sity for immediate severe taxation; and taxation is scarcely ever popular, even with the most patriotic. So an additional issue of one hundred and fifty millions was authorized, thirty-five millions to be in denominations of less than five dollars. This act was approved by the President July 11, 1862.

In the absence of other methods for the support of the armies and the navy, and in the presence of constantly-increasing expenditures and greater facilities for the production of paper money-joined with its growing popularity-the limit of the legal-tender issues was not probable to be long preserved at even three hundred millions. The Secretary was compelled to make prompt use of all the authority conferred upon him, and rapidly exhausted it. The system worked so efficiently, indeed, that before the end of the war, Congress had authorized the application of the legal-tender sanction to one form or another of Government obligations to a total amount of TWELVE HUNDRED AND FIFTY MILLIONS OF DOLLARS! These several forms of legaltender obligations may be thus summarized:

1. The legal-tender United States notes, commonly called "the greenbacks," four hundred and fifty millions: authorized by the acts of February 25 and July 11, 1862, and March 3, 1863. Of the issues thus authorized, however, sixty millions were to be in lieu of the "demand-notes," and fifty millions were to be held as a reserve for the reimbursement of the temporary loan beyond other convenient means of satisfaction. The Secretary was directed to retire the demand-notes as rapidly as practicable.

2. Treasury notes payable not more than three years from date, bearing interest in currency at a rate not exceeding six per cent. (principal payable in currency also), four hundred millions. Act of March 3, 1863.

3. Treasury notes redeemable after three years, bearing a currency interest not exceeding seven and three-tenths per cent. per annum, four hundred millions. Acts of March 3 and June 30, 1864.

How far these several acts were availed of by Mr. Chase, the following brief statement will show:

The whole legal tenders outstanding on the 30th of June, 1862, were $149,660,000; of which $53,040,000 were demand

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notes. The total of the public debt at the same date was $514,211,371.92.

The whole outstanding legal tenders on the 30th of June, 1863, were $390,997,608; of which $3,351,019 were demandnotes; and the public debt was $1,222,113,559.86.

The legal tenders outstanding June 30, 1864, amounted to a total of $600,431,119; of which $780,990 were demand-notes; $431,178,670 were legal-tender notes proper; $15,000,000 were three-years six per cent. compound (currency) interest-bearing notes; $44,520,000 were one-year five per cent. (currency) notes; and $108,951,450 were two-years five per cent. (currency) notes. The public debt was $1,740,690,489.49.1

The war experience seems to justify the conclusion that the legal tender was a measure warranted by political and military necessity, and that there was no other means of escape from the financial embarrassments existing at the time of its adoption. Without it the circulating notes of the Government would have been of no more value than the notes of the suspended banks; possibly they might have been of less value; but with it, they were clothed with a power which at once gave them a marked superiority. Many of the banks would have rejected them— not always from want of patriotism, but from motives of selfinterest; and they would have been refused by a considerable class of citizens who, hostile to the war, would not have hesitated to clog its management in every way not actually treasonable. Both these probabilities are attested by facts connected with the issue of the "demand-notes." The difficulty disappeared under the operation of the legal tender. It enabled the Government at once to relieve itself of embarrassment. It secured prompt and ample supplies for both army and navy. It relieved and invigorated the industries of the people. It restored confidence, by furnishing a substitute for money, which for the time, at any

1 Mr. Fessenden stated that on the 30th of June, 1865, the outstanding legal tenders amounted to $669,255,895; of which $472,603 were demand-notes; $432,687,966 legal tenders proper; $42,338,710 were one and two-years currency fives; $15,000,000 were three-years currency sixes; $178,756,080 were three-years compound sixes. The public debt was $2,682,593,026.53.

On the 31st of October, 1968, Secretary McCulloch stated the public debt at $2,808,549,437.55. The United States notes amounted to $428,160,569, and the interest-bearing legal tenders to $178,012,141.

rate, perfectly performed all the functions of money. Though it depreciated when the issues became excessive, the depreciation was too slow seriously to injure creditors generally. The increased business activity produced by the vast consumption of the Government, compensated for such losses. It did not bear with extreme hardship upon salaried persons, because in the main salaries were advanced pari passu with the depreciation. But it did bear with great severity upon those whose income was derived from unchangeable annuities, and large classes of laborers suffered because daily wages did not keep pace with the depreciation. But this was somewhat compensated by the increased steadiness of labor, and the sense of suffering was in a measure lost in the excitement furnished by the war.

Excessive issues increased the public debt more rapidly than if it had been possible to conduct the war upon a coin basis, which was not possible. In the midst of unlimited supplies of "greenbacks," indifference to expenditure was altogether too marked a characteristic of the war administration. On the other hand, however, these extensive issues enabled the Government to "float" its bonds successfully, and kept the aggregate of the debt far below what it would have been if the Government had used the notes of the banks. But they had this miserably bad effect: they bred extravagance and corruption among all ranks and classes of people, and in both the military and civil service.'

1 "Upon an average our army, on a peace footing, has cost us $1,000 annually per man-rank and file. In the war in which we are now engaged we present the extraordinary spectacle of an army hardly ever before equaled in numbers, hired at the rate of wages paid to able-bodied men in the various peaceful avocations from which they were drawn. To the men in the ranks $13 a month is paid, with their food and clothing. The soldier in the French army receives only about 56 cents a month; the pay of our soldiers being twenty times greater. The estimate in the French budget for 1860 was 845,908,744 francs, or $64,687,500, for an army on a war footing of 762,765 men, and in addition a reserve militia on a peace footing of 415,746 men. We all know the maintenance of such an army has created serious embarrassments in the finances of the empire. They have, if we may credit foreign journals, completely changed the policy of the emperor. It costs this country twelve times as much to maintain a soldier in the field as it does the French Government. Our forces now under arms are, consequently, equivalent to 7,500,000 men for that country. It costs us two and a half times as much to maintain a soldier as it does the English Government. We hire our money at twice the rate of interest. Our expenditures per man, measured by the standard of interest paid, are on a scale

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The advance in prices which happened during the war is to be attributed not wholly to the inflation of the currency; it was due partly to the fact that the Government was a vast consumer, and that in the supplies furnished it was counted by most contractors legitimate to cheat the public not only in quality of goods but in the extortion of prices no private purchaser would pay. If all the corruption of this character could be uncovered, it would be appalling. But, after all, there is a very definite sense in which the inflation was the primary as well as the ultimate cause of the corruption and the increase in prices; it furnished the means for both.

The depreciation of the Government notes was not fairly marked by the premiums paid for coin. The fluctuations in the price of gold were certainly extraordinary, and no adequate cause has been assigned to account for them. But they were, doubtless, in part due to military disasters, in part to mere spirit of speculation, and in part to the arts and efforts of public enemies operating in the gold-market. The state of the currency, however, did not account for them all. Thus, on the 13th of January, 1862, the premium in New York was 3 per cent.; it rose to 48 on the 13th of February, and fell to 14 on the 13th of March; then rose again, till on the 13th of June it was 5 per cent.; on the 15th of July it was 17; on the 15th of Octobes it was 32, and closed on the 31st of December at 34. February 25, 1863, it had advanced to 724; but on the 26th of March, there being favorable news from the Southwest, it fell to 401; on the 2d of April it rose again to 58; a few days later, upon receiving report of the iron-clad attack upon Fort Sumter, it fell to 46, and after the battle of Gettysburg, the surrender of Vicksburg, and at the news of the surrender of Port Hudson, to 234. This was in July. On the 16th of October it rose to 56, and went no higher during the year. On the 2d of January, 1864, it opened at 52; it went up to 88 on the 14th of April, and fell to 67 on the 29th. June 22d, the date of the

more than four times greater than for that country. England can expend $1,200,000,000 a year without creating a greater burden in the shape of a public debt than $600,000,000 would be for the United States."(From a "Report of the American Geographical and Statistical Society," January, 1862, cited by Roscoe Conkling, in the House of Representatives, February 4, 1862.)

passage of the gold bill, it rose to 130, and fell next day to 115. On the 1st of July, the day upon which the resignation of Mr. Chase as Secretary of the Treasury was announced to the public, it went up to 185; on the 2d of July it receded to 130, and on the 6th the gold bill was repealed. On the 11th of July it advanced again to 184; on the 15th it fell to 144, and after various fluctuations fell on the 26th of September to 87—thus rising, between the 1st of January and the 1st of July, 1864, from 52 to 185; and falling, between the 1st of July and the 26th of September, from 185 to 87. None of these fluctuations were brought about by an increase or decrease of the currency; on the contrary, gold rose most rapidly when there was no considerable increase of the currency, and fell in the face of large additions to it.' It is noticeable also, that the prices of commodities did not fluctuate either so rapidly or extensively as gold; and moreover, gold, relatively to prices before the war, had also suffered a serious depreciation.

The question of the constitutionality of the legal tender should be kept steadily distinct from that of its necessity, even if, in a period of war, it be conceded that the necessity for its use was overwhelming and unavoidable. The framers of the Constitution do not seem to have provided, in the supreme law, for a condition of civil war, and that they intended to prohibit legal-tender paper seems clear upon a fair interpretation of the discussion in the Federal Convention in relation to the subject, when considered, especially, with reference to the history of legal-tender paper in the War of the Revolution. The most and the least that can be said of the matter may be expressed in the words of the sagacious De Maistre, who, in his work on "The Generative Principle of Political Constitutions," has said: "That which is most constitutional is precisely that which cannot be written."

NOTE TO CHAPTER XXVII.

Ir has sometimes been alleged that the act of the British Parliament (of 1797), authorizing the suspension of cash payments by the Bank of England, was substantially a legal-tender act. During the debate upon the

1 See "Report of Comptroller of the Currency," 1864.