Reminiscences of Sixty Years in Public Affairs, Vol. 2

G >> George S. Boutwell >> Reminiscences of Sixty Years in Public Affairs, Vol. 2

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The dollar was coined and it was known as the Trade Dollar. It
contained 420 grains of standard silver.

The Mexican dollar which contained about 416 grains, was then sold at
a premium, and it was used extensively in the China and India trade.

It was my expectation and the expectation of all concerned, that the
trade dollar, from its added value, would take the place of the Mexican
dollar in the immense trade of the East. My own confidence was great.
Indeed, the thought of failure never occurred to me. Unfortunately,
the stolidity of the Chinese and the force of habit among that people
were not considered by us. From long use they had become accustomed
to the Mexican dollar. They refused our trade dollar, notwithstanding
its greater weight.

We coined and put into circulation, at home and abroad, about
36,000,000 pieces, many of which were afterwards recoined as legal
tender dollars under a special act of Congress.

With the failure of that undertaking came the crusade against the act
of 1873. Whether the two events sustained to each other the relation
of cause and effect, I cannot say.

The suggestion that Senator Stewart of Nevada was assenting to the
demonetization of the silver dollar derives support from the fact that,
in the month of February, 1874, he indorsed the gold standard in two
speeches, delivered, respectively, on the 11th and 20th days of that
month. On the 11th he said: "I want the standard gold, and no paper
money not redeemable in gold." On the 20th he added: "Gold is the
universal standard of the world. Everybody knows what a dollar in gold
is worth."

It is certain that in the month of February, 1874, when the contents
of the Mint Bill were in the public statutes, the demonetization of the
silver dollar, and the recognition of the gold dollar as the unit of
value, had not affected the judgment nor disturbed the sensibilities of
the advocates of silver.

I dismiss this branch of the subject with the observation that the act
of 1873 placed the United States in a commanding position in regard to
the use of silver. If that metal had continued to maintain its
supremacy upon the ratio then established between gold and silver coin,
there could have arisen no demand for the coinage of silver. If, on
the other hand, silver should depreciate, the government might, at
its pleasure, use, or it might decline to use, that metal as coin.

I now pass to a part of the history of the controversy not heretofore
considered in public discussions, from which it will appear that the
trusted representatives of the silver interest put aside the most
inviting opportunity, if not the only opportunity, for the adoption of
the bimetallic system by the commercial nations of the world.

The act of 1873 prepared the way for the use of silver by the
commercial nations of the world, upon an agreed ratio with gold, if
indeed, the possibility of such an arrangement ever existed. We were
upon a gold basis; the balance of trade, by groups of years, was in our
favor; we had a gold revenue from customs of about $200,000,000, and
the excess of Treasury receipts over expenditures was nearly
$100,000,000 a year.

If we had chosen to accumulate gold and postpone payments upon the
Public Debt, we could have brought the nations of the earth to our feet.

It was under circumstances thus favorable for negotiations for the use
of silver that the Silver Commission of 1876 was constituted, and
authorized, among other things, to inquire "into the policy of the
restoration of the double standard in this country, and if restored,
what the legal relation between the two coins of silver and gold,
should be."

This authority opened a way for the introduction of a policy on the
part of the United States looking to an arrangement for the use of
silver by the states of Europe, and on that authority the commission
dealt with the project of an international bimetallic system.

The commission consisted of eight persons. Senator Jones was the
chairman, and Mr. Bland, of Missouri, was an influential member. It
was my fortune to be of the commission and it was my fortune also to
be alone in opinion upon the main questions that were treated in the
reports.

The majority of the commission consisted of Messrs. Jones, Bogy,
Willard, Bland and Groesbeck. They favored the remonetization of the
silver dollar, and that without delay.

Of the points made in their report, I mention these. They said: "The
supply of gold is diminishing, being now but little more than one half
what it was in 1852, and is always so fitful and irregular from the
method of its production that it is ill-suited to be a sole measure of
value."

This statement as a statement of an existing fact was wide of the
truth, and as a prophecy it was as fallacious as are the prophecies
which predict the destruction of the world. From 1851 to 1855 the
annual gold product of the world was 6,410,324 ounces. From 1876 to
1880 the annual gold product of the world was 5,543,110 ounces. The
gold product of the latter period was eighty-six per cent of the gold
product of the former period.

Far wide of the truth were the predictions of the majority in regard
to the future product of gold. For the year 1894 the product was
8,737,788 ounces, or about thirty-seven per cent over the product of
1851-'55.

They, the majority, said: "No increase in the yield of silver in the
immediate future seems upon the whole to be probable." The commission
said further: "The exchanges of the world, and especially of this
country, are continually and largely increasing; while the supplies of
both the precious metals, taken together, if not diminishing, are at
least stationary, and the supply of gold, taken by itself, is falling
off."

Each of these two statements in regard to the precious metals was a
serious error, and in their controlling influence upon the judgment of
the commission they were fatal errors.

The gold product of the world in 1876 was 5,016,488 ounces. In 1894
the product had risen to 8,737,788 ounces, a gain of more than
seventy-four per cent in the short period of eighteen years.

In 1876 the product of silver was 67,753,125 ounces, and in 1894 it
was 167,752,561 ounces, a gain of about 147 per cent in eighteen years.

Upon these errors the majority of the commission based a policy by
which the only opportunity that the country ever had for the
establishment of a bimetallic system which should include the
commercial nations of Europe, was put aside and forever lost.

If, in 1876, I had anticipated the immense increase in the product of
silver, I might have hesitated, but in the view that I was then able
to command I had great confidence that a bimetallic arrangement might
be secured.

The majority of the commission favored bimetallism but they demanded,
first, the remonetization of the silver dollar. On the other hand,
I claimed that all thought of the further use of silver should be
postponed until the attempt to secure the co-operation of other
countries had been tried faithfully.

The policy of the majority of the commission prevailed, and it was
consummated by the Statue of 1878, which was passed over the veto of
President Hayes, and which authorized the coinage of the silver dollar.

When we had accepted silver, when we had abandoned the vantage ground
that we had occupied, it was in vain that we solicited the co-operation
of England, France and Germany. The adoption by the United States of
a silver-using policy led the statesmen of those countries to
anticipate the more extended and continuous use of silver leaving to
them a monopoly of gold, while we should sink financially to the level
of the degraded states of the world. That catastrophe we have escaped
after an experience of twenty-five years, and then only by the
combined efforts of the two great political parties.

I submit brief extracts from the report of the majority of the
commission and from my individual report of 1876, that our relative
positions may be understood.

The commission said: "We believe that the remonetization of silver in
this country will have a powerful influence in preventing, and probably
will prevent, the demonetization of silver in France and in other
European countries in which the double standard is still legally and
theoretically maintained."

Again the majority said: "It may be added that a legislative
remonetization on the relation to gold of 15.5 to 1 accomplishes
without delay all the objects of the proposition for an international
conference, which is urged from various quarters."

That I may place myself where I stood in 1876 I present brief extracts
from my report of that year.

First I said: "There can be but one standard of value in any country
at the same time, and a successful use of gold and silver
simultaneously can be effected only by their consolidation upon an
agreed ratio of value, and by the concurrence of the commercial nations
of the world.

"The undersigned is also of opinion that it is expedient for this
Government to extend an invitation to the commercial nations of the
world to join in convention for the purpose of considering whether it
is wise to provide by treaties and concurrent legislation for the use
of both silver and gold in all such nations upon a fixed relative
valuation of the two metals; and, finally, that until such an
agreement between this Government and other commercial nations can be
effected, the United States should pursue the existing policy in regard
to the resumption of specie payments."

Further I said: "It is to be apprehended that the remonetization of
silver by the United States at the present time would be followed by
such a depreciation in its value as to furnish a reason against the
adoption of the plan by the rest of the world, and that an independent
movement on our part would increase the difficulties rather than
diminish them."

These extracts shall suffice. I now repeat the assertion with which I
introduced this topic, viz.: That in 1876 the majority of the Silver
Commission put aside the most favorable opportunity, indeed the only
opportunity, that the country has ever had for the organization of a
universal system of bimetallism.

Of that majority, Senator Jones of Nevada, and Representative Bland, of
Missouri, were the leading members. If in defence or in extenuation
of the policy of the majority it shall be said that the United States
has not remonetized silver, and that, therefore, the policy of the
majority has not been tested, a partial rejoinder, if not, indeed, a
satisfactory reply, may be deduced from the facts that between the
years 1878 and the year 1893 the Government coined more than
400,000,000 silver dollars, and yet, in that period of time, silver
bullion fell from 1.15 plus per ounce to .65 plus per ounce.

It is worthy of notice that the product of silver in the United States
has increased with the demand for silver. Upon the passage of the
Sherman Bill the product advanced from 45,000,000 ounces in 1888 to an
average of 55,000,000 ounces from 1889 to 1893, inclusive. Upon the
repeal of that act the product fell to 49,000,000 ounces in 1894.

It is not only probable, it is certain, that with every increasing
demand for silver there will be an added supply. Consider what has
happened since the appearance of the inventions of which I have spoken.

The world's annual product of silver from 1493 to 1865, inclusive, was
16,887,157 ounces. The largest annual product was from 1861 to 1865,
when it reached 35,401,972 ounces. From 1866 to 1894 inclusive, the
annual average product was 114,326,397 ounces. In 1894 the product was
167,752,561 ounces, which, as will be observed, was about nine times
the annual product from 1493 to 1865.

From 1876 to 1894 the business of silver mining was increased 147 per
cent. Can any one name any other business or pursuit in which there
was a like increase? And is not the inference justified that the
profits have been large and tempting, notwithstanding the
demonetization of silver in some countries and the suspension of
coinage in other countries?

I turn now to the future, and first as to the possibility of the
further use of silver as currency.

I assume that in countries where the standard is gold there may be a
considerable use of silver, as in the United States to-day.

An international bimetallic system, binding nations to each other for
a definite term of years, is a proposition involving large
responsibilities.

If in 1885 it was not practicable to secure the adoption of the
bimetallic system, when silver was worth eighty-four cents per ounce,
what is the prospect of its adoption when silver is worth only sixty-
four cents per ounce, with an annually increasing product and a
diminishing price?

What remains? This, possibly: That the nations may agree to purchase
each a per cent of a fixed amount of silver as the product of each
year. This scheme might prove, and probably it would prove, to be only
a temporary expedient.

The enormous increase in the business of silver mining is evidence that
the profits are far in excess of the profits that are gained in other
pursuits. The increase in product is likely to be followed by a fall
in price. Such are the resources of the earth that an increase in the
demand for silver will be followed by an increase in the supply.

Gold mining is obedient to the same law. From 1876 to 1894 the product
increased 74 per cent. That ratio of increase is likely to continue.
The world is not in peril of a gold famine. Gold as a currency,
passing from hand to hand, will be used less and less. Substitutes,
for which gold can be obtained, will be preferred. The volume of
currency in a country is not limited by the amount of gold that a
country may possess. It may increase the amount of subsidiary coin
very largely, and it may add to the sum of paper money, provided that
that paper money is always redeemable in gold.

Nor does the quantity of gold in a country determine the price of
commodities, except as that gold is a part of the total volume of the
currency of the country. The volume of currency as a whole is the
force by which the salable value of commodities is affected.

In truth, gold plays a small part only in actual business. It is a
regulator of business rather than an active instrument for the
transaction of business. It is not an exaggeration to say that the
use of gold in business is limited to a small fraction of one per cent
of the aggregate transactions in countries where gold is the standard.

It is not improbable that in the near future the world is to meet a
surfeit of gold, as it is now meeting a surfeit of silver. Yet even
then its capacity as a standard will not be affected. History does
not carry us to a time when gold was not the recognized standard for
the measurement of every other kind of property, and that not by one
tribe or people only, but by mankind in every clime and in every stage
of savageness or of civilization.

As the Mint Bill and the demonetization of silver have occupied the
attention of the country for a third of a century, and as there may be
a revival of the controversy at a time in the future I have thought it
wise for me to make a record of the facts in the most enduring form at
my command.

At the end this is my claim for the Mint Bill of 1873: It established
the gold standard for the United States for all time. All the
subsequent legislation has rested upon the fact that the Statute of
1873 made the gold dollar the standard of value in the United States.

XXXV
BLACK FRIDAY--SEPTEMBER 24, 1869

So much time has passed since September 24, 1869, that there may be a
large public who may become interested in a review of the events of the
spring and summer of that year which culminated in Wall Street, New
York, in the transactions and experiences of the day known as "Black
Friday."

When the Forty-first Congress assembled in December of that year, the
House of Representatives directed the Committee on Banking and
Currency "to investigate the causes that led to the unusual and
extraordinary fluctuations of gold in the city of New York, from the
21st to the 27th of September, 1869." The committee made a report
which was printed under date of March 1, 1870, and which may be found
in a volume entitled "Garfield's Report on the Gold Panic
Investigation." From that report it appears that certain persons in
the city of New York entered into an arrangement, or understanding, or
combination, as early as the month of April, 1869, for the purpose of
forcing the price of gold artificially to a rate far beyond what might
be called the natural price. The committee, of which General Garfield
was chairman, characterized the combination as a conspiracy.
Technically and in a legal point of view the parties concerned could
not be treated properly as conspirators. It does not appear that they
contemplated the violation of any law, but only a policy by which gold
might be advanced from time to time, and out of which advance large
sums of money might be realized by those who were holders of gold.
Upon that theory Jay Gould and James Fisk, Jr., who were the leaders
and organizers of the combination, with their associates, made large
purchases of gold at prices varying from thirty to thirty-five per
cent premium. At the close of the month of April, the price of gold,
not then, as far as known, under the influence of any speculative
movement, was at a premium of about thirty-four per cent. The
indications were that, during the months of May and June, the parties
interested in the combination made large purchases. By the 20th of
May the price had reached a premium of forty-four per cent. From
that time onward, until the last of July, the premium diminished, and
at that date the rate was thirty-six per cent.

When I entered the Treasury Department in March, there had not been
sales of gold nor purchases of bonds by the Treasury Department as a
policy, and but few transactions on either side had been made by my
predecessors in office. As early as the 12th day of May I commenced
the purchase of bonds for the sinking fund and for the reduction of the
interest-bearing public debt. The total purchases during the year
1869 amounted to something more than $88,000,000, for which there was
paid in currency $102,000,000 and a margin over. At that time, the
customs receipts were in gold exclusively, and the purchase of bonds
could only be made by a sale of bold or by a direct purchase of bonds
to be paid for in gold. Suggestions were made by bankers and others
in the city of New York, and perhaps elsewhere, that the purchase of
bonds should be made in gold. This suggestion was not acceptable to
me, and upon the ground that the sale of gold would be limited to those
who had bonds, or who could procure bonds, for the payment of gold.
From the 29th of April, when the first sale of gold was made, until the
31st day of December, the sales amounted to something more than
$53,000,000, and the proceeds to something over $70,000,000. The
difference in the amount realized from the sale of gold and the amount
paid for bonds purchased was met by the excess of receipts over the
expenditures of the Government during that period.

As having some connection, and perhaps an important connection, with
what is to be said hereafter touching General Grant's action in the
days of September, when the speculation was going on, I think it proper
to make a statement of my relations to the President. I had declined
the office of Secretary of the Treasury, and on the morning of my
nomination to the Senate I wrote a letter to Mr. Washburne, through
whom the invitation of the President that I should accept the office
was made, requesting him and urging him to say to the President that
I was unwilling to accept the place. My nomination was sent to the
Senate and confirmed, and as there seemed to be no alternative for me,
I entered upon the duties of the office. Due in part to these
circumstances, as I think, the President accepted the idea that the
management of the Treasury Department was in my hands, and from first
to last, during the four years that I was in his Cabinet, his acts and
his conversation proceeded upon that idea. Moreover, he was influenced
by a military view that an officer who was charged with the conduct of
a business, or of a undertaking, should be left free to act, that he
should be made responsible, and that, in case of failure, the
consequences should rest upon him. It happened, and as a plan on my
part, that neither the President nor the Cabinet was made responsible
for what was done in the Treasury Department. Hence it was that I
presented to the Cabinet but two questions. One of these was of no
considerable consequence. The other related to the political effect
that might follow a loan that I contemplated making upon certain terms
in the year 1872, when the Presidential contest was pending. In the
line of these views, it happened that I announced my purpose to
purchase bonds in May, 1869, without conference either with the
Cabinet or with the President. When the announcement was made, there
was a slight advance in bonds. In order that the business interests
of the country might not be influenced by an apprehension that changes
might take place in the policy of the Department, I announced (as
stated in Chapter XXXIII) at the beginning of each month the sales of
gold and the purchases of bonds that were to be made during the coming
month. Those announcements were sent out on the evening of Sunday,
either the last Sunday of the closing month or the first Sunday of the
opening month. The despatches were written by myself Sunday evening,
and sent to the Assistant Treasurer at New York. A copy was given to
the agent of the Associated Press, that the public might be informed
in the morning of the policy for the ensuing month, and that there
should be no opportunity for speculation by persons who might obtain
information in advance of the general public. Unhappily, this policy
was made the basis of the proceedings in New York which culminated in
"Black Friday." The parties interested--I do not call them
conspirators--assumed that for thirty days the policy of the department
as to the sale of gold and the purchase of bonds would remain
unchanged, and on that basis they proceeded to make arrangements for
the advance in gold. Not satisfied with that policy, which was
designed to save the business community from unnecessary apprehensions,
an attempt was made to induce me to make an announcement for two or
three months. Such suggestions were made in letters that I received
from interested parties in the city of New York.

Speculation in gold was not all on one side. There were speculators
who were anxious to break down the price of gold, and between the lines
I could read the condition of the respective parties from whom I
received letters. Under date of September 23, I received a letter
from a prominent house in New York in which the writer said: "I am
actuated to again portray to you the state of financial affairs as they
now exist in this city. The speculative advance in gold has brought
legitimate business almost to a standstill, owing to the apprehension
of a corner, which from appearances may appear at any moment."

It did not follow that the writer of the letter was "short on gold," as
the phrase is. I had, however, in my possession at the time a list of
persons in New York who were supposed to be contestants, some for an
advance in gold and others for a fall. The writer of the letter was
among those whose names had been given to me as speculators for a fall
in gold. In this connection I may say that it was no part of my policy
to regulate affairs in Wall Street or State Street or Lombard Street.
Until it became apparent that the operations in New York affected
largely and seriously the business interests of the country, and until
it became apparent that the Treasury receipts were diminished by the
panic that had taken possession of the public, I refrained from any
interference with those who were engaged either in forcing up or
forcing down the price of gold.

Under date of the 24th day of September, I received a letter from my
special and trusted correspondent in the city of New York in which I
find this statement: "This has been the most dreadful day I have ever
seen in this city. While gold was jumping from forty-three to sixty-
one the excitement was painful. Old, conservative merchants looked
aghast, nobody was in their offices, and the agony depicted on the
faces of men who crowded the streets made one feel as if Gettysburg
had been lost and that the rebels were marching down Broadway. Friends
of the Administration openly stated that the President or yourself must
have given these men to feel that you would not interfere with them or
they would never dare to rush gold up so rapidly. In truth, many
parties of real responsibility and friends of the Government openly
declared that somebody in Washington must be in this combination."

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