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Updated: July 28, 2025
It is not strange, therefore, that this body at once declared itself in favor of inflation. The plan proposed was what was known as the "American System of Finance": money was to be issued only by the Government and in the form of legal-tender paper redeemable only with bonds bearing a low rate of interest, these bonds in turn to be convertible into greenbacks at the option of the holder.
A large number of financiers urged the repeal of the legal-tender clause, the funding of the notes into bonds with some limitations, and further contraction of their volume by direct withdrawal.
McCulloch's plans were to take from the compound-interest notes their legal-tender quality, from the date of their maturity, and to sell six per cent bonds, redeemable at the pleasure of the Government, for the purpose of retiring both the compound-interest notes and the plain legal-tenders.
Frank Walker shared this feeling, and, by way of helping the Court, he had promised Adams for the North American Review an article on the history of the Legal Tender Act, founded on a volume just then published by Spaulding, the putative father of the legal-tender clause in 1861.
As reported from the Finance Committee, the first section fixed the maximum limit of United-States notes at $382,000,000. The limit was raised to $400,000,000 on motion of Mr. Wright of Iowa, and the Senate refused to allow any clause for future reduction. This was $44,000,000 beyond the amount of legal-tender notes then in circulation.
The resolutions which followed demanded the suppression of bank notes and the issue of all money by the Government, such money to be full legal-tender at its stamped value and to be provided in sufficient quantity to insure the full employment of labor and to establish a rate of interest which would secure to labor its just reward.
The proposition of the United States "that the delegations recommend to their respective governments the adjustment of a fixed relation between the two metals and the use of both in that relation as unlimited legal-tender money," was rejected.
This, however, would depend upon the law of demand and supply, though it should be borne in mind that by making legal-tender and bank notes convertible into coin or its equivalent their present specie value in the hands of their holders would be enhanced 100 per cent. Legislation for the accomplishment of a result so desirable is demanded by the highest public considerations.
Gold and silver are now the recognized medium of exchange the civilized world over, and to this we should return with the least practicable delay. In view of the pledges of the American Congress when our present legal-tender system was adopted, and debt contracted, there should be no delay certainly no unnecessary delay in fixing by legislation a method by which we will return to specie.
Hooper dismissed the proposition summarily and argued strongly for a contraction of legal-tender notes. Mr. Hulburd of New York maintained that taxation could not be increased to meet the existing and maturing obligations of the Government.
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