History for ready reference, Volumes 1 to 5

Part 721

Chapter 7213,891 wordsPublic domain

"The gold discoveries of California and Australia were directly the cause of the Latin Union. … In 1853, when the subsidiary silver of the United States had disappeared before the cheapened gold, we reduced the quantity of silver in the small coins sufficiently to keep them dollar for dollar below the value of gold. Switzerland followed this example of the United States in her law of January 31, 1860; but, instead of distinctly reducing the weight of pure silver in her small coins, she accomplished the same end by lowering the fineness of standard for these coins to 800 thousandths fine. … Meanwhile France and Italy had a higher standard for their coins than Switzerland, and as the neighboring states, which had the franc system of coinage in common, found each other's coins in circulation within their own limits, it was clear that the cheaper Swiss coins, according to Gresham's law, must drive out the dearer French and Italian coins, which contained more pure silver, but which passed current at the same nominal value. The Swiss coins of 800 thousandths fine began to pass the French frontier and to displace the French coins of a similar denomination; and the French coins were exported, melted, and recoined in Switzerland at a profit. This, of course, brought forth a decree in France (April 14, 1864), which prohibited the receipt of these Swiss coins at the public offices of France, the customs-offices, etc., and they were consequently refused in common trade among individuals. Belgium also, as well as Switzerland, began to think it necessary to deal with the questions affecting her silver small coins, which were leaving that country for the same reason that they were leaving Switzerland. Belgium then undertook to make overtures to France, in order that some concerted action might be undertaken by the four countries using the franc system—Italy, Belgium, France, and Switzerland—to remedy the evil to which all were exposed by the disappearance of their silver coin needed in every-day transactions. The discoveries of gold had forced a reconsideration of their coinage systems. In consequence of these overtures, a conference of delegates representing the Latin states just mentioned assembled in Paris, November 20, 1865. … The Conference, fully realizing the effects of the fall of gold in driving out their silver coins, agreed to establish a uniform coinage in the four countries, on the essential principles adopted by the United States in 1853. {2219} They lowered the silver pieces of two francs, one franc, fifty centimes, and twenty centimes from a standard of 900 thousandths fine to a uniform fineness of 835 thousandths, reducing these coins to the position of a subsidiary currency. They retained for the countries of the Latin Union, however, the system of bimetallism. Gold pieces of one hundred, fifty, twenty, ten, and five francs were to be coined, together with five-franc pieces of silver, and all at a standard of 900 thousandths fine. Free coinage at a ratio of 15½:1, was thereby granted to any holder of either gold or silver bullion who wanted silver coins of five francs, or gold coins from five francs and upward. … The subsidiary silver coins (below five francs) were made a legal tender between individuals of the state which coined them to the amount of fifty francs. … The treaty was ratified, and went into effect August 1, 1866, to continue until January 1, 1880, or about fifteen years. … The downward tendency of silver in 1873 led the Latin Union to fear that the demonetized silver of Germany would flood their own mints if they continued the free coinage of five-franc silver pieces at a legal ratio of 15½:1. … This condition of things led to the meeting of delegates from the countries of the Latin Union at Paris, January 30, 1874, who there agreed to a treaty supplementary to that originally formed in 1865, and determined on withdrawing from individuals the full power of free coinage by limiting to a moderate sum the amount of silver five-franc pieces which should be coined by each state of the Union during the year 1874. The date of this suspension of coinage by the Latin Union is regarded by all authorities as of great import in regard to the value of silver."

_J. L. Laughlin, The History of Bimetallism in the United States, pages 146-155._

MONEY AND BANKING: A. D. 1861-1878. The Legal-tender notes, or Greenbacks, the National Bank System, of the American Civil War.

"In January, 1861, the paper currency of the United States was furnished by 1,600 private corporations, organized under thirty-four different State laws. The circulation of the banks amounted to $202,000,000, of which only about $50,000,000 were issued in the States which in April, 1861, undertook to set up an independent government. About $150,000,000 were in circulation in the loyal States, including West Virginia. When Congress met in extraordinary session on the 4th of July, the three-months volunteers, who had hastened to the defence of the capital, were confronting the rebel army on the line of the Potomac, and the first great battle at Bull Run was impending. President Lincoln called upon Congress to provide for the enlistment of 400,000 men, and Secretary Chase submitted estimates for probable expenditures amounting to $318,000,000. The treasury was empty, and the expenses of the government were rapidly approaching a million dollars a day. The ordinary expenses of the government, during the year ending on the 30th of June, 1861, had been $62,000,000, and even this sum had not been supplied by the revenue, which amounted to only $41,000,000. The rest had been borrowed. It was now necessary to provide for an expenditure increased fivefold, and amounting to eight times the income of the country, Secretary Chase advised that $80,000,000 be provided by taxation, and $240,000,000 by loans; and that, in anticipation of revenue, provision be made for the issue of $50,000,000 of treasury notes, redeemable on demand in coin. 'The greatest care will, however, be requisite,' he said, 'to prevent the degradation of such issues into an irredeemable paper currency, than which no more certainly fatal expedient for impoverishing the masses and discrediting the government of any country can well be devised.' The desired authority was granted by Congress. The Secretary was authorized to borrow, on the credit of the United States, not exceeding $250,000,000, and, 'as a part of the above loan,' to issue an exchange for coin, or pay for salaries or other dues from the United States, not over $50,000,000 of treasury notes, bearing no interest, but payable on demand at Philadelphia, New York, or Boston. The act does not say, 'payable in coin,' for nobody had then imagined that any other form of payment was possible. Congress adjourned on the 6th of August, after passing an act to provide an increased revenue from imports, and laying a direct tax of $20,000,000 upon the States, and a tax of 3 per cent. upon the excess of all private incomes above $800. The Secretary immediately invited the banks of Philadelphia, New York, and Boston to assist in the negotiation of the proposed loans, and they loyally responded. On the 19th of August they took $50,000,000 of three years 7-30 bonds at par; on the 1st of October, $50,000,000 more of the same securities at par; and on the 16th of November, $50,000,000 of twenty years 6 per cents., at a rate making the interest equivalent to 7 per cent. These advances relieved the temporary necessities of the treasury, and, when Congress reassembled in December, Secretary Chase was prepared to recommend a permanent financial policy. The solid basis of this policy was to be taxation. … It was estimated, a revenue of $90,000,000 would be needed; and to secure that sum, the Secretary advised that the duties on tea, coffee, and sugar be increased; that a direct tax of $20,000,000 be assessed on the States; that the income tax be modified so as to produce $10,000,000, and that duties be laid on liquors, tobacco, carriages, legacies, bank-notes, bills payable, and conveyances. For the extraordinary expenses of the war it was necessary to depend upon loans, and the authority to be granted for this purpose the Secretary left 'to the better judgment of Congress,' only suggesting that the rate of interest should be regulated by law, and that the time had come when the government might properly claim a part, at least, of the advantage of the paper circulation, then constituting a loan without interest from the people to the banks. There were two ways, Secretary Chase said, in which this advantage might be secured: 1. By increasing the issue of United States notes, and taxing the bank-notes out of existence. 2. By providing a national currency, to be issued by the banks but secured by the pledge of United States bonds. The former plan the Secretary did not recommend, regarding the hazard of a depreciating and finally worthless currency as far outweighing the probable benefits of the measure. … Congress had hardly begun to consider these recommendations, when the situation was completely changed by the suspension of specie payments, on the 28th of December, by the banks of New York, followed by the suspension of the other banks in the country, and compelling the treasury also to suspend. {2220} This suspension was the result of a panic occasioned by the shadow of war with England. … To provide for the pressing wants of the treasury, Congress, on the 12th of February, 1862, authorized the issue of $10,000,000 more of demand notes. Before the end of the session further issues were provided for, making the aggregate of United States notes $300,000,000, besides fractional currency. There was a long debate upon the propriety of making these notes a legal tender for private debts, and it seemed for a time that the measure would be defeated by this dispute. [The bill authorizing the issue of legal tender notes known afterwards as 'Greenbacks' was prepared by the Hon. E. G. Spaulding, who subsequently wrote the history of the measure.] Secretary Chase finally advised the concession of this point; nevertheless, 55 votes in the House of Representatives … were recorded against the provision making the notes a tender for private debts. Congress also empowered the Secretary to borrow $500,000,000 on 5-20 year 6 per cent. bonds, besides a temporary loan of $100,000,000, and provided that the interest on the bonds should be paid in coin, and that the customs should be collected in coin for that purpose. Nothing was said about the principal, for it was taken for granted that specie payments would be resumed before the payment of the principal of the debt would be undertaken. … Congress had thus adopted the plan which the Secretary of the Treasury did not recommend, and neglected the proposition which he preferred. … When Congress met in December, 1862, the magnitude of the war had become fully apparent. … The enormous demands upon the treasury … had exhausted the resources provided by Congress. The disbursements in November amounted to $59,847,077—two millions a day. Unpaid requisitions had accumulated amounting to $46,000,000. The total receipts for the year then current, ending June 30, 1863, were estimated at $511,000,000; the expenditures at $788,000,000; leaving $277,000,000 to be provided for. There were only two ways to obtain this sum—by a fresh issue of United States notes, or by new interest-bearing loans. But the gold premium had advanced in October to 34; the notes were already at a discount of 25 per cent. The consequences of an addition of $277,000,000 to the volume of currency, the Secretary said, would be 'inflation of prices, increase of expenditures, augmentation of debt, and, ultimately, disastrous defeat of the very purposes sought to be obtained by it.' He therefore recommended an increase in the amount authorized to be borrowed on the 5-20 bonds. … In order to create a market for the bonds, he again recommended the creation of banking associations under a national law requiring them to secure their circulation by a deposit of government bonds. The suggestion thus renewed was not received with favor by Congress. … On the 7th of January Mr. Hooper offered again his bill to provide a national currency, secured by a pledge of United States bonds, but the next day Mr. Stevens, of Pennsylvania, submitted the bill with an adverse report from the committee on ways and means. On the 14th of January Mr. Stevens reported a resolution authorizing the Secretary of the Treasury to issue $100,000,000 more of United States notes for the immediate payment of the army and navy. The resolution passed the House at once, and the Senate the next day. … On the 19th of January President Lincoln sent a special message to the House, announcing that he had signed the joint resolution authorizing a new issue of United States notes, but adding that he considered it his duty to express his sincere regret that it had been found necessary to add such a sum to an already redundant currency, while the suspended banks were still left free to increase their circulation at will. He warned Congress that such a policy must soon produce disastrous consequences, and the warning was effective. On the 25th of January Senator Sherman offered a bill to provide a national currency, differing in some respects from Mr. Hooper's in the House. The bill passed the Senate on the 12th of February, 23 to 21, and the House on the 20th, 78 to 64. … It was signed by the President on the 25th of February, 1863."

_H. W. Richardson, The National Banks, chapter 2._

"One immediate effect of the Legal Tender Act was to destroy our credit abroad. Stocks were sent home for sale, and, as Bagebot shows, Lombard Street was closed to a nation which had adopted legal tender paper money. … By August all specie had disappeared from circulation, and postage-stamps and private note-issues took its place. In July a bill was passed for issuing stamps as fractional currency, but in March 1863, another act was passed providing for an issue of 50,000,000 in notes for fractional parts of a dollar—not legal tender. For many years the actual issue was only 30,000,000, the amount of silver fractional coins in circulation in the North, east of the Rocky Mountains, when the war broke out. … Gold rose to 200-220 or above, making the paper worth 45 or 50 cts., at which point the 5 per cent. ten-forties floated. The amount sold up to October 31st, 1865, was $172,770,100. Mr. Spaulding reckons up the paper issues which acted more or less as currency, on January 30th, 1864, at $1,125,877,034; 812,000,000 bore no interest."

_W. G. Sumner, History of American Currency, pages 204-208._

The paper-money issues of the Civil War were not brought to parity of value with gold until near the close of the year 1878. The 1st day of January, 1879, had been fixed for resumption by an act passed in 1875; but that date was generally anticipated in practical business by a few months.

_A. S. Bolles, Financial History of the United States, 1861-1885, book 1, chapters 4, 5, 8, and 11, and book 2, chapter 2._

MONEY AND BANKING: A. D. 1871-1873. Adoption of the Gold Standard by Germany.

"At the close of the Franco-Prussian war the new German Empire found the opportunity … for the establishment of a uniform coinage throughout its numerous small states, and was essentially aided in its plan at this time by the receipt of the enormous war-indemnity from France, of which $54,600,000 was paid to Germany in French gold coin. Besides this, Germany received from France bills of exchange in payment of the indemnity which gave Germany the title to gold in places, such as London, on which the bills were drawn. Gold in this way left London for Berlin. With a large stock of gold on hand, Germany began a series of measures to change her circulation from silver to gold. {2221} Her circulation in 1870, before the change was made, was composed substantially of silver and paper money, with no more than 4 per cent of the whole circulation in gold. … The substitution of gold instead of silver in a country like Germany which had a single silver medium was carried out by a path which led first to temporary bimetallism and later to gold monometallism. And for this purpose the preparatory measures were passed December 4, 1871. … This law of 1871 created new gold coins, current equally with existing silver coins, at rates of exchange which were based on a ratio between the gold and silver coins of 1:15½. The silver coins were not demonetized by this law; their coinage was for the present only discontinued; but there was no doubt as to the intention of the Government in the future. … The next and decisive step toward a single gold standard was taken by the act of July 9, 1873. … By this measure gold was established as the monetary standard of the country, with the 'mark' as the unit, and silver was used, as in the United States in 1853, in a subsidiary service. … Under the terms of this legislation Germany began to withdraw her old silver coinage, and to sell as bullion whatever silver was not recoined into the new subsidiary currency."

_J. L. Laughlin, History of Bimetallism in the United States, pages 136-140._

MONEY AND BANKING: A. D. 1893. Stoppage of the free Coinage of Silver in India.

The free coinage of silver in India was stopped by the Government in June, 1893, thus taking the first step toward the establishment of the gold standard in that country.

MONEY AND BANKING: End----------

MONGOLS: Start--------

MONGOLS: Origin and earliest history.

"The name Mongol (according to Schmidt) is derived from the word Mong, meaning brave, daring, bold, an etymology which is acquiesced in by Dr. Schott. Ssanang Setzen says it was first given to the race in the time of Jingis Khan, but it is of much older date than his time, as we know from the Chinese accounts. … They point further, as the statements of Raschid do, to the Mongols having at first been merely one tribe of a great confederacy, whose name was probably extended to the whole when the prowess of the Imperial House which governed it gained the supremacy. We learn lastly from them that the generic name by which the race was known in early times to the Chinese was Shi wei, the Mongols having, in fact, been a tribe of the Shi wei. … The Shi wei were known to the Chinese from the 7th century; they then consisted of various detached hordes, subject to the Thu kiu, or Turks. … After the fall of the Yuan-Yuan, the Turks, by whom they were overthrown, acquired the supreme control of Eastern Asia. They had, under the name of Hiong nu, been masters of the Mongolian desert and its border land from a very early period, and under their new name of Turks they merely reconquered a position from which they had been driven some centuries before. Everywhere in Mongol history we find evidence of their presence, the titles Khakan, Khan, Bigui or Beg, Terkhan, &c., are common to both races, while the same names occur among Mongol and Turkish chiefs. … This fact of the former predominance of Turkish influence in further Asia supports the traditions collected by Raschid, Abulghazi, &c., … which trace the race of Mongol Khans up to the old royal race of the Turks."

_H. H. Howorth, History of the Mongols, volume 1, pages 27-32._

"Here [in the eastern portion of Asia known as the desert of Gobi], from time immemorial, the Mongols, a people nearly akin to the Turks in language and physiognomy, had made their home, leading a miserable nomadic life in the midst of a wild and barren country, unrecognised by their neighbours, and their very name unknown centuries after their kinsmen, the Turks, had been exercising an all-powerful influence over the destinies of Western Asia."

_A. Vámbéry, History of Bokhara, chapter 8._

_A. Vámbéry, Travels in Central Asia www.gutenberg.org #41751_