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[271] to fix the relative rights and obligations of the parties to those treaties. As this tender on our part has been declined, as foreign nations have refused us the benefit of the treaties to which we were parties, they certainly have ceased to be binding on us; and, in my opinion, our relations with European nations are, therefore, now controlled exclusively by the general rules of the law of nations. It is proper to add, that these remarks are intended to apply solely to treaty obligations toward foreign governments, and have no reference to rights of individuals.

Finances.

The state of the public finances is such as to demand your earliest and most earnest attention. I need hardly say that a prompt and efficacious remedy for the present condition of the currency is necessary to the successful performance of the functions of government. Fortunately, the resources of our country are so ample, and the spirit of the people so devoted to its cause, that they are ready to make any necessary contribution. Relief is thus entirely within our reach, if we have the wisdom to legislate in such manner as to render available the means at our disposal.

At the commencement of the war, we were far from anticipating the magnitude and duration of the struggle in which we were engaged. The most sagacious foresight could not have predicted that the passions of the Northern people would lead them blindly to the sacrifice of life, treasure, and liberty, in so vain a hope as that of subjugating thirteen independent States, inhabited by many millions of people, whose birth-right of freedom is dearer to them than life. A long exemption from direct taxation by the general government had created an aversion to its raising revenue by any other means than by duties on imports, and it was supposed that these duties would be ample for current peace expenditures, while the means for conducting the war could be raised almost exclusively by the use of the public credit.

The first action of the provisional Congress was therefore confined to passing a tariff law, and to raising a sum of fifteen millions of dollars by loan, with a pledge of a small export duty on cotton, to provide for the redemption of the debt.

At its second session, war was declared to exist between the Confederacy and the United States, and provision was made for the issue of twenty millions of dollars in treasury notes, and for borrowing thirty millions of dollars on bonds. The tariff was revised, and preparatory measures taken to enable the Congress to levy internal taxation at its succeeding session. These laws were passed in May, and the States of Virginia, North-Carolina, Tennessee, and Arkansas, having joined the Confederacy, the Congress adjourned to meet in the city of Richmond in the following month of July.

Prior to the assembling of your predecessors in Richmond, at their third session, near the end of July, 1861, the President of the United States had developed, in his message, the purpose “to make the contest a short and decisive one,” and had called on Congress for four hundred thousand men, and four hundred millions of dollars. The Congress had exceeded the Executive recommendation, and had authorized the levy of half a million of volunteers, besides largely increasing the regular land and naval forces of the United States. The necessity thus first became urgent that a financial scheme should be devised on a basis sufficiently large for the vast proportions of the contest with which we were threatened. Knowing that the struggle, instead of being “short and decisive,” would be indefinite in duration, and could only end when the United States should awaken from their delusion of conquest, a permanent system was required, fully adapted to the great exigencies before us.

The plan devised by Congress, at that time, was based on the theory of issuing treasury notes, convertible, at the pleasure of the holder, into eight per cent bonds, the interest of which was to be payable in coin; and it was correctly assumed that any tendency to depreciation that might arise from over-issue of the currency would be checked by the constant exercise of the holder's right to fund the notes at a liberal interest, payable in specie. This system depended for success on the continued ability of government to pay the interest in specie; and means were, therefore, provided for that purpose in the law authorizing the issues. An internal tax, termed a war-tax, was levied, the proceeds of which, together with the revenue from imports, were deemed sufficient for the object designed. This scheme required, for its operation, that our commerce with foreign nations should not be suspended. It was not to be anticipated that such suspension would be permitted otherwise than by an effective blockade; and it was absurd to suppose that a blockade “sufficient really to prevent access” to our entire coast, could be maintained.

We had the means, therefore, (if neutral nations had not combined to aid our enemies by the sanction of an illegal prohibition on their commerce,) to secure the receipt into the treasury of coin sufficient to pay the interest on the bonds, and thus maintain the treasury notes at rates nearly equal to par in specie. So long as the interest continued to be thus paid with the reserve of coin preexisting in our country, experience sustained the expectations of those who devised the system. Thus on the first of the following December, coin had only reached a premium of about twenty per cent, although it had already become apparent that the commerce of the country was threatened with permanent suspension by reason of the conduct of neutral nations, and that the necessary result must be the exhaustion of our specie reserve. Wheat, in the beginning of the year 1862, was selling at one dollar and thirty cents per bushel, not exceeding, therefore, its average price in time of peace. The other agricultural products of the country were


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