Sunday, March 31, 2013

Our Financial Policy

Thomas H. Benton at the commencement of the Mexican war, condensed the method of sound national financiering into a single phrase: “Taxes first, loans next, and treasury paper last.”  Congress began at the second step last summer, and is now urged to take the third with perfect recklessness.  It is so much easier to stamp paper with showy pictures and delusive promises and call it money, than it is to draw real money by direct taxation from the pockets of the people, that our legislators have strong temptations to pursue the former course.  Debtors, who wish to pay off their obligations in a depreciated currency, speculators, who have stocks or goods to sell, and seek to obtain high prices under an inflated currency, foreign bankers, who wished to raise the rate of exchange and cause a flow of gold to Europe, and government contractors who, in the general unsettling of values, can charge the most exorbitant rates for supplies – all these classes desire an excessive issue of irredeemable paper money.  But there are strong symptoms that Congress will shut down on “demand notes” after $50,000,000 are issued, and will leave no article untaxed which is capable of yielding a revenue.  The House committee of ways and means are diligently at work adjusting the details of new internal tax bills which will produce, it is thought, at least $200,000,000 per annum, with the tariff duties already levied on imports.  This is beginning at the right end.  The beneficial effects of such rumored action is seen in the decline of the premium on gold from 5 to 1½@2 per cent. during last week.  Loans can be easily obtained at fair rates of interest, if securely anchored on stiff taxes.  Treasury paper can be resorted to as a temporary expedient, while waiting for taxes or loans to come in.  But there should be no humbug about it, no leaning upon it exclusively.  Broken promises and worthless pledges should form no part of the currency of a rich and intelligent people.  Irredeemable paper money is “played out” as a financial resource.  It has ruined more people that war for the last 150 years and has disgraced governments more deeply that defeat.  Experiments with it have always ended in one way, and burned the fingers of both rulers and subjects.  Are we to learn nothing from history?  No matter if the “demand notes” should be ultimately redeemed, as we all believe the will be.  They have depreciated already, so that 5 per cent discount has been charged upon them at Washington, even for “drinks.”  Increase the quantity, expand the general circulation with these notes, and they depreciate still further by a law as inexorable as that which melts snow and ice in a warm day.  For they are not money, calling them money will not make them so, acts of Congress and official autographs will not hold them up.  Alchemy of lead and iron is an exploded old fogy idea, but alchemy of paper, though just as ridiculous and impossible has many advocates.  Gold and silver are the only recognized money of the world.  Paper currency, however well secured will not pass in our trade with other nations.  A huge volume of “demand notes” will assuredly drain us of gold to be sent abroad, for we cannot stop trading with the rest of mankind, and must pay them balances in gold, and see balances rapidly accumulate against us from the withdrawal of orders for produce, which an inflated currency will carry up to a pitch making it unprofitable to buy of us, in comparison with countries enjoying a stable currency.  It may be tiresome to repeat so many truisms, but the great importance of the subject, and the fanciful bubbles that are blown by serious journals and admired by dashing operators of the John Law and Jules Isaac Mires class will justify the continued discussion. – {Springfield Republican.

– Published in The Burlington Weekly Hawk-Eye, Burlington, Iowa, Saturday, February 1, 1862, p. 1

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