1 Mr. Shellabarger, Congressional Globe, 37th Cong., 3d Sess., p. 407.

2 Mr. Watts, ibid., p. 391. 3 Ibid., p. 409.

* Ibid., p. 339. Mr. Walker included bank deposits in his estimate of the volume

of the currency. Calhoun's statement of the theory is not quite so bold and dogma-

tic as Mr. Walker represented it. See Works of John C. Calhoun (New York, 1853),

Vol. II, p. 347.

114 History op the greenbacks

Replying to Walker, Mr. Riddle raised no objection to

the method of his argument, but declared that an important

element had been omitted in the calculation the govern-

ment required much more currency in time of war than in

time of peace. "So far from there being a redundancy of

the currency," he concluded, "I believe there is a defici-

ency." 1 The commonest rejoinder to the statement of

redundancy, however, was the assertion that prices of com-

modities had not risen materially. 8

But the matter was carried farther. Not satisfied with

denying the depreciation of the paper currency, some mem-

bers asserted that further inflation was necessary to facili-

tate borrowing. This argument, too, seems to have been

derived from a passage in Mr. Chase's report:

The government can resort to borrowing only when the issue

[of United States notes] has become sufficiently large to warrant

a just expectation that loans of the notes can be had from those

who hold or can obtain them at rates not less advantageous than

those of coin loans before suspension. 3

This language can hardly mean anything else than that the

government should continue to issue its notes until their value

had been so depressed that holders would be ready to

exchange $100 of currency for an annual gold payment of

$6. Congressmen at least took this view. Mr. Horton

declared a further issue of currency necessary "in order to

fund a large amount of debt."* Similarly Mr. Hooper

opposed selling bonds below par and preferred to adhere to

the policy of previous legislation, which, according to him, had

been "to issue legal-tender notes in sufficient amount ....

to float .... bonds and keep them at par." 5 Mr. Spaulding

1 Congressional Globe, 37th Cong., 3d Sess., p. 383.

2 Cf. Ibid., remarks of Messrs. Hooper, p. 386, Watts, p. 391, Riddle, p. 383, and

Walker's rather feeble reply, p. 407.

3 Report of the Secretary of the Treasury, December, 1862, p. 14.

Congressional Globe, 37th Cong., 3d Sess., p. 387. & Ibid., p. 412.

THE THIRD LEGAL-TENDER ACT 115

urged the same argument. The treasury found difficulty,

said he, in borrowing currency to pay for the necessary

loans; consequently more currency should be issued. 1

Finally, Mr. Watts declared that he would issue legal-tender

notes, "until the rate of interest should come down to such

a reasonable notch that the government could afford to go

with some prospect of ultimately paying the amount of its

Indebtedness and interest." 2

Such talk marks the extreme length to which the idea

that government should not sell bonds below par was carried.

When the treasury was unable to get funds by selling bonds

at par there were three possible courses: (1) to make the

securities offered more attractive to investors by raising the

rate of interest or lengthening the time for which they would

run ; (2) to make no change in the terms of the bonds but to

accept the market price for them ; (3) to decrease the value

of the currency to a point where $100 in greenbacks was

worth less in the minds of the public than the promise of a

gold income of $6 for a term of years and final repayment