Sunday, April 12, 2015

John M. Forbes to Senator William P. Fessenden, January 13, 1862


New York, January 13, 1862.

My Dear Sir, — I see that the financial question is pressing, and before I turn my face eastward I cannot help repeating some of the suggestions which I have already made, the soundness of which is chiefly the discussion here, where so many are opposed to them.

1st. Taxation for interest and current ordinary expenses; on this all agree now, but many will oppose if you once get into the “irredeemable gulf.”

2d. Your main reliance for carrying on the government must be upon selling your long bonds at the best prices they will bring after a fixed policy has been announced, and of course using proper judgment as to the time and manner of bringing them forward.

3d. Avail of short loans, exchequer bills, or emission of small notes for currency, under the advice of experts in whichever manner or form promises to give greatest relief temporarily; but it will be a fatal error to rely upon it as your chief dependence. It is limited in amount and liable to great mischief the moment it is pushed beyond a certain and very moderate amount.

4th. Make this currency, or short paper, or demand paper, in whatever shape you put it, as good as possible by providing for its being received by government for all dues, by fixing a mode of its redemption, and by making it fundable at a good rate of interest. Raise it all you can, so as to make it good, and cause it to be received by all classes voluntarily in payment of debts already existing, but avoid making it a legal tender unless you want to see it depreciate. To make it a legal tender will be to give notice to capitalists to get their capital out of the country as fast as possible, and to foreign capitalists to keep from sending money here, and to sacrifice what available stocks they have, government included, as early as possible before the depreciation has got very bad.

5th. Finally, avoid pledging anything but the faith of the government for your debt.

It will be urged to pledge your revenues, or certain specified parts of them. If this pledge covers all your issues, past, present, and future, it amounts to nothing. If confined to the present debt and to certain specified loans it will be urged upon you by those who hold the present loan and wish it secured, and who wish to see the war ended, even at the cost of disunion or submission, whenever the loan now authorized is expended.

If our policy is to be war until we succeed, whether it cost us five hundred millions or five thousand millions (about England's debt), let us have no pledge of our revenue. Even if the loan was sure to be limited, it would be unworthy the dignity of government to pawn our revenue for it, like a Mexican or South American state, and would defeat its object if that object really was to raise the public credit.

We are rich and strong, and it only requires strong action and wise measures of finance at this crisis to carry us through.

Most respectfully and truly yours,
J. M. Forbes.


I fear the interest of the banks in keeping up for a little while the price of the long bonds (1881) may influence them to other and temporary expedients. If you follow their advice you will soon see them slipping out of their long bonds at the best prices they can get.

If one doubted about the true policy, the opposition to it of the “Herald,” the organ of the seceders, should turn the scales. It goes for irredeemable currency and for short expedients. It wants to see the war short — and disgraceful!   J. M. F.

SOURCE: Sarah Forbes Hughes, Letters and Recollections of John Murray Forbes, Volume 1, p. 277-9

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