Part 13
A Price Convention of the six Middle States was held at York, Pa., in March, 1777, but was unable to agree upon a single point.
When the Price Conventions failed of their object, new ones were held fixing new limits, for example fourfold the prices of 1774, then eightfold, then tenfold, then twentyfold--terrorism being applied in each case to enforce the decrees. Country folks accused town folks of extortion, and threatened to come in and take what they wanted by force. Town folks accused country folks of withholding their produce, and so laws were enacted against withholders. Anonymous hand bills and broad-sides were circulated threatening vengeance on merchants.
As a result of such irrational business disturbances, Boston was, in October, 1779, on the verge of starvation; money transactions had nearly ceased and business was done by barter.
A soldier's pay had dropped by depreciation from $7.00 per month to 33 cents, although it had been twice raised by Congress. Washington could not move his soldiers to Yorktown till Robert Morris had borrowed hard money from Rochambeau for their back pay.
In March, 1780, Congress tried the colonial experiment of "new tenor" in a very awkward and roundabout way, and declared that "old tenor" to be worth 40 to 1; the actual depreciation being 60 for 1. As it was supposed that $200,000,000 of Continental money was out, this was a repudiation of all but $5,000,000 of it. The depreciation then went on more rapidly than before. The "new tenor" bills started at a depreciation of 2 for 1, which became 3 for 1, even before they reached the army, and dropped to 6 to 1 in a few months. Old tenor went at a galloping pace at 500 for 1 in Philadelphia, when it ceased to circulate. In the remoter districts of the South, it continued in circulation nearly a year longer, and until the depreciation had reached 1,000 to 1. The southern people, when they learned that they had been using the stuff long after it had become worthless in the North, thought that they had been cheated by the Yankees, thus intensifying the sectional distrust which was already so dangerous.
Continental money was now an object of execration and afterwards of derision. "Not worth a continental" became a synonym for absolute worthlessness, and remains an axiom to this day. In the Act of Congress approved August 4, 1790, authority was granted for funding the bills in 6 per cent bonds "at the rate of $100 in the said bill for $1.00 in specie." Only $7,000,000 turned up to take advantage of this provision.
MR. BANKER: I want to be perfectly frank with the rest of you men. Last Thursday I was over at Mr. Lawyer's office and we got into a discussion about this matter. I was literally astounded to find him in favor of Government issues of money, and that he actually thought such issues were constitutional. I knew how Mr. Merchant and Mr. Manufacturer stood, for we had talked the matter over some time ago. So we got together and divided up the work we should each of us do in order to convince Mr. Lawyer that he was wrong on both points.
From what has been shown with respect to the facts I am sure that Mr. Lawyer must be convinced that the principle at least of Government issues of legal tender paper money is unsound; for all the evidence, as we have seen for 100 years, from 1690 to 1790, is all on one side. Indeed not a single exception can be found anywhere. You will remember that everyone of the thirteen original states tried fiat legal tender paper money, and then when they all united under the Continental Congress, they tried it altogether; but the result was precisely the same.
_First_: You will remember, came the issuance of the Bills of Credit, as they called them, or Greenbacks, as we call them, paper money.
_Second_: And immediately all the gold and silver disappeared because driven from the channels of trade, with something cheaper with which the debtor could cancel his obligations.
_Third_: Dishonesty, dishonor, fraud, disaster, ruin and repudiation followed each other in quick succession.
_Fourth_: Then came the return to sound conditions when paper issues were discarded and the effort to make something out of nothing was abandoned.
Mr. Lawyer, I want to ask you now whether you do not think we have made a case against you so far as the unwisdom and utter folly of Government issues of paper money is concerned.
MR. LAWYER: I must admit that the facts are overwhelming. I had never taken the time nor trouble to investigate the subject, but had assumed that one of the functions of our Government was the issuance of money, even paper money, if you like. It seems from what has been shown here and last Wednesday night as well that this scheme of issuing paper money has been tried, not only by everyone of our thirteen Colonies and the Continental Congress, but by practically every country of the world at some time or other. It was tried in Austria, England, France, Germany, Italy, Russia and is now going on in nearly every one of the South American countries with the same experience, I am informed, that other countries have suffered. Now, so far as the facts have been disclosed, there is not a single instance in which the scheme has been tried that has not resulted in precisely the same way--complete failure and ultimate dishonor and repudiation if persisted in as a principle.
Under the circumstances I must say, as every fair-minded man must, that the practice has been an absolute failure, and therefore it must be admitted that the principle must be unsound, for it seems to have worked nowhere, although tried under every conceivable condition. Of course I am compelled to give in on the unsoundness of the scheme. Now, you understand, that my admission as to the unsoundness and unwisdom of the practice does not carry with it my admission that the United States Government has no constitutional right or authority to issue paper money if it chooses to do so.
MR. BANKER: I understand perfectly well that your admission of the one point has nothing whatever to do with the constitutional question, but I wanted to know your conclusion after a consideration of the facts as presented first.
I think everyone here will agree that the disastrous experiences of the colonies and of the Continental Congress in issuing paper money must have forced this question upon the minds of the framers of the Constitution, as one of the very greatest importance to be settled by them. Certainly what they thought about it would indicate what they intended to do. I will first show this by what they said, and then I will demonstrate what they intended to do by what they actually did do in the Constitutional Convention.
Alexander Hamilton, in June, 1783, set forth explicitly in a resolution for a new Constitution of the United States of America his deliberate opinion in these words: "To emit an unfunded paper as the sign of value ought not to continue a formal part in the Constitution, nor ever hereafter to be employed; being in its nature pregnant with abuses and liable to be made the engine of imposition and fraud; holding out temptations equally pernicious to the integrity of Government and to the morals of the people."
In 1786, Thomas Paine, the author of "Common Sense," in an opinion on Paper Money used this language: "The laws of the country ought to be the standard of equity and calculated to impress on the minds of the people the moral as well as the legal obligation of political justice. But tender laws of any kind operate to destroy morality and to dissolve by the pretence of law what ought to be the principle of _law_ to _support_, reciprocal justice between man and man; and the punishment of a member who should move for such a law ought to be _death_."
In the summer of 1785 Richard Henry Lee, then president of Congress, warned Washington of a plan formed for issuing a large sum of paper money in the next assembly of their state, adding as his opinion: "The greatest foes in the world could not devise a more effectual plan for ruining Virginia. I should suppose every friend to his country, every honest and sober man, would join heartily to reprobate so nefarious a plan of speculation."
Washington replied to Lee in these words: "I never have heard, and I hope I never shall hear, any serious mention of a paper emission in this state. Yet ignorance is the tool of design and is often set to work suddenly and unexpectedly."
In 1787, on the 9th day of January, Washington wrote to Jabes Bowen as follows: "Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice."
To Mr. Stone, a member of the Senate of Maryland, who appealed to Washington to allow his opinion on this subject to be made publicly known, Washington wrote just three months before the opening of the Constitutional convention, as follows: "As my sentiments thereon have been fully and decidedly expressed long before the assembly either of Maryland or of this state was convened, I do not scruple to declare, that if I had had a voice in your legislature, it would have been given decidedly against a paper emission upon the general principles of its utility, as a representative and the necessity of it as a medium.
"To assign reasons for this opinion would be as unnecessary as tedious. The ground has been so often trod that a place hardly remains untouched. In a word the necessity arising from the want of specie is represented as greater than it really is. I contend that it is by the substance, not with the shadow of a thing, we are to be benefited. The wisdom of man, in my humble opinion, cannot at this time devise a plan, by which the credit of paper money would be long supported; consequently, depreciation keeps pace with the quantity of the emission, and articles for which it is exchanged rise in a greater ratio than the sinking value of the money. Wherein then is the farmer, the planter, the artisan benefited? An evil equally great is the door it immediately opens for speculation, by which the least designing, and perhaps most valuable part of the community are preyed upon by the more knowing and crafty speculators."
In 1785, George Mason wrote "they may pass a law to issue paper money, but twenty laws will not make the people receive it. Paper money is founded upon fraud and knavery."
On the first day of August, 1786, Washington wrote to Jefferson: "Other states are falling into the very foolish and wicked plans of emitting paper money."
In May, 1788, Charles Pinckney, in a speech in the Convention of South Carolina, said: "I apprehend these general reasons will be found true with respect to paper money; that experience has shown that in every state where it has been practiced since the Revolution, it always carries the gold and silver out of the country, and impoverishes it."
John Marshall, the greatest of all our Chief Justices, the man who breathed into the dry bones of a constitutional contract, the soul of nationality, expressed himself at various times in these words: "He had 'an unabated zeal for the exact observance of public and private engagements.' He rightly insisted that the only ways of relief for pecuniary 'distresses' were 'industry and frugality'; he condemned 'all the wild projects of the moment; he rejected as a delusion every attempt at relief from pecuniary distresses' by the emission of 'paper money' or by 'a depreciated medium of commerce.'" George Bancroft said: "These were his opinions through life. He gave them to the public in 1807, and twenty-four years later in a revised edition of his 'Life of Washington,' he confirmed his early convictions by the authority of his maturest life."
James Madison, who was probably more responsible for the Constitution than any other single individual, used these words in addressing the delegates of Virginia in the year 1786: "Paper money is unjust; to creditors, if a legal tender; to debtors, if not legal tender, by increasing the difficulty of getting specie. It is unconstitutional, for it affects the rights of property, as much as taking away equal value in land. It is pernicious, destroying confidence between individuals; discouraging commerce; enriching sharpers; vitiating morals; reversing the end of government, and conspiring with the examples of other states to disgrace Republican Government in the eyes of mankind." As the result of his words and the well-known opinions of Washington, Lee and Mason, the House of Delegates of Virginia on the first day of November resolved by a vote of 85 against 17 that an emission of paper money would be "unjust, impolitic and destructive of public and private confidence, and of that virtue which is the basis of Republican Government."
Disquieting symptoms having appeared in Virginia, Madison, in April, enjoined Monroe, a member of its assembly, to battle paper money.
Madison enumerated among the evils for which the new Constitution should provide a remedy, the "familiar violation of contracts in the form of depreciated paper, made a legal tender." In his notes for his own guidance in the Federal Convention, he laid down the principle that "Paper money may be deemed an aggression on the rights of other states," and just five weeks before the time for the meeting of the convention, he wrote from Congress, then sitting in New York, to Edmund Randolph, as follows: "There has never been a moment since the peace, at which the federal assent would have been given to paper money."
In conclusion, Mr. Lawyer, I want you, because you are a particularly good reader, and ought to be more interested in this subject than anybody else, if you are wrong, to read the story of the Constitutional Convention as related by George Bancroft.
MR. LAWYER: I will very gladly do so.
"The convention of the states for the reform of the confederacy organized itself by electing as its president George Washington, who of all the public men in his day was the most decided in his convictions and the most outspoken in his words on the inherent dishonesty of irredeemable paper bills.
"Virginia took the lead, and Randolph, its governor, in his opening speech drew attention to paper money by reminding its hearers that the patriotic authors of the confederation did their work 'in the infancy of the science of constitutions and of confederacies, when the havoc of paper money had not been foreseen.'
"Among the delegates from Connecticut were Oliver Ellsworth, who in the Federal Congress had repeatedly served on committees for the reform of the federal constitution, and Roger Sherman, who, in 1752, had published his conviction that good laws and poor money are irreconcilable. They agreed to insist in the convention 'that the legislatures of the individual states ought not to possess a right to emit bills of credit for a currency, or in any manner to obstruct the recovery of debts, whereby the interests of foreigners or the citizens of any other state may be affected.'
"The refusal of the convention to confer on the legislature of the United States the power to emit bills of credit or irredeemable paper money in any form is so complete that, according to all rules by which public documents are interpreted, it should not be treated as questionable; but as the truth in this case is of infinite importance, and has been questioned by those in authority, the wrong done to the Constitution may justify a simple narrative of the facts, which ample and indisputable records establish, and which no power can alter.
"The journal of the convention for framing the Constitution was kept under the supervision of its members, and its authority is vouched for by Washington, not only as the presiding officer of the convention, but as President of the United States in a special message to Congress.
"By a clause in the ninth article of confederation of the United States of America, and only by that clause, the confederated states had authority 'to emit bills on the credit of the United States.'
"Of the legislature of the United States, under our present constitution, the court insists that 'Congress is clearly authorized to emit Bills of Credit.' But is it so?
"The eighth clause of the seventh article, in the first draft of the Constitution, was as follows: 'The legislature of the United States shall have the power to borrow money and emit bills on the credit of the United States.' The journal of the convention for August 16th makes this record: 'It was moved and seconded to strike out the words "and emit bills," and the motion to strike out these words "passed in the affirmative. Yeas: New Hampshire, Massachusetts, Connecticut, Pennsylvania, Delaware, Virginia, North Carolina, South Carolina, Georgia--9. Nays: New Jersey, Maryland--2." So the convention by a vote of more than four to one, refused to grant to the legislature of the United States the power "to emit bills on the credit of the United States."'
"For the interpretation of this record, Madison, the best possible witness, has left this note: 'Striking out the words cut off the pretext for a paper currency, and particularly for making the bills a tender either for public or private debts.'
"Madison was the chief author of the new Constitution. Its opponent, Luther Martin, the attorney-general of Maryland, a delegate to the Federal Convention and present at the debate, read to the Maryland House of Delegates a paper, in which he gave his account of the purpose of the Convention; his evidence agrees exactly with that of Madison, and for nearly a hundred years his fidelity as a witness was as little questioned as that of Madison. Here are two witnesses: Madison, who approved the prohibition, and Martin, who condemned it; the court pushes the testimony of Madison aside as if he had 'not explained himself,' though on the point in question his words are as clear as sunlight. The address of Martin the court rejects as a 'philippic,' though it contains not a word of invective against any individual, and does contain the clearly expressed wish of its author 'not to wound the feelings of any person.'
"We have a record of what was spoken and of what was done in the Federal Convention kept by Madison, who took upon himself the most solemn engagement to preserve the truth for the instruction of coming generations, and whose opportunity, capacity, and integrity no one questions. His report of what was said and done on the 16th of August in the Federal Convention preserves the testimony of many witnesses, taken down as it were by the most capable notary.
"The question before the Convention was: Shall power be granted to the legislature of the United States 'to emit bills of credit'? The first witness is Gouverneur Morris, a man free from illusions; a delegate from the state which contained Philadelphia, then the most opulent city in the thirteen states; and as by its interests he was nearly connected with the city and state of New York, he thoroughly represented the interests of commerce. He moved to strike out the grant of power to 'emit bills on the credit of the United States,' saying: 'If the United States have credit, such bills will be unnecessary; if they have not, will be unjust and useless.' The seconder of Gouverneur Morris was Pierce Butler, a delegate from South Carolina, then the richest commercial state in the South. He remarked in the course of debate that 'paper is a legal tender in no country in Europe,' and he was urgent to withhold from the Government of the United States the power to make it so.
"Madison interposed: 'Will it not be sufficient to prohibit the making' the bills 'a tender'? Gorham, in reply to Madison, held that no accompanying prohibition was sufficient to make it safe to grant to the legislature of the United States the power to emit bills of credit. He spoke absolutely 'for striking the words out,' saying: 'If the words stand, they may suggest and lead to the measure.'
"The words of Oliver Ellsworth, our third chief justice, were: 'This is a favorable moment to shut and bar the door against paper money. The mischiefs of the various experiments which have been made are now fresh in the public mind, and have excited the disgust of all the respectable part of America.'
"Randolph expresses 'his antipathy to paper money'; but, 'could not agree to strike out the words, as he could not foresee all the occasions that might arise.'
"James Wilson, in concurrence with Ellsworth, said: 'It will have a most salutary influence on the credit of the United States to remove the possibility of paper money. This expedition can never succeed whilst its mischiefs are remembered; and, as long as it can be resorted to, it will be a bar to other resources.'
"George Reed spoke for Delaware: 'The words, if not struck out, would be as alarming as the mark of the beast in Revelation.'
"John Langdon, of New Hampshire, conforming to the wise instructions of the towns of his state, said: 'I had rather reject the whole plan than retain the three words "and emit bills."'
"Madison, agreeing with the journal of the convention, records that the grant of power to emit bills of credit was refused by a majority of more than four to one. Eleven men took part in the discussion; and every one of the eleven whether he spoke for or against the grant of the power, Gouverneur Morris, Pierce Butler, James Madison, Nathaniel Gorham, George Mason, John F. Mercer, Oliver Ellsworth, Edmund Randolph, James Wilson, George Reed and John Langdon, each and all, understood the vote to be a denial to the legislature of the United States of the power to emit paper money. Take the men, one by one, and see how weighty is the witness of each individual; take them together and add the consideration that they, every one of them, unanimously support each other and are contradicted by no one, and who shall dare question their testimony? The evidence is perfect; no power to emit paper money was granted to the legislature of the United States.
"By refusing to the United States the power of issuing bills of credit, the victory over paper money was but half complete. The same James Wilson, who twelve days before, with Oliver Ellsworth, had taken a chief part in refusing to the United States the power to emit paper money, and the same Roger Sherman, who in 1752 had put forth all his energy to break up paper money in Connecticut, jointly took the lead. The first draft of the Constitution had forbidden the states to emit bills of credit without the consent of the legislature of the United States; on the 28th of August they jointly offered this motion: 'No state shall coin money, nor emit bills of credit, nor make anything but gold and silver coin a tender in payment of debts,' making the prohibition absolute. Roger Sherman, animated by zeal for the welfare of the coming republic of countless millions, exclaims in the debate: 'This is the favorable crisis for crushing paper money.' His word was the will of the convention, and the states, by a majority of eight and a half against one and a half--that is, by more than five to one--forbade the states, under any circumstances, to emit bills of credit. This is the way in which our Constitution 'shut and barred the door against paper money' and 'crushed' it.