The balance in the Treasury on December 30, 1860, subject to the warrant of the Secretary, was $2,078,257. During the calendar year 1861, the net receipts of the treasury from all sources were $218,224,077.64, as against $59,217,030.19 for the previous year; but the expenditures had increased in a still greater ratio, and in January, 1862, the Treasury was unable to answer the requisitions upon it for disbursements. Additional resources to carry on the Government became imperative, but no coin was left in the country for which to sell a loan. Of the depreciated bank currency there was believed to be then in existence only about $150,000,000, and this with the $60,000,000 of Treasury notes made the entire circulation of the country only $210,000,000; and to collect these notes together for public disbursement, scattered as they were throughout the country, would be almost as hopeless a task as to issue a loan for coin and bring back to the country the metallic currency which had gone abroad to pay foreign indebtedness.

To meet this emergency, and with a view of utilizing all the resources of the country, Congress, by act approved February 25, 1862, authorized the issue of $150,000,000, of notes, not bearing interest, payable at the Treasury of the United States, and of such denominations as the Secretary of the Treasury might deem expedient, not less than five dollars each. Of this amount $60,000,000 were for the redemption of the notes of July 17 and August 6, 1861. . . .

Later in the same session, by act approved March 17, 1862, Congress declared the outstanding notes of July 17 and February 12, 1862, to be a legal tender in like manner, for the same purposes and to the same extent, as the notes authorized by the act of February 25, 1862. Still later, by act of July 11, 1862, Congress authorized an additional issue of $150,000,000 of notes of similar character, and, like those already issued, exchangeable for bonds; and also provided that the Secretary might receive and cancel any notes heretofore issued, and in lieu thereof issue an equal amount of notes authorized by this act. The act also provided that not less than $50,000,000 of these notes should be reserved for the payment of certain deposits, to be used only when, in the judgment of the Secretary of the Treasury, the same or any part thereof might be needed for that purpose. By act of July 17th following Congress authorized the issue of postage and revenue stamps for use as fractional currency, preferring this expedient to metallic coins or tokens reduced in value below the existing standard, making them receivable in payment of all dues to the United States under five dollars, and exchangeable for United States notes when presented in sums of not less than five dollars.

Under these several acts a total circulation of $250,000,000 could be issued, and in an improbable contingency $50,000,000 more; also a supply of fractional currency. These issues, together with the issues of bonds, relieved the Treasury from its embarrassment, and on the 1st of July, 1862, not a requisition upon the Treasury from any department remained unhonored.

The military reverses of June, July, and August of that year, however, injuriously affected the financial condition of the country, and Congress, by act of March 3, 1863, authorized, among other measures, an additional issue of $150,000,000 of notes having substantially the same qualities and restrictions as those theretofore issued, and provided that in lieu of any other United State notes returned to the Treasury and destroyed there might be issued an equal amount of notes authorized by this act. It also provided that holders of United States notes, issued under and by virtue of the several acts heretofore cited, must present them for the purpose of exchanging them for bonds on or before the 1st day of July, 1863, and that thereafter the right to thus exchange them should cease and determine. The same act also provided that in lieu of the postage and revenue stamps authorized for use as fractional currency, commonly called postal currency, there might be issued fractional notes of like amounts and in such form as might be deemed expedient; the whole amount of fractional currency issued, including postage and revenue stamps, not to exceed $50,000,000. Under these several acts there could be issued of legal-tender notes $450,000,000, and of fractional currency $50,000,000. No additional issue of notes was thereafter authorized.

The issue of Treasury notes by the Government was no new departure, but the notes issued under the several acts above stated bore certain qualities not given to any issued prior to 1861. They were declared by law to be lawful money and a legal tender for all debts, public and private, except for duties on imports and interest on the public debt, and they were convertible into interest-bearing bonds. Their convertible property, however, ceased to exist on the 1st of July, 1863, and since that date the Government has had for the first time in its history a national currency of its own notes—notes not convertible into other obligations and not redeemable at any specified time or place. These notes were both a loan to the Government and a national currency. The only justification attempted for their issue was that it was a war measure, one of necessity, not choice; and the notes were not expected to survive the exigencies which caused their issue. It proved, however, a most important measure. For, right or wrong, the employment of these notes as a legal-tender currency has exerted a most powerful and decisive influence over the property material interests of every individual in the United States, and has become a tremendous factor in every problem, political, social, or economical.

The notes were first issued April 1, 1862, and their issue gradually increased in amount until January 30, 1864, on which day there were outstanding $449,338,902, the highest point reached. By act approved June 30, 1864, Congress directed that the total amount of United States notes issued or to be issued should never exceed $400,000,000, and such additional sum, not exceeding $50,000,000, as might be temporarily required for the redemption of temporary loans. Despite this restriction as to the amount of the notes which could be issued, and the extraordinary properties with which they were endowed, their value depreciated until on July 11, 1864, they were worth but 35 cents on a dollar, and their value fluctuated from day to day, unsettling prices of commodities, stimulating speculation, and creating distrust and apprehension in all business circles. A retirement of the amount in excess of four hundred millions was gradually made, in conformity with the law and a generally approved policy of retiring the notes as rapidly as practicable.

Secretary McCulloch, in his annual report for 1865, exprest his opinion that the legal-tender acts were war measures passed in a great emergency; that they should be regarded only as temporary; that they ought not to remain in force a day longer than was necessary to enable the people to prepare for a return to the gold standard; and that the work of retiring the notes which had been issued should be commenced without delay, and carefully and persistently continued until all were retired. . . .

There was a general feeling throughout the country that specie resumption should be kept in view, and on March 18, 1869, an act of Congress "to strengthen the public credit" was approved. In this act the faith of the United States was solemnly pledged to make provision at the earliest practicable period for the redemption of the notes in coin. No further change was made in the amount of outstanding notes, nor any further legislation had in regard to them, until January 14, 1875.

An act then provided—first, for the manufacture and issue of subsidiary silver coins in redemption of the outstanding fractional paper notes; second, for an unlimited issue of national banknotes, with a provision for the retirement of legal-tender notes to the extent of 80 per cent. of such issue, until the amount of legal-tender notes outstanding should be reduced to three hundred millions; and, third, for the redemption in coin of the legal-tender notes, on presentation in sums of fifty dollars and upward at the Sub-Treasury in New York on and after January 1, 1879. To carry out the purposes of this act, ample authority was given the Secretary of the Treasury to apply all surplus revenues of the Government, and also to issue at par in coin an unlimited amount of bonds of the description authorized by the refunding act. . . .

Under the clause of the act authorizing the redemption of legal-tender notes in the amount of 80 per cent. of national bank-notes thereafter issued, the Treasury began to redeem notes in March, 1875, and continued to do so until May 31, 1878, on which date an act was approved forbidding their further redemption. There was thus redeemed of these notes an amount of $35,318,984, leaving outstanding to be redeemed in coin under other provisions of the resumption act $346,681,016. The cash in the Treasury was , of course, lessened in the amount of this redemption, and the loss was made up by the surplus revenues, which would otherwise have been aplicable to the redemption of some other kind of indebtedness. . . .

The preparations were so complete that on January 1, 1879, the date when resumption took effect, the treasurer held of gold coin and bullion $135,382,639.42; of standard silver dollars coined under the act of February 28, 1878, $16,704,829; and of fractional silver coin, including silver bullion, $15,471,265.27. The amount of coin held by the Treasury as available for resumption purposes an that day, after deducting all matured coin liabilities, was about $135,000,000, or about 40 per cent. of the amount of notes to be redeemed. The thoroughness of preparation for resumption had quieted all apprehensions as to the success of the policy, and on the first day of resumption only straggling demands for coin were made, the amount aggregating less than the amount of notes preferred by the holders of coin obligations. And during the entire year there were redeemed of the legal-tender notes only the amount of $11,456,536; while for the same period there were paid out of such notes on account of coin obligations more than $250,000,000. There were also received of such notes in payment of customs dues in the year ending December 31, 1879, $109,467,456.

Thus, after much labor and sacrifice, the country was lifted out of the financial bog of depreciated paper currency, and with the resumption thus happily secured came a revival of business, an extraordinary demand for labor of all kinds, and a confirmation of that confidence which was so necessary for all business enterprises, and which had grown step by step with every movement made toward a specie basis.

The following table shows the market price, in coin, of $100 of the legal-tender notes of the United States for January and July of each year from 1862 to 1879 inclusive—mean of highest and lowest in each month specified:

Month   |   Month
YEARS   January  July   |   YEARS   January  July
1862 97.6 86.6   |   1871 90.3 89.0
1863 68.9 76.6   |   1872 91.7 87.5
1864 64.3 38.7   |   1873 88.7 86.4
1865 46.3 70.4   |   1874 89.7 91.0
1866 71.4 66.0   |   1875 88.9 87.2
1867 74.3 71.7   |   1876 88.6 89.4
1868 72.2 70.1   |   1877 94.0 94.9
1869 78.7 73.5   |   1878 97.9 99.5
1870 82.4 85.6   |   1879 100.0 100.0

During the year 1879 coin flowed into the Treasury, while but little demand was made for its payment therefrom; so little, indeed, that the Treasury became drained of its notes, and in December it was obliged to require its creditors to receive in part payment of their dues 20 per cent. in coin—one-half in gold coin, the other half in the new silver dollars.

1 From an article in Appleton's "Annual Cyclopedia" for 1879. By permission of D. Appleton & Company.
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