COMMERCIAL CHRONICLE AND REVIEW. Report of Mr. McCulloch-Government Receipts and Expenditures past, present, and prospective-Monthly Statement of Debt criticized-Prices of leading articles for eight years--Action of Congress on Contraction-Presidents Message and United States Securities--Railroad Stocks-Prices of Gold-Movements of Treasure for Year-Exchange prices of, &c. THE reassembling of Congress, the message of the President, and the reports of his Secretaries to Congress, are the chief matters of interests the past month. Never has the annual report of the Secretary of the Treasury been looked for with more general anxiety, or been received with more distinguished marks of public approval than that of Mr. McCulloch, to which we devote a large part of this number of the Magazine. It comprises the transactions of the year ending 30th June last, and the financial history of the most critical period of the war, which it contains, will attract the attention of one class of readers, while its statements as to our future financial policy awakens the interest of all. This able state paper is valuable as a record of the past no less than as a forecasting of the future. In looking over the balance sheet of the national Treasury here spread before us, the first point which attracts attention is the prodigious resources of our people who, after more than three years of exhausting war expenditure have without resorting to any foreign loan, contrived to raise among themselves no less than 1,800 millions of dollars. To this most significant fact history affords no parallel, and to it, future republican nationalities in both hemispheres, will look with pride and emulation, in like times of crushing trial and patriotic self sacrifice. Let us briefly examine the details, however. At the opening of the last session, Congress supposed, and the Treasury estimate stated, that the deficlt for the fiscal year 1864-5 would amount to 482,000,000. Such, however, were the expenditures incident to the struggle, that we have had to provide for nearly twice that amount, or 942,000,000. And much of this sum was to be raised when gold was wildly fluctuating above 200, and United States bonds were quoted below 40. Besides this 942 000,000, however, we had to provide for over 150,000,000 of maturing short obligations, which were to be paid in money as they fell due. Moreover, our internal taxation proved less productive than was anticipated. Instead of yielding 300,000 000 it brought into the Treasury but 209,000.000. The customs also fell off from 102,000,000 in 1854 to 85,000,000 in 1865. We will not Low revive the unwelcome memory of the circumstances which, in the spring and summer of 1864, so damaged the national credit that the proposal for a loan of 33,000,000, advertised on the 25th of June was withdrawn on the 2d of July, as it was evident "that such loan would not be taken on terms which it would be the interest of the government to accept." Suffice it to say, that by skillful management the public confidence was gradually restored and all opposing difficulties were surmounted by Mr Fessenden and by his successor Mr. McCulloch. The tabular exhibit on page 12 of the report, shows that of the 1,100,000,000 wanted, 257,000,000 were funded in five and six per cent long bonds; 671,000,000 were raised by the Seven thirties, and the remainder chiefly by the issue of compound-interest legal tenders, which have now almost ceased to pass current as active paper money. Our space forbids a detailed account of this part of the report, and we content ourselves with simply compiling from it the following table, which shows the gradual increase of our national debt since the beginning of the war, with the responsive growth of our fiscal strength to bear the burdens it has imposed upon us. We have added the estimates for the years 1866 and 1867, and the amounts are stated in millions of dollars: But there are other points of the gravest practical importance which these figures illustrate besides the expansiveness of our national resources and our ability to bear a heavy fiscal burden. They show how rapidly the pressure on our other resources is diminishing. The war department, on which 1,031 millions were expended last year, is estimated at 473,000,000 in 1866, and 38,000,000 in 1867. The navy expenditure, which was 122,000,000 last year, will be 51,000.000 in 1866, and is to be reduced to 44,000,000 in 1867. The effect on the public credit produced by reductions on so vigorous a scale, and extended to all the details of the government expenditure, it is impossible to over estimate, for in national finances good credit chiefly means economy and good administration. Secondly, it appears from Mr. McCulloch's estimates that this contraction will reach the national debt as well as the national expenditures. The debt of the United States, he says, has increased since the end of June last, when the fiscal year ended. He has borrowed $138,773,097 22 since that time, but so large was the income from internal revenue and from other sources during the month of September, that he has paid off 13,000,000 of this amount, and he expects to reduce the 138,000,000 to 112,000,000 before the end of the current fiscal year. If so, we have traversed the highest peak in the mountain of our indebtedness, for during the year 1867 Mr. McCulloch is sanguine enough to expect that he will pay off 111,000,000 more. To estimate the full force of these reductions, we must remember that of our debt of 2,808,000,000, less than one-half is in long bonds, and the remainder has to be funded in a permanent shape with as little delay as possible. To facilitate still more this funding operation, Mr. McCulloch brings forward a scheme to pay off the national debt in a little more than a quarter of a century. On this plan we shall have some suggestions to make on another occasion. But apart from all considerations of early redemption, there is no doubt that our long bonds will be easily negotiated if Mr. McCulloch's articipations prove true, and we realize an excess of income from taxation over the national expenditure. * Estimated, The last point we shall cite from the report is that which refers to the contraction of the volume of our paper money. True to the sound principles of finarce which he has always professed, Mr. McCulloch opposes any increase of National Bank currency, and asks for further power to withdraw from circulation the interest-bearing legal tenders. In this matter of contracting the currency the policy of the government, as expressed by the President, the Secretary of the Treasury, and the Comptroller of the Currency, is appoved by the press and by the people, and has also received the sanction of Congress. The official monthly statement of our National Debt will be found on another page, and among its interesting details we may mention the new gold notes, which have not increased during thr month, and are evidently less popular than was anticipated by their promoters. We were told that by the gold note policy vast amounts of coin would be gathered in from boards, and attracted to the Sub-Treasury, where, in some mysterious way, this borrowed gold was to help the Government credit. So far, however, very little coin seems to have been deposited in this way. And the seven millions of gold deposits now in the Treasury vaults, appear to be chiefly useful as affording to the dealers in specie, free of charge, the facilities for speculation and for safe keeping of coin, which form. erly they had to pay heavily fo. at the Bank of New York. The compound inte est notes have increased 13 millions since 1st December, and amount now to 180 millions. As the official statement is printed this month in much less convenient form than usual, and does not show, as heretofore, how large an amount of these compound notes has been destroyed, we have no op portunity of verifying the rumor which is again current in Wall street that Mr. McCulloch, to save the interest accumulated, is cancelling all the old inert notes that are paid into the Treasury, and supplying their place with new ones. It is to be observed also that the increase in the aggregate amount of compound notes have not arisen from Mr. McCulloch's having converted greenbacks into them as he has legal authority to do. The greenbacks amount still to 426 millions, at which sum they have stood for some time past. The objection has been raised to this method of converting greenbacks into compound notes, that the process involves a considerable loss of interest. But there is an equal, or even a greater difficulty attending every other method of contraction; and yet the benefits far outweigh the cost. Moreover, this plan has the advantage of having stood the test of experience. It has been tried on a large scale, and so far the successful results have realized the anticipation of Mr. Chase, when he made the experiment of issuing compound notes in 1864. The importance in this point of view of the contracting of our active currency, which the conversion into compound legal tenders has effected, it is impossible to over-estimate. None of the plans of contraction hitherto proposed have done half as much, and none have operated so imperceptibly, and with so little derangement of the credit-machinery or of the business interests of the country. The third point demanding special notice in the statement before us, is the increase of the demand loans. Their amount has now advanced to $97,257,194, an increase of nearly eight millions for the month. It will be remembered that the act of 30th June, 1864, authorized the increase of these call loans to one hundred and fifty millions. This increase was necessary as a war measure, and to give the necessary elasticity to our financial machinery during the prodigious fiscal efforts of the closing year of the war. There are, however, numerous evils which, since the return of peace, have arisen from the large unwieldy dimensions of these demand loans. The chief objection to them, however, is that they prevent contraction, and favor inflation of the currency. It is reported, and the rumor is welcomed with much satisfaction in financial circles, that Mr. McCulloch intends to announce the cessation of interest at an early day on all call loans above five per cent. This conservative movement could not but be attended by the best results. We are glad to see that an increase is taking place in the certificates of indebtedness. These securities are extremely scarce, and before the excessive issues which flooded the market with them towards the close of Mr. Chase's administration, they were very much sought after for temporary investment, and commanded high rates. The aggregate now out is $60,667,000, and this amount might no doubt be gradually increased to 100,000,000, if the issue could be made at about the present market price. Of all the short-date obligations of the Treasury, the certificates of indebtedness have probably been productive of the least practical embarrassment to the department. Had a freer use been made of these securities, the retiring of twenty-four millions of maturing five per cent legal tenders would not have necessitated an issue of thirteen millions of compound interest notes, or, what is even more objectionable, an increase of eight milions in the call loans. To show the growth and extent of the inflation of nominal values by our greenback irredeemable currency we give below a comparative table of the wholesale prices at this port of the leading articles of foreign and domestic produce from 1859 to the present time. We do not, of course, wish to be understood as urging that the depreciation of our paper money is the sole cause of the advance which has taken place. We have repeatedly stated that the prices of all sorts of commodities are raised by our heavy taxes, by speculation, by a number of circumstances which during the war have either increased the cost of production, or disturbed the relations of demand and supply. No one whose opinion is entitled to credit can overlook these causes of the fluctuation of market values. But the point we raise is that the high prices which have prevailed among us are only partially and in a very subordinate degree accounted for by these minor causes. Beyond and above all these in its influence on values, is the depreciation of the currency. Prices have risen far more than they ever could otherwise have done, because the dollar is not worth as much as in specie paying times. The paper dollar has lost part of its purchasing power. It is not worth its normal value of ten silver dimes. To-day it only represents seven. A year ago it would not purchase five. It requires no mathematical genius to show us that prices expressed in these depreciated paper dollars must be higher and more fluctuating than if expressed in gold dollars. Remembering, then, that depreciation of the currency is the great producer of high prices, let us examine in the light of this Next month it may perhaps be worth eight. principle the course of inflation as shown by the sales in open market from which we have compiled the subjoined table. We give the prices, January 3d, of each of the last eight years: Excluding cotton, iron, rosin, and a few other articles whose fluctuations in value are partly due to other well-known causes, we find the general course of prices tending upwards during the increase of our paper money. That increase reached its highest point some time ago, since which our paper money has been gradually diminishing, and as our paper currency has grown less so prices have fallen too. 1 15 65 86 1 25 1 85 227 200 195 160 1 70 2 15 2 80 4 75 4 10 862 84 104 12 27 14 734 614 10 10% 934 9% 76 |