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Updated: June 11, 2025
An inconvertible paper currency, stimulating industry and improving morals by converting beneficent commerce into baleful gambling that fatal invention did not then exist. Meantime, the legitimate trader and innocent citizen were harassed, and the general public endangered, as much as the limited machinery of the epoch permitted.
Goldwin Smith no unfavourable judge of anything American justly said some years since, the capital error made by the United States Government was the "Legal Tender Act," as it is called, by which it made inconvertible paper notes issued by the Treasury the sole circulating medium of the country.
Being a new country, she ought in her times of financial want to borrow of old countries; but the old countries were frightened by the probable issue of unlimited inconvertible paper, and they would not lend a shilling. Much more than the mercantile credit of America was thus lost.
To invoke Turgot as a dabbler in Socialism because he opened ateliers de charité, is as unreasonable as it would be to make an English minister who should suspend the Bank Charter Act in a crisis, into the champion of an inconvertible paper currency. Turgot always regarded the sums paid in his works, not as wages, but as alms.
Nor is it likely that any of the many schemes of which Mr Stilwell's "Great Plan, How to Pay for the War," is a particularly bold example for paying off debt by a huge issue of inconvertible currency, will achieve any practical result.
By an admirable mingling of firmness and conciliation the mutiny was quelled in the navy without serious consequences resulting to the state. To meet the financial difficulties, an act was passed by Parliament permitting the Bank to suspend specie payment thus delivering the country, for a period of more than twenty years, over to a wholly inconvertible paper currency.
The carrying trade and the fisheries began soon to revive, but it was some years before the old prosperity was restored. The war had also wrought serious damage to agriculture, and in some parts of the country the direct destruction of property by the enemy's troops had been very great. To all these causes of poverty there was added the hopeless confusion due to an inconvertible paper currency.
In 1819, speaking of the inconvertible paper money, he recanted his views of 1811, as his opinions with regard to the question had undergone "a material change." "He had," he said, "voted against Mr. Hooner's resolutions in 1811, he would now vote for them if they were brought forward."
The financial wreckage left by the mad monarchy adventure was, however, appalling. Not only was there no money in the capital but hardly any food as well; for since the suspension of specie payments country supplies had ceased entering the city as farmers refused to accept inconvertible paper in payment for their produce.
As is well known, inconvertible paper issued by Government is sure to be issued in great quantities, as the American currency soon was; it is sure to be depreciated as against coin; it is sure to disturb values and to derange markets; it is certain to defraud the lender; it is certain to give the borrower more than he ought to have. In the case of America there was a further evil.
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