That radical difference consists in this, that all the schemes proposed are based upon one of two fundamental principles: funding the redundant circulation in interest-bearing bonds, with the object to improve the value of the currency; or taxation, with the object to sustain the public credit, and incidentally to improve the currency. The funding principle presupposes the main evil to be the depreciated currency; the taxing principle presupposes an impaired public credit as the main evil, as evidenced by the depreciation of Treasury notes as a currency.

The plans offered by the Senator from Tennessee and myself, are founded upon the principle of taxation—all others upon that of funding.

In my opinion, the evil existing is an impaired public credit, occasioned by a redundant issue of Treasury notes, as evidenced in the cost of supplies to the government, when purchased with that form of credit, and by the value placed upon those notes by the people as a circulating medium. I do not believe that a want of confidence in our success in the war in which we are engaged, or in the ability of the government eventually to redeem its obligations, has contributed, but in a very slight degree, to impair the public credit, but that it has resulted from other causes. If we had no war, and the same amount of Treasury notes had been issued, the same causes existing to affect their value, the depreciation would, in my opinion, have been very nearly as much as it is at present. But under existing circumstances the evil affects the credit of the government, and a remedy should be applied which will not contribute to impair, but to strengthen and sustain it.

I shall endeavor to show, that the public credit has not been impaired by a want of confidence of success, or of ability to redeem its obligations, but by a redundant issue of Treasury notes, as already stated.

The value of a currency, like every other marketable commodity, is regulated and governed by the law of supply and demand.

The depreciation of our Treasury notes has resulted, mainly, from a violation of that law: a redundant supply, and a reduced demand, other causes concurring to make the depreciation still greater.

While we have been flooding the country with a redundant issue of Treasury notes, demanded by our military operations, without adopting any appropriate and efficient measures to redeem and extinguish, or to absorb and retire the surplus above the business wants of the country, we lost sight of the fact, that the condition of the country had reduced the demand for money far below the ordinary business standard.

I will enumerate some of the causes that produced that result: 1st. The suspension of the laws for the collection of debts, by the Legislatures of the several States, thereby relieving debtors from all necessity for effort to pay the very large private debt owing in the Confederacy. 2d. The blockade of our ports by the enemy, resulting in the stoppage of our foreign commerce, and the internal trade dependent upon it. 3rd. The annihilation, by the war, of the immense trade existing before that time, between the States of the South and those of the North. And 4th. The confiscation of all debts due by our citizens to alien enemies, with the postponement of payment, until after the close of the war. The destruction of our foreign, and the internal trade dependent upon it, with the suspension of the payment of all debts, have reduced the demand for money far below the amount which would be required, if those causes did not exist.

It is assumed by the Secretary of the Treasury, that the business of the Confederacy requires a circulating medium of the value of two hundred millions of dollars. But I apprehend that this assumption has reference to an active and healthy business condition; the courts open the payment of debts enforced, with an active foreign and domestic commerce existing. If so, then a much smaller sum would suffice under existing circumstances, with all trade, foreign and domestic, annihilated, and all pre-existing indebtedness as it were sponged out. I think it may be safely assumed, that a circulation of fifty millions of dollars would supply the demand required for all legitimate business transactions. Taking gold its the standard, the correctness of this assumption is proven by the relative value between it and Treasury notes. The average relative value between them, throughout the Confederacy, is about fourteen to one—at some places more, at others less, local causes and circumstances controlling. It is shown by the report of the Secretary of the Treasury, that there is outstanding seven hundred millions of dollars of Treasury notes, which bear the same relation to fifty millions: fourteen to one.

It is an axiom of political economy, that after the circulating medium has reached the amount demanded by the business of a country, an increase of quantity will not produce a corresponding increase of value—that only a certain quantity of currency can be kept at par, and that every dollar of excess only contributes to swell the volume, without increasing, but rather decreasing, the aggregate value, until it becomes so inflated that confidence in its redemption is lost, when the bubble bursts, and the whole becomes valueless waste paper.

Thus, while the causes I have enumerated have reduced the demand for money from two hundred millions to fifty millions of dollars, we have enlarged the supply to seven hundred millions. The consequences which have followed are the certain results of the violation of an immutable law of finance.

While these primary causes have been operating to produce this great disparity between the supply and demand of currency, and its consequent depreciation, other lateral causes have conspired to the same result. Amongst these I may enumerate the contraband trade carried on by persons in the Confederacy with the enemy, and the smuggling of goods from the United States into our country—the character of trade carried on by blockade runners, and the trade through Texas, across the Rio Grande, controlled by military regulations.

Neither of these trades can be carried on without a medium of exchange, which Treasury notes do not constitute. The most of the shipments of produce are on government account, or used in purchasing government supplies by individuals. At any rate, but a very small amount is used in purchasing the goods imported and sold to the people. The goods brought into the country are sold to the people for Confederate notes, which are exchanged for gold, State stocks, or green-backs, and sometimes cotton or tobacco. Confederate notes constitute a local currency, and cannot be made the medium of exchange for a foreign commerce. Whenever a local currency is forced in contact with a foreign market, either in the purchase of goods, gold, or exchange, it must inevitably suffer, as ours has done— depreciation. Goods purchased in a foreign market must be paid for in funds at par, or at least current, at the place of purchase, or in bills drawn against shipments of produce exported, which is substantially the same thing; therefore, whenever there is an over-supply of a local currency, and it is forced into the purchase of exchange based upon limited exportation, or in drawing specie from the secret vaults to which it has retired, further depreciation must follow, and the currency continue to sink like lead in the water. And then the premiums paid fix the relative value between gold and the local currency not only in that case, but eventually in all others.

In consequence of the depreciation of the currency, and the opportunity afforded and profits accruing from blockade running and trading with the enemy, a most vicious and excited spirit of speculation has been engendered, and has spread, like a contagious disease, to almost all classes—to merchants, farmers, mechanics, landlords, officers and soldiers in the army, and, I fear, to some members of Congress.

Hundreds, if not thousands of persons, have been, and are still engaged in running the blockade, or in carrying on a contraband trade with the enemy across every part of the line between them and us, at New York, Philadelphia, Baltimore, Louisville, St. Louis, Nashville, Memphis, New Orleans, and other places. In consequence of the price of exchange to carry on this trade, the goods imported are sold for our currency, for twenty, forty, and sometimes sixty times their value in gold. This exorbitant price for imported goods has produced a corresponding rise in the price, not only of luxuries, but of all the necessaries of life. The farmer demands ten or twenty prices for beef, pork, bacon, corn, flour, and every other commodity of like character, because the merchant exacts from him similar prices for domestics, calicoes, hats, boots, shoes, &c. The landlord in town charges like rates for rent, because of the charges of the merchants and farmers; mechanics do the same, and boarding is at corresponding rates, because of the extortions of all of the preceding upon the hotel and boarding-house keepers. And lastly, the Government becomes the victim of all, and cannot purchase upon credit, with its notes or bonds, the necessary supplies to sustain our armies in the field, except at the most fabulous rates. The malignity and spread of the contagion are well calculated to fill the unselfish patriot with wonder and astonishment, especially when he sees men either concealing, to prevent the government from obtaining, or refusing to sell for less than ten prices, the necessary supplies to feed and clothe the army, composed of their sons, their brothers, and their neighbors, fighting for the independence of their country, and in defence of the lives, liberty and property of its people. A strange infatuation seems to possess the great mass of the people, for while they exact the highest prices with all the tenacity of the extortioner, they squander their money with the reckless prodigality of the spendthrift.

While all these causes have been operating to depreciate and destroy the credit of the Government, I regret to say that I understand the Government itself has, upon several occasions, openly entered the gold and exchange markets, and hawked its own credit to bidders composed of brokers, shavers and stock-jobbers.

Another cause which, in my opinion, has contributed its part in the depreciation of the currency, is one which was originally recommended by the Secretary of the Treasury, and adopted by Congress, as a means to prevent that result—I mean the system of funding the notes, without adequate provision being made for the payment of the interest on the bonds. Great importance has been attached to that system as a means of absorption, and therefore of support of our currency, by preventing a redundancy. I never could see the virtues of that measure, which were ascribed to it by its advocates. I never could see the inducement to fund an uncurrent note in an uncurrent bond, and hence, at the last session of Congress, I said that the effort to prevent a redundant circulation, by funding in bonds, without adequate provision for the payment of the interest on the bonds, as a means of keeping them at, or nearly at par value, would be as futile as an attempt to sail a boat by means of a bellows in the stern, forgetting that the laws of action and reaction are equal; or an attempt to exhaust, by means of a siphon, all the water of one vessel into another upon an equal level, in disregard of the plainest laws of natural philosophy.

I claim that results have proven the correctness of my opinions. The expansion of the currency has not been prevented by funding, but it has continued to swell almost to the point of explosion. The speculator, the banker, broker and shaver, believing that the public debt will be ultimately paid in full in gold and silver, are interested in obtaining the largest possible amount of it for the very smallest possible consideration. Hence they can make more, by first depreciating the currency as low as possible, then buying it up, and funding it, than they can make by funding so as to prevent depreciation. The more the currency becomes depreciated, the less a bond will cost, and hence a premium has been held out as a standing offer to them to depreciate the currency.

The bankers, brokers, shavers and speculators fix the value of currency, which is always accepted by the great mass of the people without investigation. They can fix its value, for a time, far above or below that which the demand and supply, the legitimate regulators, would fix it at. For the reasons already given, it being to their interest to obtain the largest possible amount of the public debt for the smallest possible consideration, with the expectation of eventually realizing in gold its full value, by funding and taxation upon the people, that consideration has operated upon them to depress and keep down the value of the currency. I sincerely believe that they have, from motives of interest, contributed more to the depreciation of the value of Treasury notes, than the whole amount funded has tended to appreciate their value. They never will fund voluntarily, so as to reduce the currency to the proper volume, until they believe that the government indebtedness has reached the utmost limit of the ability of the people to pay it.

We have nearly reached that point, and now these vampires, who have been sucking out the very life-blood of the country, are thrusting before Congress a thousand schemes of finance, the distinguishing feature of every one being a system of funding in interest-bearing bonds, with a plan of taxation, which will give to those bonds a par value in gold, the taxation so assessed as to exempt them and their ill-gotten gains from any part of the contributions.

With these men and their schemes I have no sympathy. There are but few, if any of them, in my State. Our capitalists (and we have large capitalists there), believe that legitimate and profitable trade—speculation, if you so please to call it—can be carried on upon principles not inconsistent with the high dictates of honor and patriotism. This is verified by the fact, that Confederate notes are worth fifty per cent. more there than east of the Mississippi river, while we have a larger amount of that currency, in proportion to population and wealth, than there is on this side; and while we also have a vicious, I may say an infamous, cotton trade across the Rio Grande, thrown into the hands of Jews, Yankees, and men from this side of the river, by illegal military orders and restrictions.

I have attempted, Mr. President, to point out the causes that have led to our deranged financial condition. The existence of the most of them will be readily admitted, and I apprehend the like existence of the remainder, with the effects I have ascribed to them, cannot be successfully controverted. How is the evil to be remedied, and its future recurrence successfully provided against? The answer to the question, in general terms, is easily given: remove the causes, and guard against them for the future— reduce the supply of currency and increase the demand for money on the people, so as to make the demand and supply correspond,—all of which should be done for the support of the credit of the government, as the main object, affecting the currency as an incidental subject. The measures to be adopted, which shall accomplish these desirable results, present very difficult and interesting questions.

The Secretary of the Treasury has presented us with a financial scheme, which he thinks will afford the proper remedy. Emanating as it does from the head of the Treasury, for that reason as well as for the large experience and high character for financial skill of the gentleman himself, the measure proposed is entitled to our most favorable consideration, and should receive our most patient examination. No scheme, however, should be adopted because of the source from which it may have come, or of the endorsements it may have received. Every plan should stand or fall upon its intrinsic merits.

The scheme of the Secretary of the Treasury contains the following substantial provisions.

1. A loan of one thousand millions of dollars in six per cent. bonds, the principal payable in twenty years, the interest semi-annually, to be extended from time to time, hereafter, so as to consolidate the whole public debt.

2. A sale by the Secretary of the Treasury, at par, of as many of said bonds as will be sufficient to take up the outstanding circulation and to pay the appropriations made by Congress.

3. A tax of five per cent. upon all property and credits (other than the new issue of notes proposed) which may be held on the first day of April next, to be paid on the first day of July, one half in Treasury notes, or one half in coin, or in the coupons of the bonds issued for this loan.

4. Within six months a new and improved issue of two hundred millions of dollars in Treasury notes, in substitution for that amount of old issues to be cancelled, with a pledge of the faith of the government not to increase said issues.

5. The funding of the entire outstanding circulation of Treasury notes, on or before the first day of April next, in the bonds of the said consolidated loan, after which time the notes not so funded to cease to be current or receivable at the Treasury for dues.

These are the substantive features of the scheme, all others being matters of detail.

To this plea the following insuperable objections present themselves to my mind:

1. It proposes to act upon the currency directly, and appreciate it by curtailing the redundancy by compulsory funding in the six per cent. bonds of the government. It starts out upon the fundamental error that, the subject to be directly affected is the currency, and incidentally operating upon the credit of the government; whereas, the measures to be adopted should be aimed at the restoration of the credit of the government directly and incidentally to the improvement of the currency. Congress has no power whatever over a paper currency per se. It “may coin money and regulate the value thereof”—but it is well understood, that this power has reference to money coined of gold and silver. It has no power over the private business transactions between me and my neighbor—or to make a paper currency and compel us to receive it—or legislate with the view to regulate the value of that currency between us—and this is the same whether the currency consists of bank notes, shin plasters, beef hides, peltries, coon skins or its own notes. Every thing that becomes or is used as a currency, except gold and silver, becomes so, by the mutual consent of individuals.

The power to issue Treasury notes can be supported only by the authority of Congress “to borrow money.” When this power is exercised, the form of the evidence of the debt created, is left discretionary—it may be in the shape of a receipt, a bond, or Treasury note, Nor is it requisite to the exercise of this power, that money shall be actually and absolutely borrowed. Congress may borrow money of A. to buy supplies for the army from B., and give to A. Treasury notes as evidences of indebtedness for the money so borrowed. But if B. is willing to take from the government the Treasury notes for the supplies furnished, it is a substantial compliance with the constitutional provision, to deliver the notes directly to him. Between the holder and the government the Treasury notes are not money—but evidence of indebtedness—promises to pay in consideration of money borrowed or of supplies purchased, amounting to the same thing. By consent between individuals, they may become a currency, and their delivery and acceptance amount to an absolute payment, but they do not become so by virtue of any power of Congress. The power of Congress is over the credit of the government, and should be exercised with direct reference to that object, incidentally operating upon the currency, in the same manner as an individual, who by re-establishing his impaired credit, enhances the value of his outstanding obligations.

2. The scheme proposed, instead of restoring and sustaining the credit of the government, would weaken and impair, and eventually destroy it.

The public debt, exclusive of the foreign loan, is now, in round numbers, about eleven hundred millions of dollars. The taxes for the present year may be assumed at one hundred and twenty millions, which will reduce the debt to about nine hundred and eighty millions. Of this sum, without being definite, I may state, that about one half is in an interest bearing shape, and the other half bearing no interest. It is now proposed to fund the whole of this debt in six per cent. bonds, which will bear an annual interest of fifty-eight millions, eight hundred thousand dollars. The debt must continue to grow until the end of the war, when it will, most probably, amount to fifteen hundred millions—the interest upon which will amount to ninety millions of dollars. It is not proposed to pay one dollar of the principal of this already enormous debt—nor prevent its rapid future growth, except by a system of taxation, which, I believe, is beyond both the ability and willingness of the people to pay. Under the weight of such an existing and accumulating debt, bearing such a ruinous rate of interest , confidence in the ability of the government to discharge its obligations, must and will become impaired, and its credit eventually give way and fail entirely. Especially will that be the case should the people fail, through inability or unwillingness, to meet the taxes imposed upon them.

The credit of a nation and that of an individual are governed by the same immutable laws, are upheld or destroyed by similar causes. What would be thought of a man who, having engaged in trade with an unimpaired credit, after a period, finding his credit so shattered that he has to promise ten prices for everything he buys, should gravely propose to his creditors, as a means of re-establishing that credit, to surrender their non-interest bearing claims, and accept his notes, bearing a rate of interest, which will require all his efforts, and perhaps surpass his ability to pay, without reference to the principal? No prudent man would trust him the more readily in consequence of such a financial operation, but would regard his rapid insolvency as inevitable—and so, I verily believe will be the consequences of this funding scheme, if adopted by Congress. It may produce a temporary effect, by the reduction of the currency—but as time rolls on, as the war progresses, as our debt continues to grow, the credit of the government will yield by degrees, until finally it will give way with a crash, scattering bankruptcy, ruin and desolation through the land.