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Second Annual Message
During the term of James Buchanan while in office as
President March 4, 1857 to March 4, 1861.
Washington City, December 6, 1858.
Volume: V Page: 520-521 (extract) "When Congress
met in December last the business of the country had
just been crushed by one of those periodical revulsions
which are the inevitable consequence of our unsound and
extravagant system of bank credits and inflated
currency. With all the elements of national wealth in
abundance, our manufactures were suspended, our useful
public and private enterprises were arrested, and
thousands of laborers were deprived of employment and
reduced to want. Universal distress prevailed among the
commercial, manufacturing, and mechanical classes. This
revulsion was felt the more severely in the United
States because similar causes had produced the like
deplorable effects throughout the commercial nations of
Europe.
All were experiencing sad reverses at the same moment.
Our manufacturers everywhere suffered severely, not
because of the recent reduction in the tariff of duties
on imports, but because there was no demand at any price
for their productions. The people were obliged to
restrict themselves in their purchases to articles of
prime necessity. In the general prostration of business
the iron manufacturers in different States probably
suffered more than any other class, and much destitution
was the inevitable consequence among the great number of
workmen who had been employed in this useful branch of
industry.
There could be no supply where there was no demand. To
present an example, there could be no demand for
railroad iron after our magnificent system of railroads,
extending its benefits to every portion of the Union,
had been brought to a dead pause. The same consequences
have resulted from similar causes to many other branches
of useful manufactures. It is self-evident that where
there is no ability to purchase manufactured articles
these can not be sold, and consequently must cease to be
produced.
No government, and especially a government of such
limited powers as that of the United States, could have
prevented the late revulsion. The whole commercial world
seemed for years to have been rushing to this
catastrophe. The same ruinous consequences would have
followed in the United States whether the duties upon
foreign imports had remained as they were under the
tariff of 1846 or had been raised to a much higher
standard. The tariff of 1857 had no agency in the
result. The general causes existing throughout the world
could not have been controlled by the legislation of any
particular country.
The periodical revulsions which have existed in our past
history must continue to return at intervals so long as
our present unbounded system of bank credits shall
prevail. They will, however, probably be the less severe
in future, because it is not to be expected, at least
for many years to come, that the commercial nations of
Europe, with whose interests our own are so materially
involved, will expose themselves to similar calamities.
But this subject was treated so much at large in my last
annual message that I shall not now pursue it further.
Still, I respectfully renew the recommendation in favor
of the passage of a uniform bankrupt law applicable to
banking institutions. This is all the direct power over
the subject which I believe the Federal Government
possesses. Such a law would mitigate, though it might
not prevent, the evil. The instinct of self-preservation
might produce a wholesome restraint upon their banking
business if they knew in advance that a suspension of
specie payments would inevitably produce their civil
death.
But the effects of the revulsion are now slowly but
surely passing away. The energy and enterprise of our
citizens, with our unbounded resources, will within the
period of another year restore a state of wholesome
industry and trade. Capital has again accumulated in our
large cities. The rate of interest is there very low.
Confidence is gradually reviving, and so soon as it is
discovered that this capital can be profitably employed
in commercial and manufacturing enterprises and in the
construction of railroads and other works of public and
private improvement prosperity will again smile
throughout the land. It is vain, however, to disguise
the fact from ourselves that a speculative inflation of
our currency without a corresponding inflation in other
countries whose manufactures come into competition with
our own must ever produce disastrous results to our
domestic manufactures. No tariff short of absolute
prohibition can prevent these evil consequences.
In connection with this subject it is proper to refer to
our financial condition. The same causes which have
produced pecuniary distress throughout the country have
so reduced the amount of imports from foreign countries
that the revenue has proved inadequate to meet the
necessary expenses of the Government. To supply the
deficiency, Congress, by the act of December 23, 1857,
authorized the issue of $20,000,000 of Treasury notes;
and this proving inadequate, they authorized, by the act
of June 14, 1858, a loan $20,000,000, " to be applied to
the payment of appropriations made by law."
No statesman would advise that we should go on
increasing the national debt to meet the ordinary
expenses of the Government. This would be a most ruinous
policy. In case of war our credit must be our chief
resource, at least for the first year, and this would be
greatly impaired by having contracted a large debt in
time of peace. It is our true policy to increase our
revenue so as to equal our expenditures. It would be
ruinous to continue to borrow.
[END OF ARTICLE]
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