Jacob Coxey: The Cause and the Cure!
- From: "Mark M." <markm@xxxxxxxxx>
- Date: Fri, 02 May 2008 15:24:10 -0500
THE CAUSE AND THE CURE!
Statement by Mr. Jacob S. Coxey, of Massillon, Ohio on the Currency Question.
Before the Sub-Committee of Ways and Means Committee of Congress,
Washington, D.C., Tuesday, Jan. 8, 1895.
(Official Report of Mr. Coxey's verbal statement, taken for the Government
by the stenographer of the Committee on Ways and Means.)
Sub-Committee
Wm. J. Bryan, Benton McMillin, Justin R. Whiting, Julius C. Burrows, John
Dalzell
The subcommittee of the committee on Ways and Means, having under
consideration the subject of bond issues, this day met, Hon. William J.
Bryan in the chair.
Mr. J. S. Coxey, a resident of Massillon, Ohio, appeared before the
committee in advocacy of the following bills:
53rd Congress, 2d Session, H.R. 7463, June 15, 1894.
A BILL to provide for public improvements and employment of the citizens of
the United States.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled, That whenever any State,
Territory, county, township, municipality, or incorporated town or village
deem it necessary to make any public improvements they shall deposit with
the Secretary of the Treasury of the United States a non-interest-bearing
twenty-five year bond, not to exceed one-half of the assessed valuation of
the property in said State, Territory, county, township, municipality, or
incorporated town or village, and said bond to be retired at the rate of
four per centum per annum.
Sec. 2. That whenever the foregoing section of this act has been complied
with it shall be mandatory upon the Secretary of the Treasury of the United
States to have engraved and printed Treasury notes in the denominations of
one, two, five and ten dollars each, which shall be a full legal tender for
all debts, public and private, to the face value of the said bond and
deliver to said State, Territory, county, township, municipality, or
incorporated town or village ninety-nine per centum of said notes, and
retain one per centum for expense of engraving and printing same.
Sec. 3. That after the passage of the his act it shall be compulsory upon
every incorporated town or village, municipality, township, county, State
or Territory to give employment to any idle man applying for work, and that
the rate be not less than one dollar and fifty cents per day for common
labor and three dollars and fifty cents per day for team and labor, and
that eight hours per day shall constitute a day's labor under the provision
of this act.
53d Congress, 2d Session, H.R. 7438, June 12th, 1894
A BILL to provide for the improvement of public roads, and for other purposes.
Be in enacted by the Senate and House of Representatives of the United
States of America in Congress assembled, That the Secretary of the Treasury
of the United States is hereby authorized and instructed to have engraved
and have printed, immediately after the passage of this bill, five hundred
millions of dollars of Treasury notes, a legal tender for all debts, public
and private, said notes to be in denominations of one, two, five, and ten
dollars, and to be placed in a fund to be known as the "general county-road
fund system of the United States," and to be expended solely for said purpose.
Sec. 2. That it shall be the duty of the Secretary of War to take charge of
the construction of the said general county-road system of the United
States, and said construction to commence as soon as the Secretary of the
Treasury shall inform the Secretary of War that the said fund is available,
which shall not be later than sixty days from and after the passage of this
bill, when it shall be the duty of the Secretary of War to inaugurate the
work and expend the sum of twenty millions of dollars per month pro rata
with the number of mile of roads in each State and Territory in the United
States.
Sec. 3. That all labor other than that of the office of the Secretary of
War, "whose compensations are already fixed by law," shall be paid by the
day, and that the rate be not less than one dollar and fifty cents per day
for common labor and three dollars and fifty cents for team and labor, and
that eight hours per day shall constitute a day's labor under the provision
s of this bill, and that all citizens of the United States making
application to labor shall be employed.
Diagnosis of the Disease.
THE CHAIRMAN. Mr Coxey, if you are ready to proceed we will hear you.
Mr Coxey said: Mr. Chairman and gentlemen, I think it essential, in order
to show the necessity for the passage of these proposed bills, to do as
physician does in attending a patient with some dangerous disease. The
first thing the physician does is to call in his neighboring physicians and
hold a consultation, and diagnose the disease; then the diagnosis will
indicate satisfactorily to them the medicine that is necessary to be
administered in order to restore the patient to health and vigor. We find
throughout our country today a diseased condition, and I will try to
diagnose the disease for you.
It will take us back to the spring of 1893. We find at that time we had
$1,500,000,000 of all kinds of actual money in circulation. A thousand
millions of that actual money was in the hands of the people, the farmers,
and laborers, and miners, and merchants, and in the merchant's tills,
making their exchanges. After they paid their debts they took their
surplus earnings and deposited those earnings in the banking institutions
of the country. Then the bankers loaned these deposits or earnings of the
people out to the manufacturers or employers of the people. The balance of
actual money amounted to $500,000,000, which was held by the banks as a
bank reserve, and upon this bank reserve the banking institutions of the
country had created another kind of money, which consisted of commercial
paper. That commercial paper is what the manufacturers took in payment for
their products.
For instance, suppose a steel manufacturer of Pittsburgh takes a contract
to deliver steel and when he delivers that steel he agrees to take in
payment for the steel notes running from three to four months' time. That
note is answering the purpose of money, the medium of exchange, because it
has exchanged the products from the steel manufacturer to the jobber or
consumer who purchases it, just the same as though he had paid the actual
money for it.
After delivering the goods and receiving the note in payment, the next
thing that the manufacturer does is to go to the banking institution,
taking the notes with him, indorsing them, and putting them in his bank
book, and the banker takes them and discounts them, deducting the discount,
and credits the manufacturer with the balance. Then that is subject to
check. Now, the banking institutions in 1893 had discounted $4,500,000,000
of commercial paper, and $1,000,000,000 of actual money - $5,500,000,000
all told. Then, in the spring of 1893 England threw $108,000,000 of
securities upon our markets, converted them into gold, and commenced the
withdrawal of gold out of the country. The great daily newspapers
commenced the agitation that the continued purchase of silver under the
purchasing clause of the Sherman act was causing the gold to flow out of
the country. These editorials, starting originally with the papers of New
York, Boston, Philadelphia, Chicago, and all the great daily newspapers of
the country, were taken up by the country newspapers, and the bank
depositors getting the daily and weekly papers, reading these editorials,
where they saw the number of million dollars leaving the country daily and
weekly, and the assertion that the cause of it was the continued purchase
of silver under the purchasing clause of the Sherman bill, and if that
clause was not repealed it would create a panic, because it would drive
every dollar of gold out of the country - as I say, the bank depositors
reading these editorials, their minds were prejudiced and framed and they
became alarmed and rushed to all the banking institutions and commenced to
withdraw their deposits out of the banks, so that the latter part of June
and first of July, 1893, we found this condition: That the manufacturer,
who had, previous to that, made contracts to deliver his product and take
in payment for that product notes running for four months' time, went to
the banking institutions with the notes and the notes were turned into the
banker, but the banker said: "Self-preservation is the first law of nature,
and we must first protect our depositors. We cannot discount any more
commercial paper."
Now, that condition became general in all the banking institutions of this
country, and the result was that this confidence money or commercial paper
which was being used to exchange products up to that time was refused by
the banking institutions to be any longer discounted, and the manufacturer
was compelled to close down his plant.
Manufacturers Make Their Own Money.
Now, I want to give two illustrations. I was talking with Mr. Schmick, who
is secretary and treasurer of the Cherry Valley Iron Works of Leetonia,
Ohio, where they have quite a large plant and employ a great many men, and
he said: "Mr. Coxey, I do not know what caused this business depression,
but I know this: when the panic came on the Cherry Valley Iron Co. had
deposited at Cleveland $40,000 to their credit, and I went two or three
days before pay day and drew a check for $10,000 to get the currency to pay
the men their money.
"The banker said to me, 'Mr. Schmick, we can not allow you to draw this
money out.' 'Why,' I said, 'what is the matter?' 'Why,' he said, 'there
have been runs made upon our bank and all the banking institutions of this
country, and we have not got the money to cash the check.'"
He waited there two days, and at the end of that time the banker, by
considerable hustling, raised $6,000. He wanted $10,000, and had $40,000
upon deposit, and when he found he could only get $6,000 he telegraphed to
another iron concern in Columbus, Ohio, by the name of King, Gilbert &
Warner, to send him by express $4,000 in currency to Leetonia, which he
did, and with that $6,000 he got from the bank at Cleveland he went back to
Leetonia and was able to pay his men, but he called his men up after paying
them and told them what had happened.
He said to them, "I think it would be better to close down our plant,
because there is a panic in the country now. It is impossible to get money
to pay you, and you will be dissatisfied and make trouble for us." The men
withdrew and went to their labor organization and held a consultation, and
their committee went back and reported to Mr. Schmick that they thought he
should run on if he had orders; that they would work and wait until they
got it. That is one illustration.
Now I will give you another one. Russell & Co., a manufacturing concern
of Massillon, Ohio, when the panic came on had contracts to deliver steam
engines for manufacturing plants throughout the country. They delivered
the engines, and after the delivery they received notes in payments for the
engines. They took the notes to the banking institutions and were unable
to get them discounted, and the result was they could not get money to pay
their men, and they were compelled to close down their plant, and after
being closed down for over six weeks, throwing 800 men out of employment in
the city of Massillon, where I live, the only way they could start up their
plant was by issuing their own money, and that is what they did. Here is
one: (Illustration shows certificate of promise to pay one dollar with
interest of six percent to maturity only)
I am not presenting this as making any fight against Russell & Co., only to
corroborate what I say is the cause of the present business depression.
They closed down their plant and they only way they could start it up was
with yellowbacks instead of greenbacks. Let me say something else in that
connection which I think is strong proof of my claim as to the cause of the
present business depression. J.W. McClymonds, treasurer of Russell & Co.,
is also president of the Merchants National Bank. C.M. Russell, who signs
himself as secretary of Russell & Co., is a director in the Union National
Bank of Massillon. You all know that the presidents and directors of
banking institutions say whose paper shall be discounted in their institutions.
Now, if those two men connected with Russell & Co. delivered products and
took in payment notes - you know that all the property of the men giving
the notes is back of the notes - and then indorsing these notes to a
banking institution which they control and are unable to get their own
notes discounted in their own institutions, how can you expect a
manufacturer who has not influence with a banking institution to get notes
discounted? Does it not corroborate and prove conclusively that that which
has closed the manufacturing plants down in on account of the manufacturers
not being able to get their paper discounted, and to get actual money to
continue their business? If that is the case, the issue which was fought
last fall on a fear of the repeal of the tariff was a false issue. That is
the point I make, and it was simply done, I believe, to divert the minds of
the people from the real cause - the money question.
There is something else in connection with Russell & Co., and that is this:
Mr. Russell told me within the last three weeks that they had $1,000,000 of
farmer's notes in their safe. They also manufacture threshing machines and
they take in payment the notes of the farmers and whoever will buy of them;
and he said they had $1,000,000 in their safe and he could not tell
anything about the value of them whatever. He did not know whether he
would get 10 per cent. or 25 per cent., or what; and he also told me
something else in connection with it - that they had mortgages upon the
crops of farmers in Oregon and that the price of the product was so low
they did not harvest the product but allowed it to rot upon the field.
That is something else which I think deserves the attention of you gentlemen.
What the Panic has Cost the Country
Now let us see how that has affected the price of the products of the
country - the fact of the manufacturing plants being closed down. It has
created an army of unemployed numbering from 3,000,000 to 4,000,000 people
- say 4,000,000 of people. Now, 4,000,000 of people as heads of families
means from 15,000,000 to 16,000,000 people dependent upon those 4,000,000,
and adding the two together you have 20,000,000 of people who used to be
consumers and producers of commodities out of the market; because when a
laborer is thrown out of employment upon which he depends for a livelihood,
he can not purchase the money to buy the necessaries of life. Is there any
further reason for the fall in the price of wheat down to 50 cents a
bushel, and the same way with wool to 12 cents a pound, because these
20,000,000 of people have been stopped from purchasing and consuming.
Then, the question of horses comes up. The farmer wonders why the price of
his horses goes down and thinks there may be an overpopulation. But that
is not the case. Let us look and see who is was who purchased the farmer's
horses four or five years ago, when he got $200 to $225 for a horse. It
was the manufacturer. What did the manufacturer do with the horses? He
used them for conveying the raw material from the railroad to his plant and
the finished product from his plant to the depot. They were the people who
were buying them, and in anticipation of the wants of the manufacturers of
this country the farmers commenced to raise and produce horses and get them
ready for the market, and in 1893 they had them ready to sell, but when the
farmers put them upon the market, who did they find were their competitors?
Why, the very men whom he anticipated would be the buyers.
The manufacturer is now his competitor because he is a seller, not because
he is producing horses, but because he has no longer use for horses, as his
plant remains idle for a number of months and his interest account must be
cut down in some way, and so he sells these things; he realizes upon them
upon the open market, and when the farmer goes to sell a horse he comes in
competition with the man whom he supposed would be a purchaser then. Of
course, the demand being taken away for the horse, the price is bound to
fall. It is true with every branch. You will find it in the steel
business, in the iron business, in the wool business, in the clothing
business, and every branch will be affected the same, because you have
taken the purchasing power away from the consumers.
Now you have seen this system fail. Why? Because we had business based
upon $1 of actual money and $9 of credit money, and I am not taking into
consideration the hundreds of millions of commercial paper that lie locked
up in safes of the manufacturers that are not used at all, but simply from
the view of the statement of $4,500,000,000 of discount.
The Remedy: Money and Work for the Unemployed
Now then I claim the necessity for these two bills which have been referred
to your committee is apparent. The reason I claim the necessity for the
passage of these bills is this: We should get down to a system of actual
money instead of credit money or confidence money, and this will bring it
about. The first bill is called the good roads bill, and is known as that.
That calls for Congress to authorize the issue of $500,000,000 of full
legal tender Treasury notes, making them full legal tender for all debts,
public and private, and appropriate to each State and Territory at the rate
of $20,000,000 per month to set these 4,000,000 of idle and unemployed
people to work in macadamizing the roads all over the United States. I
know they are needed pretty badly at Pittsburgh, and I know they are needed
nearly as badly in the vicinity where I come from.
There is a provision in this bill which says that all labor shall be done
by the day, and not by contract labor, and that the rate of wages shall not
be less than $1.50 for a day of eight hours, and $3.50 a day for a team and
labor. This, in my opinion, would settle the eight-hour question, because
it would bring about this condition: that the Government would stand ready
at any and all times to give employment to the idle and unemployed at a
rate not less than $1.50 for day of eight hours, and thus no manufacturer
or firm would be able to hire a single individual for less than what the
Government would be willing to pay, which would be $1.50 a day for a day of
eight hours.
Now the other bill, the non-interest bearing bond bill, calls for Congress
to grant to the States, counties, townships, municipalities, towns, or
villages the right to issue bonds, without interest, not to exceed one-half
of the assessed valuation of their property, to run for twenty-five years,
and to deposit those bonds with the Secretary of the Treasury at Washington
as security for the repayment of the money. Then that it shall be
mandatory upon the Secretary of the Treasury to authorize the issue of the
face value of these bonds in full legal tender money, keeping out 1 per
cent., the actual cost of making the money, and forwarding 99 per cent. to
the State, county, municipality, township or village which issues its bonds
and deposits them with the Secretary of the Treasury as security for the
repayment of the money, they agreeing to pay this money back to the general
government at the rate of 4 per cent. per annum, all payments to be applied
upon the principal, and in twenty-five years the bonds will be canceled and
the municipality will be free from debt. Now, I would like to illustrate:
MR. DALZELL. What is the amount contemplated will be issued by that?
MR. COXEY. Not to exceed one-half of the assessed valuation of the property.
MR. DALZELL. Have you any idea of can you give us any approximate figures,
of the amount that will be issued, take the last census for instance?
MR. COXEY. No; I can not.
MR. DALZELL. You have not looked into that?
MR. COXEY. I cannot do that for this reason. My idea of the money
question is simply this; we should furnish a sufficient volume of money for
the demands of trade, and you will see as I go along, I will take up that
question and make an illustration which I think, will make it clear to you.
MR. DALZELL. I am trying to understand this thing, and I understand that
under your first bill we will have $500,000,000, and I would like to know
how much additional we will have under the second bill.
MR. WHITING. I understand that would be determined upon by what the
municipalities would decide to do, as to whether they would issue bonds or
not. Only townships which would want to improve the roads would take
advantage of the law, and other townships might say that they did not care
for them, so it would lay entirely with the judgment of the township.
MR. COXEY. Yes, sir.
THE CHAIRMAN. As I understand, the only limit is one-half of the total
assessed valuation of all property in the country?
MR. COXEY. Yes, sir.
MR. DALZELL. That, I suppose, is to be determined at the time the bonds
were issued?
MR. COXEY. Yes, sir.
THE CHAIRMAN. Do you allow the counties to issue and also allow the
municipalities within the counties -
MR. COXEY. Yes, I will reach that point -
THE CHAIRMAN. Then, will there not be danger of duplication?
MR. COXEY. I will answer this way, Mr. Chairman. I do not anticipate a
changing of the present bond system only so far as to abolish the interest.
Our present system allows all towns, villages, townships, municipalities,
counties and state to issue their bonds bearing interest.
MR. DALZELL. A matter of regulation by state law.
MR. WHITING. Not to exceed 5 per cent.
The National Banking System a Precedent.
MR. COXEY. There are different regulations in different states. In order
to illustrate this I will take a municipality that is assessed $200,000;
then it would be allowed to issue bonds not to exceed one-half of the
assessed valuation, which would be $100,000, and without interest, running
twenty-five years. They would forward that bond to the Secretary of the
Treasury and deposit it with him as security for the repayment of the
money, which is similar to what the national banking institutions are doing
now with the Government bonds. Then he would authorize them to issue
$100,000 of full legal tender money on this bond, keeping out $1,000 to pay
the engraver, printer, paper manufacturer, etc., for making the money, and
he would forward $99,000 to the treasurer of the municipality, to be paid
out for making all manner of public improvements, such as street car lines,
electric light plants, waterworks, putting in sewers, paving streets,
building school houses, market houses and making every manner of public
improvements that would be a convenience and a comfort to the people of the
municipality where the bond was issued. Now the question arises -
Basis and Redemption.
MR. M'MILLIN. How do you provide for the redemption of these bonds?
MR. COXEY. I will tell you in a moment. The first question that arises in
a man's mind is, What is back of this money? That is always the first
question when you bring this up. You have issued a bond for $100,000, and
back of that bond is $200,000 of assessed property. There is $2 of
property back of every dollar you have made and put into circulation before
you have made any improvements. Then you start the idle and unemployed to
work in creating value in the public improvements, and the city treasurer
will pay money out to men who render the services and create the value;
thus, you expend $99,000 in creating $99,000 of value in the shape of
public improvements, which is added to the $200,000 of assessed value, and
you have increased the value of your money when you put it into circulation
for services rendered and value created 50 per cent. over when you
commenced, so when you finish your improvements you have $3 of property
back of every dollar of circulation, whereas you had $2 when you commenced.
Now, as to the redemption about which the gentleman on the right asked me.
The first year they levy a tax rate to raise 4 per cent. per annum to be
applied upon the principal, the same as they do now in levying a tax rate
of 6 per cent. per annum, to be paid in interest, while they still owe the
principal. You raise the taxes, you send them in an express package to the
Secretary of the Treasury, and he takes the amount of taxes there, just the
same as the postmaster takes a stamp, and cancels it, and that money has
been redeemed, and through taxation - the only true redemption of money.
He credits that $4,000 4 per cent., upon the principal of the bond down to
$96,000 the first year, and you still have back of that $96,000 in
circulation $299,000 of value.
MR. M'MILLIN. What do you do with the $4,000 sent to the secretary of the
Treasury?
MR. COXEY. It is canceled and withdrawn.
MR. M'MILLIN. You provide for cancellation after return?
MR. COXEY. Yes, sir.
MR. M'MILLIN. And you provide no metallic redemption at all?
MR. COXEY. No, sir; no metallic redemption.
MR. M'MILLIN. In the event a county or municipality defaults in the
payment, where do you provide suit shall be brought for the enforcement
thereof?
MR. COXEY. The property belongs to the Government because it has got a
bond on it.
MR. M'MILLIN. But you see the Government would want the money; it would
not want to run every town in the country.
MR. COXEY. It is simply a part of the Government. Every municipality and
every town is part of the government, and it is simply furnishing the people -
MR. M'MILLIN. But you do not provide where any suit is to be brought or
litigation by which they can be forced to pay when they fail to pay?
MR. COXEY. Not any more than under the present bond system.
MR. M'MILLIN. If there should be no provision would not that necessitate
the closing of the transaction in the Federal court, as that is the only
court of the Government of the United States?
MR. COXEY. I presume it would.
MR. DALZELL. All this if I understand you, proceeds upon the assumption
that it is a proper function of the Federal Government to authorize loans
by municipalities on various improvements?
MR. COXEY. I will illustrate that, Mr. Dalzell, right along in the
argument. Yes, sir; that is the stand I take.
Advantages Over the Present Bond System.
MR. DALZELL. For instance, under the laws of Pennsylvania, if a
municipality is confined in issuing its bonds to 5 per cent. of its
assessed valuation, you would overturn that law by a Federal law that
authorizes them to issue 50 per cent?
MR. COXEY. Yes, sir. Now, the second year they levy another tax rate to
raise another 4 per cent., the amount they agreed to pay back to the
General Government annually. This is sent to the General Government, to
the Secretary of the Treasury, who cancels it, and you have reduced your
principal in two years to $92,000 and you still have your $299,000 of value
back of the $92,000 in circulation. By continuing that process, paying 4
per cent. per annum upon the principal, at the end of twenty-five years
your bond is handed back by the General Government, and the General
Government says to the States, counties, municipalities, townships and
villages, "you have done your part and we now cancel the bond." They are
free of debt.
Take the present system. How does the municipality borrow money? They
call the council together and authorize the issue, say, of $100,000 of
bonds, if they need that much money, provided they have got property
enough. Of course the limit is smaller than what I give, but I only make
the limit so as to furnish the money in case they need it. I do not think
they will need it, but I do claim if they need the money they ought to have
the privilege of getting the money, and they will not borrow more money
than they need from the simple fact that they are taxed annually 4 per
cent. to pay back, but these payments go upon the principal. Now, say the
council authorizes the issue of $100,000 of bonds and they agree to pay 6
per cent. interest upon the bonds and the bonds are to run twenty-five
years. They deposit the bonds with some banker or money lender. They
receive the money upon the bonds and then they go and tax the people and
raise 6 per cent. interest upon that $100,000, $6,000 for twenty-five
years, and at the end of twenty-five years they have paid $150,000 in
interest, and then they are just where they started, because they still owe
$100,000.
If the municipality under the present law can issue bonds and tax the
people to pay 6 per cent. interest upon those bonds for twenty-five years,
it strikes me it should be able to pay 4 per cent. upon the principal
without interest, and under this system, I believe, if adopted, it would go
a long way toward abolishing municipal taxation. You take large cities
like Philadelphia, New York, Pittsburgh, and the majority of the great
cities, the revenues from the street-car lines, waterworks, electric and
gas plants would more than pay back to the General Government this 4 per
cent. per annum upon the amount they borrowed from the General Government
to pay for these expenses, and therefore it will not only lower the tax
rates, if not altogether abolish the tax rates in municipalities throughout
the country, but it would have a beneficial effect upon the city
manufacturers, because my friend here in front realizes this fact, that a
great many manufacturing plants are driven out of large cities on account
of excessive taxation. They are driven to seek places in the country, on
the suburbs of the city, that are inconvenient to people who want to go to
the plant to get material and repairs and all that kind of thing, and this
will take away that bad feature of driving the manufacturers out in the
country.
A township under this bill can borrow money from the General Government and
use the money to build a school-house and make township roads. The
counties can put out county bonds and deposit those bonds with the
Secretary of the Treasury and build a courthouse and make improvements; and
I would like to illustrate that, because in my own county, Stark, our
county commissioners have authorized the issue and have issued $200,000 of
bonds, bearing 5 per cent. interest, to run twenty years. They have sold
those bonds, and they have the cash to be paid out to build a courthouse.
Now, they will tax the people of Stark county 5 per cent. on the $200,000
for the next twenty years, which will be $200,000, and we will be where we
are today, because we will still owe the $200,000 of principal, and I do
not know we are going to get the money to pay it. Under my plan you would
issue bonds running for twenty-five years without interest, deposit the
bonds with the Secretary of the Treasury, and receive the face value of
that bond in full legal-tender Treasury notes, keeping out $2,000, the
actual cost of making the money, and the Secretary of the Treasury would
forward $198,000 to the county treasurer of Stark county to be paid out for
building that courthouse. Then they would tax back out of the county
$8,000 each and every year to be paid and applied upon the principal, and
at the end of twenty-five years our bonds would be canceled. Now we are
taxing out of the people of Stark county $10,000 each and every year, and
at the end of twenty years we will still owe the $200,000 in bonds. That
illustrates the county loan. You go up to the States and see how
beneficial it would be to the States.
Shall the Government own the Railroads?
The great issue, I believe, which is before the American people today is
whether the railroads are going to own this Government or the Government is
going to own the railroads. I can show you plainly under this how you can
buy up the railroads of every State and Territory, and pay for them, and
the people will not be taxed one cent to pay for the railroads, and in
order to do that I will illustrate how they organize a railroad
corporation, because I think it is essential to do so. It requires half a
dozen men to organize a railroad corporation. They get together and
organize it. The next thing is, they go to the State capital and get a
franchise, and that franchise give the right of way through every man's
property to the railroad.
They start an engineer to surveying the railroad, and he goes to a farm of
a farmer, and gets over the fence and order a stake put here and a stake
put there, and probably one put right up to the house, and by that time the
farmer comes out and he says to the engineer, "What are you doing here?"
The engineer says, "I am staking out a railroad." The farmer says, "Where
are going to run it?" And the engineer replies, "I am going to run it
right straight through your house." The farmer becomes angry, and he
drives the engineer off his farmer. The engineer goes and reports to the
railroad corporation, and states that they cannot go through the farm. The
attorney of the company goes to the court and petitions the court to
appoint a jury or commission to assess the value of the farm. They do
that, and they go back and render a verdict of $700 damages done to the
farmer against the railroad company. What does the railroad company do?
They take $700 of lawful money issued by the General Government and tender
that in court and say to the man, "Now move out." And if he does not move
out they get the sheriff and move him, and the law gives them that right.
Now, that man had a deed to that property; he owns it, and where is the law
for it?
Under the Constitution and law, which says it is for the common benefit of
the whole people of this country that that railroad should be built
straight through the farmer's farmhouse, how, under the same law and
Constitution that guarantees equal rights to all and special privileges to
none, I claim that we can condemn the railroad property of this country and
take it.
The Government Can Buy the Railroads Without Taxing the People
Now, how can that be done? Go into the courts after the passage of the
non-interest-bearing bond bill and petition the court to appoint jurors or
a commission to go and view the railroad property of the States and
Territories, and, after they have viewed it, to render their verdict in the
courts and state the number of millions of dollars necessary to pay for
them, and then tender them lawful money as issued upon bonds without
interest running twenty-five years, based upon all the value of the States;
deposit those bonds with the Secretary of the Treasury and get the face
value of them, less per cent. for making the money, in full legal-tender
money, and then take that lawful money and tender it into the court which
will be lawful money, and get deeds for these railroads, and then go to the
railroad magnates and tell them to move out, just the same as they told the
farmer under the same law and same Constitution.
How beneficial that would be to the manufacturers and business men and
laborers of this country! Under this system you will have abolished
dividends upon railroad stock, including all the water, and also interest
upon railroad bonds. NO more interest upon railroad bonds then, and the
revenues and freight receipts from the railroads would more than pay 4 per
cent. per annum back to the General Government which you have agreed to pay
upon the amount borrowed from the General Government, and in twenty-five
years your bonds would be canceled and you would be free of debt and the
freight rates could be lowered much more, and under the system alone, by
abolishing dividends upon railroad stock, interest upon railroads bonds,
you stop this drain of gold that is leaving our country now daily and
weekly to pay dividends and interest abroad. I say that this Government
has the right to make money which would be doing this, and save that
$300,000,000 annually to the people of this country.
Elasticity of Money and Automatic Regulation of the Supply
Now the question comes, How are you to put the money in circulation? I
claim that this non-interest bearing bond proposition will act in
regulating the good of the business of the country exactly the same as the
governor does the speed of a steam engine. When I was a young man 16 years
of age for ten years I ran a stationary engine in a rolling mill, and we
set the governor to run the engine at 60 revolutions a minute. I put the
steam on, and the engine commenced to start, and when it commenced to get
up to 60 revolutions a minute the governor balls went up and began to close
the valve, and when it closed the valve the engine slackened down to 59
revolutions, and then the balls would drop and start to working the valve
in the other direction so it worked up and down, regulation the speed of
that engine between 59 and 60 revolutions a minute. This bill will act the
same, and in this way:
There are 4,000,000 idle and unemployed people in this country; 1,000,000
of them always work upon public improvements when they are made, but there
are none to be made now, because we have not the money to make them. Three
millions of them work in manufacturing plants and upon farms, and they are
idle for the same reason that the farms are not profitable; and the same
way with manufacturing plants; they are closed down. The 4,000,000 of men
will start to work after the passage of this bill, and at the end of the
first eight hours they have created, as they get not less than $1.50 a day,
$6,000,000 of value in the establishment of public improvements. Now, as
you create value by great public improvements you coin that value into a
medium of exchange called money of full legal-tender value for all debts,
public and private, and you pay those $4,000,000 of men for the services
they have rendered in creating that value.
The first evening these 4,000,000 of men take $6,000,000 of the
representative of the value they have created in that eight hours and they
go to the various stores of the country and they purchase of the surplus
products of the country. They take them out of the stores and leave in
their place $6,000,000 of legal-tender money; they go to work the next
morning; having consumed some of the products - they have had a good
breakfast, say the first in a year - they work another eight hours, and at
the end of that eight hours they have created another $6,000,000 of value,
for which the Government gives them $6,000,000 of full legal-tender money,
representing the value of these improvements which they have created, and
they purchase another $6,000,000 of provisions. In one month's time they
have created $140,000,000 of medium of exchange, representing the value of
the improvements they have created, and these men have purchased and paid
for and consumed $140,000,000 of the surplus products of the country.
Now, if we create a demand and work off the surplus products, the merchants
will write to the manufacturers and the farmers for more goods, and tell
them that they want to pay for those goods with money; that they do not
want any longer to give their notes, running for three or four months. It
may be that manufacturers read that with surprise, because they have been
accustomed to do business by receiving and tendering notes in payment, and,
they say, we can start up now, because we do not have to ask the banker to
discount commercial paper, but we will start up and pay manufacturing
expenses, and when we deliver the goods we get money in payment for them.
They try to start the plant, and they find somebody has hired the men.
Where to they find the men? They find 3,000,000 who have worked in the
plants are now working on public improvements, opening the valve at
Washington and letting the money in to start the whole wheels of industry
going again, and they have done it. They call 3,000,000 off the public
improvements because the engine has gotten up to 60 revolutions per minute
with 4,000,000,000 men on public improvements. They take 3,000,000 off and
then the engine slacks down to 59 revolutions, when the 1,000,000 left
there enables the engine to run from 59 to 60 revolutions, and by that
system it equalizes the speed and keeps that engine running between 59 and
60 revolutions a minute all the time this bill is left upon the statute books.
Then you have taken away by the adoption of that every chance of any
possible stringency in the future. Why? For this reason, if there is a
strike among the coal miners, or the employes of some manufacturing
establishment have got a complaint, the men idle and unemployed can go upon
the public improvements, and they can get a fair return for a fair day's
work, and if a manufacturing plant burns down they have got a place to go
to work and create a demand for the productions of the country by the work
on public improvements, and consuming the surplus products. They have got
a chance to work there and create a demand, to supply which these plants
will have to set to work. Another strong feature of this is this question
of what we call over production, being surplus production, from the simple
fact the purchasing power has been taken away from the people. Now you
will give them purchasing power to consume this surplus product instead of
producing something that will be put upon the market and come in
competition with an already overburdened market. This is not a marketable
improvement. You do not sell it. It simply improves the state, counties,
townships, municipalities and villages for the general good of all. You do
not sell the improvements.
What Money Is.
Now, as to the question of money. I wish to touch upon that because they
tell you that you have got to have money which is redeemable in gold. Now,
the kind of money I have advocated here today is not only redeemable in
gold, but in silver, or iron, or copper, or wheat, or rye, or oats, or
cotton, or wool, and everything else that is produced in this country,
including labor. Then you have got a stronger money that that which is
only redeemable in gold, because it is redeemable in gold and everything
else. Let us analyze that part.
You start two men to work. Say one man works upon a highway and he works
eight hours, and at the end of that eight hours he has created $1.50 of
value in improvements, and the government coins that into $1.50 of legal
tender money. It pays him at the end of the service $1.50 of full legal
tender paper money, which is the representative of the value that he has
created. He has it in his hand. It is an order for all the kinds of goods
in the country.
Suppose the second man is a man working in a gold mine, and he works eight
hours, and at the end of that time he brings up the actual value in his
hand what is called the intrinsic value of $1.50 in gold. Now, say these
two men start for the grocery store and purchase $1.50 of groceries each.
The man who works on the highway says, "I want to pay for those groceries,"
and he tenders the legal tender note of the government, and the groceryman
says, "I will not take it. The man who has the gold tenders his gold in
payment to the groceryman, and the merchant says, "I will not take that."
What do they do? They go to that great arbiter, the justice of the peace,
who settles any differences of $1.50 and is the agent of the government to
that extent, and the three men, the merchant and the men who have created
the value, enter the justice of the peace office, and the merchant says to
the justice of the peace: "These men have each purchased $1.50 worth of
groceries, and they have not paid me for them." The man working upon the
highway says: "I wish to pay for mine." And he tenders his full legal
tender paper money that he received from the government to the squire, and
the squire takes it and sees the act of Congress and engraving upon it and
the stamp upon it, which says: "This is full legal tender for all debts
public and private," and he looks up at the merchant in surprise and says:
"Merchant, that settles your account," The justice says: "Then your
account is settled anyway, because all you can get is what Congress says is
legal tender for debt." The merchant changes his mind and takes it then.
How about the man who mines the gold? He says: "I want to pay the
groceryman," and he tenders the gold to the squire. The squire looks at it
and says: "What is that?" He says: "That is gold, and that is what Sherman
and Carlisle say is money; money is gold, gold is money, and gold is God's
money." The justice of the peace says: "Take that to the Philadelphia mint
and get the stamp of the government on it, just the same as the paper has,
and then you can tender it in payment of debt, and not until then." He
does that, and he brings it back and pays the debt. Now, what was used
about that gold and paper money in paying that debt? It was the legal
tender value, and that is all you can use in money.
Method of Paying Debts Abroad.
There is another question comes up, and that is, how about settling foreign
indebtedness. Mr. Blaylock, of Blaylock & Blynn, hatters, of Philadelphia,
in conversation I said to him, in talking over this question, "Mr.
Blaylock, have you not got a lot of accounts back here you would gladly
take full legal tender American money for?" He said: "You are right." I
said: "Provided you have got that money for the hats you have sold and you
take it over to a bank of deposit, could not you buy a bill of exchange on
England in payment of imported goods?" He said: "Certainly." I said:
"Where is the necessity of gold for money here? You must part with your
labor to buy it, and first part with the labor to buy paper money issued by
the government, because you have got to render services before you can get
it. You cannot get it like the banks now. They are not rendering services
for the money they get; there would have to be services rendered and value
created for this money, and then you can get the gold; if we need gold to
go to Europe, buy that commodity, because when it leaves this country it
simply goes as a commodity, as wheat, or cotton, or any other production in
this country which is shipped to Europe."
Now, if there are any questions which you gentlemen feel like putting to me
on this question, I will gladly answer them to the best of my ability. I
do not claim to know everything on the subject, though.
MR. WHITING. This plan would eliminate interest altogether?
MR. COXEY. It would, as far as public improvements -
MR. WHITING. But would it not eliminate all interest?
MR. COXEY. Well, no; I do not think it would.
MR. DALZELL. You say it would destroy railroad dividends, and all that
sort of thing?
Protection and Revenue.
MR. COXEY. It forces the people who now have money invested in railroad
enterprises, in telegraphs, telephones, to put their money into individual
enterprises in developing the country, for example; and here is one
important feature I failed to mention, and that is that there are
$5,000,000,000 of English money invested in our different securities,
trusts and combinations here. We are taxed from $250,000,000 to
$300,000,000 annually in interest and dividends for the use of a thing that
we ought to make ourselves, money. That is what this bill will do. That
is the kind of protectionist I am; I want to drive every dollar of foreign
money out of this country and make the money to do our own business.
MR. DALZELL. And buy nothing abroad at all?
MR. COXEY. Oh, certainly; we will buy something abroad; we will buy more
abroad than now. Why? They wonder why the receipts of the government have
fallen off. It does not appear to me that they have struck the root of it.
If you stop 20,000,000 people from consuming commodities, some of which
undoubted come from abroad, that is one thing which would make your imports
fall off; it is simply because you have taken the purchasing power away
from 20,000,000 altogether, and from probably 30,000,000 more 50 per cent.
of their purchasing power has been taken away and that has had an influence
upon the subject of imports into this country; but here is the question of
money.
We are at the mercy of the English money lenders now. At any time they can
create a panic, if they wish to do so, by throwing $200,000,000 or
$300,000,000 of securities on the market, converting them to gold and
taking the gold our of the country. There would be one way of stopping the
drain of gold upon the treasury if the secretary of the treasury would use
the prerogative that he has, and that is to determine that he has the right
to pay in any kind of lawful money issued by our government, and that when
there is a legal tender presented to the Treasury he has got the right to
present in payment for that legal tender silver. That would stop the run
upon the treasury if he commenced paying out in silver.
MR. DALZELL. Let me ask this question: Why limit the beneficence of your
scheme to municipalities?
MR. COXEY. I do not.
MR. DALZELL. Why should not the individual property owner issue his
twenty-five year non-interest-bearing bond and get 50 per cent. of the
value of his property in this money?
MR. COXEY. I will answer that question in this way: I under this plan
propose to change the system of issuing bonds to borrow money for municipal
improvements. That is a great innovation over the present system, because
it will break the backbone of a monopoly of money in this country. I might
agree with you that that might be a proper thing to do, and I believe it
is, but I am not talking -
MR. DALZELL. I am not suggesting it, but I am simply asking why you should
limit it to municipalities, and why not extend it further?
A Change From the Credit System to a Cash System.
MR. COXEY. I realize that a man can be too radical in anything. I am
trying to accomplish something here that will be beneficial to the people
of this country, and I am satisfied that it will furnish the money that is
necessary to do the business of this country upon a cash system.
MR. WHITING. And you propose to be conservative?
MR. COXEY. Yes, sir; I do. I propose to substitute a cash system for a
credit system, and we have seen the result of the other, the credit system,
fail in the last eighteen months.
MR. DALZELL. You just draw the line upon municipalities?
MR. COXEY. No; township -
MR. DALZELL. No; I mean municipal institutions, whatever they are; that is
where you draw the line between radicalism and conservatism?
MR. COXEY. Yes, sir.
MR. M'MILLIN. Has it occurred to you there is a danger by the possession,
operation, and ownership by the Government directly of all the railroads in
the country; of its telegraphs, its telephones, and its means of
transportation of every kind that an Administration once in power with such
authority in its hands to subvert the Government and prevent it ever being
ousted would ultimately result in a subversion of the Government?
MR. COXEY. No, sir; I do not. I do not understand anything of the kind.
MR. WHITING. Your idea is that accumulated capital could not lie idle and
receive interest but they would have to engage in business?
MR. COXEY. Yes, sir; private enterprises.
THE CHAIRMAN. Do you not think the 4 per cent. you fix would have some
effect in determining the rate of interest charged generally?
MR. COXEY. Yes; there is a taxation of 4 per cent. upon the total amount
issued, but there will be an automatic valve working so that whatever
number of men that will work are thrown out of employment by any means at
all that number will work this valve and keep regulating it.
MR. WHITING. You think it would require Government agents to handle this
money. The bankers would have no longer an existence?
MR. COXEY. Not any more than under the present system. I establish a
precedent by the National banks. Under the national-bank act it requires
five individuals to organize a national-bank corporation. If they have
$100,000 of real estate in this municipality and they conclude to start a
national bank, they sell that property and buy $100,000 of money. Then
they sell that money and buy another piece of real estate called a
Government bond. It is real estate because it covers all the real estate
of the country. That bond bears interest, is non-taxable, and they deposit
that bond with the Secretary of the Treasury, or the Comptroller of the
Currency possibly. He charges them no tax upon the bond, pays them
interest, and gives them 90 per cent. of the face value of that bond in
national-bank notes at a cost of 1 per cent. Now, what have they done?
They have deposited their property - real estate - with the Secretary of
the Treasury, and received interest upon it and 90 per cent. of the face
value in national-bank notes to take back to the municipality to loan out
to the very men who bought that property, upon their notes bearing interest.
Then how does the municipality get any of that money? Here is this other
property which has been sold to buy money, to buy bonds, 90 per cent. of
the face given to them then; they go back to lend upon that property again,
and tax the people 6 per cent. interest upon that bond, and the people are
borrowing their own money because they have loaned these people 90 per
cent. of the face value of the bond at a cost of 1 per cent., and they go
and pay 6 per cent. for the use of that money. This will avoid that, and I
take the national banks as a precedent to establish the non-interest
bearing-bond bill, because 2 per cent. of the people for thirty-one years
have had this benefit of depositing this property with the General
Government, getting 90 per cent. in national-bank notes at a cost of 1 per
cent. I do not ask that they pay interest upon the bonds and pay 90 per
cent., but simply to give us the face value less the cost of making the money.
MR. WHITING. Some bankers have found it cheaper to use the money they had
rather than use Government money at all.
MR. COXEY. After they started? After they got deposits?
MR. WHITING. No; before.
THE CHAIRMAN. The present currency plan we are discussing in the House
allows a bank, under certain restrictions, to issue 75 per cent. in money
upon the face of its capital, depositing 30 per cent. of greenbacks and
Treasury notes, leaving a net advantage to them of a little more than 50
per cent. of the capital stock upon which they pan an interest or tax
equivalent at most to 1 per cent. one-half of 1 per cent. for the regular
expenses and one-half per cent. for a guarantee fund or safety fund. Your
plan does away with notes, and instead of allowing the banks to issue
one-half of their capital you allow the municipalities to issue one-half of
their capital?
MR. COXEY. Yes, sir.
THE CHAIRMAN. So the people, under your plan, get the benefit of the loan,
whereas under the proposed emergency plan the bankers get the benefit?
MR. COXEY. Yes; only 2 per cent. of the people now.
THE CHAIRMAN. And then the banker uses the money for whatever he can make
out of it?
MR. COXEY. It allows him the right to charge 6 per cent. interest. My
scheme is established and precedented on the national-bank system to come
and demand under the Constitution equal rights to all and special
privileges to none, because it will benefit directly the whole people
instead of 2 per cent. of the people.
THE CHAIRMAN. The rate of interest you have fixed is, of course -
MR. COXEY. It is not interest; it is simply payments.
THE CHAIRMAN. Entirely arbitrary? It can be made 5 per cent. for a less
term or 2 per cent. for a longer term?
MR. COXEY. Certainly it could. This is simply a matter of compromise with
Congress.
THE CHAIRMAN. Do you anticipate any danger from the contraction of the
currency you speak of caused by the cancellation of this money when it
comes in?
MR. COXEY. No, sir; for this reason. I thought I made that clear to you
before, but I am glad to answer that question. I claim that if a
manufacturing plant is forced to suspend or burn down, or any dire disaster
happens that throws a thousand men out of employment by shutting down, they
have always got work on public improvements, because you cannot draw so far
upon your imagination in the future when you will see a time when there
will not be public improvements needed, because as we advance in
civilization our wants increase, and as our municipalities increase in size
they need more public improvement, and for that reason you can not draw so
far upon your imagination that you will not see time when improvements will
not be needed.
THE CHAIRMAN. You claim for your system the advantage of elasticity?
MR. COXEY. Yes, sir; I do.
THE CHAIRMAN. Which is also claimed by the advocates of the proposed
emergency plan?
MR COXEY. Yes, sir.
THE CHAIRMAN. Except they believe that the banks will find it profitable
to increase the currency when it is needed, and you claim that the fact
that men are out of employment and need work will draw out money when it is
needed, and when there is plenty of money out everybody will be employed
elsewhere, so it will not be called for from the government?
MR. COXEY. Yes, sir; that stops the valve of public improvements. When
the manufacturing plants are closed down the valve then opens because the
men go on public improvements. There is the elasticity; that is the
automatic working of the valve.
THE CHAIRMAN. You think the plan by which you secure elasticity is a safer
one than the banks can provide?
MR. COXEY. Yes, sir; I do. I think it is a dangerous system to allow 2
per cent. of the population of this country to say when you shall have
money and when you shall not. I know that from actual experience.
THE CHAIRMAN. Do you anticipate that your plan will arouse any opposition
upon the part of the banks?
MR. COXEY. Well, a little. Mr. Chairman and gentlemen, I think you very
kindly for hearing me.
Thereupon the committee adjourned
.
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