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But he also foresees the long-range results of his
triumph. In an effort to avoid the inflationary
consequences of unrestrained printing of paper money by
uncontrolled state banks (now that the Bank of the
United States no longer exists), the President, always
an advocate of " hard money," issues the Specie
Circular, requiring that public lands be paid for in
gold or silver. It is not successful. Land sales and
prices drop: those who have specie hoard it: speculators
thrive.
EIGHTH ANNUAL MESSAGE
During the term of Andrew Jackson while in office
as President March 4, 1833, to March 4, 1837.
Washington, December 5, 1836
Volume: III Pages: 246-253 (extract) "The influence
of an accumulating surplus upon the legislation of the
General Government and the States, its effect upon the
Credit System of the country, producing dangerous
extensions and ruinous contractions, fluctuations in the
price of property, rash speculation, idleness,
extravagance, and a deterioration of morals, have taught
us the important lesson that any transient mischief
which may attend the reduction of our revenue to the
wants of our Government is to be borne in preference to
an overflowing treasury.
I beg leave to call your attention to another
subject intimately associated with the preceding
one---the currency of the country.
It is apparent from the whole context of the
Constitution, as well as the history of the times which
gave birth to it, that it was the purpose of the
Convention to establish a currency consisting of the
precious metals. These, from their peculiar properties
which rendered them the standard of value in all other
countries, were adopted in this as well to establish its
commercial standard in reference to foreign countries by
a permanent rule as to exclude the use of a mutable
medium of exchange, such as of certain agricultural
commodities recognized by the statutes of some States as
a tender for debts, or the still more pernicious
expedient of a paper currency.
The last, from the experience of the evils of the
issues of paper during the Revolution, had become so
justly obnoxious as not only to suggest the clause in
the Constitution forbidding the emission of bills of
credit by the States, but also to produce that vote in
the Convention which negatived the proposition to grant
power to Congress to charter corporations---a
proposition well understood at the time as intended to
authorize the establishment of a national bank, which
was to issue a currency of bank notes on a capital to be
created to some extent out of Government stocks.
Although this proposition was refused by a direct
vote of the Convention, the object was afterwards in
effect obtained by its ingenious advocates through a
strained construction of the Constitution. The debts of
the Revolution were funded at prices which formed no
equivalent compared with the nominal amount of the
stock, and under circumstances which exposed the motives
of some of those who participated in the passage of the
act to distrust.
The facts that the value of the stock was greatly
enhanced by the creation of the bank, that it was well
understood that such would be the case, and that some of
the advocates of the measure were largely benefited by
it belong to the history of the times, and are well
calculated to diminish the respect which might otherwise
have been due to the Action of the Congress which
created the institution.
On the establishment of a national bank it became the
interest of its creditors that gold should be superseded
by the paper of the bank as a general currency. A value
was soon attached to the gold coins which made their
exportation to foreign countries as a mercantile
commodity more profitable than their retention and use
at home as money. It followed as a matter of course, if
not designed by those who established the bank, that the
bank became in effect a substitute for the Mint of the
United States. Such was the origin of a national-bank
currency, and such the beginning of those difficulties
which now appear in the excessive issues of the banks
incorporated by the various States.
Page: 247 (extract) "Although it may not be
possible by any legislative means within our power to
change at once the system which has thus been introduced
and has received the acquiescence of all portions of the
country, it is certainly our duty to do all that is
consistent with our constitutional obligations in
preventing the mischief's which are threatened by its
undue extension. That the efforts of the fathers of our
Government to guard against it by a
constitutional provision were founded on an intimate
knowledge of the subject has been frequently attested by the bitter
experience of the country.
The same causes which led them to refuse their
sanction to a power authorizing the establishment of
incorporations for banking purposes now exist in a much
stronger degree to urge us to exert the utmost vigilance
in calling into action the means necessary to correct
the evils resulting from the unfortunate exercise of the
power, and it is to be hoped that the opportunity for
effecting this great good will be improved before the
country witnesses new scenes of embarrassment and
distress.
Variableness must ever be the characteristic of a
currency of which the precious metals are not the chief
ingredient, or which can be expanded or contracted
without regard to the principles that regulate the value
of those metals as a standard in the general trade of
the world. With us bank issues constitute such a
currency, and must ever do so until they are made
dependent on those just proportions of gold and silver
as a circulating medium which experience has proved to
be necessary not only in this but in all other
commercial countries.
Where those proportions are not infused into the
circulation and do not control it, it is manifest that
prices must vary according to the tide of bank issues,
and the value and stability of property must stand
exposed to all the uncertainty which attends the administration of institutions that are constantly
liable to the temptation of an interest distinct from
that of the community in which they are established.
The progress of an expansion, or rather a depreciation,
of the currency by excessive bank issues is always
attended by a loss to the laboring classes. This portion
of the community have neither time nor opportunity to
watch the ebbs and flows of the money market. Engaged
from day to day, in their useful toils, they do not
perceive that although their wages are nominally the
same, or even somewhat higher, they are greatly reduced
in fact by the rapid increase of a spurious currency,
which, as it appears to make money abound, they are at
first inclined to consider a blessing.
It is not so with the speculator, by whom this
operation is better understood, and is made to
contribute to his advantage. It is not until the prices
of the necessaries of life become so dear that the
laboring classes can not supply their wants out of their
wages that the wages rise and gradually reach a justly
proportioned rate to that of the products of their
labor. When thus, by the depreciation in consequence of
the quantity of paper in circulation, wages as well as
prices become exorbitant, it is soon found that the
whole effect of the adulteration is a tariff on our home
industry for the benefit of the countries where gold and
silver circulate and maintain uniformity and moderation
in prices.
It is then perceived that the enhancement of the price
of land and labor produces a corresponding increase in
the price of products until these products do not
sustain a competition with similar ones in other
countries, and thus both manufactured and agricultural
productions cease to bear exportation from the country
of the spurious currency, because they can not be sold
for cost. This is the process by which specie is
banished by the paper of the banks. Their vaults are
soon exhausted to pay for foreign commodities. The next
step is a stoppage of specie payment---a total
degradation of paper as a currency---unusual depression
of prices, the ruin of debtors, and the accumulation of
property in the hands of creditors and cautious
capitalists.
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