Specie Payments

Collier's New Encyclopedia (1921)

SUSPENSION OF, AND RESUMPTION OF, terms signifying the regulation of currency during times of stress, as during a war. Suspension of specie payments means that the Government and the banks suspend payments in metal coin, silver or gold, and issue instead "credit money," in paper. This was done in the United States in 1862, when the Government found itself compelled to borrow more money than could be raised by the banks of the country. In other words, the need of money by the Government, suddenly expended, found the money in circulation inadequate to meet that need. So paper money must be issued to fill the gap. When this is done recklessly and without restriction, as it was in 1862, this paper currency depreciates es in value. The resumption of specie payments after such a period of financial dislocation must necessarily be very gradual. In the above instance resumption was not begun till 1879, and then it was several years more before normal conditions were restored. During the Civil War the Government was again compelled to suspend specie payments because of vast quantity of metal currency which was being hoarded by the people. A large volume of Treasury notes were, therefore, issued and made to take the place ce of metal money. It was 1879 before the resumption of specie payments in this case begun. During the World War the United States was practically the only belligerent country which was not compelled to suspend specie payments, the result being that its currency is now at a premium in all other countries.