Grover Cleveland (December 2, 1895)
To the Congress of the United States:
The present assemblage of the legislative branch of our Government occurs at
a time when the interests of our people and the needs of the country give especial
prominence to the condition of our foreign relations and the exigencies of our
national finances. The reports of the heads of the several administrative Departments
of the Government fully and plainly exhibit what has been accomplished within
the scope of their respective duties and present such recommendations for the
betterment of our country's condition as patriotic and intelligent labor and
I therefore deem my executive duty adequately performed at this time by presenting
to the Congress the important phases of our situation as related to our intercourse
with foreign nations and a statement of the financial problems which confront
us, omitting, except as they are related to these topics, any reference to departmental
I earnestly invite, however, not only the careful consideration but the severely
critical scrutiny of the Congress and my fellow-countrymen to the reports concerning
these departmental operations. If justly and fairly examined, they will furnish
proof of assiduous and painstaking care for the public welfare. I press the
recommendations they contain upon the respectful attention of those charged
with the duty of legislation, because I believe their adoption would promote
the people's good.
By amendatory tariff legislation in January last the Argentine Republic, recognizing
the value of the large market opened to the free importation of its wools under
our last tariff act, has admitted certain products of the United States to entry
at reduced duties. It is pleasing to note that the efforts we have made to enlarge
the exchanges of trade on a sound basis of mutual benefit are in this instance
appreciated by the country from which our woolen factories draw their needful
supply of raw material.
The Missions boundary dispute between the Argentine Republic and Brazil, referred
to the President of the United States as arbitrator during the term of my predecessor,
and which was submitted to me for determination, resulted in an award in favor
of Brazil upon the historical and documentary evidence presented, thus ending
a long-protracted controversy and again demonstrating the wisdom and desirability
of settling international boundary disputes by recourse to friendly arbitration.
Negotiations are progressing for a revival of the United States and Chilean
Claims Commission, whose work was abruptly terminated last year by the expiration
of the stipulated time within which awards could be made.
The resumption of specie payments by Chile is a step of great interest and
importance both in its direct consequences upon her own welfare and as evincing
the ascendency of sound financial principles in one of the most influential
of the South American Republics.
The close of the momentous struggle between China and Japan, while relieving
the diplomatic agents of this Government from the delicate duty they undertook
at the request of both countries of rendering such service to the subjects of
either belligerent within the territorial limits of the other as our neutral
position permitted, developed a domestic condition in the Chinese Empire which
has caused much anxiety and called for prompt and careful attention. Either
as a result of a weak control by the central Government over the provincial
administrations, following a diminution of traditional governmental authority
under the stress of an overwhelming national disaster, or as a manifestation
upon good opportunity of the aversion of the Chinese population to all foreign
ways and undertakings, there have occurred in widely separated provinces of
China serious outbreaks of the old fanatical spirit against foreigners, which,
unchecked by the local authorities, if not actually connived at by them, have
culminated in mob attacks on foreign missionary stations, causing much destruction
of property and attended with personal injuries as well as loss of life.
Although but one American citizen was reported to have been actually wounded,
and although the destruction of property may have fallen more heavily upon the
missionaries of other nationalities than our own, it plainly behooved this Government
to take the most prompt and decided action to guard against similar or perhaps
more dreadful calamities befalling the hundreds of American mission stations
which have grown up throughout the interior of China under the temperate rule
of toleration, custom, and imperial edict. The demands of the United States
and other powers for the degradation and punishment of the responsible officials
of the respective cities and provinces who by neglect or otherwise had permitted
uprisings, and for the adoption of stern measures by the Emperor's Government
for the protection of the life and property of foreigners, were followed by
the disgrace and dismissal of certain provincial officials found derelict in
duty and the punishment by death of a number of those adjudged guilty of actual
participation in the outrages.
This Government also insisted that a special American commission should visit
the province where the first disturbances occurred for the purpose of investigation.
The latter commission, formed after much opposition, has gone overland from
Tientsin, accompanied by a suitable Chinese escort, and by its demonstration
of the readiness and ability of our Government to protect its citizens will
act, it is believed, as a most influential deterrent of any similar outbreaks.
The energetic steps we have thus taken are all the more likely to result in
future safety to our citizens in China because the Imperial Government is, I
am persuaded, entirely convinced that we desire only the liberty and protection
of our own citizens and redress for any wrongs they may have suffered, and that
we have no ulterior designs or objects, political or otherwise. China will not
forget either our kindly service to her citizens during her late war nor the
further fact that, while furnishing all the facilities at our command to further
the negotiation of a peace between her and Japan, we sought no advantages and
interposed no counsel.
The Governments of both China and Japan have, in special dispatches transmitted
through their respective diplomatic representatives, expressed in a most pleasing
manner their grateful appreciation of our assistance to their citizens during
the unhappy struggle and of the value of our aid in paving the way to their
resumption of peaceful relations.
The customary cordial relations between this country and France have been undisturbed,
with the exception that a full explanation of the treatment of John L. Waller
by the expeditionary military authorities of France still remains to be given.
Mr. Waller, formerly United States consul at Tamatav, remained in Madagascar
after his term of office expired, and was apparently successful in procuring
business concessions from the Hovas of greater or less value. After the occupation
of Tamatav and the declaration of martial law by the French he was arrested
upon various charges, among them that of communicating military information
to the enemies of France, was tried and convicted by a military tribunal, and
sentenced to twenty years' imprisonment.
Following the course justified by abundant precedents, this Government requested
from that of France the record of the proceedings of the French tribunal which
resulted in Mr. Waller's condemnation. This request has been complied with to
the extent of supplying a copy of the official record, from which appear the
constitution and organization of the court, the charges as formulated, and the
general course and result of the trial, and by which it is shown that the accused
was tried in open court and was defended by counsel; but the evidence adduced
in support of the charges, which was not received by the French minister for
foreign affairs till the first week in October, has thus far been withheld,
the French Government taking the ground that its production in response to our
demand would establish a bad precedent. The efforts of our ambassador to procure
it, however, though impeded by recent changes in the French ministry, have not
been relaxed, and it is confidently expected that some satisfactory solution
of the matter will shortly be reached. Meanwhile it appears that Mr. Waller's
confinement has every alleviation which the state of his health and all the
other circumstances of the case demand or permit.
In agreeable contrast to the difference above noted respecting a matter of
common concern, where nothing is sought except such a mutually satisfactory
outcome as the true merits of the case require, is the recent resolution of
the French Chambers favoring the conclusion of a permanent treaty of arbitration
between the two countries.
An invitation has been extended by France to the Government and people of the
United States to participate in a great international exposition at Paris in
1900 as a suitable commemoration of the close of this the world's marvelous
century of progress. I heartily recommend its acceptance, together with such
legislation as will adequately provide for a due representation of this Government
and its people on the occasion.
Our relations with the States of the German Empire are in some aspects typical
of a condition of things elsewhere found in countries whose productions and
trade are similar to our own. The close rivalries of competing industries; the
influence of the delusive doctrine that the internal development of a nation
is promoted and its wealth increased by a policy which, in undertaking to reserve
its home markets for the exclusive use of its own producers, necessarily obstructs
their sales in foreign markets and prevents free access to the products of the
world; the desire to retain trade in time-worn ruts, regardless of the inexorable
laws of new needs and changed conditions of demand and supply, and our own halting
tardiness in inviting a freer exchange of commodities, and by this means imperiling
our footing in the external markets naturally open to us, have created a situation
somewhat injurious to American export interests, not only in Germany, where
they are perhaps most noticeable, but in adjacent countries. The exports affected
are largely American cattle and other food products, the reason assigned for
unfavorable discrimination being that their consumption is deleterious to the
public health. This is all the more irritating in view of the fact that no European
state is as jealous of the excellence and wholesomeness of its exported food
supplies as the United States, nor so easily able, on account of inherent soundness,
to guarantee those qualities.
Nor are these difficulties confined to our food products designed for exportation.
Our great insurance companies, for example, having built up a vast business
abroad and invested a large share of their gains in foreign countries in compliance
with the local laws and regulations then existing, now find themselves within
a narrowing circle of onerous and unforeseen conditions, and are confronted
by the necessity of retirement from a field thus made unprofitable, if, indeed,
they are not summarily expelled, as some of them have lately been from Prussia.
It is not to be forgotten that international trade can not be one-sided. Its
currents are alternating, and its movements should be honestly reciprocal. Without
this it almost necessarily degenerates into a device to gain advantage or a
contrivance to secure benefits with only the semblance of a return. In our dealings
with other nations we ought to be open-handed and scrupulously fair. This should
be our policy as a producing nation, and it plainly becomes us as a people who
love generosity and the moral aspects of national good faith and reciprocal
These considerations should not, however, constrain us to submit to unfair
discrimination nor to silently acquiesce in vexatious hindrances to the enjoyment
of our share of the legitimate advantages of proper trade relations. If an examination
of the situation suggests such measures on our part as would involve restrictions
similar to those from which we suffer, the way to such a course is easy. It
should, however, by no means be lightly entered upon, since the necessity for
the inauguration of such a policy would be regretted by the best sentiment of
our people and because it naturally and logically might lead to consequences
of the gravest character.
I take pleasure in calling to your attention the encomiums bestowed on those
vessels of our new Navy which took part in the notable ceremony of the opening
of the Kiel Canal. It was fitting that this extraordinary achievement of the
newer German nationality should be celebrated in the presence of America's exposition
of the latest developments of the world' s naval energy.
Our relations with Great Britain, always intimate and important, have demanded
during the past year even a greater share of consideration than is usual.
Several vexatious questions were left undetermined by the decision of the Bering
Sea Arbitration Tribunal. The application of the principles laid down by that
august body has not been followed by the results they were intended to accomplish,
either because the principles themselves lacked in breadth and definiteness
or because their execution has been more or less imperfect. Much correspondence
has been exchanged between the two Governments on the subject of preventing
the exterminating slaughter of seals. The insufficiency of the British patrol
of Bering Sea under the regulations agreed on by the two Governments has been
pointed out, and yet only two British ships have been on police duty during
this season in those waters.
The need of a more effective enforcement of existing regulations as well as
the adoption of such additional regulations as experience has shown to be absolutely
necessary to carry out the intent of the award have been earnestly urged upon
the British Government, but thus far without effective results. In the meantime
the depletion of the seal herds by means of pelagic hunting has so alarmingly
progressed that unless their slaughter is at once effectively checked their
extinction within a few years seems to be a matter of absolute certainty.
The understanding by which the United States was to pay and Great Britain to
receive a lump sum of $425,000 in full settlement of all British claims for
damages arising from our seizure of British sealing vessels unauthorized under
the award of the Paris Tribunal of Arbitration was not confirmed by the last
Congress, which declined to make the necessary appropriation. I am still of
the opinion that this arrangement was a judicious and advantageous one for the
Government, and I earnestly recommend that it be again considered and sanctioned.
If, however, this does not meet with the favor of Congress, it certainly will
hardly dissent from the proposition that the Government is bound by every consideration
of honor and good faith to provide for the speedy adjustment of these claims
by arbitration as the only other alternative. A treaty of arbitration has therefore
been agreed upon, and will be immediately laid before the Senate, so that in
one of the modes suggested a final settlement may be reached.
Notwithstanding that Great Britain originated the proposal to enforce international
rules for the prevention of collisions at sea, based on the recommendations
of the Maritime Conference of Washington, and concurred in, suggesting March
11, 1895, as the date to be set by proclamation for carrying these rules into
general effect, Her Majesty's Government, having encountered opposition on the
part of British shipping interests, announced its inability to accept that date,
which was consequently canceled. The entire matter is still in abeyance, without
prospect of a better condition in the near future.
The commissioners appointed to mark the international boundary in Passamaquoddy
Bay according to the description of the treaty of Ghent have not yet fully agreed.
The completion of the preliminary survey of that Alaskan boundary which follows
the contour of the coast from the southernmost point of Prince of Wales Island
until it strikes the one hundred and forty-first meridian at or near the summit
of Mount St. Elias awaits further necessary appropriation, which is urgently
recommended. This survey was undertaken under the provisions of the convention
entered into by this country and Great Britain July 22, 1892, and the supplementary
convention of February 3, 1894.
As to the remaining section of the Alaskan boundary, which follows the one
hundred and forty-first meridian northwardly from Mount St. Elias to the Frozen
Ocean, the settlement of which involves the physical location of the meridian
mentioned, no conventional agreement has yet been made. The ascertainment of
a given meridian at a particular point is a work requiring much time and careful
observations and surveys. Such observations and surveys were undertaken by the
United States Coast and Geodetic Survey in 1890 and 1891, while similar work
in the same quarters, under British auspices, is believed to give nearly coincident
results; but these surveys have been independently conducted, and no international
agreement to mark those or any other parts of the one hundred and forty-first
meridian by permanent monuments has yet been made. In the meantime the valley
of the Yukon is becoming a highway through the hitherto unexplored wilds of
Alaska, and abundant mineral wealth has been discovered in that region, especially
at or near the junction of the boundary meridian with the Yukon and its tributaries.
In these circumstances it is expedient, and, indeed, imperative, that the jurisdictional
limits of the respective Governments in this new region be speedily determined.
Her Britannic Majesty's Government has proposed a joint delimitation of the
one hundred and forty-first meridian by an international commission of experts,
which, if Congress will authorize it and make due provision therefor, can be
accomplished with no unreasonable delay. It is impossible to overlook the vital
importance of continuing the work already entered upon and supplementing it
by further effective measures looking to the exact location of this entire boundary
I call attention to the unsatisfactory delimitation of the respective jurisdictions
of the United States and the Dominion of Canada in the Great Lakes at the approaches
to the narrow waters that connect them. The waters in question are frequented
by fishermen of both nationalities and their nets are there used. Owing to the
uncertainty and ignorance as to the true boundary, vexations disputes and injurious
seizures of boats and nets by Canadian cruisers often occur, while any positive
settlement thereof by an accepted standard is not easily to be reached. A joint
commission to determine the line in those quarters on a practical basis, by
measured courses following range marks on shore, is a necessity for which immediate
provision should be made.
It being apparent that the boundary dispute between Great Britain and the Republic
of Venezuela concerning the limits of British Guiana was approaching an acute
stage, a definite statement of the interest and policy of the United States
as regards the controversy seemed to be required both on its own account and
in view of its relations with the friendly powers directly concerned. In July
last, therefore, a dispatch was addressed to our ambassador at London for communication
to the British Government in which the attitude of the United States was fully
and distinctly set forth. The general conclusions therein reached and formulated
are in substance that the traditional and established policy of this Government
is firmly opposed to a forcible increase by any European power of its territorial
possessions on this continent; that this policy is as well rounded in principle
as it is strongly supported by numerous precedents; that as a consequence the
United States is bound to protest against the enlargement of the area of British
Guiana in derogation of the rights and against the will of Venezuela; that considering
the disparity in strength of Great Britain and Venezuela the territorial dispute
between them can be reasonably settled only by friendly and impartial arbitration,
and that the resort to such arbitration should include the whole controversy,
and is not satisfied if one of the powers concerned is permitted to draw an
arbitrary line through the territory in debate and to declare that it will submit
to arbitration only the portion lying on one side of it. In view of these conclusions,
the dispatch in question called upon the British Government for a definite answer
to the question whether it would or would not submit the territorial controversy
between itself and Venezuela in its entirety to impartial arbitration. The answer
of the British Government has not yet been received, but is expected shortly,
when further communication on the subject will probably be made to the Congress.
Early in January last an uprising against the Government of Hawaii was promptly
suppressed. Martial law was forthwith proclaimed and numerous arrests were made
of persons suspected of being in sympathy with the Royalist party. Among these
were several citizens of the United States, who were either convicted by a military
court and sentenced to death, imprisonment, or fine or were deported without
trial. The United States, while denying protection to such as had taken the
Hawaiian oath of allegiance, insisted that martial law, though altering the
forms of justice, could not supersede justice itself, and demanded stay of execution
until the proceedings had been submitted to this Government and knowledge obtained
therefrom that our citizens had received fair trial. The death sentences were
subsequently commuted or were remitted on condition of leaving the islands.
The cases of certain Americans arrested and expelled by arbitrary order without
formal charge or trial have had attention, and in some instances have been found
to justify remonstrance and a claim for indemnity, which Hawaii has not thus
Mr. Thurston, the Hawaiian minister, having furnished this Government abundant
reason for asking that he be recalled, that course was pursued, and his successor
has lately been received.
The deplorable lynching of several Italian laborers in Colorado was naturally
followed by international representations, and I am happy to say that the best
efforts of the State in which the outrages occurred have been put forth to discover
and punish the authors of this atrocious crime. The dependent families of some
of the unfortunate victims invite by their deplorable condition gracious provision
for their needs.
These manifestations against helpless aliens may be traced through successive
stages to the vicious padroni system, which, unchecked by our immigration and
contract-labor statutes, controls these workers from the moment of landing on
our shores and farms them out in distant and often rude regions, where their
cheapening competition in the fields of bread-winning toil brings them into
collision with other labor interests. While welcoming, as we should, those who
seek our shores to merge themselves in our body politic and win personal competence
by honest effort, we can not regard such assemblages of distinctively alien
laborers, hired out in the mass to the profit of alien speculators and shipped
hither and thither as the prospect of gain may dictate, as otherwise than repugnant
to the spirit of our civilization, deterrent to individual advancement, and
hindrances to the building up of stable communities resting upon the wholesome
ambitions of the citizen and constituting the prime factor in the prosperity
and progress of our nation. If legislation can reach this growing evil, it certainly
should be attempted.
Japan has furnished abundant evidence of her vast gain in every trait and characteristic
that constitutes a nation's greatness. We have reason for congratulation in
the fact that the Government of the United States, by the exchange of liberal
treaty stipulations with the new Japan, was the first to recognize her wonderful
advance and to extend to her the consideration and confidence due to her national
enlightenment and progressive character.
The boundary dispute which lately threatened to embroil Guatemala and Mexico
has happily yielded to pacific counsels, and its determination has, by the joint
agreement of the parties, been submitted to the sole arbitration of the United
States minister to Mexico.
The commission appointed under the convention of February 18, 1889, to set
new monuments along the boundary between the United States and Mexico has completed
As a sequel to the failure of a scheme for the colonization in Mexico of negroes,
mostly immigrants from Alabama under contract, a great number of these helpless
and suffering people, starving and smitten with contagious disease, made their
way or were assisted to the frontier, where, in wretched plight, they were quarantined
by the Texas authorities. Learning of their destitute condition, I directed
rations to be temporarily furnished them through the War Department. At the
expiration of their quarantine they were conveyed by the railway companies at
comparatively nominal rates to their homes in Alabama, upon my assurance, in
the absence of any fund available for the cost of their transportation, that
I would recommend to Congress an appropriation for its payment. I now strongly
urge upon Congress the propriety of making such an appropriation. It should
be remembered that the measures taken were dictated not only by sympathy and
humanity, but by a conviction that it was not compatible with the dignity of
this Government that so large a body of our dependent citizens should be thrown
for relief upon the charity of a neighboring state.
In last year's message I narrated at some length the jurisdictional questions
then freshly arisen in the Mosquito Indian Strip of Nicaragua. Since that time,
by the voluntary act of the Mosquito Nation, the territory reserved to them
has been incorporated with Nicaragua, the Indians formally subjecting themselves
to be governed by the general laws and regulations of the Republic instead of
by their own customs and regulations, and thus availing themselves of a privilege
secured to them by the treaty between Nicaragua and Great Britain of January
After this extension of uniform Nicaraguan administration to the Mosquito Strip,
the case of the British vice-consul, Hatch, and of several of his countrymen
who had been summarily expelled from Nicaragua and treated with considerable
indignity provoked a claim by Great Britain upon Nicaragua for pecuniary indemnity,
which, upon Nicaragua's refusal to admit liability, was enforced by Great Britain.
While the sovereignty and jurisdiction of Nicaragua was in no way questioned
by Great Britain, the former's arbitrary conduct in regard to British subjects
furnished the ground for this proceeding.
A British naval force occupied without resistance the Pacific seaport of Corinto,
but was soon after withdrawn upon the promise that the sum demanded would be
paid. Throughout this incident the kindly offices of the United States were
invoked and were employed in favor of as peaceful a settlement and as much consideration
and indulgence toward Nicaragua as were consistent with the nature of the case.
Our efforts have since been made the subject of appreciative and grateful recognition
The coronation of the Czar of Russia at Moscow in May next invites the ceremonial
participation of the United States, and in accordance with usage and diplomatic
propriety our minister to the imperial court has been directed to represent
our Government on the occasion.
Correspondence is on foot touching the practice of Russian consuls within the
jurisdiction of the United States to interrogate citizens as to their race and
religious faith, and upon ascertainment thereof to deny to Jews authentication
of passports or legal documents for use in Russia. Inasmuch as such a proceeding
imposes a disability which in the case of succession to property in Russia may
be found to infringe the treaty rights of our citizens, and which is an obnoxious
invasion of our territorial jurisdiction, it has elicited fitting remonstrance,
the result of which, it is hoped, will remove the cause of complaint. The pending
claims of sealing vessels of the United States seized in Russian waters remain
unadjusted. Our recent convention with Russia establishing a modus vivendi as
to imperial jurisdiction in such cases has prevented further difficulty of this
The Russian Government has welcomed in principle our suggestion for a modus
vivendi, to embrace Great Britain and Japan, looking to the better preservation
of seal life in the North Pacific and Bering Sea and the extension of the protected
area defined by the Paris Tribunal to all Pacific waters north of the thirty-fifth
parallel. It is especially noticeable that Russia favors prohibition of the
use of firearms in seal hunting throughout the proposed area and a longer closed
season for pelagic sealing.
In my last two annual messages I called the attention of the Congress to the
position we occupied as one of the parties to a treaty or agreement by which
we became jointly bound with England and Germany to so interfere with the government
and control of Samoa as in effect to assume the management of its affairs.
On the 9th day of May, 1894, I transmitted to the Senate a special message,
with accompanying documents, giving information on the subject and emphasizing
the opinion I have at all times entertained, that our situation in this matter
was inconsistent with the mission and traditions of our Government, in violation
of the principles we profess, and in all its phases mischievous and vexatious.
I again press this subject upon the attention of the Congress and ask for such
legislative action or expression as will lead the way to our relief from obligations
both irksome and unnatural.
Cuba is again gravely disturbed. An insurrection in some respects more active
than the last preceding revolt, which continued from 1868 to 1878, now exists
in a large part of the eastern interior of the island, menacing even some populations
on the coast. Besides deranging the commercial exchanges of the island, of which
our country takes the predominant share, this flagrant condition of hostilities,
by arousing sentimental sympathy and inciting adventurous support among our
people, has entailed earnest effort on the part of this Government to enforce
obedience to our neutrality laws and to prevent the territory of the United
States from being abused as a vantage ground from which to aid those in arms
against Spanish sovereignty.
Whatever may be the traditional sympathy of our countrymen as individuals with
a people who seem to be struggling for larger autonomy and greater freedom,
deepened, as such sympathy naturally must be, in behalf of our neighbors, yet
the plain duty of their Government is to observe in good faith the recognized
obligations of international relationship. The performance of this duty should
not be made more difficult by a disregard on the part of our citizens of the
obligations growing out of their allegiance to their country, which should restrain
them from violating as individuals the neutrality which the nation of which
they are members is bound to observe in its relations to friendly sovereign
states. Though neither the warmth of our people's sympathy with the Cuban insurgents,
nor our loss and material damage consequent upon the futile endeavors thus far
made to restore peace and order, nor any shock our humane sensibilities may
have received from the cruelties which appear to especially characterize this
sanguinary and fiercely conducted war, have in the least shaken the determination
of the Government to honestly fulfill every international obligation, yet it
is to be earnestly hoped on every ground that the devastation of armed conflict
may speedily be stayed and order and quiet restored to the distracted island,
bringing in their train the activity and thrift of peaceful pursuits.
One notable instance of interference by Spain with passing American ships has
occurred. On March 8 last the Allianca, while bound from Colon to New York,
and following the customary track for vessels near the Cuban shore, but outside
the 3-mile limit, was fired upon by a Spanish gunboat. Protest was promptly
made by the United States against this act as not being justified by a state
of war, nor permissible in respect of vessels on the usual paths of commerce,
nor tolerable in view of the wanton peril occasioned to innocent life and property.
The act was disavowed, with full expression of regret and assurance of nonrecurrence
of such just cause of complaint, while the offending officer was relieved of
his command. Military arrests of citizens of the United States in Cuba have
occasioned frequent reclamations. Where held on criminal charges their delivery
to the ordinary civil jurisdiction for trial has been demanded and obtained
in conformity with treaty provisions, and where merely detained by way of military
precaution under a proclaimed state of siege, without formulated accusation,
their release or trial has been insisted upon. The right of American consular
officers in the island to prefer protests and demands in such cases having been
questioned by the insular authority, their enjoyment of the privilege stipulated
by treaty for the consuls of Germany was claimed under the most-favored-nation
provision of our own convention and was promptly recognized.
The long-standing demand of Antonio Maximo Mora against Spain has at last been
settled by the payment, on the 14th of September last, of the sum originally
agreed upon in liquidation of the claim. Its distribution among the parties
entitled to receive it has proceeded as rapidly as the rights of those claiming
the fund could be safely determined.
The enforcement of differential duties against products of this country exported
to Cuba and Puerto Rico prompted the immediate claim on our part to the benefit
of the minimum tariff of Spain in return for the most favorable treatment permitted
by our laws as regards the production of Spanish territories. A commercial arrangement
was concluded in January last securing the treatment so claimed.
Vigorous protests against excessive fines imposed on our ships and merchandise
by the customs officers of these islands for trivial errors have resulted in
the remission of such fines in instances where the equity of the complaint was
apparent, though the vexatious practice has not been wholly discontinued.
Occurrences in Turkey have continued to excite concern. The reported massacres
of Christians in Armenia and the development there and in other districts of
a spirit of fanatic hostility to Christian influences naturally excited apprehension
for the safety of the devoted men and women who, as dependents of the foreign
missionary societies in the United States, reside in Turkey under the guaranty
of law and usage and in the legitimate performance of their educational and
religious mission. No efforts have been spared in their behalf, and their protection
in person and property has been earnestly and vigorously enforced by every means
within our power.
I regret, however, that an attempt on our part to obtain better information
concerning the true condition of affairs in the disturbed quarter of the Ottoman
Empire by sending thither the United States consul at Sivas to make investigation
and report was thwarted by the objections of the Turkish Government. This movement
on our part was in no sense meant as a gratuitous entanglement of the United
States in the so-called Eastern question nor as an officious interference with
the right and duty which belong by treaty to certain great European powers calling
for their intervention in political matters affecting the good government and
religious freedom of the non-Mussulman subjects of the Sultan, but it arose
solely from our desire to have an accurate knowledge of the conditions in our
efforts to care for those entitled to our protection.
The presence of our naval vessels which are now in the vicinity of the disturbed
localities affords opportunities to acquire a measure of familiarity with the
condition of affairs and will enable us to take suitable steps for the protection
of any interests of our countrymen within reach of our ships that might be found
The Ottoman Government has lately issued an imperial irade exempting forever
from taxation an American college for girls at Scutari. Repeated assurances
have also been obtained by our envoy at Constantinople that similar institutions
maintained and administered by our countrymen shall be secured in the enjoyment
of all rights and that our citizens throughout the Empire shall be protected.
The Government, however, in view of existing facts, is far from relying upon
such assurances as the limit of its duty. Our minister has been vigilant and
alert in affording all possible protection in individual cases where danger
threatened or safety was imperiled. We have sent ships as far toward the points
of actual disturbance as it is possible for them to go, where they offer refuge
to those obliged to flee, and we have the promise of other powers which have
ships in the neighborhood that our citizens as well as theirs will be received
and protected on board those ships. On the demand of our minister orders have
been issued by the Sultan that Turkish soldiers shall guard and escort to the
coast American refugees.
These orders have been carried out, and our latest intelligence gives assurance
of the present personal safety of our citizens and missionaries. Though thus
far no lives of American citizens have been sacrificed, there can be no doubt
that serious loss and destruction of mission property have resulted from riotous
conflicts and outrageous attacks.
By treaty several of the most powerful European powers have secured a right
and have assumed a duty not only in behalf of their own citizens and in furtherance
of their own interests, but as agents of the Christian world. Their right is
to enforce such conduct of Turkish government as will restrain fanatical brutality,
and if this fails their duty is to so interfere as to insure against such dreadful
occurrences in Turkey as have lately shocked civilization. The powers declare
this right and this duty to be theirs alone, and it is earnestly hoped that
prompt and effective action on their part will not be delayed.
The new consulates at Erzerum and Harpoot, for which appropriation was made
last session, have been provisionally filled by trusted employees of the Department
of State. These appointees, though now in Turkey, have not yet received their
The arbitration of the claim of the Venezuela Steam Transportation Company
under the treaty of January 19, 1892, between the United States and Venezuela,
resulted in an award in favor of the claimant.
The Government has used its good offices toward composing the differences between
Venezuela on the one hand and France and Belgium on the other growing out of
the dismissal of the representatives of those powers on the ground of a publication
deemed offensive to Venezuela. Although that dismissal was coupled with a cordial
request that other more personally agreeable envoys be sent in their stead,
a rupture of intercourse ensued and still continues.
In view of the growth of our interests in foreign countries and the encouraging
prospects for a general expansion of our commerce, the question of an improvement
in the consular service has increased in importance and urgency. Though there
is no doubt that the great body of consular officers are rendering valuable
services to the trade and industries of the country, the need of some plan of
appointment and control which would tend to secure a higher average of efficiency
can not be denied.
The importance of the subject has led the Executive to consider what steps
might properly be taken without additional legislation to answer the need of
a better system of consular appointments. The matter having been committed to
the consideration of the Secretary of State, in pursuance of his recommendations
an Executive order was issued on the 20th of September, 1895, by the terms of
which it is provided that after that date any vacancy in a consulate or commercial
agency with an annual salary or compensation from official fees of not more
than $2,500 or less than $1,000 should be filled either by transfer or promotion
from some other position under the Department of State of a character tending
to qualify the incumbent for the position to be filled, or by the appointment
of a person not under the Department of State, but having previously served
thereunder and shown his capacity and fitness for consular duty, or by the appointment
of a person who, having been selected by the President and sent to a board for
examination, is found upon such examination to be qualified for the position.
Posts which pay less than $1,000 being usually, on account of their small compensation,
filled by selection from residents of the locality, it was not deemed practicable
to put them under the new system.
The compensation of $2,500 was adopted as the maximum limit in the classification
for the reason that consular officers receiving more than that sum are often
charged with functions and duties scarcely inferior in dignity and importance
to those of diplomatic agents, and it was therefore thought best to continue
their selection in the discretion of the Executive without subjecting them to
examination before a board. Excluding 71 places with compensation at present
less than $1,000 and 53 places above the maximum in compensation, the number
of positions remaining within the scope of the order is 196. This number will
undoubtedly be increased by the inclusion of consular officers whose remuneration
in fees, now less than $1,000, will be augmented with the growth of our foreign
commerce and a return to more favorable business conditions.
In execution of the Executive order referred to the Secretary of State has
designated as a board to conduct the prescribed examinations the Third Assistant
Secretary of State, the Solicitor of the Department of State, and the Chief
of the Consular Bureau, and has specified the subjects to which such examinations
It is not assumed that this system will prove a full measure of consular reform.
It is quite probable that actual experience will show particulars in which the
order already issued may be amended and demonstrate that for the best results
appropriate legislation by Congress is imperatively required.
In any event, these efforts to improve the consular service ought to be immediately
supplemented by legislation providing for consular inspection. This has frequently
been a subject of Executive recommendation, and I again urge such action by
Congress as will permit the frequent and thorough inspection of consulates by
officers appointed for that purpose or by persons already in the diplomatic
or consular service. The expense attending such a plan would be insignificant
compared with its usefulness, and I hope the legislation necessary to set it
on foot will be speedily forthcoming.
I am thoroughly convinced that in addition to their salaries our ambassadors
and ministers at foreign courts should be provided by the Government with official
residences. The salaries of these officers are comparatively small and in most
cases insufficient to pay, with other necessary expenses, the cost of maintaining
household establishments in keeping with their important and delicate functions.
The usefulness of a nation's diplomatic representative undeniably depends much
upon the appropriateness of his surroundings, and a country like ours, while
avoiding unnecessary glitter and show, should be certain that it does not suffer
in its relations with foreign nations through parsimony and shabbiness in its
diplomatic outfit. These considerations and the other advantages of having fixed
and somewhat permanent locations for our embassies would abundantly justify
the moderate expenditure necessary to carry out this suggestion.
As we turn from a review of our foreign relations to the contemplation of our
national financial situation we are immediately aware that we approach a subject
of domestic concern more important than any other that can engage our attention,
and one at present in such a perplexing and delicate predicament as to require
prompt and wise treatment.
We may well be encouraged to earnest effort in this direction when we recall
the steps already taken toward improving our economic and financial situation
and when we appreciate how well the way has been prepared for further progress
by an aroused and intelligent popular interest in these subjects.
By command of the people a customs-revenue system designed for the protection
and benefit of favored classes at the expense of the great mass of our countrymen,
and which, while inefficient for the purpose of revenue, curtailed our trade
relations and impeded our entrance to the markets of the world, has been superseded
by a tariff policy which in principle is based upon a denial of the right of
the Government to obstruct the avenues to our people's cheap living or lessen
their comfort and contentment for the sake of according especial advantages
to favorites, and which, while encouraging our intercourse and trade with other
nations, recognizes the fact that American self-reliance, thrift, and ingenuity
can build up our country's industries and develop its resources more surely
than enervating paternalism.
The compulsory purchase and coinage of silver by the Government, unchecked
and unregulated by business conditions and heedless of our currency needs, which
for more than fifteen years diluted our circulating medium, undermined confidence
abroad in our financial ability, and at last culminated in distress and panic
at home, has been recently stopped by the repeal of the laws which forced this
reckless scheme upon the country.
The things thus accomplished, notwithstanding their extreme importance and
beneficent effects, fall far short of curing the monetary evils from which we
suffer as a result of long indulgence in ill-advised financial expedients.
The currency denominated United States notes and commonly known as greenbacks
was issued in large volume during the late Civil War and was intended originally
to meet the exigencies of that period. It will be seen by a reference to the
debates in Congress at the time the laws were passed authorizing the issue of
these notes that their advocates declared they were intended for only temporary
use and to meet the emergency of war. In almost if not all the laws relating
to them some provision was made contemplating their voluntary or compulsory
retirement. A large quantity of them, however, were kept on foot and mingled
with the currency of the country, so that at the close of the year 1874 they
amounted to $381,999,073.
Immediately after that date, and in January, 1875, a law was passed providing
for the resumption of specie payments, by which the Secretary of the Treasury
was required whenever additional circulation was issued to national banks to
retire United States notes equal in amount to 80 per cent of such additional
national-bank circulation until such notes were reduced to $300,000,000. This
law further provided that on and after the 1st day of January, 1879, the United
States notes then outstanding should be redeemed in coin, and in order to provide
and prepare for such redemption the Secretary of the Treasury was authorized
not only to use any surplus revenues of the Government, but to issue bonds of
the United States and dispose of them for coin and to use the proceeds for the
purposes contemplated by the statute.
In May, 1878, and before the date thus appointed for the redemption and retirement
of these notes, another statute was passed forbidding their further cancellation
and retirement. Some of them had, however, been previously redeemed and canceled
upon the issue of additional national-bank circulation, as permitted by the
law of 1875, so that the amount outstanding at the time of the passage of the
act forbidding their further retirement was $346,681,016.
The law of 1878 did not stop at distinct prohibition, but contained in addition
the following express provision:
And when any of said notes may be redeemed or be received
into the Treasury under any law from any source whatever, and shall belong to
the United States, they shall not be retired, canceled, or destroyed, but they
shall be reissued and paid out again and kept in circulation.
This was the condition of affairs on the 1st day of January, 1879, which had been
fixed upon four years before as the date for entering upon the redemption and
retirement of all these notes, and for which such abundant means had been provided.
The Government was put in the anomalous situation of owing to the holders of
its notes debts payable in gold on demand which could neither be retired by
receiving such notes in discharge of obligations due the Government nor canceled
by actual payment in gold. It was forced to redeem without redemption and to
pay without acquittance.
There had been issued and sold $95,500,000 of the bonds authorized by the resumption
act of 1875, the proceeds of which, together with other gold in the Treasury,
created a gold fund deemed sufficient to meet the demands which might be made
upon it for the redemption of the outstanding United States notes. This fund,
together with such other gold as might be from time to time in the Treasury
available for the same purpose, has been since called our gold reserve, and
$100,000,000 has been regarded as an adequate amount to accomplish its object.
This fund amounted on the 1st day of January, 1879, to $114,193,360, and though
thereafter constantly fluctuating it did not fall below that sum until July,
1892. In April, 1893, for the first time since its establishment, this reserve
amounted to less than $100,000,000, containing at that date only $97,011,330.
In the meantime, and in July, 1890, an act had been passed directing larger
governmental monthly purchases of silver than had been required under previous
laws, and providing that in payment for such silver Treasury notes of the United
States should be issued payable on demand in gold or silver coin, at the discretion
of the Secretary of the Treasury. It was, however, declared in the act to be"
the established policy of the United States to maintain the two metals on a
parity with each other upon the present legal ratio or such ratio as may be
provided by law." In view of this declaration it was not deemed permissible
for the Secretary of the Treasury to exercise the discretion in terms conferred
on him by refusing to pay gold on these notes when demanded, because by such
discrimination in favor of the gold dollar the so-called parity of the two metals
would be destroyed and grave and dangerous consequences would be precipitated
by affirming or accentuating the constantly widening disparity between their
actual values under the existing ratio.
It thus resulted that the Treasury notes issued in payment of silver purchases
under the law of 1890 were necessarily treated as gold obligations at the option
of the holder. These notes on the 1st day of November, 1893, when the law compelling
the monthly purchase of silver was repealed, amounted to more than $155,000,000.
The notes of this description now outstanding added to the United States notes
still undiminished by redemption or cancellation constitute a volume of gold
obligations amounting to nearly $500,000,000.
These obligations are the instruments which ever since we had a gold reserve
have been used to deplete it.
This reserve, as has been stated, had fallen in April, 1893, to $97,111,330.
It has from that time to the present, with very few and unimportant upward movements,
steadily decreased, except as it has been temporarily replenished by the sale
Among the causes for this constant and uniform shrinkage in this fund may be
mentioned the great falling off of exports under the operation of the tariff
law until recently in force, which crippled our exchange of commodities with
foreign nations and necessitated to some extent the payment of our balances
in gold; the unnatural infusion of silver into our currency and the increasing
agitation for its free and unlimited coinage, which have created apprehension
as to our disposition or ability to continue gold payments; the consequent hoarding
of gold at home and the stoppage of investments of foreign capital, as well
as the return of our securities already sold abroad; and the high rate of foreign
exchange, which induced the shipment of our gold to be drawn against as a matter
In consequence of these conditions the gold reserve on the 1st day of February,
1894, was reduced to $65,438,377, having lost more than $31,000,000 during the
preceding nine months, or since April, 1893. Its replenishment being necessary
and no other manner of accomplishing it being possible, resort was had to the
issue and sale of bonds provided for by the resumption act of 1875. Fifty millions
of these bonds were sold, yielding $58,633,295.71, which was added to the reserve
fund of gold then on hand. As a result of this operation this reserve, which
had suffered constant and large withdrawals in the meantime, stood on the 6th
day of March, 1894, at the sum of $107,446,802. Its depletion was, however,
immediately thereafter so accelerated that on the 30th day of June, 1894, it
had fallen to $64,873,025, thus losing by withdrawals more than $42,000,000
in five months and dropping slightly below its situation when the sale of $50,000,000
in bonds was effected for its replenishment.
This depressed condition grew worse, and on the 24th day of November, 1894,
our gold reserve being reduced to $57,669,701, it became necessary to again
This was done by another sale of bonds amounting to $50,000,000, from which
there was realized $58,538,500, with which the fund was increased to $111,142,021
on the 4th day of December, 1894.
Again disappointment awaited the anxious hope for relief. There was not even
a lull in the exasperating withdrawals of gold. On the contrary, they grew larger
and more persistent than ever. Between the 4th day of December, 1894, and early
in February, 1895, a period of scarcely more than two months after the second
reenforcement of our gold reserve by the sale of bonds, it had lost by such
withdrawals more than $69,000,000 and had fallen to $41,340,181. Nearly $43,000,000
had been withdrawn within the month immediately preceding this situation.
In anticipation of impending trouble I had on the 28th day of January, 1895,
addressed a communication to the Congress fully setting forth our difficulties
and dangerous position and earnestly recommending that authority be given the
Secretary of the Treasury to issue bonds bearing a low rate of interest, payable
by their terms in gold, for the purpose of maintaining a sufficient gold reserve
and also for the redemption and cancellation of outstanding United States notes
and the Treasury notes issued for the purchase of silver under the law of 1890.
This recommendation did not, however, meet with legislative approval.
In February, 1895, therefore, the situation was exceedingly critical. With
a reserve perilously low and a refusal of Congressional aid, everything indicated
that the end of gold payments by the Government was imminent. The results of
prior bond issues had been exceedingly unsatisfactory, and the large withdrawals
of gold immediately succeeding their public sale in open market gave rise to
a reasonable suspicion that a large part of the gold paid into the Treasury
upon such sales was promptly drawn out again by the presentation of United States
notes or Treasury notes, and found its way to the hands of those who had only
temporarily parted with it in the purchase of bonds.
In this emergency, and in view of its surrounding perplexities, it became entirely
apparent to those upon whom the struggle for safety was devolved not only that
our gold reserve must, for the third time in less than thirteen months, be restored
by another issue and sale of bonds bearing a high rate of interest and badly
suited to the purpose, but that a plan must be adopted for their disposition
promising better results than those realized on previous sales. An agreement
was therefore made with a number of financiers and bankers whereby it was stipulated
that bonds described in the resumption act of 1875, payable in coin thirty years
after their date, bearing interest at the rate of 4 pet cent per annum, and
amounting to about $62,000,000, should be exchanged for gold, receivable by
weight, amounting to a little more than $65,000,000.
This gold was to be delivered in such installments as would complete its delivery
within about six months from the date of the contract, and at least one-half
of the amount was to be furnished from abroad. It was also agreed by those supplying
this gold that during the continuance of the contract they would by every means
in their power protect the Government against gold withdrawals. The contract
also provided that if Congress would authorize their issue bonds payable by
their terms in gold and bearing interest at the rate of 3 per cent per annum
might within ten days be substituted at par for the 4 per cent bonds described
in the agreement.
On the day this contract was made its terms were communicated to Congress by
a special Executive message, in which it was stated that more than $16,000,000
would be saved to the Government if gold bonds bearing 3 per cent interest were
authorized to be substituted for those mentioned in the contract.
The Congress having declined to grant the necessary authority to secure this
saving, the contract, unmodified, was carried out, resulting in a gold reserve
amounting to $107,571,230 on the 8th day of July, 1895. The performance of this
contract not only restored the reserve, but checked for a time the withdrawals
of gold and brought on a period of restored confidence and such peace and quiet
in business circles as were of the greatest possible value to every interest
that affects our people. I have never had the slightest misgiving concerning
the wisdom or propriety of this arrangement, and am quite willing to answer
for my full share of responsibility for its promotion. I believe it averted
a disaster the imminence of which was, fortunately, not at the time generally
understood by our people.
Though the contract mentioned stayed for a time the tide of gold withdrawal,
its good results could not be permanent. Recent withdrawals have reduced the
reserve from $107,571,230 on the 8th day of July, 1895, to $79,333,966. How
long it will remain large enough to render its increase unnecessary is only
matter of conjecture, though quite large withdrawals for shipment in the immediate
future are predicted in well-informed quarters. About $16,000,000 has been withdrawn
during the month of November.
The foregoing statement of events and conditions develops the fact that after
increasing our interest-bearing bonded indebtedness more than $162,000,000 to
save our gold reserve we are nearly where we started, having now in such reserve
$79,333,966, as against $65,438,377 in February, 1894, when the first bonds
Though the amount of gold drawn from the Treasury appears to be very large
as gathered from the facts and figures herein presented, it actually was much
larger, considerable sums having been acquired by the Treasury within the several
periods stated without the issue of bonds. On the 28th of January, 1895, it
was reported by the Secretary of the Treasury that more than $172,000,000 of
gold had been withdrawn for hoarding or shipment during the year preceding.
He now reports that from January 1, 1879, to July 14, 1890, a period of more
than eleven years, only a little over $28,000,000 was withdrawn, and that between
July 14, 1890, the date of the passage of the law for an increased purchase
of silver, and the 1st day of December, 1895, or within less than five and a
half years, there was withdrawn nearly $375,000,000, making a total of more
than $403,000,000 drawn from the Treasury in gold since January 1, 1879, the
date fixed in 1875 for the retirement of the United States notes.
Nearly $327,000,000 of the gold thus withdrawn has been paid out on these United
States notes, and yet every one of the $346,000,000 is still uncanceled and
ready to do service in future gold depletions.
More than $76,000,000 in gold has since their creation in 1890 been paid out
from the Treasury upon the notes given on the purchase of silver by the Government,
and yet the whole, amounting to $155,000,000, except a little more than $16,000,000
which has been retired by exchanges for silver at the request of the holders,
remains outstanding and prepared to join their older and more experienced allies
in future raids upon the Treasury's gold reserve.
In other words, the Government has paid in gold more than nine-tenths of its
United States notes and still owes them all. It has paid in gold about one-half
of its notes given for silver purchases without extinguishing by such payment
one dollar of these notes.
When, added to all this, we are reminded that to carry on this astound, lug
financial scheme the Government has incurred a bonded indebtedness of $95,500,000
in establishing a gold reserve and of $162,315,400 in efforts to maintain it;
that the annual interest charge on such bonded indebtedness is more than $11,000,000;
that a continuance of our present course may result in further bond issues,
and that we have suffered or are threatened with all this for the sake of supplying
gold for foreign shipment or facilitating its hoarding at home, a situation
is exhibited which certainly ought to arrest attention and provoke immediate
I am convinced the only thorough and practicable remedy for our troubles is
found in the retirement and cancellation of our United States notes, commonly
called greenbacks, and the outstanding Treasury notes issued by the Government
in payment of silver purchases under the act of 1890.
I believe this could be quite readily accomplished by the exchange of these
notes for United States bonds, of small as well as large denominations, bearing
a low rate of interest. They should be long-term bonds, thus increasing their
desirability as investments, and because their payment could be well postponed
to a period far removed from present financial burdens and perplexities, when
with increased prosperity and resources they would be more easily met.
To further insure the cancellation of these notes and also provide a way by
which gold may be added to our currency in lieu of them, a feature in the plan
should be an authority given to the Secretary of the Treasury to dispose of
the bonds abroad for gold if necessary to complete the contemplated redemption
and cancellation, permitting him to use the proceeds of such bonds to take up
and cancel any of the notes that may be in the Treasury or that may be received
by the Government on any account.
The increase of our bonded debt involved in this plan would be amply compensated
by renewed activity and enterprise in all business circles, the restored confidence
at home, the reinstated faith in our monetary strength abroad, and the stimulation
of every interest and industry that would follow the cancellation of the gold-demand
obligations now afflicting us. In any event, the bonds proposed would stand
for the extinguishment of a troublesome indebtedness, while in the path we now
follow there lurks the menace of unending bonds, with our indebtedness still
undischarged and aggravated in every feature. The obligations necessary to fund
this indebtedness would not equal in amount those from which we have been relieved
since 1884 by anticipation and payment beyond the requirements of the sinking
fund out of our surplus revenues.
The currency withdrawn by the retirement of the United States notes and Treasury
notes, amounting to probably less than $486,000,000, might be supplied by such
gold as would be used on their retirement or by an increase in the circulation
of our national banks. Though the aggregate capital of those now in existence
amounts to more than $664,000,000, their outstanding circulation based on bond
security amounts to only about $190,000,000. They are authorized to issue notes
amounting to 90 per cent of the bonds deposited to secure their circulation,
but in no event beyond the amount of their capital stock, and they are obliged
to pay 1 per cent tax on the circulation they issue.
I think they should be allowed to issue circulation equal to the par value
of the bonds they deposit to secure it, and that the tax on their circulation
should be reduced to one-fourth of 1 per cent, which would undoubtedly meet
all the expense the Government incurs on their account. In addition they should
be allowed to substitute or deposit in lieu of the bonds now required as security
for their circulation those which would be issued for the purpose of retiring
the United States notes and Treasury notes.
The banks already existing, if they desired to avail themselves of the provisions
of law thus modified, could issue circulation, in addition to that already outstanding,
amounting to $478,000,000, which would nearly or quite equal the currency proposed
to be canceled. At any rate, I should confidently expect to see the existing
national banks or others to be organized avail themselves of the proposed encouragements
to issue circulation and promptly fill any vacuum and supply every currency
It has always seemed to me that the provisions of law regarding the capital
of national banks, which operate as a limitation to their location, fail to
make proper compensation for the suppression of State banks, which came near
to the people in all sections of the country and readily furnished them with
banking accommodations and facilities. Any inconvenience or embarrassment arising
from these restrictions on the location of national banks might well be remedied
by better adapting the present system to the creation of banks in smaller communities
or by permitting banks of large capital to establish branches in such localities
as would serve the people, so regulated and restrained as to secure their safe
and conservative control and management.
But there might not be the necessity for such an addition to the currency by
new issues of bank circulation as at first glance is indicated. If we should
be relieved from maintaining a gold reserve under conditions that constitute
it the barometer of our solvency, and if our Treasury should no longer be the
foolish purveyor of gold for nations abroad or for speculation and hoarding
by our citizens at home, I should expect to see gold resume its natural and
normal functions in the business affairs of the country and cease to be an object
attracting the timid watch of our people and exciting their sensitive imaginations.
I do not overlook the fact that the cancellation of the Treasury notes issued
under the silver-purchasing act of 1890 would leave the Treasury in the actual
ownership of sufficient silver, including seigniorage, to coin nearly $178,000,000
in standard dollars. It is worthy of consideration whether this might not from
time to time be converted into dollars or fractional coin and slowly put into
circulation, as in the judgment of the Secretary of the Treasury the necessities
of the country should require.
Whatever is attempted should be entered upon fully appreciating the fact that
by careless, easy descent we have reached a dangerous depth, and that our ascent
will not be accomplished without laborious toil and struggle. We shall be wise
if we realize that we are financially ill and that our restoration to health
may require heroic treatment and unpleasant remedies.
In the present stage of our difficulty it is not easy to understand how the
amount of our revenue receipts directly affects it. The important question is
not the quantity of money received in revenue payments, but the kind of money
we maintain and our ability to continue in sound financial condition. We are
considering the Government's holdings of gold as related to the soundness of
our money and as affecting our national credit and monetary strength.
If our gold reserve had never been impaired; if no bonds had ever been issued
to replenish it; if there had been no fear and timidity concerning our ability
to continue gold payments; if any part of our revenues were now paid in gold,
and if we could look to our gold receipts as a means of maintaining a safe reserve,
the amount of our revenues would be an influential factor in the problem. But,
unfortunately, all the circumstances that might lend weight to this consideration
are entirely lacking.
In our present predicament no gold is received by the Government in payment
of revenue charges, nor would there be if the revenues were increased. The receipts
of the Treasury, when not in silver certificates, consist of United States notes
and Treasury notes issued for silver purchases. These forms of money are only
useful to the Government in paying its current ordinary expenses, and its quantity
in Government possession does not in the least contribute toward giving us that
kind of safe financial standing or condition which is built on gold alone.
If it is said that these notes if held by the Government can be used to obtain
gold for our reserve, the answer is easy. The people draw gold from the Treasury
on demand upon United States notes and Treasury notes, but the proposition that
the Treasury can on demand draw gold from the people upon them would be regarded
in these days with wonder and amusement; and even if this could be done there
is nothing to prevent those thus parting with their gold from regaining it the
next day or the next hour by the presentation of the notes they received in
exchange for it.
The Secretary of the Treasury might use such notes taken from a surplus revenue
to buy gold in the market. Of course he could not do this without paying a premium.
Private holders of gold, unlike the Government, having no parity to maintain,
would not be restrained from making the best bargain possible when they furnished
gold to the Treasury; but the moment the Secretary of the Treasury bought gold
on any terms above par he would establish a general and universal premium upon
it, thus breaking down the parity between gold and silver, which the Government
is pledged to maintain, and opening the way to new and serious complications.
In the meantime the premium would not remain stationary, and the absurd spectacle
might be presented of a dealer selling gold to the Government and with United
States notes or Treasury notes in his hand immediately clamoring for its return
and a resale at a higher premium.
It may be claimed that a large revenue and redundant receipts might favorably
affect the situation under discussion by affording an opportunity of retaining
these notes in the Treasury when received, and thus preventing their presentation
for gold. Such retention to be useful ought to be at least measurably permanent;
and this is precisely what is prohibited, so far as United States notes are
concerned, by the law of 1878, forbidding their further retirement. That statute
in so many words provides that these notes when received into the Treasury and
belonging to the United States shall be "paid out again and kept in circulation."
It will, moreover, be readily seen that the Government could not refuse to
pay out United States notes and Treasury notes in current transactions when
demanded, and insist on paying out silver alone, and still maintain the parity
between that metal and the currency representing gold. Besides, the accumulation
in the Treasury of currency of any kind exacted from the people through taxation
is justly regarded as an evil, and it can not proceed far without vigorous protest
against an unjustifiable retention of money from the business of the country
and a denunciation of a scheme of taxation which proves itself to be unjust
when it takes from the earnings and income of the citizen money so much in excess
of the needs of Government support that large sums can be gathered and kept
in the Treasury. Such a condition has heretofore in times of surplus revenue
led the Government to restore currency to the people by the purchase of its
unmatured bonds at a large premium and by a large increase of its deposits in
national banks, and we easily remember that the abuse of Treasury accumulation
has furnished a most persuasive argument in favor of legislation radically reducing
our tariff taxation.
Perhaps it is supposed that sufficient revenue receipts would in a sentimental
way improve the situation by inspiring confidence in our solvency and allaying
the fear of pecuniary exhaustion. And yet through all our struggles to maintain
our gold reserve there never has been any apprehension as to our ready ability
to pay our way with such money as we had, and the question whether or not our
current receipts met our current expenses has not entered into the estimate
of our solvency. Of course the general state of our funds, exclusive of gold,
was entirely immaterial to the foreign creditor and investor. His debt could
only be paid in gold, and his only concern was our ability to keep on hand that
kind of money.
On July 1, 1892, more than a year and a half before the first bonds were issued
to replenish the gold reserve, there was a net balance in the Treasury, exclusive
of such reserve, of less than $13,000,000, but the gold reserve amounted to
more than $114,000,000, which was the quieting feature of the situation. It
was when the stock of gold began rapidly to fall that fright supervened and
our securities held abroad were returned for sale and debts owed abroad were
pressed for payment. In the meantime extensive shipments of gold and other unfavorable
indications caused restlessness and fright among our people at home. Thereupon
the general state of our funds, exclusive of gold, became also immaterial to
them, and they too drew gold from the Treasury for hoarding against all contingencies.
This is plainly shown by the large increase in the proportion of gold withdrawn
which was retained by our own people as time and threatening incidents progressed.
During the fiscal year ending June 30, 1894, nearly $85,000,000 in gold was
withdrawn from the Treasury and about $77,000,000 was sent abroad, while during
the fiscal year ending June 30, 1895, over $117,000,000 was drawn out, of which
only about $66,000,000 was shipped, leaving the large balance of such withdrawals
to be accounted for by domestic hoarding.
Inasmuch as the withdrawal of our gold has resulted largely from fright, there
is nothing apparent that will prevent its continuance or recurrence, with its
natural consequences, except such a change in our financial methods as will
reassure the frightened and make the desire for gold less intense. It is not
clear how an increase fix revenue, unless it be in gold, can satisfy those whose
only anxiety is to gain gold from the Government's store.
It can not, therefore, be safe to rely upon increased revenues as a cure for
our present troubles.
It is possible that the suggestion of increased revenue as a remedy for the
difficulties we are considering may have originated in an intimation or distinct
allegation that the bonds which have been issued ostensibly to replenish our
gold reserve were really issued to supply insufficient revenue. Nothing can
be further from the truth. Bonds were issued to obtain gold for the maintenance
of our national credit. As has been shown, the gold thus obtained has been drawn
again from the Treasury upon United States notes and Treasury notes. This operation
would have been promptly prevented if possible; but these notes having thus
been passed to the Treasury, they became the money of the Government, like any
other ordinary Government funds, and there was nothing to do but to use them
in paying Government expenses when needed.
At no time when bonds have been issued has there been any consideration of
the question of paying the expenses of Government with their proceeds. There
was no necessity to consider that question. At the time of each bond issue we
had a safe surplus in the Treasury for ordinary operations, exclusive of the
gold in our reserve. In February, 1894, when the first issue of bonds was made,
such surplus amounted to over $18,000,000; in November, when the second issue
was made, it amounted to more than $42,000,000, and in February, 1895, when
bonds for the third time were issued, such surplus amounted to more than $100,000,000.
It now amounts to $98,072,420.30.
Besides all this, the Secretary of the Treasury had no authority whatever to
issue bonds to increase the ordinary revenues or pay current expenses.
I can not but think there has been some confusion of ideas regarding the effects
of the issue of bonds and the results of the withdrawal of gold. It was the
latter process, and not the former, that, by substituting in the Treasury United
States notes and Treasury notes for gold, increased by their amount the money
which was in the first instance subject to ordinary Government expenditure.
Although the law compelling an increased purchase of silver by the Government
was passed on the 14th day of July, 1890, withdrawals of gold from the Treasury
upon the notes given in payment on such purchases did not begin until October,
1891. Immediately following that date the withdrawals upon both these notes
and United States notes increased very largely, and have continued to such an
extent that since the passage of that law there has been more than thirteen
times as much gold taken out of the Treasury upon United States notes and Treasury
notes issued for silver purchases as was thus withdrawn during the eleven and
a half years immediately prior thereto and after the 1st day of January, 1879,
when specie payments were resumed.
It is neither unfair nor unjust to charge a large share of our present financial
perplexities and dangers to the operation of the laws of 1878 and 1890 compelling
the purchase of silver by the Government, which not only furnished a new Treasury
obligation upon which its gold could be withdrawn, but so increased the fear
of an overwhelming flood of silver and a forced descent to silver payments that
even the repeal of these laws did not entirely cure the evils of their existence.
While I have endeavored to make a plain statement of the disordered condition
of our currency and the present dangers menacing our prosperity and to suggest
a way which leads to a safer financial system, I have constantly had in mind
the fact that many of my countrymen, whose sincerity I do not doubt, insist
that the cure for the ills now threatening us may be found in the single and
simple remedy of the free coinage of silver. They contend that our mints shall
be at once thrown open to the free, unlimited, and independent coinage of both
gold and silver dollars of full legal-tender quality, regardless of the action
of any other government and in full view of the fact that the ratio between
the metals which they suggest calls for 100 cents' worth of gold in the gold
dollar at the present standard and only 50 cents in intrinsic worth of silver
in the silver dollar.
Were there infinitely stronger reasons than can be adduced for hoping that
such action would secure for us a bimetallic currency moving on lines of parity,
an experiment so novel and hazardous as that proposed might well stagger those
who believe that stability is an imperative condition of sound money.
No government, no human contrivance or act of legislation, has ever been able
to hold the two metals together in free coinage at a ratio appreciably different
from that which is established in the markets of the world.
Those who believe that our independent free coinage of silver at an artificial
ratio with gold of 16 to 1 would restore the parity between the metals, and
consequently between the coins, oppose an unsupported and improbable theory
to the general belief and practice of other nations; and to the teaching of
the wisest statesmen and economists of the world, both in the past and
present, and, what is far more conclusive, they run counter to our own actual
Twice in our earlier history our lawmakers, in attempting to establish a bimetallic
currency, undertook free coinage upon a ratio which accidentally varied from
the actual relative values of the two metals not more than 3 per cent. In both
cases, notwithstanding greater difficulties and cost of transportation than
now exist, the coins whose intrinsic worth was undervalued. in the ratio gradually
and surely disappeared from our circulation and went to other countries where
their real value was better recognized.
Acts of Congress were impotent to create equality where natural causes decreed
even a slight inequality.
Twice in our recent history we have signally failed to raise by legislation
the value of silver. Under an act of Congress passed in 1878 the Government
was required for more than twelve years to expend annually at least $24,000,000
in the purchase of silver bullion for coinage. The act of July 14, 1890, in
a still bolder effort, increased the amount of silver the Government was compelled
to purchase and forced it to become the buyer annually of 54,000,000 ounces,
or practically the entire product of our mines. Under both laws silver rapidly
and steadily declined in value. The prophecy and the expressed hope and expectation
of those in the Congress who led in the passage of the last-mentioned act that
it would reestablish and maintain the former parity between the two metals are
still fresh in our memory.
In the light of these experiences, which accord with the experiences of other
nations, there is certainly no secure ground for the belief that an act of Congress
could now bridge an inequality of 50 per cent between gold and silver at our
present ratio, nor is there the least possibility that our country, which has
less than one-seventh of the silver money in the world, could by its action
alone raise not only our own but all silver to its lost ratio with gold. Our
attempt to accomplish this by the free coinage of silver at a ratio differing
widely from actual relative values would be the signal for the complete departure
of gold from our circulation, the immediate and large contraction of our circulating
medium, and a shrinkage in the real value and monetary efficiency of all other
forms of currency as they settled to the level of silver monometallism. Everyone
who receives a fixed salary and every worker for wages would find the dollar
in his hand ruthlessly scaled down to the point of bitter disappointment, if
not to pinching privation.
A change in our standard to silver monometallism would also bring on a collapse
of the entire system of credit, which, when based on a standard which is recognized
and adopted by the world of business, is many times more potent and useful than
the entire volume of currency and is safely capable of almost indefinite expansion
to meet the growth of trade and enterprise. In a self-invited struggle through
darkness and uncertainty our humiliation would be increased by the consciousness
that we had parted company with all the enlightened and progressive nations
of the world and were desperately and hopelessly striving to meet the stress
of modern commerce and competition with a debased and unsuitable currency and
in association with the few weak and laggard nations which have silver alone
as their standard of value.
All history warns us against rash experiments which threaten violent changes
in our monetary standard and the degradation of our currency. The past is full
of lessons teaching not only the economic dangers but the national immorality
that follow in the train of such experiments. I will not believe that the American
people can be persuaded after sober deliberation to jeopardize their nation's
prestige and proud standing by encouraging financial nostrums, nor that they
will yield to the false allurements of cheap money when they realize that it
must result in the weakening of that financial integrity and rectitude which
thus far in our history has been so devotedly cherished as one of the traits
of true Americanism.
Our country's indebtedness, whether owing by the Government or existing between
individuals, has been contracted with reference to our present standard. To
decree by act of Congress that these debts shall be payable in less valuable
dollars than those within the contemplation and intention of the parties when
contracted would operate to transfer by the fiat of law and without compensation
an amount of property and a volume of rights and interests almost incalculable.
Those who advocate a blind and headlong plunge to free coinage in the name
of bimetallism, and professing the belief, contrary to all experience, that
we could thus establish a double standard and a concurrent circulation of both
metals in our coinage, are certainly reckoning from a cloudy standpoint. Our
present standard of value is the standard of the civilized world and permits
the only bimetallism now possible, or at least that is within the independent
reach of any single nation, however powerful that nation may be. While the value
of gold as a standard is steadied by almost universal commercial and business
use, it does not despise silver nor seek its banishment. Wherever this standard
is maintained there is at its side in free and unquestioned circulation a volume
of silver currency sometimes equaling and sometimes even exceeding it in amount
both maintained at a parity notwithstanding a depreciation or fluctuation in
the intrinsic value of silver.
There is a vast difference between a standard of value and a currency for monetary
use. The standard must necessarily be fixed and certain. The currency may be
in divers forms and of various kinds. No silver-standard country has a gold
currency in circulation, but an enlightened and wise system of finance secures
the benefits of both gold and silver as currency and circulating medium by keeping
the standard stable and all other currency at par with it. Such a system and
such a standard also give free scope for the use and expansion of safe and conservative
credit, so indispensable to broad and growing commercial transactions and so
well substituted for the actual use of money. If a fixed and stable standard
is maintained, such as the magnitude and safety of our commercial transactions
and business require, the use of money itself is conveniently minimized.
Every dollar of fixed and stable value has through the agency of confident
credit an astonishing capacity of multiplying itself in financial work. Every
unstable and fluctuating dollar fails as a basis of credit, and in its use begets
gambling speculation and undermines the foundations of honest enterprise.
I have ventured to express myself on this subject with earnestness and plainness
of speech because I can not rid myself of the belief that there lurk in the
proposition for the free coinage of silver, so strongly approved and so enthusiastically
advocated by a multitude of my countrymen, a serious menace to our prosperity
and an insidious temptation of our people to wander from the allegiance they
owe to public and private integrity. It is because I do not distrust the good
faith and sincerity of those who press this scheme that I have imperfectly but
with zeal submitted my thoughts upon this momentous subject. I can not refrain
from begging them to reexamine their views and beliefs in the light of patriotic
reason and familiar experience and to weigh again and again the consequences
of such legislation as their efforts have invited. Even the continued agitation
of the subject adds greatly to the difficulties of a dangerous financial situation
already forced upon us.
In conclusion I especially entreat the people's representatives in the Congress,
who are charged with the responsibility of inaugurating measures for the safety
and prosperity of our common country, to promptly and effectively consider the
ills of our critical financial plight. I have suggested a remedy which my judgment
approves. I desire, however, to assure the Congress that I am prepared to cooperate
with them in perfecting any other measure promising thorough and practical relief,
and that I will gladly labor with them in every patriotic endeavor to further
the interests and guard the welfare of our countrymen, whom in our respective
places of duty we have undertaken to serve.