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Report of the Committee on Finance
on the Bill (H. R., 92) to Tax, Fund, and Limit the Currency:

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Confederate States of America. Congress.
Senate. Committee on Finance

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Call number 236 Conf. 1864 (Rare Book Collection, UNC-CH)

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[No. 18--Secret.]

SENATE, January 25th, 1864.--Two hundred and fifty copies ordered to be printed.

[By Mr. Semmes.]


        The undersigned, members of the Finance Committee, to which was referred a House bill entitled "An act to tax, fund, and limit the currency," have had the same under consideration, and beg leave to submit the following views in regard to it: The subject is of such vast importance that they cannot but be deeply impressed with a sense of the responsibility of those whose duty it is to act upon it. The finance questions which now engage the attention of Congress and the country are surrounded with such difficulties that one might well pause before he offered a scheme as a correct solution of so great a problem, where a mistake in regard to it would be attended with the worst of consequences. But, on the other hand, the dangers of delay are so great, and the necessity for some decided action so manifest, that the undersigned are impelled by a sense of duty to submit the plan which they think will be the most likely to afford relief. They can truly say that, in their opinion, the disease has made such progress that none but the boldest and most vigorous measures can remedy the evil. Before discussing these measures it may be well to review briefly our financial history, that we may use the lights of our past experience to guide us in the future. The first attempt of the Government to convert its credit into a currency, and thus borrow, to

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a certain extent, without interest, was made at the second session of Congress in Montgomery, Alabama. By the act of May 6th, 1861, provision was made for a loan of $50,000,000 on bonds bearing eight per cent. interest and for the issue of twenty millions of treasury notes, without interest, payable after the war, and receivable in payment of public dues. These notes were fundable at the pleasure of the holder in eight per cent. bonds, which were reconvertible into like notes whenever he might desire to do so. Upon the theory of this system of finance the currency was to be self-regulating in regard to an undue expansion or contraction by adjusting itself to the level of a bond paying eight per cent. interest in specie. If such a bond was worth par or nearly par in specie, then the currency could not fall much below that value by expansion, or rise much above it by contraction. For in the one case the surplus would be funded by the operation of individual interest, and in the other the equilibrium would be restored by a reconversion of a portion of the bonds into notes. But to sustain such a scheme of currency the payment of the interest upon the bond in specie was indispensable. When, therefore, it became obvious that this could not be done and that war on a great scale was to be maintained chiefly by the use of public credit, it ought to have been understood that the self-regulating feature of this system was lost and that the necessity had arisen to place the the finances upon a different foundation.

        Undoubtedly the issue of Treasury notes ought to have been then restrained within limits fixed by law and in such a manner that the currency could not have been inflated to an undue extent. This being done, the Government should have resorted to taxation and the sale of bonds for the means of meeting its expenditure. It would have been far better to have submitted to such a discount as would have been made upon the bond, than to have inflated the standard of value to such an extent as to force the Government to incur a debt for three-fold the value received and to threaten with ruin both public and private credit. Nor was this all; for this currency, constantly expanding in volume, lost some of the most essential attributes of a standard of value, because it was constantly changing. A standard of value, although nominally greatly beyond the specie standard, might still be used as a true measure if it bore a constant proportion to the precious metals. Such a standard would be inconvenient enough; but still it would measure values as rated in specie, which is the general standard of the world. But in our case the volume of currency was constantly increasing and men were tempted to refuse to sell to-day because they were sure of a higher price to-morrow. Some efforts were made by Congress to prevent this evil in the law of Sept. 23d, 1862, which provided for an alternative issue of bonds or of treasury notes, and allowed the Secretary of the Treasury to put forth either in his discretion. This law required the bonds to be used in preference to the notes where it could be done, and, in effect, authorized the Secretary to sell them below par. But the law itself was defective in not imposing a positive restriction upon the amount of treasury notes to be issued. Without this protective power, of the law, it was, perhaps

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impossible for the Secretary to have resisted the pressure for the note, which was the more convenient form of credit. At that day it is doubtful whether public opinion would have sustained him in submitting to the necessary discount had he sold them for treasury notes. Few will now doubt but that such ought to have been the policy prescribed by the law itself. But the opposite opinion prevailed at the time and treasury notes were allowed to be issued until the amount became so enormous that Congress felt itself constrained at the last session to seek some means for absorbing the excess beyond the amount necessary to supply the true currency wants of the country. A law was passed to constrain the holders of the notes to place a portion of them in bonds by curtailing the funding privilege after a certain period. But, to provide a more efficacious absorbent, the Secretary of the Treasury was authorized to issue $250,000,000 in bonds, whose interest, at the rate of six per cent. per annum, was payable in specie or in cotton at six pence sterling per pound. There was good reason at that time to suppose that such a bond would sell well in foreign markets, and with the sterling exchange thus procurable it was hoped that the treasury notes could be purchased to a large extent; for they then stood as eight or ten to one in specie. But unfortunately the military reverses of the last year so impaired our credit abroad as to destroy this well-formed expectation, and now we have to look to some other plan for relief, if indeed, relief be practicable. That it is practicable, the undersigned believe; but, in their opinion, it can only be had by prompt, vigorous and radical measures. We must strike at the root of the evil, for to apply palliatives now will be to aggravate its distress, through the very means which are used to postpone the final hour of the system now in existence. Before, however, discussing the plan which is offered, it is but just to those who have to deal with this subject practically to say that no scheme of finance can be maintained in the face of serious military reverses. For, after all, public credit depends as much upon the sword of the soldier who defends the country as upon the pen of the law-giver who regulates its form and character. Nor are these the only considerations independent of the system itself, which affect its successful operation.

        Public credit rests, at last, upon the native resources of a country, and the prospect of their proper development. In the former we are rich enough for all the possible demands to be made upon them; but in regard to the latter, it is to be doubted whether we have not too much neglected our industrial system in our almost exclusive attention to the military wants of the country. But whether we look to the industrial or the military system, we shall find a reform in the currency to be an almost indispensable condition of success. In the first place, we must so fix our currency as to make it a standard by which men may measure the value of their contracts with the Government and each other. Secondly, we must bring that currency within such limits as will make it so near to the specie standard, that debts contracted upon such a measure of value can be paid, hereafter, in gold or silver, according to the promise that has been given; and thirdly,

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we must endeavor to attain these ends by means which will operate upon all as equally, and fairly its possible. In studying this great problem, we must look, not only to the amount, but to the character of our debt, as possibly in the latter we may find the key to its solution. Our interest-bearing debt is about $400,000,000, of which $102,000,000 consists of treasury notes, and the residue of bonds. Our non-interest-bearing debt, which now constitutes the currency of the country, will probably amount to $790,000,000 on the 1st of April, 1864. In this estimate, no allowance is made for notes which have been lost or destroyed--a sum which necessarily must have been large, and which may possibly amount to $50,000,000

        This currency as compared with that of the Confederate States when the war broke out, is, probably, now worth about twenty-five cents in the dollar, upon a contrast of the prices, at the two periods, of such articles as are not much affected by scarcity or peculiar circumstances. Such, at least, is the opinion of persons who have a practical acquaintance with the subject, and who were consulted by the undersigned. None supposed that prices had not been enhanced more than three-fold when estimated in the present currency. This value of the tresaury note is daily diminishing, because the Government is issuing fifty millions of such notes in every month. Its character, as a standard of value, is fast being destroyed, and unless something is done, they will not only become utterly worthless, before very long, but they will involve us in a bonded debt so large in its nominal amount, that we shall be unable to pay it when it shall have reached its final dimensions. All, then, will probably agree that nothing could be worse than to leave the present system in operation. But some who are of opinion that we should disturb none of the promises on the face of the note, propose that we should leave the present amount of treasury notes outstanding, and issue no more. The effect of this would be that both the Government and private individuals would contract debt upon a scale which would require them to pay four dollars in value for every one received. When we remember that the Secretary estimates our annual expenditures, upon the present standard of value, at about $1,427,000,000, we can easily reckon the liabilities probably to be incurred in the course of two or three years of war. For it is preposterous to suppose that such a war as that in which we are now engaged can be conducted upon taxation alone. On the contrary, we must depend mainly upon credit for the means of prosecuting it. Can any man doubt but that such a scheme would result, either in repudiation of the whole debt, or else in scaling it according to the specie values received in exchange for it. There is still another plan which it may be well to examine before proceeding to an analysis of the House bill. That scheme was proposed on the authority of the bankers' convention, and still has its advocates. It proposes to issue one thousand millions of bonds, bearing interest at the rate of six per cent. per annum, and with coupons attached, to be payable in specie. A tax is to be laid to bring in $60,000,000, which is to be payable in specie or in these coupons, and these bonds, which would be worth all that they represented on

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their face, in specie, are to be exchanged at par for treasury notes, which cost their holders not more than twenty-five cents in the dollar. This tax of $60,000,000, in specie, would be equivalent to one of $1,200,000,000 in treasury notes, at the present period. This tax must be paid in addition to what is to be received for the expenses of the counties, the cities, and of the States, and for the maintenance of the Confederate Government, and the prosecution of the war. Would it be possible to do this without bringing a large portion of the property of the country to the hammer, and spreading ruin and disaster throughout the land? And to whom would this property be transferred? To those having funds abroad, upon which they could draw, and to the holders of those bonds whose coupons were made equal to specie by law. It is difficult to estimate the extent to which the property of the country would be transferred to its monied men under such a scheme as this. These objections are applicable, in some degree, to all the plans which propose to lay a tax, payable in specie. Such a tax imposes a much greater burthen upon the people than it would seem to do at first sight. If it be true that prices not effected by the scarcity of the articles for which they are paid, are now four times as great, when estimated in treasury notes, as when reckoned in specie in 1861; and if one dollar in treasury notes is now worth only four cents in specie, then specie is five times as valuable now, in the Confederate States, as it was in 1861. A result which is not impossible, startling as it may seem at first view. When trade is open with the world, the value of specie is nearly equal in all places between which there is a free exchange of commodities. But when a country is closely blockaded, and cannot export its products freely in exchange for specie, that article may become of greater value there, on account of its scarcity, than it bears in the rest of the world.

        Having now discussed some of the prominent plans proposed for the public relief in the present diseased condition of the currency, the undersigned beg leave to submit their views in regard to the bill of the House referred to the Committee on Finance for consideration. That bill proposes to allow the notes to be funded according to the provisions of existing laws until the 1st of April next, and after that, in five per cent. bonds at par, until the 1st of June, and at seventy-five cents, fifty cents, twenty-five cents, and ten cents in the dollar upon the first day of each successive month up to October, after which period, the note is to be deprived of all value and perish, as it were, in the hands of the holder. But these notes are always to be receivable in payment of the taxes of 1864, provided they are paid in certificates representing them, in sums of not more than one hundred dollars; and, as there is no limit of time as to the issue of these certificates, it may be said that the tax of 1864 is always payable in the notes which they represent. In addition to these old notes, the Secretary of the Treasury is to issue new notes to the amount of two hundred million of dollars. It is difficult to foresee what is to be the precise effect of these complicated provisions. If we are to judge by our past experience, the amount funded by the 1st of April will be comparatively small, and those which are outstanding will scarcely

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be placed at a depreciated rate in a four per cent. stock so long as the holders hope to pass them at par in the payment of taxes. If so, a large amount of these notes will circulate along with the two hundred millions of new notes for a great portion of the year, during which we shall suffer all the evils now experienced from an inflated currency. Such of the notes as are not paid for taxes or funded will perish in the hands of the holders, and the law will be found to work so unequally as between those who get a good bond in exchange for them, or who receive payment at par for them, and those who get nothing, that the latter will raise such a clamor for relief from Congress as probably to create the necessity for new legislation upon the subject. If, on the other hand, the bill should work as seems to have been expected, and a large amount of these notes should be absorbed in bonds and taxes, then the numbers of the class thus injuriously affected, will be diminished; but the people will be exhausted by the payment of an onerous tax for no other purpose than to discharge at par old liabilities and satisfy the class of public creditors who have given bonds in exchange for the securities which they hold. Having thus used up the resources from taxation, the Government would be forced to resort to its credit in the forms of new treasury notes and of bonds. The new debt, thus created, would probably be greater than the amount of the old paid off in this process of heavy taxation. If the provision for receiving these old notes in payment of taxes should be repealed to avoid the difficulty just adverted to, then the amount of notes which would perish in the hands of the holders would be so great that new legislation would become necessary to remedy the gross inequalities in the operation of the law. It is to be observed that all the schemes which propose to remedy the existing evils involve repudiation in some form. The bankers' scheme proposes to repudiate the promise to receive the notes in payment of all public dues, except the export duty upon cotton. That of the Secretary of the Treasury proposes, after a short time, to repudiate the promises to fund and receive them. The scheme of the House repudiates all the promises specified in the note after the first of October. Indeed, it is difficult to see how any scheme can remedy the evil if the literal performance of every promise is required.

        If things are left as they are to avoid an apparent breach of promise, it has been shown, as we think, that the result will be an utter destruction of the value not only of our treasury notes but also of our bonds. If, then, the occasion has arisen when we must sacrifice the letter of the promise to ensure a substantial compliance with it, or even if the time has arrived when we must choose between a partial and a total failure to meet our obligations, there ought to be no hesitation in taking the necessary steps to secure, at least, a partial performance of our contract. But happily for us, as we believe there is a mode of relief by which we may comply substantially, with our promises and save the public creditor from any loss, in his dealing with us. As has been said already, the key to the solution of this problem, may be found in the character of our debt. On the first of April next, we shall owe about seven hundred and forty millions

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of dollars in treasury notes, which bear no interest. These notes constitute nearly the entire currency of the country. The value of this currency consists mainly in its purchasing power, which depends upon its convertibility into such objects of human desire as are usually bought and sold. If this currency be receivable in payment of debts, then the value of its dollar is measured by the proportion of its amount to that of the average daily exchanges, which are made in money. If six hundred millions and two hundred millions in currency will each effect the same average amount of daily exchanges, then the two are equal in value, provided each constitutes the whole currency of the country at the time of their respective issue, and then a dollar of the last currency is worth three dollars in the other, because of the different proportions which the two currencies bear to the exchanges. In this case, the purchasing powers of the one and of the three dollars are precisely equal. The conditions of this equality are that each shall constitute the entire currency of the country, and be adequate to the transaction of its daily exchanges, at the times of their respective issues, and that they should be receivable in payment of debts. Upon these conditions, this equality remains, whether you add or subtract the promise to pay at a distant period. If then, there should be seven hundred and forty millions of dollars in treasury notes outstanding on the first of April next; and if a tax of two thirds of the nominal amount should be levied on each note, to be deducted from its face, the currency would then consist of one third of the former amount, or of two hundred and forty-six millions, in round numbers, and the one third would be equal in value to the whole, because the two would be equal in their purchasing powers; for each would constitute the entire currency of the country; each would be adequate to its exchanges and each would be receivable in the payment of debts inasmuch as the people would take as money whatever was received by the Government and the banks. It can be shown that such an operation as this, is substantially no violation of the promises of the Government. It inflicts no injury upon the note-holder, because it falls upon all in a like proportion, and leaves him the same purchasing power that he had before. It does not diminish the value of his funding privilege, because, if the principal sum is reduced to a third, the interest is enhanced three fold by the medium in which it is paid. Six per cent. on one hundred dollars in the new notes is equal in value to six per cent. on three hundred dollars when paid in the old, because the new note is worth three times as much as the old; nor is the promise to renew the note violated to the injury of the holder. What matters is to the tax-payer, whether you assess his property at one third of its value in old notes, and receive them at one third of their nominal value, or whether you treble the assessment and take the note at its face. But it may be said that you violate the promise to pay the whole, when you pay only one third of the amount. But if the note holder can convert his note the day after the operation, into the same value in commodities which would have commanded the day before, he is not really injured, inasmuch as he has his remedy in his own hands; and such undoubtedly would

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be the case, if the views already presented are correct. Let it be supposed, however, for argument's sake, that the scheme recommended by the Finance Committee does reduce the value of all these promises to one third of their nominal amount, it still remains true that the holder will receive more for his note than he gave in exchange for it. For, as a general rule, the cost of that to the holder was not more than twenty-five cents in the dollar. Of course there are exceptions, as in the case of persons receiving these notes for salaries or for the principal or interest of debts contracted before the war. But, as a general rule, the proposition just stated may be taken to be true. If these two propositions be true, the holder who receives thirty-three and a third cents only in the dollar for his note, obtains nearly forty per cent. more than he gave for it, and is benefited instead of being injured by his transaction in Government paper. But in point of fact the note has been reduced to twenty-five cents in the dollar by taxation, and the people have paid the tax of seventy-five percent. on its value before it reached the present holder. To test the truth of this proposition, let it be supposed that the currency of a country consisted of one hundred millions dollars in treasury notes, which were convertible into specie at par, and were sufficient for the demands of circulation; if, then, the Government should issue another one hundred millions of dollars in treasury notes, this new issue would operate as a tax of fifty per cent. on the holders of the existing currency; for, if a bushel of wheat brought one dollar before, it will now bring two. Of course this supposition presumes that the ratio of supply and demand for wheat remained the same and that the currency constitutes the only variable element of price. To carry out the illustration still further, let it be supposed that in a succeeding year, the Government issues in addition to the two hundred millions of dollars of the then currency as much more; the dollar is now reduced to twenty-five cents in value as compared with specie, for four dollars are required to buy a bushel of wheat. The last issue, of course, operated as a tax of fifty per cent. on the two hundred millions of dollars then outstanding, for it diminished the value of that currency one half. Now clearly the first of these taxes was paid by the owners of the one hundred millions of dollars of notes and the second by the owners of the two hundred millions of dollars in currency.

        It is also manifest that the last holder of the note, who sold his bushel of wheat for four dollars, bore none of this burthen. The tax itself was the result of the issue of new paper by the Government, and issued according to a right which nobody has ever doubted. That the imposition of this indirect tax is impolitic few will dispute; but that there is no repudiation in the exercise of such a right, will also be generally admitted. But if these repeated issues did involve a repudiation of existing obligations, how is the wrong to be remedied? Not by giving the man who sold his bushel of wheat for four dollars, a hundred cents for every dollar of his note. To give him seventy-five cents, more in the dollar that he paid for it, would be to tax again those who had already paid a tax of seventy five per cent. on the note in order to raise a like amount a second time for the

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benefit of him who had borne none of the burthen. The injustice of such a proceeding is so obvious as to need no illustration. If anybody is entitled to a return of this tax on the part of the Government, it is the man who paid it. But that person can neither be ascertained nor reached, as the payment was made by the insensible process of exchange, as the note was used in the thousand transactions of purchase and sale between individuals. Seventy-five cents on the dollar have already been paid by the people, not through their government it is true, but in their individual capacities, and when the remaining twenty-five cents due on the dollar are paid, the entire obligation is discharged. It is strange that the tax laid upon the note holder by the issue of new notes, and which is really burthensome and oppressive to him, is never objected to as unjust or a breach of promise, whilst the far lighter imposition of taking a part of the notes themselves, and thus diminishing the currency, is charged with the sin of repudiation.

        To contrast the two operations, let it be supposed in the case stated above, that the Government, instead of taxing the $2000,000,000 in currency fifty per cent., by issuing as much more, had laid the same tax by taking half or one hundred millions of the notes which were to be destroyed when received. The holders of the remaining notes would be as well off as before, because they would still hold the entire currency of the country, and they could buy as much with the part as with the whole. The bushel of wheat which he bought with two dollars before, he now purchases with one. But it may be said, is this theory true, no matter how great the reduction--would the holder have been as well off if the amount of currency had been reduced to $50,00,000? Clearly not; for the $50,00,000 would, upon supposition, be insufficient for the exchanges of the country, and the Government would issue as much more. The original holders would then own, not all, but half of the currency, and thus have but half of the purchasing power which they formerly possessed. To state the proposition briefly, if we tax the notes by diminishing their amount we appreciate their value; but if we tax them indirectly by new issues we depreciate the value of the note. Why, then, should this latter be preferred to the former method ? But if we consider the nature of currency, and the circumstances under which it is taxed, we may fairly assert that a tax of sixty-six and two thirds per cent. upon the note, to be deducted from its face, does not impose as great a burthen upon the holder as a tax of five per cent. upon real estate which yields not more than four per cent. income. When the per centum of taxation is so much greater on the note than on other property, one is apt to suppose that the form of taxation is assumed to disguise an actual repudiation of a part of the promise. And yet such a view of the question in this case might be grossly fallacious. Equality of taxation, in its just sense, consists in imposing equal burthens on individuals and classes, and not in exacting equal proportions of their property in the form of taxes.

        Governments generally lay a larger duty upon distilled spirits than upon other articles; but the burthen laid upon the producer is not

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greater than that upon others, as he can make a corresponding increase of price, owing to the more active demand for what he manufactures; so most tariffs impose higher duties upon luxuries than upon necessaries; and here, too, the burthens may be equal, because the rich can afford to pay these high duties, and after having done so, will be not more inconvenienced than the masses who pay lower duties upon the cheaper articles of consumption. So, too, the rate of taxation upon land is generally less than upon personal property, because the per centum of income from the former is generally less. If, then, the propsoed tax upon the treasury note will burthen the holder no more han the proposed tax of five per cent upon land will burthen its owner, the former tax may be considered as fairly laid. For if the landowner pays five per cent on land which yields him but four, he will be forced to sell a part of his principal, and when the operation is over he will not be able to buy as much with his property as he could before. But the note-holder, after deducting sixty-six and two-third per cent from his note, can purchase as much with the remainder as he could before. Upon whom, then, is the tax most burthensome? Certainly not upon the note holder. If, then, owing to the nature of the currency itself, we can pay this high tax and yet impose no greater burthen upon him than the rest of the community, why should we not do it. If, in the fair cause of taxation, these notes can be reduced to one-third of their nominal value, without bearing unequally upon any, how can we be charged with repudiation for accomplishing that beneficial result?

        Admitting, then, that the proposed legislation is not unjust to the note-holder, it is highly to be commended because its influence would be most salutary upon public credit and every other form of Government security. The value of the land would become greater, because the interest would be worth more on account of the medium in which it would be paid. Public credit would be stronger, because the debt would be reduced within manageable dimensions and its increase would be less on account of the sounder currency in which the Government would deal. But it may be said why not reduce the face of the bond as well as that of the note? The answer is obvious; the purchasing power of the note is as great after the operation as before; but it would not be so with the bond, as bonds are not currency. Many of the bonds, too, were obtained in exchange for treasury notes, when they bore a much higher value than at present.

        If the scheme recommended by the Committee on Finance should be adopted, we should start with an interest-bearing debt of about $400,000,000, and this debt would consist of $298,000, 000 in bonds, and $102,000,000 in interest-bearing treasury notes. For all practical purposes the public debt might be estimated at this amount, because the non-interest-bearing treasury notes would be reduced to a sum which could be long kept afloat by the demand for currency. That is to say, if the States will leave to them, as they ought, the entire field of circulation. In this condition of our finances, we might well hope to dispose of the $500,000,000 of new bonds, which are to be of a very attractive character, upon good terms for Treasury notes.

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        This resource, in addition to the taxes which it is proposed to lay, ought to maintain the Government for at least two years, at the rate of four or five hundred millions of annual expenditure. Upon this subject the undersigned will venture no prophecy, as the elements of calculation are so uncertain. But the proposed measures will probably give great present relief in the existing state of our finances. In the opinion of the undersigned, it is indispensable to devote the taxes received from the people to the payment of interest on the public debt and to the expenses of the Government. To attempt to pay any portion of the public debt by taxation now, would leave the Government to be supported by public credit alone, and would throw so much of it in the market as would greatly depreciate our best securities. If this be so, it will be found impossible to bring our currency within safe limits without some system of forced reduction. The undersigned believe that the plan proposed by them is the most equal, just and effective of all that have been suggested. But there are some evils which are necessarily attendant upon them all. There is reason to apprehend difficulty in adjusting contracts made in 1863, and in the early part of 1864, to the new standard. But there is probably less difficulty of this sort to be feared from the plan herein proposed than from the others, because the old notes will still be in circulation for some months to come, and the debtor may justly claim that they should be received at the rate which was contemplated when the contract was made. The sense of justice and public opinion which have already smoothed down many difficulties in the way of our circulation, will probably prescribe the true standard by which such contracts will be settled. Indeed, it may be a question for the courts to decide whether, in the absence of an express stipulation to the contrary, the values contemplated in the contract, are not to be measured in the actual values of the treasury notes at the time when it was made, as estimated in the currency in which the debts are to be paid.

        It has been apprehended by some that so large a tax upon the note will be regarded as repudiation, and seriously injure our credit in public opinion. But if it be true that the proposed scheme leaves the note as valuable in the hands of the holder after its operation as before, that, in any aspect of the case, it gives him more than he gave for the note, and that, viewed as a tax alone, the imposition is equal and just, then there is no man of fair mind who would discredit a government for such legislation. It cannot be denied but that the world is often carried away by appearances. The plausible is sometimes the worst enemy of the true. But in this case our people, at least, are deeply interested in ascertaining the truth, and there is not much fear but that in the the end they will find it. They will sustain any scheme of finance which they believe to be just and which promises the means to carry on the war for some time to come. Of course no scheme can operate successfully in the face of serious military reverses, or if the industrial system is too much impoverished in the effort to place men in the field. But the first we do not apprehend, and the latter we must guard against. For the rest, it is to be said that it is the people's government, the people's war and the people's credit.

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Every man in the country knows that we must sustain the last, if we would either maintain the Government or prosecute the war successfully. There can be no fear, therefore, that the people will fail to sustain the currency when it is confined within fixed limits, and it becomes practicable to do so, for all will feel the necessity of supporting it as strongly as we do.