One Nation Under Gold

by James Ledbetter

  2. “Mineral Wealth of California,” Albany Argus, reprinted in Pittsfield Sun, December 7, 1848.

  3. “California,” The American Review, no. 16 (April 1849): 335.

  4. James Rawls and Walton Bean, California: An Interpretive History (Boston: McGraw Hill, 2011), 113.

  5. In Switzerland, a group of gold-standard advocates managed in 2014 to get a nationwide referendum on increasing the gold reserves backing up the Swiss franc from 7 percent to 20 percent. The proposal was roundly rejected; 78 percent voted against it.

  6. Peter Blakewell, “Gold and the Discovery of America,” in Gold in History, Geology and Culture: Collected Essays (Raleigh, NC: North Carolina Department of Cultural Resources, 2001), 83.

  7. Fletcher Melvin Green, “Gold Mining: A Forgotten Industry of Ante-Bellum North Carolina,” The North Carolina Historical Review 14, no. 1 (January 1937): 3.

  8. Gallup Poll Social Series: Economy and Personal Finance. Interviews conducted April 3–6, 2014.

  9. “A Man Who Is Not Going to California,” New York Herald, February 19, 1849, 1.

  Chapter 1: El Dorado Comes True

  1. George Washington to Burwell Bassett, April 22, 1879, in The Writings of George Washington from the Original Manuscript, 14:432. The biographer’s estimate is in Paul Leland Haworth, George Washington: Farmer (Indianapolis: Bobbs-Merrill, 1915), 286.

  2. John Sherman’s Recollections of Forty Years in the House, Senate and Cabinet: An Autobiography (Chicago: Werner, 1895), 254.

  3. Sherman’s Recollections, 254.

  4. A thorough examination of the benefits and drawbacks of free banking can be found in Arthur J. Rolnick and Warren E. Weber, “Free Banking, Wildcat Banks and Shinplasters,” Federal Reserve Bank of Minneapolis Quarterly Review 6, no. 3 (Fall 1982): 10–19.

  5. The most thorough account of Jefferson’s views on currency takes this quotation as its title; Donald F. Swanson, in The Virginia Magazine of History and Biography 101, no. 1 (January 1933), 37–52.

  6. Drew McCoy, The Elusive Republic: Political Economy in Jeffersonian America (Chapel Hill: University of North Carolina Press, 1980), 138.

  7. Ebenezer Smith Thomas, Reminiscences of the Last Sixty-five Years (Hartford: The Author, 1840), 2:84–85.

  8. An excellent account of Jackson’s slow strangulation of the Second Bank of the United States can be found in Robert V. Remini, Andrew Jackson and the Bank War (New York: W. W. Norton, 1967).

  9. Davis Rich Dewey, Financial History of the United States (New York: Longmans and Green, 1903), 100.

  10. Bray Hammond provides a pointed discussion of the American obsession with “purity” around banking and government in Sovereignty and an Empty Purse: Banks and Politics in the Civil War (Princeton, NJ: Princeton University Press, 1970), 22ff.

  11. For an exhaustive account of Jackson’s pet bank strategy, see Harry N. Scheiber, “The Pet Banks in Jacksonian Politics and Finance, 1833–1841,” The Journal of Economic History 23, no. 2 (June 1963): 196–214.

  12. Jackson to Van Buren, January 3, 1834, Van Buren Papers, LC. Cited in Remini, Andrew Jackson and the Bank War, 154–155.

  13. The relationship between the banking wars of the 1830s and the economic slump that ensued is hotly debated. While many historians have linked Jackson’s banking policy to the later boom and crises, Peter Temin forcefully argues in The Jacksonian Economy (New York: W. W. Norton, 1969) that the economy was largely driven by factors beyond Jackson’s control. And regardless of cause, Murray Rothbard maintains that the “1839–1843 contraction was healthful for the economy in liquidating unsound investments, debts, and banks, including the pernicious Bank of the United States.” A History of Money and Banking in the United States Before the Twentieth Century (Auburn, AL: Ludwig von Mises Institute, 2002), 103.

  14. Address delivered in Fort Wayne, Indiana, October 11, 1865, Hugh McCulloch, Addresses, speeches, lectures and letters upon various subjects (Washington, DC: W. H. Lepley, 1891), 49.

  15. Abraham P. Nasatir, “The French Consulate in California, 1843–1856, The Moerenhaut Documents,” California Historical Society Quarterly 13, no. 1 (March 1934): 66.

  16. S. M. McDowell to family, probably early 1853, cited in Malcolm J. Rorhbough, Days of Gold: The California Gold Rush and the American Nation (Berkeley: University of California Press, 1997), 213.

  17. Richard Walker’s essay “Another Round of Globalization in San Francisco” contains a wealth of data about the effects of the gold rush on San Francisco’s economy: Urban Geography 17 (1996): 60–94.

  18. Official Report on the Gold Mines, Colonel Richard Barnes Mason to Brigadier-General R. Jones, August 17, 1848, available at http://sfmuseum.org/hist6/masonrpt.html.

  19. “The Gold Mine,” The Californian, August 14, 1848. This editorial is accessible through the California Digital Newspaper Collection.

  20. The gold rush presented a fascinating alternative and challenge to what we often think of as the “natural” system of private property in the United States. So long as placer mining was prevalent, vast tracts of bountiful land legally belonged to no one but the person who could lay a claim first. Neither the state nor any private actor could intervene—a system in marked contrast to the development of property in Europe and the eastern part of the United States. By the 1870s, a state legal framework arose that would change that situation, but not before a powerful squatter’s rights movement had asserted itself. See Henry George, Progress and Poverty (New York: Robert Schalkenbach Foundation, 1942), 385–386; and Donald J. Pisani, “The Squatter and Natural Law in Nineteenth-Century America,” Agricultural History 81, no. 4 (Fall 2007): 443–463.

  21. Robert F. Heizer, The Other Californians: Prejudice and Discrimination under Spain, Mexico, and the United States to 1920 (Berkeley: University of California Press, 1977), 155–156. See also John Soennichesen, The Chinese Exclusion Act of 1882 (Santa Barbara, CA: Greenwood Press, 2011).

  22. Charles N. Alpers, Michael P. Hunerlach, Jason T. May, and Roger L. Hothem, “Mercury Contamination from Historical Gold Mining in California,” United States Geological Survey, 2005. http://pubs.usgs.gov/fs/2005/3014/.

  23. H. W. Brands, The Age of Gold (New York: Doubleday, 2002), 442.

  24. Details of the development of the Panama route are in John Walton Caughey, The California Gold Rush (Berkeley: University of California Press, 1948), ch. 4.

  25. Banking figures compiled from Banker’s Magazine, in William G. Sumner, A History of Banking in All the Leading Nations (New York: Journal of Commerce and Commercial Bulletin, 1896), 456.

  26. The international economic effects of the Gold Rush are discussed in Gerald D. Nash, “A Veritable Revolution: The Global Economic Significance of the California Gold Rush,” in A Golden State: Mining and Economic Development in Gold Rush California, ed. James T. Rawls and Richard J. Orsi (Berkeley: University of California Press, 1999), 276–292.

  27. A thorough compilation of the details of the Central America sinking and aftermath is contained in E. Merton Coulter, “The Loss of the Steamship Central America, in 1857,” The Georgia Historical Quarterly 54, no. 4 (Winter 1970): 453–492.

  28. Albert J. Churella, The Pennsylvania Railroad, Volume 1: Building an Empire, 1846–1917 (Philadelphia: University of Pennsylvania Press, 2012), 192.

  29. The causes of the 1857 Panic remain much debated. However, a thorough account of its unfolding is given in James L. Huston, The Panic of 1857 and the Coming of the Civil War (Baton Rouge: Louisiana State University Press, 1999), ch. 2.

  30. W. P. Tatham to Messrs. Baring Brothers & Co., October 12, 1857, cited in Austin E. Hutcheson, “Philadelphia and the Panic of 1857,” Pennsylvania History 3, no. 3 (July 1936): 182–194.

  31. Sherman’s Recollections, 251.

  32. “Will the Federal Government Be Financially Successful?,” The Economist, August 24, 1861, 927.

  33. Many bankers and members of Congress in 1862 maintained that the adoption of greenbacks was more expedient than i
t was absolutely necessary—that even if heavy taxes and unusually high interest rates on loans were necessary to fund the war, those were nonetheless preferable to the adoption of a paper currency with questionable constitutional legitimacy. Some economists and historians have held to this view, including Wesley Clair Mitchell in A History of the Greenbacks (Chicago: University of Chicago Press, 1903). Nathaniel Stephenson, in Abraham Lincoln and the Union (New Haven: Yale University Press, 1920), asserts as a “common” estimate that the use of paper money added $600 million to the cost of the war. Others maintain that many of the late nineteenth- and early twentieth-century historians of the greenback period had hard-money biases.

  34. An 1886 account from Donn Piatt, an author and onetime Lincoln ally, offered an unsourced, undated conversation between Lincoln and Chase in which Chase insists that paper money is not constitutional, and Lincoln replies: “I will violate the Constitution if necessary to save the Union.” As Stephen Sawyer and William J. Novak have written, this is “now thought a false tale.” Other accounts emphasize a letter—ostensibly written in 1864 but not publicly circulated until the 1880s—in which Lincoln credited a friend, Colonel E. D. Taylor, with being “the father of the present greenback.” But the authenticity of the letter is dubious, and its content is irrelevant: the letter credits Taylor with suggesting a paper money system to Lincoln during a meeting “on or about the 16th” of January 1862. By that time, Spaulding’s legal-tender bill had already been drafted, reported to committee, debated in the House Ways and Means Committee, and circulated to heads of the nation’s largest banks. In his book Lincoln’s War (New York: Random House, 2004), Geoffrey Perret places the meeting between Taylor and Lincoln in the summer of 1862, which makes even less sense, given that the law creating legal-tender paper money passed in February.

  35. Davis Rich Dewey, Financial History of the United States (New York: Longmans, Green, 1903), 284.

  36. Pendleton, quoted in Elbridge Gerry Spaulding, History of the Legal Tender Money Issued During the Great Rebellion (Buffalo: Express Printing Company, 1869), 44.

  37. Mitchell, A History of the Greenbacks, 59.

  38. Representative Clement Vallindigham, quoted in Spaulding, History of the Legal Tender Money, 53.

  39. Hammond, Sovereignty and an Empty Purse, 227.

  Chapter 2: A Crash, a Clash, and a “Crime”

  1. My version of the events leading up to Black Friday relies on several sources, all of which are dependent upon the House inquiry Investigation into the Causes of the Gold Panic, 41st Congress, 2nd session, report no. 31 (Washington, DC: Government Printing Office, 1870). The most thorough standalone book is by Kenneth D. Ackerman, The Gold Ring: Jim Fisk, Jay Gould, and Black Friday 1869 (New York: Dodd, Mead, 1988). Other information has been gleaned from Maury Klein, The Life and Legend of Jay Gould (Baltimore: Johns Hopkins Press, 1986); W. A. Swanberg, Jim Fisk: The Career of an Improbable Rascal (New York: Scribner’s, 1959); and William McFeely, Grant: A Biography (New York: W. W. Norton, 1981), 319–331.

  2. Report of the Secretary of the Treasury on the State of the Finances for the Year 1865 (Washington, DC: Government Printing Office, 1865), 4.

  3. Grant’s 1869 inaugural address can be found at http://avalon.law.yale.edu/19th_century/grant1.asp.

  4. Investigation into the Causes of the Gold Panic, 152–153.

  5. An in-depth discussion of postwar banking challenges in the South can be found in George L. Anderson, “The South and Problems of Post–Civil War Finance,” The Journal of Southern History 9, no. 2 (May 1943): 181–195.

  6. The Journal of the Joint Committee of Fifteen on Reconstruction, ed. Benjamin B. Kendrick (New York: Columbia University Press, 1914), 283.

  7. “Financial Policy of the Administration,” New York Times, August 25, 1869.

  8. The early September letter from Grant to Boutwell feels like a hot pistol emitting no smoke. It appears to have been sent; Boutwell testified before Congress that he received the letter and acted on it by September 4. Yet to the best of my knowledge, no record of the letter’s text exists anywhere. Boutwell told Congress that he believed the letter to be in his residence in Groton; Congress, in an otherwise sweeping investigation, does not appear to have demanded to see it. Inquiries at relevant archives have been similarly unproductive.

  9. Robert Sobel, The Big Board: A History of the New York Stock Market (New York: Free Press, 1965), 93.

  10. Joseph M. Cormack, “The Legal Tender Cases: A Drama of American Legal and Financial History,” Virginia Law Review 16, no 2 (December 1929), 140.

  11. “Legal Tenders,” New York Times, February 8, 1870.

  12. Hepburn v. Griswold, 75 U.S. 603 (1869).

  13. See, for example, Richard Timberlake, Constitutional Money: A Review of the Supreme Court’s Monetary Decisions (New York: Cambridge University Press, 2013), ch. 12 and 13.

  14. Sidney Ratner adduced evidence, including from Boutwell’s memoir, and concluded that “it seems highly probable” that Grant knew the content of the Court’s decision before appointing two judges who had supported the constitutionality of greenbacks in lower court decisions. “Was the Supreme Court Packed by President Grant?” Political Science Quarterly 50, no. 3 (September 1935): 343–358.

  15. Charles Fairman, Mister Justice Miller and the Supreme Court, 1862–1890 (Cambridge, MA: Harvard University Press, 1939), 170.

  16. Charles Evans Hughes, The Supreme Court of the United States (New York: Columbia University Press, 1966), 50.

  17. The act did allow for a “trade dollar,” heavier than the old silver dollars, to be used for transactions outside the United States, primarily in China. The economist Paul M. O’Leary made a case that the omission of the silver was intentional, although he rests responsibility not with any member of Congress but with Henry Richard Linderman, a former director of the Philadelphia Mint, who had a hand in drafting the 1873 legislation. See “The Scene of the Crime of 1873 Revisited: A Note,” Journal of Political Economy 68, no. 4 (August 1960): 388–392. There is no question that Linderman did not favor minting a silver dollar. However, O’Leary’s argument is somewhat undermined by the fact that the original 1870 Treasury draft of the legislation—on which Linderman worked, as O’Leary argues—did in fact include a provision for a regular silver dollar. Only days later was this removed when the bill was actually introduced into Congress; later still, an amendment included the heavier trade dollar. See History of the Coinage Act of 1873 (Washington, DC: Government Printing Office, 1900). Linderman is also the culprit in Samuel DeCanio’s groundbreaking article “Populism, Paranoia, and the Politics of Free Silver,” Studies in American Political Development 25 (April 2011): 1–26. DeCanio elicits substantial evidence that Linderman was in fact bribed by William Ralston, president of The Bank of California, both to craft the legislation and to ensure its passage. Ralston’s influence apparently also included some legislators, including Nevada senator William Stewart, who later came out vehemently against the “crime.” DeCanio further developed the bribery thesis in his book Democracy and the Origins of the American Regulatory State (New Haven, CT: Yale University Press, 2015).

  18. The mystery of how the Coinage Act became so reviled continued to intrigue historians and economists more than a century later. Milton Friedman published a useful and thought-provoking paper entitled “The Crime of 1873” (Hoover Institution, Working Paper No. E-89-12, April 1989), from which some of this account is drawn. One person who did notice the bill’s silver demonetization and recommended against it was James Ross Snowden, a former treasurer of the Mint. He told Sherman he found the change “unadvisable,” although even he did not envision the silver dollar commonly circulating as currency. See History of the Coinage Act of 1873, 85.

  19. “How the Silver Question Effects the Working of Silver Mines,” Idaho Statesman, August 31, 1876.

  20. Ewing gave a lengthy speech, “On Resumption, Contraction, Free Banking,” which was reproduced in The Ohio Democrat, September
6, 1877.

  21. Ernest Seyd to Samuel Hooper, February 17, 1872, reproduced in History of the Coinage Act of 1873, 131–148.

  22. Mining Stock Association to Senator William Stewart, published in the Nevada State Journal, February 8, 1890, cited in Paul Barnett, Agricultural History 38, no. 3 (July 1964): 178–179.

  23. Richard Bensel, Passion and Preferences: William Jennings Bryan and the 1896 Democratic National Convention (New York: Cambridge University Press, 2008), 14.

  24. Sobel, The Big Board, 135.

  25. Margaret Good Myers et al., The New York Money Market: Origins and Development, 291, cited in Milton Friedman and Anna Schwartz, A Monetary History of the United States (Princeton, NJ: Princeton University Press, 1963), 107n26.

  26. The gold reserve figures come from Sobel, The Big Board, 138.

  27. See “Discussion in the Senate,” New York Times, February 1, 1895. In addition, there is some question as to whether the $100 million figure had the full force of law. It was included in a bank charter statute passed in 1882. See Alexander D. Noyes, “The Treasury Reserve and the Bond Syndicate,” Political Science Quarterly 10, no. 4 (December 1895): 573–602.

  28. Charles Hoffmann, “The Depression of the Nineties,” The Journal of Economic History 16, no. 2 (June 1956): 137–164.

  29. “Starving in the Arid Lands,” New York Times, November 12, 1893.

  30. Grover Cleveland, Presidential Problems (New York: The Century Co., 1904), 152.

  31. See, for example, H. W. Brands, “Upside-Down Bailout,” History Net, June 3, 2010, http://www.historynet.com/upside-down-bailout.htm.

  32. Alyn Brodsky, Grover Cleveland: A Study in Character (New York: St. Martin’s Press, 2000), 363.

  33. According to a contemporary account from a financial journalist, a coffee importer was able to undersell the Morgan bond syndicate slightly and began filling its orders by withdrawing gold from Treasury, worth more than $30 million. See Alexander D. Noyes, “The Treasury Reserve and the Bond Syndicate,” Political Science Quarterly 10, no. 4 (December 1895): 600–601.