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Doc. 96. Financial troubles of the South.

The following is the circular of the Confederate Secretary of the Treasury, which was addressed to the Commissioners appointed to receive subscriptions to the Produce Loan, in receive subscriptions to the Produce Loan, in reply to a call for relief from the cotton planters. The Southern planters, seriously oppressed by the blockade, appealed to the rebel Government either to purchase the entire cotton crop of the year, or to make an advance upon its hypothecated value. To both these proposals their Financial Secretary declined to accede:

Mr. Memminger on the produce Loan.

Treasury Department, Richmond, Oct. 17, 1861.
To the Commissioners appointed to receive Subscriptions to the Produce Loan:
gentlemen: Inquiries have been made from various quarters:

1. Whether, during the continuance of the blockade, any efforts should be made to procure further subscriptions.

2. Whether the Government will authorize promises to be held out of aid to the planters as an inducement to such further subscriptions.

The first inquiry seems to imply a misunderstanding of the scheme of the subscriptions. [207] Many persons have supposed that the Government was to have some control of the produce itself; others, that the time of sale appointed by the subscription was to be absolute and unconditional. The caption at the head of the lists, when examined, will correct both these errors.

The subscription is confined to the proceeds of sales, and contains an order on the commission merchant or factor of the planter to pay over to the Treasurer the amount subscribed in exchange for Confederate bonds. The transaction is simply an agreement by the planter to lend the Government so much money, and in order to complete the transaction a time and place are appointed when the parties may meet to carry it out. The important point is that it shall certainly be completed at some time, and that is secured by the engagement of the planter. Whether that time be December or June is simply a question of convenience, and works no injury to either party. The Government is sure of the eventual payment, and derives from that certainty so much credit; and it loses nothing because it gives its bond only when the money is paid.

It is obvious, therefore, that the subscriptions are as valuable to the Government during the blockade as after it. The blockade simply suspends the completion of the engagement. It becomes the interest of both parties to wait for a good price, and the Government will readily consent to a postponement of the sale.

You perceive, therefore, that it is desirable to continue your exertions to increase the subscriptions, and you are authorized to say that the Government will consent to a reasonable extension of the time appointed for sale.

3. The next inquiry is as to promise of material aid from the Government to the planters.

In answering this inquiry I am to speak in advance of any act of Congress. What that body may see fit to do is not for me to determine. I can merely express the views of the Department; these must govern your actions until reversed by a higher authority. It would be a sufficient answer to the inquiry to say that the action of the Government is settled by the Constitution. No power is granted to any Department to lend money for the relief of any interest. Even the power of Congress, in relation to money, is confined to borrowing, and no clause can be found which would sanction so stupendous a scheme as purchasing the entire crop with a view to aid its owners.

But it may be said that the Constitution of the provisional Government may be altered by Congress, and it is the duty of this Department to prepare the way for such alteration, if in its judgment the financial necessities of the country demand the change. I am not disposed, then, to close the inquiry with the abrupt manner thus made by the Constitution, and will proceed to consider the subject upon its intrinsic merits.

Two plans of relief have been proposed:

The one is that the Government should purchase the entire crop of the country; the other, that an advance should be made of part of its value. In either case the payment is to be made by the issuance of Treasury notes; and, therefore, if we put aside for the present the many and serious objections to the possession, transportation, and management of the crop by the Government, it becomes simply a question of amount. To purchase the whole crop would require its whole value, less the amount of subscription cotton at two hundred million dollars and the subscription at fifty million dollars. The purchase would then require one hundred and fifty million dollars of Treasury notes, and, if to this sum be added the amount of value for other agricultural products, which would certainly claim the same benefit, the sum required would probably reach one hundred and seventy-five million dollars.

The amount called for by the other plan of making an advance would depend upon the proportion of that advance. Few of the advocates of this plan have put it lower than five cents per pound on cotton, and at the same rate on other produce. It may, therefore, be very fairly set down at about one hundred million dollars.

If we consider, first, the least objectionable of these plans, it is certainly that which requires the smaller sum; and if this be found impracticable, the larger must of necessity be rejected.

Our inquiry, then, may be narrowed down to a proposal that the Government should issue one hundred millions of Treasury notes, to be distributed among the planting community upon the pledge of the forthcoming crop.

The first remarkable feature in this scheme is, that it proposes that a new Government, yet struggling for existence, should reject all the lessons of experience, and undertake that which no Government, however long established, has yet succeeded in effecting. The “organization of labor” has called forth many ingenious attempts, both speculative and practical, among well-established Governments, but always with disastrous failure. With us, however, the experiment is proposed to a new Government, which is engaged in a gigantic war, and which must rely on credit to furnish means to carry on that war. Our enemies are in possession of all the munitions and workshops that have been collected during forty-five years of peace; their fleets have been built at our joint expense. With all these on hand they yet are obliged to expend nearly ten millions of dollars per week to carry on the war. Can we expect to contend with them at less than half that expenditure?

Suppose that it may require two hundred millions of dollars, then the proposal is, that at a time when we are called upon to raise this large sum for the support of the Government, we shall raise a further sum of one hundred millions for the benefit of the planting interests For it must be observed, first, that the Government receives no benefit whatever from this advance. The money is paid to each individual planter; and, in exchange, the Government receives only his bond or note; or, if the cotton [208] be purchased, the Government receives only certain bales of cotton. That is to say, the Government pays out money which is needful to its very existence, and receives in exchange planters' notes or produce, which it does not need, and cannot in any way make use of.

It must be observed, in the next place, that Treasury notes have now become the currency of the country. They are, therefore, the measures of value. In this view, it is the duty of Government to limit their issue, as far as practicable, to that amount which is the limit of its currency. Every person acquainted with this branch of political science is aware that, if the currency passes this point, it not only becomes depreciated, but it disturbs the just relations of society, precisely as though an arbitrary power should change the weights and measures of a country. If the currency of a country should be suddenly extended from one hundred to two hundred millions of dollars, that which was measured by one dollar is now measured by two, and every article must be paid for at double its former price. The Government, from the necessities of war, is the largest of all purchasers, and thus, by a kind of suicidal act, compels itself to pay two dollars for what one would formerly have purchased, and at this rate of advance two hundred millions of dollars can effect no more than one hundred millions of dollars would have effected before; or, in other words, one hundred millions of dollars are actually sunk in the operation.

Such a condition of the currency the Government has anxiously endeavored to guard against. The war tax was laid for the purpose of creating a demand for Treasury notes, and a security for their redemption. Their redundancy has been carefully guarded against by allowing them to be funded in eight per cent. bonds. If necessity shall compel the Government to issue, for the defence of the country, and to keep out two hundred millions, it is plain that every accession must impair and may defeat all the precautions.

If the Government should undertake, for the sake of private interests, so large an increase of issue, it may hazard its entire credit and stability. The experiment is too dangerous, and relief for the planters must be sought in some other direction. And may not that remedy be found?

In the first place, let the planters immediately take measures for winter crops, to relieve the demand for grain and provisions. Let them proceed to divert part of their labor from cotton, and make their own clothing and supplies. Then let them apply to the great resource presented by the money capital in banks and private hands. Let this capital come forward and assist the agricultural interest. Heretofore the banks have employed a large part of their capital in the purchase of Northern exchange; let them apply this portion to factors' acceptances of planters' drafts, secured by pledge of the produce in the planters' hands. An extension of the time usually allowed on these drafts would overcome most of the difficulties. This extension could safely reach the probable time of sale of the crops, inasmuch as the suspension of specie payments throughout the entire Confederacy relieves each bank from calls for coin. The banks are accustomed to manage loans of this character, and will conduct the operation with such skill as will make them mutually advantageous. The amount of advance asked from the banks would be greatly less than if advances were offered by the Government, and all the abuses incidental to Government agencies would be avoided.

It seems to me, therefore, that it is neither necessary nor expedient that the Government should embark upon this dangerous experiment. It is far better that each class of the community should endeavor to secure its own existence by its own exertions, and if an effort be at once made by so intelligent a class as the planters, it will result in relief. Delay in these efforts, occasioned by vague expectations of relief from Government, which cannot be realized, may defeat that which is yet practicable.

C. G. Memminger, Secretary of the Treasury.


Comments of the Richmond Whig.

The Richmond Whig of the 24th of October, in discussing the above circular of Mr. Memminger, gives the following picture of the financial condition of the South:

If we understand correctly the proposition for buying the cotton and tobacco crops with Treasury notes, Mr. Memminger wholly misapprehends it. He looks upon it as a scheme for the “organization of labor” --as a sort of socialist project, by which Government undertakes to provide for the wants of a thriftless and worthless community, for and in consideration of — nothing. This is a total misconception of the project, and of the deep and devoted spirit of patriotism which prompts it on the part of the people. Its object is to bring the vast resources of the country, now lying dormant and inert, into vigorous action, to repel the public enemy, and make good our independence. No land more abounds in all the substantial materials for comfort and independence, and, when the markets of the world are open, in the elements of wealth; but, under existing circumstances, they are of little avail. The tokens or representatives of value are wanting us. To supply this deficiency, and save ourselves from perishing in the midst of abundance, is the end proposed by this scheme.

But Mr. Memminger tells us that this scheme, instead of aiding the Government, will embarrass it; that the Government will have to raise two hundred millions to prosecute the war; that to raise an additional hundred millions for the relief of the planting interest will be an additional burden, to that amount, on the resources of the Government. If this were so, his conclusion would be right, and the scheme would at once be rejected. But his error proceeds [209] from the fallacy of regarding the people of the Confederate States and the Government thereof as separate, independent, and antagonistic entities. The idea is founded on “the projection” (to use a map-maker's phrase) of the old Yankee system at Washington, and should not be tolerated for a moment in the new Republic of the South. For every moment of its existence the Confederate Government is indebted to the people, whose creature it is, and who have breathed into it the breath of life. But is the issue of a hundred millions of Treasury notes by the Government equivalent to the payment of so much specie by the Government? They may serve the people as money, but they cost the Government nothing but the paper on which they are printed. They do not bear interest; and if the article for which they are given be intrinsically valuable, the solvency and ultimate redemption are insured, at the same time that the community is relieved by a timely and judicious use of its credit. But, says Mr. Memminger, this one hundred millions of Treasury notes will come in competition with the two hundred millions necessary for the war, and depreciate the value of the whole, and enhance the price of whatever Government wishes to buy. To prevent this result, Mr. M. withholds the hundred millions, but suggests that planters get the same amount of paper money from the banks: as though this paper money would not inflate prices quite as much as the same amount of any other sort of paper money. To prevent the country from being flooded with this worthless paper money, which in the end will swamp the banks and scatter ruin through the land, is one great reason with us for desiring a paper currency which will possess an intrinsic value. “The suspension of specie payments throughout the entire Confederacy (says Mr. M.) relieves each bank from calls on coin” --i. e., those institutions that already have out four for one, may throw out as much as they choose; there is no check upon them whatever. This unfolds a terrible future for the country.

It is this incapacity we complain of which, along with other evidences of inefficiency, excites so much distrust and alarm in the country.

We believe that the cotton and tobacco crops, in the hands of a wise, energetic, and enterprising Government, would, in spite of the blockade and war, be sources of boundless credit and irresistible strength. Those articles are in demand all over the civilized world. Suppose our Government, six months ago, had had in warehouse and insured two hundred million dollars' worth of tobacco and cotton, bought at eight and ten cents, they could, by proper energy, have had credit to that amount in London, and our coast might at this moment be thoroughly guarded by steel-plated steamers. The same result, by the same means, might still be effected perhaps in time to anticipate the inroads which the enemy meditate against us. We know they are making immense preparations to burn our cities and ravage our river shores, by means of iron-cased vessels; and yet, so far as we are advised, our authorities are making no preparations to meet them. It will be a poor boast for Mr. Memminger that he has expended but fifty millions, if, for the want of a few additional millions, our cities are destroyed and our land desolated.

Mr. Memminger suggests as serious objections “the possession, transportation, and management of the crops by the Government.” We do not understand that the scheme proposes to throw these labors on the Government. Let the crops be sent to warehouses and insured by the planter for twelve months, the certificate of the inspector and the policy of insurance to be forwarded to the Treasury Department. A few additional clerks to register these would be the only increase of patronage involved in the proceeding. Even if five hundred agents were required, the scheme would be less obnoxious than that which has sent forth five or six thousand collectors and assessors in quest of a petty tax, which may serve little other end than to reimburse the officers and harass the people.

Virginia, though interested in this scheme, is to a less amount than the States to the south of us. The Cotton States, which produce but a single crop, are reduced to a very painful condition. They cannot sell their cotton; they are not even permitted to deliver it in readiness for sale. The consequence is, that they will, for the means of subsistence, be at the mercy of the usurers. If this were all, they, as well as we, would make a shift to weather the storm; but the safety of the Republic is at stake. The Secretary's policy is playing into the hands of the enemy, and aggravating the evils of the blockade, which, under a wiser dispensation, instead of evils, would be blessings.

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