9 JUNE 1866, Page 13


[FROM OUR SPECIAL CORRESPONDENT.] New York, May 25, 1866. THE news to be brought by the Cuba, which arrived at Halifax on the 21st, had been looked for with more than usual interest, but bar Wall-Street men were hardly.prepaied for such a story of panic and excitement in London as was immediately sent by telegraph from Halifax, and fully confirmed yesterday on the arrival of the Cuba's mails. The effect of this financial revulsion upon our Money Market has been thus far very slight. The sudden and largely increased demabd for money on your side, which of course had to be sent chiefly in bullion, raised the price of gold from 130 to 139 on Wednesday, and to 141 to-day- Friday ; but between these extremes there were almost hourly fluctuations to the extent of 4 cents. in a day, and the rise was plainly produced by legitimate demand, and the efforts of specu- lators availing themselves of that demand, not at all by lack of confidence, or by any noteworthy stringency in the Money Market. I find everywhere (and I have been much in Wall Street during the last three days) an expression of sincere and respectful sympathy for the people who suffered this sharp financial pinch, and of gratification that we were able so promptly and so easily to comply with the unexpected demands upon us for British account. By to-morrow noon 11,000,000 of dollars in gold will have left this port and Boston for Liverpool within three days, making 22,000,000 since the 1st of May. Nor have I heard, except in a single instance, any reference to those somewhat memorable articles upon our financial condition, and especially upon our intentions toward our creditors, which appeared in the London Times, the Saturday Review, and other London papers about eighteen months ago and previously, and from which any cruelly disposed person may obtain some gratifi- cation by compelling their writers to read them aloud to a circle of admiring friends. I notice in what took place in London on the 10th and 11th of May an illustration of a remark recently made in one of these letters, that the opinion you had all been taught to entertain that " Americans " are more excitable than English- men is quite erroneous, and that on the contrary I and others have noticed that Englishmen are more excitable and appre- hensive than we are. I remember very distinctly all the visible incidents of the great financial crash of 1857 which, like that of this May in England, was ushered in by a short period of anxiety just deep enough to thoroughly rouse public attention, and then was precipitated by the sudden failure of a very large concern, the Ohio Life and Trust Company. The shock, as most of my readers will remember, was equally sudden and profound, and it was also lasting. In the course of ten days large wholesale dealers were selling at retail for cash down. I saw the steps and the windows of many of them filled with their wares ticketed with prices. But in all this, even in the three or four first days of the crash, when panic was universal, and it seemed as if "the bottom had fallen out," there was no such excitement as that reported by the London papers of May 12. My office was then in Wall Street, and so far from there being a throng in any part of the street, there was a visible excitement only at two, or perhaps three, banking houses, one of which was a savings' bank ; and at no one of these were there more than enough people to fill the entrance and the steps, not enough to impede free passage on the side walk ; and of those who thus made a run upon the banks, a large proportion were Irish people.

Our present financial condition, compared with that through which we have lately passed and that which certain prophets predicted for us, is not without interest. In November, 1861, the debt of the United States was two thousand and seventeen millions of dollars ; in Treasury notes and National Bank notes there were 868,000,000 of dollars in circulation ; and gold, which had touched 285 in July of that year, stood at 260 and there- about. -The prices of all the necessaries of life had nearly doubled since 1861 (they having fallen in 1860, the first year of the war), and yet, although there was necessarily a very close economy prac- tised in all households, except those of the comparatively few men

who were enriched directly or indirectly by the war, there was in the winters of 1863 and 1864 very little suffering, even among the poorer classes. Since that time gold has gone down, until within

the past month it has touched 124, and we have begun to pay off our debt, and yet prices remain about where they were when gold stood at between 260 and 285, and the amount of paper in circulation in Treasury notes and National Bank notes (the former having been diminished and the latter increased), which is now on the best authority 700,000,000 of dollars, is not more than the business of the country can com- fortably bear, or in fact, according to men whose financial opinions I am only worthy to record, than it really needs.

However this may be, the significant fact has for more than a year asserted itself, that in our present financial condition the value of gold, of coined money, has no effect whatever upon the prices of commodities, except those which we must pay for by

sending gold out of the country. Side by side with this fact, and 'dependent upon it, is the other, that the 700,000,000 of dollars in notes which are only promises to pay on demand, of which the holder knows that he will never ask the fulfilment, and that if he did for years they would not be fulfilled, are yet used by the people with entire confidence and content, with no more doubt as to their being "good," in fact, than if they were gold or silver coins. Of course this condition of money affairs has provoked much inquiry as to its cause, but no answer has been made which seems to be found satisfactory. It is with much diffidence that I venture to offer a very simple one, for finance is one of the many sub- jects that I profess not to understand. In this department of human endeavour I have, it is true, attempted, like some other men, to successfully solve the fascinating problem—take 3 from 2, and 5 remain, but only to encounter ignominious failure. But, go to, as Mr. Tupper says ; was not William Pitt ruined by his housekeeping, and does not Dogberry claim consideration be- cause he is "a fellow that hath had losses ?" In brief, my reason is that gold and silver coins have ceased to be money in this country. Not merely that they have been withdrawn from circu- lation, and are more or less satisfactorily represented by notes, but that they have, for the time being, actually ceased to be money, and have become in every sense of the term mere merchandise. What is money ? I have sought in vain from all authorities, lexicographers, and political economists for a compendious and exact definition. Johnson's "metal coined for the purposes of commerce," and Webster's to the same effect, are, I am sure most of my readers will think, childishly insufficient. In the winter of 1862 a gentleman who has a high reputation as a publicist both in Europe and America was discussing, in a small company of which I was one, the proposal to make Treasury notes a legal tender by Act of Congress. He spoke against the proposition without qualification, told how he had entreated Mr. Chase, then Secretary of the Trea- sury, and certain members of the Finance Committee of Congress, not to bring ruin upon the country by making notes, even Trea- sury notes, a legal tender ; and at last, taking a greenback from his pocket, he held it up, saying, 4' That thing money? It's a good thing in its way, a convenient thing, but call it money !" and he snapped it in the air with contempt. Well, the war lasted twice as long as we then thought that it would, the debt became ten times as large, Treasury notes were made a legal tender, and the country is not exactly ruined. And the reason why it is not ruined—but, according to Mr. Gladstone and Sir Morton Pete, the reverse—is, I venture to say, because that thing that my friend flouted so contemptuously was money ; not the representative of money, but money, as much as any guinea or dollar that ever was 'coined. For of money I have framed to myself this definition, which I offer to the use of all those who are not satisfied with Johnson's, and who cannot make a better themselves. 'Money- s circulating measure and representative of value, authorized by law and sanctioned by custom.' Of course one element of this definition must be lacking in the case of money among savage people who have no law, but in all others I think that every part of the definition will be found to be essential. That money is a measure of value is an admitted truth in political economy. But a measure of value might be an abstraction, like, for instance, our "mill," which practically at least, does not exist, and therefore, although a measure of value, is not really money. But the measure must not only besides be representative, it must circulate—for instance, our mill again ; suppose one coined and kept in the Mint as a standard, or sup- pose many coined, in either case the mill would not be really money, because in the latter it would be thrown out of circula- tion as of too small value to be used The establishment of this circulating measure and representative of value by law is a prime necessity to the perfection of money too obvious to be insisted upon, but it was illustrated here in a singular and striking manner in the early part of the war. When silver disappeared suddenly and absolutely from circulation, people with one con- sent began to use postage stamps, which we have, I believe, in greater variety and of higher value than you-1, 3, 5, 10, 12, 15, 24 cents., and so on up to 90 cents. These were used universally, singly or in packages, and minute envelopes were made with the sum to be represented by the stamps that should be contained in them printed on the outside. Under the circumstances they answered the purpose quite well, and they remained in use a long time. They were as exact a measure of value as coin ; they were a representative of value, and had, besides, a real and legally recognized value ; and their use was sanctioned by custom. But not having the authority of law, debts could not be paid in them, except by mutual consent. They, however, took such hold of the public mind, that when the fractional paper currency was issued by the Government this was called "stamps," which name it retains among uneducated people to this day. They talk about "having the stamps" or "getting stamps," where before the war they would have said "change." The appearance of this fractional currency, however, and the making of it by law receivable for dues to the Government in sums of five dollars, united with the Legal Tender Act to the extinction of gold and silver coin as money here for the time being. For although the coins of the United States are still legally money, they have entirely lost the power and func- tions of money. They are legalized measures and representatives of value, but their use is no longer sanctioned by custom. A man with a pocket full of silver and gold, and nothing else, would have great difficulty in getting through a day here. He could always get something for his eagles and his half-dollars, to be sure, but so he could for his watch, his hat, or his pocket-knife. About a year and a half ago I was in an omnibus, when a man entered who was plainly a Cuban Spaniard. He offered the driver a small gold coin, a dollar or a quarter-eagle, for his fare. "What am I to do with this?" said the man ; "this is not money." We all, except the Spaniard, laughed, but Jehu was right. It was not money, and he could do nothing with it. The Spaniard could not speak a word of English, and was moneyless with a handful of gold. One of his fellow-passengers settled the matter by giving the driver a very dirty, ill-smelling piece of paper, about an inch and a half square. At another time I found myself without my pocket-book at a restaurant where I rarely go. But in a purse I had some coin, which I have carried all through the war, for I confess that I like the sight and the feeling of the stamped metal,— a barbarous taste of which I have not been able to rid myself. I offered a silver half-dollar, but although the cashier (such is the grand name of the money-taker at these places) had his drawer full of "money," he could not give me change for my silver, which I preferred to leave with him and redeem with a fifty-cent " shinplaster " or " stamp " on my way home. While I was talking with this man, another customer expressed some doubts as to the genuineness of a part of the change he received. "Oh, never mind," was the reply, "almost anything '11 go that has a little printin' on it." A few months ago it was decided in one of our highest Courts, as perhaps the readers of the Spectator have learned, that a contract, made since the passage of the Legal Tender Act, to pay a certain sum of money in coin, could not be enforced. If the contract had been to give, in payment so many ounces of gold of a certain fineness, specific performance might have been compelled, but for the payment of a dollar the paper dollar and the gold dollar are legally the same. And so they are, to all intents and purposes, in reality, and without harm, that I can discover, to trade or to inflividuals. For in spite of this ruling of the Courts gold went down to 124, and would have continued to fall if it had not been for the disturbances in Europe, which raised its price as a commodity; and all the while prices in paper kept up, as I before remarked, affected in no way by fluctuations in the value of coin. For these reasons I venture to express the opinion that gold and silver coin have actually ceased to be money among a rich and thriving people, who have plenty of the precious metals, and to spare ; and that the " thing " that my political-economist friend scouted so was actually money, as actually money and as good money, within the United States, as a golden eagle. And therefore I also venture the opinion that anything, whether it be wampum, cowries, pasteboard, gold, or silk-paper "with a little printin' on it," that complies with all the parts of the definition given above, is actually money within the limits to which that