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Senator Bailey on Calhoun's currency

Senator Joseph Weldon Bailey (1862-1929), Democrat, Texas,
in the Senate of the United States
March 9, 1908,
during the debate of the 'Aldrich Bill' (S. 3023)---

"Without intending any invidious comparison I can safely say that no man of his generation—and I do not forget that he lived in the days of Daniel Webster and Henry Clay—ever studied and understood the currency question more thoroughly than John C. Calhoun. He devised the best system ever proposed up to his time, and some profound students think that a better one has never since then been suggested. He proposed a perfectly automatic arrangement, and it would have worked out in practical operation just as he calculated. Mr. Calhoun understood that currency could and might be overissued, and he therefore incorporated into his plan an absolutely certain corrective of that abuse. His proposition was for the Government to issue a paper not redeemable in coin, but receivable in public dues. He did not contemplate that such paper be made a legal tender, and, indeed, it was not then supposed that the Government could make any note a legal tender in the payment of debts; but he believed that the United States could easily maintain such a circulation as he proposed equal to twice its annual revenue. He fully explained, however, that if such a currency was ever overissued it would immediately depreciate, and that when depreciated nobody would accept it from the Government; but everybody would use it in making their payments to the Government because they could purchase it at a discount. Under that condition this paper would flow back into the Treasury, and none of it would flow out until the entire excess was drawn from the channels of trade, and the equilibrium completely restored."

"Every man believes that the currency ought to be sufficient in volume to meet the requirements of agriculture, commerce, manufacture, transportation, and all other legitimate pursuits; nor is there any dissent from the proposition that every note in circulation should be above any reasonable suspicion against its value. It is true, sir, that men of the widest experience and of the ripest wisdom will disagree as to what constitutes a sufficient volume of currency, and even when they can reconcile their conflicting opinions on that point, they will still differ over the best means of assuring its value; but these are differences over matters of detail, and they can be reduced by mutual and safe concessions to an agreement among men who understand the general question and who sincerely desire to do what is best for our country."

"I do not ignore this phase of the question, nor am I indifferent to the injustice which may be wrought; but I hold that it is [b]the duty of the Government to provide, and to maintain, at all times and under all circumstances, an adequate volume of currency[/b]; and it must not fail in the performance of that duty, because it may do an injustice to one or to another class. We must not leave the country to endure the continuous fall of prices and the stagnation of business which inevitably result from an insufficient volume of money; nor must we wait until a speculative mania, which always follows an inflation, has debauched the conscience and prostrated the energies of the Republic. A resolute and a sensible Congress will not permit our people to suffer under either evil because its correction would be unjust to some men, or even to many men. Of course, this Government ought never to do anybody an injustice where it is possible to avoid it; but as between the injustice of a day and to a particular class, and the injustice of years and to many classes, no wise legislator can hesitate. It is infinitely better to inflict an injury upon a single class that will suffer and recover from it in due season than it is to perpetuate a wrong through all time and against all other classes."

"The most superficial knowledge of the nature and office of currency will make it plain that the issue of it is a function of the Government rather than the function of a bank. The whole reason and justification for the issue of any currency is that the supply of coin is not sufficient for the business of the country, and currency is issued to supplement it, thus in effect increasing the quantity of coin. If all of our currency were retired, and our people were compelled to conduct all transactions with coin as their only money, a most destructive revulsion would immediately ensue and a hopeless bankruptcy would overtake our most prosperous enterprises. Of course after a period of liquidation the volume of business would be readjusted to the volume of money, but our commercial, agricultural, and industrial progress would be painful and slow; and it is a knowledge of this fact which compels all men of all parties to favor the issuance of currency to supplement our supply of coin. In theory, of course, currency is not money, but is only a promise to pay money. In practice, however, it is money, and performs, when impressed with the legal-tender quality, every function of money within our own country. Not only is it spoken of as money, received as money, and treated as money in every respect by the people generally, but our law has long since adopted this common understanding, and our statutes now speak of it as money. We have gone so far as to distinguish between the currency which is "lawful money" and that which is not. We describe that which is a legal tender as "lawful money," thus asserting, at least by implication, that the present bank note, which is only a limited legal tender, is money, though not "lawful money." I am quite willing for individuals and corporations to issue their promissory notes, but I am not willing that either individuals or corporations shall issue "money," for only the Government ought to exercise that power; and gentlemen who talk so freely about taking the Government out of the banking business ought to be just as willing to take the banks out of the Government's business. I will cheerfully join them in doing the one, if they will join me in doing the other. My rule in this and in all other matters is that we shall not permit the Government to engage in the business of individuals or corporations nor permit individuals and corporations to engage in the business of the Government."

"Not only, Mr. President, does the power to coin and issue money belong to the Government, but it is wise that such should be the case. Considering the tremendous consequences to all the people, and remembering that its effect reaches into every home and determines the profits of every business, the currency of a free country ought forever to be kept under the absolute control of the Government. Those who advocate bank money and those who advocate Government money both agree that the price of almost every product and the prosperity of all classes are sensibly affected by the currency ; and it is, to my mind, an amazing proposition that this power, second only to the power of taxation, shall be committed to men whose private interest might be wholly at war with the public welfare. It will not do to tell me that the bankers are high-minded and patriotic men and that they will not abuse this mighty power. Even, sir, if I knew they would not abuse it, I would still contend that they ought not to possess it. The history of the country, however, clearly establishes that they have abused that power in the past, and I am, therefore, constrained to fear that they will abuse it in the future. Until the Senator from Georgia [Mr. Clay] declared in his speech a few days ago that several national banks had bought and deposited bonds with the Comptroller of the Currency without having taken out a dollar of circulation I had supposed that the whole cause of complaint against national banks, with reference to their issue, was that they had not taken out the full circulation which the law permitted; and I was surprised to find that some of them were so much opposed to an increase in the currency that they had deposited their bonds, but had refused to take out the notes which under the law they were entitled to receive. Without intending to impute bad faith or malfeasance in office to the Comptroller of the Currency, I venture to say that under the law no national bank has a right to begin its business until it has first taken out a circulation equal at least to 25 per cent of its capital stock."