do we want to establish a foreign credit for? Can't we produce as much as we consume? or, have we got to eternally run the nation in debt in order to exist? If the entire wealth of the nation is to be bonded for the purpose of obtaining foreign capital to create and enrich a money aristocracy, then the quicker we destroy our credit the better it will be for the American people. The people must rise en masse and wipe out class legislation, and class legislators, or the entire profits of production will be secured, through class legislation, to a money oligarchy, and the balance of the people will become slaves and paupers. That is the condition of the people of England to-day: the producing classes are slaves to a money oligarchy, and the balance of the people are paupers.
There is an abundance of currency in the National Banks at the present time, and yet there is a great depression in trade; simply because money speculators have drawn the currency into their coffers for the purpose of enforcing a high rate of interest.
Manufactories are suspending, and the operatives, being out of employment, are forced to a minimum consumption. Merchants are failing in their business in consequence of underconsumption, and thousands of honest laborers are forced into the great army of tramps that beg from door to door, until hunger tempts them to become criminals. All this suffering and crime is the result solely of class legislation. And now when the mischief is done, and money cannot be loaned in consequence of the great prostration of business, producers are invited to resume their toil on borrowed capital, at a lower rate of interest. Spring has come again; but a dead horse cannot eat grass, be it never so plentiful! Nearly the entire press of the Middle and Eastern States is controlled or overawed by the money power of the country. It dares not advocate a just financial policy, but it panders to the interest of the National Banks, and treats with ridicule every honest effort made by the people to unshackle the golden chain that is dragging them to destruction. page 23 The bond-holders claim that they took great risks in loaning the government money during the war, and they claim that they should be well paid for it. They want to convert the balance of the treasury notes into government bonds, and subject the country again to the old inflation system of banking upon a juggling gold basis. We know that some of the bond-holders took great risks in running the blockade; for they were engaged in supplying both sides with the sinews of war, for the purpose of prolonging the contest, and thereby enriching themselves at the expense of the government.
But the men that did the lighting took some risks, and thousands of them are now laying in unknown graves, while their wives and children are pleading to the government to repeal the acts that place them at the mercy of the bond-holders, who are steadily forcing them to pauperism and crime. Laboring men, instead of joining trade unions and striking for higher wages, should unite upon a financial policy that would secure to them the profits of their labor. They should not be led away by church and school questions. Religion has been used in all ages of the world, by political demagogues, to divide and enslave the people. The only vital question for the people to settle at the ballot box is, how to exchange the products of the country and prevent public robbers from securing all the profits of labor.
Organize! There is no time to lose! The money oligarchy is marshaling the speculators and office seekers for another four years raid upon the industries of the country, and the Grangers of the West and South are moving in solid phalanxes against them. The toilers of the East should break their party shackles and join the great army of producers in their noble effort to secure a currency that will protect them against legalized juggling with the national measure of values.
An honest financial system is the only foundation that will sustain a just and substantial government. Liberty, prosperity, and the life of our nation depends upon it!
We should review the past, that it may guide us in shaping our future.
We must disabuse our minds of the false idea that there is no solid wealth in any thing but gold.
We can perpetuate our government at its highest pinnacle of prosperity, and avoid the fate of Greece and Rome, by protecting honest industry from legalized robbery, and absolving our nation from The Curse Ok Gold!