The history of Chicago furnishes one with a complete history of an irredeemable papermoney system. Emigration was fast tending westward in 1835. Government land was $1.25 per acre. The emigrants had little or no money, and would purchase land on credit at greatly advanced prices. Eastern speculators flocked here and took advantage of this condition of things. The government money received for lands would be deposited in the banks, credited to the government, and then reloaned back to speculators. Thus the government had credits in banks to more than the amount of their capital, and their assets consisted almost entirely of the notes of western speculators. The government was out of debt, and had no use for its surplus, which was forming the basis of those large speculative loans, and men became even more excited and reckless than were the land operators here in Chicago at the time of the recent panic. Besides, money was taken from every branch of business to invest in these western speculations.
The President of the United States had no power to stop the sales of lands or to limit bank discounts. He saw the immediate necessity of arresting this condition of things, and he had no other way to do it than to issue an order that nothing but gold and silver should be received for the public lands. According to an invariable law, a redundancy of paper had driven the precious metals out of the country, and the banks had not the specie wherewith to redeem their bills, which were fast being presented to obtain land-office money. The banks all failed, and corporations and individuals issued certificates of indebtedness, which were interchanged as currency. States, counties, and cities paid their debts in warrants upon an empty treasury. The canal commissioners paid contractors in scrip, and the contractors paid their laborers in a lesser scrip, redeemable in the scrip of the commissioners.
Nearly every man in Chicago doing business was issuing his individual scrip, and the city abounded with little tickets, such as "Good at our store for ten cents," "Good for a loaf of bread," Good for a shave," "Good for a drink," etc., etc. When you went out to trade, the trader would look over your tickets, and select such as he could use to the best advantage. The times for a while seemed very prosperous. We had a currency that was interchangeable, and for a time we suffered no inconvenience from it, except when we wanted some specie to pay for our postage. In those days it took 25 cents to send a letter east.
But after a while it was found out that men were over-issuing. The barber had outstanding too many shaves; the baker too many loaves of bread; the saloon-keeper too many drinks, etc., etc. Want of confidence became general. Each man became afraid to take the tickets of another. Some declined to redeem their tickets in any way, and some absconded. And people found out, as is always the case where there is a redundancy of paper money, that they had been extravagant, had bought things they did not need, and had run in debt for a larger amount than they were able to pay.
Of course, nearly everyone failed, and charged his failure upon President Jackson's specie circular. In after times, I asked an old settler, who was a great growler in those days, what effect time had had upon his views of General Jackson's circular. His reply was that General Jackson had spoiled his being a great man. Said he, "I came to Chicago with nothing, failed for $100,000, and could have failed for a million, if he had left the bubble burst in the natural way."