THE AMERICAN BANKRUPTCY.
[FROM OUR SPECIAL CORRESPONDENT.] New York, February 12. THE English press has prognosticated so frequently the national bank- ruptcy of the United States, has argued about it and treated of it so constantly, as if it were already an "accomplished fact," that it seems to me probable the actual occurrence will attract less attention on the other side of the water than it really deserves. Still, whether for good or evil, the importance of the recent financial coup d'Elat —for I can call it by no better name—can hardly be over-estimated ; and, as the measure is likely to be much misrepresented, both here and at home, I wish to explain to you, as briefly as I can, exactly what has been done, as well as why and how it has been done.
There is nothing gained by refusing to look facts in the face, and therefore let me state, at starting, that an act of national bankruptcy has been committed. A measure, at the instigation of the Govern- ment, has passed the House of Representatives allowing private as well as public debts, contracted on the condition of being paid for in specie, to be liquidated at the option of the debtor by paper promis- sory notes, redeemable at some indefinite period. This is the plain English of the "Legal Tender Bill," as it is called here, which, in all probability, will have passed the Senate and become law long before you receive this; and if such a bill is not virtually an act of bank- ruptcy, words have no meaning. Admitting this fact, freely and fully, I hold what may appear a paradoxical opinion, that this mea- sure is, in reality, a hopeful sign for the future of the Union, as far as the civil war is concerned. In stating my reasons, I shall, for the sake of intelligibility, turn dollars into pounds sterling, taking the pound as equal to five dollars—a sufficiently near approximation for practical purposes.
Till little more than six months ago there was no national paper currency- whatever in the United States. The circulation was, and is, mainly carried on by means of the private notes of the different banks. Some of these notes are guaranteed by the different States in which the banks are situated, some are not ; but all of them equal, they cannot exceed, Austrian paper notes in dirtiness and rag- gedness, while their very names bear to English ears a savour of in- solvency. In July last Mr. Chase, the Secretary to the Treasury, obtained leave to issue 10 millions of notes of not less than one pound each, bearing no interest, but payable on demand at the United States Treasury. These notes were not a legal tender except in pay- ment of debts due to the Government. Like every other measure of the Washington Cabinet at this period, this measure was a half-and- half one, a temporary expedient to stave over a temporary difficulty, based upon the hypothesis that the rebellion was certain to collapse shortly, somehow or other. The hypothesis, unfortunately, was not realized, and the measure proved a failure. The mercantile community, according to every account, and the private classes, took the notes freely, and made no attempt to pass them away, except in the course of business. A considerable portion, however, of the banks, with whom Mr. phase had contrived to quarrel, refused to hold them, and made a rule of having them presented for payment as soon as they passed into their hands. Moreover, the requirements of the Government proved infinitely greater than had been anticipated By the end of last year, the Treasury became empty; the contractors who supplied the Go- vernment were unpaid ; and the rebellion remained unsuppressed, if not unimpaired in vigour. It was then that the nation and the press, not the Government (this is a fact worth bearing in mind), raised a cry that supplies must be provided for the Treasury at all costs and at all sacrifices. It is in obedience to this national demand that the recent financial measures, of which the Legal Tender Bill forms the first, have been proposed.
The scheme brought forward by the Committee of Ways and Means, appointed to investigate the subject, is briefly of this nature. Its broad principle is, that the expenses of the suppression of the
Southern insurrection we to be paid for by loans, not out of revenue raised by taxation. The manner in which this system is to be carried out is threefold. The current ordinary expenses of the Government and the interest on the proposed loans are to he provided for by an annual taxation of 30 millions; the extraordinary expenses of the war are to be paid by the issue of 100 millions of Government bonds, payable in twenty years at 6 per cent. • and to tide over the imme- diate pecuniary difficulties of the Sle:te, 30 millions of Treasury notes are to be issued, not bear* interest, and made a legal tender. Ten.millions, however, of the above issue are to be employed in taking•np the redeemable notes to the same amount, issued last July. Now, it is obvious that the value of this scheme stands or fails by its being, taken as a whole, and further, that it all rests upon the first of these proposals being fairly carried out. If the American people is prepared to pay the Interest on its debt, there is no reason why its funds should not stand as high as those of oar own Government, which has long ago surrendered any idea whatever of ever being able to pay off the capital of its debt. What discredits the value of American stock in foreign markets, is not the fear that America will never pay off the principal, but the doubt whether she will be willing to pay off the interest. By every rule, then, of prudence and sound finaace, the Taxation Bill should have been made the first of these three measures; and this was the course demanded by public opinion. Unfortunately, the Government, Congress as well as Cabinet, had procrastinated so long, that this course was impossible. Money must be had, and at once, in order to carry on the war. Supposing the Taxation Bill to be enacted, and to work satisfactorily, time must elapse before money would pour into the Treasury. Until the taxing measure was passed, Government bonds could only be converted into cash in the market, at a tremendous and unknown depreciation; and yet, outstanding creditors must be paid to secure further supplies. The contractors, who had supplied the Government, were almost all indebted to the banks for advances, and as the banks declined hold- Mg the Government demand notes, and the Government had no funds to cash them on presentation, it was useless paying the contractors in Government redeemable notes. It was, in fact, only paying Peter to rob Paul. The only way out of the difficulty was to issue notes which were a legal tender, and thus enabling the Government to pay, or- rather to defer paying, its debts. These notes are to be con- vertible on presentation in sums of upwards of 10L, into equi- valent amounts of -United States bonds, and taken at the market value; but as these bonds are redeemable at the option of the Go- vernment, and as it is still doubtful whether the interest of the con- verted bonds is or is not to be paid in Treasury notes instead of specie, I think that, without much injustice, these notes may be con- sidered irredeemable.
Great and obvious as are the evils of such a measure, it would be injustice to the American people to assume that they are ignorant of them. The facts that, in some sense, it is a measure of virtual re- prerration, that it is likely to depreciate the financial credit of the country, and that it is the first step in a most dangerous course of finance, are admitted openly in the press and in conversation. Still the one answer to every objection is, that the war must be carried on, and to that end every- sacrifice must be made. In the words of the Tribune, the strongest opponent of a "legal tender," written while the bill was under deliberation, "Let Congress act promptly and de- cidedly, even though its action should be wrong. We lack faith in irredeemable paper as a panacea for any ill whatever; but hesitation, inaction, at such a crisis, is death." It was this feeling more than any belief in its specific merits which secured the passing of the bill in the House of Representatives, and will secure its passage, in spite of even greater reluctance, in the Senate. Now in Europe the ultimate judgment on the matter will be decided by the question how far the rest of the financial programme is lilleIy to be carried out. If America is prepared to pay thirty millions annually in taxa- tion, there is no reason why the fact of her having the amount of one year's revenue issued in irredeemable notes should seriously damage her credit. That the free states alone of the North, with their twenty-two millions of inhabitants, amongst whom poverty is comparatively unknown, could, if they liked, pay 30s. per head, while we in the old country pay nearly 3/. per head in national taxes alone, can not be questioned. The doubt, of course, is, whether they are disposed to do so. This is a question practical experience alone can decide. The only thing certain is, that the popular cry of the time is for taxation. The demand of every paper I have seen, and every person I have spoken to, is, "We are ready and anxious to be taxed, provided only that the war is pushed on vigorously." It is a common assertion with Southern sympathizers that the West has declined to bear its share of taxation. There is no proof of this assertion hitherto, and, on the contrary, the balance of evidence is the other way. The duty of five cents on coffee, an article of luxury more in demand in the Western states than any other, has been paid without complaint. In every farm-house there—so a friend of mine who resides in the West assures me—you will find that some member of the family has gone off' to fight for the Union, and it is not in accordance with human nature that states which will send out their sons to fight, will refuse money to carry on the war. There is ne doubt about the readiness of the New England and sea- board states to pay taxes ; and even California, which has little direct interest in the war, has declared through its legislature its
willingness to join in bearing the national burdens. Give the people but the prospect of victory"—such is the remark I hear made constantly—" and they will submit to any amount of taxation." The truth is that, contrary to the usual rule, it is the people who are im- patient to be taxed, and the Government which is reluctant to tax the people. The explanation of this apparent anomaly is contained in the state of the political parties in the North. .Putting aside for the moment all minor questions and party deno- minations, the political world of the North appears to me to be divided, practically, into three sections upon the issue of slavery. The old Democratic party, represented more or less by the Nem York Herald, are staunch supporters of the Union, but are equally staunch opponents of all abolition doctrines, which they regard as fatal to any reconstruction of the Union consistent with the restoration of their political influence. Then there is the so-called Union section of the Republican party, of which Mr. Seward at home and Mr. Thurlow Weed abroad are considered the leaders, and which is opposed to any extension of slavery, and has no partiality for slavery gevierally, but which eases much more about the Union than about slavery, and would probably be willing to make considerable sacri- fices of principle with regard to the slavery question if it were possible thereby to restore the Union. Last, but not least, comes the Abolitionist section of the Republicans, of whom the Tribune is the organ, and Horace Greeley the chief. A party which does not love the Union less but hates slavery more, and believes that any reconstruction of the Union on the basis of slavery is neither desi- rable nor possible. Now, the issue of the war depends upon the question which of these parties gains the upper hand, not with the Government but with the people. Throughout this struggle the people has been in advance of and has led the Government. Now, the one universal popular feeling is a desire for the restoration of the Union under Northern supremacy; but how far this is consistent with the maintenance of the "peculiar institution" is still an open question with the people. Once, however, instil into them the per- suasion, whether right or wrong, that the existence of slavery has been the cause of disunion, and is the chief obstacle in the way of either subjugating or holding the South, and from that hour slavery is doomed, and the war becomes a life-and-death struggle against the institutions of the South. It is the knowledge of this fact which shapes the policy of every party in the North. The Union Republicans, who have hitherto mainly dictated the course of the Government, dread any measures which destroy the hope of saving the Union through a compromise ; and thus the Government has sought throughout to cheek rather than stir up national feeling; or, in other words, it is anxious to keep its hands free. The remnants of the Democratic party support the Government because they are aware it is their chief protection against the Abolitionist party, while the Black Republicans are more or less in opposition to the Govern- ment, or, more strictly speaking, to its policy. Thus, on the Legal Tender Bill, the chief advocates of taxation in preference to a system of loans were amongst the section of the Republicans represented by the Tribune ; and the real rather than the avowed motive of their desire for taxation, is to bring the war home to the people. There has been a growing belief in the nation, that for the sake of sparing slavery the war is being carried ou languidly ; and the more directly the cost of the war presses upon the masses, the more this feeling gains ground. The sympathy of the North for slavery is already vanished; a little delay more, and indifference will be succeeded by aversion. Abolitionism, instead of being unpopular, is becoming fashionable. There are many straws floating about which show already the way the wind is turning. Anti-slavery lec- turers, who two years ago were snubbed in Philadelphia, are now cheered by crowded audiences. Dr. Cheever, the most earnest of abolitionists, is allowed to preach against slavery in the House of Representatives at Washington, itself situated in a slave state ; and lastly, a Captain Gordon lies under sentence of death in New York, for being engaged in the slave trade (an offence for which, hitherto, it has practically been impossible to secure a conviction), and yet no popular outcry has been raised even in this city, the stronghold of the Northern pro-slavery party, for the remission of his sentence. For the present, however, this feeling is counteracted by a wide- spread conviction that the rebellion is on the eve of suppression, and that the armies, which are now preparing to enter the South on every side, will restore the dominion of the Union before the summer comes ; and, while this conviction lasts, there is not likely to be any national outcry for abolition. If, on the other hand, it should prove useless, and no real progress is made before the Taxation Bill has had time to act, then, unless my informants are much mistaken, there will be such Legal Tender Bill is the first of revolutionary measures, and it is not a demand for unsparing action as no Government can resist. The likely to be the last. It is a proof that the North is in earnest, and, as such, it promises well for the future.
AN ENGLISH TRAVELLER..
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