66 redeemed? Congress in 1878 answered this question by providing that when a greenback was redeemed in specie it should not be retired, cancelled or destroyed, but should be re-issued and paid out again and kept in circulation." The greenbacks in circulation at this time amounted to $346,000,000, and this amount has never been materially decreased. Under the Sherman Act of 1890 (p. 314) the treasury notes as well as the greenbacks could be presented for redemption. In 1893 there were $150,000,000 of these notes, and the sum was increasing. Here was $500,000,000 of paper money, greenbacks and treasury notes together, and only $100,000,000 of gold with which to redeem it. As we have seen (p. 314), this condition of affairs alarmed the financial world and there was a rush to the treasury with greenbacks and treasury notes. The reserve fell rapidly, and the Secretary (in 1894-1895) was compelled to sell bonds (borrow money) to the amount of $262,000,000, in order to keep the gold reserve at the $100,000,000 mark. Under the currency law of 1900 the gold reserve must be $150,000,000, and United States notes are redeemable at the treasury in gold. Why have not the greenbacks been retired as they have been redeemed? The friends of the greenbacks answer that to retire them would contract the currency, would make money scarce, and thus lower prices; that we need more money, not less money. The enemies of the greenbacks say that they ought to have been retired long ago, and that under a sound system of financiering they would have been retired; that they have already cost more than their face value, and that they will be a source of danger as long as they exist. Another question: Did Congress have the right under the Constitution to issue paper money as legal tender? The Supreme Court of the United States in 1884 answered this when it declared that "Congress has the 120 Statutes at Large, p. 87. constitutional power to make the treasury notes of the United States a legal tender in payment of public and private debts in time of peace as well as in times of war." This power, the court averred, was incident to the power of Congress to borrow money, and was a power which any sovereign government could lawfully exercise. The Essential Facts of our Monetary System. We are now prepared to understand the following summary of our monetary system: (1) The federal government has complete control of all currency issues and may issue legal tender paper money as well as gold and silver currency. (2) The gold dollar of 23.22 grains is the unit of monetary value, and the coinage of gold is free. (3) Silver dollars and silver certificates, the treasury notes of 1890, and United States notes (greenbacks) are exchangeable for gold at their face value upon presentation at the treasury of the United States. (4) This redemption is made possible by the reserve fund of $150,000,000 in gold which the government keeps in its vaults. (5) The paper money, when redeemed with gold, is again used by the government in the payment of its debts, and thus again finds its way into circulation. (6) The volume of money in circulation is increased by the coinage of gold at the mints and by the notes issued by banks. (7) Bank notes are as good as gold because the government bonds which secure them are as good as gold. The Amounts of the Several Kinds of Currency. The following table prepared by the comptroller of the treasury shows the general stock of money in the United States in October, 1904: 1. What is a bank note? a government note? 2. For what purposes did Hamilton establish a government bank? Give an account of the first and second banks of the United States. 3. Give an account of State banks prior to the Civil War. 4. In what matters did the State banks fail to meet the financial needs of the government during the Civil War? 5. Describe the present national bank system. 6. Give an account of the paper money issued during the Civil War. 7. Give an account of the resumption of specie payments. 8. What was done with the greenbacks when they were redeemed? 9. Give an account of the drain on the gold reserve in 1893. 10. Why are the greenbacks not destroyed as fast as they are redeemed? What are the arguments for and against retirement? 11. What was the decision of the Supreme Court in reference to the right of Congress to issue paper money? 12. What are the essential features of our monetary system? SUGGESTIVE QUESTIONS AND EXERCISES 1. If you had $100 in a bank and owed a man living at a distance $26.87, how would you be likely to pay the debt? Is a bank check currency? Does it take the place of currency? A, B and C meet. A owes B $5, B owes C $5, and C owes A $5. A draws a check for $5 and pays B; B pays C with the check; C pays A with the check. After the transaction is finished and each has a receipt A remembers that he had no money in the bank. Can a debt be paid without money? 2. Draw a promissory note. Compare the language of the note with that found on a national bank note. Under what conditions would you accept the promissory note in payment of a debt? How is a bank note secured? 3. Study what is printed on a bank note and answer the following questions: Is it legal tender for all debts? What is the penalty for counterfeiting it? When and where was it issued? Where was it printed? 4. Suppose a bank note which you hold should be destroyed, would the bank gain by reason of the accident? 5. Study what is printed on a United States note and answer the following questions: In what year did Congress authorize it to be issued? Is it a legal tender? What is the punishment for counterfeiting it? It says: "will pay the bearer five dollars': What did these words mean at the time the note was issued? What do they mean now? 6. From the history of the United States note given in the text calculate how much the $346,000,000 of greenbacks have already cost the government, computing interest at four per cent. How much did it cost to print the greenbacks? 7. How much currency per capita is in circulation in the United States? How much per voter ? 8. What proportion of our currency consists of paper money? What proportion of money paper? Compare this with the per capita circulation of other countries. 9. Would all the currency in the United States be sufficient to pay the debt of the United States? How would the payment of the national debt affect the national banking system? Do you place the $346,000,000 in greenbacks among the debts of the United States? 10. How is the volume of currency increased as more is needed? A Hint on Reading.-See hints at the end of last chapter; also D. R. Dewey's "Financial History of the United States.'' XLIII FOREIGN COMMERCE Introductory. Commerce is the exchange of goods, merchandise, or property of any kind. All governments find it necessary to regulate commerce. In the United States power in respect to commerce is divided between the State and the federal government. Foreign commerce, interstate commerce and commerce with Indian tribes (47) are regulated by Congress, while the regulation of commerce carried on wholly within the boundaries of a State is the function of the State government. The subject of the regulation of commerce, therefore, may be treated appropriately under three heads: (1) Foreign Commerce, (2) Interstate Commerce and (3) Intrastate Commerce. In this chapter the first of these topics receives attention. The Power of Congress over Foreign Commerce. Under the Confederation commerce with foreign nations was in a confused and disordered condition. Each State had its own custom-house and levied such duties on imports as it deemed expedient. There was no uniformity in the customs rates and the commercial warfare between the several ports along the coast was destructive. To remedy these evils the Convention of 1787 placed the regulation of foreign commerce wholly in the hands of the national government. Of course it was asking a great deal of a port like New York to give up its custom-house receipts, yet patriotism in the Convention prevailed, and the States gave up their power to collect customs duties (74). |