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 observation suggest.

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 operations.

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 forbearance.

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 line.

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 far conceded.

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 its task.

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 28, 1860.

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 by Nicaragua. 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 nature.

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 imperiled.

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 exequaturs.

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 shall relate.

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 of bonds.

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 of speculation.

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
strengthen it.

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 were issued.

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 legislative relief.

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 need.

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
experiences.

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.

GROVER CLEVELAND