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Resumption of Specie Payments

RESUMPTION OF SPECIE PAYMENTS The danger to the Treasury's redemption fund lay, as every one understood, in possible gold exports. As it happened, there was no gold move ment in progress at the time of specie resumption; but foreign exchange was only a trifle below the normal gold-exporting point, and no spring season for eighteen years had passed without gold ship ments. In the first half of 1877, nearly twenty millions gold had been exported from New York, chiefly obtained from the city banks. On January 1, 1879, these New York banks held in specie only $19,781,400, but they held twice as much in legal tender notes redeemable at the Treasury in gold. Supposing, then, a further rise in exchange and a heavy export of gold, there was not the least doubt over what would happen to the Treasury reserve.

Now it is true that every bank of issue is con fronted continually with this possibility. In 1878 and 1879, while gold exports from London were in progress, the exporters carried their Bank of England notes to the Bank as a matter of course for redemp tion in gold, and shipped the gold. What was true of the London gold operations then is true to-day. But the Bank of England, like all properly managed banks of issue, exercises the power of holding back from circulation the notes redeemed, whenever its reserve has been drawn down too far. This prac tice, in the case of the Bank of England, automati cally checks a large gold export movement, through the resultant contraction of the money market. So far was the United States Treasury, in 1879, from enjoying any such precautionary power, that it was expressly forbidden to hold back notes after redemp tion. As originally passed, the Resumption Act was ambiguous on this question. It did provide for redemption of notes, prior to 1879, " until there shall be outstanding the sum of three hundred million dollars of such legal-tender United States notes, and no more." This provision obviously meant cancellation of 582,000,000 out of the $382, 000,000 existing legal tenders, and it was so applied. But the question of retirement was purposely left in doubt as regarded notes redeemed in gold after re sumption.' Before even the notes in excess of too, 000,000 had been retired, moreover, Congress took the matter in hand, and as it made its move in the midst of the legislative hurly-burly of 1878, its pur pose was likely to be plain enough. The law of May 31,1878, declared that cancellation of the notes should cease at once. The amount outstanding was then $346,681,000, instead of the $300,000,000 maximum fixed by the Resumption Act; and to this extent the Resumption Law was positively revoked. It was further provided, in this Act of 1878, that " when any of said notes may be redeemed or re ceived into the Treasury under any law, from any source whatever, and shall belong to the United States, they shall not be retired, cancelled, or de stroyed, but they shall be re-issued and paid out again and kept in circulation." It is impossible to mistake the meaning of this provision. It not only fixed the minimum of legal tender notes, but expressly forbade the Treasury to exercise any power of even temporary contraction. Mr. Sherman's attitude as regards this measure is difficult to understand. He openly approved the compulsory re-issue clause of the Act of 1878,' and in fact admitted that he had himself entertained some purpose of the kind. He was, however, too intelligent a financier not to foresee its dangers, and as we shall presently see, these dangers were seri ously impressed upon him by certain incidents of the resumption year. In his annual report of Decem ber, 1879, he therefore set up a theory of his own that notes redeemed out of the gold reserve could not be used for ordinary purposes, and therefore, with the reserve impaired, were not subject to re issue.' There is, unfortunately, not the slightest ground for such a contention. The reader must have perceived that the compulsory re-issue clause, cited above from the Act of 1878, is framed with particular care to exclude any such interpretation.

Mr. Sherman's assumption in his report of 1879 was as unwarranted as his criticism of a later Secretary of the Treasury for not claiming precisely the same discretionary privilege.' The ordinary banking safeguard, then, was wholly withdrawn from the Treasury. Under such circum stances, the resumption experiment was necessarily hazardous, and its success, even in its first year of operation, was bound to depend very largely on the commercial situation. In this regard, the resump tion year did not begin auspiciously. In 1878, the merchandise trade balance in favor of the United States had been very large; in the first five months of 1879, it decreased steadily. " These figures," wrote a commercial firm of which an ex-Secretary of the Treasury was the head, " indicate the begin. ning of a change in the relative volume of imports and exports."' Domestic markets were unfavor able. In the cotton-goods industry, demand had slackened so far that wage reductions were impend ing.' The iron trade, a traditional barometer of industrial situations, opened the year with so little activity that prices fell below the actual average cost of production.' With hardly an exception, the country's staple industries sank, during the early months of 1879, into complete stagnation. Three months after resumption, the leading financial weekly of New York remarked: " ' Where is the promised with that event ? ' is the question fre quently coming to us. ' Wheat is no higher. Corn is no higher. There is no money in any of the earth's products. Where is the promised pros perity ? ' " It is true, formal resumption of specie payments was reflected, in the home security markets, by a re covery in prices. This recovery, though extremely irregular, was permanent. But foreign capital gave no assistance to the movement; on the contrary, the higher range of domestic prices served to stimulate sales for European account, and there was abundant opportunity for such sales because of the very large amounts of United States Government bonds floated abroad during 1877 and 1878. In February, 1879, the London agent of the Treasury reported that, since the opening of the year, $43,000,000 of these bonds, and $7,000,000 of a single American railway stock, had been re-sold by London to the United States.' These sales were reflected in a rise of foreign exchange almost to the normal gold-export level.' In London, the most experienced inter national bankers, including the Rothschilds, who had placed the bulk of the recent American loans, predicted that gold was about to move in quantity from the United States to Europe.' By the middle of March, the Secretary was disturbed enough to set on foot inquiry into the possibility of controlling specie exports through sales of Government ex change. Such recourse, Mr. Sherman plainly in timated, might become necessary " in preventing popular alarm." Not even this expedient was feasible; sterling continued to advance, and finally, in the second week of June, a million and a quarter gold was shipped. This gold was obtained from the Treasury in exchange for notes; it reduced to pre cisely that extent the Government reserve.' London financial judgment of the time was thus expressed: " The effect of resumption has passed off, and we may expect to find gold steadily drifting from that side to this." The wheat harvest of 1878, in England and on the European continent, had been, as we have seen, one of the largest on record. When 1879 was well ad vanced, wheat from the English farms was still moving in quantity to storage-points. At the close of March, the stock of wheat at Liverpool was larger than at any time within five years; the same was true of every cereal product.' Frosty weather and heavy rains in England had indeed advanced the price of wheat sixpence a bushel, and it was then admitted that the English crop of 1878 would not be duplicated. But meantime the reserved supply was ample, demand from consumers was only moderate, and early in March observers of the market predicted that prices had reached their high level for the year.' This forecast seemed for some time to be correct. Wheat had advanced nine cents per bushel on the New York market since the open ing of January; the price now fell from $1.17i in March to $1.10 in the second week of April.

Little by little the foreign situation changed. As is usual with highly speculative markets, the news was contradictory, and the truth developed slowly. But it was evident in May, while the outlook for this country's harvest was steadily improving, that the European grain markets were beginning to stir with apprehension. In France, snow fell heavily late in the spring; in England, after a late and de structive frost, rain set in and continued almost in cessantly through the summer. It was literally a sunless season. At the opening of July, people were wearing heavy overcoats in London, and in the country all the crops were moulding.' By this time the impending harvest failure had begun to assume the dimensions of a national calamity. On Sunday, July 6th, by the Archbishop of Canterbury's direc tion, prayers for fair weather were offered in the English churches.' In another month the time was past when even favorable weather would help, and by August it was made clear to all the markets that, while the United States would yield the largest harvest in its history, every growing crop in the British Islands was practically ruined. No such dis aster had befallen English agriculture within the memory of living men.' The actual decrease in the wheat crop especially, as compared with 1878, was fifty-four per cent.; the total yield was smaller by thirty million bushels than in the leanest recorded year since the middle of the century.' Nor was this Europe's only agricultural catastrophe. Until mid summer, there had been favorable news from the continental crops. But the blight which fell on England's harvest—the sunless July with its succes sion of soaking rain-storms—did equal damage be yond the Channel. France, Austria, Germany, and Russia yielded, in 1879, the smallest and poorest wheat crops in ten years; the whole continental harvest fell off fifteen per cent. from the average of the three preceding years.' European states, which usually exported wheat, had not raised enough to feed their own people. " It is the American supply alone," one contemporary critic wrote, " which has saved Europe from a great famine."' To the United States, the huge American grain crop of 1879 was a double stroke of fortune. In Eng land, it stopped the mouths of Mr. Chaplin and the protectionist reactionaries, who had begun to clamor against the free right of entry to American export grain. In the United States, it settled the question of resumption. All circumstances seemed to con spire in favor of this country. Sunny and favorable " farmer's weather," with the due proportion of rains, prevailed throughout the season. The wheat fields under cultivation had increased over 1878 by half a million acres, the average yield per acre has never but twice been surpassed in this country, and the total crop exceeded by 28,000,000 bushels the crop of any previous year.' Until midsummer, as we have seen, prices for wheat had moved irregu larly; even in July and August, the market broke no less than twenty cents a bushel, wholly because of the certainty of an exceptionally large American harvest. But the positive news of Great Britain's crop failure carried the price up no less than forty cents a bushel within six weeks.' Along with this advance in prices, exports of wheat rose to wholly unprecedented volume. The foreign buying was so urgent that the country's wheat shipments, which even in 1878 did not run beyond two million bushels weekly, averaged, in September, 1879, a million bushels daily,' a volume of grain exports equalled only twice in the country's subsequent history. The crop of Indian corn was the largest on record; this, too, found a ready and profitable export market Cattle raised on the interior farms were sent abroad in such numbers that the foreign trade complained that British graziers were being forced out of the British market.' By a rather remarkable coinci dente, the famous tide-water pipe-line from the Pennsylvania oil-wells was completed in 1879, and the year's export of this product rose nearly two million barrels over the highest previous record.' By another coincidence, equally independent of any events already noticed, the cotton crop of India in 1879 was a partial failure '; Europe's supply on hand fell off thirty per cent. from the autumn stock of 1878 and fifty per cent. from 1877, and with the consequent heavy purchases by foreign spinners, the season's export of American cotton was the largest ever yet recorded.

The first result of this sudden change in the situ ation was a fall in the foreign exchanges, and conse quent dissipation of all fears that the resumption fund would be impaired. With this menace removed from the financial outlook, the country's torpid en terprise awoke. The trade revival which ensued was without question the most remarkable in this country's commercial history. In the entire range of American industries, there was practically no ex ception to the movement. In the iron trade, con sumption, which had been cramped and paralyzed for half a dozen years, and which at the opening of 1879 was not large enough to move the surplus stocks, had by December run so far beyond capacity for immediate production as to yield a profit of one hundred per cent. on current rates of cost.' In spite of the rise in raw cotton, the spinning in dustry, whose depressed condition at the opening of the year has been noticed already, enjoyed its full share of the trade revival. Print cloths, the staple of the dry-goods trade, not only advanced fifty per cent. over their price of January 1st, but closed the year with stocks depleted, mills running at full pressure, and large orders booked ahead.' This was the story in almost every trade. By August, the money market rose sharply under the heavy demand for this expanding trade, and import of gold began in quantities vastly beyond what had ever been wit nessed in the previous trade history of the United States. Within three months, $20,000,000 had come from Great Britain, $3o,000,000 from France, and $10,000,000 from Germany; and as the special need of the American bankers was currency suitable for use in interior trade, a large part of this specie went directly into the Treasury in exchange for legal-tender notes—another wholly new phenome non, impossible except under resumption.

On January 1st, as we have seen, only one third of the cash reserves of New York banks was specie, and the aggregate thus held was only On December 12th, they held $33,137,700 specie, and this was nearly eighty per cent. of the total cash reserve.' In the early months of 1879, almost the whole of the customs payments at New York were Made in legal tenders; in November and December, upwards of sixty-six per cent. were made in gold.

The Government's gold reserve accordingly rose from $119,956,655 at the close of June to $157,140, 114 at the opening of November. As early as Sep tember, Secretary Sherman notified agents of the Treasury that " gold coin, beyond the needs of the Government, having accumulated in the Treasury," they were thenceforward to pay out gold freely on ordinary disbursements.' The industrial, social, and political results of this extraordinary year were permanent and far-reaching. The series of commercial windfalls which gave the United States the upper hand in half the foreign markets came, as we have seen, on top of a five-year period of economy and liquidation; there was, there fore, a firm substratum on which to build.. Enough of an impulse was given to industry to have carried forward the movement of prosperity beyond 1879, even if succeeding years had not been equally favor able to our producing markets. But the good for tune of the American farmers did not end with 1879. Conforming to a principle old as the days of Pharaoh, Europe passed through a series of lean years, of which 1879 was only the first. The disastrous foreign shortage of that year was not indeed re peated, but the European harvests did not soon duplicate the yield of 1878 again. In 1880 the out put of the world's chief wheat-producers rose some 30,000,000 bushels over that of 1878'; but this was solely because of a seventy-million bushel increase in the American harvest; so that this country still had the advantage in the foreign trade. Even in 1881, when a good part of the American crop was destroyed by drought, the foreign harvest too ran short, and what our farmers could spare for export was sold at the highest prices in nine years.

The prosperity enjoyed by the United States was real, and its foundation solid; a fact which nothing proved more clearly than the manner in which the markets sustained reactions from excessive specula tion. With all the increase in real capital and in commercial demand, the speculators forced prices repeatedly beyond the ability of capital to sustain or of demand to meet. Had it not been for the solid foundation underlying the trade revival of 1879, they would have wrecked the movement. They began with an attempt, in the winter months, to make their own price for wheat, and did succeed in forcing the market up to such a figure that for a time exports were actually blocked, and a fleet of grain vessels, sent to New York for charters, lay idle for weeks at the city wharves.' The result of this experiment was a demoralized wheat market, and eventually, in the early part of 188o, a break of thirty-four cents a bushel. In the iron market a similar attempt was made. The price at the close of 1879, after a rise of nearly one hundred per cent. in eight months, was $35 per ton; the speculators put it up to $42 by February, 188o, and by so doing attracted from every iron-producing foreign state not only huge supplies of new material, but of old scrap iron.' Of course this bubble too collapsed; by June, the price had fallen to $23.

But after each of these speculative collapses, with the individual disasters which attended them, the underlying strength and healthfulness of the markets was asserted. The spectacular market for corpora tion shares was in a high degree typical of the general situation. This market broke sharply in November, 1879; in May and June of 1880, what seemed to be a sudden and wholesale wreck of values swept over the Stock Exchange. But from

each of these reactions, which measured the previous excesses of the speculators, values recovered and moved up again under the stimulus of real invest ment, reaching eventually a much higher level. The movement of the railway shares responded normally to the immense increase in opportunities and profits for these enterprises, as the interior lands were opened up. Not even during the development of the Western States after the war did population of these districts in particular, and of the country as a whole, increase as rapidly as it did after resumption. Annual immigration doubled in 1880 as compared with 1879, and quadrupled in the next two years. The highest annual record in the country's previous history was 459,803, in the twelve months before the panic of 1873. In 1882, the immigration was 788, 992, a total which has never since been equalled, and nearly one third of that year's immigrants were Germans, the most useful of all our foreign popula tion.

This rapid interior development gave legitimate opportunity for extension of the transportation in dustry, and prompt use was made of it. Unfortu nately, the spirit of speculation which pervaded all other markets governed the railway market also, and though it served at the time only to emphasize the seemingly irresistible movement of prosperity, its permanent results were mischievous in the extreme, and will be found playing an important part in episodes which we shall review later. The seeds of so many future disasters to this important industry were sown in the resumption period that it will be advisable to notice here exactly what happened at this epoch of its history. The performances of 1868 in the railway market were not, to be sure, repeated. The open robbery, the fraudulent stock issues, and the judicial corruption which marked the earlier history of the Erie, for instance, had disappeared with the other appurtenances of the vulgar inflation period. They were replaced, however, by another form of plunder on a larger scale. The combination of scattered railways, covering half a dozen interior States, into systems under single managements, was a normal and necessary outgrowth of the new expan sion of the West. In many instances it was wisely and prudently managed. But with the prevalent spirit of speculation, it gave almost boundless oppor tunities to shrewd and unscrupulous capitalists with one hand on the Western railway coalitions and the other in the stock market.

Most unfortunately for the transportation indus try, the leader in the movement was Jay Gould,whose disreputable record in the railway and gold markets of the inflation period made his appearance in the field after resumption sufficiently ominous. Few properties on which this man laid his hand escaped ruin in the end. He mastered more completely than any other promoter in our history the art of buying worthless railways for a song, selling them at fancy figures to a solvent corporation under his own control, and then so straining the credit and manipulating the books of the amalgamated com pany as to secure his own safe retreat through the stock market. He was not a builder, he was a de stroyer, and the truth of this statement may be easily demonstrated by tracing out the subsequent history of the corporations which he got into his clutches. That Gould had a genius for making combinations is unquestionable; but in almost every instance—the Wabash Railway, the Union Pacific, the Missouri Pacific, and the elevated railways of New York City are notable examples—he obtained this power by tempting other men to join him in a speculation for personal profit acquired through methods which sapped the financial resources of the properties con cerned. In some properties, as with the Western Union Telegraph, he forced a reputable concern to admit him to partnership through the shrewd and daring use of a species of corporation blackmail, in which he was always an adept. His favorite method of operation was exemplified in the purchase of the Kansas Pacific in 188o by the Union Pacific on the basis of new Union Pacific stock exchanged on equal terms for shares of the smaller company, notwith standing the fact that Kansas Pacific stock was earn ing nothing while Union Pacific was earning and pay ing six per cent. per annum. Gould and his confed erates of course played this particular game through the stock market, where it was easily possible for any one aware of the purposes of the two companies to buy Kansas Pacific stock at nominal figures and sell it out in the advance accompanying the announcement of the combination. At the close of 1880, it was possible to say that Jay Gould controlled every im portant through railway route west and southwest of St. Louis, except the Atchison, Topeka, and Santa Fe and the Atlantic and Pacific.' The oppor tunities for mischief of this kind, with such power in the hands of such a man, were almost unlimited.

The reckoning for all this chapter of railway plunder came in 1893, when the extraordinary list of railway bankruptcies cannot easily be explained without tracing the history of the companies back to 1880. For other companies were bound to imi tate the methods of this arch-plotter; going so far, in one notorious instance, as to sell to share holders a new issue of six-per-cent. thirty-year bonds at twenty cents on the dollar, when the shares themselves were selling between 8o and par. Yet the extent to which all these companies continued to prosper and profit under this load of improperly incurred liabilities was perhaps the strongest of all testimony to the soundness of the trade revival. The Chicago, Rock Island, and Pacific company, for instance, doubled its stock in 188o through a " scrip dividend " of one hundred per cent., and continued to pay seven per cent. per annum on its doubled stock; the Louisville and Nashville paid six, after a similar increase; the Chicago, Burlington, and Quincy, after a twenty-per-cent. " stock dividend," paid eight per cent. Actual increase in the total stock and bonds of railways in the United States, during 188o, was $524,411,843; but net earnings increased no less than $39,000,000.

What was true of railway profits was true also in other lines of trade, and 188o was undoubtedly the most prosperous year of the generation. This may be fairly judged by that faithful index, the record of business failures. In 1878, there were 10,478 such commercial deaths; in 1880, there were only 4735. The liabilities involved fell from 000 in 1878 to $65,752,000 in 1880.' The people were contented, employment was abundant, and the industrial agitation of the preceding years had ap parently disappeared.

No one who has followed thoughtfully the influ ence of trade conditions on the sentiment of voters, as already reviewed in our study of 1866, of 1874, and of 1878, will doubt what was the reasonable political expectation after the trade revival of 1879 and 1880. If the elections of 1879 had been held in June, it is doubtful what the verdict would have been. Resumption was then denounced in many quarters as a failure. The best financial plea that the Ohio Republicans could put forward, in their convention platform of May 28th, was the saving of interest charges through the Administration's re funding operations. On June 4th, the Democrats of that State retorted by demanding " the full restora tion of silver . . . as a money metal," and " the gradual substitution of Treasury notes for national bank currency," and by nominating for Governor Thomas Ewing, the author of the bill of 1877 to repeal the Resumption Act. This attitude was imitated, to a greater or less extent, by the op position party in other Western States. It affected even the East. On July 1st, the Democrats of Maine declared for " the free and unlimited coinage of sil ver "; as late as July 16th, the Pennsylvania Demo crats adopted a platform framed to suit anybody and mean anything on the currency.

But the situation, long before election day, was wholly reversed. By the early autumn months, the Administration could point out results following specie resumption even larger than what had been promised in advance,—a very unusual advantage. In 1878, the party had lost heavily in many Western constituencies; mainly, as we have seen, because of the low price of grain. In 1879, election day came at the very climax of a violent rise in agricultural prices, paid for the largest crops ever produced in the United States. Naturally, the autumn party declarations changed their tone along with the rapidly changing business outlook. The proclama tions of Republican conventions began to strike a note of triumph. " We congratulate our fellow citizens upon the restoration of confidence and the revival of business," were the words in which the Massachusetts convention of September 16th intro duced its eulogy of the Administration. " The suc. cessful resumption of specie payments . . followed by returning national prosperity," was the theme of the New York Republican declaration on September 2d. As in the preceding year, so in 1879, the autumn Democratic conventions in the East were forced to a sullen echo of this rejoicing.' There was an occasional effort, such as that of the New York State Democratic convention of Septem ber i 1th, to divert the issue into condemnation of the Secretary's " speculative methods," " question able favoritism " to particular institutions, and " extravagance " in refunding. In the West, the opposition, engaged in the same losing fight against the odds of a great harvest and a profitable grain market, declared that the Treasury's achievement was a stroke of luck. " Now that resumption is a success," Secretary Sherman himself remarked in a campaign speech, " Democrats say the Republican party did not bring it about, but that Providence has done it; that bountiful crops here and bad crops in Europe have been the cause of all the prosperity that has come since resumption."' As we have seen, there was more or less truth in this allegation. But the public mind does not trouble it self with such subtleties; it rewards or punishes, usu ally, on a strict basis of post-hoc reasoning, and in the vote of 1879 it recognized properly enough the really great achievement of the Administration. The three political battle-grounds of the year were Maine, Ohio, and New York, in each of which States a Governor was to be elected. Maine led off in September with a Republican plurality 6000 greater than in 1878. Ewing was beaten in Ohio by a plurality of 17,129, the Republican plurality of the year before having been only 3154. In New York State the opposition party had already split up into factions, and Cornell was elected by the sweeping plurality of 42,777, the largest Republican majority in the State since 1872. Meantime the Western States, which had gone quite uniformly against the Administration in 1878, made a similar response. In Michigan, one of the largest winter wheat-producing States, a fusion of Democrats and Greenbackers, whose votes combined would in the previous year have carried the State by 25,000, was squarely beaten in November, 1879, by a Republi can majority of 6043. In Iowa, the corn-growing State, the Administration majority increased over 1878 by 14,221 votes.

The Administration's victory was complete. After five years of almost uninterrupted contest over the standard of value, the battle was ended. This fact was tacitly conceded in the Presidential platforms of both parties during the summer of 1880. On the 6th of June the Republican National Convention at Chicago endorsed in the most unqualified language the financial achievement of the Hayes Administra tion. Both the Stanley Matthews wing of Repub licanism and the timid jugglers with the issue in the Western Republican conventions of 1878 and 1879 were repudiated; there was not inserted in the party's Chicago platform of 188o a single word to favor even silver coinage. Instead, appeal was made in behalf of a party which had " raised the value of our paper currency," " restored upon a solid basis payment in coin for all national obligations," and " lifted the credit of the nation." No protest was made against these declarations, even by those un lucky Republicans who had sustained the Congres sional resolution, two years before, to pay the Government bonds in silver, and who had urged repeal of the Resumption Act. Still more signifi cant was the platform of the Democratic party at Cincinnati, three weeks later: whose only declara tion on the currency was a plank for " honest money, consisting of gold and silver, and paper convertible into coin on demand; the strict maintenance of the public faith." In short, what the Hayes Adminis tration had achieved, the Administration party, reasonably enough, appropriated to its own advan tage, and the opposition could not contest its right to do so.

Except for the disputed claim involved in the 1876 election, the party had small reason to appre hend the national vote of November, 1880. The event proved even this misgiving to have been ex aggerated. But for this same clouded title, President Hayes would logically have sought renomination, and would have deserved it. When Mr. Hayes re fused to submit his name, there seemed to be some probability that Secretary Sherman's services would be recognized by the nomination. But there was an instinctive distrust of Mr. Sherman in his own party, which can only be explained by his record as a politi cal opportunist in the years before his Cabinet career. Those who did not question his sincerity doubted his stability—a doubt not wholly unwarranted by his repeated change of front before what seemed to be the ruling popular sentiment. There was, moreover, an equally instinctive feeling that the nominee of the Chicago convention would certainly be the winner at the polls in November. This conviction always leads to a sharp convention struggle. Into the de tails of the very singular preliminary contest at Chicago it is needless to enter here. Only on the thirty-sixth convention ballot was the deadlock be tween the adherents of Secretary Sherman, of ex President Grant, and of Mr. James G. Blaine broken by concentration upon General Garfield of nearly all delegates, except the Grant contingent.

At Cincinnati, three weeks later, the National Democratic convention was a gathering as tame as the Chicago convention had been exciting. The rank and file were full enough of confidence, but the party's experienced leaders were well aware that with industrial contentment on all sides their case was hopeless. The manner in which a candidate manoeuvres for the nomination, or his friends in his behalf, is governed wholly by the prospect of success. For nomination and defeat, especially if the defeat be overwhelming, commonly lead in the United States to political oblivion. In the party's National Convention of 1868, with a somewhat parallel situa tion, nearly all of the shrewdest Democratic leaders avoided nomination, and Horatio Seymour was eventually forced to take it against his will. The case of 188o was similar: The party's strongest candidates were named to the Convention in a per functory way, there was little or no contest, and on the second ballot General Hancock, who with his purely military record had nothing to lose through a political defeat, was readily placed in nomination. The result of the November ballots amply justified such misgivings. Against the 185 electoral votes awarded to Hayes in 1876, Garfield in 188o captured 214. Tilden, in 1876, obtained on popular vote a plurality over Hayes, even by the Republican count, of 252,224; Garfield's plurality over Hancock, in 188o, was 9464.

The party whose most sagacious leaders had fought and won the resumption battle seemed, in brief, to be surely seated in the control of public matters, from which the panic of 1873 and the resultant trade stagnation had so nearly banished it. But the prob lem of the currency remained. The silver question was not the only cloud on the party's horizon. The problem of resumption had been solved for 188o, and for many subsequent years, by a happy accident of nature. Far-sighted public men recognized, how ever, even at the climax of the party triumph of 188o, that the system on which resumption had been founded still left the national finances at the mercy of future commercial accidents. In almost the last official papers of the Hayes Administration occur two declarations very remarkable for their positive contradiction of one another. In his annual Treas ury report of December 6, 188o, Secretary Sherman remarked: " United States notes are now, in form, security, and convenience, the best circulating medium known." In his message to Congress on the same day, President Hayes declared: " The retirement from circulation of United States notes is'a step to be taken in our progress towards a safe and stable currency, which should be accepted as the policy and duty of the Government and the in terest and security of the people." The President, in short, condemned as unsafe and mischievous a currency which his financial minister, enjoying the full personal confidence of the President,' declared to be safe, satisfactory, and worthy of perpetuation. The incident was sufficiently singular; one of the two responsible leaders in the financial reform of 1879 must have been mistaken. We shall discover, before our study of the ensuing period is completed, which of the two was right.

' Annual Treas. Rep., 188o, p. xiv. 2 Recollections, p. 8o8.

gold, trade, united, market and notes