/ \ R E P O K T S OF THE SILYEE COMMISSION OF 18 7 6 [Being a reprint of Senate Report No. 70;}, 44th Congress, Second Session.] WASIIIXGTOK: GOVERNMENT riilNTINCf OFFICE. I S S 7 . [Public Eesolution — Ko. 27.] Joint resolatiou providing for the printing and distribution of documents of the mon- etary conferences of eighteen hundred and seventy-eight and eighteen hundred and eighty-one, and the report of tlie monetary commission created under the joint reso- lution of August fifteenth, eighteen hundred and seventy-six. Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That there be printed and bound in cloth five thousand copies each of the Eeports of the International Monetary Conferences of eighteen hundred and seventy-eight and eight- een hundred and eighty -one ; also the report of the monetary com- mission created under the joint resolution of August fifteenth, eighteen hundred and seventy-six, being Senate report Number seven hundred and three, Second Session Forty-fourth Congress, with such indices to the three reports as may be supplied by the Secretary of State; three thousand copies of each for the use of the House of Representatives, and fifteen hundred copies of each for the use of the Senate ; and that the Public Printer hold the remaining five hundred copies of each for sale, at ten per centum advance on cost-price, to any person ajiplyiug for the same. Approved, August 4, 1886, . . • •• , », • • • ^ UJ u. 44th CoNaREss, \ SEKATE. i EepoeT 2d Session. j ) No. 703. if i m THE SENATE OF THE UNITED STATES. March 2, 1877. — Ordered to be printed. Mr. Jokes, of Nevada, from the Monetary Commission created under the joint resolution of August 15, 187G, submitted the following RE POET: The commission created undet' the joint resolution of August 15, 187C, sub- mit the folloicing report: The resolution creating the commission and defining its duties was as ^S follows : ^ Besolred hy the Senate and Honse of Ecpresentativcs, That a couiraission is hereby au- \\^ thorized and coustituted, to consist of three Senators, to be appointed by the Senate; three uiembers of the Honse of Keprescutatives, to be appointed by the Speaker ; and experts, not exceeding three in nnn)ber, to be selected by and associated with them : with anthorify to determine the time and place of meeting, and to take evidence, and whose dnty it shall be to iuqnire — First. Into the change which has taken place in the relative value of gold and silver ; the causes thereof, whether permanent or otherwise ; the ctfects thereof upon trade, commerce, finance, and the proi>ics covered 1»,\ the, icso- lution of August 15, l.S7(J. 'Jiu' (jhambers of commerce in the leading cities in this country wei-e invited to turnish, aiid «lid furnish, lists of the persons most likely to be able to give information. ail 2 STATEMENT OF PAPERS APPENDED TO EEPORT. A large number of persons appeared before the commission, who were orally examined. In addition, numerous written papers from various sections of this country were received in answer to the circulars of the commission. These papers, as well as the oral testimony taken down by steno.crrai)hers, are reported herewith. Our ministers abroad have exhibited a patriotic and intelligent zeal in collecting official and other information in the countries to which they are accredited. The documents which they have furnished are very valuable, and some of them not attainable except through official applications. Some of our ministers have added able and interesting original papers. All these documents and contributious are herewith submitted. The commission are much indebted to the Secretary of State for his prompt and courteous co-operation in facilitating their communication through his Department with our ministers abroad. They are also indebted to the Bureau of Statistics, which promptly and courteously furnished all the information asked for. Several gentlemen in Europe, eminent as financial authorities, have addressed communications to the commission, which are among the submitted papers. One of these gentlemen, M. Cernuschi, appeared personally before the commission, and furnished important and valu- able information, which will be found in the reported testimony. The thanks of the country are due to him and to the other distinguished citizens of foreign nations who have made these disinterested efforts in the elucidation of a question important to the welfare of mankind. There are also submitted herewith special rejjorts of the secretary of the commission upon European and American legislation in respect to subsidiary coinage and upon other subjects. In respect to the jireparation of the minute on the production of silver in the United States, it may be stated that in 1873 a new body of paying ore was discovered in one of the mines of the Comstock lode in Nevada. Similar bodies of nearly equal extent had been previously discovered and exhausted in the Spanish-American silver-lodes and in the Comstock lode, without attracting universal attention or arousing universal fear that the commerce of the world was about to be deluged by a flood of silver, but in the present instance, through persistent and infectious exaggerations in respect to the extent and richness of the new ore- body, the most visionary expectations and unwarranted fears became universally epidemic. The estimates of the value of the ore in sight ranged from $300,000,000 to five times that amount, all of which was generally believed to be in silver. The probable out-turn of this new bonanza is a leading topic in the report of the British silver com- mission (1876), which contains, among other evidence on the subject, a quotation from a German newspaper, the Reichsanseiger, of March 14, 1876, which gives, as foremost of the " three principal causes for the depreciation of silver:" Ist. The discovery ofthe great aud celebrated silver-miues in Nevada, which in reality produce fabulous quantities of silver, the pi'oduction for the current year being valued at five hundred million francs. Deeming it ofthe first importance that these estimates and statements should be subjected to a practical and careful scrutiny, this commis- sion employed Mr. Alexander Del Mar, a gentleman technically qualified for such an investigation, to visit the mines in j)erson, and ascertain from original sources their past aud prospective i)roduction, and also generally to inquire into the silver production ofthe United States, and its sources. The result of this mission will be found in the Minute on the Silver SILVER-PRODUCTION OF NEVADA MINES. 6 Production of the United States, referred to above. ^linutes prepared by Mr. Del Mar on the coinage of the United States since 1792, annual production of silver throughout the world, annual production of gold throughout the world, and on other subjects are also reported herewith. The yield of every mine in Nevada, annually, for sixteen years, has been ascertained with precision, and of the larger mines the yield by months. The statistics have as yet been collated only for the calendar years 1871 to 187G, inclusive ; the previous years, being of lessimportance in the present connection, have been left for future attention. In addition to this work, the testimony of the persons in San Francisco who have compiled the generally-accepted statistics of the production of the precious metals in this country, was taken with the view of ascer- taining their methods of computation and the reliability thereof. Briefly, the investigation shows that the product of the Big Bonanza thus far has not exceeded $52,500,000 during the four years that it has been worked, making an annual average of about $13,000,000, of which 45 per cent, was gold, leaving for the average annual product of silver from this ore-body a fraction over $7,000,000. Taking all the iQiines of the Comstock lode together, during sixteen years of unprecedented activity in mining, assisted by the moet perfect and powerful mechanical appliances, there have been found some twelve or thirteen ore-bodieS; which have yielded, altogether, about $240,000,000, or an annual average of $15,000,000, of which about forty-seven and one-half per cent., or $7,125,000, was gold, leaving $7,875,000 as the av- erage annual production of silver. The silver product of the State of Nevada has been collated only for the six years ended December 31, 187G. During this period the aver- age annual product was $19,000,000, and for the vear 1870 by itself only $28,000,000, instead of $100,000,000, so confidently stated by the lieichs- anzeiger. The silver product of the United States during the same period was $155,000,000, making an annual average of $20,000,000; the product for 187G by itself was $38,200,000. When these returns are contrasted with the computations -which have hitherto obtained currency, it will be seen that the latter have uniformly and greatly exaggerated the pro- duction of silver in this country. America, since its discovery, has been the chief source of the world's s^upply of the precious metals ; and, as the proportion of silver in that supply was much greater ])rior to the California gold discoveries than it was in the Old World, either before or after the discovery of America, the opening of the American mines was followed by, if it did not cause, a considerable, although slow, widening of the relation between the two metals. Humboldt (Fluctuations m Supply of Gold, published in 1838) says : The relative value of gold and silver fluctuated during the first hundred years sub- scfjucnt to the discovery of (he new continent between 1 to lO-j^ and 1 to 12; in the last two centuries, between 1 to 14 and 1 to 16. Their relative value settled, however, about the middle of the seven- teenth century, at between 15 and IG to 1. In England it was fixed by Sir Isaac Newton, in 1717, at about 15J- to 1. At the commence- ment of tliis century (1803) France conformed to the mean of the relations existing at tiiat tiine by fixing it at 15.^ to 1. The Ihictuations in tlie relative market value of gold and silver were unimportant during the ])resent century until 1873, when the (Icrinaii and American laws tode- monetize silver were e'liacted. The determination of (J<'nnany to enact such a law had been previously announced by the decree of December 4 SILVER STEADY BEFORE THE DEMONETIZATIONS. 4, 1871, and tho American movemeuts to the saiue end, which seem to have been better understood in Europe than in this country, were com- menced as early as 18C8. The general money system of Europe had been that of the double stan- dard until 1873. The conspicuous exceptions were Holland, which had been during" much the larger part of its history a single silver standard country, and England, which had adopted the single gold standard in 1816 by law, and in 1821 in fact. In consequence of the apprehensions of a fall iu the value of money, or, what amounts to the same thing, a rise in wages and in the price of property, excited by the California and Australian yield of gold, Belgium adopted a single silver standard in 1850, and the German states in 1857. Belgium, however, returned to the double standard in 1861. Germany and the United States demonetized silver in 1873. At that time it was neither depreciated nor unsteady" in value, nor had any change occurred in the relative production, cousumption, or distribution of the precious metals to indicate its depreciation in the future, nor was any actual or probable depreciation assigned as a reason for its demonetization. The average flow of silver to India was undisturbed, and the Big Bonanza in the Com stock lode was undiscovered. Mani- festly, the real reason for the demonetization of silver was the appre- hension of the creditor classes that the combined production of the two metals would raise prices and cheapen money unless oue of them was shorn of the money function. In Europe this reason was dis- tinctly avowed. It cannot be successfully controverted that the sole causes of therecent disturbance in the relative valueof gold and silver were the demonetiza- tion of silver by Germany, this country, and the Scandinavian states, and the closure of the mints of Spain, Holland, and the Latin Union against it. Twelvemonths agotwo other causes were insisted uj)on, name- ly, the falling oil" of the India demand for silver and an enormous actual and anticipated yield of silver by the Comstock lode. TheAsiaticde- maudislully restored, and the actual silver production in Nevada is now not only more correctly understood, but discussion has established the general conviction, which has always been that of the soundest authori- ties, that no increase in the production of the precious metals which is at all probable would have any immediate appreciable effect upon either their combined or relative value. Humboldt (Fluctuations, &c., 1838) says: In the modern world, the universality and rapidity of communication, which restore the equilibrium as well as theamount of the accumulated masses of gold and silver alreadi/ existing, tend to render still more stable the relative value of the metals « * » The enormous masses of precious metal already accumulated in Europe render any consider- ahle or continued variation iu the relative value of gold and silver impossible. Expe- rience has shown this. In England, for instance, in the ten years from 1817 to 1827, more than 1,294,000 marks of gold [$180,959,000] were converted into money, and yet this monopoly of gold only raised the proportion of it to silver from 1 to 14.97 to 1 to 15.60. * * * Any increase in the production which our imagination could call into existence would appear infinitely triiiing compared with the accumulations of thou- sands of years now in circulation. Changes in the relative value of the two metals are entirely different from changes in their absolute value, or, in other words, their value as compared with all other things. Thus one metal may have fallen greatly as compared with the other, and at the same time not only may not have lost, but may even have increased in purchasing power. In describing a divergence in the relative value of the metals, without ref- erence to the purchasing power of either, it is as correct to say that one has risen iu value as to say that the other has fallen. In fact, looking only DIVISIONS OF THE QUESTION. 5 to the relation of the metals, both things have occurred. One has fallen and one has risen, each relatively to the other, to the full extent of the divergence. In order to ascertain whether silver has fallen or gold risen since 1873, not relatively to each other, but relatively to all other things, a comparison must be made between general prices in gold and silver, res])ectively, then and now. Such a comparison would show that the purchasing power of gold has increased since then in all countries, and that the purchasing i)ower of silver has decreased in none. The discussion of the use of silver as money involves several ques- tions, which, if not divisible, are distinguishable ; or, in other words, if so intimately connected as not to be susceptible of a separate decision, they are yet so distinct that it will subserve the purpose of both clear- ness and convenience to consider them separately. The first is, whether the universal employment of silver as money co- extensively and concurrently with gold in times past has been, upon the whole, justified by adequate considerations. The second is, whether, if so justified heretofore, new conditions have arisen to make this employment of the two metals inexpedient at the present time. The third is, whether the discarding of either of the two metals as money would not cause such a fall in the prices of commodities and prop- erty, and consequently impose such unjust and ruinous burdens on debtors, individual and national, as to be justifiable on no plea of con- venience, and defensible only on the plea of absolute necessity. The fourth is, whether the employment of silver as money by the United States is a practicable policy in view of its actual demonetization in several countries and of its threatened demonetization in others. The fifth is, whether, if the policy be practicable, it is demanded, or otherwise, By the commercial, industrial, and financial interests of the United states. I. OBSERVATIONS UPON THE GENERAL QUESTION OP EMPLOYING THE TWO PRECIOUS METALS AS MONEY. The question of the desirability and utility of using both gold and silver as money metals has been decided in the affirmative by the gen- eral judgment and practice in all historical times. This statement may possibly require some explanation in respect of India and China, which contain the two greatest masses of human population, and, upon com- mon estimates, rather more than one-half of the total population of the globe. Gold cannot take the place of silver as the money of those re- gions, because gold is too valuable to measure the small earnings and expenditures of their inhabitants. In India, under the British adminis- tration, silver is the only legal tender. What the legal tender may be in China is obscure, but in respect to the inhabitants of both China and India, and more esi)ecially in respect to the ruder poi)ulations in other parts of Asia and in Africa, the legal-tender (]uality of money is of far less inii)ortance to them than it is to the highly civilized i)opida(ions of Europe and America. The ramified system (►f credits, frequently on long time, and sometimes ])erpetual, which seems inseparai)le from a iiigh (;iv- ilizatioii, is unknown to tlieiitajority oilhehuman race, to whom llie prin- cipiil use of money is to make jMiicliases, and not to pay ilebts. The amount ofgold is small as compared with the amount of silver in 1 lie East. Gold is not the money of the East, not are the prices there intluonced 6 GENERAL REASONS FOR DOUBLE STANDARD. by its scarcity or abuiitlaijce, as lliey are by the scarcity or abuDclaiiceoF silver. But it is readily accepted as a precious commodity, at about its silver value in Loudon. In the presence of this general judgment of mankind in favor of using both the precious metals as money, it will be sufticieut to state summarily some of the consideTations which justify this judgment. The fluctuations in the aggregate current su])ply of tlie two metals are less frequent and less violent than are the lluctuations in the sup- ply of either metal, and consequently the fluctuations in the value of the two, used together as money under the double standard, are fewer in number and less in degree than would be the fluctuations in the value of either one of them, and the chances of avoiding the evils of an iusuflicient supply of money are much greater. No considerable simul- taneous increase of both has occurred since the Christian era, with the single exception of the period when the mines of the New World were opened. Whenever one of the metals has been produced in unusual quantities, the production of the other has generally remained station- ary or has declined, so that variations in the aggregate production have been restrained within endurable limits. Thus, there was no increase of the silver yield when gold was produced in unusual quantities from the Brazilian mines and during the first half of this century from the Eussian mines. The production of silver remained steady during the first fifteen years of the working of the gold fields of Australia and California, and did not increase until their productions declined. Gold and silver are. both fit for money, by all the necessary qualities of indestructibility, resistance to chemical changes, divisibility, general steadiness of combined production, and amount of combined stock, which is small enough to make them precious, and at the same time large enough to render them convenient in ordinary handling. They are the only metals which combine these qualities. With augmenting capital, increasing population, the continued spread of civilization and stable government, increased efficiency of machinery, and improved processes of mining, it may be that the production of gold and silver will be increased ; but under the conditions named an increased pro- duction would be necessary for the preservation of the equilibrium between money and all other things. The considerable diflerence in the value of the same weight of the two metals recommends the use of both as money. Gold, in any condi- tion of purity heretofore adopted in coinage, cannot be used for ordinary retail transactions. A gold coin of the value of an average day's labor in Europe, or even in America, would be too small for handling; and in Asia a gold coin measuring a month's wages would be inconveniently small. It is very doubtful if any contrivance of coinage could make gold answer the purposes which silver has always answered in the smaller exchanges. The expedient of a gold coin of which the principal weight and bulk should be alloy may be suggested, but the genuineness and real value of such a coin would elude ordinary means of verification ; and it is doubtful if it could ever be made to command that ready and universal confidence essential to money. It would be an experiment full of hazard. Silver is especially adapted for coins of small value, which are the only ones used by the masses of mankind, and may be used without inconvenience in the largest transactions, as modern appli- ances have made it feasible to handle even the largest sums of silver without inconvenience. The two metals together fill but scantily the measure of the money needs of the world, and they can only fill it upon GENERAL REASONS FOR DOUBLE STANDARD. 7 the coiiditiou that botb are mouey in the fullest seuse; and nothing is such mouey if it be restricted in its legal-tender function. The combined stock of gold and silver is so large in comparison with the amount of their current production that variations in their current supply aflect stocks only in a minute degree. A certain percentage of the current sui>ply is constantly needed to keep the stock of the precious metals good against loss by accident, abrasion, and their absorption in the arts. But this is not all that is required. The rapid increase of the world in population and commerce demands a corresponding increase of the stock of the precious metals, in order that the relation between mouey and all other thiugs may not be disturbed, and that the ruin of productive interests by falling prices may be avoided. The greatest gold yield ever known was during the live years ending with 185G. The annual average production during that period was $150,000,000, while tUe silver production during the same period averaged annually only $40,000,000. This was an enormous increase of the annual gold sup- ply and consequently in the aggregate supply ; but the excess of supply in any one year was only an imperceptible addition to existing stocks, and so raj»id was its absorption by the increased demands of business that its effect on prices was not visible for several years, and the maxi- mum increase of prices finally produced, and which was soon lost, did not exceed 20 per cent. Tooke says (History of Prices, vol. 6, pages 158-194) that notwithstanding the increase of metallic supplies from 1848 to 1856, there was in 185G no '•'' corresponding increase of general prices ; ?ior, in the case of large groups of commodities^ any increase of prices whenever, but, on the contrary, prices rather sunk to a loicer than rose to a higher level.'''' •The stocks of gold and silver being much greater now than in 1848, they would be less affected by any new discoveries even of the same impor- tance as those of California and Australia. So, also, new supplies of the precious metals absolutely as great as those of the years following 1848 would be of far less consequence in their relation to the vastly increased amount of commodities, exchanges, and population of the present time. It is one of the common estimates that in 1848, thedate of the California discoveries, the bullion value of the world's stock of plate, coin, and bars was $2,800,000,000 in gold and $4,000,000,000 in silver, but of coin and bars alone $1,200,000,000 in gold and $2,200,000,000 in silver. The total produ<;tion of gold and silver in the five years ending with 185G was $950,000,000, being an addition of only 14 per cent, to the total stock, inclusive of plate, or of 28 per cent, to the stock in coin and bars. The total production of gold alone in the same years was $750,000,000, which was an ae practicfilly based on one metal, and it the cheai)er and more available one. Whenever the legal and mail^et relations of the metals eoiiieidti there would be duality in the material of the standiird, but unity in its value, which would make it in its all iuiportant feature a single titaudard. 10 GENERAL REASONS FOR DOUBLE STANDARD. The philosophy of the double standard is that a rise in the value of money and a iall in general prices are the greatest evils which can befall the world, and its object is to prevent, as far as possible, the occurrence of these evils. It takes no precautions against a fall in the value of money, because in the whole history of the human race not a single instance can be pointed out of a fall in the value of either or of both of the metals which has not proved a benefaction to mankind; while, on the other hand, during every period and whenever a rise in the value of metallic money has occurred it has been attended by financial, industrial, political, and social disaster. An increasing value of money and falling prices have been and are more fruitful of human misery than war, i^estilence, or famine. They have wrought more injustice than all the bad laws which were ever enacted. Under the double standard these evils could never occur, except by a rise in the value of both metals, while under the single standard they might be caused by a rise in the value of one of them. The statement sometimes made that the two metals never in fact circulate iudifierently and concurrently is not true. Notwithstanding the legal relation of value between the two precious metals estab- lished in 1792 in this country did not coincide exactly with the market relation, yet they circulated concurrently, with perhaps a preponder- ance of silver in the circulation until 1821, when the resumjition of specie payments in gold by the Bank of England caused an advance in the value of gold and a consequent widening of the relation of value between the two metals. (See papers on the currency ap- pended to the report made in 1830 by Mr. Ingham, Secretary of the Treasury.) Also, after the change made in 1834 in the legal relation of value between the two metals, they circulated concurrently until about 1850, although, on account of the undervaluation of silver by the law of 1834, there was a constant tendency to an exportation of silver in the set- tlement of foreign balances. The draining of a country of its silver coins is necessarily slow, as they are less in value than gold coins, and are consequently diffused among a vastly greater number of holders. It is lor this reason that silver has less fluidity of circulation than gold, and presents greater obstacles to its concentration in large masses. The dangers of a financial panic occasioned by sudden and violent out- flows of the money of a country are therefore less where the circulation is largely of silver than where it consists wholly or principally of gold. The legal relation between gold and silver was fixed in France by the law of 1803 at 15i to 1. This was substantially the market relation throughout the world at that time. After the passage of that law the two metals circulated concurrently in France with the preponderance in the circulation sometimes of gold and sometimes of silver, until re- cently, when the coinage of silver was interdicted in the mints of Eu- rope and the United States. The coincidence of the market with the legal relation of the two metals during nearly three-quarters of this century cannot be supposed to have been due to steadiness in their rela- tive supply, nor to steadiness in the relative cost of their production, for during this period there had occurred the widest fluctuations in both the cost of production and in the amount produced. It must have been largely due to the French double-standard law of 1803, which was a ligature so strong, and which bound the metals so firmly together, at the relation of 15 J to 1, that neither the extraordinarily varying relative supplies of the two metals from the mines of the world nor the fitful demands of single-standard countries for their particular money metal could force them nearer together or wrench them further GENERAL REASONS FOR DOUBLE STANDARD. 11 apart, erxcept locally, temporarily, and in a trifling and unimportant degree. If the United States sbonld resume specie payments under the double standard, with the same legal relation of value between the metals as exists in France, there could not be a reasonable doubt that these two great commercial countries would be strong enough to preserve a coin- cidence between the legal and market relations of the metals, and thereby i^reserve their concurrent use as money. The United States is now relatively' a greater commercial and financial power thau was France in 1803, and with greater opportunities for growth aud devel- opment, and could alone exert a steadying influence on the relation of the metals more powerful than France was able to exert. Under the double standard the debtor may, at his option, avail him- self of money coined out of either metal in the payment of his obliga- tions. This option is of no practical importance, except when a variance between the h^gal and market relations of the metals becomes sensible. Neither does it work any injustice, nor is it, in fact, confined to one side of any transaction. The creditor is swift to avail himself of it when he lends money, and he never lends in the metal which for the time being happens to be the dearer one. He cannot claim, therefore, that it is his equity to be paid in the dearer metal, and he never is so paid unless, between the dates of lending aud of being i)aid, the double standard is abrogated, so that he is enabled to exact what he did not lend. The debtor may justly complain if he is iorced to pay in the dearer metal or money, which he never receives wiien he borrows. The enormous aggregate of debts in this country', x>«blic and private, were contracted b}' borrowing national paper currency or in the purchase of property at paper-currency jn-ices. It is urged that the debtors ought not to com- plain if they are forced to pay these debts in specie, and that they ought to have foreseen that the resumption of specie payments in the near future was probable, and that the right of i^aying in paper currency might be taken away from them. But it cannot be said that they ought also to have foreseen that the option of paying in silver, which had al- ways been theirs, would be taken away, and that they would be con- demned to pay in gold alone, ajid not only that, but in gold enormously appreciated in value, if other importantdoublestaiulardcountriesshould follow our exami)le and make it their sole standard of vahies. If it were ordinarily, or even frequently, the case that changes in the relative market value of the metals were caused by a fall in the value of one of them, as compared with all other things, rather than by a rise in the value of the other, it would to some extent tend to strengthen the theory of the advocates of a single standaid that the woikings of the double standard are inequitable. But if, on the other hand, it can be shown that the ('hanges which have heretofore occurred in the rela- tive market value of the metals have been invariably occasioned by a rise in the value of one of them, and not by a fall in the value of the other, and if it be ])robable, if not certain, that so long as the natural operation of the double standard is not interfered with this will be the case hereafter, then the justice of making i»aymentN in the most avail- able metal could not be disputed, and the double standard, instead of impairing, would i)reservc the eiiuity of contracts. All the changes that ]iav(! occnired in tli(^ ri'l;itiv(^ value of the metals during tln^ present century, ex<;ept those wliicli took i)lae(5 alter the de- monetization of silver by Oerinan.v and the United Statesand the general closure of the mints against it, are clearly traceal)h; to a rise iu ihe- value of one of them by reason of an extraordinary demand of single-standard 12 GENERAL REASONS FOR DOUBLE STANDARD. countries for their particular mone^' metal. lu no instance can any fall be shown to have taken place in the value of the other, as compared with all other things. In 1821, when the Bank of England resumed specie payments in gold, a change occurred in the relative value of the metals in the London market. Silver fell relatively to gold, but there was at that time no decrease in the demand of the world for silver, which was still accepted as money everywhere except in England. No cliange had then recently taken place in the relative production of the metals, nor had England any silver with which to frighten or affect the market. The supply of and the demand for silver was unchanged at that period. It is clear, therefore, that in that instance the change in the relative value of the metals in the London market was not due to a fall in silver, but arose wholly from the new demand for gold and from a rise in its value. When in 1859 such a change occurred in the relative value of the metals in the London market as to carry up the London quotation of standard silver to 62^^01. per ounce in gold, no recent change had then taken place in the relative production of the two metals to cause a change in their relative market value. Gold had been produced in un- usual quantities since 1848, but the effect until 1859 had been merely to produce a gradual and not very great fall in the value of the two metals combined as compared with other things, but not in their relative value. The demand for gold was as strong and steady as it had previously been. The commerce of gold-using countries was as active as ever, and the gold prices of commodities underwent no marked change during that year. But, on the other hand, there was an uqprecedented demand for silver in England for export to Asia. In that single year the silver export from Great Britain to the East was £14,828,521, or over $70,000,000, which was double the amount of the then annual silver product of the entire world. The unprecedented price of silver in London in 1859 was therefore manifestly due to the extraordinary demand for it in that market, and not to a fall in the value of gold as compared with the value of all other things which it is the function of money to measure. In respect to the disturbance in the relative market value of the metals which followed the German demonetization of silver, it could be shown from a comparison of j^rices in silver in 1873 and 1877 that that metal has more than maintained its purchasing power over everything except gold. In 1873, GO d. in gold would purchase an ounce of standard silver in Loudon. In 1877 it only requires 54 d. to buy the same amount. It is within the knowledge of all that 54 d. will now buy, in England, or in any other country, more real estate, more labor, and more of the general commodities which the world deals in, except silver, than 60 d. would in 1873. The exchangeable value of an ounce of standard silver is there- fore greater than it was four years ago. While the general purchasing power of silver has thus been maintained, it would be an inexcusable blunder to deprive it of its debt-paying jiower, and of its power, as money, to check the fall in prices which is now striking as with a palsy the limbs of commerce and industry. It is of the highest importance that the relations of value between money and all other things should be preserved with as little disturb- ance as possible. All experience shows that this important end can be more nearly attained under a money system based on both metals, and through the use of the cheaper metal whenever a change occurs in their relative value. The industrial and economical world find their l^rincipal occupation in the production and distribuiion of those things which are necessary for huumn wants, and which minister to human GENERAL REASONS FOR DOUBLE STANDARD. 13 comfort and hai)piiiess. They areuoteugaged in jusnlting fioin fluctuations in tLe relative value of those inehils, werci a '■'• (jrcat detri- ment to the public.''^ Lord Liverpool did not point out the luiture of the '■'■ detriment''^ caused l)y such changes, nor lias it ever been pointed out by any of the advocates of a single standard. Ii)ven if it be admitted that such fluctuations in the relative value of the metals may occasion- ally occur in the future, as they have in the past, and that lirst one and then the other will, at intervals, jucponderate in the channels of circu- 14 THE REASONS GIVEN FOR DEMONETIZING SILVER. latiou, as it has not been shown that they have caused any substantial injury or even inconvenience in the past, it is not probaljle that they will cause any in the future. The general public would be subjected to neither inconvenience nor loss in such changes. The smaller coins used in retail transactions will always necessarily be silvercoins. In the larger transactions representative paper, based on both of the metals, would, on account of its greater convenience, be universally used in specie- paying countries. The inconvenience arising from a gradual displace- ment, in the reserves of banks and of public treasuries, of one metal by the otherj would scarcely be noticed by the managers of those reposi- tories, and would not be felt at all elsewhere. IL . THE E]VrPLOYMENT OF BOTH GOLD AND SILVER, AS MONEY HAVING BEEN HERETOFORE REGARDED AS DESIRABLE, HAVE NEW CIR- CUMSTANCES ARISEN TO MAKE IT OTHERWISE AT THE PRESENT TIME ? Under this head it will be sufficient to discuss the more limited ques- tion, whether new circumstances have arisen to make it expedient to discard silver, as the discarding of the other metal is not proposed. Some reasons for and against discarding either apply equally to both. But others apply only to silver j and still others apply to that particular metal with peculiar force. It might be expedient, or even necessary, to abandon ttie double standard if, Jirst, the combined production of both' had increased and was increasing to such a degree, in comparison with augmenting needs for money, as to threaten their serious depreciation, and such an increase of the prices of commodities as would derange commerce and subvert the justice of contracts ; or if, second, it could be demonstrated that liuctuations in the relative supply of gold and silver produced immedi- ate efi'ects upon their relative value, and that silver was being produced in such abnormal excess, and gold in such abnormal deficiency, consid- ering the demands for both metals respectively, as to threaten such a continuing and indefinite widening of the relation of value between them as would render necessary frequent changes in their legal relation ; or if, third, there were such changes in the habits of mankind, or in the amounts of money used, as to render silver, by reason of its weight and bulk, less fit to be employed as money than formerly. INCREASED YIELD OF GOLD AND SILVER SINCE 1848. The first supposed case, of a depreciation in the value of gold and silver by reason of their excessive production, involves a wide range of discussion. It is proposed specially to consider the increase of the pro- duction and stock of the precious metals since the California discoveries, the efl'ect of that increase on i)iices and productive industry, and the necessity of a continuing increase to meet the demands of the increasing population and commerce of the world. The gold yield of Australia and California was at its maximum in the five years ending with 1856. The aggregate production of both metals was also at its maximum during the same period. Since then the com- bined annual production of the two metals, instead of augmenting, has diminished. The annual production of silver has increased, but that increase has been more than counterbalanced by the annual decrease in REAL OBJECT OF DEMONETIZATIONS. 15 the yield of gold. ISince 1848 the great bulk of new gold lias been yielded by our Pacific States and by Australia, and nearly all of it from alluvial wasliings, which are yielding- less year by year. It is not controverted that all the probabilities are that the auriferous i)roductiou of both re- gions will continue to fall ofl', although perhaps slowly. It is true that new sources of supply may be discovered, but it is iuji)robable that new sources equally prolific w.ill ever be discovered, and it is only barely pos- sible that thev will be discovered and made available within any near period. It has been said that, " unlike agriculture, there is but one crop in a mine ;" and it may also be said that the greater the number of mines and gold-fields worked out, the less chances there areof finding new ones. Discoveries are hoped for in Africa, on the Amazon, and in the Guiauas; but in all those regions the development of new mines, if, hapi)ily, they should be discovered, would be retarded by tropical heats and diseases, by the barbarous character of the populations, and by the lack of stable governments and consequently of efficient protection of life and i)rop- erty. In California and Australia there were discovered almost simul- taneously the richest and most extensive gold-fields of which there is any record. Their develoi)ment was directed by the genius and prosecuted with the energy of the foremost races of the world, who were favored by all the advantages of free and stable governments, well administered laws, unlimited access to capital, healthy and invigorating climates, together with facilities for attracting great sujiplies of labor. Such a combination of circumstances, never before known, may never occur again ; and, as it is now certain that the California and Australian pro- duction of gold has distinctly passed the culminating point, all sound reasoning admonishes mankind to prepare for a steadily-decreasing yield of that metal. And it is never to be forgotten that in view of the rapid increase of the population, commerce, and money-wants of the world, a stationary supply of the money metals would have all the paralyzing effects which a diminishing supply would have, if poiJulatiou, commerce, and money- wants remained stationary. The steadiness of general prices can only be maintained when money and population increase in equal relative i)roportions. General prosperity and a general fall in prices never did and never can co-exist. ORIGIN OF THE SCHEME OF DEMONETIZATION. The scheme of demonetizing one of the metals throughout the west- ern world originated soon after the discovery of gold in California and Australia, at a time when the yield was at what has since proved to have been its maximum, but which was then expected by many to con- tinue on an ascending scale for an indefinite period. An eminent Eng- lish writer (De Quincey) published at that time an elaborate collation of current accounts, from which he arrived at the conclusion that the annual out-turn of gold would soon reach seventy millions sterling, or .l!350,0(JO,000. On the basis of such expectations, the governments of Europe were invoked by Chevalier and others to prevent t he aiit i(ii)ated depreciation in the value of money, or, in other words, the anticipated rise in general prices, by the demon(;tization, not of silver, but of gold. Chevalier (Fall of Gold, I85G-';>7) said : Tb<; quantity of ^folfl unrnially tlirowii on the gMiP luncli greater than it is. ' * '" If all tbe argeutif- erous lodes of Mexico, Peru, and Bolivia, known to be rich, were worked with the ma- chinery used at Washoe, their yield would really Hood the world. * * ♦ New de- posits of silver will be found, and iunuruerable rich lodes on the Pacific slope .of the tlnited States, not yet opened, will be worked with protit. Tliese sanguine expectations in respect to the yield of silver, like the previous expectations in respect to the yield of gold, have been baffled by the event; but they were sincerely entertained, and were largely in- strumental in alarming the moneyed capitalists of the world and induc- ing them to exert their power and influence with various governments in the direction of demonetizing silver. Their fear now was, not that the increased yield of silver would depreciate that metal relatively to gold, but that it would produce a fall in the value of money, consisting of both metals, as the yield of gold had previously done, and cause a rise of general i^rices, to the prejudice of the income and creditor classes. EXAGGERATIONS OF THE SILVER YIELD. What we are now witnessing, and have witnessed since 1856, is a decrease in the annual yield of gold, exceeding in amount the annual increase in the yield of silver. All the probabilities point to a con- tinuance of this reduction in the yield of gold in the future. If there is danger of an undue increase of the production of the two metals combined, or if there is any good foundation for the hope that the com- bined production can be kept up to the point of correspondence with the increasing net^d of money, it is to be found in a still further increase in the yield of silver, and, for the present, in such increase in this country. From the conditions surrounding its production, it is not reasonable to sux)pose that the supply of silver from Mexico, Central America, or South America will vary much in the future, certainly not in the im- mediate future, from what it has long been in the past. Their produc- tion of silver is now decreasing rather than increasing. The condition of things in all those countries is too stationary in respect of popula- tion, capital, skill, and ijolitical situation to justify the expectation of any great increase in their silver product. The United States is the only highly progressive nation which i)Ossesses silver mines ot importance. There are none in Europe or in the British colonies which are known and worked. It is the mines of the United States which have furnished the entire increase of silver which has occurred since 1860, and it is from these mines only, according to all appearances, that this increase can be maintained or carried to still higher figures. Tabulated statements of the production of silver were submitted to the British parliamentary silver commission of 1876, by Sir Hector Hay, a bullion broker of London, who was referred to by that commission as a very high authority. These tables cover a period of twenty-four years, from 1852 to 1875,both inclusive. They give the annual production of silver outside of America, without any variation from year to year, at £2,000,000, or $10,000,000. This estimate must include the silver ex- tractecl from Spanish lead and other argentiferous imported ores in the refineries of England. During the first two-thirds of these twenty-four years the annual production of Mexico and the countries south of it is put down, without yearly variation, at £6,000,000. But in the last third of these twenty -four years there are some yearly variations, although not great, and the average annual yield is estimated at £5,125,000. In each of the two last reported years, 1874 and 1875, it was £5,000,000. Upon the whole, the production of the world, outside of America, may be taken as small, unimportant, and stationary. In Mexico and the PRODUCTIOX OF SILVER. 19 countries south of thnt re])ublic it is large iind impoitaiil, hut in (lie immediate present decreasing- rather than increasing. Undoubtedly capacities for and possibilities of increasing the yield of silver exist there, but where a business like that of silver-mining has been ])rosecuted steadily and continuously for nearly four centuries, great and sudden changes either in the methods or results of mining- may not be expected except under some such remote contingency as the occupation of Mexico by the people of the United States. In 1800, according to Humboldt, the annual silver-production of Mex- ico and the countries south of it was £7,071,831. During the ])eriod from 1809 to 1829, in consequence of the revolutions against the Sj)an- ish Government, it fell, according to Jacob, to an annual average of £3,109,000. As has been seen, it subsequently advanced to an annual average of £6,000,000, and stands now at about £5,000,0(K). The average annual yield of silver in the United States during the five years ending with 1875 was $23,800,000. As no silver was produced in this country during the tive years ending with 1850, it results that the world's average annual yield of silver in the live years ending with 1875, as compared with the live years ending with 1850, increased $23,800,000 in the United States, diminished $4,353,130 in Mexico and the countries south of it, and was stationary elsewhere. Comparing those two peri- ods, the net increase of the world's annual silver- vield was therefore $19,446,870. More than one-half of the silver-product of the United States is from the Comstock lode. A sudden cessation of the yield of that lode is not to be expected. An average depth of 1,800 feet having been attained, it may be safely presumed that the culminating point of its production has been reached, and that a decrease is probable in the near future. (See minutes on sdver-production.) That such is the judgment of the community where these mining ])roperties are located, and where >!iey are principally held and best known, is shown by the declining market- price of the stocks representing them. The utmost that can be hoped for IS that the total supply may be kept up by increased vigor in the work- ing of the lower-grade argentiferous veins which are found so abun- dantly in the Kocky Mountains and westward to the Sierra Nevada. lUit, from the slowness which characterizes the development of ordinary silver-mines, it is not probable that their yield will increase as rapidly as tlie yield of the Comstock lode will diminish. All that can be safely said on the possible discovery of new and great bonanzas is that the chances are against such discoveries within any near ])eriod. More than three centuries elapsed between Potosi and the ('omstock lode, and it is a fact of observation, both in respect to silver bonanzas and great goldlields, tiiat they are separated I)y great si)aces of g('ograi)hical distance. It certainly cannot be proposed to ])re(licato legislation upon the jjossible discovery of new goldlields like those of Cabfornia and Austzalia or of new silvei' lodes liUe those of Potosi annt experien. The increase of the world's wealth since l.Sl<.> ;ir |iiii|i«'rly ill Illlllrit SlIltt'H, 1850 i5i7, 1:15.(100.(100 1860 l(i, l.7.»,(l()(t,()(lU 1870 :t(», ()(W, 000, 000 24 INCREASING COMMERCE OF THE WORLD. In the British Australian colonies the rate of increase Avas greater. In Europe it was less, although still great. In the workl as a whole it must certainly have kept pace with the increase of the stocks of the precious metals. In Great Britain and Ireland the value of property assessed to iu- come-tax was : 1872 £435,000,000 1848 256,000,000 Increase 179,000,000 It is a striking feature of modern and especially of recent times that the area of civilization, with all its attendant conditions, has been im- mensely extended over substantially unoccupied portions of the earth. The foremost European races have spread rapidly and resistlessly in every direction. Wherever they have planted their feet they have estab- lished order, encouraged industry, built up commerce, created wealth, and infused with the commercial idea the sluggish populations by which they were surrounded. It is thus that Europe gw.ws quite as much abroad as at home, and it will be its glory in coming times to be over- shadowed by its colonies, which are diffusing its blood, genius, arts, and languages over every continent and over the isles of all the seas. While the former seats of civilization exi)and in population and power, new and great civilized nations appear upon the scene. The figures which mark the extent of these new creations enlarge so rapidly and so soon become obsolete and useless that it seems a waste of time to charge the memory with Ihem. The annual imports of Australia are now stat(;d at $250,000,000, implying an aggregate foreign commerce of twice that amount, which surpasses that of Gieat Britain forty years ago, that of France twenty- five years ago, and that of the United States twenty years ago. Canada, the Cape of Good Hope, and other British dependencies attest also the colonizing energy of Great Biitain, and, if less strikingly, it is only because of the contrast with the prodigious advancement of Australia. In South America the colonization of other European races, not accompanied as in the British case by extensions of European sov- ereignty, but equally involving the extension of European civilization, is proceeding upon a great scale. During the year 1875 the European emigration to Buenos Ayres actually exceeded that to New York. If the business of the world is to be based on metallic money the pro- duction of either of the metals would be entirely insufficient. Both gold and silver must still be used as money, and the production of both must continually increase if the advance of the world iu wealth, com- merce, and population is to continue in an equal ratio as in the recent past. If metallic money becomes insufficient, by reason of the demone- tization of either of the precious metals, or from any cause, one of two things must happen — The commercial, industrial, and numerical progress of mankind must be arrested, and if the decrease of money shall be a continuing one and cover a long period of time it must end in an absolute check to progress and possibly in the destruction of existing social and political institutions. Or, what is most probable, relief would be sought in an extension and perpetuation of existing systems of inconvertible money, which owe their origin to the pressure of expanding population and com- merce against the restrictive bounds of a stationary and perhaps declin- ing aggregate supply of the two metals. RELATIVE VALUE OF GOLD AND SILVER. 25 Daring certain periods in tlie past, when prices have been fallin.ij by reason of a shrinkage in the volanie of money, a slow and toilsome advance has been made in the accumulation of wealth. Under such conditions its just distribution is imi)ossible. A shrinking volume of money and falling prices always have had and always must have a tend- ency to concentrate wealth, to enrich the few, and to imjioverish and degrade the many. This tendency is subtde, active, and portentous throughout the world to-day. Fluctuations in the relative production of the metals do NOT affect their RELATIVE VALUE UNDER THE PRESENT CON- DITIONS OF THE world's BUSINESS, SO LONG AS THE LAW OF ONE OR MORE IMPORTANT COUNTRIES PERMITS THE UNRESTRICTED COINAGE OF BOTH METALS. AND INVESTS BOTH EQUALLY WITH THE MONET FUNCTION. It is said that changes in the relative value of the two metals are caused by changes in the cost and amount of their relative current pro- duction, and that from the very chance nature of mining changes in the cost and amount of production must constantly occur, and that, conse- quently, such frequent changes must be made in the legal relation of gold and silver as to render the maintenance of the double standard ex- tremely inconvenient. It has always been a theoretical objection to the double or optional standard that the market relation of value of gold and silver might so diverge from the legal relation as to render a readjustment of the latter occasionally necessary. We have had but one readjustment since 1791i in our own coinage, namely, in 1834. The change of 1837 in the legal relation was too minute and trifling to be called a re adjustment. The re-adjustment of 183-4 was not made necessary by any change which had taken place in the market-relation of gold and silver, but because the legal relation originally established in 170U did not accord with the market-relation at that time. If the projier relation had been estab- lished in 1792, it is doubtful if a re-adjustment would have been required down to the present time. In the debates in the French Chambers upon the law ot 1803, fixing io^ to I as the legal relation between gold and silver, it was conceded that changes in that relation might be required at probable intervals of half a century; but none has, in fact, been made in France since then, nor until recently have any even seemed to be necessary. The relative value of the two metals, which had fluctuated consider- ably during the Middle Ages, settled and became steady about the mid- dle of the seventeenth century. Whether because the great oi)p()siiig forces of the American supi)ly of, and the Asiatic ilemaud for, silver had then reached the flnal atijustment of their etiects, or whatever may have been the cause, the fact is (M-rtarn tlmt from that time on, and for more than two centuries, and down to li^71-'75, when tiic Geiinan de- monetization of silver began to ,()00 might cause a serious depreciation in its value. The extent to which any commodity not in present demand can be held s])eculatively in the market, depends ui>on the number of persons who i)ossess the cai»ital to hold it, and at the same time the confidence and temi)er to induce them to do so. Ten million dollars in silver is a large and onerous amount to be carried speculatively, with the loss of interest and other charges, even in the London market, but it is a wholly insignilicant sum in the circulation of even one considerable country. The much larger sum placed on the markets by the German demonetization of silver, would not have been felt if France hareater excess of gold liiul been brought to the Freueh mint after the California and Anstralian discoveries than could ha\"e been brought to it in silver in consequence of the German movement. There is not, and lias not been since 1873, any question of the power of Fran(;e and its monetary allies in Europe, to sustain silver and the double standard. England and Germany are important countries, but they are uot important enough, with a current annual production of $101,000,000 in gold and only $74,000,000 in silver, to raise gold and depress sil- ver, if France again resumes silver coinage. Either France or the United States could resume the coinage of silver without suffering anything more or worse than the exchange of their commodities or possibly some small amount of gold for silver. If they or either of them refuse to do so, it will not be from expediency or necessity, but becaus^e their ancient opinions have been changed for the new dogmas which originated in the increase of metallic supplies after 1848. WEIGHT AND BULKINESS OF SILVER. The inconvenience and expense of transporting and handling sums in silver sufficiently large to meet the requirements of the increased exchanges of modern commerce is sometimes urged as a reason for the abandonment of the heavier and bulkier metal. To this it is a sulBcient answer that the facilities for transportation have increased as rapidly and as greatly as the volume of commercial exchanges, and even more. In the transportation of the precious metals, the chief cost is the risk, and is therefore j)roportioned to the value, and not to the bulk and weight, which have become comparatively unimportant considerations. If the weight of a given value in silver is greater than the same value in gold, the risk in its carriage is less, because it is less liable to furtive seizure and concealment. As a matter of fact, the charges for transpor- tation are about as low for one metal as for the other. So far as conven- ience of handling is concerned, it is enough to say that both gold and silver are too bulky and heavy for the ordinary transactions of busi- ness. Only a minute percentage of large payments is made in either metal, nearly all of them being made with paper, or by transfers of credits. What is called gold in the markets and in the bank reserves in this country is to a considerable extent not really that metal, but certificates of the deposits of it issued in money-note form by the Sec- retary of the Treasury of the United States. Such certificates may and ought to be issued upon the deposit of silver, which can be held at less risk than gold. They should be issued for bars of both metals, stamped at the Government assay-offices, as well as for coins. They would be much more convenient for money use than coin of either metal. The habits and prejudices of the people of the United States are confirmed in favor of a safe paper money. If by safety is meant constant convertibility at will into coin, no paper money could be safer than that based dollar for dollar on coin or bullion in the Govern- ment vaults. Such j)aper would be universally used in transacting the business of the country. A certificate in money-note form issued by the United States Treasury for a deposit of silver in its vaults would be neither heavier, bulkier, nor less convenient than a like certificate issued for a deposit of gold. Jevons (Mechanism of Money, page 203) says : The use of representative money is becoming so general in the most advanced com- mercial countries, that the portability of metallic money is a question of very minor importance. UNJUST TO REDUCE MEASURE OF VALUES, 33 The Journal of the London Statistical Society (March, 1875) says: Snch is the development of credit in this country, that it has been roughly calculated that 97 per cent, of payments are ordinarily effected by checks, bills, and other expedi- ents of credit ; about '2i per cent, by bank-notes ; and about i per cent, by coin. In this country the proportion of money used in settlinfj balances, reckoniuoj both bank-notes and coin as money, is somewhat larger than in England, but is still small. III. THE CO:\IBINED MASS OF GOLD AND SILVER HAVING BEEN THE MONE- TARY MEASURE OF VALUES, IS IT JUST TO REDUCE THE MEASURE BY DISCARDING EITHER METAL? The facts that both gold and silver have heretofore been used as money, that prices have been controlled by their combined volume, and that existing contracts on an enormous scale have been entered into on that basis by States, municipalities, corporations, and individu- als, are the most important of all the facts to be considered in respect of propositions to demonetize either metal. If gold alone had always been used as money, although less steady as a measure of value than gold and silver together, and in other respects less desirable, the objection would be well taken, that the addition of silver would double the existing volume of money and thereby depreciate it, and thus injure the creditor. The arguments of justice and expediency are more cogent against diminishing the mass of money by discarding silver, when both gold and silver have been always and almost universally used as money. The great majority of creditors have other connections with the business operations of the communities in which they live, and other forms of investment than those which constitute them creditors. What they would gain as creditors by a contraction in the volume of money, would be partially, if not entirely, lost by their unavoidable partici- pation in the general depression resulting from the fall in prices which such contraction would occasion. Alison (England in 1815 and 1845) says of the currency contraction brought on bv the British gold resump- tion policy of 18 19-'21: There can be no doubt that the reduction of interest has injured the holders of the available capital of the country nearly as much, in many cases, as the producing classes have been injured by the fall in the money-prices of their commodities. * * • Probably it has reduced the incomes of creditors forty per cent. And so, on the other hand, what thoy might lose as creditors tluough an abundance of money and a general rise of prices would be more or less comj)ensated by the buo^'aucy and activity of business, and by the enlarged revenues from real estate and ti.xed capital, which follow an in- crease in the volume of money. To the dclitor classes there is no compen- sation fortheappreciationof money, and ^ hey are less able to bear losses. This difference in the respective conditions of debtor and creditor was well summed up in the following language in a report made to tiio United States Senate, June 9, 1808, by Mr. Sherman, chairman of the Committee on Finance: The depreciation of the burden of debt is a loss to a cbi-ss generally benefited by the increased values of fixed property, and better al)li) to bear the diminution of llieir ca])ital; but an increase of the burden of the dchl to the debtor class often jiroducoa absolute ruin. Price, the expresnion of a relation between money and other things. Price is the expression in money terms of the relation which the unit of money bears to a specified quantity, or the unit of each and every S. Rep. 703 3 34 VOLUME OF MONEY CONTROLS PRICE. other thiag in exchange. It is also the exi)ression iu units of property and services of the value of the unit of money, and without having any influence on the relations is the sure indicator of the exchange relations which the units of all other things bear to each other. Market price is the expression in the units of money of an equilibrium between the correlative demands of bnyer and seller. It is, in fact, generally estab- lished through a competition between sellers rather than buyers, the market iDrice of any article being the smallest quantity of money for which the unit of such article is offered for sale in open market. By the word unit,when applied to money, is intended that denomination in which accounts are kept, and in which judgments are rendered for money, as the dollar in this country and the pound sterling in England. By the same word, as applied to commodities, is intended that specific portion or quan- tity by multiples or fractions of which all quantities are accustomed to be described, as a ton for coal or a yard for cloth. The relations in exchange of all other things than money are not at all affected by the volume of money or by its increase or decrease. Nov do changes in the volume of money practically affect a transaction wherein a sel- ler of property makes immediate purchase of other i^roperty with the proceeds of such sale. Exchange by barter can be as equitably ef- fected under one volume of money and under one range of prices as another. But under a credit system, where contracts aggregating a vast amount, to pay money at future periods, have been made, steadi- ness in prices becomes the all-important consideration, and that steadi- ness depends on the steadiness iu the quantitative relation between money and all other things. The performance of contracts to deliver commodities or render services is not made either less or more difficult by an increase or decrease in the volume of money. But nearly all contracts in the commercial world are for the future delivery of money, and the consideration received and the promise made in such contracts are based on existing prices. The command, therefore, which commodi- ties and services may have over money in the future, and which will find its expression iu price, becomes a matter of vital importance. Whenever under any firmly-established Government a system of money has been generally accepted, the value of each unit of such money be- comes 9. general mental conception,which,if it be what is called a value, or metallic money, is not based on the past or probable future cost of producing the material of which it is composed, nor on the average cost of its production, nor on the cost of its production iu either the most or least prolific mine. Nor, if it be what is called credit-money, having full legal-tender functions, is that portion of it which is uuhoarded and in circulation and performing the functions of money, based upon the present value of the promise of the issuer to redeem it, nor ui^on the proximity or remoteness of such redemption. Under firmly-established systems the value of each unit of either metallic or fiat money depends absolutely upon the number of such units and the relation they bear to the services they are required to perform. The purchasing-power of the world's entire stock of metallic money would neither be increased nor diminished by an increase or diminution of its magnitude, if other things should at the same time remain unchanged. The value of that stock can only be changed by an increase or diminution of the things which it is the function of money to measure. If the volume of either metallic money or accepted fiat money should be doubled at however great or little cost, other things remaining the same, the aggregate value of neither would be changed, but the value of each unit would be diminished one-half. METALLIC VALUES NOT DEPENDENT ON COST OF PRODUCTION. SS* The cost of producing the precious metals lias no direct influence upon the value of metallic money, but might tend, although the history of mining does not show this to be the case, to stimulate or discourage production, and, consequently, in long periods of time, to affect the mag- nitude of the metallic money stock, and it is the magnitude of that stock relative to the amount of services it is required to perform that controls the value of each unit of either metallic or fiat money. But even if it were true that au increasing vakie of monej' stimulated mining, the nature of the occupation is such that the increase of the yield would be slow and doubtful, and unless there should occur such improbable, if not imi)0ssible, discoveries as those of California and Australia, whose recurrence has been marked by the lapse of centuries, generations of falling prices and ruin might come and go before relief could be had. In a great majority of the instances, in which the current metallic sup- ply has been largely increased, it has not been due to any stimulus given to mining by the increased value of money, but to the purely chance discoveries of new mining-fields. As often as otherwise, these discoveries have been made accidentally by persons while engaged in otlier pursuits than mining. And whenever they have been made by those engaged in mining, the surrounding circumstances show that they were as likely to have been made at one time as at another, and without reference, ex- cept in a remote degree, to the increasing or decreasing value of money. Indeed, it is to be doubted whether the cost to the miner of producing the precious metals differs at different times, and whether the amount produced does not depend entirely upon accidental discoveries. How- ever this may be, nothing can be more certain than that the production of the precious metals bears no scientific relation to the increase or de- crease of population and commerce, which alone should govern the in- crease or decrease of the stock of money. In respect to almost all other commodities, an advancing ])rice causes an immediate increase in production. In agricultural protlucts a single year suffices, and in manufactured articles periods far short of a year, and the increased production requires no movement of population, but only a different direction of their industries. Gold and silver mines are generally found in sterile regions, remote from populations, and destitute of the supplies and materials needed in mining. It is only a small ]>or- tion of the human race that are both able and willing to leave the coiu- forts and conveniences of home to engage in such a ha/.ar(tii re;ii estate is found to be, not a decline of its nominal pric«', but a diiiiiMution in the number of transactions. Market-reports quote real estate "dwiij 211317 38 PRICES NOT CONTROLLED BY CK'EDITS. few sales, hut prices firm.''^ This stagnation is ascribed to temporary causes, aud a speedy recovery predicted. In order to maintain prices the terms of purchase are made easier. The amount of cash payments is reduced, and the deferred j^ayments, secured by mortgage on the property, extended over longer periods. After a time this expedient fails, and, even then, nominal prices are unnaturally held up for a short period by the struggles of those who have purchased upon these ex- tended credits, andby the tenacity of owners who refuse to sell at lower figures, and mortgage their own property to protract their power to hold. The stagnation of voluntary transactions is finally followed by the activity of involuntary ones under the direction of sherifi's and by the foreclosure of mortgages. Upon any material decline in the price of real estate, a large class of investors, believing that the bottom has been reached, and desiring to l^rofit by the reaction which they think is sure to come speedily, enter the market and temporarily check the decline. Another fall in prices sweeps them and their margins away, and a third class of dealers, now absolutely certain that bottom prices have been reached, and sure that a further decline is impossible, come in as purchasers. Each succeeding purchaser fortifies his conclusion that present prices are bottom prices, by comparing them with and finding that they are no higher than the l)rices of some period in the past which is arbitrarily assumed to be a standard level, below which subsequent prices could never permanently go. It is overlooked that price is only the expression of a relation, and that no correct conclusions can be drawn from a comparison of the prices of two periods unless comparisons be also made of the money stock, population, and exchanges of both periods. Contrary to all calculations as the volume of money shrinks prices continue to fall, aud these dealers encounter the fate of their predecessors. These operations repeat them- selves until universal distrust prevails, and until it is found that, when money is decreasing in volume, prices have no bottom except a receding one, and that they are inexorably ruled by the volume of money. The effects of a decrease of the volume of money in a particular country arising from its abnormal outflow or from its withdrawal from the chan- nels of circulation through the distrust which i)re vails when unsound and speculative undertakings are breaking down, or when the country is convulsed by political disturbances, are the same as the effects of a gen- eral decrease in the volume of money. The result in both cases is a fall in prices. But in the first case the equilibrium is restored by a quickly- returning wave of prosperity, and the evils resulting are confined to individuals aud to special localities ; and those dealers are fortunate who IJurchase in the first stages of the decline. But in the second case the cause of the fall in prices is radical, and must continue until prices go out of existence, unless the decrease in the volume of money is arrested. In the whole history of the world every great and general fall of prices has been preceded by a decrease in the volume of mone3^ There never has been a decrease in the volume of money, nf»r has there ever been a stationary volume of money, unless accompuined by a stationary pop- ulation aud commerce, which has not sooner or later resulted in a gen- eral fall of prices, and there has never been a recovery therefrom ex- cept through a preceding increase in the volume of money. After the volume of money has begun to decrease every dollar of credit extended at the old range of prices aggravates the disaster which must come sooner or later. Stagnation and panic are nothing more nor less than the results of a struggle to make prices express truly the relation between VIEWS OF THE METALLIC SCHOOL. 39 mouey and all other things. Fluctuations of prices frequently arise from special causes, but they are local and temporary in their character. Even were it possible to devise a money system so ixn-fect that steadi- ness in the general level of juices would be absolutely assured, there would still occur occasional fluctuations in the prices of i);uticular com- modities, arisiug from a temporary glut or scarcity of such commodities in the general markets, caused by exceptionally favorable or unfavorable conditions, which might suddenly enlarge or diminish their production, or vary the demaud for them. Such fluctuations cannot be avoided. They mark the ebb and flow of business and no more attect the general level of prices or i)rosperity than the ebb and flow ot the tides afl[ect the general Rivel of the ocean. The i)roducers of and dealers in each article should be better able than anybody else to foresee and guard against them, aud have no reason to conii)lain of theai. But they may well complain when the general level of prices is disturbed by monetary legislation, which they could not foresee, are not responsible for, and whose injnrious efl'ects they could not by any degree of prudence avoid. There have long existed two opposing theories in respect to money. Views of the metallic school. One school advocates a continuance of the generally prevailing system of money made of the two commodities, gold and silver. The especial merits claimed for this system are, that its workings are entirely auto- matic, that the money value of the commodities upon which it is basid depends upon their useful intrinsic qualities and is measured by the average cost of their production, and that their volume depends upon the yield of the mines aud not uiH)n the caprice of legislation. They claim that the province of the Government is not to create mouey, but to coin it, and thereby give to it the best authentication of purity and weight. Very many of this school claim that the investiture of such money with the function of legal tender is merely a desiguatiou of a coined commodity for which judgment shall be rendered in civil ac- tions, and that the value of the commodity is not aflected by it, w^hile othf^rs, who concede that the use of such commodities as money adds something to their value, claim that the law, in conferring the legal- tender function, only ratified what long usage had established. They all maintain that there should be no restrictions on the coinage of any or all of both metals which the mines yield, and that when coined their legal-tender functions should be unlimited. They claim that every con- ceivable system of money has been tested for scores of centuries in the crucible of experience, and that the fittest, the metallic system, has alone practically survived. They admit the unsteadiness in the value and consequently the imperfection, of ntetallic money caused by varia- tions in the consumption, yield, and cost of producing the metals, and by many other unavoidable circumstances and conditions. They admit that at certain periods these causes may increase the value of the money unit to theadvantiigeof the creditor, but they claim that at otlier periods opposite conditions would be sure to oj)erate in the interest of the debtor, and that in the long run it would be "as fair for one as lor the other," and that whatever might be tlu' injustice inllicled on individ- uals, aud whatever the llucttiations in individual lortiine, the gen- eral equitable balance between debtor and cr«'ditoi' would bo main- tained. They claim that the use of metallic money is spiead over so vast an area that changes in the current nu'lallie supply would bo slow in making themselves felt, and that the elastic (puilities of credit 40 VIEWS OF THE PAPER, OR FIAT MONEY SCH( OL. expedients would prevent temporary changes from being felt at all. They claim that any decided increase or decrease in the value of metallic monej' would so stimulate or discourage mining as to restore the equi- librium sooner or later. They admit that there is no remedy for the perturbations in the value of metallic money arising irom fluctuations in the supply of the metals. But they claim that experience demonstrates that there is a limit to the accidents and freaks of production, and none to the folly and designs of legislation ; and, consequently, that the perturbations in the value of paper money would be greater and equally without remedy. They urge that the jDOwer to increase or decrease the volume and value of money at will by legislation, and, consequently, to hold at will the fortunes of individuals and the prosperity of nations, would be a most dangerous one, and that the ever-present necessities of governments would be a constant temptation to its abuse. They claim, finally, that whatever may be the faults of metallic money, those of paper money are worse; that nothing but intrinsic value can measure value, and that paper money has no other than a representative value, anil therefore cannot measure intrinsic value, butthatthe precious metals possess intrinsic value, and for this reason are fitted to serve as its measure ; that value inheres in the quality of a material thing, and not in mental estimation, and hence that nothing but a material thing possessing it intrinsically can serve as its true standard ; that the dan- ger of paper money is illustrated by i)recept, philosophy, and example, and that the financial, political, and social wrecks of states and people, with which it has punctuated history, should serve as warnings against it. Views of the inconvertible paper^ or fiat money school. The other school advocates an exclusively flat paper money, to be is- sued by the Government, which should possess no value on account of the intrinsic qualities of the material of which it is composed, but whose value should be extrinsic and derived from the useful functions with which the Government invested it, and whose each unit should be kept steady in value through legal limitations and regulations of the number of such units issued. The views of this school are that utility, accompanied by limitation of quantity, is the basis of exchangeable value. That this utility may either depend upon such intrinsic qualities as would render the thing possessing them valuable to man in isolation as well as to man in so- ciety, or upon extrinsic, artificial qualities which society may confer upon any article, however intrinsically valueless, by endowing it with the power of performing the money function. That the evident fact that this function does not inhere in and cannot be conferred on any article so as to make it either valuable or useful to man in isolation, while it is essential to the very existence of society, demonstrates that money value is not derived from the useful, intrinsic qualities of the material upon which the money function may be conferred. They also call attention to the facts that, the usefulness to the individual of any article depends solely upon the intrinsic qualities which it may possess, and is not at all diminished by its existence in unlimited quantity, but that money, on the contrary, becomes entirely useless unless its quan- tity be limited. They conclude from these facts that the money value of the material of which money is composed rests solely upon the purely artificial and extrinsic qualities conferred upon it ; that this value is VIEWS OF THE PAPER, OR FIAT MONEY SCHOOL. 41 inseparable from society, and arrows out of its need of and demand for an instrument of valuation and exchange. They maintain that money is not in itself wealth, but a set of counters for computing- and exchanging wealth, or, as was said by Bishop Berkeley, "a ticket entitling to power and fitted to record and transfer this power ;^^ and that " it is of little consequence what materials the tickets arc made of;" that there are certain qualities which are essential to a proper i)erform- ance of the money function; that money should be steady in value, portable, divisible, distinguishable, and dif&cult of imitation; that of all these qualities steadiness in value is the one most essential and indis- pensable ; that the highest office of money is that of measuring values, present and future, and that to perform this office equitably its each unit must possess through time a practically unfluctuating, unvarying purchasing power; that as this steadiness can be secured only through a limitation and regulation of its quantity, the power of limitation and regulation should be always present, and that to this end the material of money should be producible at all times without limit, and as near as possible without cost, and destructible without loss. They maintain that when the money function is conferred uiwn gold and silver, while the requirements of portability, divisibility, distinguishability, and difficulty of imitation are tolerably met, the requirements of constant attainability and iuexpensiveuessareuotmet atall,aud that the superlatively essential requirement of steadiness in value is so imijerfectly met as to render them unfit for money. They claim that the money function is the noblest of all functions and invests anything upon which it is conferred with a utility far greater than is possessed by any other exchangeable article known to man; that this utility is the true and only scientific basis of money value; that the value begotten of this utility is all that is needed for money and all that money can possibly possess, and is all and the only kind of value ever estimated, when money, whether me- tallic or fiat, is used. That whenever the material of money is in demand as a commodity, such demand can neither increase the money-value Dor disturb either the commodity or the money until it rises to the level of the money demand, when it begins to destroy the money. That this is illustrated in subsidiary coinages and in the full-tender silver coinage of the Latin Union, the bullion-value of which, being below the money- value, prevents the metal in the coin from being either exported or used forother than money purposes. That in that coinage it is the legal-tender function conferred by the sovereign authority and verified by its stamp, and not the metal that receives the impression, which really constitutes the monej, and that this stamp of authority would be as efficient and valuable if impressed on paper, and that this had been shown in the experience of our fractional paper currency. That while the bullion in this coinage has added nothing to the value of the money, the Govern- ment stamp has effectually deprived the world of the use of the bullion, and that the cost of the bullion is a loss to the people for which there is no compensation. That the aggregate of the money-value which can exist in any country is limited, and fixed automatically by its environ- ment. That it bears a sure relation, however indeterminate, to the population, wealth, and exchanges of such country as modified by the character and habits of the people, their modes of transacting business, the rapidity with which their exchanges are effected, anrices, it would encourage gambling in prices instead of encour- aging ])roduction, and would enil in llie destruction of that industry which it at first stimulated. Such wouhl be the haste to convert money into j)roperty thatthe price of all forms of [troperty would advance more rapidly than the waj:es of labor. The laborer, excited by the apparent in- crease in the valu(? of ev(u\vtliing, would soon become discontented with the slow accumulati(jnsof liis increased wages. Using his surj)his earn- ings as a basis of credit, which is readily extended upon small margins when i)rices are rising, he would leave the held < f productive industry for the illusory but more inviting Held of speculative venture. An increasing volume of money somitinwa needed,, after long periods of ])ros1ratio7i. It may, however, V»e ])ossibIe tlii'.t when industry has been <1 wailed, commerce paralyzed, and tlie spirit of enterprise (^rushed out l»y a long continued shrinka,ge in tin; voluau; of money and falling prices, the- stimulus of rising prices would l>e a necessary tiMuporary treatment. Atthe(3hristian eratlie metallic; money of the Itimiaii lOmpire amounted to $1,8(10,000,000. liy Mie end of the fifteenth centtiry it hud shruuU to 8. Eep. 703 4 50 SHRINKING MONEY OF THE DARK AGES. lesstlian $200,000,000. Duiiugthisperiod amostextraordinarv aiidbale- fulchauge took place iij tbecouditioii ot tlie world, Populatiou dwiudled aud commerce, arts, wealth, aud freedom all disa])peaied. The people were reduced by poverty and misery to the most degraded conditions of serf- dom and slavery. The disintegration of society was almost complete. The conditions of life were so hard, that individual selfishness was the only thing consistent with the instinct of self preservation. All i)ul)lic spirit, all generous emotions, all the- noble aspirations of man shriveled and disapi)eared as the volume of money shrunk and as i)rices fell. History records no such disastrous transition as that from the Koman Empire to the Dark Ages. Various exi»lanarions have been given of this entire breaking down of the frame-work of society, but it was cer- tainly coincident with a shrinkage in the volume of money, which was also without historical parallel. The crumbling of institutions kept even step and pace with the shrinkage in the stock of money and the falling of prices. All other attendant circumstances than these last have occurred in other historical periods unaccompanied and unfollowed by any such mighty disasters. It is a suggestive coincidence that the first glimmer of light only came with the invention of bills of excbange and i)aper sub- stitutes, through which the scanty stock of the prtcious metals was in- creased in efdcieucy. But not less than the energizing influence of Potosi and all the argosies of treasure from the New World were needed to arouse the Old World from its comatose sleep, to quicken the torpid limbs of industry, and to plume the leaden wings of commerce. It needed the heroic treatment of rising prices to enable society to reunite its shat- tered links, to shake off the shackles of feudalism, to relight and uplift the almost extinguished torch of civilization. That the disasters of the Dark Ages were caused by decreasing money and falling prices, and that the recovery therefrom and the comparative prosperity which followed the discovery of America were due to an increasing supply of the pre- cious metals and rising prices, will not seem surprising or unreasonable when the noble functions of money are considered. Money is the great instrument of association, the very fiber of social organism, the vitaliz- ing force of industry, the protoplasm of civilization, and as essential to its existence as oxygen is to animal life. Without money civilization could not have had a beginning; with a diminishing sup[)ly it must languish, and, unless relieved, finally perish. Symptoms of disasters similar to those which befel! society during the Dark Ages were observable on every hand during the first half of this century. In 1809 the revolutionary ti oubles between Spain and her American colonies broke out. These troubles resulted in a great diminu- tion in the production of the precious metals, which was quickly indicated by a fall in general prices. As alread^^ stated in this report, it is estimated that the purchasing-power of the precious metals increased between 1809 and 1848 fully J 45 per cent., or, in other words, that the general range of prices was GO per cent, lower in 1848 than it was in 1809. Dur- ing this period there was no general demonetization of either metal and no important fluctuation in the relative value of the metals, and the supply was sufficient to keep their stock good against losses by accident and abrasion. But it was insufficient to keep the stock up to the proper correspondence with the increasing demand of advancing populations. The world has rarely passed through a more gloom j" j^eriod than this one. Again do we find falling prices and misery and destitution inse])arable conii»anions. The poverty and distress of the industrial masses were intense and universal, and, since the discovery of the mines of Amei ica, without a parallel. In England the sufferings of the people found ex- INCREASE OF MONEY SOMETIMES NEEDED. 51 pression iu demands upon Parliament for relief, in bread-riots, and in immense Chartist demonstrations. The military arm of the nation had to be strengthened to prevent the all-pervadinji- discontent from ripening into open revolt. On the Continent the fires of revolution smoldered everywhere and blazed out at many points, threatening the overthrow of states and the subversion of social institutions. Whenever and wherever the mutterings of discontent were hushed by the fear of increased standing armies, the foundations of society were honeycombed by ])owerful secret political associations. The cause at work to produce this state of things was so subtile, and its advance so silent, that the masses were entirely ignorant of its nature. They had come to regard money as an institution fixed and immovable in value, and when the price of property and the wages of labor fell, they charged the fault, not to the money, but to the proi)erty and the employer. They were taught that the mischief was the result of overproduction. >rever having observed that overproduction was complained of only when the money stock was decreasing, their prejudices were aroused against labor saving machinery. They were angered at capital, be- cause it either declined altogether to embark in industrial enterprises or would only embark in them upon the condition of employing labor at the most scanty remuneration. They forgot that falling prices com- pelled ca[)ital to avoid such enterprises on any other condition, and for the most i)art to avoid them entirely. They did not comprehend that money in shrinking volume was the prolific parent of enforced idleness and ])overty, and that falling prices divorced money, capital, and labor, but they none the less felt the paralyzing pressure of the shrinking metal- lic shroud that was closing around industry. The increased yield of the Russian gold fields in 184G gave some relief and served as a parachute to the fall in prices, which might otherwise have resulted in a great catastrophe. But the enormous metallic sup- plies of -California and Australia were all needed to give substantial and adequate relief. Great as these supplies were, their influence in raising prices was moderated and soon entirely arrested by the increasing ])opu- lations and commerce which followed them. In the twenty-five years - between 1850 and 187C the monej' stock of the world was more than doubled, and yet at no time during this period was the general level of prices raised more than 18 per cent, above the general level iu 1848. A comparison of this effect of an increasing volume of money after 1848 with the effect of a decreasing volume between 1809 and 1848 strik- ingly illustrates how largely diflerent in degree is the influence upon prices of an increasing or decreasing volume of money. The decrease of the yield of the mines since about 180."), while jiopulation and com- merce have been advancing, has already produced unmistakable syn)p- toms of the same general distrust, non-employment of labor and i)olit- ical and social disquiet, which have characterized all former perio«ls of shrinking money. Steadiness in the volume of money esuential to prosperity. It is in a volume of money keei)ing even pace witii advan(;iiig popii lation and commerce, and in the resulting stea€r capitals in England or France, rests on no philo- sophical basis whatever. Irrespective of the time-contracts, it is of no consequence what the volume of money may be, provided it be subdivided, EFFECTS OF SHRINKING MONEY. 53 into such number of units, or iractions of un ts, as would meet physical requirements, while the equity of such contracts can be met only by luaiutaining the relation betwceu money and other things uudisturbed. Equally fanciful and eironeous is the propositiim that the rates of in terest lor money can be lowered by increasinji its (luantity. It is i)rices, and not interest, which depend ujion the volume of money. The rates for the use of loanable ca])ital depend upon entirely different factors; such as the current rates of business ])rotits, productiveness of the soil, the security of pro])erty, the stability of government, pressure of taxa- tion, and the fiscal policies of governments, such as the maintenance of public debts, which necessarily increase the rate of interest. In truth, increasing the amount of money tends iudiie('tly to increase the rate of interest by stimulating business activity, while decreasing the amount of money reduces the rate of interest by checking enteri)rises and thereby' curtailing the demand lor loans. This is signally illustrated b.v the present condition of things in every part of the commercial world. The rate of interest should be, and under a correct money system would be, merely an expression of the rate of profit which could be uuide through the use of borrowed capital. Effects of a decreasing volume of money. While the volume of money is decreasing, even althimgh very slowly, the value of each unit of money is increasing in corre^spouding ratio, and proi)erty is falling in price. Those who have contracted to pay money find that it is constantly becoming more difficult to meet their engagements. The margins of securities melt rai)idly away, and the confiscation by the creditor of the property on which they are based becomes only a question of time. All productive enteii)rises are dis- couraged and stagnate because the cost of producing commodities to-day will not be covered by the prices obtainable for them to morrow. Ex- changes become sUiggish, because those who have money will not ])art with it for either jiroperty or services, beyond the requirements of actual current necessities, for the obvious reason that money alone is increas- ing in value, while everything else is declining in price. This results in the withdrawal of money from the channels of circMdation, and its de posit in great hoards, where it can exert no infiuence on prices. This hoarding of money from the nature of things mast continue and in- crease not only until the shrinkage of its volume has actually ceased, but until capitalists are entirely satisfied that money lying idle on spe- cial dei)Osit will no longer aftord them revenue, and that the lowest levt'l of prices has been reached. It is this hoarding of money, when its vol- ume shrinks, which causes a fall in prices greater than would Ix' caused by the direct eflect of a decrease in the stock of money. iMoney in shrinking volume becomes the i)aramonnt object of connuerce instead of its beneficent instrument. Instead of mobilizing industry, it poisons and dries up its life-currents. It is the fmitlnl source ol" polilictal and social distnil)ance. It foments strife between labor and other forms of cai)ifal, while itself hidden away in security gorges on both. Jt re wards close-fisted lenders and filches from and hanUrnpts enterprising borrowers. It circulates freely in tiie slock exchange !mt avoids IIk- labor exchange. It has in all ag(;8 been the, worst enemy with which society has had to coiitend. The great and still continuing fall in prices in the liiiiled Slates has proved most disastrous to nearly every industrial enterprise. Tlio bitter experienceof the last few years has been an expensive but most thorough 54 15FFECTS OF iSHRINKlNG MONEY. teacher. It bas taught capitalists neither to invest in nor loan money on such enterprises, and just as thoroughly has it taught business men not to borrow for the purpose of inaugurating or prosecuting them. Of the few business enterprises now being successfully prosecuted, the larger part are based on a monopoly secured either by patents or ex- ceptional conditions. The business man has discovered that the less active and enterprising he is the better he is off. The manufacturer avoids loss by damping down furnace-fires and slowing down machinery. The mining companies would find profit in inactivity, and would i)rob ably suspend operations, were it not for the great loss they would sustain in doing so. Mines can be properly opened only through a great outlay of capital, which would be practically lost if they were closed down for any considerable period of time. The filling up with water, the caving in of galleries, the crushing in of shafts, the rusting of machinery, and the general disarrangement of their interior workings would require for their repair a not much less expenditure than was necessary for their original opening. Hoping for better times, they therefore struggle on against an adverse current, without profit and generally only without loss by redvicing their miscellaneous expenditures to the lowest possible point and wages to a starvation level. The miners ascend from the dark and gloomy depths of the mine with their scanty pittance called wages, to find in a famishing houseliold a gloom that is more profound. They await with heroic fortitude and a sometimes impatient hope the advent of another Sir Humphrey Davy, with a lamp capable of shed- ding light on the cause of existing evils, and of protecting them and all others who depend on their labor for their daily bread against a linger- ing misery more to be dreaded than the deathly danger that lurks in the treacherous fire-damp. The stockholders of railroads have suffered a vast shrinkage in the value of their property and in the volume of their traffic and in rates of transportation, while their debts have remained nominally the same but really increasing. In order to make their decreased receipts meet the interest on their bonds, they are forced to reduce their operating- expenses to the lowest possible point. Their struggles seem to be in vain, and unless that system can be changed which is making each dollar which they owe more valuable, and at the same time causing a shrinkage in their business, and which is chaining labor and all other forms of <;apital to the chariot-wheels ot money-capital, they will, one after another, be swallowed by the l ondholders. In the end the stock- holders Avill be entirely out of the account, and the contest will be be- tween different classes of bondholders, if that can be called a contest where victory is assured in advance to the liens which have priority. Farmers whose lauds are noc mortgaged, and their employes who at least are insured against absolute want, best escape the evils of the times, but the ijrices of agricultural products must finally decline with the reduction in the number and means of the consumers. The tendency of falling i^rices is to break down the vast diversified interests of the country, and to force a constantly-increasing proportion of the po[)ula- tion into the one single primitive industry of cultivating the soil. The Dnited States, instead of continuing a highly commercial and manu- facturing nation, will, until falling prices are checked, become more and more exclusively agricultural and pastoral. Securities have already become so impaired through falling prices that loanable capital has fled affrighted from the newer and more sparsely settled sections of the country and accumulated in large amounts in the great financial centers M^here securities are more ample. The per- SHRINKING MONEY FATAL TO LABOR. 00 soiial and proixTty socuiitiesol individuals bavo <^eiuM ally ceased to be available, except at tlie bij^best rates (»t' iiitei est, or at ruinously low val- uations. Money can be borrowed readily only upon sucb securities as bouds wbicb are based ou tbe unlimited tax levyinji' jjower of the (iov- ernnieut, or upon tbe bonds and stocks of lirst-class trunk-lines of railroad corporations, whose frei,ubt and fare rates are jn-actiially a tax ui)on the eutire i)Oi)ulation and resources of tbe regions which they traverse and sup])ly. The competition among capitalists to loan money on these more am])le securities has become very keen, and sucb se- curities command money at unprecedentedly low rates. These low and lowering rates of interest, instead of denoting financial strength and industrial prosperity, are a ji^uge of increasing prostration. Large accumulations of money in financial centers, instead of being caused by the overflow of a healthful circulation, or even a proof of a suffi- cient circulation, are unmistakable evidence of a congested conditiou, caused by a decreasing and insufficient circulation. The leadiuess with which Government bonds bearing a very low rate of interest are taken, instead ot showing that tbe credit of the Government has im- proved, IS melancholy evidence of the prostratetl condition to which industry and trade have been reduced. There need be no haste in re- minding the public debt at the rates now proposed and considered low. Unless the progress of the commercial world in the policy of contracting money by demonetizing silver is cheidved, bonds bearing a much lower rate of interest than auy yet offered will be gladly accepted by capitalists here and in Eui'ope. When the money stock is diminishing and prices are falling, the lender not only receives interest, but finds a protit in the greatly increased value of the ])rincipal when it is returned to him. A loan of money made in 18(i9, if repaid in LS4S, would have been rei)aid with an addition of 145 per cent, in tlie purchasing ])ower of principal and interest, besides all the interest i)aid. Those wdio have loaned money to this Government since 18GI have already received nearly as much in the increased value of their ])rincipal as in interest, and all the i)rob- abilities are, in respect to the four per cent, thirty-year national bonds now being negotiated, if they are redeemed in gold, that more protit will be made by the augmentation in tbe value ol i)iinerty unjustlx , aiiitalists refuse to exchange money, whose command over property is increasing, Ibi jtroperty, whose command over money is decreasing, also make them refuse to ex<;liange it for labor for the production of pidperty. In a eominen'.ial sense, industrial enterprises are never undertaken nor carried on excej)t with the hope and expectation of gain. This expectation, unless under excep- tional conditions, falling markets destroy. While ciii)italists, for these 58 SHRINKING MONEY FATAL ro LABOR. reasons, cannot afford to invest money in productive enterprises, still less can anvV)od.v afford to borrow money for siicU iiivestaients at any rate of interest, however low, and but little money is being now borrowed, except ibr purely speculative ventures, or to supply i)ersonal and family wants, or to renew old obligations. Money withdrawn from circulation and hoarded in consequence of tailing prices, although neither paying- wages, nor servingto exchange thefruits ot inilustry, nor performing any of the true functions of money, is nevertheless not unproductive. It may not be earning interest, but it is enriching its owner through an in- crease of its own vane, and that, too, without risk, and at the expense of society. If this were not the case, ynd if money were, while idle, losing a little in value instead of guining, or if it simply held 1*8 own, it would be constantly diminished to the extent of the necessary expendi- tures of its owners who, under such conditions would be impelled by every instinct of thrift to seek for revenue through its employment in productive enterpii>es. The pecnliiir effect ot a contraction in the vol- ume of mimey is to give protit to the owners of unem]>loyed money, through the iipineciation of its purchasing power, by the mere lapse of time. It is falling jtrices that robs labor of employment and precipi- lates a conliict between it and moiiey capital, and it is the appreciating effect which a shrinkage in the volume of money has on the value of money that renders the contest an unequal one, and gives to money capi- tal the decisive advantage over labor and over other lornis of cai)ital in- vested in industrial enterprises. Idle machinery and industrial appli- ances of all kinds, instead of being productive of protit, are a source of loss. They constantly deteriorate through rust and waste. They cannot escape the assessor and tax gatherer, as the bulk of mouey does, and must ])ay extra insurance when idle. Labor, unlike money, cannot be hoarded. The da>'s labor unperformed is so much capital lost fofever to the laborer and to society. It being his only capital, his only means of existence, the laborer cannot wait on better times for better wages. Absolute necessity forces him to dispose of it on any terms which the owners of money may dictate. These are the conditions which surround the laborer tljroughout the commercial world to-day. The labor of the past is enslaving the labor of the present. At least that i)ortiou of the labor of the past which has been crystallized into money is enabled, through a shrinkage ot its volume and while l>ing idle in the hands of its owners, to increase its command over present labor and over all tonus of property and to transform vast numbers of honest and industrious workmen intotramps and l)eggars. Theselaborers mustmaketheir wants conform to their diminished earnings. They mustcontent themselves with such things as are absolutely essential to their existence. Consumption istherelbre constantly shrinking toward such limits as urgent necessities require. Production, which must becontiueil to the limits indicatetl by consumi)tion, is constantly tending toward its minimum, whereas its ap- pliances, built up under more favorable conditions, are sufficient to sup- ply the maximum of consumption. Thus idle labor, idle money, idle macliinery, and idle capital stand facing each other, and the stagnation spreads wider and wider. The future affords no hope or prospect of improvement, excejit through a change in financial policies. Prices have been i)ersistently tailing throughout the world since 1873, and as fast and as far in specie-paying countries as elsewhere. If the policy of chaining the industry antl commerce of the world to a single metal be persisted in by the United States, Germany, and the other Euroi^ean countries acting in concert with them, mouey must still rise iu value, and prices must continue to fall. The depression iu productive industry SHKi:SKlxNG MONEY FATAL VO LAliOli. 59 will become more deathly, aud the number ol itlif l.iborersi will iudeti- Ditely multiply. The loss which this country sustaiiiN by reason of the eulorced idleness ol thiee million persons who, aklmugh uile, must still in some scanty way be supplied with lood, clothing, and shelter, is in the aggregate very great, if it be estimated ai one dollar per day lor each laborer, it would amount in two years to a suuj sutlicicnt to tlischaige the national debt, it would pay the interest, at live per cent. |)er annum, on eighteen thousaml million dollars. It woukl be a sum muie than sufficient to supply auew each year the circulating metlium of the country. It would amount, in lour years, to a greater sum thau the world's eutire gold product has amounted to iu the last lilty i)rolitic years. It would aggregate iu ten years a value far greater thau the value of the world's eutire product of both gold and silver for the last hundred years. It would amount in four years to a sum more than sufficieut to duplicate aud stock every mile of railroad now in the United States. Contrasted with the startling sum thus auiuially lost through the shrinkage of money and falling prices, the amount which could by any possibility be lost in a generation ihiougli tiuciiuuions iu the relative values of gold, silver, ami paiJer, woukl weigh as meredu&t iu the balance. If to this loss be added luat caused by the non emi)loy- meiit of productive machinery aud appliances, the aggregate becomes appalling. The average stocks of nearly all commodities are at no time suhicieut lor more than a lew mouths' consumption. Without constant reproduction mankind would soon be stripped of all their movable possessions. ]So more fatal blow, therefore, could be directed against the economical machinery ot civilized life than one against labor, and that blow cau be most effectively delivered through a [tolicy which strikes down prices, if all debts in this country had been doubled by an act of legislation, it would have beeu a far less calamity to the debtor aud to the country than the increase in their real biailen already caused by a contraction in the volume of money. Aud inhuitely more disastrous in every sense than an unjusL iuciease in the burden of debt is the universal, stagnation of industry and commerce re&uliing from the same cause. The doubling of debts would have left the pro- ductive forces unimpaired, while lalling prices are sapping them in- sidiously aud fatally, isations have otteu exhibited an astonishing capacity lor sustaining and repairing the destruction of great and protracted wars. The explanation ot this will be found in the fact that their i)ioductive forces have atsuch times continued vigorous and active. Armies in barracks and on parade are as essentially non producers as when actively engaged, and a considerable proportion ol the additions made to armies iu times of war are recruited from the ranks of non- producers. England was never more j)rosperous thuu during the iSa- poleonic wars. The JS^oithern and Western iStates of this Union were never more prosperous than during the civil war, ami for some time afterward, tto long as all the productive forci's are activ*' almost any burden cau be bcnne. The debts of the country, great as tluy are, would scarcely weigh as a feather if all its labor were employed, in- deed, this country could better all'ord, in an ecoiioniical view, tosupiKut one million of soldiers in the held than to support its present army of three millions that falling prices have conscripted into tlie ranks of non- pioducers. Authority empha8ize» what experience teaches. All resijectablc authorities agree as to the relative etlects of an in- creasiug and decreasing money. Several of them are presented, the 60 AU'l'HORlTIES ON SHKlNKlNCi MONEY. earliest in point of time being the following, from David Hume's Essay on Money: It is certain that since the discovery of the mines in America industry has increased in all the nations of Europe. * * We find that in every kingdom into which money begins to flow in greater abundance than formerly, everything takes a new face ; labor and industry gain life ; the merchant becomes more enterprising, the manufacturer more diligent and skillful, and even the farmer follows his plow with greater alacrity and attention. * * * It is of no manner of consequence with regard to the domes- tic happiness of a state whether money be in a greater or less quantity. The good pol- icy of the magistrate consists only in keeping it, if possible, still increasing ; because by that means he keeps alive a spirit of industry in the nation and increases t he stock of labor, in which consists all real power and riches. A nation whose money decreases is actually at that time weaker and more miserable than another nation which pos- sesses no more money, but is on the increasing hand. Alexander Hamilton, in his report (1791) ou the mint, says: To annul the use of either of the metals as money is to abridge the quantity ot cir- culating medium, and is liable to all the objections which arise from a comparison of the benefits of a fall with the evils of a scanty circulation. Thomas Jefferson, in a letter to Mr. Hamilton (February, 1792), says: I concur with you that the unit must staud on both metals. William H. Crawford, Secretary of the Treasury, in a report (Feb- ruary 12, 1820) to Congress, says: All intelligent writers on currency agree that when it is decreasing in amount, pov- erty and misery must prevail. Mr. R. M. T. Hunter, in a report (1852) to the United States Senate, says: Of all the great effects produced upon human society by the discovery of America, there were pi'obably non» ko marked as those brought about by the great influx of the precious meials from the New World to the Old. European industry had been declin- ing under the decreasing stock of the precious metals, and an appreciating standard of values; human ingenuity grew dull undertheparalyzinginfluencesofdecliningprofits, and capital absorbed nearly all that should have been divided between it and labor. But an increase in the precious metals, in such quantity as to check this tendency, operated as a new motive-power to the machinery of commerce. Production was stim- ulated by finding the advantages of a change in the standard on its side. Instead of being repressed by having to pay more than it had stipulated for the use of capital, it was stimulated by paying less. Capital, too, was benefited, for* new demands were created lor it by the new uses which a general movement in industrial pursuits had developed ; so that if it lost a little by a change in the standard. It gained much more in the greater demand for its use, which added to its capacity for reproduction, and to its real value. The mischief would be great, indeed, if all the world were to adopt but one of the precious metals as the standard of value. To adopt gold alone would diminish the specie currency more than one-half; and the reduction the other way, should silver be taken as the only standard, would be large enough to prove highly disastrous to the human race. The Encyclopaedia Britannica, 1859 (article Precious Metals, by J. R. McCulloch), says : A fall in the value of the precious metals, caused by the greater facility of their pro- duction, or by the discovery of new sources of supply, depends in no degree on the theories of philosophers, or the decision of statesmen or legislators, but is the result of circumstances beyond human control ; and although, like a fall of rain after a long course of dry weather, it may be prejudicial to certain classes, it is beneficial 1^ an incomparably greater number, including all who are engaged in industrial pursuits, and is, speaking generally, of great public or national advantage. Ernest Seyd, 18(»8 (Bullion, page 613 ), says: Upon this one point all authorities on the subject are agreed, to wit, that the huge increase in the supply of gold has given a universal impetus to trade, commerce, and industry, and to general social development and progress. The American Review (1876) says : Diminishing money and falling prices are not only oppressive upon debtors, of whom, in modern times, states are the greatest, but they cause stagnation in business, re- duced production, and enforced idleness. Falling markets annihilate profits, and as it is only the expectation of gain which stipulates the investment of capital in opera- AUTHORITIES ON SHRINKING MONEY. 61 tions, inadequate employmeut is louud lor labor, and tlioso who are employed can only be 60 npou the condition of dimiuiebed wages. An increasing amount of money, and consequently augmenting prices, are attended by results precisely the contrary. Pro- duction is stimulated liy the prolits resulting from advancing prices; labor is conse- quently in demand and better paid, and the general activitj and buoyancy insure to capital a wider demand and bigber remuneration. Leon Faucbet (1843), iu Researches upou Gold and Silver, says: If all ibe nations of Europe adopted the system of Great Britain the price of gold would be raised beyond measure, and we should see produced in Europe a result lam- entable enough. Before a Frencb monetary convention in 1869 testimony was given by the late M. W'olowski, by Baron Eotliscliild, and by M, Rouland, governor of the Bank of France. M. Wolowski said: The sum total of the precious metals is reckoned at tifty milliards, one-half gold and oue-balf silver. If, by a stroke of the pen, they 8upi)rcss one ot these metals in the monetary service, fhey double the demand for the other metal, to the ruin of all debtors. M. Eouland, governor of the Bank of France, said: We have not to do with ideal theories. The two moneys have actually co-existed since the origin of human society. They co-exist because the two together are neces- sary, by their quantity, to meet the needs of circulation. This necessity of the two metals,' has it ceased to exist ? Is it established that the quantity of actual and pro- spective gold is such that we can now renounce the use of silvir without disaster ? Baron Eotbschild said: The simultaneous employment of the two precious metals is satisfactory and gives rise to no com plaint. Whether gold or silver dominates for the time being, it is always true that the two metals concur together in forming the monetary circulation of the world, and it is the general mass of the two metals combined which serves as the measure of the value -ol' things. The suppression of silver would amount to a veritable destruction of values without any compensation. At the session (October 30, 1873) of the Belgian ]Monetary Commis- sion, Professor Laveleye said : Debtors, and among them the state, have the right to pay in gold or silver, and this right cannot be taken away without disturbing the relation of debtors and creditors, to the prejudice of debtors', to the extent of perhaps one-half, certainly of oue-lhird. To increase all debts at a blow (brunqncmenl), is a measure so violent, so revolutionary, that I cannot believe that the Government will propose it, or that the Chambers will vote it. The contrast presented by these anthorities between the efiects of an increasing and decreasing vokime of money shows that if a cliaiige in the one direction or the other is unavoidable, a change in the direc- tion of increase is the most desirable. Undoubtedly the best condition n])on the whole is that of steadiness, or only sncli an increase of money as would coriespond with the advance of population. But with the his- tory before us of thirty centuries of mining, we know that an iiijtirions and excessive increase of metallic money has never occurred. \Vc may feel assured that it never can occur, because the enlargement of commei- cial exchanges, which results from an increase of money, sjx'edily re- stores the equilibrium. The dangei- of an unduly iiicrcasiug money is theoretical and fanciful. The mischief which practically threatens the world, ami which has been the most prolific cause of the social, i)oliti- cal. and indu.strial ills which have aniieted it, is thai of a decreasing and deficient money. It is from siu;h a > jtrincipally on credit, and get the means for improvement on credit. Debt and credit run through all the rami- tications of permanent investment in the United Stales. Vavu (tiiurch edifices do not escapt mortgages. 'J'wo years ago the Stockholder, one of the financial journals ol New Vork, stated it to be the opinion ol well- informed persons that of the lots on Manhattan Island, computed at 1.00,000, improved a ndunim proved, thre(;lburt lis were moil ga-^cd. 'J'his may be too high an estimate, and it may i>e the, case tliat properly is 64 PARLS CONFERENCE OF 1867. mortgaged to a greater^ extent in New York City than in other portions of the conntry. Bat there can be no doubt tliut (»n the lowest estimates the mortgage-debts of the conniry aggregate a vast and startling amount. The question of preserving steadiness in the value of money, and consequentlj' in the prices of property, and especially" of guarding against a change in the direction of contracting the volume and appre- ciating the value of money, is, therefore, the transcendently important one in the discussion of the policy of demonetizing silver. It is a mistake, although a very common one, to suppose that the Paris conference of 1867 recommended the demonetization of silver and the adoption of an exclusive gold standard. What it did recommend was such a unification of the gold coins of the leading commercial nations as would render them convenient for iuternational use. The i)ractical measure proposed was that the British pound sterling should be reduced to twenty -five francs and the American eagle to fifty francs. The de- monetization of silver formed no part of the policy proposed. The only recommendation on that point was, that nations having the double s^"-mlard should agree to establish such a legal relation of value be- tween the two metals as would not practically exclude the circulation oi gold. This recommendation was embodied in the following resolu- tion: The advantage of international nee which will be acquired by coins of the metal selected as a common standard will not of itself be a sufiScient guarantee for the maintenance of their circulation in each nation, but it will also be necessnry to be farther stipulated, by nations now having the single standard of silver and by the nations which have the double standard, that the relation of the value of the two metals shall not be so fixed as to prevent the circulatiou of gold. After a long discussion, this resolution was adopted unanimously. The representatives of two nations (Prussia and the United States) declined to vote, and the latter (Mr. Euggles) for the express reason that it recognized the continuance of the double standard, to which he was opposed. It will thus be seen that the action of Germany in 1871 wag in no respect conformable to the recommendations of the Paris conference. Germany, in demonetizing silver, did what that conference did not rec- ommend, and in refusing to adapt its coinage to international use, did not do what that conference did recommend. It is, therefore, not the Paris conference of 1867, but the legislation of Germany of 1873, which compels a review of the grounds upon which gold and silver have always and almost universally been regarded as equally money-metals, and a consideration of the policy and the consequences of abandoning the monetary use of one of them. No question more vitally affecting the interests and happiness of the human race has ever claimed discussion and decision. It is no such question as was supposed to exist twenty years ago, when the anticipations of the Californian and Aus- tralian yield were so exaggerated beyond the actual event as to create a belief, more or less extensive, that the stability of the standard of values required the demonetization of one of the metals. The yield of the two metals since 1848 has not, upon the whole, raised the prices of commod- ities much, if at all, and this yield, instead of increasing, has been for several years rather decreasing. The danger which menaces is, therefore, not a i)lethora, but a scarcity of money, even if both metals are retained as such. But w^th the demonetization of one of them we should wit- ness a contraction and scarcity of money and fall in prices which, in magnitude and suddenness combined, has no i)recedent in the history of the world, and in respect to the (consequences of which we have no adequate experience to guide us. The mresiderjt of the Ijiver- pool (loi rowed in silver and have to pay in gold. No doubt, if such a state of things were to hapi)en, some countries would have to jtasH intr) liqnidatifui and make a eomposilion with their creditors, and ultimately matters would st!ttli' down evc-ryw hrn', after excessivt- sutlenng ami confusion, into a universal system of gcdd )iaym<'nts ; 1 ml the nrecssaiy n-snli woidd be that t Ik- nn-tallic basis on which tin- business (d' the wurld was done w(Hild be immensely irdiMcd. It would bo as if tin mines were shut up f(n- several years. Inst end of, sa> , 1. UMi millions [sterling | of gold and silver to do i lie busiiu'ss of irxidiangi', I here wouM be 700 nr h(I(1 uniliotis [sterlinii] of gr)ld, ami a limited amount id' silver as sm;ill changi". .Mont'y values would fall greatly; national dclits, like our own, would jiress much in<»ro heavily, atid a period of snll'ering and contraction of busiur.ss would ensim, sindlar lo what the t'uitt'd .States has expeiienecd on coming painfully back from inll.'ited papi-r toward h|)eeic payniei.fs. No ubt at last the process would be ac'ccunplished, (inly gain by such a contraction in the volume and consequent appreciation in the value of money as would drive their debtors to bankruptcy and ruin. They will see it more clearly hereafter if the demonetization of silver is persisted in. This country, with its vast extent of unoccui)ied fertile territory, its ala)ost boundless resources, its ingenious, enter])rising, industrious, and increasing po])ulation. its comparative imuiunity from the danger of foreign wars, its free institutions, and its stable govern- ment, would i)erhaps be able to sustain any burden thrown upon it by an unwise and unjust policy. But it must be remembered that these favorable conditions do not exist everywhere, and that less lavored debtor nations would sink under a load which this country might be strong enough to carry. IV. UNDER THE ACTUAL CIRCUMSTANCES OF THE MOVEMENTS IN OTHER COUNTRIES, IN THE DIRECTION OF DEMONETIZING SILVER, IS IT PRACTICABLE FOR THE UNITED STATES TO MAINTAIN THE DOUBLE STANDARD ? It is said tbat the policies of other countries which we cannot control are giving to silver a tendency to such a degree of depreciation and fluctuation as would unfit it for monetary use, and that it is not in our power to resist this tendency by remonetizing silver ourselves. The following is a statement of different nations, not including the United States, with their estimated populations, classified according to their metallic standards : SILVER-STANDARD COUNTRIES. Population. Russia 76,000,000 Austria 36,000,000 Egypt 4,500,000 Miesico 8,000,000 Central America 2, 600, 000 Ecuador 1,300,000 Peru 3,400,000 China 400, 000, 000 British India 237, 144, 456 768, 944. 4.56 As Eussia and Austria both have legal tender paper money, their population will be noneffective in relation to the matter in hand, until MONEY STANDARDS OF VARIOUS NATIONS. fi7 they resuuie specie payments, or coiiiineiiee to hoard sp«M'ie with a view to such i)ayraeiits. With that deduction, the population actually usinji the silver standard is G5(),944,4i")(5. UOUULK-MANDAJU) (..(JLNTKUCS. Population. Greece 1 , 400, (oO RoiiuKiuia 4,UH(i, OdU Colombia '. •.', <,(io, V.OO Vcuoziioki ,. . ] , G(lU, 0(1(1 Cbili 1.1)00, (l(/(» Uruguay 400, 1 'Oo Paraguay 1, "200, 0'JO .Tai)au ;{:{, 000, Odd Hollanti :5,T00, OdO France :{(>, tjOd, 000 Belgium .">, 100,000 Switzerland 'J, 700, 000 Italy 20, K)0, 000 Spain Ki, 400,000 1:57,300,000 As Italy has not only a legal-tender paper u)oney, but substantially no metallic money in circulation, its poi)ulation may be net down as non- effective, thus reducing- the i)opulation of this group to 110,500,000. In Holland, France, Belgium, Switzerland, anaii.^on with the j)oj)ulatiOn of India and Chin;!. In Spain a lo^,al decK-e w;is issued in the summer ot l.STti, interdict- ing the coinage of silver excej)! on government account. This decree also declared it to be the intention of the government to limit the legal- tender I'unctioii of silver to !.">(» pesetas, or about )?2.S, afti-r it had obtained Rud coined a suflicient amount of gold to make it practical)le to do so, 68 MONEY -STANDARDS OF VARIOUS NATIONS. The peseta and lianc are equivalents in value. The reason assigned for this intention was the depreciation of silver relatively to gold. The price of silver in London was at about its lowest point when this decree was issued. What influence the subsequent advance in its price in that market may have on the policy of Spain is uncertain. In Holland silver was the sole standard until 1816. In that year the double standard was adopted with the legal relation between the metals of 15.873 to 1, which undervalued silver and practically banished it from the circulati/)u. In 1847 silver was again adopted as the sole standard, not in consequence of the discovery of gold in California, but just before that event. The i)rincipal reason assigned by the statesmen of Holland for this change in 1847 was, that it had proved disastrous to the com- mercial and industrial interests of Holland to have a money system identical with that of England, whose financial revulsions, after its adoption of the gold standard, had been more frequent and more se- vere than in any other country, and whose injurious effects were felt in Holland scarcely less than in England. They maintained that the adoption of the silver standard would preventEngland from disturbing the internal trade of Holland by draining off its money during such re- vulsions, and would secure immunity from evils which did not originate in and for which Holland was not responsible. In 1875 a law was passed interdicting the coinage of silver except on government account, and I^roviding for an unrestricted gold coinage, with unlimited legal-tender functions at a legal relation between the metals of 15.G04 to 1. This law was avowedly provisional, and was to expire January 1, 1877, Buless re-enacted. The executive department of that country decidedly favor the gold standard, and have proposed two laws for its eslablishment, both of which have failed to receive the sanction of the legislative chambers. The law first proposed restricted the coinage of silver at the Java mint as well as at the home mint, and deprived silver coin in Holland, but not in Java, of the legal-tender function, except for small payments. The law last proposed prohibited absolutely the fur- ther coinage of silver. It did not demonetize coins already minted, but authorized the finance minister, at his discretion, to purchase and withdraw them from the circulation. The American minister to the Hague, xNOvember -17, 1876, referring to this law, says : Wltli regard to the Dutcli East Indian colonies the rule will be substantially the same, leaving it to the minister of linance to make proper arrangements with the colonial minister. This law was agreed to in November last by the lower chamber, but was defeated in December in the ujiper chamber by a decisive vote; and thereupon, on the 23d of December, the ministry proposed a new law, substantially keeping in force the law of 1875, which was passed. The ultimate policy of Holland remains to be determined. France, Belgium, Italy, Switzerland, and Greece constitute what is called the Latin Union, and are bound by treaty until 1880 to receive each other's gold and silver coins at their respective treasuries at a relation of value between the metals of 15^ to 1. By an agreement made in January, 1874, and which still continues with modifications, France, Italy, Belgium, and Switzerland limited their silver coinage (exclusive of subsidiary coins) to the following sums for the years named, stated in francs: 1874 140.000,000 1875 150,000,000 1876 108,000,000 These were the maximuni amounts of the silver coinage permitted by SMALL AMolNI <»K SMAIJJ l\ IM'L'Ol'K. t)9 the a.G:reeiiient for tlie \(ai-.s luiimMl n sjMH'tivel.v. but cither eouutry mijiht decline to coin the (|i!ota assigneil to it, ;ni(l in fact SwitzerUuid dill so decline in ISTo. In Ani^nst, l.sTU, tlic President ot France sus- pended entirely the coinage of silver, excei)t lor subsidiary ])uri>^ses. This was in j)ursuanee of a law passed Anjinst o, l.S7urposes. Italy, Austria, and liussia, having an actual currency of legal-tender paper, mav be left out of this account. They have no silver to dispose of. In respect to Italy, it is stated in the report (1870) of the Britisii sil- ver commission: Italy Las Ijeeii gradually deuuded oT her silver ciincucy. Siiut! lr;G5 ]ar;^e aiiit»iiiitB have been exported; her forced pai)er eurreucy has api)arently expelled the whole of the metallic ciirrencv, of which t lie silver coins auiounled at ihe hcf^jiiiiiiii^jof IstiCi I. . about £17,000,000. In the tabulation in the same report of the (juantities of silver thrown on the market during the lour years from 187- to 187"), bolh inclusive, Italy is put down as Ihrnishing eight millions sterling, or as mucli as was furnished during the same time by Germany and the Scandinaxian states combined. An Italian finance ministei' has estimated tlu' Italian export ol both the metals since 180(; at .sii(M),(iOO,()()0. The tacts given in the r<'j)ort made Deeemlier !!(►, !87(», I'y Mr. <'omp ton, of the British embassy at Ivome, seem to justily Ins statement that ".s//(C6' ISfUi, when paper money uus inhoilimd in the, pUicc of <<>in, iinirlif Ji:;;0,00(),OUO north (f HUvaymen1s, and on a gold standard, it wonhl enormously increases the, demand for and relative value of gold ; but such a resumption in those (rountiies is impossil)le, and any attempt in that direction improbable. Their resumpiioii on any metallic stantcn)ber last of the share- holders of the Oriental Batdc of London, which lias extensive aud inti mate connections with the India trade, the president said that with few exceptions, India produce was so low that even the general war sup- posed to be menacing Europe could not make things worse. To the same efi'ect was the testimony last summer beJ'ore the Uritish cummis- sion, and it is not weakened by the tact, which the commission say is borne out by the testimony, that the imports as well as the exports of India are on a low range of prices. Both facts prove the same thing, that silver is not in excess, but scarce and delicieut, in India. The demand in India for coined money, on any scale, is of very mod- ern origin, not antedating the i)resent century, and has become imi)or- tant even more recently than that. The old native practtiee was to pay land-rents iu the products of the land, and nearly all transactions even tifty years ago were by barter. W. Nassau Lee, one of the l)est informed aud most intelligent writers on Indian topics, in a work entitled "Urain of Silver to the East," dated at Calcutta iu 18(13, but |)rintere, because making less use of credits ajid representative money, ('olonel Hyde, who was for fourteen years director of the Calcutta mint, testifieil before the British e.ommission to the, same geneial facts which ar*- given in Mr. Lee's work, and gave it as his opinion that " it.s (India's) cajxtcittj for ahNorbing nilrcr remains great.-'' Another witness, McKenzie, who had been a mer- chant, indigo manufacturer, and railway manager in India, testitied that the aynients were susi»ended in 1S62. There was also, in 1860, a considerable quantity of full-tender American silver coin in use, and a still larger (luantity of foreign silver coin,especially Mexican dollars and French five-franc jiieces. Third. The quantity of the foreign silver coin, not entered at the cus- tom-houses, brought in by the 4,508,852 immigrants that arrived in this country during the seventeen years referred to. The New York Commissioners of Emigration (December 15, 1854) say: German immigrants have, for the past three years, as estimated l>y the best German authorities, brought into the country annually about $11,000,000. The amount of money thus brought into the country is incalculable. In 1856, these commissioners questioned all the immigrants, and found that, according to the answers, the actual cash brought into the United States by them averaged $68.08 per capita of the 142,342 arriv- ing in that year. Superintendent Kennedy's report (January, 1858) says: While the table of 1856 presents the average amount of cash means at $68.08 per head, subsequent information showed that, had full admission been made of the funds in possession, the average would have been at least double the amount reported. It cannot be known in what proportions this cash, amounting to more than $300,000,000, brought in by immigrants in these seventeen years, consisted of bankers' dralts, gold, or silver. Gold is easier to carry, but, on the other hand, the German immigration bringing in the most money was from a country having for the greater part of the time no gold currency. A review of all the facts of the case seems to justify a conjecture, if not an opinion, that the consumptinn of silver in the United States, in plate and in the arts, during these seventeen years, averaged iiimually $10,000,000. The populations of Europe (exclusive of France, Great Britain, and Germany), of America (exclusive of the United States), of Africa, and of Australia are as follows, respectively: Europe l'J.>, 000, 000 America 4(5,000,000 Africa 4 20:5,000,000 Australia 4,500,000 Total 44.5,500,000 Throwing out of this account altogether the barbarous poition anionnt- ing to 160,500,000 of the African population, it maybe assumed that the remaining 285,000,000 consume per cai)ita two-fifths as'niuch silver as the ])eople of Great Britain, or $19,702,732 annually. A small group of countries (Holland, Belgium, the English colonies, Switzerland, and the Scandinavian states), with a poi)ulation of 26,500,000, coiismiuMiiiito as much per capita as Great Britain. Austria, Italy, and Russia in Europe, with a population of 132,000,000, have substantially ('xpclled silver by paper, and use very little in coinages, but their wealth and habits make them large consumers in other forms. Northern Africa uses silver largelyin both forms, and so does Spain. If the annual silver i)roducti()n of the world does not go above its present figure of $74,000,000, and if the annual consumption outside of Asia continues at $50,000,000, the total inadequacy of tlic^ n'liiaiiiing $24,000,000 to supply the Asiatic demand is ai)parent. It is certain that 84 EECENT CHANGES IN VALUE OF GOLD AND SILVER. British India alone, containing only one-fourth of the population of Asia, cousumed that quantity annually on the average of the forty years end- ing with 1875. Schem's Statistics gives 798,000,000 as the total pop- ulation of Asia. This estimate includes 182,000,000 outside of India and China. Undoubtedly, the consumption of silver in India is above the average of Asiatic consumption, but it is everywhere considerable, and in China is constantly increasing, and in probable contingencies may increase very largely. During the last year (1870) India and China took $55,000,000 from England and San Francisco, Even if tlie lutuie Eniopean demand for silver shall be less than what it was before 1849, it is never to be forgotten that the silver pro- duction, wbich is now less than that of gold, had been, from the discov- ery of America to 1849, two or three times greater, and that it was upon this anterior proportion of production that the relative value of the metals had adjusted itself, and had been substantially steady for two centuries ])rior to the discovery of the great gold fields of Califor- nia and Australia. Recent fluctuations in relative value of gold and silver. As this branch of the investigation appertains especially to the prob- abilities of future steadiness in the value of silver, a resume of the facts connected with the recent panicky changes in the relative value of gold and silver would seem to be necessary, in order to form a correct judgment as to whether there is any cause to apprehend their recurrence in the future. On the one hand it may be said that the possibility of such changes, proved by the actual fact of silver having been sold in London at 4G| pence in gold per ounce, is sufficient to impair confidence in its luture steadiness. On the other hand it may be said that the divergence in the relative value of the metals was wholly due to a rise in gold. A comparison of general prices in 1873, when the German demonetization of silver went into effect, with present prices, will show that the purchasing power of both metals has increased, and gold more than silver to'the full extent of the divergence. But even if it were due equally to a rise in the value of one metal and a fall in the other, or entirely to a fall in silver, it may be demonstrated that it cannot be other than temporary, and that the concurrence of the causes producing it can never again be possible. The relative value of silver and gold of 15^ to 1 — which is equivalent to CO4 pence in standard gold for an ounce of standard silver — had not varied in the London market very materially, or for any great length of time, during this century, until 1875. The average quotation during 1875 sunk as low as 58^ pence. During 1876 the range of fluctuation in the London market in each month was as follows : January - •- 56| 54| February 54| 53 March 54^ 52^ April 54 53i May 54 52 Juue 52 50 July 5H 46f August 53| 50 September 52fV 51i October 53^ 52 November 55 53^ December 5SJ 56 In their circular of January 4, 1877, reviewing the business of 1876, Pixley & Abell, bullion brokers in London, state that on the 8th of July PANIC OF 1876 IN SILVER. 85 there was " an exceptional sale at 46^." Such a quotation is of no more value than the maximum grold quotation of Bhick Friday in New York. The causes which, in concurrence, produced the thictuations in the rel- ative value of gold and silver which culminated in July, 1870, were — First, the demonetization of silver, by Germany in 1871, by the United States in 1873 and 1874, and by the Scandinavian states in 1874 ; the limitation on the coinage of silver imposed by France, Bel- gium, Switzerland, and Italy in 1874; the closure of the Holland mint against the coinage of silver on private account in April, 1875; the refusal of Switzerland, in 1875, to coin silver at all, and in the summer of 187G, by authority given to and actually exercised by the President of the French Eepublic, the suspension of the silver coinage altogether ; the Spanish royal decree (187G) closing the mint of that Kingdom against private depositors, and declaring the purpose of that Government to demonetize it for all sums exceeding $28 at the earliest practicable moment; and the submission (1876) to the Dutch legislative chambers of a ministerial project of demonetizing silver in Holland, and of ex- tending to the mint in Java the restriction against coinage%r individuals already imjiosed (April, 1875) upon the mint in Holland. Second, a serious decline, for the time being, in the India demand for silver. Third, an increase in the production of silver in the United States, considerable in fact, but the effect of which was immensely increased by exaggerations, and by the persistent error that the yield of the Corn- stock lode was wholly of silver, when it was really about one-half gold. Fourth, the summary suppression by Germany of $13(),()()0,()00 of bank- notes and the consequent demand for gold to take their place. Fifth, a law of the United States, enacted in 1875, ordaining a re- sumption of payments in gold January 1, 1879, and thus menacing the world with another enormous demand for that metal. In respect to the effect of the last two facts, it may be observed that the British resumption of gold payments in 1821 raised the value of gold relatively to silver 5 percent., although at that time all other countiies had either the double standard or the silver standard, and there was, therefore, no such c(mii)etition for gold as exists npw. It the circum- stances existing then had been similar to those existing to r otherwise. ()verm;istering €xigen(;ies sometimes <*om])el national suspi'iisions of sjtecie paynuMits, and neither national susjtensions nor resumptions can o(M;ur without a perturliing elfe(;t uj»()n tlie value of the precious nu'tals relatively to other things, nor without such effect upon their iclative \aliie, if the countries suspending or resuming have their mon«'y standaids based on a single metal. Tint it is not piohalile, nor scaiccly p()ssil)le, that all the causes of a(li\ergence l)(^t weei; the metals which have been operat- 86 INHERENT STRENGTH OF SILVER. ive ill the recent case can ever again be acting simultaneously and in one direction within any i)eriod which need be covered by the foresight of legislation. There is an equal chance that all these causes may operate hereafter simultaneously in the other direction ; and if it be wise to legislate against remote contingencies, gold should be demonetized as well as silver. The tendency of the two metals to return to their old relation, or of silver to recover from its fall, if the latter mode of expression is to any persons more acceptable, was manifested very soon after the silver panic of last July, and has made a degree of progress which tends to confirm the belief that, in any event, the full recovery of the old rela- tion may be relied upon. The partial recovery actually realized, while the causes of the widening of the relation of the metals still continue active, proves the existence of great forces always at work to steady the relation, l^o mints closed to silver have been opened to it; no law demonetizing silver has been repealed ; no threat of demonetizing it has been withdrawn ; and the supply of silver from the mines con- tinues undiminished, although some of the exaggerations concerning it have been corrected. Nothing has been done by our Government since July, 1876, to raise the gold-price of silver, except the continuance of the coinage of subsidiary silver, authorized and commenced long before, under the resumption act of January, 1875. The influence of this de- mand has been more than offset by sui^plies from the increased sales of silver bj the German Government since last summer. The gold-price of silver has advanced since July, 1876, not by the aid of Governments, but from its own inherent strength. Its value rests securely on the magnitude of the existing stock, its universal dilfusion, and the universal demand for it by the peo[)le of all countries, and especially by the teeming populations of the East. Jevous, who advocates the gold standard for Europe, said two years ago (Money and exchanges, page 142): The hundreds of millions who inhabit India and China and other parts of the east- ern and tropical regions employ a silver currency, and there is not the least fear that they will make any sudden change in tlieir habits. Although the pouring out of forty or fifty millions sterling of silver from Germany may for soine years depress the price of the metal, it can be gradually absorbed without difficulty by the eastern nations, which have for two or three thousand years received a continual stream of the pre- cious metals from Europe. If other nations should, one after another, demonetize sil- ver, yet the East may be found quite able to absorb all that is thrust upon it, lirovided that this be not done too rapidly. In Asia, as elsewhere, the demand for money, in the sense of desire for it, is unlimited and insatiable. Undoubtedly the effective demand of Asia is limited to its capacity to pay for silver, but this guarantee of the value of silver, which is its money, is nothing short of the entire mass of the disposable commodities of the Asiatic world. It is difficult to see how any amount of silver which Europe has left, whether thrown upon Asia "rapidly " or otherwise, can have anything beyond the most transient influence. The evidence on this branch of the subject all goes to establish the conclusions that the Asiatic demand alone will be sufficient, within a comparatively short period of time, to absorb the surplus stock of silver in Europe and overtake the current supjdy and place silver at its old relation of value to gold, and that, if the United States should remone- tize it, the practical resumption of specie payments could not be more than fairly begun before the old equivalency between the metals would be restored. It is apparent that the current supply of silver is too MONETARY LAWS OF THE UNITED STATES. 87 nearly statiouary, auci the surplus European stock too nearly exhausted, to resist much longer the appreciating effect of th<> old and continuing demand from the East. But if this old demand were reinforced by the new, great, and increasing demand of the United States, as it would be if specie payments were resumed and silver remonetized in this country, the relative value of the metals would be almost iustautly re- stored. The opportunity to obtain silver, before the disposable Europril, 1792, Congress, in the law establishing a mint, enacted that "T/je moiwy of the United States shall be expressed in dollars or tmits," the dollar " to be of thevaliie of a Spanish milled dollar, as the same isnoiv current,''^ and contain 371^ grains of pure silver. The same act fixed the weight of puic gold in the eagle at 247.5 grains, or 24.75 grains of gold to tiie dollar, wliich made fifteen pounds of coined silver the equivalent in all payments of one i)0und of coined gold. In 1834, the" weight of pure gold in the eagle was reduced to 232 grains, and, as no change was made in the silver dol- lar, the equivalency between gold and silver became 10.045 of silver to 1 of gold. In 1837, the quantity of alloy in both the gold and silver coinage was changed, so as to make the coins of both metals nine tenths tine. The quantity of pure silver in the dollar was not changed, but the quantity of pure gold in the eagle was increased to 232.2 grains, so that the equivalency between gold and silver became 15.088 of siher to 1 of gold. Since 1837 no change has been authorized in the weight or purity of metal in either the gold or silver dollar. It will thus be seen that in the whole history of the United States the weight of i)ure silver in the silver dollar has never been changed, while the weight of pure gold in the gold dollar has been changed twice. Gold and silver have been money in this country since its first settle- ment, by force of the English common law, and the Constitution of the United States recognizes and fixes them as money by the provision that the States shall not make anything but '■'(/old and silver eoin a tender in the payment of debts. ^^ Congress cannot urposes which it would not answer. To and including 1846, $58,964,673 were coined at the mint in half-dollars. The non-coinage of the silver dollar piece is of no more imj)ortance that the non-coinage, now made absolute and complete by law, of the gold dollar piece. It is no such trifling question as that which now agitates this country; but it is the demonetization of one of the two precious metals, and the striking down of prices to the standard of the other metal alone. It is not the silver dollar, but silver money, in whatever convenient forms the law may authorize and the owners of silver bullion may elect, whose restor- ation to its ancient and constitutional place is demanded. It is urged by many that silver was practically demonetized by the act of 1834, which undervalued it; by others, that it was practically demonetized by the act of 1853, authorizing subsidiary silver coins. Although these persons disagree as to dates and causes, they agree in insisting that it was practically demonetized in some way, and at some time before 1873, and that the legislation of 1873-'74 in respect to silver merely gave legal expression to an existing fact. If silver was then already demonetized, the persistency of the eiibrts to secure the passage of a law to demonetize it appears remarkable. From June 9, 1868, when Mr. Sherman, chairman of the Committee on Finance, made a report to the United States Senate in favor of '• a .single standard, exclusively ofgold,^^ to February 12, 1873, no session of Congress went by in which some bill relating to the coinage, to compass t Iiat ob- ject, did not make its appearance. These efforts did not attract public attention, but the records exiiibit them. Watchful and ])ersistent labors are never undergone to accomplish what is already accomplished. The manifest truth is that silver was demonetized in 187.')-'74, not ln'cause it was already demonetized, but because it was still money and stood in the way of the scheme to establish " a single standard, cxclusirelyofgokV^ As the essence of money in the Western World is the. iegal-tendei' func- tion, it is only by law that anything can be monetize(l or demonetized, and silver was as completely a money-metal in this country until l.s73-'74 as it had ever been. What is loosely spoken of as its |)ractical demone- tization at that time, was its temporary disappearances from tlie of jjrior acts to pay '■^in coin'''' was changed in the act of July 14, 1870, to a r)romise to pay in " coin of the present standard valueP This change in- sured the jiurchasers of bonds issued under it against being i)aid in coins of a different standard value; but not less clearly did it insure to the people of the United States the privilege of paying, at tlieii- option, in any of such coins. If the new language holds the United States rig- orously to i)ay in such coins, not less rigorously does it hold the owners of the bonds to accei»t them. The Utiite money, but to pay "coin" of Ihe then '■'■ Htandanl value,^^ meaning oi'tlie weight ami lineness of the gold and siher dollars Ihen liciiig coined at the mini. Uolh parties took the risk of the lluctuations of the metals. The L'liited Stales received no 100 UNITED STATES BONDS PAYABLE IN COIN, NOT GOLD. guarautee against their rise, and gave no gnarantee against their fall. The assumption that the agreement of the United States was to pay coin of the then market or commercial value is to the last degree absurd. The United States agreed to pay a specific thing, not a specific value. There is no tribunal to determine what the changes are in the market or commercial value of dollars. No prudent Government or individual would give an obligation so shadowy and indefinite, and no prudent capitalist would accept such an obligation. In issuing bonds under the act of July 14, 1870, the United States took the risk of a rise in the value of both the metals. The parties accepting the bonds took the opposite risk of a fall in the value of either of them. The chances against the United States were wars and political disturb- ances in the mining countries, such as caused a decrease in the produc- tion of gold and silver between 1809 and 1848, or that the mines would be from any other cause less productive, or that countries not using gold or silver might decree their use as money, and thus make a new demand for then), or that a change of fashion might increase the consumption of the metals in the arts. Either of these circumstances, or all com- bined, might raise the value of the metals very materially. On their part, those who accepted the bonds took the risks of an increased pro- duction of either or both of the metals by the discovery of new gold and silver mines or by the more vigorous working of old mines, or tljat com- mercial countries might demonetize one or both of the metals, or that great amounts of gold or silver miglit be liberated by the suspension of specie payments in imi)ortant countries, or that the habits of the world might be so changed that less amounts of gold and silver would be used for other purposes than as money. Either of these circumstances, or all combined, might depreciate the value of one or both of the metals very materially. One fact, not a matter of chance but of reasonable certainty, operates steadily against the United States. This is the advance of the world in population, wealth, and exchanges, and the consequent requirement of more money, with no certainty that the mines will produce more. The risks were and are mutual. Is it supposed that, upon the occur- rence of any or all of the circumstances which would tend to raise the value of both metals, and thereby increase the burden of obligations payable in them, the United States would ask or that the bondholder would agree to a corresponding scaling of the contract ? Has a bar- gain been made where the creditors, under all vicissitudes, stand to win and not to lose ? Is the United States bound to the obligations and penalties of the contract, and debarred from all the advantages con- ferred by its terms ? These interrogatories admit of but one reply. There is no dispute about tlie facts of the case or the law. A contract has been entered into between the Government and its creditors, involv- ing contingencies which may favor either party, and both parties must abide the issue, whatever it may be. It would be beneath the dignity of the Government to demand any advantages which the law and the contract made under it do not confer. It would be a violation of justice and a betrayal of the great interests confided to its charge to accept anything less. The Government is an agent and not a principal. It is the trustee of the nation, and must find the charter and guide for the administration of the afiairs intrusted to it in the law and not in senti- mental emotions. The creditor would have no reason to complain of either the law or the fact if he were now paid in silver. The contingencies which have hap- pened have not been favorable to the United States, but otherwise. INDEBTEDNESS OF THE UNITED STATES IN EUROPE. 101 Not only has the value of both the metals risen, but a coiuparisou of gold prices in 1870 ^vith silver prices in 1877 will show that the purchasing power of silver is greater now than the purchasing power of gold was then. Payment to-day in silver would not only give the creditor all that he is entitled to under the law and the contract, but would mete out to him more than equity alone would demand. It is sometimes said that the more recently-issued bonds should be paid in gold, because the United States receives gold for them. The obligations of a bond are not governed by the price, or the species of money, or the nature of the consideration received by those who issue it. They are governed by the terms of the bond, and nut by what it is sold for. A bond sold at 105 can have no other construction tlnin a similar bond sold at 50, and a bond sold for gold can have no other con- struction than a similar bond sold for silver or greenbacks, or given in payment for supplies or services. The promise, and not the considera- tion, governs. If it were really true that what is received for bonds determines what they promise, the holders of a majority of the outstand- ing bonds of the United States would be in a much less favorable posi- tion than they now occupy. Indebtedness of the United States to Europe and trade relations with Europe. We are largely the debtors of Europe, a relation we do not occupy toward any other quarter of the globe. The aggregate of our indebt- edness, ])ublic and corporate, held there, is estimated to exceed $2,000,000,000, and is, on any computation, an immense sum. If it be taken at $2,000,000,000, the annual interest must be fully $100,000,000. This is the minimum of the current estimates. It isnot a tribute, in the odious sense of a contribution exacted by a sovereign or imposed by a conqueror, but in its financial effects does not differ from either, and there has never been any parallel to it in history, ancient or modern. In the recent and continuing discussions in Great Britain it is treated as a capital and dominating fact relative to British India that India is obliged to pay annually in London £15,000,000, or $75,000,000, partly as interest upon loans and partly for expenditures of the Indian administration in England. But Indiahasai)opulation five times greater than that of the United States, and its London payments are in larger proportion for interest on money expended in productive works than is the foreign interest-account of this country. No part of our national debt, which is so largely held abroad, arose from investments in produc- tive works. We occupy still another relation to Europe. It is the principal juir- chaser of our agricultural staples, of our petroleum, and of the; raw i)rod- ucts of our forests. So long as we export those articles Europe will bo our chief customer. It has the manufacturers to bay our cotton, and a dense [)opulatioii whose demand for food and raw i)rodiU'ts of various kinds cinnot besui)i)lied at hotut;. For' a long luturt^ we. shall find there the i)rincii)al foreign market for our timber, jx'troleuni, cotton, cereals, tobacco, rice, beef, pork, and dairy products, and it is from tin* j>roc<'edH of these commodities that the inter(^st on our debts held in Miiropeniust be and is really i)aid. And it is with those ('.onntries which now li.ivetho gold standard, or have taken stejts in that rices to oi- below the coin-prices of the world. The (liflicnlty of olttainiiig gold in that way was ])ointed out in the Senate of the i'nitecl States .January 21', IS74, by (lovernor F>()UTWKLL, who had been recently at the head of the Treasuiy I)ei)artnient. lie S(;oule(l the i)r()]»osit ion that it was jtossilile to obtain even .$100, 000, 000 in gold by the sale of ])oimIs Ibi- rt'snniption, or tor any other j)uiposes. IN^ferring to a i)ro])osition to Iranslei' lothis eountvy iVoin London only 8lil,000,()0(»in gold, he vsaid: Tlie J Sank of England, foiesecing Ilia I I here would lie an accnmnlat ion ol coin to the credit of IIk^ United t5tal(;8 wliich ini;:lil, Ik; taken away liodily in specie, gave notice to the offlcers of the Treasury Department of the Unitcil States that ilie power of that 104 GOLD RESUMPTION RUINOUS. iustitutiou would bo arrayed against the whole proceeding unless we gave a pledge that the coin should uot be removed and that we would reinvest it in the bonds of the United States as they were offered in the markets of London. We were compelled to comply. It was in the interest of the Government that we should do so, because we did not want the coin, and we did want the bonds. But it shows the feeling that animates that central financial power of Great Britain, and it shows a policy on the part of that institution, and of every kindred institution on the continent of Europe, sustained by all the banking and commercial classes, by which, if it were necessary, and this proposition should become a law, the bonds of the United States would be excluded from the stock markets of every financial city. There are in the nine great banks of Europe only $600,000,000 in specie. That specie is held as a reserve with reference to their local business and with reference to the great transactions that take place between the countries of the continent of Europe and Great Britain. I may say, without disparaging the authors of these propositions, that it is useless for Con- gress to waste time upon legislation looking in that direction. There is another fact known to all. We recovered at Geneva an award against Great Britain of $15,500,000. When this claim was maturing the banking and commercial classes of Great Britain induced the Government to interpose, and by diplomatic arrangements through the State Department here, operating upon the Treasury Department, secured the trans- fer of securities, and thus avoided the transfer of coin. In the presence of these facts, is it to be assumed for a moment that we can go into the markets of the world and purchase coin with which we can redeem four, three, two, or one hundred million outstanding legal-tender notes ? When a drain ot gold sets m, the Bank of England raises its rate of discount until it makes money scarce enough, and reduces the prices of commodities low enough to arrest the drain. This is a necessity for its own preservation, to which it must sacrifice everything else, not except- ing its own customers. It is unfortunately too plain how the United States, depending upon the European prices of its commodities for the means to pay its debts, must fare in a contest for gold with the banks of London and Berlin. And so far as it is true, as it doubtless is to some extent, that our in- debtedness to Europe is paid from the sale of commodities elsewhere, the United Slates, as a debtor country, is interested against such a diminu- tion of the world's measure of values as would result from demonetiz- ing silver, and ought to throw the weight of its example and influence against it. Every additional employment for gold increases its value, and it must be an unwise policy for the United States, owing large d^bts held in gold standard countries, and many of them specifically payable in gold, to make a new demand for that metal, of from three to five hundred mill- ions of dollars, by adopting an exclusive gold standard. The interests to be subserved by such a policy are not American interests, but those of the gold-standard countries of Western Europe, and especially of Eng- land, which are to an enormous extent the creditors of the United States and of other parts of the world. Upon this general statement it is apparent that a struggle for a given quantity of both the metals must be less severe than a straggle for the same quantity of a single metal. The needed quantity is a less percent- age of the stock of both metals than it is of the stock of either. The whole world can be drawn upon for both, while only a part of the world can be drawn upon for one ; and if the single metal sought for is gold, it is only the smallest part of the world which can be drawn upon. The actual and legal money of the Cnited States is now, and has been since 18C2, paper issued by the Government. It owed its origin to ex- igencies growing out of the civil war, and to the belief that it was neces- sary for the preservation of the Government. The law authoriziug its issue has been decided by the highest judicial tribunal to be warranted by the Constitution. It owes its value to the demand of the population of the country for money, and not to the indefinite promise to redeem it in coin. The value of each unit or dollar, population and productive GOLD RESUMPTION RUINOUS. 105 forces reuiainiug the same, depeuds upou the number of such dollars issued and occupying the channels of circulation. It is not disguised that it will be an extreme hardship to compel those who have borrowed paper, or have become indebted by purchases at paper prices, to liqui- date their obligations in coin. It is not a good answer to this to say that if debtors suffer in this way now, creditors suffered in an inverse way fifteen years ago. The answer would be a better one if it could be truly said, as it cannot be, that the debtors who are now to suffer are the same persons who made a corresponding gain fifteen years ago, and that the creditors who are now to gain are the same persons who then suffered a corresponding loss. An injustice to one class of persons is neither remedied nor compensated by inflicting an injustice upon another class. The ouly ground upon which a resumption of coin payments can be justified is that it is absolutely essential to the public welfare. If resumption is demanded, it is by policy, and not by equity. No man's equities are impaired by a continuance of the present state of things. There is no holder of greenbacks who cannot get as much as he gave for them. If prices have been inflated in this country, it was caused by an excessive issue of legal-tender paper, resulting from the real or supposed necessities of the Government. No particular class can be charged with being responsible for it. Those who now find themselves crushed beneath a load of debts through falling prices brought about by a contraction of the currency cannot be justly taunted with previous recklessness, because they transacted business in prices regulated by forces over which they had no control. As the debtors of the country are not more responsible than the creditors for the suspension of specie payments, the burdens of resumption should not be imposed on them alone. It is claimed that resumption is necessary for the welfare of all. Whatever sacrifices may be necessarily attendant upon it should there- fore be, as nearly as possible, equitably shared by all. Under any plan of resumption there will be hardships and benefits, and they will be unequally distributed. But the plan selected should be such a one only as would subject existing equities and interests to the least possible disturbance. A transition from a standard of paper to one of gold will hardly be claimed to be such a method of returning to coin payments as would best mitigate the unavoidable hardships incident thereto. And so far as it aggravates them, it is an aggravation called for by neither honor nor duty. When the sus- pension of specie payments took place all obligations were payable in either of the two metals, gold or silver, at the option of the debtor. It would be manifestly inequitable to resume without an option and in one metal. Eesumption of specie payments under the double standard is the utmost that can be claimed by creditors at home or abroad. Even such a resumption would not preserve existing equities, but would inii)air them less than a resumption in the more straightened standard of gold. Even if it were conceded that a gold standard is abstractly the best, and ought ultimately to be ado])ted, the present time is luost badly chosen lor such a measure. The sulliciiuitly dilfifidt step from i)aper to coin should be first taken, to be followed by the stei) froin (join to gold, at soine opportune moment to be indicated by subse- quent events. The restoration of the double standard seems to be the most efficacious, and, for the present, the indispensal»lc measure to bring about a re.snnip- tion of specie payments. To convert all the vast and ranii(i(!d p;iper debts of this country into gold debts, and to do this when a similar le in its extent and intensity, and the final results of which it is impossible to foresee, and has inflicted upon Ger- many itself an industrial prostration which menaces the most serious social and political disturbances. The attempt of a third country, of the importance of the Uuited States, to establish a gold standard, while the production of that metal is still stationary or declining, will be a ruinous failure, or, if it succeeds, can only do so temporarily and through the destruction of all the produc- tive interests of the country. A detailed statement cannot be made which will show that there is now more than $1,000,000,000 in gold coin and bars in the western world. That the current supply-is not more than the current consumption, is shown by the fact that no increase of the aggregate stock since 1805 is anywhere visible. Onthe3dof August, 1872, the London Economist published tables proving that the annual ex- cess of gold imports into Great Britain over exi)orts, from 1858 to 1871, GOLD RESUMPTION RUINOUS. 107 averaged five millious sterling, showiug that amount to be needed an- nually to keep up the British stock. On the 16th of January, 1875, the Economist reiterated its convictions: The annual supjily necessary for England alone is £5,000,000. Five millions sterling for that single country is one fourth part of the present total gold production of the world. At the lowest calculation $300,000,000 in gold would be required to enable the Government and banks of this country to resume and main- tain specie payments in gold. This amount is about 20 per cent, of the entire stock of the western world* No such draught can be successfully made ui)on that stock without causing a ruinous fall in gold prices everywhere. These considerations should call a halt in the attempt to chain this country to a metal whose supply, without any demand from this country, has been insufficient to ijreveut the general decline in gold prices which has been a continuing one for several years and is still unchecked. The resumption of specie payments in gold is said to be an easy task, because the premium on gold is now reduced to a small percentage. It ■would be easy if resumption involved only a reduction of commodities from their present valuation in greenbacks to their present valuation in gold. But what is really involved is a reduction from present prices in green- backs to the i)ricesin gold, which would prevail after gold was enormou.sly enhanced in value by the new demand and competition for it with other countries, which gold resumption in this country would inevitably cause. The premium on gold in greenbacks is small, but the premium on gold in Bank of England notes was still smaller in 1821, when the British resumption of specie payments in gold resulted in a most ruinous reduc- tion of the prices of property and of the wages of labor. The value of gold is not at all the same thing before and after a sudden and new de- mand for it to the extent of hundreds of millions of dollars. With the history yet fresh of the British gold resumption, which brought ruin upon a generation, there can be no excuse for repeating the fatal error of David Eicardo, the leader in that disastrous work, that resumjition means onlj' an ai)preciation of paper equal to the differ- ence between paper and gold before the resumption. In the debates in the British House of Commons on gold resumption, May 24, 1819, Mr. llicardo said : The question is not deserving hall" an hour's consideration of tlie house. The dif- ficulty is only that r,f raising the currency fhrec per cent, iu value. And who can donht that, even in those states in which the currency is entirely metallic, it often sutFered a variation equal to this without inconvenience to the public? William Waid (Remarks on the Commercial Legislation of 1846), quoted in iJoubleday's Life ol" tSir Kobert Peel (vol. 1, page 245), says : Mr. Ricardo lived to change his opinion, and shortly before he died (182:5) expressed that he had done so. The late Sir W. Hoygate was with him, and he said : "Ay! iley- gatc, you and the few others who opposed us on the cash payments have proved right. I saiayments in gold, and the a(;tual and constant convertibility of green- backs and bank notes into gold, but only tlieappreciation oCgicciibackH toanominal parity with gohl, and if green backs are tocontinuc to be the ordinary currency of the jieople and gold is still to be used only for the 108 SILVER-PRODUCING CAPACITY OF THE UNITED STATES. payment of import duties, an immense injury will have been inflicted upon the country without any commensurate benefit. There woukl still be fluctuations, depending upon the course of foreign trade in the rela- tive value of gold and greenbacks, and calculations of the greenback price of gold would be no easier at lOOi than at 105. Any resumption not based upon a large and adequate supply of gold would be a delusion and a snare, leaving the country exposed to the changes and chances of commercial and political events abroad. The business of the country would be always disturbed by the fear or fact of suspension. A merely nominal resumption would be a baseless air- built castle, liable to be toppled over by every breeze. If a parity of the national currency with specie is to be treated as re- sumption, that currency has already reached not merely a parity with, but a premium of 3 per cent, above a specie (silver) dollar, which was a full legal tender when specie payments were suspended. To that re- sumption, the only one that law or equity could demand, there is no present impediment except the interdiction of the coinage of that dollar. The United States a silver-producing country. The United States is the largest silver-producing country in the world, furnishing, in fact, rather more than one-half of the total supply. Al- though there is no good reason to expect any great and sudden enlarge- mellt of the silver yield of this country, our argentiferous territory is wide and is being vigorously explored, and the facilities of all kinds for that species of mining are being constantly enlarged. From the nature of things, silver production rises and falls more slowly than that of gold, but we may expect the occasional discovery of rich veins, and a steady increase of the capital invested in silver mining, unless the value of silver be depreciated by demonetization. And the first impression, at any rate, must be that it is a singular policy for the greatest silver-produc- ing country in the world to co-operate in movements to depreciate the value of the product. In a report made to the United States Senate, June, 1868, recommend- ing " a single standard exclusively of gold,^^ and assigning four reasons therefor, Mr. Sherman, of Ohio, gave the first place to the following : The United States is the great gold-prodiiciug country of the world, now producing more than all other nations combined, and with a capacity for future production almost without limit. Mr, Sherman was misinformed as to the facts. The United States have not produced as much gold as all other nations combined in any year since 1850. Its production in 1868 was $48,000,000, and that of all other nations $72,000,000. But iff the supposed fact in 1868, that the United States i)roduced more gold than all other nations, was a good reason for making gold the sole money standard, the real fact that the United States now produce more silver than all other nations seems to be at least as good a reason for retaining that metal in its old place in the double standard. It is said that, although we produce silver largely, we produce gold quite as largely, and that it may be some time before there is such an excess of silver-production as to cause a material depreciation in its value. The suggestion made is, in substance, that if we lose by the depreci- ation of silver resulting from its demonetization, we shall gain as much or more, or at any rate, some considerable offsetting advantage by the TRADE WITH THE EAST. 109 appreciation of gold. That seems to be true if we do not look beyond the direct gain of the rise in the value of the gold that we produce. But, as, in the case supposed, gold is to be the measure of the value of every- thing else, a, rise in the value of gold means a fall in the prices of all commodities and all forms of property. And as gold measures commod- ities and property so immeasurably exceeding itself in value, no rise in its value can be a compensation for the losses it must cause. If no better indemnification is proposed for the ruin of our silver-mines than such an appreciation of gokl as will reduce the prices of property of every de- scription, to a ruinous level, aggravate the burden of debts, and arrest the industrial progress of the human race, the indemnification is an im- measurably greater calamity than the loss for which it is proposed as a compensation. The trade relations of the United States with Europe and with other parts of the world compared. It is often said that we should conform our money standard to that of the commercial nations — that is to say, of England and Western Europe— rather than to that of Asia, Africa, and Central and South America ; and that we should have the gold standard because England and Grer- many have it, and because the same standard will, it is predicted, be adopted by the other nations of Western Europe. This suggestion involves two ideas, both erroneous ; first., that trade with commercial nations is specially advantageous and more worthy of cultivation than trade with noncommercial nations; and, second, that trade between commercial nations is facilitated by unilormity in their money standards. The traditional ideas of mankind have certainly always been that it is the greater or less degree of commerce with the East which deter- mines the commercial position of nations. It is a familiar and general belief that it was the control of the trade of the Orient which aggran- dized Tyre and Alexandria in ancient times, the Italian cities of the Middle Ages, and, after a change of the route to the East by the doub- ling of the Cape of Good Hope, first Portugal, then Holland, and fiually, an(l to the present days, England. It was in pursuit of the prize of the oriental trade, to be reached by a new route to the Indies, that Columbus discovered America, which he did not seek. It was the control of the oklest route to tiie Indies that fired the ambition of Napoleon and suggested his Egyptian campaign. It is because England knows that its commercial supremacy depends upon Asiatic trade and upon keeping open the road to India, that it made the sudden purchase, a lew months ago, of an interest in the Suez Canal, at a cost of $20,000,000. The danger that the threatened war between Russia and TuIk(^y will not be confined to those two coun- tries, is the certainty that Enland will defend its connections with Asia against all comers, and especially against any territorial advance of Itussia which may menace them. When that vital point is assailed, England will bristle with war, to be waged with all its forces by land and by sea, with or without allies, tooth and nail, to the last man and to the lasti)Ound sterling. J^>eing in the same gener.d climate, on the same i)lane of civilization, and with a near equality in the perfection of the industrial arts, the western nations of Europe seem to be naturally our commercial rivals rather than our customers. And. this is so, with the large exception 110 TRADE WITH THE EAST. which arises from our ability to supply certain raw products and agri- cultural staples. Describing our situation summarily, it may be said that our commer- cial intercourse with Western Europe consists of two parts : First, the export of articles indispensable to Europe, such as cotton, the cereals, tobacco, and the products of animals, a trade which needs no stimulation or favor of any kind. Second, the import from Europe of manufactures. This is a trade which all parties and the representatives of all shades of economical opinion in this country wish, to see steadily diminished and eventually terminated. The reasons which conduce to this uniformity of desire are very diverse, as also are the modes proposed to accomplish the object sought. Some propose protective tariffs and high duties as the best means. Others maintain that the better if not the only way to keep out European manufacturers is by the production in this country of superior articles at lower prices, and that this is onlj^ possible with free trade or simply a revenue tariff" and cheap raw material. But, by whatever way it may be reached, a diminution, tending always to an extinction of imports from Europe, is universally desired in this country. It is in trade with other parts of the world, in less advanced stages of civilization, or with essentially different systems of civilization, or with essentially different raw products resulting from marked diversity of climates, that we find the natural outlets for our manufactures, and in many cases the opportunity for a mutually advantageous exchange of native productions. It is not perceived that that trade can become too large. All interests and opinions favor its expansion, and, unlike the trade with Western Europe, its existence and extent depend upon the wisdom and vigor of our efforts to secure and increase it. Our trade with England would be but little affected if we should be entirely pas- sive in relation to it. With Ohina, on the other hand, we have no trade which we do not actively seek. Commercial nations will seek after our trade. We must ourselves seek after trade with the non-commercial nations. It is by no means clear that trade between nations is either increased or facilitated by a concurrence in their standards of money. But even if it were so, the double standard would meet all requirements better than the single standard. It would tend to keep constantly available a sufficient stock of both metals for the trade of either gold or silver standard countries. However it may be in respect to trade with non- commercial coun- tries, it has never been shown that diversities of money, however aris- ing, whether from single standards of a different metal, or from systems of irredeemable paper currency, are any hindrance to trade between commercial countries. Whatever the moneys of such countries may be, they are always interconvertible at known and not widely- variant rates. There is no property on sale in London for which the holder would re- fuse payment in silver or in greenbacks at the current rates of exchange; and there is no property on sale in New York for which the holder would refuse payment in Bank of England notes at the current rates of ex- change. Greenbacks are not a legal tender in London. Silver is not a tender there. ISfeither are American gold eagles, and both greenbacks and silver are as readily convertible into sterling money as gold eagles are. The irredeemable paper currency existing in this country since 1862 has not obstructed its European trade in any degree whatever. The trade of England with commercial countries was not obstructed when it had an inconvertible paper currency from 1797 to 1831. The paper MONEY STANDARDS OVER FOREIGN TRADE. Ill moneys of Eiissia, Austria, Italy, France, and Brazil, altbouj;h differing greatly in their value relatively to gold and silver, are no hindrances to their trade with each other, with the United States, or with European countries having metallic standards. Various nations in Europe, in close proximity to each other, or having large intercourse with each other, have had different single metallic standards, without experienc- ing any inconvenience from that circumstance. The single silver stand- ard existed in Holland from 1847 to 1875, and in Germany from 1857 to 1871, but the large trade of both with England, having, a single gold standard, was carried on during those periods with undiminished facility. The long and still contiuuingdifferenceof currency between England and its greatest dependency, India, is a striking illustration of the fact that trade between distinct peoples is not obstructed by the difference in their money standards. Both are parts of one empire, and the coin- ages of both are impressed with the head of the same ruler, but the British sovereign is not a good tender for a debt in Calcutta, nor is the Indian rupee a good tender lor a debt in Loudon. Oases are said to have occurred of such extreme financial pressure in both those cities that loans of money, that is to say, silver, have been refused at Calcutta on a pledge of sovereigns, and that loans of money, that is to say, gold, have been refused in London on a pledge of rupees. No difficulty has ever arisen in the immense trade between Great Britain and India from this difference of currencies, although this is doubtless due in part to the exceptional circumstances which have given to England a large and constant supply of silver, notwithstanding that its standard money is gold. A fact, less striking in some aspects, but more so in others, is the difference in the actual currencies of the Atlantic and Pacific States of this Union. The difference is not made by law, but is a matter of choice on the part of the iieople of the Pacific slope. They judge that it has advantages for them, and both they and the people on the Atlantic i)er- ceive that it is not in the least degree obstructive to theii' mutual inter- course. There is no more difficulty in -ranslating the greenback prices of New York into the gold prices of San Francisco, than there is in translating pounds avoirdupois into French kilogi-ams. A distinguished writer, J. E. Cairnes, professor in the University College of London, in a recent work (1874) on Political Economy, says: " It appears to me that the influence attributed by many able writers in the United States to the depreciation of the pai)er currency, as re- gards its effects on the foreign trade of the country, is, in a great er cent. It is now 2 per cent. In the one humlred and twenty-two years pre- ceding ISIG, when the gold standaid was adopted, Ihei-e were only six- teen clianges, and the rate never fell below 4 or rose above (> per cent. The frequently re(;urring crises in the Lon Gurney) went down with liabilities of ninety millions of dollars, was scarcely felt here. With a currencj' of gold, or of paper convertible into gold, we should feel instantly every change in Europe, and especially in England. We should not altogether escape that influence with the double standard of gold and silver, but at any rate, with such a standard, one part of our currency would be secure from European perturbations. The dollar and the pound. It was suggested in various forms of language by some of the wit- nesses examined by the commission that the British gold sovereign, or pound sterling, is for the world the generally accepted monetary unit of value, and is the best known and most widely used torin of money, and that this is a reason for the adoi)tion of the single gold standard l)y the United States. And in this connection it is said that even our pur- chases in the East, when made with money, are not made by sending silver, but by sending bills of exchange, drawn on, accepted in, and pay- able in London, and in the money of London. And the inference is drawn that such bdls have a world-wide acceptability, in cons^ecpience of the particular currency in which they are payable. But, manifestly, the availability in distant regions of such acceptances depends wholly upon the credit of the acceptors, and in no degree upon the money in which the bills acce])ted are expressed. Such acceptances were equally available when pounds sterling signi- ■ fled Bank ot England notes, as they did from 1707 to 1S2I, as at present, when they signify gold sovereigns. The availability of such ac(;ept;inees depends upon tlic fact that London became early the central |)()int of the wealth, banking, and commerce of the world, and has banks, bank- ers, and commercial houses, the solidity of whose credit is everywhere 116 DOLLAR AND POUND STERLING COMPARED. known. The pre-eminence of London in tliese pa-rticulars, fairly won and fairly maintained by solid traits of national character, must be admitted to still exist, but it is weakened sensibly by the advancing rivalry of New York, and may soon be by that of San Francisco. " Who shall say," to quote the words of Governor Morgan (report to United States Senate, June 9, 1868), "that the course of trade may not make an American city, New York or San Francisco, the center of exchange, and confer upon us the advantages so long enjoyed by European capi- tal?" In the United States Senate, March 9, 1870, the pending proposition being to authorize the refunding of the national debt in bonds payable in Loudon, Paris, Amsterdam, and Berlin, in pounds, francs, and thalers, the late Mr. Sumner opposed it, exclaiming: 1 cannot forget my own country, nor can I forget that great primacy which I hope to see her assume in the money-markets of the world. New York is our natural money- center. Why should we revolve about European money-centers? Let us keep our own center here at home. There may be merchants, wedded to an accustomed routine, who be- lieve that it is only through the circuitous and clumsy expedient of a bill of exchange on Loudon that America can pay silver in China. But this will not be credited by the active men of the present generation, who can better realize that we have now a great and opulent city on the Pacific, within thirty days' steaming of Japan and China, which is the gateway of our silver mines, and which would hold their products always in large stock if silver were remonetized. London, at any rate, realizes it, and it is stated in a recent number of the Economist, of that city, that "London merchants now pay for their tea and spices by tele- graphing to San Francisco orders for the shipment of American silver." And if it is not true to day, the time is not distant when it will be true, that to whatever extent commercial and hankers' acceptances are used by us in the East in lieu of coin, they can be obtained in San Francisco more advantageously than in London. Some of the greatest banking- houses in Europe, including the Messrs. Rothschild, are already repre- sented by agencies in San Francisco. It is no disparagement to the pound sterling, which represents the opu- lence and good faith of English merchants and the unvarying integrity of the English coinage, to say that the silver dollar has been longer known, is more widely used, and is more familiar to mankind than any other coin of either metal. It was in common use in 1785, when the American Congress adopted it as the unit of account. The credit of our decimal money is due to Mr. Morris, but it was Mr. Jefferson who proposed the dollar as the unit of account, and, in his paper addressed to Congress, he assigns as the reason, that the Spanish silver dollar was ^^ familiar to the minds of the people, and already as much referred to as a measure of value as the respective provincial pounds,''^ although our British connection had been so recently severed. We had come by the dollar naturally, from our proximity to and growing trade with Spanish Amer- ica. It was through Spain, as the sovereign of the silver-mining regions of this continent, that the world received its metallic supplies for centu- ries, and that the silver dollar became everywhere known. But it is said, and appears to be true, that Spain received the dollar from Austria during their union under Charles V,and that it was first coined from the silver of the Bohemian mines as the " thaler," which name it yet bears in Geimanic countries. If there are Americans who are gratified to coacede that the pound sterling is and must remain the world's unit of monetary value, there DOLLAR AND POUND STERLING COMPARED. 117 are Englishmen who reluctantly .yield the palm to the silver dollar. Jev- ons, discussing the question of the probable international unit of the future, says (Money and Exchange, page 170) of the Spanish and Mexican silver dollars, that "these coins have for a hundred years past been received by tale almost without question in most parts of the world." On page 172, he says that "the Americans might have much to say in favor of the dollar. It corresponds to the coins which have for two or three centuries been most widely circulated and treated as units of ac- count, so that there is much weight of experience in its favor." And again, on page 179, he says that "the fact that the dollar is already the monetary unit of many parts of the world gives it large odds. For us, this question was settled by our revolutionary ancestors in 1785, and by the mint act of 1792, which bears the approving signature of Geneial Washington. And it is a noteworthy fact that General Washington is connected with the silver dollar, not only bj' his approval of the act of 1792, but by his indorsement of the memoir of Mr. Jeffer- son which led to the adoption of the silver dollar unit in 1785. (Wash- ington's letter to Grayson, in Sparks' Life of Washington, vol. 9, page 125.) The silver dollar has thus the sanction of the solid and practical sense of General Washington, added to that of the learning, genius, and i)hilosophy of Mr. Jefferson. It is as much a tradition of the United States as their national military air, or their national flag, and it is a i^olicy as well as a tradition. Money in shrinMng volume the primal cause of the present universal com- mercial a7id industrial depression. The real cause of the present universal derangement of commerce and industry must be ascertained before the proper remedy can be de- vised. The causes assigned are various and contradictory. Many of them never had any existence in fact. Others are inadequate or absurd in themselves, or by reason of being coniined to narrow localities or special interests, cannot have produced a mischief which reaches all places and all productive interests. Overproduction is one of these alleged causes, although food, clothing, houses, and everything useful to mankind, are and probably always will be in deficiency, ascompared with the needsof them. The constant effort of the human race is and ought to be to multiply production. The ag- gregate effective demand for products, that is to say, the aggregate de- mand accompanied by an ability to purchase, always increases with pro- duction. Supply and demand mean substantially the same thing, and are nothing but two faces of the same fact. Every new supply of any product is the effective basis of a new demand for some other product. The cai)acity to buy is measured exactly by the extent of production, and there is practically no other limit to consumption than the limit of the means of. payment. Overproduction of particular things may occur, but that is soon corrected by the loss of i)rolits in producing them. Overproduction in the general and in the aggregate is impos- sible. The contrary opinion will be held only by those who regret the discovery of the steam-engine, the spinning-Jt'iiny, and the sewing and thrashing machines, and who believe that while mankind iiave tli«' skill to devise methods of increased production th(!y have no (tapacnly to provide for the distribution of the products of industry. Production is the sole and only source of wealth, and in fact is but another name for wealth. Ov('ri)ruending on the relation between the volume of money and other tilings. It is maintained by many that existing evils are the results of a loss and lack of confidence, and that the sufficient remedy would be found in its restoration. Cn all occasions they ]»oitiay in glowing ])hrase the abounding i)rosperity which would follow if moneyed and other capitalists would freely exhibit confidence by inauguiating industrial and commercial enterpiises. IJnt it is to be observed that they con- tent themselves with recommending confidence to others, while they are careful not to make a practical exhibition of any on their own part. They seem, in short, to be unconsciously influenced by the view that 120 PRESENT DISTRESS CAUSED BY SHRINKING MONEY. while they might profit by the confidence of others, confidence on their own part might involve them in losses. The real mischief is not the lack of confidence, but the lack of any legitimate grounds for confidence, and there neither will be, nor ought to be, any revival or extension of confidence so long as the volume of money continues to shrink and prices continue to fall. Under existing conditions, if by any possibility confidence could be inspired, the conseq^uences would be baneful rather than beneficial. Similar conditions to those which i)receded the panic of 1873 exist in the main to-day. The volume of money is shrinking absolutely and relatively to other things, although perhaps not as ra])idly as between 1865 and 1873, and the prices of property are gradually shriveling. The principal difference is that since 1873 the credits extended by mon- eyed institutions have been largely curtailed or cut off altogether, and consequently the material of which panics are made is not in as great abundance as then. The collapses which are constantly occurring do not make as much noise nor attract as much attention as the explosion of 1873, because they do not occur simultaneously nor conspicuously with public institutions, such as banks, as in 1873, but nevertheless they are constantly takingplace in all parts of the country in increasing numbers. All that is necessary to change this monotonous rattle of isolated collajjses into a general crash is to restore confidence and credit. As the collapse of 1873 is generally attributed to an overextension of con- fidence and credit, a restoration of confidence now, when the conditions are the same, must pave the way to a new collapse, and would be placing a dynamite for luture explosions under the foundations of busi- ness. It is very necessary to understand in what particulars confidence has been lost belbre deciding that its restoration is either possible or, under existing conditions, even desirable. It has not been lost in the intrin- sic value of real estate or of any useful thing. It has not been lostin the fruitfulness of the soil, or in the ingenuity, industry, or integrity of the people, the stability of the Government, or in the productive powers of labor and machinery. Confidence has not been lost in anything except the possibility of maintaining prices while the volume of money is being shiunk by existing legislation. Confidence has been lost that capital invested in productive enterprises can be returned with a profit, or even intact, to the investors. Its restoration while present conditions remain is impossible, and would woik mischief if it were jjossible. It is stoutly affirmed by many that the present stagnation is the result of uncertainty as to the luture value of the paper money of the country. If there were any such uncertainty, and if there were, consequently, pos- sibilities of a rise as well as of a fall in prices, the adventurous temper of the businessmen and the people generally would cause active investments and purchases, as was illustrated during and immediately after the civil war, when such an nnceitainty really existed. The true cause of the stag- nation is to be found in the opposite fact. Instead of it being an uncer- tainty as to the future value of paper money, it is the absolute certainty that, under present legislation, paper money must still increase in value and that prices must continue to fall. The statement that there was any general rise of piices during the two or three years prior to the crisis of 1873 is wide of the mark. The highest range of prices attained was in or about 18G5. From tiiat year on to 1873 there was a general tendency to a fall, but such was the momentum which extraordinary metallic supplies had previously given to them that they continued comparatively firm for seven or eight years PRESENT DISTRESS CAUSED BY SHRINKING MONEY. 121 after their metallic snpi)ort had become insufficient, and after they were left to stand in part npon the treacherous foundations of credit. In 1873 those foundations suddenly gave way, and prices, property, banks, and business houses went down with a crash. In this country, as is famil- iarly known, it was only by mortgages that the nominal prices of real estate, the largest and princijial description of property, were sustained during 1871-'7L'-'73. Even by this means it was only in ra])idly grow- ing cities and towns that real estate prices were kept up, while during the same period, and for several years immediately prior thereto, the prices of agricultural lands were abnormally low. Without doubt, the prices of a few commodities were high in 1871-'72-'73, but only from exceptional causes. Iron was abnormally high in those years from a sudden expansion of railroad building', and this led to great specula- tions, notably in England, in iron and coal. But the high i)rices of these articles do not ])rove a high level of general prices in those years any more than the high prices of cotton proved a high level of general prices during and immediately after the American civil war. The ten- dency of prices was already downward in 1873 when their fall was has- tened and intensified by the demonetizations of silver by Germany and the United States. The true and only cause of the stagnation in industry and commerce now everywhere felt is the fact everywhere existing of falling prices, caused by a shrinkage in the volume of money. This is in part the misfor- tune of mankind, as the mines have failed for several years, under ener- getic working, to yield the precious metals in quantity sufficient to keep jjace with the increasing needs of the world for money. But it is in part due to the lolly of mankind in throwing away a benefaction of nature by discarding one of the precious metals. Existing evils date with that folly, which precipitated and now enormously aggravates them. Many learned and excellent persons and associations of persons in all paits of the world, whose instruments of observation seem to have been adjusted for the examination of remote objects, and, consequently, unfitted for and a hindrance to the inspection and examination of any- thing near at hand, have furnished many far-fetched, incom])rehensible, and impossible causes for existing evils, which agree in nothing except their remoteness. They have seen through a glass darkly or they would have discovered that the cause was all around and about them ; that it is the same cause that has invariably i)receded and accompanied similar evils. They would have seen that money in shrinking volume was en- gaged in its legitimate work of ruin. This is the great cause. All others are collateral, cumulative, or really the efl'ects of that primal cause. Practical men see what tlie mischief is and the^' all see it alike, and, without formulating their ideas in set words and i)hrases, they all state it alike. Capitalists, large and small, give one, and only one, reason for refusing to invest in ])roductive enterprises. Uniformly and universally the reason given is that i)rice8 are failing and may contiiuie to fall, and that money is the best thing to get and hold while that state of thing continues. All can see that prices have fallen and are fall- ing, although they may disagree, or may not trouble themselves to form any oi)iiiion, as to the cause of the fall. And all (;an see, and do see, that it is tailing prices which cause the stagnation of business, with all its necessarily attendant circumstances of an increasing press- ure of debts, of de(;rcasing employjufMit ami wages of labor, and of diminishing consumption. Ealliug prices is only another expressiou for an increasing value of money, and those who desire still further to appreciate the value of money by contracting its volume, desire 122 PRESENT DISTRESS CAUSED BY SHRINKING MONEY. still further to reduce prices, and still further to widen and deepen the gulf between monej^-capital and labor. Money-capital is the fund out of which wages are paid. Capital can only fructify through the employment of labor, and labor is helpless without capital. It is in vain to advise those who depend upon their daily wages for their support, and who possess no capital but their willing hands, to change their places of residence and engage in agricultmal pursuits. Even had they the means to emigrate, which most of them have not, they would still have to be supplied with seed, implements, and animals, and with support from seed-time to harvest. It is still more plainly idle to advise them to engage in any species of handicraft or manu- facture on their own account. In modern times human labor is avail- able only in connection with machinery and appliances. A policy which tends to a constant fall of prices, and therefore compels capital from the justifiable instinct of self-preservation to withdraw from pro- duction, is a policy which reduces laborers to a worse condition than if money were wholly abandoned and the system of barter were re es- tablished. The condition of the laborer is as bad when money-capital is not employed as if it did not exist. The effect of falling prices is the same upon the smallest capitalist as upon the largest. The hope of gain is for all of them the only inducement to take the risks and labor of enterprises, and they will all prefer to consume their accumulations rather than to invest with the certainty of losing them. They will, of course, consume them as slowly as possible, and to that end will re- duce their expenditures within the smallest possible limits. Laborers thrown out of employment must in some way have a bare subsistence, but there can be no other sources for it than the scanty earnings of such as are employed, and the capital in existence, which cannot refuse food to the starving. That shrinking money and falling prices are the cause of existing evils, was pointed out eight years ago by the London Economist, in its review (18G9) of the previous financial year. It then said : It may be safely affirmed that the present annual supply of thirty millions sterling, of gold is no more than sufficient to meet the requirements of the expanding com- merce of the world, and prevent that pressure of transactions and commodities on the precious metals which means in practice prices and wages constantly tending totvard decline. » # » The real danger is that the present supplies should fall off, and among the greatest and most salutary events that could now occur would be the discovery of rich gold deposits in three or four remote and neglected regions of the earth. Instead of the discovery of new gold-fields, that which has actually happened since 1869 has been a declining production in old ones. The annual supply of $150,000,000, then considered barely sufficient to meet the demand, has dwindled to $101,000,000, while during the same period the demand and necessities for money have been constantly and largely increasing. This increasing demand, crowding upon a failing supply, was of itself a great misfortune; but, as if to change unavoid- able evils into deliberate ruin, several commercial countries, including our own, demonetized silver. In its review of the financial year 1872 (published March 15, 1873), the London Economist predicted the inev- itable consequences in the following language: At the end of 1872, the (German) gold coinage amounted to twenty-one millions ster- ling. The following paragraphs from the well-informed city writer of the Daily News gives the latest facts, and properly draws attention to their important character: " By the present bill, the German Government is certainly paying Englaud the com- pliment of adopting its single gold standard, but the cost of the measure to the Loudon and other money markets cannot but be great. As the annual money supply of gold PRESENT DISTRESS CAUSED BY SHRINKING MONEY. 123 throughout the world is reckoned at little more thau £20,000,000, and the usual de- mand lor miscellaneous purposes is very large, it follows that, if the German Govern- ment perseveres in its policy, the strain upon existing stocks and currencies will be most severe. Unless the annual production of gold should suddenly increase, the money markets of the world are likely to be perturbed by this bullion scarcity." These inevitable cousequences of the policy of Germany, and of the United Statesaud othercoautries co-operating with Germany, have been and are now being realized as predicted. But, strange to say, many of those who foresaw and predicted them now deny what tlie wliole world knows to be true, that i)aralyzed trade and stagnant industry, the neces- sary accompaniments of '■'•prices and wages constantly tending toicard de- cline,'^ are the natural results of the demonetization of silver, which began in injustice and is culminating in disaster. The folly of that policy is only equaled by the folly of hoping that prosperity can be restored while that main and principal cause of existing evils is still at work. What is doubtful is whether even with the use of both gold and silver there may not be a most injurious ^^ pressure of transactions and commodities on the precious metals^ The fatal effects of discarding either of them are only too clear, and those who adv^ocate it are, wittingly o'r unwittingly, the enemies of the human race. A general view of the industrial prostration in Europe, dating with 1873, is i)resented in the annual tables of the Moniteur des Interels Ma- teriels of Brussels, a very high authority, of the ofterings in the Euro- pean markets of new shares and new bonds in industrial undertakings, 8uch as mines, railroads, and manufactures. These figures, which, if not absolutely correct, are likely to exhibit accurately the proportions between different years, are as follows: 1872 $9fi8,362,500 lb73 897, 4:iO, 000 1874 4:52, 450 000 1875 147,(i'37,500 The United States, even if its paper currencies had been left undis- turbed, could not have escaped grievous injury from the demonetization of silver. The heavy interest account on its indebtedness held in Eu- rope must be i)aid by the export of products and their sale at metallic prices, which were certain to fall, and have fallen, through the pressure brought upon European gold markets by the adoi)tion of the single gold standard in Germany and other countries. But the i)aper currencies of this country were not left undisturbed. On the contrary, they had been constantly and largely contracted from the close of the civil war down to 1873, and a shrinkage in the volume of accepted i)aper currencies has the same effect upon prices, productive industry, and i)ios])erity as a shrinkage in the volume of metallic money. Between 18G4 and 1875 the population of the country using the national currency was nearly doubled by the addition of the people of the Confederate States in 18G5, and by the natural increase of both the sections afterward. As a consequence, theproductiveforcesof the country and the demand for money to meas- ure and exchange the fruits of its augmented industry w'ere increased, if not in as great a ratio, at any rate xery larjiely. But during this period the volume of i)aper currencies was steadily shrinlving in the United States, while the metallic money of the specie-paying countries of Eu- rope was undergoing the sanu; ])r()(!ess. Later on, the specie-resumption act (January 14, 1875) wasj)asse(l. Its true character, as now interpreted, was neither avowed in Congress nor nnderstood by the counti-y at the time of its i)assage. The plivjiscology of the act created the imi)resNion that there was t(> be no redact ion of the 124 PRESENT DISTRESS CAUSED BY SHRINKING MONEY. aggregate of paper money, but that legal-tender notes were to be dimin- isbed only as bank-notes were increased. As tbe act is administered in l>ractice, both classes of notes are being reduced at tbe same time, wbile the po])ulation of the country is expanding. The words of the act may justify this method of administration, but it was not with that under- standing that it was sanctioned by Congress. A more fatal misconception grew out of the ignorance that pre- vailed almost universally until after the passage of the resumi)tion act, that silver had been demonetized, and hence, that a law providing for specie payments \vas really a law for gold payments. The people were not aware that coin then meant gold, and that coin payments involved the shriveling of all values to the measure of a single metal. They were in favor of resumption but not confiscation, and they were not aware that resumption as proposed was but another name for spoliation. Although theperiod fixed for this spoliation was nominally in the future, it actually commenced at once and is now proceeding day by day. It having been made certain, so far as tbe law could make it certain, that each dollar of the actual money of the country would, on a given day in the near future, be raised to the value of a gold dollar, the universal tendency was, and has continued to be, to change all forms of property into money, and to refuse investment in either property or productive enterprises. Moneyed capitalists, knowing the disastrous effects which the impending fall in prices would have on the financial condition of borrowers, prudeutially withdrew or diminished all credits and hastened to realize on securities. They have never been deceived for one moment by the idle fallacy that resumption in gold involved an appreciation in the value of the legal-tender notes and a fall in prices only to the extent of the present difference between the value of those notes and gold. They know that the ai)preciation of legal tender notes must reach that vastly higher level which the value of gold must reach when hundreds of millions of it are demanded for resumption, and that prices will sink to a corresponding point: of depression. It is through these plain processes, that he who runs may read and understand, that the crushing effect of the demonetization of silver is already felt, although practically and legally the money of the United States is still paper. It is through these iilain processes, although real resumption in gold is neither possible January 1, 1879, nor on any other day, except through a great and improbable increase of (the world's stock of gold or on the basis of universal ruin, that every effort made to reach such resumption by locking up paper or gold is a disastrous step toward bankruptcy. It is through these plain processes that the stagnation and paralysis in commerce and industry everywhere visible, which had already been brought about by a contraction in the volume of money, are being- aggravated and intensified as the time approaches for that unknown measure of contraction which will be absolutely necessary to render the paper money of the country constantly convertible into a stock of gold that must be ruinously meager, unless some great commercial country shall consent to suspend specie payments for our especial benefit. CONCLUSIONS. Upon the facts and considerations hereinbefore set forth, and after carefully weighing the views presented to them orally and in writing by various jiersons, the commission submitthefoUowinganswers to the questions referred to them by Congress : 1. The first question relates to the causes of the recent change in the CONCLUSIONS. 125 relative value of gold and silver, aud to the effect of that change upon " trade, commerce, ti nance, and productive interests of the country." This commission concur in the following opinion of the British silver commission (1876) : Notwitlistandingc the late rise in the production of silver as compared Tvitb gold, its proportion toal causes were aided by a contempo- raneous diminution of the Asiatic demand ftir ^'ilvcr, and by enormous exaggerations of the actual and prospective yield of the Xevada silver- mines. The effect of all these causes, principal and accessory, reached its culminating point in the panic of July, 187G, in the London silver market. Many of these causes are essentially temporary. The Asiatic demand for silver has already recovered its accustomed force, and the delusions in respect to the Nevada mines no longer exist. In the opinion of the commission, if the United States restore the double standard, the spread of the movement in favor of a single standard of gold will be de- cisively checked. The effects of the demonetizations so far accom])lished, and of the resulting disturbance of the relative value of gold and silver upon trade, commerce, finance, and productive interests in this coun- try and throughout the commercial world, have been signally disastrous, and especially to the countries which have recently demonetized silver or in which the gold standard was already established. In all comineicial countries the same phenomena are simultaneously presented, of falling prices of commodities and real estate, diminishing public revenues, starv- ing, poorly-i)aid,and unemployed laborers, aud rapidly-multiplying bank- ruptcies. These facts, existing everywhere, must aris<^ from some cause operating everywhere, and no such cause is or can be i)ointed out except the decrease of the metallic supi)lies from the mines, and consequently the decrease of metallic mon<^y relatively to population and commerce since about 1865, and the larger and more sudden decrease of njetallic money caused by the partial destruction of the money functions of one of the precious metals. This distress dates with the law of the United States of February 12, 1873, and the law of Germany of July, 1873, giving practical effect to a previous decree of that empire of December 4, 1871, for the establishment of a single gold standard. The stationary or de- clining production of the metals had already i)roduced a stringency in the metallic money markets of the world, and as money stringency and panic are near neighbors, the demonetization of one of the metals broke down the partition between them. The demonstration of the nature of the mischief seems com])U*tc. What the world has witnessed immedi- ately following a concerted movement to demonetize silver is that fall in prices, ruin of jiroductive interests, and increase in the absorbing power of moneyed capital which could not tail to attend a sudden narrowing of the measure of values. Prior to 1873 i)rices were regulated l>y the general existence of a measure of values consisting of the two metals of aboutequal])roportionsin the world's stock. To annihilate the mone- tary function of one must greatly increase the purchasing [)ower of the 126 CONCLUSIONS. other, and greatly reduce prices. As all debts, public and private, in Europe aud America had been contracted while the double standard was in practical operation, their weight, always burdensome, became crushing when made solvable exclusively in one metal. Silver, to the amount of three thousand million dollars in coin, the accumulation of filty centuries, is so worked into the web and woof of the world's com- merce, that it cannot be discarded without entailing the most serious consequences, social, industrial, political, and commercial. The evil is enormously aggravated by selecting gold as the metal to be retained, and silver as the metal to be rejected. The supply of gold is diminishing, being now but little more than half what it was in 1852, and is always so titful and irregular from the method of its production that it is ill suited to be a sole measure of values. Placer- washings require little or no capital, and are soon exhausted. Silver, on the other hand, is found in veins which extend to great depths, the development of which can neither be commenced without capital nor abjiudoued without the loss of heavy investments. Its production is, therefore, comparatively steady and permanent, and it is this steadiness in the production of silver, together with the vast stock in use as money throughout the world, which is the moderator of the fluctuations of gold, aud which, during the sudden and enormous ad- ditional supplies of gold since 1848, saved the commercial world from ruinous disaster. The Oalifornian and Australian placers would have inflicted practical confiscation upon the creditor classes if the silver, which many of them now seek to discard, had not protected them. The exchanges of the world, and especially of this country, are continu- ally and largely increasing, while the supplies of both the precious metals, taken together, if not diminishing are at least stationary, and the sup- ply of gold, taken by itself, is falling oft". To submit the vast and in- creasing exchanges of this country and the world to be measured by a metal never reliable in its supply, and now actually diminishing in its supply, would make crisis chronic and business paralysis perpetual. 2. The second question covers the two points of the restoration of the double standard in this country, and of the best legal relation be- tween gold and silv^er. The commission recommend the restoration of the double standard and the unrestricted coinage of both metals, but are unable to agree upon the legal relation which should be established be- tween them. The views of individual members of the commission upon this last point are hereto appended. 3. The third question relates to "the policy of continuing legal-tender notes concurrently with the metallic standards, and the effects thereof upon the labor, industries, and wealth of the country." The commis- sion do not suppose that it is possible to maintain paper in actual con- current circulation with coin, unless the i^aperismade equaliu market value to coin, by actual convertibility into it, and that the answer to this question may be embraced in the answer to the fourth and last question, which relates to the resumption of specie payments. 4. Thefourth question covers " the best means for providing for facili- tating the resumption of specie payments. " The opinions of the witnesses examined upon this ])Oiut, and the views ujjou it which arecontaiued in written communications addressed to the commission, are various and contradictory. The experience of other countries furnishes little aid in reachingconclusions which can command confidence. The fact in regard to paper money issued directly by governments and having a forced cur- rency seems to be, that it has seldom been redeemed in coin. To re- deem the paper issues of a country and keep the coin in circulation has CONCLUSIONS. 127 al\fays beeu regarded as a very delicate aud difficult operation. In the two empires of the preseut day, covering the greatest extent of territorial area, Hussia and Brazil, such paper money has existed, in the tirst for a century, aud in the second for about half that time. In Russia there have been large issues and occasional redemptions at a percentage. In Brazil tiie paper seems to have been maintained at a close and steady approximation to the value of coin. The only conspicuous exami)le of a government resumption is that of England in 1821. The suspension of coin payments in that case was not in form that of the government, but in substance it was so, from the intimacy of the relationsbetweeu the gov- ernment and the suspending Bank of England.' The government itself gave up coin payments aud tendered nothing to the holders of national obligations but depreciated bank-notes. Nothing seems to be certain, except that the British resumption of 1821, as it was actually accom- plished, was followed by an unexampled commercial and industrial de- liression, covering nearly the period of a generation. The economical writers and authorities of that country do not agree that the resump- tion was finally efiected iu the most judicious mode, and still less do they agree as to what would have been a better mode. It is uot possible, therefore, to draw from that historical example much to enlighten us as to the proper policy to be now pursed by the United. States. The commission have been ab'e to arrive at only the one single conclusion, that resumption in this country is uot practicable under the circumstances, until the existing laws making gold the sole metallic legal tender are repealed. Besumption, while those laws remain iu force, is the establishment of an exclusive gold standard iu the United States," just as English resumption in 1821 gave eftect to the English gold-law of 181G. That the two precious metals together are adequate to main- tain existing prices is made at least doubtful by the fact that so many countries have abandoned coin payments within recent years, and have resorted to paper money. The total inadequacy of gold alone is appa- rent. Germany, Great Britain, and France are the only countries in the world which have any considerable quantity of it, and the maximum esti- mates of the aggregate amount they have in coin aud bars will not ex- ceed $1,300,000,000. It is uot suggested that there are any available aud disposable quantities elsewhere. In the opinion of the commission, the total quantities iu the Western World are much exaggerated iu the average estimates of statisticians. Germany commenced its march (not yet completed) to a single gold standard unembarrassed l)y national debt or foreign debt of any kind, and with a tribute exacted from France of $1,000,000,000. If the Ger- man movement, under these favoring circun)stances, has resulted in such great commercial disturbance and such general distrcvss, it can scarcely be estimated what linaneial disasters wdl befall this country if it shall persist in a sin)ilar uiovement under the weight of enormous debts, public and jtrivate. In the opinion of the commission, the re- moneti/ation of silver is a n)easure essential to s])ecic jtaymeiits and may make such ])ayments practicable. Both gold and silver are found in our own territory, and their jtioductiou is among tlie most important of our industries, and both are needed and in tiie lullest measure to ren- der the resumption of specie payments jmssible. The i)rol»lem of re- sumi)tiou is uot an easy one undei- any <;on(iiti()ns, but the encigics of the American jieojjle may be ibund e(pial to it, if tliey are uot deprived of one-half of tiieir ancient and constilulional money. Tlic commission believe that the remouetization of silver in this couu- try will have a powerful intlueuce iu preventing, aud probably wdl pre- 128 CONCLUSIONS. vent, the demonetization of silver in France and in other Enropean countries in which the double standard is still legally and theoretically maintained. But if, notwithstanding remonetizatiou here, further Eu- ropean demonetization shall tate place, the result for us will be an ad- vantageous exchange of commodities which we can spare, for money ■which we need. The silver of Europe, disposable in the event of fur- ther demonetizations of it on that continent, will come to us, if at all, in payment for commodities, and in transactions which will be free and voluntary on the part of our citizens, who may be trusted to take care of their own interests. Such transactions will give a much-nreded stimulus to our commerce, and cannot fail to be made on terms which will be advantageous to us. Nations cannot suddenly dispose of a considerable mass ot either metal without a loss from the temporary fall in its price, and this loss becomes the profit of the purchasers when the old price is recovered. Being flooded with the silver of Europe — now treated by many persons as an alarming danger — is being flooded with one of the precious metals and with money, if silver is remonetized in this country. Silver is the same thing, whether obtained by commerce with Europe or from the mines of America, and those who oppose our receiving it from abroad must wish to see our mines closed at home. If the states of the Latin Union, or other countries in Europe, abandon the double standard after we readopt it, or because we readopt it, it will be a policy on their part through which great advantages will inure to us and great disasters will befall them. It would inaugurate in the United States an era of prosperity, based upon solid money, obtaiued on profitable terms, and under circumstances necessarily stimulating to our industry and commerce. Finally, the commission believe that the facts that Germany and the Scandinavian states have adopted the single gold standard, and that some other European nations may possibly adopt it, instead of being reasons for perseverance in the attempt to establish it in the United States, are precisely the facts which make such an attempt entire ly im- practicable and ruinous. If the nations on the continent of Europe had the double standard, a gold standard would be possible here, be- cause, in that condition, they would freely exchange gold for silver. It was that condition which enabled England to resume specie payments in gold in 1821. The attainment of such a standard becomes diflicult precisely in proportion to the number and importance of the countries engaged in striving after it ; and it is precisely in the same proportion that the ruinous effects of striving after it are aggravated. To propose to this country a contest lor a gold standard with the European nations, is to propose to it a disastrous race, in reducing the prices of labor and commodities, in aggravating the burdens of debt, and in the diminution and concentration of wealth, in which all the contestants will sufl'er im- measurably, and the victors even more than the vanquished. JOOJT P. JONES. LEWIS V. BOGY. GEORGE WILLAED. E. P. BLAND. WM. S. GEOESBECK. Opinions of Messrs. Jones, ^ogi/, and Willard concerning the Jegal rela- tion of value which should be established between the metals. In the opinion of the undersigned, the proper legal relation of value to be established in the United States between silver and gold is 15.5 to 1. OPINIONS OF MESSRS. JONES, BOGY, AND WILLARD. 129 That is the legal relation in all the double-standard countries of Europe, with the single exception of Holland, where the double standard has been provisionally established with a relation of 15.0 to 1. It would be unreasonable to expect France, whose legal relations between the metals of 15.5 to 1 has existed since 1803, and whose actual metallic circulation ap])roximates 81,000,000,000, to assent to a change of the relation, which would compel the recoiuage of either the gold or silver ])ortion of that vast stock. The states of the Latin Union, including- France, are, in fact, re- strained by treaty until 1880 from changing the relation. Indeed, it is not suggested by anybody that it is probable or reasonably possi- ble that a double standard will be maintained in Europe upon any other relation than 15.5 to 1. It is certain, therefore, that when the mints of Europe are again opened to the unrestricted coinage of silver, the London ])rice of silver uiust again become 00.87 pence in gold i)er ounce, or substantially that. If we resume the coinage of the silver dollar with a weight of 412.5 grains, and the gold dollar remains unchanged, it will give a relation between the metals of 15.98 to 1, and a legalValuation to silver of 59 pence per ounce in gold. This would make the market or bullion value of silver 3 per cent, greater tljan its mint or legal value. The result would be, that no silver would be coined in this country, and even if it were coined could not be kei)t in circulation, but would be sure to be exported. This is just what happened after the relation of 15.98 to 1 was established here by the acts of 1834 and 1837, and is certain to happen again if we reestablish that relation, and if the double stand- ard with unrestricted coinage is maintained in Europe. A law of the United States remonetizing silver, but on a relation which would prevent its circulation if the mints of the double-standard countries of Europe were reopened to the coinage of silver, would tend to keep those mints iiermanently closed to silver. We cannot expect France to coin it, if we practically refuse to coin it in concert with Europe, by fixing a relation under which coinage here would be practi- cally suspended. If the gold dollar is not changed, the bullion value of a silver dollar of 412.5 grains must again be 103 cents in gold whenever the double- standard countries of Europe oi)en their mints to the free coinage of both metals, and our silver would flow away and would not return unless through some extraordinary demand in gold standard countries, arising from commercial or financial revulsions the value of gold should ad- vance to a- parity with it. The effect of such a demand would be, of course, to drain away the gold of this country, but we could not obtain any relief through its replacement by silveruntil the drain had i)rocecded far enough to raise the value of gold fully three per cent. On the con- trary, if our relation should (•orres])ond with the general relation of double-standard countries, silver would tiow into or out of the United States upon the slightest change in the relative value of the two metals. Upon the first call upon us for gold to meet extraordinary tiou which does not i)roduco this result, fails altogether to meet the demand of the times. 136 MINOEITY REPORT OF MR. BOUTWELL. As loii.fi: as silver is merely an article of commerce in Great Britain, where our bills due to other countries are finally adjusted, the use of silver as a standard in this country will fail to produce any of the im- portant results which ought to flow from the resumption of specie pay- ments. The resumption of specie payments means, or should mean, that the paper currency of the country is redeemable at the will of the holder in coin, which will be received in payment of debts due toother countries, and at its nominal value. To say that the holder of a D nited States note can obtain silver for the note, and that with the silver he can purchase gold and pay a debt due in London, is, in fact, a statement that he could then do what can now be done. The holder of a United States note can purchase gold, and with the gold he can pay his foreign debts. London is the financial center of the world, and while there are two theories as to the sources of its power in this ])aiticular, neither theory affords any support to the i)olicy of using silver as the standard of value in the LTuited States. One theory is that the act of tbe British Pailiamentof 1810, by which gold alone was made the standard of value, was the foundation of the commercial and financial i)re-eminence of England. While the undersigned does not concur m this opinion, he thinks it proper to state that if Great Britain is indebted for her commercial and financial sui^iemacy to that act, the success of her policy would justify and require its imitation by the United States at the present time. The undersigned, however, is of opinion that the financial supremacy of England is due largely, if not entirely, to her policy in encouraging manufactures and fostering and extending her maritime power. Jt remains, however, to be said that the accumulations of capital are grenter in England than with us ; that credits for commercial transac- tions over the whole world ciin be obtained more cheaply there than elsewhere ; and that while her pre-eminence in these particulars remains London will continue to be the clearing- house for other countries. In- asmuch as balances there must be settled in gold, it would seem wise for other commercial nations to make that metal the sole standard of value, or by a general agreement, to which England should be a party, secure the adoption of the bimeti^;llic standard. In addition to the results which will follow the introduction and use of silver coin in the United States, to which reference has already been made, the undersigned cannot omit to notice the effect of the measure upon the pubhc faith and credit of the country. By the act of the i'5th of February, 1862, it was provided that all duties on imported goods should be paid in coin, and tbafthe coin so received should be set apart as a special fund and applied to certain pui])oses. These were, first, to the j^ayment in coin of the interest on the bonds of the United States ; and, secondly, to the purchase or pay- ment of one per centum of the entire debt of the United States, the same to be set apart as a sinking-fund, the interest on which in a like manner should be apphed to the purchase or payment of the public debt, as the Secretary of the Treasury should from time to time direct. After the passage of the act of 1834, by which an increased value was given to gold as compared with silver, the standard of value practically was gold, the only use for silver being in the circulation of subsidiary coins, which were in fact tokens, after the act of 1853, the weight then being so light as to preclude their purchase and use as bullion. At the time of the passage of the act of 1802 gold was the only coin in circulation and the only standard of values in the country. Customs receipts were in gold exclusively, and they have been so collected from MINORITY EEPORT OF MR. BOUT WELL. 137 that time to the present. The interest upou the public debt has beea paid uniformly iu gold coin. Although there was authority for the coinage and use of the silver dollar containing 4Il2j^p grains of standard silver, yet, as a matter of fact, its coinage had been suspended, and the overvalued gold coin had been substituted universally in its place. Public creditors may very well claim that they are entitled to receive in payment of the interest and principal of the public debt the gold coin of the standard value authorized and in circulation at the time that the act of ISOU was passed. The undersigned is of opinion that the adoption of silver as the stand- ard would be followed by a loss, in the depreciation of the ])ublic credit, far greater than any gain to the Government by the payment of the interest and principal of the public debt in a coin less valuable than gold. Indeed, the depreciation of the public credit proceeding from acts of imputed bad faith, whether properly so imputed or not, cannot be compensated by any pecuniary gain, however large. It is to be observed, further, that the duties on goods imported, if collected in silver, would be subject to the variations attending the market price of silver as compared with gold in other countries, and especially in England, where gold is the standard of value. The con- sequence of such a fluctuation to the manufacturers of the country and to merchants engaged in importing goods can be easily foreseen. One of the chief objections to the irredeemable paper currency of the country is in the fact that the importer can never be assured that the price at which he sells his goods will be equal, when converted into gold, to their (;ost with the duties in gold added. But this condition of tilings docs not aliect materially the domestic manufacturer. The substitution of silver, however, and its use iu payment of duties, would leave the domestic manufacturer constantly exjwsed to the effect u[)ou business and profits produced by the changes that would certainly take pla(;e in the value of silver when measured by the gold standard. There can be but one standard of value in any country at the same time, and a safe and successful use of gold and silver simultaneously can be effected only by their consolidation upon an agreed ratio of value and by the con(;urrence of the commercial nations of the world. While, in the o]>inion of the undersigned, it is desirable to secure the use of the two metals by the concurrent a(;tion of the commercial nations, he does not entertain the opinion that any serious evils will come to us from maintaining the existing i)()licy in regard to gold and silver. We are now upon a gold standard, and although the i»aper currency of the country is depreciated to the extent of tive or six per cent., there has been, upon the whole, a constant imi)rovement in its value since the close of the war. Diuing th(! last thre(; years there has been a dei)ression in business, but that depression is not due to the currency of the country, the evi- dence of which is found in the ftu;t that a like dt^])ression in kin, there was no general fall of i)rices in the London market corresponding to the great depreciation which then took place in the price of silver. In July, 1870, an ounce of standard silver would not purchase, either in London or New York, by about 17 per cent., so large a share of i' pure gold. Then iJOd., or ono-foiirtliof a sovereign, contains i!8.25 grains of pure golil, and the ratio of value between the two metals is as 28.25 to 444, or as 1 to 15.71(34-. 140 MINORITY REPORT OF MR. BO WEN. before. But gold had not risen. An ounce of standard gold could have been exchanged for v^ery little, if any, more of other commodities gener- ally, excepting silver, than in May, 1875. Even if general prices were somewhat depressed during these fourteen months, they certainly did not then immediately undergo a far more rapid change in the opposite direction, reaching their former level in December of the same year. In all its essential features, the fluctuation in the prif e of silver was an isolated phenomenon, having nothing corresponding to it in the general course of trade. If we look at the circumstances affecting the relative demand and supply in the case of the two precious metals, we shall arrive at the same conclusion. During the last quarter of a century the annual prod- uct of gold from the placers and mines has been so much in excess of the demand as to render it exceedingly ])robable that the value of that metal has been steadily, thongh slowly, falling, and that this decline is not even yet arrested. It is matter of the commonest observation, that the necessary expenses of living and maintaining a family have been con- stantly on the increase since 1rices of commodities generally, reckoned in gold, have risen very considerably both in Europe and America. i^To one expects that they will recede again to what was their level before the discoveries of gold in California and Australia. The total annual product of gold in the world had risen from about 'J7 mill- ions of dollars in 1849, to an average of more than 105 millions for the five years beginning with 1850, and to 13G millions as the average for the next five years ending with 1859.* What was the consequence of this enormous increase of the supply ? From the price-lists of the Economist newspaper, and from other sources. Professor Jevons, in his work on the Fall of Gold, published in 1863, compiled tables of the monthly prices of 39 of those chief articles of commerce, which may properly be regarded as necessa- ries of civilized life, and thus ascei'tained the average annual jirice of each of them for the whole period from 1845 to 1863, both inclusive. He thus proved that their prices had, " on an average, risen between 1845-'50 and 18G0-'62 in the ratio of 100 to 110.2, which is equivalent, to a depreciation of gold in the ratio 100 to 80, or by. 14 per cent." He then took 79 minor commodities, less generally in use, the prices of which advance more slowly, since, as they are chiefly articles of luxury, an enchauced price diminishes their consumption ; and taking the aver- age of the whole 118 articles, the rise of prices, comparing the same two periods, was " found to be in the ratio of 100 to 110.25, corresponding to a depreciation of gold in the ratio of 100 to 90.70, or by about 9^ per cent." He adds as the final result, " the lowest estimate of the fall that I arrive at is 9 jjer cent., and I shall be satisfied if my readers accept this. At the same time, in my own opinion, the fall is nearer 15 per cent." Is there any good reason to believe that this fall in the value of gold has stopped, or has been materially retarded, since 1862? I think not. Taking the three periods of five years each which elapsed between 1859-74, we find the average annual product of gold throughout the world in each of them to be respectively, using the nearest round num- bers, 102 millions, 103 millions, and 100 millions of dollars. In 1875, the same authorityt puts the product for the year at 101 millions of dollars. * Tooke & Newmarch's History of Prices, aad the Economist newspaper, cited in Goscheu's parliamentary report on the Depreciation of Silver, t Goschen's parliamentary report, as before. MINORITY REPORT OF MR. BO WEN. 141 There is nothing in these figures which would lead us to suppose that the fall was much impeded ; certainly it could not have changed to a rise. Again, while over 310 millions of pounds sterling were added to the stock of gold in the world during the fourteen years l«49-'62, during the thirteen subsequent years, up to the end of 1875, there was a fur- ther addition to this stock amounting to 2G3 miliionsof pounds sterling. We are justified, then, in concludiug that a rise in the value of gold dur- ing the latter period was impossible. While the fall of gold has been so slow and gradual as to be with dif- ficulty detected, except when we regard its aggregate result after the lapse of a number of years, the depreciation of silver has been sudden and very great. It took place, as we have seen, in less than two years, and it amounted to 20 per cent. Its causes are easily discovered. Chiefly through the discovery and the rapid development of the silver- miues'in the United States, there was a sudden and immense increase of the supply, and that was soon followed by an indei)eudeut but con- siderable diminution of the demand. These two causes united created something like a panic, and several of the Governments of Europe made haste to get rid, so fVir as was possible, of a commodity which, as it seemed, must rapidly decline in value, and to preserve their standard of value by demonetizing silver. Their action, 'of course, only enhanced the evil for others, against which it was intended to guard themselves. The stock of silver no longer needed for use as money in Germany, or for additional coinage by the States constituting the Latin Monetary Union, was thrown ujion the market, where it operated to increase and accelerate the decline which had previously become inevitable. The Comstock lode has been lor our own times what Potosi was for the sixteenth century, though its eiiects have been developed much more raj)idly. The'great increase in the supply ot the precious metals from America, which took place during the latter half ot the sixteenth century, was mainly owing to the discovery of the mines of Potosi, which were first systematically worked in 1545. Before that year, as we learn from Humboldt, the annual i)roduct of both the precious metals from Amer- ica was only about 3 millions of dollars. Before 1000, Potosi had nearly quadrupled this amount, having raised it to 11 millions; and the conse- quence was, within a quarter of a century, that silver fell to about one- third of its former value. Before 1570, a quarter (eight bushels) of wheat of middle quality was sold in England, on an average of a long- period of years, for about two ounces of pure silver; about IGOO (still taking an average of many years, so that the exceptionally good and exceptionally bad croi)S may offset each other) the price had advanced to a little over six ounces, a i)oint from which it has not receded from that day to this. is'ow i)ass over about three centuries, and we come to the effect ])ro- duc, and have sinc(^ largely imported gold, and have sold silver amounting to over JO millions of dollars. Holland I'or some time pursued a vacillating policy, though attempts to alter her laws respecting coinage were made as early as October, 187L'. But at last, in 144 MINORITY REPORT OF MR. BOWEN. June, 1875, her parliament passed an act prohibiting the coinage of silver, indefinitely, and allowing the coinage of gold. Under this law, a gold 10-florin piece has been struck, and during the next nine months, 56 millions of florins in gold were issued, and have taken the place of an equivalent amount of silver, which has been discharged from circula- tion. France and the other states (Belgium, Switzerland, Italy, and Greece) constituting the Latin Monetary Union, have adopted an ex- pectant policy, merely restricting within narrow limits the further coin- age of silver, though the French minister of finance recently proposed a law authorizing the Government to prohibit entirely the issue of any more silver 5-franc pieces. France, which had previously \)e<^n almost drained of silver, first through purchasing cotton from India during the American war, and next by the payment of the German indemnity, has replenished her stock of that metal through the natural laws of trade, without any special legislation, but merely by contracting her paper currency, which for a time took the place of the exported silver money. She is probably deterred from adopting exclusively a gokl standard, through her apprehension of the effect which would be produced in low- ering the i^rice of silver by throwing her large stock of it upon the market, in which case the cost of filling up the circulation with gold would be very considerable. As already remarked, this action of the European Governments in partially discarding silver from circulation as money has tended in two ways to increase the depreciation in value of that metal ; first, by throwing large quantities of it upon the already burdened bullion- market, and secondly, by narrowing the field for its employment, and thereby lessening the demand. But to suppose that its depression in price oriffinatcd in their action on the currency, and is entirely attribu- table to the measures which they adopted, would be to invert the rela- tion of cause and efl'ect. Eather its previous fall in value, and appre- hended farther decline, caused them suddenly to demonetize it, as other- wise their general and nearly simultaneous action in regard to it would have been arbitrary and motiveless. There is no conceivable reason why they should all, within a brief period, have made haste to get rid of silver, if it had not appeared to them to be rapidly sinking in value while on their hands. We have next to consider whether the causes Mhich have produced the recent changes in the relative value of gold and silver are "perma- nent or otherwise." The question herein indicated does not admit at present of a determinate answer. We may form a somewhat loose esti- mate of the probabilities affecting the immediate future, perhaps for the next six or eight years ; but if we attempt to look farther, or to arrive at more definite results, events as unexpected and as vast in their influence as the gold discoveries in California and Australia, or the finding of silver ore in the Comstock lode, may falsify all our calculations. Of all human industries, mining the precious metals is the most precarious and uncertain. Legislation which is to effect interests and industries so large and complicated as those which depend upon the state of the currency in the United States, and upon the preservation of the standard of value, cannot be safely based upon vague estimates, or upon the inter- ested statements and valuations made by large holders of stock in silver- mines; but explorations recently made upon the spot by the Director of the United States Mint, by Prof. R. E. Rogers, and other eminent geologists and mineralogists, and by mining engineers, leave little doubt that the quantity of silver-ore already partially exposed to view and measurement in the Comstock lode is enough to keep up the average MINORITY REPORT OF MR. BOWEN. 145 product of that metal at least to its pre.seut amount for some years to come. It is not probable, then, that the supi)ly will soon fall off, and there are no indications that the demand for the employment of silver, either in the arts, for monetary purposes, or for exportation to the East, will again become as extensive within the next Ave years as it was five years ago. On the contrary, the evidence goes to show that electro- plated forks, spoons, and ornaments are already to some extent taking the place of the corresponding articles, far more costly, which contain a larger proportion of pure silver. ISTo one expects that England, Ger- many, Denmark, Sweden, and Norway will soon reverse what is now their established policy, by again bringing silver into circulation as money, except for the very limited ])urposes of a subsidiary currency; and if not, then all these countries, excepting England, must continue for some time to be sellers rather than buyers of this metal. Moreover, the facts already mentioned make it highly probable that France, Hol- land, and Belgium* may soon adopt entirely the monetary policy of Germany, as they have already adopted it to some extent ; and neither British India nor China seems likely soon to have again so large an excess of exports over imports as will enable either of them once more to exercise its extraordinary power of absorbing silver currency. There may be some farther reaction from the sort of panic in the market which recently depressed the price of standard silver to less than 50d. per ounce; but the fluctuations of value in the markets of the world caused by speculative movements or panics are of short duration and, very limited extent. Silver may not again fall as low as it was in July, 1870 ; but it would be unreasonable to expect that it will soon recover and permanently maintain the price which it commanded in 1870. Thenextsubjectof inquiry referred to this Commission concerns the policy of a " restoration of the double standard in this country, and, if restored, what the legal relation between the two metals, silver and gold, should be." AS the value of any commodity whatever depends primarily upon its cost of production, which is constantly varying, and secondarily upon its supply and demand, which are also extremely variable, as is shown by the incessant fluctuations of market-prices, it is obvious that there cannot be an absolute standard of value. Such a standard means some- thing fixed and unchangeable, by their relation to which all othc^r valu- ables may be measured. Now, there is no such commodity known ; everything varies in value from one week to another, both from intrinsic causes peculiar to itself, such as its inherent difSculty of attainment, and from extrinsic causes affecting those agents, labor and capital, by which alone this diflaculty can be overcome. The best that can be done is to select an approximate standard, tiiat is, some one commodity which seems more stable tlian any other, and estaV)lish that by law as the stand- ard by which the values of all other commodities are to be measured. liCgislation is competent to do this, and practically has done it both in England and Germany, by estal)lishing a certain i!umher of grains of l>ure gold, coined into either a sovereign or a matk, and declaring that this sliall be tlie common measure of value. But legislation is not (;om- jietent to select two such (joininodities, and to dedans that they siiall both l»e the standard or (M)mmon measure; or in other words, that tliero shall be a double standard. To attempt to do so is as absurd as it would be to dcr^lare by law that two (blocks should both be the standard for measuring time, though, as everybody knows, no two clocks can be made which shall keep perfect time with each other. *Accordin<5 to the latest accounts, Belgium has done so already. S. Rep. 703 10 146 MINORITY REPORT OF MR. BOWEN. This iheoretical view of the matter is amply coutirmed by experience. Every attempt to establish the so-called "double standard" has been a failure. The first step toward causing any commodity to become a standard of value is to make it a legal tender for the payment of debts. But though the law may declare that either of two commodities shall be legal tender, only one of them, and that the cheaper one, is actually adopted as a medium of payment. If gold and silver be the two com- modities chosen, and the legal relation between them be made to con- form to the ratio of their market-prices at the time of the enactment, the fluctuations of the market will speedily change that ratio ; and then the overvalued one speedily pushes the other out of circulation, and becomes itself the sole standard of value. It appears from the table already referred to, showing the monthly fluctuations in London of the gold-price of standard silver per ounce, that this price remained un- altered for as long a period as four months only once in forty -three years. Usually it varied every month, and but seldom remained fixed for two successive months. But any such departure of the market-price from the relative value of the two metals as established by law must cause that one which is overvalued, or of which the nominal exceeds the real value, to displace the other and take the whole circulation to itself. Always the bad money pushes out the good, as every one will adopt the easiest and cheapest means of paying his debts. Thus France attempted, as early as 1803, to establish a double stand- ard, and fixed by law the relative value of the two metals at 1 to 15.5. This ratio made the legal price of pure silver to be 28.64 grains of pure gold i)er ounce. But for over forty years the market-price of silver did not on an average exceed 28.25 grains of pure gold per ounce, so that the law overvalued it more than one per cent. To this extent, then, in France, silver was worth more as coin than as bullion, while gold was worth more as bullion than as coin. There was a profit of about one per cent, in carrying silver to the mint to be coined, and in melting up or exporting gold. Of course, silver flowed into France and filled up the circulation, while gold coins disappeared, or could be obtained only at a premium. In those times, when one was paid even so small a sum as 1,000 francs, he received his bulky and heavy money in a canvas bag, and had to hire a porter or a cab to con- vey it home. During the six years before 1852, the excess of the imports of silver into France over the exports was more than 28 millions sterling. The discoveries of gold in Caliiornia and Australia about 1850 re- versed this state of things, as it was foreseen that gold must fall in relative value. Hence the market-price of silver rose above its mint valuation, and consequently the amount of gold presented for coinage in France became immense, and there was a drain of silver, vast quan- tities of which were melted down and shipped to India. The incon- venience which resulted from the want of small change had to be met by reducing the small coinage to the state of a subsidiary or token- currency, all pieces of two francs and under being much overvalued, so that they could not be exported or melted up without considerable loss. But the silver five-franc piece was nominally retained at its old valu- ation, and to fill the gap caused by its practical disappearance, gold five- franc pieces were coined to a large amount. Like our own gold one- dollar coins, however, these were found to be inconveniently small, and the coinage of them ceased even before the recent depreciation of silver brought the silver five-franc pieces again into circulation. During the six years, beginning with 1852, the excess of the exports of silver from France over the imports was more than 45 millions sterling. MINORITY REPORT OF MR. BOWKN. 147 Hence it appears that the French attempt to establish a double standard has been a total taihne. France bad silver for her only standard from 1803 till about IS.IO, and g:old for her only standard ever since. Even now, since the recent great depreciation of silver, restrict- ing the coinage of that metal within very narrow limits is a virtual adherence to the single standard of gold. The corresponding sittempt to establish a double standard in the United States resulted in a similar exjierience of loss, inconvenience, and failure. A law of Congress passed in 1792 established the United States Mint, and so regulated the coinage that both 24.75 grains of pure gold and 371.25 grains of pure silver were made legal tender for a dollar. This was an attempt to establish the double standard on the ratio of 1 to 15, which was probably the actual ratio of the market-prices of the two metals at that epoch. But silver immediately began to decline in price, andbefore 1800 it had reached the ratioof 15.42; while in 1803,aswehave seen, even the French ratio of 15.5 had become too small. Of course, the overvalued silver filled up the circulation almost entirely ; the whole coinage of gold for forty years was less than twelve millions of dollars; and this little was for the most part either preserved as a curiosity, or melted up and exported. A gold coin was seldom seen, and silver was virtually the only standard. This was not the worst. As the silver dollar had been made to conform almost precisely in weight and fineness to the Spanish milled dollar, Spanish quarters, eighths, and sixteenths, usually much debased by abrasion and clip- ping, poured into the country through our trade with the Spanish West Indies and South America, and soon formed almost our whole fractional currency. A small Spanish coin called a pistareeji, so much worn as hardly to be worth 17, passed current for 20 cents. Vainly did the United Stated Mint issue American fractional coins of full weight and value, as these were soon melted uj), and the bullion sold at a high profit for the worn Spanish coins which were equally current. Never was there a better illustration of the principle that bad money invariably dis- places the good. The law of 1834 remedied these evils by actually lowering the stand- ard more than 6 per cent., and thereby establishing the relative value of the two metals at 1 to 16. Instead of 24.75, only 23.2 grains of pure gold were coined into a dollar, and thereby the par of exchange with England, which had been about $4.50, was raised to $4.87, for the pound sterling. Moreover, as by the ratio thus established, silver was under- valued about 3 per cent., gold began to be issued in large quantities and came into general use, while silver pieces of the denomination of $1 were almost entirely thrown out of circulation, and the silver frac- tions of a dollar were kept in use only through the necessity of having some small change, and because, being much handled, they soon lost a portion of their weight by abrasion. The nuisance of the much worn Si>anish coins was gradually abated by a general refusal to accept them as more than four-fifths of their nominal value. Practically, then, the attempt to establish a double standard had resulted in lowering the whole standard more than G per cent., and in establishing first silver, and then gold, as the whole measure of value. In less than twenty years, the fluctuations of price in the market again created a necessity of tinkering the so-called ''double-standard" cur- rency. Soon after 1850, silver rose so much in price thateven the smaller silver coins began to be melted up and sold as l)ullion. It became diffi- cult to efiect small purchases, or to obtain " change" for a dollar. Con- gress had now to undo what it had done in 1834. But its action was 148 MINORITY REPORT OF MR. BOWEN. reversed, not by restoriug the gold dollar to its former full weight and value, but by diuiinishing the quantity of silver which represented a dol- lar just about as much as it had lessened the quantity of gold in the dol- lar nineteen years before. The law of 1853 virtually surrendered the double standard, and made gold coin the only available legal tender for any debt over five dollars; for though the former one-dollar piece, con- taining 371.25 grains of pure silver, was not expressly demonetized, it had gone out of use, and practically remained out of use, in the domestic currency, because its value as bullion had come to exceed by about three per cent, its value as coiu. But the silver fractional deuominations, from half a dollar downward, were reduced to the state of a subsidiary or token currency, by so far diminishing their weight that a dollar's worth of them contained only 345.6 grains of pure silver, aud by making them legal tender only for an amount not exceeding five dollars. Thus gold was maintained as the single available standard for nine years longer, when, in 1862, the issue of an inconvertible paper cur- rency, and making it legal tender, practically abolished every standard of value, and introduced the state of uncertainty, of wild fluctuations of prices, and consequent reckless speculation, from the evil effects of which the country has not recovered up to the present day. In 1873, however, probably as a precaution against the great depreciation of silver which was even then foreseen, Congress took the last step toward the legal establishment of the single gold standard by demonetizing silver alto- gether, making all our silver coins legal tender only for an amount not exceeding five dollars. The gain which would accrue from manufactur- ing silver bullion into coius at a nominal value largely exceeding its cost was constituted a special fund for making good the " wastage; " it might properly be used to meet the heavj^ loss to which a silver currency is always subject from abrasion and clipping. In the opinion of the undersigned, it is expedient to take one more step toward assimilating our system of metallic currency to that of England and the commercial world generally. By diminishing the quantity of pure gold in the dollar only three fifths of one grain, or considerably less than half of what the law of 1834 subtracted from it without pro- ducing injury or complaint, our American half-eagle or five-dollar piece would become almost the exact equivalent of one pound sterling, and would differ only by a very small fraction from the value of twenty-five (gold) francs in France and the other States of the Latin Monetary Union, and from twenty (gold) marks in Germany. Already the English sov- ereign or one pound sterling is a recognized portion of the actual cur- rency of such countries as Portugal, Brazil, and Egypt, and is practi- cally current at its full value in every civilized country. Austria has recently coined and issued gold four-florin aud eight-florin pieces, which, as practical equivalents respectively of the French ten franc and twenty- franc coins, are easily expressed as definite portions of the pound ster- ling. Hence the slight change here recommended would be attended with the following imj^ortant advantages: 1. It would be a long step toward establishing one monetary unit, denomination of account, and standard of value for the whole commer- cial world. 2. It would greatly facilitate the computation and settlement of in- ternational balances, accounts, and exchanges. 3. It would be the strongest possible safeguard for the future sta- bility of the standard of value, as all nations would be interested in its preservation, and it could not be effectively altered without their unani- mous consent. MINORITY REPORT OF MR. BO WEN. 149 4. In making remittances to other conutries, it would no longer be necessary to melt the coins and have the bullion recoined at considera- ble charge in a foreign mint. The Government would no louger be put to the heavy expense of coining and recoiuing the same bullion, which had been first sent abroad, and then returned, through fluctuations in the balance of trade. 5. As American gold coins would be equally current everywhere with English sovereigns, x^Tew York would share at least one of the advan- tages which have made London the banking-house and commercial cen- ter of the civilized world. 6. In the language of Professor Jevons, " a world-wide gold currency of unimpeachal3le fidelity and excellence would be obtained " alike from British, French, German, and American mints. 7. It would much facilitate our return to specie payments, the present premium on gold, 5i, being reduced immediately to about 3 per cent. Justice, however, requires that ail debts and contracts expressly made payable in gold, and outstanding on the date of the law authorizing this change in the coinage, shoiild be discharged only by tender of dol- lars each containing 23.2 grains of pure gold, or by their equivalent. After what now has been said, it is hardly necessary to consider the third subject proposed by Congress to this commission, namely, " the policy of continuing legal-tender* notes concurrently with the metallic standards." As it has been proved both by theory and experience that a double standard is an illusion and a failure, every attempt to establish it having led to frequent changes of legislation and to great inconveni- ence and uncertainty in commercial affairs, any project for creating a tri])Ie standard ought to be summarily rejected as impracticable and absurd. The law may say that either a gold dollar, a silver dollar, or a l)aper dollar shall be indiscriminately legal tender ; but the only actual tender ever made for the payment of a debt will be that one which, at the time, is the cheapest of the three. Hence the most effectual means of rapidly debasing the standard, that is, of depreciating the value of a dollar, will be to authorize any one to cancel debts outstanding against him by proffering in payment that one out of three different kinds of dollars which happens at the moment to be of the smallest value, espe- cially when, as during the last year, the three are rapidly and largely changing their relative values. Only last July, the so-called " trade- dollar," the heaviest and most valuable one ever coined, was worth about .86, and the " greenback " paper dollar about .89, of a gold dollar. Five months later these proportions were reversed ; the trade-dollar had risen in value to .94^, and the greenback to .92J, in gold. What sort of a standard Mould they have been, either separately or together, when they are liable to such fluctuations both in their relative and absolute values in less than six months ? As there was no apparent change in the average price of commodities in general between July and Decem- ber, 187G, we may be sure that the value of the gold dollar during that interval remained without alteration. Yet, under the attempt to create a triple standard, it is certain that the gold dollar would have been the only one which, during those five months, could not have come into use. Whatever, then, might be the intention of Congress in attempting to create a double or triple standard, it is certain that the actual conse- quence of such attempt must be to exclude gold altogether, and to make either silver or the legal-tender note the only measure of value and the only medium for the payment of debts. We have, tlKUcfoic, merely to consider whether it is expedient and just to establish either of these two forms of money, in preference to gold, as the sole standard. 150 MINORITY REPORT OF MR. BOWEN. Money, properly so called, has two perfectly distinct functions to per- form. It must be capable of use both as a standard of value and as a medium of exchange. It is obvious that the former of these functions is by far the more important. As to the latter, almost any commodity, even any ticket of transfer or token of debt, though without any in- trinsic value, may be made to serve perfectly well as a medium of ex- change, the question which of them is to be preferred for this purpose being determined solely by considering which is the most couvenient. Silver, copper, nickel, bank-checks, railroad-tickets, postage-stamps, ac- counts-current, or offsets of sales against ])urchases, and the like, may serve as media to facilitate the transfer of those commodities which are the only real objects of barter and sale. What is called a subsidiary or token currency, whether it be silver, copper, or nickel, is of this nature, the law affixing a definite limit both to the amount of it in use, and to the extent to which it shall be a legal tender, and also giving it a con- ventional, often differing from its intrinsic, relation to the real measure of value. Far otherwise is it with the other function of money, that of serving as a standard of value, as on the proper execution of this office some of the most momentous interests of the whole community are entirely dependent. The very life of trade, and of confidence between man and man, depends on the due performanoe of contracts, on the successful maintenance of a system of credits, and on the anticipation of what will be the relative value of money and commodities at some future day. Very few mercantile transactions are really completed at the time when tbe bargains are first made, or when the commodities affected first change hands. Nearly all of them, either directly, or in their necessary and in tended consequences, extend into a more or less remote future. The trader buys onlj'^ in order to sell again, it may be the next week, the next month, or the next year. In every commercial community, far the larger portion of the sales which are effected are made on credit ; that is, on promises of payment at some future day. And the debt thus contracted, through the agency of banks and other financial instruments, becomss itself an object of barter and sale, which are again dependent on trust in the future. Even in the case of cash-sales of commodities for speedy consumption, the purchaser's choice of the time and place for the trans- action usually depends on his estimate of what prices are, or will be, elsewhere or on some other day. All such bargains, expectations, and promises must be expressed, and, if necessary, registered, in the common denomination of account — in francs, pounds sterling, or dollars j and any uncertainty as to the future value of this denomination of account must discourage individuals from engaging in the transaction, or, if not foreseen, must work hardship and injustice to them in the result. And these evils may all be caused, not only by any actual alteration of the standard within the period of time belonging to the transaction or the contract, but by any reasonable grounds of fear that within that time it may fluctuate in value. Any depreciation of the currency, if foreseen a few weeks before its occurrence, may be so lar anticipated and exag- gerated in its effects upon the market, that a very considerable rise of prices may take place some time before the currency is depreciated at all ; and then, owing to the reaction of disappointed hopes and fears, the real depreciation, when it comes, may be contemporaneous with a considerable fall in prices. Trade thus becomes a lottery, and legiti- mate enterprises in commerce and manufactures must either be aban- doned altogether, or kept ui) under a heavy cost of insurance against the uncertainty of the returns. The enhancement of prices produced MINORITY REPORT OF MR. BO WEN. 151 by such insurance takes i>lace without any of that compensation to the consumers, embracinji: tlie whole laboring- class in the community, which arises from a corresponding increase in their income or wages. In the opinion of the undersigned, to adopt silver for tlie standard dollar would be a greater discouragement to manufactures and trade, and would do more harm to all the great industrial interests of the country, than even the continuance of the i)resent wretched system of an inconverti- ble paper currency. ]S^ot only during the last year has silver undergone greater and more rai)id tlu(;tuations in price than paper, but the causes of its fluctuation are more difficult to be discovered, and less controllable, because wholly out of reach by legislation. By a very moderate and gradual contraction of the legal-tender currency, it is certain that Con- gress can prevent the ])ai)er dollar from sinking below its present value, and, by a few other well-considered measures, can steadily raise its value to par without spreuding alarm, or creating any disturbance in the markets, or perilling any interest but those of the stockjobbers, even before the time now fixed by law for the resuuiption of si)e(ne payments. But in view of recent experience, who can tell what the price of silver "will be six mouths hence, or what legislative enactment can increase or diminish that ])rice a single penny? As well might a legislator attempt by taking" thought to add one cubic to his stature. Yet the only appar- ent motive for urging the adoption of a silver standard in the United States, at the very time when all Europe seems to be on the point of discarding it, is the vain expectation that an act of Congress may have the effect, in the stock-jobbers' phrase, of bulling the price of silver throughout the markets of the world. Granted that such an act might create a market for the silver which still remains to be sold by Germany and other European countries, it certainly could not restrict the pro- ductiveness of the mines in the Comstock lode, or restore to British India and China their former power of absorbing the surplus silver of the civilized portions of the globe. It would not be becoming for the dignity, as it certainly would be prejudicial to the interests, of the United States to engage in an operation equivalent to stock -jobbing, by making heavy purchases on a falling market of a commodity generally dis(;redited elsewhere, in the idle hoi>e of raising and controlling itsijrice. The benefits of such an operation, if any, would be reaped only by the sto(;kholders in silver mines, while the inconvenience and loss would be sustained by the people. There are special reasons why silver is less eligible than gold for the chief place in a metallic currency. Its weight and bulk are too great in ])roportion to its value, so that it is very inconvenient for use in large transactions, and for the settlement of international balances. Its proi)er place is a subordinate one, being well fitted for small retail pur- cha.ses and adjusting the fractional portions of accounts. And this pla(;e, as a subsidiary or token currency, seems to be nowdeterminately marked out for it throughout Europe. We leain from the Director of the United States Mint, that one million of dollars in gold coins weighs 1 ton, 10 hundred-weight, 86 pounds; wliile the same value in " trade dollars" amounts to oO tons, and in KMl)sidiary silver coins to a little over '21 tons, 11 hundied-weigiit. Any one who was in France about IMO, when silver was virtually tln'only standard, and no bank-bills were in use of a less denomination than one hundred francs, will remember how burdensome and inconveiiiciit this form of moiu^y setMued. Another and more serious objection to the use of silver currency is its liability to considerable loss of weight and value by abrasion and 152 MINORITY REPORT OF MR. BOWEN. clipping. Gold coins are but little exposed to deterioration from these causes. Having considerable value in small bulk, they are closely scru- tinized when offered in payment, and if light in weight are rejected, so that worn and clipped coins, so to speak, never get a foothold in the currency. But silver pieces, especially the fractions of a dollar, because their value is comparatively trifling, are not closely examined, and so still pass current, though their original value has been much impaired. By a careful and extensive series of experiments, weighing a large number of (gold) sovereigns taken at random from those which had been a long or short time in circulation, Professor Jevons ascertained that the loss by abrasion on each coin was almost always exactly pro- portional to the number of years it had been in use. He was thus enabled further to ascertain that the average annual loss of weight by each sovereign was forty-three thousandths of one grain. In twenty-six years of use, therefore, it will have lost by abrasion about one per cent, of its value. In the same manner, he found the average annual wear of the /i«7/- sovereign to be sixty-nine thousandths of a grain, or more than half as much again as that of a whole sovereign. The smaller coin, therefore, loses by friction one per cent, of its value in about six- teen and a quarter years, this greater loss being attributable to its ex- posing more surface in proportion to its weight, and to its being more rapidly handled in purchases at retail. We do not know that any equally careful experiments have been made to ascertain how much silver coins lose annually by abrasion, but a tol- erably good estimate may be formed by comparison of the two cases. Other things being equal, the loss will be proportioned to the amount of surface exposed to friction, and also to the frequency and carelessness with which the coins are handled IS^ow, a shilling exposes to wear about as much surface as a sovereign, and therefore, from this cause alone, a pound sterling in silver shillings will lose annually by abrasion twenty times as much as the same value in one gold piece. Moreover, in the numberless petty transactions of every-day life, shilhngs are circulated far more rapidly and carelessly than sovereigns, and their consequent loss by friction must thus be much increased. Then the estimate formed by the best authorities seems a reasonable one, that the annual loss ou silver coins by abrasion is at least 1 per cent. Hence it appears that the cost of repairs, the difficulty of maintaining the currency in full weight and good condition, is at least twenty six times as great for silver coins as for gold ones. If the government neg- lects its duty of making good at considerable expense this annual dete- rioration by wear, the state of a silver currency soon becomes deplora- ble. After some years of ordinary active use the coins betray their loss of weight by their worn and defaced appearance, and the evil is increased and made universal by dishonest persons, who pick out from the circula- tion the pieces freshly issued from the mint and others which happen to be less worn, and by punching or clipping reduce them to the average, or below the average, of debasement. Also, as the coins now pass perhaps for 10 per cent, more than they are worth, foreign silver coins of inferior weight are attracted from neighboring countries to a place where they are current for a higher value than they possess at home ; and the task of expelling these intruders is by no means an easy one. Already, though our fractional silver currency has been but very recently restored to use, worn Canadian and Spanish "quarters" and punched American coins have begun to appear in circulation. If remedial measures are not adopted, our silver currency will soon be again in as bad condition as it was just before 1830, or as that of England before the recoinage of MINORITY REPORT OF MR. BOWEN. 153 1696, or as that of Germauy before her abaudouruentof the silver stand- ard in 1873. The evil in question is not so considerable, and a remedy for it is not difficult to be had, if silver be restricted to its only proper monetary function, that of furnishing a subsidiary or token currency. No oue is then obliged to receive the deteriorated coins except to the small amount for which they are legal tender ; and as the whole quantity in circulation is not very great, and the Government have reaped a large profit by issuing it at a rate considerably above its intrinsic value, this profit may properly be made a fund for defraying the expense of constantly withdrawing the light coins and filling the vacuum with others of full weight fresh from the mint. In this way, England and France of late years have kept their subsidiary silver coins in perfectly good condition, the former country usually issuing new and perfect pieces each year to the amount of £3.000,(00, yet without at all increasing the volume of this portion of the currencj', because old and worn coins to the same amount are withdrawn. But if silver is made legal tender for any amount whatever — and that is what the project of a double or triple standard means — gold will dis- appear from circulation, no fund will be available to defray the consid- erable cost of annual repairs, and both the United States Treasury and the country generally will be reduced to the condition in which British India is already placed, with heavy liabilities both abroad and at home, which are payable only in gold, but with taxes, wages, and dividends receivable in a metal which may again, as during the last year, lose 16 per cent, of its value within six UDonths. A few persons who do not understand the subject imagine that, if the mint and the treasury be required, under the system of a double stand- ard, freely to exchange gold dollars lor silver ones at par, or the re- verse, whenever such exchange is demanded, then neither metal could fall below the value of the other. Certainly it could not, within the lim- its of the country foolish enough to act thus, and during the few weeks which could elapse before its mint and treasury would be drained of their last gold dollar. For, suppose the price of silver should fall in the London market only 2 per cent, below its former value relative to gold, then any person, by shii)pingtbence $980,000 worth of silver bull- ion, could receive for it here one million of gold dollars, and could re- peat this operation indefinitely, or until stopped by the bankruptcy of our mint. A compulsory union of the dearer metal with the cheaper one could permanently establish an equality of value between them only if the unequal marriage were sanctioned by all the nations of the earth. But, as probably both England and Germany would at once forbid the banns, this project of M. Czernuschi is not likely to be soon carried into operation. The undersigned sees no objection, however, to a considerable enlarge- ment of tlie limits within wlii(;h the subsidiary silver currency is now issued and made a legal tender, j)aper money being withdrawn to an extent equivalent to the enlarged issue thus made, as has been already done in the case cfthe silver fractit)ns of a dollar, so that the aggr<'gate volume of the currency shall not be increased. An important step would thus be taken toward a resum])tion of specie i)aynients, and a rea- sonable concession would be made to those who desire a larger use of silver money. Dollars might I)e coined ea(;h containing 345.0 giains of pure silver, be mad<' legal tend('r to an amount not exc'ceding twenty dollars, and be issued only in ex<5hange for [)ai)er money, whether green- backs or national-bank notes, of any denomination below five dollars, 154 MINORITY REPORT OF MR. BOWEN. the notes thus received iu exchange being immediately canceled and destroyed. A burdensome redundancy of silv^er thus thrown into circu- lation might be prevented by making it receivable by the Treasury to any amount in payment of all dues to the Goverument which are not by law made payable only in gold. These silver dollars would be a con- venient and unexceptionable medium of exchange, and as they would not be a standard of value, they could not introduce any uncertainty about the just fulfillment of contracts. They could not be melted up or exported without loss, and- as receivable by the Goverument to any amount, they could not become depreciated in the market. The amount of one-dollar and two-dollar notes now in circulation is about sixty -five millions of dollars. These would all be gradually withdrawn, and their place would be filled by silver coin iu all retail transactions. We come now to the last subject which this commission is required to consider, namely, "the best means for facilitating the resumption of specie payments." In the opinion of the undersigned, the two measures already herein proposed would go far toward accomplishing such re- sumption without creating any disturbance in the markets, without any injurious shock of sudden transition, and without harming any class or interest that can rightfully claim to be protected by the Government. Each of these measures is a concession to one or the other of the only two parties who now appear to be hostile to such resumption. Re- ducing the quantity of pure gold in the dollar to 22.6 grains, through bringing it so much nearer the present value of the legal-tender (green- back) note, favors those of the indebted class who fear that resumption will make it more difiicult lor them to pay their debts. Substituting silver for all notes below the denomination of five dollars will be as large a measure of protection to what may be called "the silver interest" as can reasonably be asked from Congress. Should these two recommen- dations be adopted, it is reasonable to believe that the premium on gold would continue to decline as fast, and also as uniformly and innocuously, as it has done since March 9, 1876; and since its fall within ten months after that date from 15 to 5^ per cent., so far from creating any injury or disturbance, has been attended with a considerable growth of confi- dence and revival of trade, there are no grounds for apprehending any evil consequences through its lurther decline from 3 per cent, to zero. The paper dollar having thus risen to its par value, specie payments might safely be resumed some time before the period now fixed by law, as the amount of surplus gold already in the Treasury would be quite su£ficient to meet the very moderate demands which would then be made upon it to redeem its notes. In order to make sure of this further decline, however, and also to diminish what would still be the excessive volume of paper currency, the Secretary of the Treasury should be enabled and required gradually to lessen the amount of it in circulation. He is already authorized to sell United States bonds for gold as a means of providing for resumption, and also to sell the gold so obtained and receive legal-tender notes in payment. These notes he should be required to destroy to the amount of three millions of dollars a month, none others being issued in their place. This would only be to continue, under the authority of law, the same rate of contraction which has spontaneously taken place during the last twenty-two months. These preliminary measures being adopted, Congress might safely and justly repeal all laws whi<}h "make anything but gold and silver coin a tender iu payment of debts." It is evident, thes, that the accumulation of more gold in the Treas- ury is not a necessai-y means or preliminary for the resumption of specie MINORITY REPORT OF MR. BO WEN. 155 payments. The legal-teuder notes originally issued in payment of debts due from the United States are redeemed and discharged when received as an equivalent for the same amount of debts due to the United States, noue'others being issued in their place. In fact, the process of redemp- tion is constantly going on through the receipts from internal taxation and other sources ; and this process is made final, simi)ly by not paying out again these notes or any others, and by making what provision may be necessary to discharge the ordinary obligations of the Treasury, either by imposing additional taxes or by the sale of bonds. During the last fiscal year about one hundred and twenty-five millions of these notes were received as internal revenue and from the sale of the public lauds; and if none others had been issued in their pla«e, resumption would, before this time, have been complete, and accomplished, too, by a process so gradual and harmless,that none but those who closely watch the financial operations of the Government would have been aware that anything unusual was going on. What is to be feared from making silver an unlimited legal tender is not so much a depreciation of the standard of value, as the recurrence of sudden and great fluctuations in the market-prices of commodities, and of reckless speculation in commerce, mining, and manufactures, which are properly attributable, as in the case of paper money, to hav- ing no standard ac all. What we dread is not the fall, but thefuctua- tion,m value of the would-be standard, and the feeling of uncertainty thereby produced ; and this dread is only confirmed and enhanced by the recovery in the market-price of silver, within the last six months, from about 4:1 d. to 5S^d. an ounce, being about all that it had lost during the earlier part of the year 1876. Against this uncertainty, and its de- pressing efiect upon all legitimate enterprise, industry, and trade, noth- ing can protect us. The discovery of more bonanzas in the Comstock Lode, the further demonetization of silver by France and Holland, or a still more unfavorable balance of trade in British India, may send the price of that metal down again iluring the next half year lower than ever. With such a contingency hanging over it, commerce does not start into full activity and industry is paralyzed. Those who still fear that a resum])tion of gold payments would be l)rejudicial to our financial interests, and do wrong as well as harm to the indebted classes, ought to learn from the experience of the last three years, and especially from that of the year which has just ended, that their apprehensions are groundless. The war i>rices, the wild specula- tions, and excessive personal expenditures, which had been created and fostered by the immense issues of paper money in 18G4 and 1865, and maintained by the convulsive efforts of those who had been enor- mously enriched by these events, reached at length their inevitable issue, and came to an end all at once in the crises of September, 1873. More than ever before during the present century rents and prices fell, real estate ceased to be marketable, merchants went into bankrui)tcy, rail- roads passed into the hands of receivers, manufactories stopped, the incomes of persons not in active business but living on their private means were cut off", and the laboring classes were thrown out of employ- ment. Great as was the calamity, however, after the storm had cleared the air a revival would probably have begun in less than a twelve- month, as had been the case in all former commercial crises, had not the Secretary of the Treasury so far strained his authority beyond all law or precedent as to throw upon the market, without any express sanction by Congress, an additional issue of twenty-six niiilions of paper money, with the tlireat that it might be followed by eighteen 156 MINORITY REPORT OF MR. BOWEN. millions more. Tbeu, indeed, people did not know what to expectj confidence broke down entirely; capitalists preferred to allow their funds to remain idle, rather than to make loans which might be repaid in dollars not worth half as much as those which had been borrowed, and what might have been merely a temporary convulsion, followed by the glow of reviving health and strength, passed over into that general paralysis of trade and industry which we have witnessed during the last three years. Experience has demonstrated that the cause of this prolonged evil, which has brought multitudes of industries and deserving persons to the brink of penury and ruin, was not what the inflationists call a lack of money. When the calamity was at its height, as it was throughout 1875 and the early part of 187C, there was no lack, but rather a supera- bundance, of money, the banks and the capitalists having more than they knew what to do with. Hence they were eager to let it on un- doubted security, such as Government stock, and oti call, as the phrase is, so that there would be no time nor opportunity for its depreciation, at as low a rate as 3 or even 2^ per cent. With a circulation then amounting to nearly seven hundred and forty millions of i)aper dollars, which at that time were worth about 87 cents apiece, and which, because commerce and industry were paralyzed, were freely ofiered on call at 3 per cent, interest, it would surely have been absurd to call for the issue of " more money " as a means of rescuing the country from its diffi- culties. At length, especially during the latter half of the year 1876, the evil began to cure itself, and that, too, by means which clearly indicate that the undue inflation and consequent fluctuating value of the currency had been the sole original source and the aggravation of the difficulty. Spontaneously, without any aid from legislation, or any concert between individuals or the banks, the paper currency l3egan to contract itself. Unable to make any i^rotitable use of their funds, because credit was dead in the community, and the wings of enterprise were clip})ed, many of the banks voluntarily surrendered their circulation altogether or in part, and either retired from the business, or confined their operations to what are the only two proper functions of a banking institution, those of deposit and discount. They were thus relieved from some heavy taxes, and were able to withdraw their United States' stock, deposited as security to redeem their circulation, and by selling this stock at the advanced prices which it commands in the market, because payable in gold only, to make greater gains than were possible from lending their own notes at 3 per cent, interest. Though the act of January 14, 1875, repealed all limits to the increase of national-bank circulation, and thereby invited a further inflation of the currency, it appears from the last report of the Comptroller of the Currency, that the total decrease of legal-tender notes and national-bank notes between January 14, 1875, and November 1, 1876, has been over fbrty-five millions of dollars. And this process of diminution is still going on, the amount of legal-tender notes on deposit with the Treasurer for the purpose of still further retir- ing bank-notes being, on November 1, 1876, nearly twenty-two millions, so that the aggregate amount of paper money voluntarily withdrawn from circulation in less than twenty-two months has been about sixty- six millions, or 9 per cent, of the whole quantity in use. And what has been the consequence of this spontaneous contraction of the paper currency ? The paralysis of credit and industry is passing away, and commerce to a marked degree has begun to revive. A very favorable balance of trade has reduced the rates of exchange on England MINORITY REPORT OF MR. BOWKX. 157 considerably below par, and gold has constantly flowed into the country to an unprecedented extent. According to the estimates of the Director of the Mint, the amount of coin and bullion in the United States on June 30, 1876. was over one hundred and eighty-one millions, of which about thirty millions were silver. As the imports of gold during the autumn of 1870 were immense, owing to the favorable balance of trade, and as the mines of both the precious metals during the same period were very productive,* there can be no doubt that the quantity of the precious metals in the country on January 1, 1877, was at least two hundred and twenty millions. In the opinion of the undersigned, that sum is a sufficient basis on which specie payments could be maintained without difficulty or disturbance, even if resumption should take i^lace at a very early day. For the effect of such resumption would be to rescue this specie from its present semi-latent state, employed only in foreign trade and in certain limited transactions with the United States Treasury, and bring it once more into full use as money — as a constituent part of the active circulation of the country. So brought back, it would even more than fill the gap caused by the partial withdrawal of paper currency, and in this way, combined with its effect in still further restoring confi- dence, and putting more heart into trade and manufactures, the prob- able immediate effect of resumption would be to raise the prices of com- modities generally, instead of depressing them, and thus actually to favor the indebted States, and, generally, the indebted classes of the people. Turn the matter as we may, the chief cause of the evils under which for three years the country has suffered, has been impaired credit, and the want of trust in the future. It has been the absence of any fixed standard of value, and the uncertainty in the markets caused by the fear lest Congress should again inflate the paper currency. Who were the greatest losers by this deplorable state of things? Not the creditor class, surely; not the capitalists; not the owners of unencumbered houses and lauds, and Government gold-paying stocks, and fully con- structed and equipped railroads, which are still paying dividends, though at reduced rates. These have something to fall back upon ; their incomes are diminished, it is true, and sometimes cut off altogether ; but they can still subsist for a long time, even on their lace for silver in a monetary system i« that of a sub- 160 MINORITY REPORT OF MR. BOWEN. sidiary or token currency which is considerably overvalued by law and made legal tender only within certain limits. These limits being inde- terminate except by general' considerations of expediency, there is no valid objection to so far widening them as considerably to increase the amount of silver now in circulation, paper money being withdrawn to an equivalent amount, and the silver coins being made legal tender for any sum not exceeding twenty dollars. 8. The proposed " policy of con tinning legal- tender notes concurrently with the metallic standards" would be in the highest degree inexpedi- ent and unjust, this paper-money system having been the chief cause of the paralysis of trade and industry under which the country has labored for the last three years, and Congress having as far back as 1869 sol- emnly pledged the faith of the country tor the resumption of specie paymeutt at the earliest practicable moment. 9. Circumstances at the presenttime have made such resumption both practicable and easy within a very brief period, the paper currency having spontaneously contracted itself at the average rate of three mil- lions a month during the last twenty-two months. In order to complete this very desirable result, and to make our mon- etary system conform in all important respects to that of the most pros- perous and best ordered commercial countries of Europe, the following measures are respectfully recommended for adoption by Congress: 1. That dollars be coined each containing 345.6 grains of pure silver, which shall be legal tender for any sum not exceeding twenty dollars, and shall be issued onlj^ in exchange for paper currency below the de- nomination of five dollars, and the one-dollar and two-dollar notes so received in exchange shall be immediately canceled and destroyed. These silver dollars, however, shall be receivable toany amount in pay- mt'Ut of any dues to the Government, except for duties on imports. Alter January 1, 1878, notes below the denomination of five dollars shall not be paid out either by the Treasury or the banks, and shall not be legal tender. 2. Gold shall in future be coined only at the rate of 22.6 grains of pure gold to the dollar, so that the half-eagle or five-dollar piece may be almost the exact equivalent of one pouud sterling ; and the gold so coined shall be legal tender to any amount: Provided, ho7rever, That all debts and contracts expressly made payable only in gold, and outstand- ing on the date of this enactment, shall be paid and discharged only by dollars each containing 23.2 grains of pure gold, or by their equivalent. 3. Out of the paper currency received by the Government in the col- lection of its internal revenue, a sum not exceeding three millions of dollars each month shall not be reissued, but shall be canceled and de- stroyed ; and any deficit which may thereby be created in the Treasury shall be supplied in the manner already authorized by law, namely, by tlie sale of any of the United States bonds which the Secretary (f the Treasury is now empowered to issue. All of which is respectfully submitted bj^ FRANCIS BOWEN. I concur in foregoing report of Mr. Bowen. R. L. GIBSON. SPECIAL REPORTS OF THE SECRETARY OF U. S. MONETARY COMMISSION. The secretary, George M. "Weston, having been directed by the Com- mission to investigate and collate the facts, authorities, &c., relating to the special subjects named below, prepared the following papers: Page. Asiatic trade and the flow of silver to the East 163 Constitntional powers of Congress and the States in respect to metallic money 180 Legislation in Europe and the United States in relation to subsidiary silver coins 194 The trade dollar 200 161 S. Eep. 703 11 SPECIAL REPORTS. ASIATIC TEADE AND THE FLOW OF SILVER TO THE EAST.— ENGLISH MISCONCEPTIONS. Of current British writers known on this side of the Atlantic, Jevons alone seems to have an adequate ideaof tae importance and reliability in the future of the eastern demand for silver. Many leading British writers entirely misunderstand the causes which give rise to this demand, which is an essential element in fixing the value of silver, whether measured in gold or in general commodities. These mistakes of British economi- cal authorities will be found to be remarkable both in character and per- sistency, and they undoubtedly constitute the principal origin of the delusion that the general tendency of silver is towards depreciation, which prevails largely in Enghmd, and which Seyd and other English advocates of the double standard do not wholly escai)e. The most authentic exhibition of the errors current in London in recent years in respect to the general nature of the trade between Europe and Asia is to be found in the annual reviews of finance and commerce in the London Economist, the principal portions of which have been regu- larly reprinted in the journal of the London Statistical Society as pos- sessing a high, recognized, and permanent value. As respects the special case of India, it may safely be assumed that the current ideas of England are authentically expressed, not only in the London Economist, but in the report of the British Silver Commis- sion of 1876, the chairman of which. Sir. Goschen, seems to be regarded in that country as one of its most eminent financiers, both in practical experience and in clearness and breadth of theoretical views, and in the resolutions of the governor and council of India (Se])tember 22, 1876), which cover the entire subject of the monetary relations of India with the world, and especially with Great Britain. OPINIONS OF THE LONDON ECONOMIST. REVIEW OF 1864, PRINTED MARCH 11, 1865. In four years the imports from ludia and the Levant have certainly doubled in value. These are countries of exceedingly backward civilization. Hitherto, the native culti- vators have had few wants, and have been so ignorant of the real i)rinciplcs of trade as to regard gold and silver as jirecious beyond all other tilings, ami as lit only to be buried in secret hoards, instead of Ixiing put away as rapidly as jiossiblc in exchange for articles of use and enjoyment. A trade, therefore, of imports from these countries, suddenly doubled in volume, necessarily implied the transniission of a large part of the price in specie and bullion ; and so it actually happened. 'J'lie average annual export of treasure to India and the Levant for the live years ld57-'()l was i;Ji millions sterling ; the average export of ]80:5-'C4 was 2.'5 millions. A free and vigorous commerce is potent to arrive rjii)idly at a stale of things in wliicl) trade, even with very backward countries, bcfoini'x the barter of oiiv set of com- moditiex for another set of vcarly equal exehaiuieahle valite. The probability seems to be that in IHtif) the action of thoeastcun deuumd for bullion remittances will be on a much more restricted scale than in 18():?-'(M ; ami that the taste already excited in those countries for articles of Knglish ))roduetioii will have laid the foundations of a commerce as regular as that with America or France. 16:} 164 FLOW OF SILVER TO THE EAST. The immense wealth poured into Bombay and Bengal during the last two years has apparently at last broken down most of the barriers to the reception by the natives of thoroughly European notions of commerce. REVIEW OF 1865, PRINTED MARCH, 1866. The great rise in the price of cotton led to large and urgent orders to India and elsewhere for further and early supplies, and such orders of necessity implied consider- able remittance of treasure, and that treasure chiefly in the form of silver, to be pur- chased on the continent by means of gold sent there from this country. The four countries or regions which have been most profoundly affected by the de- mand for cotton at high prices have been India, China, Egypt, and Brazil. Year. 1864 1863 1862 1861 1860 Merchandise im- ports from In- d ia, China, Brazil, and Egypt. Millions stg. 94.6 83.6 62.9 42.1 37.0 Merchandise ex- ports to India, China, Brazil, and Egypt. Millions stg. 38. 32. 24.8 29. 30. The peculiarity of these figures is the amazing increase they exhibit of nearly sixty millions sterling in the imjyorts from India, China, Brazil, and Egypt against an in- creased export of no more than eight millions sterling. For five years we have been laying widely and deeply the foundations of avast future trade with those fertile trop- ical countries. We found the people who inhabit them rude, ignorant, without enter- prise and with few wants, but the golden (silver) shower which has descended so plentifully upon them since 1860 has already had some effect, and it is quite certain that the increase of eight millions in the export is only the beginning of a demand which -^iW presently reduce the trade to the sound condition of an exchange of merchandise representing values not very widely different. REVIEW OF 1886, PRINTED MARCH, 1867. The large drain of gold and silver to Egypt, India, and the East, which has been in progress since 1861, chiefly in payment of cotton, came to an end in March and April last (1866). The total export from Europe was nine and a half millions, or one-third less than the export (fourteen millions) of 1865. For five years the tide of the precious metals has run so strongly and constantly toward the East that the supplies from the gold countries have been absorbed for that destination as quickly as they appeared. We shall now see a different state of things. REVIEW OF 1867, PRINTED MARCH, 1868. The revival of the cotton cultivation in America has already reduced the export of gold and silver to India to a narrow compass. Instead of the enormous drain of twenty-four millions sterling in each of the years 1863 and 1864 and of fourteen millions in 1865, the exports fell to ten millions in 1866, and in 1867 to the comparatively small sum of three and a half millions. A few years will enable us to judge of the effects on the Indian populations of the prodigious prosperity of the last five years. The railways will have etiectually opened up new markets in the interior, and will have carried European goods where they never appeared before, and the improved means and wages of tlie cultivators will enable them to buy articles formerly beyond their reach. All these influences will powerfully tend to make European exports to India more nearly balance than hitherto the European im- ports from it, and will, therefore, reduce the trade to such an exchange of commodities as will require but small supplemental transmissions of specie. It is, indeed, conceiv- able that at no distant period the current of the metals might tend more strongly/row India than to it. REVIEW OF 1868, PRINTED IN 1869. The Abyssinian war has led to a large increase in 1868 in the export of gold and silver to Egypt and the East. The total exports by English and French steamers were — In 1867 £3,695,000 In 1868 10,075,000 FLOW OF SILVER TO THE EAST. 165 Of this six and one-third millions of increase, nearly four millions is duo to the Abyssinian war. The slightly-increased exports to India have arisen from the revived demand for Indian cotton. The effect of the cessation of the bullion drain to the East early in 1866 is strikingly shown in the rapid rise of the total bullion reserves of the Bank of England and the Bank of France, In India, a system of sound paper currency has been established, which, in the course of twenty years, may, by remote possibility, lead to a real economy of coin in that country. At present, the bank-notes are less than ten millions sterling, probably not a thirtieth part of the circulation of the presidencies. REVIEW OF 1869, PKINTED jIARCH, 1870. In 1869, there has been no Abyssinian war to swell the exports of gold and silver to Egypt and Bombaj^, but the figures are nevertheless not very different — say nine mill- ions in 1869 against ten millions in 1868. The peculiarity of the 1869 ligures is the large increase in the silver and the falling oft" in the gold shipments. During the ten years 1860-69 the total export of gold and silver (chiefly the latter) from Europe to Chinahaa amounted to about twenty millions sterling. But this sum represents only about half the influx of the precious metals into China, inasmuch as the import into that country from California is believed to be nearly as large as the import from Europe. The effect of the improved condition of India, the higher wages, and the cheaper modes of transit, has already extended the Indian markets for English goods, and so set in action a train of causes likely to diminish jiermanently the drain of gold and silver to the East. REVIEW OF 1870, PRINTED MARCH, 1871. The bullion trade with India has fallen into small proportions. In 1863 and 1864 the export of gold and silver to India and China was 24 millions sterling per annum ; last year, 1870, it had fallen to 4^ millions, and a reflux Ixom the East to Europe has actually been witnessed in mercantile calculations of exchange. Itis not unlikely that thisreflux current xvill expand and continue. During the twenty years 1851-70 Europe has sent to the East 51 millions sterling of gold and 176 millions sterling of silver — together227 millions, or an average exi^ort of (say) 11 millions per annum. The annual production of gold from the new sources, California and Australia, has been about 15 millions ster- ling. The eastern demand has amounted, therefore, to over 70 per cent, of the new production. The Australian and Californian supplies seem to be gradually but steadily diminishing, and there is an apparent probability that the effect of the development of India may bo to render the hoards of treasure possessed by the nations available for ivest- ern purposes, and available at the very time when they are needed. This result will be assisted by the steady progress of the bank-note circulation of India. The authorities have quite recently satisfied themselves that the bank-notes may be pushed more vig- orously into circulation, and that the minimum denomination may be reduced from ten to five rupees. REVIEW OF 1871, PRINTED MARCH, 1872. We give our usual table of the movement of gold and silver to the East. There has been some revival in 1871 of these exports, and the total reaches 6i millions against 4^^ millions in 1870. The higher prices of cotton will lead to augmented remittances to India. REVIEW OF 1874, PRINTED MARCH 13, 1875. Mr. Herzog, the delegate of Switzerland to the Monetary Conventions of 1865, 1871, has investigated the subject [silver] with care. He lays stress on the diminution by one-half since 1866of the export of silver to the East, arising from the advancing diffusion of European goods over the Asiatic countries. All the predictions of the Economist as to the course of the Asiatic trade have been falsified by the event. The flow of the metals to Asia is still as active as ever. The Economist entirely overlooks the real cause of this flow, and nearly all which it has to say about it is quite aside from the mark. Asia was called ^^ a sink of nilver^ in the time of the liomans, but if the view is limited to the i)astfour centuries, the reasons why it is a sink of silver, and to some extent of gold also, will more clearly appear, because the facts of these later centuries are more exactly known. 166 FLOW OF SILVER TO THE EAST. Since 1492 the great bulk of the supply of the precious metals has been from the New World. Chevalier estimates that from the voy- ages of Columbus to the California gold discoveries the world's metallic supply was derived — ^ From the Old World $1,072,000,000 From the New World 7,259,000,000 Since the California gold discoveries, from 1849 to 1876, both inclu- sive, taking the mean of the figures given by accepted authorities, the world's metallic supply was derived — From the Old World $827,000,000 From the New World 3,755,304,927 In the New World, in this last statement, Australia is included. Since 1492 the flow of the precious or money metals has been contin- uous from the New to the Old World, and could not have been other- wise. The flow of those metals is determined by the tendency, always at work, of prices to an equilibrium. Nothing but an impassable Chinese wall could have prevented the outflow from Australia of the bulk of the $1,200,000,000 of gold produced there within the past twenty- five years. If such a wall had existed, the principal part of this gold would not have been produced, as the wages of labor would have risen so high that the cost of the gold would have exceeded its exchangeable value. No such wall exists in this case, and therefore prices are only kept high enough in Australia, relatively to prices elsewhere, by the production of gold there, to cause the constant outflow of that metal, and that condi- tion of things will not be changed until the mines give out. Those parts of the world which specially produce the precious metals can never have, on that account, any greater excess above their due proportion of them than is just sufficient to produce an adequate current of overflow. That is the limit of the perturbation of the money level in such cases. The same circumstances which prevent the metals from remaining in the New World, in which they are principally mined, prevent their re- maining in the country or countries in the Old World which receive them in the first instance. All the gold and silver of America, exported in the early periods of its discovery, passed to Spain, but neither did or could remain there. Until within a few years Europe has received sub- stantially the whole of the exported gold and silver of America and Australia, and does now receive much the greater part of them, and it is through and by Europe that they have been diffused over the Old World, each portion of it always receiving and retaining its due propor- tion. It is these facts which have caused the flow of the metals from the Occident to the Orient during the past four centuries. The flow depends upon the relatively excessive i^roduction of the metals in the New World, and will continue without interruption for- ever, subject only to the possibility that the discovery and working of mines in Asia may bring up its metallic production to the average of the general production of the world. The due proportion of the precious metals which the difierent parts of the Old World will receive and retain is that proportion which is deter- mined by the various circumstances of population, commerce, wealth, laws of currency, national habits, and vicissitudes of prosperity, adver- sity, growth, and decay, which fix the relative amounts of the metals held at any given period in the several subdivisions of the globe. The flow of the metals from Europe to India may have been quickened at particular times by a specially high price for India cotton,justasthe FLOW OF SILVER TO THE EAST. 167 same flow to China is quickened today by the specially high price of favf silk. But the flow in the direction of India would have been as steady, and perhaps as great, if no such substance as cotton had ever existed. Changes are constantly occurring in the things which are the subject-matter of commerce. Industry takes one direction today and another to-morrow. If India could not have supplied its imperative W^iit of silver by producing cotton, it would have supplied it by the pro- duction of something else. The export of cotton from this country does not date so far back as the adoption of the present Federal Constitu- tion. Cultivation of it in our Southern States was preceded by that of indigo, and maybe followed by something else now wholly unanticipated, it has been said of India that it never fails to produce anything which is demanded from it, or, in other words, anything which it can sell. It is now selling wheat, until lately entirely unknown in its list of exports ; and is at this moment third on the list of countries furnishing wheat to England, being surpassed only by Eussia and the United States. The precise way in which the extra cotton exports of India during the American civil war and the extra prices then received by India for cot- ton may have affected the amount of its metallic stock is, that it was a circurnstance which may have permanently enriched India as compared with Europe. If it did, by so much does it permanently enhance the percentage of the precious metals which India will retain. That is true of any other circumstance which may advance the relative position of India. It is unquestionable that British domination in India during this century has been favorable to its wealth and commerce. It has been a better government than India ever had before, subject to the objection, whatever the force of it may be, that it is a foreign domination, estab- lished and maintained by the sword. The continuous metallic flow from Europe to Asia is determined by the fact that Europe, as the first receiver of the treasures of the New World, always has an excess of metallic money as compared with Asia. The necessarily lower wages and prices of Asia will always attract money. No " taste for European goods'''' can ever be created there which wifl be equal to its necessity for money, or put an end to the demands of its vast, rich, and industrious populations for the precious metals for other purposes, which arise from their immemorial usages and habits. The extent of the metallic flow from Eurojie to Asia is determined in the long run, and aside from the temporary effect of exceptional cir- cumstances, by the one single fact of the extent to which Europe re- ceives the metals from other quarters. Before California and Australia, it was determined by the greater or less production of the Spanish- American mines, which had been, from the discovery of this continent to 1848, the chief source of the supply of the precious metals. At the beginning of this century Humboldt estimated their annual production at forty-three million dollars, of which he computed that twenty-five millions were sent to Asia. When that production fell off so greatly after 1809, in consequence of the revolutions in Spanish America, European supplies fell off", and the flow to Asia diminished accordingly. The fact is stated correctly in the book of W, Nassau Lee, printed in 1863, entitled '■'■Brain of Silver to the Ecest^^ but the reason assigned for it by him is entirely erroneous, being precisely that of the present views of the Economist. Mr. Lee says : Up to 1814 no great change in the normal state of things was perceptible ; but in that year, consequent upon the great increase of British imports which foUowed the breaking 168 FLOW OF SILVER TO THE EAST. up of the old East India Com-pany's monopoly, the flood of silver began to shallow, and in 1832-'33 it had almost dried up. From this time the tide continued to ebb and flow with uncertain fluctuations until 1849-'50, when it set in with redoubled strength, and has since been increasing in depth and breadth with such rapidity as to cause some alarm for the equilibrium of prices in India. The returns of trade with England and China have for some years shown an aver- age balance of £10,000,000 in favor of India. The ^^ great increase of British imports after 1814" did not result from the " hreaMug up of the old East India Company's monopoly y^'' but was due to the fact that the metallic prices of commodities fell greatly in Europe after 1809, in consequence of a sudden diminution of the metallic sup- plies, consistingprincipally of silverfrom America. Humboldt estimates the annual average American silver production, at the commencement of this century, at £7,071,831. From 1809 to 1829 this annual average production was reduced, according to Jacob, to £3,109,000, and Europe, which received this production, sent less silver to Asia, for the plain reason that it had less to send. The falling i^rices in Europe attracted fewer commodities from India, and caused more European goods to be sent to India. It was this which caused the '•'■ great increase of British imports after 1814" into India, and reduced the metallic flow to India. When the flood set in again, after 1849-'50, ^Hhe old East India Com- pany'' s monopoly^^ was as much broken up as it was in 1814, and Indj^ was equally as open to unrestricted '^ British imports.^' But afterl849-'50 Europe could spare both gold and silver in abundance; gold, because the mines of Australia and California were i)roducing it ; and silver, by substituting gold for it in the channels of its own circulation. Comparing the five years after with the five years before April 30, 1849, the excess of metallic imports into India over exports, taking its trade with all nations, rose from £8,578,572 to £18,938,601. A more instructive comparison will be to take periods of ten years before and after April 30, 1849. This comparison will show a rise in the excess of I^ian metallic imports from £20,699,090 to £70,721 ,378. It took longer tffibn five years after April 30, 1849, to cause the new gold discoveries to be fairly felt in India. The California production was active in 1849, but Australia, until 1852, had only produced $7,000,000. McPherson {Commerce with India) says : The Indian trade arose to a considerable magnitude at the same time that the Amer- ican mines began to pour their treasures into Europe, which happily has been pre- served from being overwhelmed by the inundation of the precious metals, as it must have been if no such exportation had taken place. Jevons [Mechanism of Money and Exchanges, 1875) says : Asia is the great reservoir and sink of the precious metals. It has saved us from a commercial revolution and taken oft' our bands many millions of bullion, which would be worse than useless here. From the earliest historical ages it has stood in a similar relation to Europe. In the Middle Ages it relieved Europe of the excess of Spanish- American treasure, just as it now relieves us of the excess of Australian treasure. Nothing short of a complete interdiction of commerce and intercourse will prevent the flow of the metals from the Occident to the Orient. The tendency of money, through its influence upon prices, to come to an equilibrium, is as certain and irresistible as the tendency of water to a level, and, like that, can only be arrested by absolutely cutting off the connections. It will be seen how untenable the view is, which the Economist insists upon in so many different forms of language, that the great supplies of the metals, principally silver, sent from Europe to the East, during the period immediately following the California and Australian discoveries, had produced, or were rapidly producing, such a saturation of Asia with FLOW OF SILVER TO THE EAST. 109 the metals, manifested in advancing wages and prices, that the flow of the metals to Asia must cease, and even be changed into a reflux current. That no such saturation has yet been produced is shown b^- the current fact that the flow to Asia is as vigorous as ever. From the nature of the case, no such saturation ever can occur. The metallic flow could by no possibility proceed further at any time than to produce a mone- tary equilibrium between Europe and Asia ; but this equilibrium would be forthwith disturbed again by the continuing fact that Europe is the receiver of the products of the mihes, and that Asia is a great consumer of them. Water may come to a level between two connected reservoirs, but cannot remain at a level if new water flows into one of them while the water io the other is constantly oozing, leaking, and evaporating. The California and Australian discoveries increased the metallic sup- plies of Asia, but in no greater proportion than they increased the metallic supplies of Europe. They produced no greater effects in rais- ing wages and prices, and in stimulating new wants and new tastes for luxury in Asia, than they did in Europe. If Asia consumes more European goods than formerly, Europe consumes more of the peculiar products of the Orient than formerly. Asia has only received, since 1848, its due proportion of the new supplies, in the form, largely, of silver thrown out of the European currencies by the substitution of gold, or, if any excess has been received, it is accounted for by an an- terior deficiency. The water has merely risen to higher points than before in both the reservoirs at the same time, the rise in one corre- sponding always to the rise in the other. The direction of the flow has not changed, and never will change so long as one of the reservoirs is the sole or principal receiver of new supplies. No reflux current will set from the reservoir which is subjected without intermission to the exhaustion of oozings, leakages, and evaporation, and whose sole re- source of recuperation is its connection with the other. In respect to the two hundred and twenty-seven millions sterling of the metals sent by Europe to Asia during the twenty years ending with 1870, the Economist may have intended to say that it was 70 per cent, of the metallic production of California and Australia received in Europe during the same period, but it was certainly only 29 per cent, of the metallic production of the world during the same period. If to the two hundred and twenty-seven millions sterling received during those twenty years from Europe by Asia there be added what Asia may have received directly from the metal producing countries, the aggregate would not seem to be out of i)roportion to Asiatic wealth, commerce, and population. OPINIONS OF THE BRITISH SILVER COMMISSION. The question of British trade and financial relations with India, as a part of the more general question of those relations between Asia and the Western World, occujties a leading i)osition in the report of the British Silver Commission of 187G. The question deserved the ])ositiou given to it, as the general Asiatic and sj)ecial Indian deniand lor silver is of the first injportance in fixing both its absolute value and its value relatively to gold. The general view of the situation presented by the (commission is, that the annual amount whieh the Covcrninent of" India has fo pay in England by way of int(;rest on (Icbts ;in higher and no lower, to i)ur- chase more of the lucky stock. There is no more connection between the demand of India for silver and remittances to India in government bills than there is between the thermometer and the course of tlu^ piices of stocks, and perhaps not so much, as tln^ weather does somewhat affect the temper and (Miterjjrises of maitlcind. The account-current of India trade for the four years ending in March, 1870, as the British commission j)resent it, consists of three items, 172 FLOW OF SILVER TO THE EAST. namely, (1) the payment of interest from India to England represented by government bills drawn on India; (2) the balance in favor of India of merchandise exports over merchandise imports; and (3) the cash remitted to India by England. The material questions in the case are, which of these items is the dominating one and controls the others, and which (if either) of them is completely controlled by the other two. The British commission assumes that the dominating item is the annual interest to England, and that this will always be paid, let the other two items fare as they may. They assume, also, that the cash remittance to India is controlled by the condition of the other items, and is always merely what happens to be left after deducting from India's merchan- dise balance the amount of its annual interest account to England. The actual order of pre-eminence in power of these three items is pre- cisely the reverse of what the British commission assume it to be. The demand which India, or any other country, makes for money is the most urgent and resistless of all its demands, and overbears everything else. The demand for money, instead of taking what happens to 136 left after deducting imports from exports, conclusively determines, by its action upon prices, what the balance of exports over imports shall be. The balance of trade depends upon prices, and prices are controlled by the abundance or deficiency of monej\ In the four years ending in March, 1876, the money wants of India required and were satisfied with a re- mittance of treasure by England of 16^ millions sterling. In the pre- ceding four years India had received treasure from England in a much larger measure, and its money want was temporarily less urgent. The India money-market, requiring only 16J millions sterling in the four years ending in March, 1876, permitted a range of prices for merchan- dise which made the merchandise export balance what the British com- mission state it to have been. If their report, instead of being made July 5, 1876, had been delayed another year, they would have fouijd the facts in a new i)hase. India's interest payment to Englaud is now some- what greater than it was on the average of the four years ending in March, 1876. Its money demand, which had lulled during those four years because the immediately i^recediug treasure imports had been somewhat excessive, has resumed its normal condition of activity and power, and, in fact, far exceeds the average of twenty years past. And whatever it may be, it will compel the merchandise balance and, if necessary, the debt payment to England to conform to its own superior power. This debt payment, instead of being the pre-eminent one in the list of the necessities of India, as the British commission assume it to be, is, in fact, subordinate to both the other necessities of India, for money and for merchandise. It is as true in financial dynamics as it is in physical dynamics, that the greater force always overcomes the less. The possession by nations of their due proportion of money is an absolute necessity and an absolute certainty. The payment by nations of their debts, however desirable it may be, is neither necessary nor certain. Mankind have not had a very long experience in the matter of national debts, as they have not been much known until within a century. But it is certain that some of the most flourishing nations of Europe, as France, Austria, and Russia, have at various times repudiated, or scaled down, larger or smaller portions of their debts. Still others, as Spain and Greece, are in a chronic con- dition of bankruptcy. England, from 1797 to 1821, paid nothing but suspended and depreciated banl^-notes. And it is now inevitable that all the nations in Europe, including England, which have very large debts, will become bankrupt, in the event of a general and protracted FLOW OF SILVER TO THE EAST. 173 ■war. The law of morals is the same for Asia as for Europe, and the philosoj)hy of facts is the same. If India cannot pay its debts, and also maintain its stock of money, it has no power of choice as to which of the two things it will do. Its stock of money will be maintained, and its debts will be postponed to a more convenient season, or will be reduced to more practicable figures, or will remain permanently uupaid. It is undoubtedly true that a nation may be deprived of money of one kind by the substitution of money of another kind. No fact is more familiar than that in the experience of mankind. The English are the political masters of India. If they are restive under a drain of silver to India, and prefer a drain of gold, they may try the experiment of an exclusive gold currency there, but they will certainly not try it until they have determined to again suspend specie payments them- selves and resort to paper money. Under the demands for gold from other nations, that metal does not exist, and is not at all likely to be pro- duced, in quantities sufficient to sustain a gold currency in Great Britain and India at the same time. Or, adopting a different policy, and one which is not obstructed by any physical impossibility, they may decree a paper money for India, and undertake to force its circulation there by law. To whatever extent they might succeed in that, they would arrest the further export of silver to India for monetary purposes, and might even possess themselves of more or less of the silver now in the Indian circulation. Theoretically, there are no limitations upon the omnipo- tence of Parliament, anywhere within the British dominion. The managers of the London Times evidently supposed that there were no practical limitations when they proposed last summer that the Indian occupiers of lands, who possess nothing but silver rupees, should be commanded to pay their rents in gold sovereigns. The wise and cau- tious statesmen of England know that the practical limitations are numerous, and are very careful not to overstep them. The integrity of their great Empire, encircling the globe, and embracing so many diver- sities of religion, habits, and race, is preserved not more by arras than by policy. They will do nothing rashly in dealing with peoples so wedded to old traditions and ways as their India subjects. That they entertain no present idea of demonetizing silver in the East is illustrated by the British royal proclamation of 1876, establishing in Mauritius a silver currency, with the India rupee as the unit, the same as in British Ceylon, Mauritius having had, since 1852, an exclusive standard of gold. The money of India will remain metallic and remain silver, subject to possible gradual and partial displacements by convertible and volun- tarily accepted paper, until a remote future develops conditions not now possible to be foreseen. The stock of silver money needed for India will increase with its increasing exchanges, and with the progress, known to be constant, of the substitution of coin for barter in its transactions. The flow of silver thitherward, required to maintain its stock of money, will continue so long as the seas are open and commerce is unobstructed, and it will never be diminished l)y the payment of debts. THE FINANCIAL TIIEOKIES OF THE INDIA GOVERNMENT. The governor in council of India a(loi)ted September 22, 1870, a seiies of resolutions upon the financial situation, of which the following was the sixth : When India is in ii noi-ni.-il condition, i. i., wlnin tiic.r«! is no al)nurin;il (ii-inand i'or any of her Htsiples, and hIio in not, l)onowin;^ large HUins from abroad, the aniount of treasure to settle her accounts with the world is not considerabh?, an," and because Europe held on to what little was received from them. The flow to India commenced again after 1850 in a deeper and broader cur- rent than ever before That was because the metallic production of the world had then become greater than ever before. Two circumstances have increased the proportion received by India of the total metallic production during- the past twenty seven years : First. The abandonment by the United States and by the greater part of Europe since 1850 of the use of metallic money and the substi- tution of a forced circulation of paper. This, of course, has enabled India and all other metal-using countries to obtain more of the current metallic supplies than would otherwise have fallen to their share. Second. The great progress made in India during recent years in sub- stituting cash for barter in its internal transactions. The India government in this enumeration of ^'- abnormaV causes of India's metallic imports since 1850 overlook both these circumstances. The British commission of 1876 dwell largely upon the one last named and present the facts relating to it with great fullness. Mr. Lee, writing in 1863 {Drain of tSilver to the Uast), said that the use of coins was even then almost unknown in India outside of the cities, and he estimated that two thousand million dollars of additional coined money would be needed to properly supply it. The real popula- tion of India is now known to be two hundred and thirty-seven mill- ions, while Mr. Lee's estimate of the coin needed for its wants was based on an estimated jiopulation of only one hundred and eighty mill- ions. If the coins are being constantly worked up into ornaments, in the manner described by Mr. Mackenzie, the required new coinage must be greater than Mr. Lee's estimate, in some proportion not easy to compute. The testimony taken by the British commission of 1876 is all to the effect that large parts of India are still to be supplied with coins. That commission say : The facts warrant the conclusion that the use of silver coin has greatly extended iu India, and ivill continue to extend, not so much by the use of move silver in the territories already occupied by the existing currency as by the gradual increase of its use in the remoter parts of India. Upon the whole, the evidence seems to be that the introduction of coins into new Indian areas of circulation will continue as active during the current twenty-seven years as during the past twenty-seven. If this proves to be so, no circumstance now suggests itself calculated to diminish hereafter the proportion which India has been taking, since 1849, of the total metallic production of the world, except that suspen- sions of specie payments elsewhere may not occur upon so extensive a scale as heretofore. And even if India shall liereafter take a some- what less proportion of the combined production of the two metals, it migiit still maintain and increase its absorption of silver. Instead of importing treasure in the ratio of two parts of silver to one of gold, the India demand for its money, which is silver, has only to become more urgent to change the ratio ot silver to three parts out of four or foui' parts out of five. There has really been nothing '■Udmormai" in the metallic imports of India, since 1850, which requiren England, and the evidence seems to be that in all those parts of India in which the use of money has fully superseded barter, more metallic money per capita, is used than in England. It would be a very grave fact, as affecting the future value of the metals, and especially of silver, if the movement of treasure to India since 1850 was really abnormal and ought to be principally ascribed to the negotiation of loans in England. On that view, which is the one taken by the India government, the movement of treasure to India must now substantially cease, as these loans are already quite as large as England deems to be safe, and will be increased only under some such owerpowering necessity as famine or war. This view is not the correct one. It is based upon an entire misconception of the history of India and of Indian financial and trading relations with the rest of the world, and it involves a theory in respect to the effect of foreign loans which is contrary to sound reasoning and to experience. Foreign loans are never ultimately realized in money. They are very rarely even temporarily and partially so realized, and, when the^ are, the money so received immediately flows out. It must do so, because it must raise the prices of the country receiving it, and thereby stimulate merchandise imports and diminish merchandise exports. The amount of metallic money a country may receive may be temporarily affected by accidental circumstances, such as a foreign loan, but the amount it can permanently retain is fixed by the inflexible rule that it must be such an amount as is consistent with the range of prices which the necessary commercial and monetary equilibrium of the world imposes upon every country having commercial connections with other countries. FLOW OF SILVER TO THE EAST. 177 If this range of prices, wliicli is permanently the only possible one, is temporarily exceeded, money flows out until prices fall to the proper level, and, if prices go temporarily below this range, money flows in until they are restored to the proper level. Disregarding all tlieoretical refinements as to the exact ofifice or offices of money, it is sufficient to know that tl^ere is a necessary relation between the volume of money and prices, and that therefore the tendency of i^rices, always at work, to come to an equilibrium between commercial countries, and which may be conveniently described as the law of prices, must at last control the flow and distribution of money. Disturbing circumstances are of various kinds. Among them have been the facts that the bulk of the money-metals was procured in limited localities, or was received by a single country. That these cir- cumstances only temporarily retarded the eqmible diffusion of the metals, was shown in the cases which conspicuously arrested the attention of mankind, of the Spanish American countries which for more than three centuries furnished nearly the entire metallic supply of the world, and of Spain, which for a considerable jieriod hirgely monopolized the me- tallic exports from its colonies. It was soon seen that the Spanish-Ameri- can countries, which x)roduced the metals, and Si)ain, which principally received them, only had permanently just enough more metallic money than they would otherwise have possessed, to set in motion and keep in motion the current of outflow. Instructed by those exami>les, man- kind at once anticipated what they have actually witnessed in the recent cases of Australia and California. Both those regions, no mat- ter how rich in metallic production, are bound rigorously and inex- orably to a certain range of metallic prices, any permanent excess beyond which would cause them to be entirely stripped of money, and, as their prices must have a certain range, they can have no other volume of metallic money than such as is consistent with that range. Another circumstance which may possibly disturb for a time the mone- tary equilibrium is that of international loans. But ihis equilibrium speedily recovers from a disturbance, no matter what the cause of the disturbance may be, and illustrations are innumerable of the fact tliat countries in the long run acquire no money by borrowing abroad. Ibis country has been conspicuous for such borrowing since the civil war, and while these borrowings have been in progress metallic money, in- stead of flowing into it, has flowed out of it. The case of the Aus- tralian colonies is similar to that of this country, in the fact of the pos- session of abundant mines, and their borrowing experience has had the same results. They are now in the full career of negotiating loans in England, under the encouragement of English bankers and manufact- urers, who profit thereby ; but these loans, as in our case, instead of car- rying money from England to Australia, do not even diminish in the least degree the contrary flow of it fiom Australia to England. Eussia, also a mining country, has pushed borrowing abroad since the Crimean ■war to a point seriously menacing its credit, but witli all its foreign loans, added to the treasures of the Ural and of the Siberian gold wash- ings, the only money found there is the paper rouble. Nowhere among all the countries making foreign loans is there ])er('« ived any inward flow of metallic money, except in the solitary case of India, which of itself suggests what is otherwise established to be true, that the inward flow in that case is due to other causes. If we pass from the borrowing to the lending side in international transactions we see the same thing in a reversed view. ].( nding nations never part with any money. England, which has been nuiking loans for S. lie,]). 703 12 178 FLOW OF SILVER TO THE EAST. fifty years, never liad any approximation to tlie ainonnt of money it has loaned, and possesses as much now as it ever did. Its loans have been, in substance, mere credits to draw upon in payment for merchandise, and their net result has been the conversion of English iron, coals, cotton cloths, and similar things, at round prices and round profits, into foreign securities. As the borrowing nations obtained no money, and only swelled their merchandise imports, England parted with no money and only swelled its exports. The description given by a late Secretary of the Tr«'asury (Governor Boutwell) of his experience in loan negotia- tions in England has been often quoted, and is very familiar. He was politely informed by the Bank of England that the Euglish would be very happy to take his loans to any desired extent, but it must be on the condition that he would agree not to take any mouey away from Loudon. Therecentestraordinary caseofawar fine of one thousand million dol- lars imposed by Germany upon France, and all actually paid by France within a space measured by months, illustrates in its consequences the sure and speedy operation of the economic laws which restore the mone- tary equilibrium, however extreme and violent the disturbance of it may be. The fine was paid, either in actual specie or in bills of exchange on London and other specie-paying i>oints. France borrowed nothing- abroad wherewith to make the i)aynjent, and at the end of this vast op- eration is found to be possessed of as much gold and silver as when the operation began, while Germany has i)ermanently gained no gold and silver by it. The money flowed out of Germany as fast as it flowed in, from the inflation of prices which it produced. France, on the other hand, has recovered, by increased exports of merchandise, all the money paid out for the fine, and has actually prospered from the enlargement and stimulation of the industries which have furnished the means for these increased exports, which would be the experience of this country if it would set resolutely about paying ofl" its foreign debts. But, irrespective of all other aspects of the case, it seems to be clear that, if the monetary equilibrium between Germany and France was only transiently dis- turbed by the memorable transaction of the war-fine, it cannot have been affected between England and India by the loans made at intervals dur- ing a series of years, which are referred to in the sixth resolution (Sep- tember, 1876) of the India government. It will not escape the most casual observation that the increased cotton export of India and the loans made by England to India did not occur until the metallic import, of which they are proposed as the explanations, was already under full headway. The world was so stocked with cotton by the unprecedented American crop of 18G0 that it was not until 1862 that Indian cotton exporters began to profit by the American civil war. The India debt to England, direct and by way of guarantees of railroad and canal investments, has grown up principally since 1862, the annual clmrges upon it haviog swollen from four millions sterling in that year to fifteen millions sterling in 1876, In fact, in the eight years after April 30, 1849, India incurred no direct debt in England, and in the same eight years the total of its debt, incurred in the shape of railroad and canal guarantees, was only £7,406,240. Manifestly, the sudden rise of In