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(caption) Finance and Currency. Number Three: to Jefferson Davis, President of the Confederate States 1 p.
From the Duff Green Papers, call number 993 (Southern Historical Collection, University of North Carolina at Chapel Hill)
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Library of Congress Subject Headings, 21st edition, 1998
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For the Montgomery Mail
Ricard, McCulloch, the Edinburgh Review, Colwell and Mr. Calhoun, all agree that "if there was perfect security, that the power of issuing paper money would not be abused, that is, if there was perfect security for its being issued in such quantities as to preserve its value, relatively to the mass of circulating commodities nearly uniform, the precious metal might be entirely discarded from circulation." Mr. Calhoun and Mr. Colwell both declare in favor of the use of public credit as better than gold if issued under proper regulations. McCulloch and the Review assume that it is impossible to regulate the quantity of paper. Their remarks refer to an issue by banks, and their illustrations refer to the banking system of Great Britain. As I propose to use the public credit, and to limit the quantity of certificates in circulation by a system of tax and funding, by which it will be completely in the power of Congress to regulate the quantity of certificates in circulation, it follows that by paying a proper rate of interest on the bonds, and levying a sufficient tax upon the certificates, the bonds may be made worth so much more than the certificates, that the number not funded will soon be so few that inasmuch as all dues to the Government must be paid in gold or in the certificates, the latter will soon become of equal value as gold, for if the tax proposed be not sufficient to coerce the funding, Congress should reserve the power to increase the taxes to that point. As the rate of interest should be a just compensation for the use of capital, and the effect of taxing the certificates will be to prevent their depreciation, the increased value of the certificates will always indemnify the holder for the tax.
I apprehend that the most active opposition to the measure I propose will come from the existing banks, although, as it is their business to deal in money, the banks of all other interests will be most benefited by an abundant and cheap currency, so guarded as to prevent its fluctuation in value, and, by its use, protecting them against the foreign demand for gold, and preventing the losses and derangements of their business which will otherwise occur as the consequence of the frequent recurrence of the fluctuation of the value of gold in foreign markets. Those who are interested in banking should remember that the value of their capital and credits, at the present time, depends chiefly upon the value of the public credit--the depreciation of which has so deranged their business that the future is an impenetrable cloud of uncertainties. The effect of the proposed measures will be to convert all the public securities held by them into a six per cent. fund, which will be at all times convertible into the certificates of the government, which, by a proper system of taxing, will soon, for all the purposes of money, be equal to gold.
Again, the present system of banking requires bank-notes to be converted into specie. An early resumption of specie payments is impossible, without repudiation, and with or without repudiation, it would overwhelm the whole country with universal bankruptcy, blotting out of existence the greater part of the capital engaged in banking. The process proposed will create a domestic currency equal to all the wants of the government, which being received and payed out in all its fiscal operations, and being, as far as concerns the Government, on a par with gold, will by virtue of the tax soon be limited to the quantity required for that use. If, as I believe, the effort of limiting the quantity of certificates, by taxation, will be to make them of equal value as gold, for all the uses of money. The large sum of the public debt, funded under the operations of the system, will increase in value relatively to the increased value of the certificates; and the effect of the increased value of the whole of the public debt will be to give to the banks a basis for the issue of the best paper money ever issued under any system of banking heretofore known. Those interested in banks and banking should remember that we must commence de novo. It is impossible that any one can fail to see that the credit and resources of all, every one, the banks as well as the people, are involved in the credit of the Confederate and State Governments.