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The Pamphlet Collection of Sir Robert Stout: Volume 4


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To the Editor of Cincinnati Enquirer:

Sir: The German Empire stands to-day indebted for its existence to the Zollverein or Tariff Union, under which, more than half a century ago, was inaugurated a system of protection against the outside world and of free inter-state trade among the states comprising it. Under the teachings of the political economists, however, these states have for some years past been gradually abandoning protection and embracing a British free trade policy.

When in 1871 the treaty of peace was made which obliged France to pay to Germany $1,100,000,000 as a war fine, the German government assumed that Germany was about to receive substantially this amount in specie and bullion. The German people thought the same, and, being enterprising, at once embarked in all kinds of industrial, mercantile, and financial operations. But what, however, has been the actual result? Only a small portion of this fine was paid by the transfer of money to Germany. The French government itself directly remitted but $100,000,000 in gold and silver, and the largest estimate of the total amount of specie in all sent from France for the purposes of payment is less than $240,000,000.* Some went for the same purpose from England

* The French official returns show that the exports of gold and silver from France to Germany were as follows :—

Gold. Silver.
1871 frcs. 111,045,410 frcs. 62,440,3S0
1872 frcs. 8,537,710 frcs. 64,910,220
1873 frcs. 170,498,760 frcs. 140,935,420
1874 frcs. 878,400 frcs. 605,952
frcs. 290,960,280 frcs. 274,897,972
Total gold and silver frcs. 565,858,252

* * *The above amount is doubtless exclusive of the direct remittance by the French Government of $100,000,000, not entered at the Custom House.

The imports of gold and silver into France from Germany were as follows :—
Gold. Silver.
1871 none none
1872 frcs. 16,997,300 frcs. 54,074,200
1873 frcs. 8,394,800 frcs. 76,479,200
1874 frcs. 16,508,800 frcs. 194,054,300
frcs. 41,900,900 frcs. 325,807,700
Total gold and silver frcs. 367,708,600

Amount of exports in excess of imports January 1, 1871, to December 31, 1874, $39,629,930.

page 3 to Germany, but by 1847 the movement of specie was from Germany to England. During 1875 it has been to a trifling extent in favor of Germany. * The bulk of the payments were made by the French government in bills of exchange, many of which were drawn against exports of merchandise to Germany and other countries. Of the actual money paid to the German government a large portion came from the German people and for which they only received foreign merchandise. This

* Exports of gold and silver from Great Britain to Germany:—

1871 £ 11,580,170
1872 9,398,225
1873 7,542,282
1874 249,088
1875, January 1, to September 30, inclusive 1,827,145
£ 30,596,910

Imports of gold and silver into Great Britain from Germany:—
1871 £ 2,106,707
1872 1,665,133
1873 543,457
1874 2,437,074
1875, January 1, to September 30, inclusive 1,153,010
£ 7,905,447

Amount of exports in excess of imports, January 1, 1871, to September 30, 1875, $110,280,510.

The excess of the imports of merchandise into Germany over and above the exports, from 1870 to 1874 inclusive, is stated by the Bavarian Vaterland, as quoted in Lippincott's Magazine, December, 1875, p. 773, as follows:—

1870 thalers 68,000,000
1871 thalers 185,000,000
1872 thalers 313,000,000
1873 thalers 500,000,000
1874 thalers 484.800,000
thalers 1,550,800,000

Having but little ocean-carrying trade, and collecting annually but a moderate amount of interest on foreign indebtedness, the above is substantially a balance against Germany, which has only been settled by the French war fine, and which balance has offset all of the advantages which would have flowed from the receipt of that fine in money.

It may not be out of place here to state that the money paid for the bonds negotiated abroad by the Treasury Department of the United States, and by railroad companies and others, has to be furnished by the American people—they only receiving merchandise from abroad for this money. The importation of this merchandise has been and is still stimulated by the sale of the bonds, for which latter the foreign purchasers pay in bills of exchange drawn against the former. Germany has received her great war fine almost, if not wholly, in foreign merchandise; we have received merchandise for our bonds, and our finance minister is still permitted to persist in this suicidal policy!

page 4 money was for a considerable time locked up in the imperial treasury, and the immediate effect of the payment of the fine was therefore, to the German people, rather one of contraction than of expansion.

But, still further, on receiving it Germany determined to adopt a new coinage with the gold standard, using silver simply for subsiduary purposes. In accordance with this scheme, by the end of September, 1875, $75,000,000 of silver, nickel, and copper coins had been withdrawn from circulation, and but $38,500,000 issued; and the government has recently been shipping silver to India to get rid of it, thinking itself very smart in selling it at 5 per cent, discount before its further depreciation in Europe. In addition to this, on January 30, 1875, it caused to be passed a bill providing for a great central Imperial Bank under the control of the chancellor of the Empire, and for the withdrawal of all notes under 100 marks ($25). The amount of these notes was then $134,000,000, of which $105,000,000 had been withdrawn by September 30, last. This amount has to some extent been replaced by notes of higher denominations, but it is impossible to overestimate the baleful effects of the retirement of such an amount of small coins and of paper under $25—the currency of the people.*

Another effect of the excessive importation of merchandise into Germany is, that, while to August 21, 1875, $289,000,000 of the new gold coins had been coined, it was several months since estimated that from $75,000,000 to $100,000,000 of this money had then already been exported or melted. The draft has fallen thus heavily upon gold, because, since the determination of Germany to demonetize silver, the

* The actual net contraction of the note circulation is over $47,000,000, which, added to $36,500,000, that of the small coins, gives a total contraction of $83,500,000 growing out of these combined operations.

page 5 fall in the price of the latter in Europe has been so great that there would now be a loss of from 7 to 8 per cent, in exporting old silver thalers, notwithstanding the fact that they are to be allowed temporarily to circulate as a legal tender, in common with gold, after Jan. 1, 1876, when the gold standard is to be adopted. During 1874 France alone drew directly from Germany nearly $40,000,000 of gold and silver, and it is now believed holds as much of these metals as she did before she began to pay the line. In addition, the well ascertained fact may be stated that she has repossessed herself of all of her loans taken by foreign countries while she was paying this fine.
The results of the tamperings with the currency by Germany in the midst of a free trade policy are well known. That country has been the scene of crises and continued depression in business for two years past,* and a Philadelphia paper of Friday last contained the following paragraph :—

"The London Morning Post of October 23 has a Berlin despatch of the 22d, saying the depression of trade is felt so keenly by the industrial classes that the government has been requested, as a means of preventing acute distress, to resort to the measure successfully adopted in the last two wars, namely, the establishment of loan banks. The government has not as yet shown much inclination to accede to the request. Serious distress is anticipated among the industrial working classes during the coming winter, and apprehensions are also entertained of a crisis in financial circles."

The Vienna correspondent of the London Economist, writing under date of October 26, says:—

"In Germany there is still great depression of business, indeed almost more than in Austria. A list of prices of the safest railway and bank shares and debentures, shows a loss of more than £ 18,000,000 ($90,000,000), since the 1st of January. In commercial circles there is again a cry for loan banks, such as were of good service during the time of war, 1870—71. But as these loan banks had a right of issuing notes, there is little hope or none that their institution can be granted, the present law forbidding all extra issue of notes."

Such are the fruits of the administration of government by incompetent hands, and so nearly universal is this incompetency in high places, throughout the world, that it may safely be assumed that one

* "The Berlin correspondent of the London Times draws a somewhat dismal picture of the commercial outlook in Prussia during the coming winter. Prices are high, business dull and declining, failures numerous, and money under the new banking law very tight, and the number of the unemployed large and increasing."—N. Y. Nation, Nov. 25, 1875.

page 6 of the greatest of the dangers to be apprehended by a people is that of its central government finding itself in easy financial circumstances. Should it be so, it will be free and almost certain to try experiments which are ruinous to the best interests of the people. When such a government is "hard up," it is necessary for it to follow such a policy as will vigorously develop the national power. Hence it is that so long ago as the time of Montesquieu the people regarded a national debt as a national blessing, finding the burdens of a debt less intolerable than incapacity among their governors when that incapacity was freed from the restraints of overwhelming public exigencies.

Wholly unable to control the incomings and the outgoings of gold, the government of the German Empire has transferred the foundations of its entire societary fabric to a quicksand. Involving, as this does, every interest of the nation, and with it the happiness, the morals, and even the lives of the people—being, in fact, the parent of countless sufferings and crimes—it is in itself a crime so great that there is no exaggeration in characterizing it as the sum of all crimes.

But this criminality of the governors of Germany is but a type of the doings of all governments. If the world is to advance, if the condition of the people is to improve, if the rich are not to be made steadily richer and the poor poorer, then the people must from this time forth determine to take from every government the power to select the quicksand as the place for the foundations of the societary fabric. In a word, moneys must hereafter he adopted, the quality of money in which cannot be destroyed without the total destruction of their value—it being essential when governments issue moneys, that that quality shall be preserved until by concurrent action of the government and the people it is deemed proper to retire them from circulation.* Then will they cease to be exportable. Luckily for man we have not far to seek to find such moneys. Nearly if not quite all civilized peoples are heavily weighted with the interest upon their public debts, while at the same time paying to banks annually immense sums for the use of the paper money of these banks. Let the debts be turned to a useful account, let the interest paid to banks for circulating mediums cease, let there be none but "current moneys of the realms." Let these current moneys of the realms be wholly of "paper, based on the wealth of the respective countries, and made interconvertible, at the pleasure of the holder, with the national bonds bearing a low rate of interest. This provision of interconvertibility will always ensure a supply of money in exact accordance with the demands of the people.

But we shall be told that these moneys will lack intrinsic value, and

* A large portion of the work of the mints of the world is the melting and recoining of gold and silver which have already been coined be one or another of these mints.

page 7 will therefore not be genuine, good, and honest. In reply we would say that it is not intrinsic value which is most highly prized in money, but that quality which flows from its being either a legal tender or supposed to be interconvertible with a legal tender. The quality of acceptability for the payment of debts and the purchase of commodities and services is the great element of power in money. If intrinsic value be what men most regard in money, why is it theft lands are not prized above greenbacks? Because, in spite of intrinsic value, lands are neither a legal tender nor convertible into one. What would be thought of the government of the United States, if it should undertake to force the holders of greenbacks to take lands in exchange for them at $1.25 per acre? Such a proceeding would most justly be denounced as repudiation, unless these lands were made a legal tender at or above $1.25 per acre, when the ownership in them would pass from hand to hand as money, as it did in Rome and Ancient Britain.*

The world has been led by the teachings of a false philosophy into a belief that it is the purely intrinsic value of gold and silver which gives to these metals such almost universal acceptability throughout the world. The truth is, however, this latter comes from the fact that so many governments have adopted one or the other of them as the material out of which their legal tender is made. At small expense they can, therefore, by coinage, in almost every country be made to take a form which gives them throughout that country universal acceptability for the payment of debts and the purchase of commodities and services. Let all civilized countries discard these metals as the materials for money, as eventually they will, and so large a part of their intrinsic value will immediately thereafter vanish by reason of decreased use for them, that it can only be restored by largely decreased production. We have seen how the action of Germany alone has robbed the silver thaler of from 7 to 8 per cent, of its old intrinsic value, although it is still for a time to be allowed to circulate at that value. It needs but the concurrent action of two or three more equally important governments to convert this depreciation of 7 to 8 percent, into one of 25 per cent.

* Any scheme which looks to robbing the greenback of its legal tender quality, or of forcing the holders of it to take from the government in exchange for it anything which is neither a legal tender nor convertible into one, is a scheme for repudiation pure and simple, be it disguised as it may.

The Director of the United States Mint, foreseeing the result here indicated, in his Report of December, 1875, calls for the protection of the silver interest in the following words :—

"The trade-dollar coinage should be continued if for no other purpose than to make a local market for the silver. Ultimately, China must have a national coinage of silver, and, in the mean time, a more extensive use of the silver coins of other countries will be found useful, not only to the Chinese, but likewise to foreign residents at the different ports. The American trade-dollar has been well received in that Empire, and if authority were given to coin at our Western mints 5, 10, 20, and 50 cent pieces of the same standard, they would no doubt find a ready market at the different commercial ports, and gradually work their way into the interior of the Empire. If this trade coinage should incidentally afford protection to our mining interests, which have already been injuriously affected by the fall in the value of silver, it could hardly be regarded otherwise than as sound national policy."

That part of the Act approved January 14, 1875, which provides for the substitution of fractional currency by silver coins, and which was brought about largely by the power of the unscrupulous silver-mining "ring" represented in the U. S. Senate, is protection enough, and none more should be granted until that act is repealed.

Note.—January 19, 1876. The Berlin Correspondent of the New York Tribune, writing under date of Dec. 8, 1875, says:—

"A paragraph in recent files of the Tribune shows me that the monetary situation in Germany is attracting attention in America. This is highly desirable. There are not many points of essential resemblance between the troubles that now afflict us and those which vex the souls of people In the United States, but there is value oven in contrast. You suffer from too much, we from too little, circulating medium.* Your inflationists are trying to argue the country out of the necessary fortitude for the resumption of specie payments; our government is practising an actual contraction before introducing a uniform gold standard throughout the Empire. The experiment on the popular patience is, therefore, not unlike that required of the American people, and it is interesting to see how it is made and borne in this land of prudent finance.

* * * * *The experience of England and France was in favor of confining bank issues to notes of largo denominations. That principle being adopted, two things became necessary—the retirement of the small bank-notes and the issue of a corresponding supply of gold and silver coin. In the course of time, however, it appeared that, in spite of the gold Received from the French indemnity, the supply of the precious metals was not equal to the extraordinary demand, and to-day we are at our wits' end for small change—in fact, for currency of any fort. Although the Bank of Prussia, which is now become the Imperial Bank, has been .steadily raising the rate of discount, which has been as high as seven per cent., it cannot satisfy the public demands for money. In the mean time the purchase of gold at London and elsewhere for recoining goes steadily forward and the mint is actively at work; but it will be many weeks, not to say months, before the currency once more reaches a sound basis. As you already know, the government has fixed on January 1, 1876, for the simultaneous introduction of the gold standard. The complaints from trading people in this crisis are loud, and, what is more, they are well grounded."

* Oh! Can it be possible that this indeed be so? Do almost identical effects ever in chemistry, mechanics, or political economy follow from diametrically opposite causes, or is it only that the philosopher who here attempts to interpret the cause from the effect, is at fault? Both the United States and Germany are to-day furnishing new and sad examples of the old, old story of the quackery of lawmakers, subordinating commerce to one of its instruments—money; exalting the servant above his master.—H. C. B.

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Knowing, as we well do, how impotent all governments are to prevent the exportation of the precious metals, and therefore how utterly unstable these metals are as a basis for the financial and business affairs of a people; seeing, too, that intrinsic value is not the quality which is most regarded in money; with also the evidence furnished by the blunders of the German government—a good type of all governmental action in monetary affairs—of its utter incapacity properly to regulate the volume of currency, how in justice to the various peoples of the world can these peoples any longer be prevented from having supplied to them a domestic non-exportable currency, the volume of which shall be determined by themselves alone? They cannot, and they should no longer be, and in the ebb and flow of such a currency, made interconvertible with the national bonds bearing a low and fixed rate of interest, not exceeding 3.65 per cent, per annum, will be found "a subtile principle that will regulate the movements of finance and commerce as accurately as the motion of the steam engine is regulated by its governor. Such paper money tokens will be much nearer perfect standards of payment than gold and silver ever have been or ever can be."

Henry Carey Baird. Philadelphia, Nov. 9, 1875.