Liberty Matters
Leggett and ‘Hard Money
I have enjoyed all the contributions to the discussion so far.Here I want to clarify the extent to which Leggett should be called a "hard money" advocate. Brian Schoen in his response essay refers to Leggett's "support for hard-money policies" and states: "For Leggett, removing bank-issued paper and preserving 'real money' (aka specie) would aid the laboring man." That accurately describes Leggett's earliest published views, but – much as it did on slavery – his thinking evolved on the question of hard money (silver and gold coins) versus bank-issued paper (banknotes, circulating debt claims contractually redeemable for silver or gold coins).
Early on, Leggett denounced private banknotes as such. In 1835 he criticized the "privilege" of allowing private firms "to coin a worthless substitute for gold and silver; to circulate it as real money; and thus enter into competition with the General Government of the United States, in one of the highest and most important of its exclusive functions."[56] (He would later recognize that the U.S. Constitution did not give Congress an exclusive right to issue coin.) He charged the state-chartered banks of issue with foolish and speculative expansions and contractions of the money supply, "subjecting the community to continual fluctuations of prices" and thereby causing "seasons of preternatural prosperity and severe distress, shaking public faith, exciting a spirit of wild speculation, and demoralizing and vitiating the whole tone of popular sentiment and character." He did not at this point stop to consider that the banks would not have acted spontaneously in unison but were rather acting under the common influence of the credit policies of the Second Bank of the United States (BUS). He would later identify BUS policies as the culprit for the boom-bust cycle ending in the Panic of 1837.
To limit the spread of banknotes, Leggett in 1834 called on the New York state legislature to "refuse to grant any more charters of incorporation" to banks of issue and to "take effectual measures to prohibit the small note issues."[57] In the meantime he suggested that workingmen should write slogans on the backs of banknotes that came into their hands, like "Jackson and Hard Money!" or "Gold before Rags!," before passing them on.
By 1837, however, Leggett no longer used hard-money language. He had come to realize that the remedy for privilege in banking was not further legal restrictions but rather completely free competition in banking. He now wrote of leaving the banking system "entirely to the laws of trade."[58] Rather than having the legislature block the entry of any additional banks, he argued for permissionless note issue:
Any individual has a right to stamp his name, and his image too, if he pleases, on a piece of silver or gold, and exchange it for what it is intrinsically worth. In the same way we contend that he has a natural right to give his promise to pay a certain sum on a piece of paper, and, subscribing it with his name, to pass it for what those with whom he deals may be willing to receive it.
Leggett now repeatedly denounced New York state's "Restraining Law," which prohibited the entry of any bank not chartered by the legislature.
In an 1837 essay supporting Jackson's veto of the recharter of the Second Bank of the United States and calling for the removal of the federal government's money balances from state-chartered banks to simple Treasury coin depositories, Leggett argued sweepingly for laissez faire in banking.[59] Just as the federal government has no warrant to interfere with the exchange of goods, he wrote,
it has, properly, nothing to do with the currency, which is also an affair of trade, and perfectly within the competency of its own natural laws to govern. Let the government confine itself to its plain and obvious political duties. Let it have nothing to do with a "credit system." Let it connect itself neither with corporations nor individuals. Let it keep its own money, taking care that it is money, and not promises; and let it leave it to unfettered sagacity and enterprise to devise and carry into effect whatever system of exchange and credit may be found most advantageous to the commercial interests of society.
Faced with the disorder surrounding the Panic of 1837, Leggett urged that the legislature of the state of New York should
give freedom to that spirit of enterprise which even now, in the chaotick state of things to which exclusively privileged bank monopolies have reduced us, stands ready, if only allowed free scope, to rescue the community from the terrible confusion of general bankruptcy. If Governour Marcy wishes to convene the legislature, let it be for the purpose of repealing all the restraints on the trade in credit and money, and not for imposing new burdens on the defrauded people, for the benefit of a few privileged charter mongers.[60]
Leggett's mature position was thus that governments should be restricted to hard money, but the public should be left free to use whatever kind of money it preferred. There should be no legal restrictions against banknotes to keep them from the hands of businesses and individuals. In an answer to a reader's question, Leggett made this position very clear. Here I quote at greater length an 1837 passage that I quoted only a snippet from in my response essay.[61] Leggett wrote:
There is an ample amount of bullion for all the purposes of a currency. But freedom of trade does not imply the abolition of paper credit. It merely contemplates the separation of government from the credit system, whether in the way of restraint, regulation, or encouragement. There is an ample quantity of bullion in the world for an exclusive metallick currency, but prices would, of course, have to undergo a vast reduction, to adjust them to a hard money scale. But an exclusive metallick currency could only be instituted and maintained by the force of arbitrary government edicts, totally contrary to the first principles of natural justice. Bank-notes, in their intrinsick nature, are nothing more than the promisory notes of one individual to another, they are merely one of the forms which confidence between man and man assumes. So long as the laws do not interfere, and give an adventitious character to these notes, there is no reason, in natural justice or social expediency, why they should be interdicted. If left to themselves, they will not extend beyond the limits of a secure foundation, nor the demands of general convenience.
Endnotes
[56.] "The Course of the Evening Post," Evening Post, (May 18, 1835). <https://oll.libertyfund.org/titles/682#Legett_0012_106>.
[57.] "Small Note Circulation," Evening Post, (August 6, 1834). <https://oll.libertyfund.org/titles/682#Legett_0012_193>.
[58.] "Strictures on the Late Message," Plaindealer, (January 14, 1837). <https://oll.libertyfund.org/titles/682#Legett_0012_264>.
[59.] "Connexion of State with Banking," Plaindealer, (May 6, 1837). <https://oll.libertyfund.org/titles/682#Legett_0012_308>.
[60.] "The Remedy for Broken Banks," Plaindealer, (June 3, 1837). <https://oll.libertyfund.org/titles/682#Legett_0012_373>.
[61.] "Questions and Answers," Plaindealer, (June 17, 1837). <https://oll.libertyfund.org/titles/682#Legett_0012_387>.
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