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What influence did the greenback currency have as one of the many factors that affected the production of wealth? In the first place, the paper standard was responsible in large measure for the feeling of "prosperity" that seems from all the evidence to have characterized the public's frame of mind. Almost every owner of property found that the price of his possessions had increased, and almost every wage-earner found that his pay was advanced. Strive as people may to emancipate themselves from the feeling that a dollar represents a fixed quantity of desirable things, it is very difficult for them to resist a pleasurable sensation when the money value of their property rises or their incomes increase. They are almost certain to feel cheerful over the larger sums that they can spend, even though the amount of commodities the larger sums will buy is decreased. Habit is too strong for arithmetic.
 But, more than this, "business" in the common meaning of the word was unusually profitable during the war. The "residual claimant" is in most enterprises the active business man, and, as has been shown, his money income did as a rule rise more rapidly than the cost of living. In other words, "business" was, in reality as well as in appearance, rendered more profitable by the greenbacks. There is therefore no error in saying that the business of the country enjoyed unwonted prosperity during the war. And it may be added that the active business man is probably a more potent factor in determining the community's feeling about "good times" and "bad times" than is the workingman, the landlord, or the lending capitalist.
The effect of high profits, however, is not limited to producing a cheerful frame of mind among business men. Under ordinary circumstances one would say that when the great majority of men already in business are "making money" with more than usual rapidity they will be inclined to enlarge their operations, that others will be inclined to enter the field, and that thus the production of wealth will be stimulated. But the circumstances of the war period were not ordinary and this conclusion cannot be accepted without serious modifications.
1. It has been shown that business men realised the precariousness of all operations that depended for their success upon the future course of prices -- and nearly all operations that involved any considerable time for their consummation were thus dependent. So far did this disposition prevail that it produced a marked curtailment in the use of credit. The prudent man might be willing to push his business as far as possible with the means at his own disposal, but he showed a disinclination to borrow for the purpose. Thus the uncertainty which all men felt about the future in a large measure counteracted the influence of high profits in increasing production.
2. The foregoing consideration of course weighed most heavily in the minds of cautious men. But not all business men are cautious. Among many the chance of winning large profits in case of success is sufficient to induce them to undertake heavy risks of loss. On the whole, Americans seem to display a decided propensity toward speculative ventures and are not easily deterred by having to take chances. To men of this type it seems that the business opportunities offered by the fluctuating currency would make a strong appeal. But, while the force of this observation may be admitted, it does not necessitate a reconsideration of the conclusion that the instability of prices tended to diminish the production of wealth. For in a time of great price fluctuations the possibilities of making fortunes rapidly are much greater in trade than in agriculture, mining, or manufactures. Every rise and fall in quotations holds out an alluring promise of quick gain to the man who believes in his shrewdness and good fortune, and who does not hesitate to take chances. The probable profits of productive industry in the narrower sense might be larger than common, but this would not attract investors in large numbers if the probable profits of trading were larger yet; and such seems clearly to have been the case during the war when the paper currency offered such brilliant possibilities to fortunate speculators in gold, in stocks, or in commodities. Instead, then, of the greenbacks being credited with stimulating the production of wealth, they must be charged with offering inducements to abandon agriculture and manufactures for the more speculative forms of trade.
This tendency of the times did not escape observation. On the contrary, it was often remarked and lamented in terms that seem exaggerated. Hugh McCulloch, for instance, in his report as Secretary of the Treasury for 1865, said:
There are no indications of real and permanent prosperity . . . in the splendid fortunes reported to be made by skilful manipulations at the gold room or the stock board; no evidences of increasing wealth in the facts that railroads and steamboats are crowded with passengers, and hotels with guests; that cities are full to overflowing, and rents and the necessities of life, as well as luxuries, are daily advancing. All these things prove rather . . . that the number of non-producers is increasing, and that productive industry is being diminished.
In one of his reports as special commissioner of the revenue, Mr. Wells said:
During the last few years large numbers of our population, under the influence and example of high profits realized in trading during the period of monetary expansion, have abandoned employments directly productive of national wealth, and sought employments connected with commerce, trading, or speculation. As a consequence we everywhere find large additions to the population of our commercial cities, an increase in the number and cost of the buildings devoted to banking, brokerage, insurance, commission business, and agencies of all kinds, the spirit of trading and speculating pervading the whole community, as distinguished from the spirit of production.
Within the period under review, then, it seems very doubtful whether the high profits had their usual effect of leading to a larger production of raw materials or to an increase in manufactures. The prudent man hesitated to expand his undertakings because of the instability of the inflated level of prices; the man with a turn for speculative ventures found more alluring opportunities in trade.
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