facts shown in this diagram may be shown in diagrams taking gold for the base line, and showing the fluctuations of commodities and greenbacks compared with gold, or taking prices for a base line and showing the variations from that line of the lines representing gold and greenbacks. The commodities that cost $100 on January 1, 1860, rose during the year not more than 84 cents, and fell not more than $2.21. In January, 1861, the list stood at $96.24; in June, $94.79; in July, $87.66; in August, $86.32; in September, $87.59; and in December, $97.15.

The first effect of the war, then, was not to raise prices. It may be presumed that the state of alarm and uncertainty incited men to sell rapidly and turn their merchandise into money. This was favorable to the government. The coincidences in the table above are striking enough to amount to something very near a mathematical demonstration. Between January, 1862, and November, 1864, the premium on gold and the premium on merchandise agree within less than a dollar in nine months, within one to five dollars in eleven months, within five to ten dollars in five months, and within ten to twenty dollars in eight months. In the latter part of 1864 there was a decided advance in prices. This is easily accounted for by the destruction of material that had occurred, and the effect of what Professor Adams calls the labor tax- the withdrawal of men from industries to recruit the army. But the general advance of prices having occurred, the depreciation of legal tender notes in gold and their depreciation in commodities vary sympathetically much as before. From November, 1864, to December, 1866, are twenty-five months. In one, the first of the series, before the rise of prices had been completed, the two premiums are within three or four dollars of each other. The difference is between twenty and twenty-five dollars in three months, between twenty-five and thirty dollars in five months, between thirty and forty dollars in four months, and between forty and fifty dollars in twelve months.

The corresponding movements of the two premiums can be seen at once on a diagram, but they can be followed as well in

a table of figures. The table shows complete comparisons between the gold premium, average, for one month, and the merchandise premium for the first day of the following month in fifty-eight cases. In thirty-nine of these cases an advance in the premium on gold is immediately followed by an advance in the premium on merchandise, and conversely in the case of a fall; of the thirty-nine instances, twenty-five are rises and fourteen are falls. In ten of the remaining nineteen instances the premium on merchandise follows the movement of the premium on gold after an interval of a month; a rise in gold from July to August is followed by a rise in prices on the first of October instead of the first of September. Of the nine remaining cases some of the rises of prices when gold fell, or falls of prices when gold rose, are very small fluctuations, and some occurred late in the summer of 1864 when the general range of prices was advancing as measured in gold.

Secretary Fessenden was so carried away with the prevalent delusion about the nature of gold premiums that he remarked in his annual report:

It is quite apparent that the solution of this problem [the violent fluctuations of gold in 1864] may be found in the unpatriotic and criminal efforts of speculators, and probably of secret enemies, to raise the price of coin, regardless of the injury inflicted upon the credit of the country, or desiring to inflict. All such attempts should be indignantly frowned upon by a patriotic community, and efforts of all good citizens invoked to counteract such nefarious schemes. A law providing for the exemplary punishment of combinations for such a purpose might tend to vindicate, if it could not fully protect, the public rights in this regard ; and it should be, so far as possible, rigidly enforced.

It is a sufficient reply to this to point out that, while the highest point reached by gold was 285, bar iron went up on the same scale to 500.

No government has succeeded in fixing prices; and until that can be done, the legal tender quality of government paper is impotent for all purposes, except to enable debtors to cheat their creditors - an operation of no sort of value to the government and a distinct injury to the community. It is not im

probable that the war might have been carried through on a gold basis without the issue of government notes. Without the greenbacks we could have borrowed money in London; there were times when that would have been convenient to us. If we had had English money, we should have had English sympathy, and there would have been no Alabamas. It is the belief of many that the attitude of England prolonged the war. Her attitude would have been different if we had eschewed legal tenders and borrowed money in Lombard Street.

There was a pretty good stock of gold in this country at the outbreak of the war. The government could have borrowed every dollar of it if it had not driven it out of the country. In the fiscal year 1861, more gold came into this country than went out of it by $16,548,531. According to Treasury estimates, we had $90,000,000 more of coin in the country in 1861 than in 1860. The superintendent of the mint estimated that there was between $275,000,000 and $300,000,000 of coin in the country in 1861, all but $20,000,000 of which was in the loyal states. Although there was an enormous increase in government disbursements, it does not follow that anything like a proportionate increase in the volume of the currency was necessary; for one thousand dollars will pay for a million dollars worth of merchandise if it circulate fast enough. In the latter part of the summer and in the fall of 1861, the associated banks of New York, Philadelphia, and Boston loaned the government $5,000,000 every six days; and these advances could not only have been kept up indefinitely, - for Mr. George S. Coe says that the money flowed back into the banks in a week from the time. it was advanced to the government, but it could have been greatly increased by bringing the banks of other cities into the association, and promptly supplying the banks in return with something they could sell to the people. The banks of the three cities advanced $150,000,000 to the government before they received any negotiable securities from the government. From August to December 7, 1861, the banks of New York advanced $105,000,000, and their gold reserves were depleted only $7,000,000, in spite of this great delay in the delivery of

the 7-30 notes.

But in December Secretary Chase began paying out the "old demand" notes. Of course they, instead of gold, flowed into the banks. This was the beginning of the end. In three weeks after December 7 the New York banks lost $13,000,000 of gold, and then they suspended specie payments. Then the era of fiat money set in. There was a deliberate purpose to depreciate the currency in 1862, in order to make bonds sell at apparent par. Congressmen declared that it was not becoming the dignity of a great nation to peddle its bonds in Wall Street for what they would bring in gold. Representative E. G. Spaulding said in the House, in opposition to putting bonds on the market without previously diluting the currency:

Depreciation would greatly increase the debt by requiring a much larger amount of bonds to be issued than would be needed if your loans were taken at par... I fear the 20-year 6 per cent bonds would under the pressure fall to 75, 70, 60, and even 50 cents. This would be a ruinous mode of raising the means to carry on the war.

But if Mr. Spaulding did not believe that the government's promises to pay would be taken at par when they carried with them 6 per cent interest in gold, why did he suppose that promises to pay at no fixed time and carrying no interest would circulate at par? Simply because he was a victim of the legal tender, or fiat money, delusion. The very 6 per cent bonds that Mr. Spaulding was talking about were issued at less than 65, measured in gold; and in July, 1864, they had fallen to 40. In that year depreciation was repeated in order to make 5 per cent 10-40 bonds sell at apparent par.

To the government this involved enormous loss. It cannot be calculated, but some facts will suggest its immensity. The government issued, of the 5-20's of 1862, $514,771,600, which, reduced to gold by the average annual premiums in the years of issue, yielded $293,323,711. Here is a shrinkage of no less than $221,447,889. The entire amount of this loan was redeemed at or very close to par in gold. The government borrowed in real value $293,323,711; it paid 6 per cent on the