Part 1153

"We have heard a great deal in later years about the surreptitious demonetization of silver in 1873. There was, however, vastly too much criticism wasted on the act of 1873; for the real demonetization of silver in the United States was accomplished in 1853. It was not the result of accident; it was a carefully considered plan, deliberately carried into legislation in 1853, twenty years before its nominal demonetization by the act of 1873. … In 1853 the single standard was gold. This was a situation which no one rebelled against. Indeed, no one seemed to regard it as anything else than good fortune (except so far as the subsidiary coins had disappeared). … In the debates it was proposed that, as the cause of the change in the relative values of gold and silver was the increased product of gold, the proper remedy should be to increase the quantity of gold in the gold coins. … There was no discussion as to how a readjustment of the ratio between the two metals might be reached, for it was already decided that only one metal was to be retained. This decision, consequently, carried us to a point where the ratio between the two metals was not of the slightest concern. And so it remained. The United States had no thought about the ratios between gold and silver thereafter until the extraordinary fall in the value of silver in 1876. … In the provisions of the act of 1853 nothing whatever was said as to the silver dollar-piece. It had entirely disappeared from circulation years before, and acquiescence in its absence was everywhere found. No attempt whatever was thereafter made to change the legal ratio, in order that both metals might again be brought into concurrent circulation. Having enough gold, the country did not care for silver. … In 1873 we find a simple legal recognition of that which had been the immediate result of the act of 1853, and which had been an admitted fact in the history of our coinage during the preceding twenty years. In 1853 it had been agreed to accept the situation by which we had come to have gold for large payments, and to relegate silver to a limited service in the subsidiary coins. The act of 1873, however, dropped the dollar piece out of the list of silver coins. In discontinuing the coinage of the silver dollar, the act of 1873 thereby simply recognized a fact which had been obvious to everybody since 1849. It did not introduce anything new, or begin a new policy. Whatever is to be said about the demonetization of silver as a fact must center in the act of 1853. Silver was not driven out of circulation by the act of 1873, which omitted the dollar of 412½ grains, since it had not been in circulation for more than twenty-five years. … The act of February 12, 1873, is known as the act which demonetized the silver dollar. Important consequences have been attached to it, and it has even been absurdly charged that the law was the cause of the commercial crisis of September, 1873. As if a law which made no changes in the actual metallic standard in use, and which had been in use thus for more than twenty' years, had produced a financial disaster in seven months! To any one who knows of the influence of credit and speculation, or who has followed the course of our foreign trade since the Civil War, such a theory is too absurd to receive more than passing mention. To the year 1873 there had been coined of 412½-grain dollars for purposes of circulation, only $1,439,457, and these were coined before 1806."

_J. L. Laughlin, History of Bimetallism in the United States, part 1, chapters 5 and 7._

See, also, MONEY AND BANKING: A. D. 1848-1893.

UNITED STATES OF AMERICA: A. D. 1873. The Panic.

"The panic of 1873 differed very materially from the other great panics by which this country has been afflicted. Lack of capital was the main difficulty in 1837 and 1857. Population had increased so rapidly that millions of human beings were out of work, and apprehension spread lest there might not be food enough to go around. In 1873, however, men were well employed. Business of all kinds was in excellent condition, and no one doubted for a moment that there would be plenty for every man to eat. The excellent condition of trade, in fact, was the chief factor in the panic of 1873. Everyone was busy, and wanted money with which to carry on his trade. For two years before the crash, money had been in great demand. {3575} Railroads had recently been built to an extent such as this country had never known before. Whereas, in 1861, railroad construction amounted to only 651 miles, in 1871 it reached the then unprecedented figure of 7,779 miles. This new mileage, moreover, was mainly in the West, where the immediate remuneration was but slight. Railroads were being pushed forward into regions which could not be expected to return an income for twenty years. The cost of railroad construction in this country during the five years preceding September, 1873, was estimated by the Comptroller of the Currency at no less than $1,700,000,000. The money to pay for this extravagant building was obtained, not from the earnings of the old portions of the road, but from enormous issues of railroad bonds, placed to a large extent among the banks of this country, but still more among the capitalists of Europe. In the Northern Pacific Company occurred the most flagrant abuse of railroad credit the world has ever known. … One after another of the Western roads defaulted in paying the interest on its bonds. The result was, that, by the summer of 1873, the market for new issues of railroad bonds had practically disappeared. Meantime the banks and bankers of New York were loaded down with railroad paper. The railroads had borrowed money for short periods in the expectation that before their notes fell due they would have raised the money to make payment by the sale of bonds. A temporary relief was felt, in June, 1873, through the customary midsummer ease in money. But this temporary respite only made the difficulty worse. Deluded by the momentary calm, the New York banks added still further to their loans. … The year before, money had grown tight early in September, and the more cautious banks began gradually to call their loans, fearing that the experience of 1872 might be renewed. But the rates for money did not noticeably increase, and the only cause for excitement early in the month was the failure, on September 8, of the Mercantile Warehouse and Security Company, owing to advances on bonds of the Missouri, Kansas & Texas Railroad. This was followed, on the 13th, by the failure of Kenyon Cox & Co., of which firm Daniel Drew was a member, caused by loans to the Canada Southern Railroad. By this time the sky was heavily overcast. Money was now advancing rapidly, the New York banks were calling loans on every hand, and new loans on railroad paper were scarcely to be had at all. Suddenly, on the 18th of September, the tempest burst. On the morning of that dark day, Jay Cooke, the agent of the U. S. Government, with some four millions of deposits from all parts of the country, and his fifteen millions of Northern Pacific paper, declared his inability to meet his debts. The report flew down 'the street' with the ferocity of a cyclone. Railroad shares were thrown upon the market by the bushel, in utter disregard of their intrinsic value. … Stock brokers continued to announce their failures all day long. Nothing seemed able to withstand the shock, and when, on September 19, the great banking house of Fisk & Hatch went under, terror became universal. A run was started on the Union Trust Co., which was believed to have close intimacy with Vanderbilt's railroads, and on the Fourth National Bank, whose dealings were largely with Wall street brokers. The panic, was by this time so general that the banks began to refuse one another's certified checks, and on the 20th a considerable number of the New York banks suspended payment. On that day the Union Trust Co., the National Trust Co., and the National Bank of the Commonwealth all closed their doors. At 11 o'clock on the 20th, the New York Stock Exchange, for the first time in its history, closed its doors, and the Governing Committee announced that the board would not be opened till further notice. This high-handed measure caused an outcry for the moment, but on calmer judgment it was generally conceded that the measure was a good one. On the evening of that Saturday, September 20, the Clearing House Association met and adopted a plan similar to that adopted in the panic of 1857, and in substance this: Any bank in the Clearing House Association might deposit with a committee of five persons, to be appointed for that purpose, an amount of its bills receivable, or other securities to be approved by the committee, and the committee were then to issue to that bank certificates of deposit, bearing interest at 5 per cent. per annum, to an amount not exceeding 75 per cent. of the securities or bills receivable so deposited. These certificates could be used in settlement of balances at the Clearing House for a period not to extend beyond the 1st of the following November, and they were to be received by creditor banks during that period daily, in the proportion which they bore to the aggregate amount of the debtor balances paid at the Clearing House. The amount of certificates should not exceed $10,000,000. The legal tenders belonging to the associated banks were to be considered and treated as a common fund held for mutual aid and protection, and the committee were given power to equalize the same by assessment or otherwise in their discretion. This scheme, simple as it was, proved of the utmost efficacy in mitigating the evils that must always follow a distrust among banks. The lull occasioned by the intervening Sunday was employed by President Grant and Secretary of the Treasury Richardson in a visit to New York. All day long they gave audience to business men at the Fifth Avenue Hotel. Suggestions of every description were offered as a remedy for the disease. The most feasible proposition, and that which was finally adopted, was the purchase of Government bonds. … Shortly after his return from the Fifth Avenue Hotel, Secretary Richardson announced his intention to buy Government bonds, and, in a few days, $13,000,000 of the U. S. greenbacks were thus absorbed. … On Tuesday, September 30, the Stock Exchange was once more opened. It was expected on all hands that this would be the signal for another onslaught. But so general was this expectation that most persons refrained for the moment from offering their stocks. As a result, the market opened a trifle higher than it had closed ten days before. It continued to advance, moreover, till October 7. On that day a new decline set in, and on October 14 came a fearful drop, which carried prices lower than on September 20. From this reaction there was a gradual improvement till October 31, when the failure of Hoyt, Sprague & Co., the great mill owners of Providence and New York, once more shook the market and brought stocks, on October 31 and November 1, to the lowest prices of the year. {3576} With those prices it became manifest that the panic had reached its end. Money had already begun to flow to New York both from Europe and from the West, and the public, tempted by the excessive decline in stocks, began to purchase freely. The result was a steady though gradual improvement through the remainder of the year."

_The Panic of 1873 (Banker's Magazine, November, 1891)._

UNITED STATES OF AMERICA: A. D. 1875. The Whisky Ring.

See WHISKY RING.

UNITED STATES OF AMERICA: A. D. 1875. The second Civil Rights Bill and its declared unconstitutionality.

"Congress, to give full effect to the fourteenth amendment to the federal Constitution, passed an act in 1875, which provided that all persons within the jurisdiction of the United States shall be entitled to the full and equal enjoyment of the accommodations, advantages, facilities, and privileges of inns, public conveyances on land and water, theatres and other places of public amusement, subject only to the conditions and limitations established by law, and applicable alike to citizens of every race and color, regardless of any previous condition of servitude. … In 1883 the act was held unconstitutional. The Fourteenth Amendment, says Bradley, J., does not 'invest Congress with power to legislate upon subjects which are within the domain of State legislation, but to provide modes of relief against State legislation or State action of the kinds referred to. It does not authorize Congress to create a code of municipal law for the regulation of private rights; but to provide modes of redress against the operation of State laws and the action of State officers, executive and judicial, when these are subversive of the fundamental rights specified in the amendment.' Civil Rights Cases, 109 United States 3."

_T. M. Cooley, Constitutional Limitations which rest upon the Legislative Power of the States, 6th edition, pages 733-734 and foot-note._

UNITED STATES OF AMERICA: A. D. 1876. Admission of Colorado into the Union.

See COLORADO: A. D. 1806-1876.

UNITED STATES OF AMERICA: A. D. 1876. The Sioux War. Battle of Little Big Horn. Death of General Custer.

Hostilities with a powerful confederation of Sioux or Dakota tribes of Indians, in the northwest, were brought about, in the spring of 1876, by gold discoveries in the Black Hills and the consequent rush of miners into the Indian reservation. To subdue the hostile Indians, three military expeditions were set in motion,—from Fort Fetterman, under General Crook, from Fort Ellis, in Montana, under General Gibbon, and from Bismarck, in Dakota, under General Terry. These were to converge on the upper waters of the Yellowstone, where Sitting Bull, the able chief of the Sioux, and his camp, in the valley of the small stream commonly known as the Little Big Horn. The Sioux warrior used the advantages of his central position like a Napoleon, striking his assailants in turn, as they came near, with far stronger forces than they knew him to possess. Crook was forced back; Gibbon was brought to a halt. Terry came last on the ground. His command included the famous Seventh Cavalry,—the regiment of General Custer. In ignorance of the surprising number of braves which Sitting Bull had collected, Custer was sent to make a detour and attack the Indian camp from the rear. Doing so, on the 25th of June, he rode into a death trap. Five companies of the regiment, with its heroic commander at their head, were surrounded so overwhelmingly that not one man escaped. The remaining seven companies were too far from the others to cooperate in the attack. They fortified a bluff and held their ground until the 27th, when Terry and Gibbon came to their relief. The Indians retreated toward the mountains. The campaign was soon resumed, and prosecuted through the fall and winter, until Sitting Bull and some of his followers fled into British America and the remaining hostiles surrendered.

_F. Whittaker, Complete Life of General George A. Custer, book 8, chapter 4-5._

ALSO IN: _J. F. Finerty, War Path and Bivouac, part 1._

UNITED STATES OF AMERICA: A. D. 1876. The Centennial Exhibition at Philadelphia.

In 1871, the Congress of the United States passed an act to provide for the commemoration, in 1876, of the centennial anniversary of the Declaration of Independence, by holding an exhibition, at Philadelphia, "of American and foreign arts, products, and manufactures." The act created a commission, composed of one delegate from each state and territory of the United States, to which commission was committed the "exclusive control" of the contemplated exhibition; though the State of Pennsylvania was required to make provision for the erection of suitable buildings. "To the surprise of those writers who had contended that there would be no exhibits from abroad,' there was shown a universal desire on the part of all nations to co-operate liberally in the World's Fair of 1876. These different governments appropriated large sums of money, selected as commissioners men of the highest standing, loaned to the exhibition their most valuable works of art, and in every sense indicated a desire on the part of the Old World to forget the past and to unite itself closely with the future of the New. Singular as it may seem, there was no disposition on the part of Congress to facilitate and aid in carrying out this grand enterprise. The money had to be raised by private subscription, from all sections of the United States, and it was only by a determined and persistent effort with Congress that at last a government loan was secured of $1,500,000, which loan has been called up by the government and repaid since that time. The City of Philadelphia appropriated $1,000,000 and the State of Pennsylvania $1,500,000, and all other states, notably New Jersey, Delaware, Connecticut, New Hampshire, etc., subscribed to the stock issued by the Centennial Board of Finance. In 1873, the location so well known as Fairmount Park was selected for the exposition, and immediate possession given by the City of Philadelphia, free from all expense or charge, and who also liberally contributed to the success of the World's Fair 1876 by the erection of two magnificent bridges over the Schuylkill at a cost of over $2,500,000, in addition to the various improvements made in Fairmount Park. … The total number of exhibitors at the World's Fair 1876 was estimated at 30,864, the United States heading the list with 8,175; Spain and her colonies, 3,822; Great Britain and colonies, 3,584; and Portugal, 2,462. …

{3577}

The exhibition opened on the 10th of May, 1876, and from that time until November 10, 1876, there were admitted a grand total of 9,910,966 persons, of whom 8,004,274 paid admission fees amounting to $3,813,724.49."

_C. B. Norton, World's Fairs, chapter 6._

UNITED STATES OF AMERICA: A. D. 1876-1877. The Twenty-third Presidential Election and its disputed result. The Electoral Commission.