rpr-J^^'
THE
BIMETALLIC CONTROVERSY.
A COLLECTION OF
PAMPHLETS, PAPERS, SPEECHES AND LETTERS,
BY
HENRY H. GIBBS k HENEY R. GRENFELL,
FORMEULY GOVERNORS OP THE BANK OP ENGL.VJ^D ;
Together with Contributions from
Eael Geey
Lord Sherbeooke
Lord Beamwell
Peofessoe Bonamy Peice
Peofessob Jevons
Sib T. H. Faeeer
Me. R. Giffen
Me. C. Daniell
Me. H. D. MACLEOD
M. Henei Ceenuschi
Reprinted from tfie Originals.
OF TEE ^^
*WI7EIISIT7]
LONDON:
EFFINGHAM WILSON, ROYAL EXCHANGE.
1886.
.r""
^^^
y^SJ^f/
TABLE OF CONTENTS.
(^A detailed Index will he found at the end of the volume.')
Preface. page
The Double Standard. (Gibbs.) 1881. i
Letter on Mr. DanieirsPampMet" Gold ) ,j.^ ^,^^., a„^„^4- o iq7o /:-
in the East," by Mr. GrenfeU. } ^'<»^^^'^^ ^^^^^t 2, 1879. 65
Reply by Mr. Daniell „ „ 9, „ 68
„ IMr. GrenfeU „ „ 23, „ 70
„ Mr. Daniell „ „ 30, „ 72
The case against Bimetallism. (Giffen.) Fortnightly I
Rev WW, J " » "5
Bimetallism. (Jevons.) Contem^wranj JR£view,Ma.j,l8Sl. 99
What is a Pound ? (GrenfeU.) Nineteenth Century, June, 1881. 11 1
IstheValueofGold&Silver Money Artificial? ) ^, „,. ^ „ j^^,
" B." (Lord BramweU.) ] -^'^^ ^ ^^^^^' ^"^^^ ^ ^»«^- ^ 3^
"F." (FaiTcr.) „ „ 21, „ 138
„ Henri Cemuschi. „ „ 26, „ 142
„ " Chrysargyros." (Gibbs.) „ „ 26, „ 143
"F." (Farrer.) „ „ 27, „ 147
„ H. D. Macleod. „ „ 28, „ 148
„ Henri Cemuschi. „ June 1, „ 149
-F." (Farrer.) „ „ 2, „ 150
The Double Standard. Correspondence between ) -iir t
Earl Grey & Mr.-Grenfell. } ^^y-June, „ 153
What is Money ? (Lord Sherbrooke.) Nineteenth Century jA.i^xi\,\882. 183
What is a Standard ? (GrenfeU.) „ „ May, „ 197
Speech by Mr. GrenfeU at a Meeting of the Association. . .March 8, „ 219
„ Mr. Gibbs „ „ 8, ,, 225
The Scramble for Gold. (Gibbs.) Bullioni^t. „ 18, „ 231
Concerning Faith in Treaties. (Gibbs.)... „ April 15, „ 237
The Value of Money. (Gibbs.) „ May 20, „ 245
The Ratio of Value, &c. (Daniell.) „ „ 20, „ 251
Whither would the Dearer Metal go? (GrenfeU.) „ June 24, „ 259
BimetaUic England. (Gibbs.) „ „ 24, „ 267
Paper or Metallic Inflation. (GrenfeU.)... „ „ 24, „ 275
The Ratio between Gold & Silver. Two ) t^t „ ^ .„^ n^^^-Uo,. ,a.
Letters by Mr. Gibbs. } ^^^^^^""^^'^^*^^^^' " ^^'
BimetaUism Again. Correspondence between Mr. GrenfeU ) « ,
& Professor Bonamy Price. ( ^^P^" " ^^3
Correspondence: Sir T.H. Farrer, Mr. Gibbs & Lord BramweU, Mar. 1883. 335
The Gold Question & the FaU of Prices. (Gibbs.) ) -r,,, , . ^
National Review, j '^^^^ " 345
The Price of Silver. (Gibbs.) Letter to the Economist, Sept. 19, 1885. 375
Concluding passages of Speech at Manchester. (GrenfeU.) Feb. 6, 1886. 381
London,
September, 1886.
We have been induced to make a collection of
our writings and those of the most distinguished
among our opponents on the subject of Bimetallism
by the fact that so keen an interest in the question
has been of late awakened in the public mind.
The result of this has been that the Government have
determined to act on the recommendation of the
Royal Commission appointed to consider the causes
of the Depression of Trade, and appoint a Special
Commission to examine this and kindred questions.
This being so, it may be useful to recur to the
arguments of two of the guardians of English
currency who have given some time and labour to
VI
them, and who see no reason to doubt the accuracy
of then- information and the soundness of their
conclusions in favour of the new doctrine.
Among the early contributions to the Bimetallic
literature there were two, either of which would
have served as an introduction to this collection,
— namely, Mr. E. Gladstone's Catechism and
Mr. Chapman's Memorandum, — but, in order to
avoid all unnecessary repetition, we have pre-
ferred confining ourselves to the preliminary
statement of the question in Mr. Gibbs' pamphlet,
which is placed at the commencement of this
collection. We have abstained, therefore, from
asking permission to reprint these short and pithy
papers.
The writers whose contributions have, with
their permission, been inserted in this volume^ are
chiefly those with whom it is a subject of just
pride to us that we have been privileged to contend.
They are all celebrated for their powers of mind
Vll
and for the part they have played in the practical
solution of many difficult investigations. Many of
these contributions are models of fair and serious
treatment, affording a marked contrast to certain
specious but hasty criticisms which have been
published. There is only one omission which we
regret, namely, that of the papers of the late
Mr. Bagehot reprinted from the Economist and
published after his death. Some of these we
might, perhaps, have been permitted to include,
but we found it impossible to do so, because we
are not conscious of having made them specially
the subject of our own replies : the fact being that
when we took up the controversy the conditions
of the question had somewhat altered since those
papers were written.
H. H. G.
H. R. G.
^'^ OP TOB^^
'UNIVBRSIT?:
THE DOUBLE STANDARD.
Gold alone is the Standard Money of Great Britain.
That is to say, the value of all commodities is measured by
and expressed in the Pound sterling, consisting of 113'0016
grains of pure Gold, or 123*27447 grains of Standard
Gold.
Silver coins are in this country merely tokens, —
metallic notes representing portions of the Gold pound ;
thus, a crown is payable by law as the fourth of a Gokl
pound,* although the intrinsic or metallic vahie of the
coin is much less.
In Germany, until the year 1872, Silver was the only
Standard Money, and all commodities were in that country
measured in Silver just as in this they are measured in
Gold.
In France, as in the other countries belonging to the
" Latin Union," Gold and Silver alike are the measure of
value of all other commodities ; 15 J ounces of pure Silver
or one ounce of pure Gold being equally a discharge for a
debt of 107-1342 francs, the Gold piece of 20 francs
bearing that proportion to the Silver piece of 5 francs, and
the debtor having in all cases by law the option of paying
his debt in either metal.
I take, arbitrarily, these three countries. Great Britain,
Germany (before 1872), and France, as representatives of
their several systems ; the last as an example (until 1874,
Avhen she suspended free mintage of standard Silver money)
of the full use of the Double Standard, or what is now
* Subject to tlie iOs. limit.
called by the name of BimctalllsTn, and the two first as
examples, severally, of the two varieties of a Single or
Monometallic Standard.
It may be useful to give here a sketch of the position
and progress of the Silver question since I first took it up
in 1879.
The price of Silver towards the end of 1879 was higher
than at present. Having been 60d. per ounce in 1872, it
fell as low as 46|^. in 1876, from which it rose by various
fluctuations to 53^d. in November, 1879. It stood at the
close of 1880 at about 51|c?.
The chief causes of the depreciation of Silver may be
stated as follows : —
1. Increase of production, of Silver, from 8 J millions in
1861 to about 16 millions in 1879.
2. Decrease in demand of Silver, owing to —
(«) Demonetization of Silver in Germany, the
Scandinavian States and Holland ; and limi-
tation of Silver coinage by the Latin Union.
(b) Increase in amount of India Council Bills,
coupled with less demand in India for coin,
owing to bad harvests, &c.
3. Enhancement in the value of Gold, owing to —
(a) Diminution in its supply, which fell from
an estimated average annual production in
1852/6 of nearly 30 millions, to about 21
millions at present.
[b) Increased demand for Gold — Germany and
minor States absorbing about 86 millions,
.and the United States (since 1872) more
than 40 millions, together about one-fifth of
the total computed quantity in existence.
Mr, II. II. Gibbs.
3
Since 1878/9 tlic (Usturbiiio- elements in Em'ope and
India may be regarded as having ceased to be active. In
general terms it may be said that the operations in
Germany have not been extended ; that the amount of
India Council Bills has not increased ; and that the im-
proved condition of India and the East has maintained a
due absorption of Silver.
Setting aside, therefore, for the moment, any further
enquiry into these points, the subjects which appear to
require examination, as having made some progress in the
last two years, or as likely to hold a prominent place in
influencing the immediate future, are —
1. The production of Silver and Gold, especially in
America, as compared with previous years.
2. The operation of the American Silver coinage law,
and the condition of things brought about under it.
3. The proposed arrangements in Italy for a new Gold
Standard coinage.
Production of Silver and Gold.
During the past three years it would appear that so
far as the United States is concerned, the production of
Silver has remained nearly stationary.
Estimates, which are generally accepted, show that the
production in 1879 amounted to £7,406,000 against
£7,449,000 in 1878, and that last year (1880) it was about
£7,500,000.
The following are the estimates of production in the
United States for the last seven years : —
1874 3,464,000
1875 6,521,000
1876 7,858,000
1877 9,169,000
1878 7,449,000
1879 7,406,000
1880 7,500,000
B 2
The production in other countries does not appear to
have sliown any considerable variation ; and as the esti-
mates of supply in the year just ended are not in excess of
the year 1879, it may be broadly stated that the greatly
increased production prior to 1878 has, as was anticipated,
not been maintained.
The production of Gold during the last three years
appears to have diminished considerably.
In the United States, the production for the last four
years, ending 30th June, is estimated by the mint authorities
as follows : —
in 1877
9,380,000
1878
10,240,000
1879
7,780,000
1880
7,200,000
The production in Australia is stated also to have
decreased though not so sensibly, while the prospect of
any large supply of Gold from India is still uncertain.
The United States Coinage Law and its
Results.
This law was passed in 1878. Its chief provisions
are —
1. That the United States Treasury shall coin Silver
monthly (whether it is required for trade or not)
to an amount of not less than £400,000, or more
than £800,000, — the neccssai-y amount of Silver for
this purpose being purchased by the Government
at the market price.
2. Dollars so coined are to be of the Aveight of 4 12 J
grains of standard Silver *' as provided by the Act
Mr. II. II. Gihhs.
'' of January, 1837," and are to be a legal tender,
at their nominal value, for all debts and dues, public
and private, *^ except where otherwise expressly
" stipulated in the contract."
3. That any holder of this coin, in sums of not less than
10 dollars, may deposit it and obtain a certificate
for it. These certificates are receivable for
Customs, taxes, and all public dues, and may be
re-issued.
It is of course difficult to ascertain with precision the
working of a foreign law in a foreign country, but from
the results it would appear, and, indeed, it seems to be
admitted, that this Act has failed to fulfil the objects it
aimed at.
It is stated that under the law about 80 millions of
dollars (£16,000,000) had been coined before the close of
last year, and that before the close of the present year the
amount will, if the coinage continues, exceed 100 millions
(£20,000,000). That, of the sum already coined, about
three-fourths, say ;$' 60,000,000 (£12,000,000) remained in
the Treasury vaults, belonging to the Treasury, or to
Banks and others to whom the Treasury has issued
certificates for them. That only about 20 million dollars
(£4,000,000) remained out of the Treasury vaults, including
all those actually held by the Banks ; and that probably
not more than 10 millions (£2,000,000) had gone into
active circulation.
These dollars outside the limits of the United States are
scarcely worth nine-tenths of a Gold dollar, though
practically to a resident American they are equivalent to
Gold. That they are, however, unacceptable is evident,
and the question is exciting great attention. Prominent
amongst the remedial measures has been the proposal to
increase the weight of the dollar — but to make it equal to
Gold it must be raised from 4 12 J grains to 455. At tlie
late annual convention of bankers at Saratoga it was re-
solved to recommend that these dollars be melted back into
bullion, a subsidiary coinage being issued only as required;
and that certificates be issued for deposits of Silver bullion
as nearly as possible at the market price. There is clearly
a growing desire in some quarters to get rid of the Act
altogetlier.
Whilst the Silver coined under this Act cannot be got
into circulation, the absorption of the Gold coinage,
especially in the West, is represented as being very great.
According to an estimate by the United States Mint
authorities, the Gold coinage circulation of the country
was increased, by coinage and imports of coin, more than
£20,000,000 between the 1st January, 1879, the date fixed
for resumption, and the 1st November, 1880.
The Proposed Redemption of Forced
Currency in Italy.
The Italian Government propose within the next two
years to redeem so much of their paper circulation as will
place the remainder in a satisfactory condition ; and to this
end, they purpose raising a loan of £25,760,000, of which
£16,000,000 is to be in Gold. It would appear that the
Government, so far as their views have been made known,
entirely put aside, under present circumstances, the question
of a Double Standard, and take the opportunity afforded
})y the substitution of a metallic for a forced paper cuiTcncy
of introducing a Gold standard.
On a review of the general position, so far as this has
changed during the past eighteen months, the following
appear to be some of the results ; —
Mr. H. H. Gibbs.
1. The divergence between the value of Silver and Gold
has widened.
That this is the case would appear from the
following considerations : —
As regards Silver, the demand has not largely-
increased, if at all, whilst the production has re-
mained nearly stationary. In the United States
the coinage under the law of 1878 has been
continued, but the country has not absorbed it. The
coins lie idle, and do not even need the usual
supply of Silver to maintain them in good con-
dition. In Europe the limitation of Silver coinage
by the Latin Union is still in force, and the former
large Silver coinage of Germany and the Northern
States needs no longer the supply formerly required
to sustain it. Against this, however, must be
placed an increased importation into India of more
than four millions sterling last year over the pre-
vious year.
On the other hand the supply of Gold is not
only less, but the demand for it has increased in
every direction. Assuming the Australian yield to
have been maintained at the diminished supply of
the last few years, that of America is confessedly
less. But as regards demand; — in the United
States the absorption has been continuous. In
Europe the increased amount of Gold coinage
superseding Silver, and the extended area over
wdiich it prevails, needs for its maintenance a
larger supply than formerly ; whilst even India —
probably owing to greater prosperity — has imported
pearly £600,000 this year in excess of last. The
diminution in the price of Silver from about 53^^.
in November, 1879, to 5l|^/. in December, 1880,
probably represents the result of the operation of
these causes.
2. Under the influence of circumstances within view,
the probability is that the divergence of price will
be greater rather than less.
The power of India and the East to absorb Silver
is an unknown element. Although Avith prosperity
it would increase, yet in such periods the importa-
tion of Gold (possibly for manufacturing purposes)
increases also. But there does not appear to be
any visible demand for Silver elsewhere; whilst
any change in the present law of the United States,
which is fast becoming intolerable, would lessen
the demand there, and possibly release the accumu-
lated useless stock.
Any action of the Italian Government, in the
direction of introducing a Gold standard, would of
course still further complicate the position ; and
any general revival of trade would stimulate all
the causes now at work for a larger need of Gold
in face of a diminishing supply.
Looking at the matter from the point of view of the
advocates of a Double Standard, it would appear, that
apart from all local considerations, and assuming no great
Gold discoveries should alter the conditions, the natural
causes which have been at work have been in the direction
of strengthening the views of those who lean to that solu-
tion of the question; a view which of necessity is held most
strongly by the United States as the chief Silver-producing
country. The question may be asked whether any advance,
and if so, to what extent, has been made in enabling them
to enforce their will on Europe.
The working of tlie United States law of 1878 shows,
if such a lesson were neqded, the futility of a partial
y
bimetallism. Had there been bimetallism, pure and simple,
Avitli free coinage of either metal to every one, America,
as France in past time, would have brought up the value of
Silver to its old point ; though some have urged that she
could not long maintain this service, unless a change arose
in the relative value of the two metals, in the direction of
making the less valuable the more valuable, — a view which
I will discuss later on. But the United States did not
establish bimetallism, and the question seems to be now
before them, whether they shall establish it, or whether
they will throw aside even the present semblance
of a Silver legal tender, and revert to a single Gold
standard, trusting that the constant absorption to meet the
needs of an ever-extending area of population will tend to
a settlement of the question in the direction they desire,
and conscious of the power they possess as the great food-
suppliers of the world.
The conditions would of course be modified by new
discoveries of Gold ; but, as it stands, it would appear that
the question is being gradually narrowed to a monetary
struggle between America and Europe. America is not
likely by herself to introduce a Double Standard, as to do
so would be to part with her present stock of Gold, and
permit Europe to retain its single Gold standard; but she
can follow, if Europe leads the way, and reap the benefits
which would accrue from its establishment.
Before entering into the question whether the adoption
by this country of the Double Standard would be, under
any circumstances and in any degree, a remedy for the
evils to which I have adverted in the Preface, I will set
down what are supposed to be the comparative advantages
of the two systems.
Shortly stated, the advantage of a single metallic
standard is, that assuming the coins to be kept at their
due weight and fineness, evevj one who buys, and every
10
one who sells, knows precisely what it is that he gives and
what it is that he receives for the commodity with which
he is dealing, and that the calculations of commerce are
more simple, for those who are engaged in it, whether they
live in the same village or at opposite ends of the world, if
they have but one medium for the exchange of their
commodities.
The disadvantages which a Double Standard in one
single country brings to that country itself are so notorious,
and have been so constantly exposed in every treatise on
the subject, from Locke to John Stuart Mill, that I need
not enlarge on them.
The advantages which a Double Standard in one single
country brings to other surrounding countries are obvious.
But the advantages which a Double Standard would
bring to all countries simultaneously agreeing in adopting
it is the point now under discussion ; and it is that agree-
ment, and the causes which seem to make it necessary,
which alone present new features for our consideration.
These advantages are :
1. Uniformity, and therefore the removal of those
variables which must be an encumbrance to com-
merce.
2. Increased steadiness of prices of commodities so far
as they are aifected by the quantity of the measure
of value.
3. The providing a remedy, if not the only possible
remedy, for the new state of things in Germany,
Italy, and America, wherein these wealthy nations
arc entering into competition for the limited stock
of Gold existing in the world.
1. — It is unnecessary to say more here on the obvious
advantage to commerce of a uniform monetary system
Afr. If. //. Gihhs.
11
between nations. I will refer to it again when I speak of
Lord Liverpool's Treatise.
2. — It is clear that tlie fluctuations of price under a
Double Standard, though probably more frequent, are cer-
tainly less violent. The conclusion to which the Commis-
sion of 1868 unanimously came was confined to the assertion
of greater frequency; and I cannot better illustrate my
position than by referring to the work of Mr. Stanley
Jevons — no parti zan of the Double Standard — on Money
and the MeclLanism of Exchange^ and particularly to
pages 137-40, edition 1878, in which he discusses this point,
and insists on what he calls the compensatory or equilibra-
tory action of the Double Standard.
3. — I will now address myself to the question whether
it is the only remedy, or whether a choice lies between a
single standard of one metal only, and a compound standard
of two metals, for adoption by the chief commercial nations.
I have no doubt myself that, as a matter of theory, a
single standard would be the best for the whole w^orld of
commerce, and that Gold would be the most proper metal
to serve as that standard. That is to say, that if we could
suppose men to have set themselves at some time delibe-
rately to choose a medium of exchange and measure of
value, and Gold to have been ready to their hands in
quantity sufficient for the convenience of commerce, nothing
could have been more perfect than the selection of Gold for
the purpose.
But this is, of course, mere imagination ; for no nation
or people ever did deliberately invent and choose a standard
of value, and even had it been possible for them to do so,
the same causes, or some of them, which led some to choose
Gold, would have led others to choose Silver, brass, or iron,
sheep and oxen, even salt, dried fish, shells^ or other sub-
stances, as media of exchange,
12
No such deliberate choice could have taken place.
The precious metals, I suppose, grew into being money by
common consent and law united, and so grew because they
were exceptionally suited to serve as money. They were
imperishable, divisible, portable, beautiful, and rare, and
thus possessed intrinsic metallic value.
I approach here an incidental portion of the argmnent
in my former pamphlet, which drew down upon me the
censure of almost all my critics. It was no important part
of the argument, and might be conceded to the objectors
without affecting in the least degree the correctness of my
conclusions. It was only by way of illustration that I used
the somewhat hyperbolical expression — " Gold and Silver
" are a forced currency." The force I spoke of was consent,
and no other; and it was no confutation of my statement
to reply that nations would ?iot consent to the use of a
valueless cun-ency. I nowhere said, or implied, that they
would. My statement was but a truism, viz. : No com-
modity, however valuable, could become money without
consent or tacit concurrence of those whose money it was
to be. Even to a really forced currency im^iosed on a
nation by the will of the Prince, consent, however unwilling,
is a necessity.
I said, and I repeat, that it is from consent, and law
which presupposes consent, that Gold and Silver derive
their power as money. Their power as exchangeable com-
modities they derive, as wool and iron do, from their
intrinsic worth and usefulness. To this phrase of mine
o])jection was made, that I attiibuted their value to consent,
meaning that consent and law could make that valuable
which was not so without them, and that intrinsic worth
was of no consequence. But I said nothing of the sort, but
only that they derived their powers as money — their being
money at all — from law and consent.
For if not, and if intrinsic worth alone suffice to cause
a commodity to be money in proportion to its possession of
Mr, JI, JI. Gibbs,
13
it, then tin and ])latinnni sliould also ha money, 'svliich tliey
are not; Gold sliould be money everywhere, which it is not ;
Silver should be money here, which it is not.
Ap^ain, in my former pamphlet, I said "the metal of
" which the money is composed is indeed a commodity ;
" but when made into money it ceases to bear that character.
'' Money is not a commodity, hut a meamre of commodities,^''
thus not undeservedly bringing upon myself a flood of
criticism by using the term " commodity " in an ambiguous
sense. I used the word as Locke used it. for "a thing that
"can be valued in money"; and money, whether Gold or
Silver, or both, cannot be valued in money. Money cannot
buy money. Money considered as a measure of value, is
not, in respect that it is money, a commodity as other
commodities are. The substance of Avhich it is made
must be and must of course remain always a commodity,
and no one I suppose thought that I so far believed in
the transmutation of metals as to think otherwise. The
sovereign Avliich I hold in my hand is obviously as much a
commodity as the purse in which I place it, and stamped
or not it would be an exchangeable commodity like any
other ; but as money it has another function superadded,
it is the medium of exchange between commodities, and so
far differs from them all.
I have assumed that though Gold as a single metallic
standard for all the w orld is theoretically the best, there is
no practical possibility of its adoption.
In practice, the difficulties and even dangers of estab-
lishing it would be enormous. It would indeed be a
mistake to allege as one of these difficulties that the stock
of Gold would certainly be insufficient for the wants of
commerce, for when once the adoption of a universal Gold
Standard had been accomplished and the Gold distributed
abroad, prices which would have been disturbed would
after a time and by degrees adjust themselves, and fall into
a normal condition. Besides which, the use by other
14
civilised nations of the banking expedients employed by
ourselves — of a system of convertible paper money (to
speak only of sound expedients) — of checiues and clearings
such as ^ye have in England, would so economise the use
of the metal, that there Avould, I imagine, be more than
enough.
But setting aside the extreme improbability of such a
change in the habits of other nations, the real danger in
establishing a single Standard of Gold (or of Silver
either) for all countries having commercial relations with
each other would be the disturbance of prices to which I
have referred above, by the contraction of the circulation,
which would take place while the operation was proceeding,
in every country of the world. Work is now done by both
Gold and Silver, by Gold in some and by Silver in others,
and the same work would then have to be done by one
metal only. The adjustment of prices would then take a
long time to perfect, and meanwhile the violent and con-
tinuous fall of prices would bring disaster, panic, and ruin
in its train. Money would be harder to come by, and the
debtor who owed and had to pay £100, Avould find that in
order to raise it he must part with more commodities than
could be bought with the money when he incurred the
debt.
But though a single metal as money is only theoreti-
cally the best under present conditions, yet it is much more
than mere theory which claims a single metal as absolutely
the best money for any particidar nation in its internal
commerce ; and it does not seem certain that the very
arguments which prove this do not hold good for a uniform
system of money for that greater nation which counts
amongst its citizens the inhabitants of the whole com-
mercial world. Every argiunent Avhich Lord Liverpool
uses for this country applies equally well to the whole
family of nations ; but he was not concerned for other
states, he was not desirous of preaching a Gold standard,
Mr, If. //. Gibhs.
15
or even a uniform standard to other nations, and if he
had desired to do so, it Avould have been at that time
made all the more difficult by their several predilections
either for Silver as a single standard, or for a double
coinage of Gold and Silver ; and also by the want of those
facilities of communication which we now enjoy, and by the
impossibility which then, at least, did exist of bringing
about " international concert." But with respect to this
country, for which alone Lord Liverpool intended his argu-
ment, it was capable of and received practical application,
so that Gold became the single standard of these realms ;
of which result I will say that if nothing else had to be
taken into consideration, and if we had dealings with no
other country but the British Islands, our system would
be perfect.
I will add that till of late years the inconveniences
which have resulted have not made themselves manifest,
and my only desire in writing these pages is to arouse the
minds of the more experienced among us to the necessity
of a careful examination of those inconveniences with a
view to discover how far they are really dangerous to
commerce, and to the well-being of England's dependencies,
and how far they may overbalance the obvious benefits of
a single Gold standard ; and if it be found that thev are of
such a nature as to require a remedy, then to approach the
question what that remedy shall be with an unprejudiced
mind.
One of the remedies that has been suggested is the adop-
tion of the second system of currency, spoken of in my
first page ; that is to say, of the Double Standard as it
existed in full force in France till 1874.
Now, just as we shall find that many economists will
declare that there are no inconveniences at all in the
single Gold standard, or, if there are any, that they are
not worth serious notice, so we shall find that there are
16
enthusiastic defenders of the Double Standard who say
that not only is its admitted action not disastrous even to
a single country adopting it, but positively advantageous.
Be that as it may, it is incontestable that what is called the
Double Standard was, as applied at that time in France,
really an alternative standard, or, more strictly speaking,
produced an alternative currency. For some time before
1848, Gold, being the dearer of the two metals, had nearly
left the country, and little but Silver Avas to be seen. Later
on, when the construction of the Indian railways, and other
causes, had greatly augmented the demand for Silver, that
metal became the dearer of the two, and it became difficult
to get change for a Gold napoleon.
Yet France was in neither case a monometallic country
as has been sometimes assumed; for the bimetallic law was
still in force, every one was at liberty to pay his debt in
whichever metal he chose, and every one was entitled to
receive 1000 pieces of 5 francs for 723*391 ounces of pure
Silver, or 1000 pieces of 20 francs for 186*681 ounces of
pure Gold, delivered at the mint.
But the dearer metal had in either case for the most
part disappeared from common use, and France was so far
left with the depreciated coinage only, of Gold or Silver as
the case might be ; a condition, according to some French
economists, demanding congratulation as having brought
gain to the country, but, according to most English econo-
mists, deserving commiseration as having brought loss, some
going so far as to speak of "the misery endured by the
" people of France under their changing system."
Mr. Cernuschi's contention is that if France has lost her
Gold — to take that instance — it has not been taken from
her against her will. She has freely offered it. If she has
paid her debts to England in Gold, then for every 2()-franc
piece sent away she has had goods worth 20 Gold francs in
exchange, or else she has received Silver for her Gold, and,
by the hypothesis, more Silver than is contained in four
Mr. H, H. Gibhs.
n
5-fVanc pieces, for silver was cheaper tlian Gold in this
market. So France, lie thinks, as a nation, has gained all
round.
Without either accepting the conclusion at which he
arrives, or denying that there may be considerable in-
convenience and disadvantage in a frequent shifting of
currencies imder a bimetallic law prevailing in a single
nation, from which disadvantage a monometallic nation
must be free, one may well doubt whether the prejudice is
so great to the single bimetallic country as is commonly
supposed.
That which seems to me to be urgently needed is a
careful enquiry both into the reality of the alleged losses
and inconveniences, and into the truth of the contention
that they would be dhninished under the operation of a
bimetallic compact between all the principal nations of the
earth.
I have seen no reason to alter the opinion expressed in
my former pam2)lilet, that the alleged evils could not exist
under the circumstances of such a compact, and that if
England, the Latin Union, Germany and the United
States were agreed, all other nations would find it to their
advantage to follow their example ; and that while the use
of Silver as a medium of exchange would be legally
extended over all the nations so agreeing, it would
practically make very little or no difference in the metallic
currency used by any particular nation in its internal com-
merce, inasmuch as all would still use that for which they
have severally a preference. It may be, indeed, that the use
of Gold of late years by the United States, and the present
disinclination of the public in that country to use Silver,
may add them to the list of the nations having a preference
for Gold ; but the effect of the prevalence of a bimetallic
compact would be, in my opinion, that further change of
habits in this respect would be not promoted but arrested.
Whether or not my belief is well founded that the dis-
c
18
advantages of the Doul)le Standard as existing in any-
single country would be cured by a common accord
amongst nations, the present question is whether the evils,
whatever they may be, which now exist and are likely to
increase, are such as to need a remedy which would, in
anticipation at least, be so distasteful and so contrary to
the traditions, and, which is of more importance, to the
prejudices of a majority of Englishmen ; and I propose to
state the reasons which I will not say make such a change
necessary, but which make a patient and thoughtful
enquiry into the subject very desirable.
The question is a serious and important one, and
scarcely deserves to be treated with the indifference and
contempt with which some Political Economists are willing
to treat it ; for though the evils which now in my belief do
result from the present state of things may or may not be
found to need so radical a remedy, the evil which may-
hereafter result is a much wider one.
The inevitable end, if other nations are not in time
awake to the danger, would seem to be that while we see
the production of Gold decreasing. Gold may come to be
adopted as a standard throughout the commercial world,
with the evil consequences to which I have referred above ;
and this alone, without taking into account the present ill
effects both of the fall in Silver, and of the uncertainty of
its position from day to day, would afford a sufficient
reason for grave enquiry.
It has been said that this fear of the appreciation of
Gold is exaggerated, that the United States, a Silver-
producing country, can never really desire the demone-
tization of Silver, and that if Italy intends to resume cash-
payments in Gold, yet though she may be able to obtain
it she will certainly not be able to keep it, and that
Germany is too well aware of the loss she would sustain by-
selling the remainder of her stock of Silver, to persevere in
her intention of substituting Gold for it.
Mr. II. II. Gibbs.
19
As to the United States, the fact remains tliat a large
party loudly cry for the complete establishment of a Gold
Standard, some because they have a theoretical preference
for Gold, and some because they think that the threat of
demonetization will be their best weapon wherewith to
enforce on Europe their real desire, the adoj)tion of the
Double Standard.
As to Italy, if she has credit to obtain the loan which
she desires, and if she cancels an amount of notes equal
to the Gold remitted to her so that her circulation is not
redundant, I do not see how having once got the Gold she
can be with any certainty deprived of it. The only thing
that can withdraw specie from a country is the indebtedness
of that country, its imports exceeding its exports ; that is
to say, the state of the exchanges. The rate of interest is
the weapon with which the battle of bullion will be fought.
Some to obtain and others to retain that bullion will have
to raise their rates one against the other, and the rise of the
rate of interest implies the fall of prices.
If Italy then takes 16 millions; if the United States
demonetize the 33 millions of Silver existing, according to
computation, in the country, and supply the place of the
half that is in circulation other than in the Treasury with
Gold; if Germany absorbs an equal sum, and if France
and other states should think themselves compelled to
follow the example, the struggle for Gold Avould it seems
be no light one, and the consequences of it could not fail
to be prejudicial to England.
What is most to be dreaded in respect of Silver, and,
if possible, provided against, is a further depreciation in its
value.
I need not refer more particularly to the effect of the
existing depreciation of Silver on the finances of India, and
on all those who, whether in India or in other Silver-using
countries, have fixed sums to receive in Silver, and fixed
sums to remit in Gold.
c2
20
It is the further depreciation, and, indeed, any abnormal
fluctuation whicli affects for evil the interests of all those
in Gold-usinsf countries who have commercial dealino's with
Silver-using nations. Such fluctuation, acting on the ex-
changes, imparts an additionally speculative character to
their business; they can make no just estimate of what
they have to receive for their goods ; the thing that they
do receive is for them a commodity, just as wool is, or bark,
or silk, or tea — neither more nor less.
I have been answered as to this point, that the merchant
does know what he has to receive; for remittances being
made in bills, it is all a matter of exchange, which must of
necessity be subject to fluctuations.
I reply that it is precisely because it is a matter of
exchange that my statement is correct.
What is it that regidates the rate of exchange betAveen
nations? Where their coins are the same in substance, and
are equal (or by a fixed calculation are reduced to equality
as the pound sterling and napoleon are) in weight or fine-
ness, there are only two things which regulate the exchange.
First, the cost of transmission of the coin ; and second, the
greater or less demand for bills in the market from whence
the remittance takes place. But in such countries the rate
cannot recede below the par of exchange less the cost of
transmission. Thus the computed par of the sovereign,
measured in French Gold, being frs. 25*21 J, and the cost
of transmission being 8 or 9 cts., a rate of frs. 2o'12^ causes
the English debtor to send Gold rather than send or accept
bills.
But if, on the other hand, the coins are not the same in
substance, the exchange must also vary with the difference
in value of the two substances each in the other market.
The money of the country from which i^mittance is made
is coined from a metal which is an article of merchandise
in the State to which remittance is made, and thus an
additional element of luicertainty comes into the calcula-
Mr. II. H. Gibbs,
21
tion. It matters not whether remittance is made in Silver,
or tin, or bark; whether it is at so many pence per dollar,
or so many pence per ounce of Silver or tin, or per pound
of bark : it is a speculation in produce after all : and
accordingly, in Silver-using countries, the exchange with
England varies every day, not on the calculable value of a
metal accepted as money, but on the variable value of an
article of produce — on the ever-changing price of Silver
in this market.
But it may be said that this also is one of the ordinary
risks of trade, and involves merely an additional calcula-
tion to be made by the merchant here or by his correspon-
dent in the Silver-using country; and even if the variation
in the price of Silver occurs within the period of his
transaction, and from day to day, there must be some
means by which he can guard himself from loss.
I knoAv of none ; nor is it at all a question of having an
extra calculation to make. The variations of price are
always occurring during the period of a transaction, and
the following example will show the evil which ensues.
Suppose a manufacturer to send two consignments of
goods — one to Australia, and another to Calcutta, telling
his correspondents that 305. per piece is a covering price.
The Australian has no difficulty at all ; he knows the cost
of transmission, and will not buy a bill for remittance on
less favourable terms for the manufacturer than he could
get by sending specie. His only calculation is as to the
possible variation of the exchange between the date of his
sale and the date of his recovering and remitting the
proceeds ; and a knowledge of the exports and imports w411
give him a reasonable clue to the probabilities of rise or
fall in the exchange.
The Calcutta merchant can also estimate this ; but there
is another element on which he cannot calculate in the least
when he makes his sale. What will be the price of Silver
in England when he comes to buy his bill ? Silver is to
his English friend a mere commodity, and his remittance to
him is in its essence a shii:)ment of that commodity, and on
the fluctuations of its price he cannot calculate at all.
" But what then?" it may be answered ; " These are only
" the natural risks of Trade. Is our currency to be
" revolutionised because a manufacturer has made a loss ? "
I answer that this is an extra risk which should and could
be avoided; but the particular loss to the shipper is not the
measure of the evil ; for the risk forces him to suspend or
curtail his shipments to the country, whereby both he and
his correspondent in Calcutta suffer ; he curtails his manu-
facture accordingly, whereby large classes in England suffer,
and trade is injured all round.
As Gold is the only money current and recognised in
this country, and as Silver is the only money recognised
by certain other nations as current in their countries, and
as therefore in these last Gold is but merchandise, just as
in our country Silver is but merchandise, it must follow
that the exchange of cotton goods — one kind of merchandise
— for Silver — another kind of merchandise — is but a kind
of barter. The exchange of English goods for so many
ton weight of copper is confessedly barter, for copper is as
much " produce " as wool is. The exchange for so many
povuids weight of Silver, which is also as much " produce "
as copper is, has only this difference, that we may send our
Silver again to a place where it is money. To us it is, in a
manner, barter ; but barter with an alleviation.
But as to this I have been answered that " Barter is
" where there is no medium or measure of exchange — where
" a man wlio has more wheat than he wants, and wants
" iron, must look out for a man who has more iron than he
" wants, and who wants wheat. To call by the same name
" the case where there are two media, and measures, Gold
*' and Silver, the relative value of which has to be deter-
" mined, is surely to misuse terms," — to which I reply that
the phrase " two media " is an erroneous one. A medium
Mr. H. II. Gibbs.
23
of exchange must, I think, be something mutually accepted
as such by tsvo parties: Two "media," whereof one is a
medium accepted by one party, and the other a medium
accepted by another — one by England, and another by
Mexico — have nothing to liken them to a medium accepted
by both, nothing to take either one of them out of the
category of merchandise in the country where it is not
accepted as a medium.
Whether such dealings are properly called barter or not is
wholly unimportant. My point is that it is an embarrassment
to trade. So far as it is barter, it is disguised, as all barter
is, in commercial countries by the use of bills of exchange.
I am told, and rightly, that the inconvenience of which
I complain is only the same as is caused by paper-money
issued in excess ; and it is added that as we cannot remedy
that mischief — for no agreement can prevent a nation in
difficulties from issuing such paper — there is no reason why
we should suffer ourselves to be disturbed by this, which is
of the same kind.
But there is a great difference between the two cases,
and it is clear that if the fluctuations in exchange in a
country using inconvertible paper are due to the unforeseen
and excessive emission of such paper-money, the case is
worse than with Silver ; but this is only because the
difficulty of production is less ; the printing press mine
is more readily worked than the mountain mine ; and the
calculation of quantities is even more difficult. Mr. Goschen,
in a speech on the Silver question, says that people do a
very good business with countries where the fluctuations of
exchange are enormous. But what is good business?
Profitable business is done by some, but at the cost of
much enhanced risk, a risk which makes business unprofit-
able to others. Such business can hardly be called good.
Trade in the example quoted on p. 21, suffers all round —
both with India, and generally — by the additional risk ;
first owing to the dej)reciation of the silver currency,
24
which makes imports fall off, and secondly, and in a much
greater degree, if the country with which we are dealing is
forced, by stress of war or other emergency, to issue in-
convertible paper. To send goods to such a country at
any time may be risky : to send while the stress continues
may be to give away, if notes are issued ad libitum and
without warning.
True; nothing can prevent such a country from doing
this : but nothing can prevent a Gold-using nation from
taking the same evil course ; and all the evils of a risky
exchange would come upon us in our relations with it, and
all the evils of the depreciation of Gold Avhich its practical
demonetization by a nation so acting would produce ; and
they would come on us, as I think can be shown, with two-
fold force compared with what they would do if our money
did not consist of Gold alone.
But that a rash issue of inconvertible paper will affect
for evil the exchange of the issuing country, and do injury
to trade, is no reason for sitting quietly under the more
remediable evils of depreciated Silver, or appreciated Gold.
England, then, has suffered the inconvenience of ex-
changing her commodities, not for money, but for another
commodity, exposed to a fluctuation in price, which cannot
be sufficiently calculated — inconvenience which would cer-
tainly not occur if she, and the nations with which she
dealt, used the same metal as money, nor, as I think, if they
used the same metals as money.
How has she been able to bear such an uncivilised con-
dition of commerce ? It has only been possible because it has
gone on, till of late, unperceived. There has been a safety-
valve against the pressure, which has prevented the explosion
— a salve for the sore, which has prevented the pain being
felt. France has been there Avith her Double Standard of
Gold and Silver, preserving the equilibrium of the two
metals by receiving indifferently the Gold of England and
the Silver of India, and acting as a clearing-house between
J\[?% 11. JI, Gibbs,
25
the two countries. Mr. Giffen answered this reasoning of
mine by saying, that through a long course of years before
1848, France had practically only a single standard, and
having no Gold to give us could not therefore have done us
this service. I reply, that the fact that one metal prac-
tically prevailed in France during a certain time is nihil ad
rem. She had free mintage all the while for both. That her
Gold (or Silver) was exported did cot affect the question.
His contention is as follows :
" So long as anybody who has Gold will give it for 15 J
" of Silver, Silver cannot fall below 151."
'' But if nobody, who Is willing to give Gold for 15^
" of Silver, has any Gold to give, he has no power to
" arrest the fall of Silver in relation to Gold."
" This was the case before 1848 In bimetallic countries.
" They had no Gold to give for Silver. Therefore, they
" could not prevent Silver falling to 16, 17, 18, 19, 20, or
" any other price in relation to Gold."
" The bimetallic law was of no effect."
This is so far correct that if in a bimetallic country,
which stands alone in its bimetallism. Gold becomes the
dearer metal, it is theoretically true and practically possible
that all the Gold bullion, and, perhaps, the greater portion
of the Gold coin also, should leave the country; and then
any one In It who may want Gold for any purpose, would
have to give such an agio for It as might bring the nominal
ratio in that country, between the Silver then become
almost the sole current coin, and the desired Gold then
become practically a commodity, to any point.
But that does not in the least Invalidate my contention,
which is not that the existence of a Gold and Silver
currency In France affects the price of Silver in England,
but that it Is the law of Free Mintage, a necessary part of
the law of the Double Standard, which of itself maintains
a constant and comparatively even market for the metal ;
26
and I maintain therefore that in England or any other
monometallic Gold-using country, that law of free mintage
must needs keep the price of the commodity Silver at a
point dependent not at all on the power of getting Gold
from France, or on the agio which may be paid for it there,
but on the course of exchange between the two countries.
If, for example, France were to restore to-morrow
the full operation of her bimetallic law, there can be no
doubt that, on the same day, if exchange were about par,
the price of Silver here would return to its old point. It
would be wholly a question of exchange, and, supposing the
exchange to vary only in its normal way under the influ-
ence of more or less abundant harvests in France, and more
or less demand for foreign commodities of consumption, a
chance remittance of 15^ ounces of pure Silver to that
country for sale would necessarily establish for the remitter
a credit there for which he could draw. If exchange were
at par he would sell his draft in this market for £4 4^. llfcf.,
which is the equivalent of one ounce of pure Gold, calcu-
lated at the rate of £3 17^. lO^d. per ounce standard, or if
it was above par, for somewhat more — in neither of these
cases would he really remit the Silver — but if it was below
par his power of remittance would inevitably fix the price
below which Silver cannot go in this market. The presence
or absence of Gold in Paris, the fact that France had or
had not Gold to give us, would not in the least affect the
question. It would be wholly a question of exchange — of
the balance of trade between the two countries — on France
being or not at the moment a debtor to England.
There would always exist the power of remitting the
Silver to Paris for sale, and of drawing for the equivalent,
so as to receive it in Gold in London.
This is exactly what happened in those years between
1827 and 1871, in which France was said to be denuded of
Gold, yet the price of Silver in England only fluctuated
between 58 J and 60g, the average of the lowest year (1845)
Mr. H. II. Gibbs.
being 59§. Mr. Seyd gives the following list of prices from
1827:—
Year.
Lowest.
Highest.
Yoar.
Lowest.
Highest.
1827 ..
501
601
1854 ..
605
61 J
1828 ..
591
60J
1855 ..
60
6V>
1829 ..
591
60
1856 ..
60J
621
1830 ..
59J
60
1857 ..
61
623
1831 ..
60
60^-
1858 ..
60|
611
1832 ..
59J
60^
1859 ..
61|-
62|
1833 . .
58|
60
1860 ..
611
62|
1834 ..
59|-
60f
1861 ..
60i
613-
1835 ..
59J-
60
1862 ..
61
621
1836 ..
591
60§
1863 ..
61
61f
1837 ..
59
60e-
1864 ..
60J
62J
1838 ..
59|
601
1865 ..
60,1
61J
1839 ..
60
60i
1866 ..
60g
621
1840 ..
601
60|
1867 ..
60,^
611
1841 ..
59J
60|
1868 ..
601
61J.
1842 ..
591
59f
1869 ..
60
61
1843 ..
59
59f
1870 ..
601
62
1844 ..
59^
59|
1871 ..
60^
601
1845 ..
m
591
1872*
591
6H-
1846 . .
59
601
1873 ..
57|-
59\i
1847 .,
58^8
60J
1874 t
571
59^
1848 ..
581
60
1875 ..
551
57|
1849 ..
591
601
1876 ..
46|
581
1850 ..
591
61^
1877 ..
531.
58^
1851 ..
60
61t
1878 ..
491
554-
1852 ..
591
611
1879 ..
49
53t\
1853 ..
60|
62f
1880 ..
515-
52|-
* Demonetization of Silver by Germany,
t Suspension of free mintage of Silyer by the Latin Union.
S8
Though the difference between the profit of Gohl and
Silver produced at the mines was not abnormal, a differ-
ence existed, as is shown by the fact that France was
denuded of Gokl, the dearer metal ; yet the price only
fluctuated, as shown in the table.
The highest price in 1879 Avas 53|-, and the average
price last year was 52^^. It is now 52^^.
It is quite possible that had the relative production of
and demand for the two metals been maintained in due pro-
portion the same steadiness of price would also have been
maintained ; but my contention is, that though that pro-
duction and demand had varied, the power of claiming
107*1342 francs for my 15J ounces of pure Silver would
have tended to steady the price, and that, without the
necessity of actually making any such remittance, the
other Silver-using countries would necessarily regulate the
price they would give for Silver on the price obtainable by
remittance to France.
It is indeed conceivable that an abnormal production of
Silver in the mines, or a great diminution of the demand
through falling off of trade, or cessation of the use of
Silver as money in any country, would force merchants to
realise their consignments of Silver by shipping them to
France, and drawing against them. Then, possibly, unless
the exports of France had kept pace witli this change,
either by absolute increase or by diminution of other im-
ports, the exchange would go heavily against that country,
and a proportionate fall in the price of Silver would be
brought about ; but it would then also be entirely a (|ues-
tion of exchange, of the balance of exports and imports,
including, of course, the import of Silver.
So long as there was ])lenty of Gold in France to remit,
the fluctuation in the exchange, and consequently in the
price of Silver in this market, would lie between very
narrow limits, because the exchanges would be from time
to time rectified by ren^it^nces of Gold, but when all that
Mr, If, II. Gibbs,
29
could o'o was gone, as in the time referred to before 1848,
even then, if the exelianges remained at a point favourable
to France, Silver could not fall.
It is true that a continued fall in the exchange, or even
the expense of coining more Silver than was needed for
internal commerce, would become intolerable to the bi-
metallic country, and cause it to do as France has done
from fear of some such result, and suspend the full opera-
tion of the bimetallic law ; but until that suspension took
place, the free mintage guaranteed by that law must tie
the price of Silver to the exchange between London and
Paris.
Bimetallism, it is said, in one country only is an im-
possibility. That is only an equivocal use of the word
" Bimetallism." A Bimetallic law, and the free mintage
which is a necessary part of it, may perfectly well exist in
one country alone, and has, in fact, existed in France about
a hundred years ; but if by bimetallism is meant the cir-
culation of the two metals at the same time, it is quite true
that Gold and Silver cannot long remain and perform the
functions of a national currency in any single country while
it has monometallic neighbours. For those neighbours the
benefits of its bimetallic system will remain; for itself
remain whatever inconveniences may attach to the
system.
For the last sixty years those benefits have been ours ;
France acting as a clearing-house between England and
India has been our safecruard ao-ainst the inconveniences of
the depreciation of the currency of the latter country, but
now that the clearing-house has, for a time at least, sus-
pended its operations, the last four or ^\e years have
shown us the existence of the evil, and the danger of its
increase.
I do not think that anyone has endeavoured to show
either that there is no evil at all, or, if there is, that it is
bearable or incurable. Patience has been liberally pre-
80
scribed to us, and other remedies proposed, which, it was
thought, might be provided for us without any intervention
or care of our own. Either (1) the over-production of
Silver Avould cease, there would be at last an end to the
abnormal flood of Silver poured on the market by the
German sales of their demonetized coin, and trade would
revive from its then existing depression, and when these
things had happened, all w^ould return to its normal con-
dition, Silver and Gold would bear their accustomed ratio
to one another, the losses of the Indian Government would
cease, and stability return to our commerce with Silver-
using countries.
Or, (2) if none of these things happened, then the
pressure of the evil, if it was an evil, w^ould force France
into her old channel, and Germany, if not into her own old
channel of Silver monometallism, at least into accord with
bimetallic France, and all w^ould be well.
Let us consider the first alternative.
The over-production in America has ceased, trade has
in some measure improved, and for the present at least
there is a cessation of German Silver sales, and these two
circumstances, together with some demand for the Con-
tinent, did for a time cause a slight improvement in the
price of the metal ; but where is the return to the normal
condition which prevailed from 1 820 onwards ? Where is
the end of the losses of the Indian Government ?
It is clear that even if the dead weight of the German
Silver were removed from the market, in no case could
Silver, while treated as a commodity, return to its former
position with respect to Gold ; for there would still remain
one great cause of a lower price in the cessation of the
demand for Germany (and some other coimtries) for
coining. The Indian Government therefore would find its
difficulties alleviated, but not removed; and we could
expect no stability in whatever average price might be
arrived at when the actual disturbing causes were removed,
Mr. H. H. Gibhs.
31
so long as the compensating balance .afforded by the French
Double Standard was not restored.
A new demonetization of Silver or Gold, a great
discovery of either metal, great conmiercia^ disturbance in
countries using one, while those using the other were in
comparative prosperity — either of these causes might again
bring about violent disturbance in the relations between
Gold and Silver, and renew the evils of which we now
complain.
A new influx of Silver and Gold from the mines is, of
these disturbing causes, that one of which we need take
least account. If such new discoveries are made, we
cannot help it ; we can neither predict them nor provide
against them. If they come, they come ; and nothing we
can do can influence their coming or not coming. But
demonetization by other countries is an evil which we may
hasten or prevent. The example of Germany is already
followed by some minor nations, and the more there are that
adopt this course, the more do those who still use Silver
feel their position to be a doubtful one, and the result may
be that suggested in my Preface, namely, that others may
be in-esistibly driven to follow the example, and Silver
may cease to be money in France and the Latin Union, in
Germany and the United States.
As to the other alternative : No doubt all would be well
if the other nations would agree in the use of the Double
Standard, while we retain our present system unaltered, so
far harmonizing with bimetallism that we have a Gold
standard in one part of the empire, and Silver in another ;
but it may be doubted whether if the two nations most
concerned in the Silver question, England for the sake of
India, the United States for their own sakes, as producers
of the metal, hold aloof, the others will step into the gap.
Be this as it may, the United States have again opened the
question, and a second Conference is to meet in a few days.
It is much to be hoped that it will issue in some international
3-2
accord, for if not, it is too likely that the affair will go from
bad to worse, both in the appreciation of Gold and in the
depreciation of Silver, and agreement, which is the only
real remedy, will become every year more difficult.
It has, I think, been shown that agreement to adopt a
single metal as the medium of exchange is practically
impossible ; but the adoption of the Double Standard by
the chief nations of the world would provide them a common
metallic basis which now does and still would amply suffice
for the wants of commerce. Roughly speaking, one half
the world uses Gold, and the other half uses Silver : the
adoption of the Double Standard would make this change
only, that all the world would use both Gold and Silver.
There would be no more increase or diminution (consequent
on such a measure) in the quantity of circulating medium
among nations than if the whole quantity of both metals
were fused into what the Romans called an electrum, that
is to say, a compound metal of Gold and Silver. I have
already said (and it is little more than a truism) that no
metal has ever been the money of any country without
national consent. Even an inconvertible paper currency,
valueless though it is, may serve as the money of a nation,
but it must have national consent to make it so serve, and
that consent can make it serve notwithstanding that it is
bad in principle and in use.
That any single metal should be imiversally money we
need international consent ; but neither for a Gold measure
of value alone, nor for a Silver measure of value alone,
have we that international consent, and I see nothing in
the reason of the thing why all nations should not arrive at
a common consent to use both together in a certain relative
ratio, ti'usting to the establishment of free mintage to
produce as its consequence continuous and unrestricted
demand, and thus to preserve that ratio unaltered.
What that ratio should be, if such a thing be possible,
I will discuss presently.
Mr. II. //. Gibbs,
83
That Ijotli metals are severally well fitted to be nioney
all liistory shows, and the least costly of the two was
" current money with the merchant " before the other was
used except for ornament, probably because it was more
abundant. A certain abundance is necessary; for there
must be enough to serve as
*• The . . . common di'udge 'twixt man and man ;"
but one principal necessity is that its natural cost, or rather
difficulty, of production be considerable, so that there be
not too much abundance, for that is a safeguard against the
currency becoming redundant, and prices of commodities
inconveniently rising. But as I have said above, there are
other metals and other substances more difficult of access
and more costly to produce than either Gold or Silver.
Scarceness alone is not a sufficient qualification, nor im-
perishableness, nor portableness, necessary as these and
other qualities are.
Nor, on the other hand, is inequality of cost, or cheap-
ness of one portion of the metal used, a bar to its fitness
to be a measure of value. That a great portion of the
Gold discovered in Australia and California costs half or
a quarter as much per ounce as the Gold discovered in
some other countries, is no disparagement to the fitness of
cheap and dear Gold alike to serve as a medium of exchange.
Why should it be more prejudicial that a metal the pro-
duction of which costs only a sixteenth of what Gold costs
should be yoked with Gold in a certain proportion to do
that service for the whole world, than that cheap Gold
should be yoked with dear Gold. I can see little difference
but one of degree in the two cases, and that the metal in
question is white instead of yellow. We cannot dis-
tinguish between cheap Gold and dear Gold, and it seems
needless to make any other distinction between cheap
Silver and dear Gold than what nature has made at the
time of their being yoked together.
D
34
But the objection usually raised to a Double Standard,
to the concurrent use of Gold and Silver as money, is not
that they ought not to be so yoked but that they could
not ; and I will now proceed to state the objections which
are most commonly made, having first set down distinctly
what it is that the advocates of the Double Standard desire.
Let the Governments of the chief commercial nations
agree upon what is the present approximate ratio of Silver
to Gold — we will assume, for the sake of having a basis to
start from, that 15 J is to be that ratio. It is one on which,
as we are informed, the Governments of France and the
United States are already agreed, and which many of even
our strongest opponents are willing to allow to be the only
one possible, if the principle of the Double Standard itself
could be accepted. Let our Government agree, then, that
for the British Dominions 113*0016 grains of pure Gold
(123-27447 Standard) or 1751;5247 grains of pure Silver
(1893*5403 Standard) shall be indifierently a good discharge
for a debt of one pound sterling, and that they will coin all
Silver that any one brings to the Mint into pieces of
350*3049 grains pure, the debtor to have always the option
of paying his debt either in Gold or Silver. For other
countries the weight and denomination and currency of
Silver and Gold coins would be specified in a corresponding
manner. This is the whole Bill.
The answer to the question " What is a pound ? " would
be "either 113*0016 grains of pure Gold, or 1751*5247 jmre
" Silver, at the option of the payer."
Now the objections so far as I have been able to gather
them are the following : —
I. It is impossible to regulate by legislative enactment
the value of any commodity: Gold and Silver are commo-
dities; therefore it is impossible to fix their relative values,
Mr. H. H. Gibbs,
85
II. If it be attempted, nature will revolt against it, and
tliat wliicli is in reality and in despite of law the cheaper
of the two metals will prevail, and tlie other will leave the
country, as has been the case in our own experience in
France both with Gold and Silver.
III. But if it wej^e possible, consent is admitted to be
necessary ; and consent is impossible.
IV. But if consent were possible, and if it sufficed to
fix a reasonably approximate ratio between Gold and Silver,
there would always be a preference for Gold, which will
therefore bear a greater proportionate price; because, its
bulk being smaller, it is (1) cheaper to transmit, and (2)
easier to count.
V. Supposing a twofold standard established, the effects
of a new flood of Silver from the mines w^ould be disastrous.
It would overwhelm commerce, give a sudden and
dangerous impulse to prices, and disturb the relation
between creditor and debtor.
VI. Supposing its establishment to be on the basis of a
ratio of 15^ Silver to 1 Gold, while the existing proportion
is perhaps 18, then the effect would be, first, that such a
stimulus would be given to the working of Silver mines all
over the world that this apprehended flood of Silver would
really and inevitably come upon us ; and secondly, that
even if no increase of production took place, it would of
itself increase the total circulation of the world by the
addition to it of 2 J ounces for every 15 J.
VII. There would also be the material inconvenience
that all Silver token-coins would have to be called in and
recoined.
VIII. We have gone on for sixty years in great pros-
perity with a single standard. Why change ?
36
IX. It is impracticable ; it may suit other nations, but
it is impossible to present it in a form that can be accept-
able to England.
I do not think I have misrepresented the objections, the
first seven of which seem to me to be sufficiently cogent, and
to deserve and require most careful answers. The two last
are not, I think, of so much importance, but they have been
seriously urged by good economists, and should be noticed.
I will now state what I have to urge against these
objections.
I. " It is impossible to fix by law the value or rather
" the price of any commodity, and the precious metals
" being commodities, no price can be fixed for them."
There is no doubt of the truth of the proposition that
it is impossible to fix by law the money value of any
commodity ; and were it possible, it would be as impolitic
to enact that Silver should not be sold at less than 60d. an
ounce, as it would be to ordain that wheat should never be
sold at less than 60^. a quarter. But, by the hypothesis,
Silver is to become part of the money of the country ;
Silver and Gold arc to stand to one another in a different
relation from that in which either of them stands to wheat.
Under our present monetary law Gold stands to Silver in
exactly the same relation as Gold stands to wheat, and it
cannot be but that some change in those relations must
result from Silver becoming equally with Gold the measure
of value and means of payment for wheat — that is to say,
that a debt of £3 17^. 10^<^/. incurred for wheat may be
discharged either in an ounce of standard Gold, or in 15 J
ounces of standard Silver. The words " price and value "
seem to me to be misapplied in describing the mutual rela-
tion of the metals forming together what I venture to call
one metallic standard of value, that is to say forming in-
separable parts of one monetary system.
Mr. II. II. Gihbs.
87
INIoney cannot measure money, both metals being ac-
cepted as money. The question of price cannot arise
between them, and their price cannot therefore be fixed by
the State or otherwise. If their vakies measured in other
commodities are by nature unequal, the State can by no
law and no declaration make them equal ; but in passing a
law which makes 15 J ounces of Silver a good discharge for
a debt of one ounce of Gold (we are supposing that to be
the true proportion existing at the time of the making of
the law) it does an act which, as I shall presently show,
makes future inequality between the tw^o metals unim-
portant, and their service as money unaccompanied by any
injustice, inconvenience or irregularity.
It is true that in adopting a twofold standard, and fixing
by law an arbitrary ratio of one of the constituent parts of
that standard to the other, we do incidentally regulate the
price of a commodity; but it is only incidentally, and as
a consequence necessarily flow^ing from free mintage, and
from what I have, I think, shown to be practicable and
reasonable legislation. That is to say, we fix a price in
Silver for that portion of Gold-yield Avhich is used in the
arts, and not for the purposes of coinage or currency, and
a price in Gold of that portion of the Silver-yield w^hich is
used in the arts and not for circulation ; but the quantities,
whether of Silver or Gold, thus used are so small as com-
pared wath those doing duty as money, that the efiect of
thus fixing the price is certainly quite insignificant.
II. " The dearer metal would be exported and the
" cheaper metal w^ould take its place, thus causing a loss to
" the country."
The cheapness of one metal in the market and the con-
sequent export of the other are the two cardinal points on
which the whole question turns, and I hope that in any
answer to this w^hich may appear some attempt will be
made to show how, and by what steps, the supposed
38
difference of market value could be brought about, and
how, and by what steps, the " dearer " metal would dis-
appear. Hitherto all that is alleged is that one metal has
become dearer, and has disappeared under circumstances
wholly different from those suggested.
The allegation is that there would be a difference
between the mint price and market price of Silver, but it
seems to me impossible. I wish to know how the market
price could be quoted. In Avhat Avould it be reckoned? Not
in Gold, for it is not conceivable that a holder of Silver
would sell his 15 J ounces standard for a less sum than
£3 175. lOld. (or £3 175. 9^. Bank price), when by taking
them to the Mint he could by law have them coined for
him into pieces of Silver (19 double florins and small
change), which would be a legal discharge for a debt of
that amount: not in commodities, for it is not conceivable
that the seller of commodities would take less in Gold than
he would in Silver, when he would have no reason to
expect that his Gold would be worth more at home or
abroad. Only if his Gold would buy him more Silver or
more commodities elsewhere would he care in which metal
his price was counted.
But by the hypothesis other commercial nations arc to
be in the same case with England, and he cannot, therefore,
anywhere procure Silver at a cost of fewer commodities than
he can Gold.
But the miner, it may be said, the cost of production of
his Silver being less in proportion than that of Gold, will
be able and willing to sell it for a lower price. Why
should he do so ? If he procures it at the cost of less
labour and fewer commodities, so much the better for him.
But he will not on that account part with it for a less
number of dollars than he could get for it at the nearest
mint, less cost of carriage and interest. The l)uyer would
have to send it thither, and get the mint price : why should
not the seller do the same ? If not, and if he sells at
Mr. H. H. Gibbs,
I
89
lower price tlian liis buyer could thus obtain, he makes him
a present of his profit. In discussing this question one of
the most frequent mistakes is to confuse the profit of the
miner with the supposed advantage of the debtor. It is
commonly said that the debtor -will be master of the
situation, that he will be able to take advantage of the
creditor and pay his debts in the cheaper metal. How is
he to come by the "cheaper metal?" Plow will it be cheap
to him ? Were Englishmen able to pay their bills the easier
because Gold was to be had in Australia for the picking
up ? The only effect of cheapness of production is to give
profit to the miner and his men, and of course to enhance
prices if cheapness of production increases the quantity
produced ; but they will be prices counted not in the
miner's Silver only, but in his neighbour's Gold as w^ell.
The cost of production will no doubt regulate the value
of Gold or Silver reckoned in one another, or in other
commodities, if neither metal is money; it will do so if either
metal is money ; i.e., if one is a purchasable commodity, and
the other money, the measure in which the value of that
commodity is counted ; but its effect will not be the same if
both metals are money under an international compact.
Their cost of production will then regulate their value not
in one another, but in other commodities only.
Under such a compact Silver and Gold are as one
metal — limbs of the same body, parts of the same whole —
fused like an electrum into one mass ; and when both are
recognized as the measure of other commodities, whose value
as a mass varies with the total quantity of that measure, the
cost of production does not practically determine the mutual
value of the two parts of it. I say "practically," because,
though no law and no agreement can make the proportion
between those two parts other than what nature and labour
may have made it, my contention is that what law and
agreement can do is to make the variations in that propor-
tion wholly unimportant in the relation of the several metals
40
to the commodities of which they arc jointly the measm-e.
Diminished cost of production, resulting in increased
production of either part of the mass of metallic money
cannot, I think, reduce the value of that part in respect of
commodities, but the value of the whole mass.
But let us suppose for the sake of argument " one
" metal or the other" to be the dearer of the two, and that
therefore it " will leave the country," and the depreciated
metal will remain. It is admitted on all hands that such
was the case with France when she stood alone a bimetallic
nation surrounded by monometallic neighbours ; and that
such must be the case with any single country so standing.
It must with equal unanimity be admitted that if all
commercial nations without exception had but one mind in
the matter and received Gold and Silver alike (in a fixed
proportion) in payment of debt, no such exodus of one or
other could take place. Whither would the dearer metal
go ? Surely the objectors will not say that it will leave all
countries simultaneously !
But my contention is that the union for this purpose of
two or more of the principal nations would be sufficient so
to diminish whatever evil France may have sufiered as to
make it of very little consequence ; and that if England
were to lead the way not only would all Europe follow, but
even if all did not, yet the fear of such an export, or,
indeed, of any export at all of importance, when both
metals were used by so large a combination, would be
merely chimerical, and I think it certain that if such a
compact were once made, there could be in effect no diver-
gence between the nominal and real value of the precious
metals measured in each other, and that therefore no
debtor could gain in that Avay any advantage over his
creditor. If the other nations, as is probable, did follow
their example, assurance Avould be made doubly sure ; but
supposing some nations not to follow, could the dearest
metal be attracted to them in any quantity ? Could we
Mr, jr, U, (uhbs.
41
send our Gold to Mexico, for instance, and fetch Silver
from thence ? Gold is for the Mexicans an article of mer-
chandise. We might export Gold to that country, and it
would probably be a bad speculation ; but if we did so,
why should the Mexican sell us or pay us 16 or 17 ounces
of Silver for our ounce of Gold when he could himself send
15^ ounces to England, and buy not the ounce of Gold
indeed, but the commodities that it would purchase ?
It must, however, be admitted that Mexico, China, and
any other country remaining outside the compact will stand
in exactly the same relation towards the greater part of
Europe, the United States, and all other nations within the
compact, as the whole commercial world stood towards
France when that country stood alone in her bimetallism.
It is scarcely necessary to point out how great would
be the difference between the action of the whole commer-
cial world upon France, and the action of a few nations
upon a large number. The attracting force of those out-
side the compact would be infinitely less, and the diminu-
tion of the mass of the " dearer " metal held by those
within it would be inappreciable.
I will take China as an instance. If China should
absorb more Silver than she now does, more than the
annual production would supply, it is possible, though
highly improbable, that Silver might leave the bimetallic
nations, or rise to a i)remium.
Or if China should indeed take to imitating the
foreigner and adopt a Gold standard, she could, no doubt,
remit her Silver to Europe, and establish credits there.
Then, the debtor having the choice of metals, she would
inevitably have to pay a premium for the Gold which
would be remitted to her, and she would thus be delibe-
rately making a loss without any compensatory gain ; and
if Europe did thus remain with the "cheaper" metal, it
would be with a larger quantity of it that she would re-
main, and she would have lost nothing.
42
But in what respect would Europe be in a worse case
under a bimetallic system than she would be now if China
should choose to demonetize Silver ? The bugbear is not
of my raising, but of my opponents'. She would make her
voluntary loss in a different way. She would take a leaf
out of the German book, sell her Silver at a loss, and
having thus established credits, would demand the Gold
which in the other case she would have to buy.
III. " Consent between nations is impossible."
It is easier to allege than to prove the impossibility of
agreement. Monetary concord between the various States
of Germany would have seemed impossible a few years
ago, and yet it has come to pass. There was no ante-
cedent reason why it should have been possible to bring
about the Latin Union, but it exists, and has been an im-
portant factor in the present condition of aftairs. I believe
that the only hindrance to international agreement lies in
the attitude of this country, and in the opinions heretofore
prevalent here ; but if it can be shown that no real dis-
advantage to England in her internal commerce, and much
advantage in her external relations, would attend the
adoption of a twofold standard, that hindrance would, no
doubt, disappear.
We already know that France and the United States
are willing, provided only that others are willing also, that
Germany was anxious for a Conference on the subject, and
has, it is said, already nominated representatives. Austria
would certainly make no demur, and Italy would lose, as
the other nations would lose, the motives which are
impelling her and them to resort to a single Gold standard;
and the dangers which appear to me to threaten the com-
merce of England, and which lie in the increased and
increasing appreciation of Gold, would be averted.
Practically the decision rests with ourselves, and, if we
Mr. II. II. Gibbs.
43
Avcro ulllingf, that consent which is said to be impossible
Avould at once exist.
But, it will be said, that even supposing all were to be
willing to come to an agreement in principle, there is no
probability of their being able to fix upon a ratio between
the two metals that would commend itself to all the con-
tracting powers, and at the same time be just to debtor and
creditor alike.
The ratio was, indeed, theoretically, one of the great
difficulties in the way of an agreement, but not practically.
Prima facie the just way would be to ascertain approxi-
mately the existing proportion between the two metals, and
agree to fix that as the proportion at which the mints shall
coin the Gold and Silver brought to them.
But how is that existing proportion to be ascertained ?
The market price will not show it, for the present position
of Silver in the market is almost entirely the result of its
demonetization, and the day Germany returned to a Silver
currency Silver also would begin to return to its former
level, even without any question of the Double Standard ;
and I believe that if Silver were as widely used as before
it would be found that there would be very little difference
between the true proportion and the ratio of 15^ Avhich, by
the necessity of the case, w^as always arbitrary, and more
or less the result of a compromise.
I will discuss presently what would be the effect of
fixing that ratio if it should really be much higher than
the existing proportion, and w^hat would be the effect of
fixing it at 17 or 18 or any other ratio differing from 15 J.
This last has been the constant ratio for a much longer
pei-iod than any other. Five-franc pieces bearing that
relation to the Gold coinage of France are still legal tender
in that country; thalers bearing that relation to the Gold
coinage are still current in Germany at their full nominal
value. In those two countries, therefore, the fixing the
ratio at 17 or 18 would inflict some loss on the debtor, just
44
as fixing it here at a higher rate than its existing market
yahie Avoiild inflict some loss on the creditor, ^vho might
have to pay a debt in Silver to the foreigner. But as the
present cheapness of the Silver which the creditor would
in such a case have to buy arises from no action of his own
country, and the renewed deamess would arise also without
the necessity of any action of this country (for it would
return by the action of the foreigner if Silver were
remonetized and free mintage restored whether we retained
our single standard or adopted the double one), he would
have little reason to complain ; and indeed the making his
case worse by adopting too high a ratio under the Double
Standard Avould not be so great an injustice as the making
the debtor's worse by the depreciation of the lawful money
of his country which would result from the adoption of
too low a one.
It is quite true that the appreciation of Silver, whatever
it may be, w^ould involve a corresponding depreciation of
Gold ; and it has been asked whether, inasmuch as England
is the greatest holder of Gold, it would not be England
who more than any other w^ould be injured by its deprecia-
tion, and whether, therefore, it is not unreasonable to expect
that England should concur in the establishment of a
Double Standard with such a fixed ratio between Gold and
Silver as would ensure that depreciation.
Premising first that it is not alone the holders of the
metal itself who would be affected by its depreciation, the
answer is that the appreciation and depreciation of Silver
and Gold respectively do not depend on our concurrence.
The effect would be produced, either by a return on the
part of Germany to the Single Silver Standard from which
she departed in 1872, or by an agreement between France
and the United States with or without other European
States, to return to the Double Standard, with a fixed ratio
of 151 to 1.
But it may again be asked, " If it is certain that, in
Mr. If. rr Gihhs,
45
" case no general agreement resulted from the Conference
" one of the above-mentioned alternatives will happen,
" why should England intervene, and why not rather main-
" tain an expectant attitude and be in readiness to profit
" by whatever may be the ultimate outcome of the dclibe-
" rations?"
If it were certain, and if the abstinence of England
from co-operation did not involve a certain amount of insta-
bility in whatever action other nations may take, I could
desire nothing better; but it is far from being certain, and
the very knowledge that there is a strong and widely-spread
opinion against bimetallism in this country will tend to
make it even less probable than it would otherwise be.
But if the result is that neither is Silver reinstated in
Germany, nor the Double Standard in France and the
United States, that which does seem certain is that Gold
will be inevitably adopted by those who are now in doubt,
with the result upon prices to which I have before adverted.
Now it is worth while to inquire what practical effect
for evil the supposed depreciation of Gold would have.
Here is the sum of it. Suppose the Gold used for the
purpose of money to be £500,000,000, and the Silver used
for the same purpose to be £ 500,000,000 (the ^proportions
are not correct, but near enough, probably, for an illustra-
tion). Then, if the present price of silver be o'2d. an ounce
(a ratio of about 18 to 1), these £500,000,000 are contained
in 192,307,690 lbs. troy. Declare the ratio to be 15^ to 1,
and each of those lbs. troy becomes the equivalent of about
£3 sterling, and the £500,000,000 becomes £576,923,000—
an apparent gain to the holders of Silver of some 15 per
cent. But the whole £1,000,000,000 of circulation would
have been inflated by an addition of £76,923,000, and
depreciated, therefore, to the extent of about 7 per cent.,
which depreciation being shared by the Silver and Gold
alike, the Gold-holders and Silver-holders alike would
suffer a loss in the rise of prices, for their share of which
40
loss the Silver-liolders would be more than compensated.
The loss would not be a very great one, even if this were
the true state of the case ; but if the measure is really
advantageous for this country, even as the least of two
evils, it may be desirable to sacrifice some exactness and to
incur a small loss for the sake of bringing it about by
common accord. I have shown that the mischief which
could be done would be very small, even if the real
difference were that between 15^ and 18; but, as the
difference would be only that between 15 J and the true
proportion under remonetization of Silver, the suj)posed
prejudice would not be worth considering.
I have not desired to exaggerate the dangers which
may follow upon the appreciation of Gold, but I think it
well deserves careful examination whether they would not
be more material than any which could be caused by a
slight advance in the purchasing power of Silver.
Again, it may be objected, if the chief commercial
nations had agreed on the principle of a Double Standard,
and on the ratio between the two metals, what probability
would there be of any such concert being maintained ?
Treaties are broken every day, and so, it may be thought,
would this, if not by the reversion of one or more nations
to one or other single standard, at least by a possible change
in the ratio.
Other treaties may be broken, because by breaking them
a nation seeks to bring advantage political or pecuniary to
itself; but the Double Standard once establislied, I believe,
the breaking of this treaty would touch home interests so
widely spread, and so deeply rooted, that a change would
not be lightly made.
In one particular indeed it must be admitted that there
would be no guarantee for the maintenance of the treaty.
Whatever the agreement, and however binding its terms,
nothing can prevent any nation, party to it, from making
short work of its metallic currency, by an issue, under
3fr. H, H. Gibbs.
47
stress of war, or for any other reason, of an inconvertible
paper currency. The metallic money would in that case
flow over into the currency of other nations.
But what happens noio if a nation using a Gold
Standard issues inconvertible paper ? The Gold flows over
into the Gold-using countries, affecting their prices more
sharply than would the Gold and Silver which might leave
a bimetallic country so acting, and would be spread over
the whole world of commerce.
In any case the paper-issuing country would remain
entirely without influence on the rest, when once her
metallic money had left her. She would be outside the
pale and would in no way affect the coherence of the
others.
But some one may say, " If, after the ratio is once
" ascertained and fixed, the relative market price of Silver
" and Gold changes enormously, surely it must be not only
" expedient but necessary to change the ratio. Suppose
" Silver to become as rare as Gold — suppose it to become 50
" times commoner than Gold — is it conceivable that a ratio
" of 15^ to 1 could be maintained ? "
I have already shown, I think, that, when both were
money, there could not be a market price as distinguished
from a mint price of either metal — of Silver or Gold —
their price would necessarily be measured in commodities,
not in one another. Gold and Silver would be as one
metal; and the only effect of such a change would be,
that if the supposed rarity of Silver had produced a
diminution of the common mass of money in the world the
prices of other commodities would fall, or if its supposed
abundance had produced an increase of that common mass,
the prices of other commodities would rise ; • but such
diminution or such enhancement must, in the nature of
things, be gradual, and proportionate to the gradual dimi-
nution or increase of production; and to these the daily
48
transactions of trade would adjust themselves without
sudden or violent disturbance.
Secondly, the intrinsic danger and injustice of a change
would be great.
Whatever ratio we now fix, no practical injury is done
to the general interests of England. If we fix it a little
too low or a little too high, the interest of a score of
holders of Silver would be affected. That which they
now hold as a commodity would be to a trifling extent
raised or lowered in price, and there would be an end.
But a twofold standard once established. Silver becomes
a money of the realm, and a change would affect the
interest of every buyer and every seller, for the relation of
money to all purchasable commodities would be violently
altered. If, for example, we could suppose that the true
proportion of Silver to Gold had come to be 20 to 1 instead
of 15 to 1, and it should be decreed that the legal ratio
should be changed accordingly, then the whole mass of
Silver coin and bullion held in the country would be
reduced in value by one-fourth, and the holder mulcted to
that extent.
It needs but to mention the inconvenience which the
mere apprehension of impending change would cause, if
such change were supposed possible, to show that if
Eno^land should once resolve on such a change as the
adoption of Silver as a joint standard with Gold, she must
surely adopt it once for all, and with no arriere pensee of
future changes to and fro according as one or the other
metal might seem to be relatively more abundant.
IV. The fourth objection depends on the statement that
" there will always be a preference for Gold."
To this statement there is the short but decisive reply,
that half the world has a preference for Silver.
Mr. 11. II. Gibbs.
40
The reasons alleged for the statement — viz., cost of
transmission, and labour of connting, can also, I think, be
easily disposed of. In point of fact, it is not cheaper to
transmit Gold than it is to transmit Silver, the freight and
insurance being ad valorem, and the same for either. The
bulk either of Silver or Gold is so small as to be of no
moment in calculating the freight ; and if there he any
difference between them, Silver would have the advantage,
inasmuch as Gold, by reason of its less bulk, value for
value, is more exposed to the danger of robbery.
As to Gold being preferred because of its being easy
to count, that point leads to the enquiry into what practical
and material consequences would result from the adoption
of a twofold standard by all nations, irrespective of any
supposed effect on prices, to which latter point I will advert
under Objection V.
Would currencies remain as they are, Gold in England,
Silver in India, &c. ?
I answer, certainly they would. Certainly no revolu-
tionary change would be brought about by the admission
of Silver into one country and Gold into the other as
unlimited legal tender. Every one would be entitled to
discharge any debt contracted after the passing of the law,
in coins of standard Gold or in coins of standard Silver at
his pleasure ; but I see no reason to imagine that the latter
would be more ready to his hand than the former, or
indeed as ready. No one need fear that he will be in
danger of receiving a sack of 5000 double florins for a debt
of £1000, or of having to hire a porter to carry a bag of
Silver when he has to pay his tailor. I apprehend that
all large payments from hand to hand would ])e made as
now by cheque ; and all less ones of above £5 by notes ;
and all smaller ones by sovereigns and the Silver tokens
representing parts of a sovereign. Payments in this
country in Silver standard coins would be only exceptional.
Silver is even now a legal tender up to 40^. Does
E
50
anybody ever pay a debt of 40.f. in Silver? I can
imagine no reason wliy the Englishman should leave the
" preference" which he now truly has for a Gold currency,
nor the Indian his " preference " for a Silver currency.
Those that use Gold for their daily transactions would use
Gold still ; and those that use Silver would use Silver still.
I presume, indeed, that the law would provide that
debts or other payments falling due under contracts dated
before the law came into operation might be demanded in
Gold; but in reality there would be no reason why the
debtor under such contracts should ordinarily j)refer to pay
in Silver rather than in Gold, nor why the creditor should
prefer to receive in Gold rather than in Silver, any small
sums not payable as usual by cheque or note .
Now suppose a bimetallic law passed to take effect on
the 1st of January in any year, so soon as the Mint was
made ready for the change ; the actual thing which would
happen is this : A shipment of Silver would arrive in course
of time from Vera Cruz or some other port of shipment.
It would be transhipped as now to India, or to any country
in which there was a demand ; just as a shipment of Gold
is when the exchange is against the country, or when it
has to be exported for any especial purpose. But if there
should be no demand either to rectify the exchange or to
supply (for example) a paper-using country with a required
metal, the Silver would be taken to the Bank of England,
and the directors, acting on the altered law, woukl issue
notes against it. Those notes would fall into the Reserve
of the Bank, and their sterling amount would be at the
credit of the bringer, either in his own account in the books
of the Bank or in that of his private banker; but as the
law of the twofold standard could cause no increase in the
quantities of the two metals, there could be no jiermanent
increase in the Reserve ; nor do I see any reason why
Silver should flow to this country rather than Gold.
Certainly, Gold alone would not come to the Bank, but
Mr. II. II. Gibhs.
51
I cannot see how cajn-ioc or interest will lead men to send
Silver to it in preference. The debtor country, Avhose usual
money is Silver, will pay its debts in Silver; and the
debtor country, whose usual money is Gold, will send Gold.
England is the monetary centre of the Avorld, not because
she uses Gold and not Silver, but because she is the centre
of capital and trade. All the Gold and all the Silver of
the w^orld comes here now, except that which is retained
for use in the country of its production. What more could
happen if both Gold and Silver were accepted by us as
money ? Some imagine that all the Silver would come to
the Bank of England, either instead of all the Gold or as
well as all the Gold ; and that in the latter case our issue
of notes would rise to a point hitherto unknown. But I
see no ground for supposing that w^e should issue one note
more than we now do. The same balances would come,
though sometimes in a different form ; and whereas now
shipment after shipment of Gold passes through England
without entering into the Bank Reserve (when the state of
the exchanges demands that it should go abroad), so it
would be in the case of the Silver also.
But England, it is said, being a creditor country, would
always be paid in the cheaper metal. This is to beg the
question that there would or could be cheapness or dearness
between the two parts of an accepted standard of value.
Gold and Silver being jointly the measure of cheapness and
dearness of other commodities could not have the same
relation to one another that either one of them bears to any
other commodity not so intimately connected with it.
The result would really be, I think, that the Bank
Avould always hold both Silver and Gold bullion, as is
already to a limited extent within its powers under the Act
of 1844, and that the amounts of the two metals so held
would be always varying, not by reason of any imaginary
cheapness or dearness of either metal, but according to the
varying condition of the balance of trade of the Silver-
E 2
5-2
using or Gold-using countries respectively in relation to
England.
The Silver received by tlie Bank would for the most
part remain in the vaults, but some of it would be sent to
the Mint to be coined into standard money, call them double
florins or dollars, or what you will, in case it should be
necessary to pay out any quantity of the new coin to the
public ; but, as I have said above, no great amount of it
would be likely to go into active circulation.
The real difference that would result from a bimetallic
law would be in international payments — in shipments of
bullion to rectify the balance of trade between ourselves
and other countries. The Bank of England would, as I
have already said, hold Silver as well as Gold ; and such
shij^ments would be made in either metal at the option of
the payer; but if made in coined metal, they would be
made, as now, by weight and not by tale, so that the labour
of counting will not enter into the question.
Some nations will have as they now have a preference
for Gold for use in the daily transactions of life, but that
they should therefore desire its employment in their inter-
national transactions is I think a chimera. No merchant
will, as it has been suggested, stipulate that the Bills of
Exchange which he may buy to be drawn on a bimetallic
country shall be payable in Gold. Why should he do so ?
Are Bills on England now paid by transfer of metal from
hand to hand ? Is it really supposed that the effect of the
establishment of the Double Standard in this country would
be that a Bill for £1000 would be met by handing to the
payee a sack of 1000 sovereigns, or five sacks of 1000
dollars each ? When there really did exist an appreciable
difference between the value of the two metals, and when it
was therefore really of inqiortance which of the two the
payee received, is there any record of a bill being drawn on
bimetallic Paris with such a stipulation on the face of it ?
Doubtless there is none,
Mr. II. II. Gibhs.
53
V. ** A twofold standard once established, any great
'' influx of Silver from the mines would dangerously disturb
" prices."
It is unquestionable that if England had a Silver as well
as a Gold standard, the working of new mines of Silver
and the production of an additional quantity of that metal,
would have the result of enhancing prices ; and if the
quantity was very large and its production very sudden,
the consequences might be severely felt.
But what if she adheres to her single standard, and the
additional production be of Gold instead of Silver ? That
which has been {e,g, 1851 and onwards) may be again;
and there can be no possible ground for saying that Silver
will be found, and Gold will not. But if Gold be found
again in extraordinary quantities, and the Double Standard
be not adopted, then the flood would pour over half the world
— the Gold-using half — and the immediate effect which the
objector justly fears would be twice as great as if the flood
w^ere spread over the whole world, and affected equally the
whole mass of currency ; and this last would certainly be
its operation if the Gold and Silver composing the mass
were joined together in a bimetallic union.
What is the case at this moment? A flood of Silver
was not long since let loose upon us, and that a double one,
from the increased yield of the mines, and from the
demonetization of Silver by Germany : Silver has been
necessarily depreciated, and prices enhanced throughout all
the Silver-using nations, and not only has the effect been
twice as great because the area over which it extends is
but half the commercial world, but it reacts also on the
Gold-using nations.
I conclude, therefore, that this fifth objection is quite
irrelevant to the question of a Double Standard ; the par-
ticular danger which it suggests, and the consequent
disturbance of the relations of creditor and debtor beinir at
54
least as great under the present law as it could be under a
bimetallic system of currency.
VI. " But supposing the bimetallic system to be
" established on the basis of a ratio of 15 J while the real
" existing proportion is perhaps 18, that difference will
" give such a stimulus to the working of Silver mines, that
^' the dreaded flood of Silver would really come upon us ;
" and even if not, will of itself be an enlargement of the
'^ Silver currency to the extent of about 15 per cent., and
" consequently a depreciation of the whole mass of cur-
" rency by about 7 per cent."
To the latter part of this objection I reply that I think
I have already shown on p. 43 that the evil effect even on
such a calculation would be more nominal than real, and
that to take 18 or any such ratio as a basis for the calcu-
lation is untrue and misleading. As to the former part of
the objection, I say that if there are indeed any mines
which have been abandoned because of the fall of Silver
from OS. an ounce to 45. Sd. or thereabouts, then a return
to the price of 5s. might bring them again into bearing and
so increase production ; but I believe there is no evidence
of any such abandonment, a much less price tlian 4.v. 3^.
being sufficient to make the working of all but })erhaps a
very insignificant number of workable mines remunerative.
VII. " It would be necessary to re-coin all our Silver
" token-coinage."
This objection must arise from the sup})osition that
standard florins, shillings, and sixpences would be coined,
which would be undistinguishable from the token-coinage.
But in fact no Silver standard money would be coined
except double florins (dollars), and there is no more reason
why they should not circulate concurrently with the Silver
tokens, than there is why the c^visting French Silver tokens
Mr. II. II. Gibbs.
55
should not circulate in the same country with five-franc
pieces. They would bear the same sort of relation to the
subsidiary coinap^e as that shown in the following table
to be l)orne by the five-franc piece to the French token-
Value ill fraucs.
5-franc piece 900 mllliemcs {^-^) fine o'
2 „ „ 835 „ 1 rl-8o,i
„ „ „ ^ Tokens ■{ '92]^
■46
I Tokens | •<^>'?i
I
A shilling would still stand for the 20th part of a pound,
whether that pound was 113-0016 grains of pure Gold, or
1751*5247 grains of pure Silver. If indeed Silver should
be more widely demonetized it may possibly become neces-
sary for Gold-using nations to call in and re-coin their silver
tokens, because the nominal value of the shilling, &c.,
would be so far in excess of the real that an irresistible
temptation would be held out to the maker of illicit silver
coin. The rehabilitation of silver, by the adoption of the
Doid)le Standard or otherwise, would make such illicit
coinage impossible.
VIII. " Our sixty years of prosperity."
This is the old fallacy of JVon causa jiro causa. The
objector sets before himself and us the varied facts of a
prosperity which has developed itself in a hundred diiferent
ways since 1819, and passes per saltum to the conclusion
that that prosperity has been caused by, or has had for one
of its causes, the adoption of a single metal as our
standard of value, but attempts no explanation of the
mode in which so limited a cause has had so great an
effect — an effect which, so far as it depends at all upon the
character of the money of the realm, may be more justly
attributed to our maintenance of an uncorrupted coinage
of certain weight and fineness, and such, as I contend, we
56
should have maintained, whether the metal of Avhich it was
composed were of Gold or Silver or of Gold and Silver.
An array of facts without cohesion — of premisses with
no logical relation to the conclusion — is a frequent resource
of the soi-disant practical man who would oppose Avhat
conflicts with his prejudices.
But the "practical" man is not unfrequently the
ignorant man under another name, and is scarcely less
dangerous than the theorist who, having no practical know-
ledge, constructs his facts for himself and deduces from
them his own preconceived conclusions.
The true practical man is he who, resting on his own
experience and knowledge, is able to arrange his facts in
logical sequence and construct a theory on which such
facts can be shown to lead inevitably to a certain con-
clusion.
Secondly, I must add that those who use this argument
seem to take no account of change of circumstances.
England has prospered for about sixty years, they say, i,e,
since 1816. But what of the last four years or thereabouts?
England suffered nothing from her single Gold standard,
notwithstanding her relations with other countries where a
single Silver standard prevailed, so long as France kept
open a door of escape ; but now that the aid of France is
no longer afforded to us, our prosperity has not been so
exemplary as to provide a very helpful argument to the
advocates of the theory that our well-being has been owing
to the fact that our standard money was of one metal
alone.
I have already mentioned Lord Liverpool (p. 11). His
Treatise on the Coins of the Realm is the foundation of
our present system of money, and his great authority, and
that of the eminent men whom he quotes, must, if the
altered circumstances of the world be left out of the
account, be a stumbling-block at the feet of those who dare
to ask for an examination of the question, Avhether the
Mr. II. IL Gibhs.
57
system of the Double Standard is not more suitable to those
altered circumstances.
No one at the present day would venture or desire to
controvert the principles which he so lucidly states. Least
of all would I do so. He proved to the satisfaction of the
Government of his day —
I. That coins which were to be the measure of property
should be, if possible, of one metal only,
II. That that metal should be Gold.
III. That the other coins should be as they now are,
tokens ; or, as we may call them, notes, repre-
senting parts of a sovereign, and made of metal
instead of paper.
In support of the first proposition he adduces the
authority of Sir WilHam Petty, Mr. Locke, and Mr. Harris;
but as he sets aside the opinion of Mr. Locke that Silver
should be that one metal, on the ground that circumstances
had so much altered that this opinion was no longer tenable,
and thinks that Locke, had he lived then, would have been
of that mind also, so I venture to think it not impossible
that, if Lord Liverpool and the great men whom he quotes
had lived in this age, they might have recognised that his
first proposition, excellent in theory, might carry with it in
practice, under the changed conditions of the mercantile
world, inconveniences which would demand a remedy ; and
I think it can be shown that the main reasons which he
adduced in support of it, and which were applicable to
England as a single nation, are no less applicable, in the
more developed condition of commerce, to the whole com-
mercial world.
The evil which presented itself to his mind was one
that does not and cannot now exist in England, viz. : that
the currency was composed of English coins of uncertain
58
weight and fineness, and included also some few coins, no
less irregular in quality, of foreign coinage, and without
any safeguard : so that men when they received this cur-
rent coin in their daily transactions could not know for
certain what it was they did receive.
There is, I say, no fear of this in England, but the
uncertainty still exists in England's transactions with
foreign nations, and even with her own dependencies, where
a different kind of money is current. Lord Liverpool's
care was to remedy the mischief as it then manifested
itself, and to provide that the same monetary system should
prevail through the length and breadth of this land ; but
the means of communication have been so much improved,
that America is as near London as Scotland was in his
time, and the several nations have been drawn more nearly
together since those days. Then the policy of all nations
was to look wholly to themselves for the promotion of their
own exclusive interests, whereas now the promotion of the
common good is better seen to be the promotion of in
dividual good. If it was then desirable that the measure
of value for England should be one, and one only, so that
all men who traded with one another should know exactly
what it was they were to receive for their wares, so is it
also now desirable that the measure of value should be one
for the nations forming the whole world of commerce, who,
far more than in Lord Liverpool's time, may be said to be
one community. But unity of money, in the sense of
causing a single metal to suffice for all, has been shown to
be an impossibility, both by reason of the preference of
nations for one or other of the metals now used, and of the
insufficiency of either one alone to provide all at once for
the needs of all. Is it not, then, our best resource to
approximate as nearly as i)ossi])le to unity by causing the
two metals, under prescribed regulations, to ])erform to
gether the service of a metallic standard for the world?
The world is already bimetaUic ; but it is an unregulated
Mr. //. //. Gibbs,
50
and hai)hazard bimetallism which prevails among us ; and
I must believe that a due regulation of it is both possible
and desirable.
I have shown that the "traffic in coins," which is the
chief inconvenience attaching, in Lord Liverpool's opinion,
to a bimetallic measure of property, would be, under such
regulation, impossible.
It is curious that the account which he gives of the bad
condition of the currency in some other countries, and of
the remedy which had been there applied, should afford one
of the most striking instances of the great difference betAveen
our times and his.
His words are very remarkable. He says : — " There is
" no circumstance that more clearly proves and illustrates
" the truth of this principle, ' That coins which are to be
" ' the principal measure of property can be made of one
" " metal only,' than the practice which (he says) has long
" prevailed in several commercial states and countries on
" the continent, of making foreign bills of exchange, and
'* sometimes other bills, exceeding a certain amount, payable
" in what is usually called Bank-Money," that is to say,
" recepisses, receipts, or notes, in return for the Gold or
" Silver bullion . . . placed by individuals in their
" custody," which receipts "are regulated by, and therefore
" represent some one of the national coins current in each
" of those states, exactly according to the standard of their
"' respective mints,"* so that they have and retain an
undisputed value, and have come to be the fixed standard
or measure according to which great jDayments are made.
He goes on to say that in Great Britain no such
establishment has ever existed — that one such bank would
not suffice, and that the establishment of many would be
inconvenient — that Great Britain scarcely needs such a
system, inasmuch as unauthorised foreign coins rarely enter
* Treatise on the Coins of the lieahn. Reprint, 1880, pp. 136, 137.
60
it to serve as currency, and tlie coins of the realm are
therefore necessarily the instruments of commerce, and the
only legal tender whether to natives or foreigners ; " and
" from thence," he says, " results the necessity in this
" country of having coins made of one metal only, which
" should serve as an invariable measure, . ." &c.
He appends a note saying that it is unnecessary to advert
to the Acts making Bank of England notes temporarily
legal tender during suspension of cash payments, " as that
" is not part of our recognised monetary system."
It is hardly necessary for me to point out how entirely
all this has changed.
The exact system to which Lord Liverpool refers as
non-existent, as insufficient for our needs, and unnecessary
for the particular purpose, is, and has long been, established
in England.
The notes of the Bank of England are issued practically
as receipts for bullion ; they are legal tender, like the
recepisses to which he refers, and serve to make, as he says
of the others, all " great mercantile payments," except where
the use of the notes is again economised by the employment
of cheques and other expedients of trade.
Lord Liverpool's argument seems to be that, in order
to remedy the inconvenience of diversity of coins and
uncertainty of weight and fineness, other nations had used
a system of vouchers representing but one metal and one
coiu, which vouchers served for all transactions of moment,
the debased coinage serving for small transactions of daily
life ; that, as in England wc could not have such a system
of vouchers, we could not safely permit a coinage of
uncertain weight and fineness.
But we now have such a system, and may contend that
the diversity of metal under a true bimetallic system is not
at all open to the condemnation which he pronounces
against the bimetallic coinage of his time. And, as in this
one particular of a National B^nk^ I Iiave shown that what
Mr. H. II. Gibbs.
61
he deemed impossible is actually existent, so also, I think
I have shown cause for belicviiio* that the other consider-
ations which I have mentioned might have been of suffi-
cient weight to have led him to allow that circumstances
might occur, and have now occurred, which should make
it necessary for the well-being of English commerce, that,
theoretically excellent as his system is, and practically
irreproachable when applied to the internal commerce of a
nation, we should not now" treat the question of departing
from it as one to be dismissed without careful consider-
ation.
IX. In the foregoing paper I have endeavoured to
answer the IXth objection. I have endeavoured to show
that there is no impracticability in the adoption of a
Double Standard, that whatever suits other nations must
now of necessity suit the whole family of nations, and I
would fain hope that I have presented it in a form which
may prove not only acceptable to England, but a remedy
for some grievous and pressing evils.
Again, in conclusion, I appeal to the wisdom and fore-
thought of all men interested in the commerce of England ;
I lu'ge every one who has at heart the prosperity of that
commerce, not to close their eyes to the dangers of the
immediate future, but to consider seriously what will be
the result of the action which may in this very year be
taken by foreign nations.
Two courses only are open to those nations: for it is
impossible that they can remain as they are. They may
adopt the Double Standard without the concurrence of
England, or they may be driven to follow the example of
Germany and adopt a Gold standard.
They may take the former course, though it will
necessarily be very much against the grain that they
should do what we tell them is bad for themselves and for
62
our advantage. That it would be satisfactory to us and
sufficient for us that they should do it is certain. But
what are the chances of its being carried out ? If they do
take such a course they will be exposed, as all admit, to
see their Gold leave them and flow into our cofters. Gold
will not leave a bimetallic union in Avhich England is
included to flow into the coffers of a nation whose com-
merce is insignificant ; but it will leave a bimetallic union
of which England does not form a part, and, when circum-
stances lead it, flow into England, which is the commercial
centre of the world.
It would not indeed do them any great harm, for no
more Gold could come to and remain in England than
what is needed for the full circulation of the country, and
that we already have ; but the apparent attraction of Gold
hitherwards, and the feeling that England was not doing
her part in the common work, might become intolerable to
the bimetallic nations, and the present agitation might
begin again, with the certain result of their recourse to the
second alternative.
We have all seen what has been the consequence of the
demonetization of Silver by Germany and the consequent
absorption of Gold by that nation, and that prices as
measured in Gold have fallen considerably wherever other
circumstances have not concurred to maintain them. What
will be the case if France and the Latin Union and the
United States should be driven to do the same ? The con-
sequent and sudden fall in prices will be not fourfold but
fortyfold, and the i)eril to our commerce will be incalculable.
The only real and permanent remedy would then be our
adhesion to the principle of the Double Standard as set
forth in these pages.
I know that my arguments rest on the hypothesis of
general agreement, and the theory that such agreement
would completely alter the conditions under which the
Double Standard has not been found to work well.
Mr. IT. 11. Gibbs.
63
Before my readers deny the possibility of my hypothesis,
and in liaste reject my theory, let me ask them to read a
quotation from the late Mr. Henry Drummond's Elementary
Propositions on the Carrencij*
" Tlie proportion of the magnitudes of the heavenly
" bodies to each other rests purely upon hypothesis. The
" annual and diurnal revolution of the earth, directly
*' opposed to the daily sensations and eyes of the practical
" ploughboy, are founded on hypothesis. So absurd, in-
'•' deed, did this revolution appear to all sober practical men
" when it was first demonstrated, that Copernicus dared
" not mention it for many years : the practical men in Italy
" constrained the Pope reluctantly to put Galileo in prison,
" and made him learn penitential psalms by heart to purge
"away his philosophy; and when Jacquier and Le Seuri
" published at Kome, so late as 1 742, the theories of that
" speculative heretic, Sir Isaac Newton, upon the same
" subject, they wisely inserted in a preface, that they did
" not presume to believe that which they had proved to be
" true, unless that practical man, the Pope, should happen
" to be of the same oj)inion."
* Sj)ecches in Parliament. Vol. ii. p. 11.
GOLD IN THE EAST.*
From the Economist, August 2, 1879.
The following letter is from a valued correspondent of
considerable experience in the subject on which he writes,
which we have pleasure in publishing : —
TO THE EDITOR.
Sir, — I have read Mr. DanielFs pamphlet, and I think
facts could be adduced to show that the thing which he
proposes is impossible.
Colonel Smith proposes to make a gold standard, and to
declare at once that the thing which is written as 10 rupees
shall mean a golden sovereign.
By the method which he suggested for carrying out
this operation, it is admitted that it could be done if the
Government could succeed in keeping silver coinage from
being smuggled into the country.
Colonel Smith, as a good official, thought of two things,
and of two things only — the Government Budget and his
* Gold in the East : Being observations on a practical method of
establishing a gold currency in India, and its influence on the trade and
finance of that country. By Clarmont J. Daniell, Bengal Civil Service.
Strahan & Co., Limited, 34, Paternoster Row, London. Price 1*.
F
60
T^salary, or that of his fellow-workers and successors.
Of the Indian cultivator and people he thou^^ht nothing.
His plan, as developed, is shortly disposed of by two
answers — one by Baron Bramwell, at the Political Economy
Club—
" If you can raise the rupee from Is. Id. to 26*. by a
" stroke of the pen, why not raise it to 2^. Otd. ? "
The other by Mr. Daniell himself, at the end of page 15,
and beginning of page 16.
Mr. Daniell proposes that the customs and sums for
revenue exceeding x should all be paid in gold.
Upon the suggestion arising that he is bound to state
where the gold is to come from, he boldly faces it by saying
that there is a very large stock of gold in India, and that,
once make gold a legal tender, that hidden stock will come
out, and be brought into general circulation.
If this large stock exists at all, or if it exists in the
hands of any people ready to make use of it, it is very
strange that use is not made of it now. If it could be
melted into bars, and sold to the Government, who want
it, why does it not now come into market? It cannot
matter to a man who has got gold to dispose of whether
its future destination is a legal tender sovereign or an
unlegal tender gold mohur, if he can get his price for it in
legal tender silver, which is all he wants.
I doubt the existence of any such disposable stock.
You might just as well have made a calculation of the
gold in the green vaults at Dresden, or in the jewel boxes
of the Sovereigns of Bavaria or Hanover, when you under-
took to introduce a gold coinage in Germany.
In fact, Mr. Daniell sees that the real objection to
his scheme is that the stock of gold for the use of the
countries using a gold standard is already too small, and
that to add India to those countries would inevitably
tend to augment the gold famine, if I may use the ex-
pression. To meet that objection he has evolved from his
Mr. H, R, GrenfelL
G7
inner consciousness the power of getting at tliis supposed
stock in India.
Mr. Lowe, in his article in the Fortnujhtly, says : " If
" I am asked where the gold is to come from, I frankly
" state I do not know."
Mr. Daniell, however, does know, and propounds his
undeveloped and unused stock existing in India.
This stock is wholly hypothetical. What we have got
before us as an example is that Germany undertook to
change its standard from silver to gold.
To enable it to perform that operation it took from
France all the gold it could get. And yet, having this
enormous sum to perform the operation, it has still lost
enormously in carrying it out.
But that is not all.
The demand for gold for Germany has upset all the
gold markets of the world, and all the silver markets.
The theory that the discoveries in America have had
anything to do with the dislocation in the prices of the
precious metals is now almost universally rejected.
If you were to add to those countries which have either
changed their standard, or ceased to coin silver ad libitum^
the xVnglo-Indian Empire, gold would rise still higher, and
silver fall still more.
The Indian producers would share in the fall of prices
all over the world, from which they have been protected.
They would have to buy the tool, money, for 2^. + X.,
which they now get for I5. Id.
Mr. Daniell says, and says rightly, that " Gold is the
" measure of value of the Indian export trade." That is, it
is the measure of value in the market of the world, i.e.,
England.
The value of the lowest necessaries of life, such
as wheat, &c., is ultimately determined by the cost
of production ; and in so far as the cost of production
in India is affected by the value there of the lowest
F 2
68
necessaries + wages + rent, which are reckoned in silver,
the Indian producer is able to make a profit where a gold
currency producer can not.
It matters not to a producer whether his profit comes
by a high scale or a low purchase for one transaction, but
the profit is more likely to continue from the latter than
the former.
If wheat has fallen in the market of the world from 120
to 100, it has equally fallen to the Indian exporting culti-
vator ; but then, with his 100, he procures 120 in that
currency with which he pays his wages, his rent, and any
debts written in anyone's books against him.
I remain, &c.
(H. K. GKENFELL.)
From the Ecanomist, August 9, 1879.
TO THE EDITOR.
Sir, — I do not wish to draw you into a discussion on
the subject of "Gold in the East"; but as the letter you
pu})lishcd on the 2nd inst. is calculated to warn readers off
the book, and my object in publishing it is that its contents
should be widely known and generally understood, will
you allow me space in the Economist for the following
remarks ? The " impossibility " of introducing gold into
the Indian currency appears to " L." to depend on the fact
that there is no large stock of gold in India. This stock of
gold in India he describes as " wholly hypothetical." So
well is its existence ascertained, that *' L." might with as
much reason describe the stock of bullion and coins in the
vaults of the Bank of England as " wholly hypothetical."
The following extract from "L.'s" letter contains a very
69
extraordinary statement, as coming from a " correspondent
" of considerable experience '' in currency matters : — " It
" cannot matter to a man who has got gold to dispose of
" whether its future destination is a legal tender sovereign
" or an unleijal tender o:old mohur." There is in the writer's
opinion no difference, for purposes of trade, betAveen legal
tender coin and bullion. Were he to stand behind the
counter of the Bank of England, and offer to merchants
drawing large supplies of gold the gold bars which pass
through the Bank on their way to the Mint, instead of
sovereigns, and tell them at the same time that the coinage
of gold had been stopped, and that no bank notes, or gold in
the form of coin, would in future be prociu-able, he would
soon, I think, have reason to alter his opinion. " L.'s "
argument amounts to this ; and he seems to think that gold
bullion is as efficient in the East for purchases as gold coin
in the West.
I am described as proposing that the Anglo-Indian
Empire should cease to coin silver " ad lihitumP Had " L."
examined my proposals with ordinary care, he would have
found that I expressly insist on the necessity of keeping the
Indian mints open for the coinage of any amount of silver
brought to them ; and that my plan for working a bimetallic
currency on the principle of maintaining the intrinsic ratio
of value between the gold and silver coins in the currency
unaltered could not be carried on for a week, if the Govern-
ment of India ceased to coin silver " ad libitum^ I forbear
to notice other inaccuracies in " L.'s " letter, or to follow
him into the discussion which the conclusion of his letter
raises, or to comment on the singular confusion of terms in
his last paragraph, as your space is limited. I hope that I
have said enough to draw attention to the subject, the
importance of which is sufficiently great to deserve more
considerate treatment than it meets with from " L."
I remain, Sm, your obedient servant,
CLAEMOXT DANIELL,
?0
From tlie Economist, August 23, 1879.
TO THE EDITOR.
Sir, — Mr. Daniell's letter in the Economist of the
9thj in answer to some portion of my letter of the 2nd, calls
for a short rejoinder.
In order to compress what I have to say into the
shortest space I use the baldest terms I can find. This
must be my excuse for what is called " inconsiderate treat-
" ment."
Mr. Daniell's first quotation is incomplete. Had he
inserted the close of the sentence he would have seen that
the meaning he gave it could not have been intended
by me.
I expressed no " opinion " " as to the difference, for
" purposes of trade, between legal tender coin and bullion."
Allow me to use "flour" instead of gold, and rc-state
the proposition.
" The miller who has flour to sell does not care whether
*' the baker makes cakes or puddings with it, provided he
" gets his money for it."
What I wished to show was that Mr. Daniell's assertion
that a stock of gold exists in India is only tantamount to
an assertion that gold exists in the bowels of the earth.
At page 36 of his pamphlet he recognises this analogy.
If it does exist in India it is either for sale or it
is not.
If it be for sale, the willingness to part with it must
depend on the price, not on whether it is destined for coin
or bars.
If he is right in supposing that making gold legal
tender would bring this gold to market, it could only be
because a higher price would be offered for it than can now
be got.
Mr. H, R, Grenfell,
71
But it is the essence of my case that to make gohl a
legal tender in India would enhance the value of gold all
over the world, and increase the dislocation in the relative
price of the precious metals which has assisted in dis-
arranging the commerce of the world.
His next point is, that I described him as proposing
that the Indian mints should cease to coin silver ad libitum.
In this I have followed the best known currency autho-
rities, whose doctrine it is that the amount of coin current
cannot be increased ad lihitiun, and that if, for State
purposes, you add to the existing currency of one metal
another currency of another metal, the one will displace the
other, not add to the total volume.
Persons bring silver to be coined because they want the
coins. Under Mr. Daniell's proposition, gold, in certain
cases, would be brought instead, and silver would thereby
to that extent cease to be brought to be coined.
In substance, I adhere to what I stated. At page 19,
in one sentence, he seems to recognise the truth of the
statement himself. But in the following sentence he
appears to dispute it.
My last paragraph appears to him confused. It refers
to the large question of whether any one wins by the
present state of exchange between England and India.
It was suggested by his own criticism on Colonel
Smith's plan, which appears to me to be well founded.
I will endeavour to make my meaning clear.
The relative prices of the precious metals being in
what Colonel Smith calls their normal state, a German
exporter of wheat and an Indian exporter of wheat each
pay 100 in its production, the one in gold, the other in
silver, and each receives, as j)rice for it, 120, or 20 per cent,
profit.
The next year the price of wheat falls from 120 to 100
in gold, and the relative prices of gold and silver become
abnormal, as at present.
72
The German, having to pay in gold, loses all his profit.
The Indian receives 100 in gold, but procures with it
120 in that currency, with which he paid his costs of
production.
His 20 per cent, profit remains.
I called this, in my first letter, being protected from the
fall in prices all over the world.
I remain, yours faithfully,
L.
(H. R. GRENFELL.)
From the Economist, August 30, 1879.
TO THE EDITOR.
Sir, — I will ask you for a little space in the Economist
to reply finally to " L.'s " remarks of August 23rd on my
scheme for introducing gold into the Indian currency, since,
apart from my own opinions being criticised, which is a
matter of little consequence, the importance of the subject
requires that it should not be argued on * wrong issues.
" L." complains that on August 9th I quoted incompletely
the words he used on August 2nd. This I did for the sake
of brevity. " L.'s " contention Avas, that it is immaterial for
a man who sought to turn his gold into coin whether he
succeeded in doing so or not, provided he got silver coin in
its place. The argmnent on "Gold in the East" is directed
to prove that gold coin is required in India, and my answer
of August 9th illustrated the position that the holders of
gold are placed in, who, having gold, are unable to coin it,
but can only use it in a crude fonn. " L.," on the 23rd,
replies with the metaphor of tlie miller, as follows : — " The
" miller who has fiour to sell docs not care whether the baker
" makes cakes or puddings with it, provided he gets his
Mr, C, DnvicU,
I
78
" money for it." True, but the miller would care very much
if he found that his flour could be made into neither cakes
nor puddings ; and the Indian owner of gold is in much the
same case who cannot turn it into coin. The question is
one of the use of gold in currency, not of the use of gold in
merchandise. It is, whether gold is of more use for ciu'rency
in the form of legal tender coins, or non-legal tender bars ;
not whether gold as coin will or will not buy more silver
than in the form of bars. "L.," on August 23rd5 modifies
his opinion that the stock of gold which I described as
existing in India is " wholly hypothetical." It is probably
more than 150 millions sterling in amount. "L." says, "if
" it is there it is either for sale or it is not." Anyone who
examines the price lists of the Presidency ports, will find
that gold is offered for sale every day in the year in India.
" L." says that, " to make gold legal tender Avould not
" bring it into the market unless a higher price were offered
" for it than now." This term, price, includes the advantage
a trader would derive from trading on a gold rather than a
silver basis. To be brief, it is the inability to obtain such
an advantage which underlies the complaints that the
Chambers of Commerce so justly make to the Indian
Government of the effect which the state of the currency
has on their trade. " L.'s " next point, that to make gold
legal tender in India would enhance its value, and increase
the confusion in trade now arising from the use of silver, I
must, with much regret, pass over, as it is impossible to
argue this part of the case within the limits to which I feel
bound to confine this letter. " L." will, I hope, excuse
my expressing an opinion that a careful consideration of the
whole scheme I propose, in all its bearings, especially in
relation to the ability of India to absorb silver and furnish
gold, and of that part of it which provides for the invariable
currency of silver and gold on equal terms, would, perhaps,
convince him that the result he fears will be minimised, or
not occur at all, and that a probability exists that in no
74
long time it is gold which might be depreciated, ana nS!
silver, under its operation. " L.'s " next remark, that to
add to the existing currency of one metal another currency
of another metal will lead to the displacement of the former,
makes no allowance for the power of expansion which the
currency of every country, whose trade is in a healthy
condition, possesses. It assumes that the quantity of silver
required for coin in India is a fixed quantity, and that the
silver which the gold displaces has no further use. The
array of facts which prove that neither of these assumptions
are true of India is too great, and they are too well known
to need repetition here. " L.'s " argument about India
being protected from a general fall in prices proceeds on
the belief that her silver currency has not lost efficiency
from the decline in the value of silver. Kot only must
this, as a fact, be accepted with the greatest amount of
qualification, but as a theory of practical application to
trade I think it was disposed of by Mr. Fawcett asking the
late Mr. Bagehot a single question, when he was under
examination before the Silver Committee (Question 1,377),
and by Mr. Bagehot's answer. This, and the two preceding
points in " L.'s " letter, along with other criticisms on my
plan, I intend to examine in a short time in another form
and place, when I hope to do more justice to the gravity of
the silver crisis as it affects India, and to the ability of my
critic, than the necessary brevity of this letter permits me
to do here.
1 am, SiiJ, yours, &c.,
CLARMONT DANIELL.
THE CASE AGAINST BIMETALLISM.
From the Fortnightly Review, August, 1879.
The fall of silver during the last few years has produced
a large crop of that dismal currency literature which has
brought almost all writing on currency into disrepute.
The distinguishing feature of this literature is the constant
assumption that some small defect in a currency which has
all the recognised essentials of a good money — a basis in
one or other of the precious metals, identity of the standard
coins with a certain weight of that metal, and security for
free coinage with only a small seignorage, or with no
seignorage at all — may be productive of monstrous evils ;
or that a small manipulation of the currency, even at the
risk of violating one of the essentials, may have some
vague and indefinite advantage. It would be useless to
enumerate the various schemes, of which the most prominent
has perhaps been the proposal, generally known as Colonel
Smith's, to raise or restore the rupee coinage of India to
a level in value with gold. They are sufficiently answered
by the common sense of the monetary world, which de-
"mands, in this question, merely that a government should
authorise a coinage having the essentials above described,
arrange for the coins being legal tender and receivable in
taxes, and for the rest leave the matter alone. But there
is one theory or system which has to a certain extent
commanded more respectful attention than the others — viz.,
the theory which is known by the name of bimetallism.
In its best form this theory is not open to the charge of
artificiality, and of being inconsistent with free mintage.
76
t^n^legree that some of the other schemesar^pe^o
the charge. The idea is that a State, instead of having
the basis of its money in one of the precious metals only,
should declare money obligations to be solvable by either
of the two metals, silver and gold, in prescribed quantities,
still permitting free coinage. The theory, therefore, has
gained adherence even from people who have little
enough sympathy with the way in which currency writers
exaggerate the possible evils of slight derangements in
the currency, and look for impossible advantages from
currency changes. I wish, then, to put together some
observations on this bimetallist question, and account if
possible for the dislike of bimetallic theories which is
entertained as a rule by those who have carefully studied
the English monetary system. Bimetallists are often
treated like other currency prophets, as inventing or
grossly exaggerating the evils produced by the choice of
monometallic systems in preference to theirs, and as aiming
at benefits which cannot possibly be derived from any
currency change. Is there real cause for this dislike or
for the contumeHous treatment which bimetallist advocates,
who comprise among their number not a few men of real
eminence as economists and statisticians, not infrequently
receive ?
It will be expedient to begin with a short account of
the bimetallist arguments. Up to a certain point mono-
metallists and bimetallists — at least the more able of the
latter — are really agreed. They hold to the common
sense doctrine of currency already referred to — that it is
not an arbitrary thing to be regulated at will, but that a
government fulfils its duty in selecting one or two of the
metals as money, receiving all that is brought to them,
impressing upon them certain stamps denoting their weight
and fineness, and declaring them receivable for taxes, if
not legal tender in release of all obligations expressed in
money. Where they part company is on the point whether
Mr. R, Giffcn,
77
a government should have one metal only, or two or more
metals for its standard. Monometallists affirm that there
should only be one, and even that there can only be one ;
bimetallists that there may be two, the law establishing
the indifferent employment of certain prescribed quantities
of one or the other, and that it is desirable two and not
one should be so used. In support of the view, bimetallists
maintain that legalising the use of both metals as a standard
will procure certain advantages which are not procurable
with one metal only. Such a regulation, it is said, would
have the effect, first of all, of keeping more money in use
than would otherwise be the case. Money would be more
abundant than with one metal only, and abundant money
is good for trade.* It is no doubt admitted now that unless
all governments and communities have the same money
regulations, the legalisation of the use of both metals will
not have the effect of keeping both in use at one time in
a particular State. On the contrary, the debtor will
always pay in the metal which it is easiest for him to
obtain; a very slight fraction of difference in procuring
the prescribed quantity of the one, as compared with
the prescribed quantity of the other, will drive the dearer
metal out of use. But any inconvenience arising from
this alteration, it is said, is amply compensated for by
the greater abundance of money generally in which all
countries participate.! Another alleged superiority in the
* See Wolowski's L'Or ct V Argent, pp. 331-2, where M. Wolowski
quotes Count Daru's argument for thie famous law of 1803, giving
France the system of bimetallic money, which it retained till within
the last few years. Daru says : " En reduisant Tor a n'etre qu'une
** marchandise, en diminuerait la masse du numeraire, on generait le
" commerce," &c., &c. And this language is still of the essence of the
bimetallist argument.
f This is the modern account of the argument. But so far as I can
judge, the authors of the French bimetallist law, as of former bimetallic
experiments, really hoped to retain both gold and silver in use in their own
country. They thought they had found a ratio from which the metals
use of the two metals as compared with the use of one
only is the increased facility of exchange between different
countries. The legal ratio of use, it is said, tends in fact
to keep the metals nearly at the corresponding relative
value, so that exchanges between countries not bimetallic
themselves, but some of them having gold and others
having silver, become almost as steady, through the help
of the bimetallic regulations of other countries, as if only
one metal Avere universally in use. This facility would be
enhanced by several nations becoming bimetallic, and still
more by all nations adopting that system. This is the
general theory of bimetallism, and it is supported by
practical arguments from present circumstances. The
depression of trade of the last few years is by some held to
be accounted for by the scarcity of money due to the
demonetisation of silver, and greater pressure upon gold ;
and by the confusion introduced into the exchanges by
France (which has played the role of intermediary between
gold and silver countries during the present century)
abandoning its bimetallic regulations. By others who do not
go so far, the actual evils of the last few years, especially
through the derangement of the exchanges, are said to be so
great as to require a special remedy such as bimetallism
would give. Finally it is held by some ardent enthusiasts
in the cause that there is a providence in the matter; that
not only have two metals adapted for use as money been pro-
vided, but that a certain ratio, viz. 15 J to 1, tends naturally
to be established between them. A bimetallic law fixing
this ratio of 15 J to 1, merely confirms an ordinance of nature I
Such is a fair account, I believe, of the bimetallic argument,
and the last point in it, I may observe, is not inserted by
way of caricature, but in order not to leave out any prin-
cipal argument on which leading bimetallists lay stress.
would not vary for a long period, and in the original draft of the law a
revisal of the ratio was contemplated. See Wolowski, L' Or et V Argent,
p. 2U5.
Mr. R. Giffe7i.
79
What we liave to inquire into, then, are the objections
of niononietallists to this argument. Is there any real
foundation for the superiority to monometallism alleged?
and are there no counter-considerations ? How far is
bimetallism even a practicable scheme ? I would begin by
saying that the whole onus of proof is on bimetallism.
Not only is the opposite system installed, but that system
has the merit of simplicity. No one can say that if only
one metal had been in existence suitable for use as standard
money, the world would have been badly off because there
were not two. The controversy is also a comparatively
modern one. What governments had to debate before the
present century was not any real choice between one or
several metals for use as standard money, but how to get
a sound metallic currency of any sort. Their difficulties
were the temptation to make a profit for themselves at
the expense of their subjects by debasing the coin or
" raising its denomination " (which comes to the same
thing), and the natural difficulty of keeping the bullion
contents of a coinage up to the nominal value assigned to it.
It is only since 1696 in England, and since the beginning
of the present century elsewhere, that governments have
learnt the wisdom of resisting the temptation to debase —
if even yet the lesson has been perfectly learnt ; and the
effectual method of meeting the difficulty caused by wear
and tear is of equally recent discovery. The alleged
advantages of bimetallism therefore are supplementary only
to the primary advantages aimed at by a good currency.
A people afflicted with debased coins, whether the debase-
ment was due to natural or artificial causes, w^ould plainly
be only too glad to get a good metallic currency of any sort.
This of itself is almost enough to prove that there is
a fundamental exaggeration in the bimetallist argument.
Why is there so much importance attached to matters
which could not have been thought of when nations were
struggling with the real difficulties of coinage ?
80
^ven wnen these real difficulties existed, it may De
remarked, though the social misery and nuisance were
intolerable, and there was some hindrance to trade, it was
possible for countries to make great advances in material
prosperity. Speaking of the seventeenth century, when,
as we shall see, the country was afflicted with debased and
constantly changing coinage, and when there was besides a
long period of civil war and confusion, Lord Liverpool
who was above all statesmen alive to the evils of a bad
currency, remarks : " It is certain, however, that during
" the whole of this period, when our coins were in so great
" a state of confusion, the commerce of the kingdom was
" progressively improving, and the balance of trade was
" almost always in favour of this country."* It seems
impossible, therefore, that bimetallic money can be so
necessary to the world as is alleged, when countries got on
so well as they did Avith money so inferior, that the question
between bimetallism and monometallism could not arise,
attention being absorbed in more serious matters.
But let us examine directly what the argument comes
to. One of the two points of superiority alleged may, I
think, be passed over as hardly counting, or rather as
counting against those
who use it as an argument for
bimetallism. This is the allegation that bimetallism
increases the quantity of money in use as compared with
the opposite system. It cannot be true that it will have
that advantage necessarily, that is if there is any advantage
in the matter. Clearly as much gold and silver may be in
use as money throughout the world, if some nations have
gold and others silver, as if some or all were bimetallic.
The quantity of money in use might be diminished by all
nations becoming monometallic, and using the same metal ;
and were this to be done suddenly, great evils might ensue.
I believe evil has ensued from the haste to introduce gold
in place of silver in some countries, which prevailed ten
♦ Lord Liverpool on the Ouins of t?ie Realm, p. 120.
Mr, R. Giffen.
81
or fifteen years n^o under the influence of eager advocates
of a universal gold money. But this diminution of the
money in use is obviously not a necessary consequence of
monometallism. It would be rather the result of an
injudicious application of the principle which the nations
of the world are not now likely to be guilty of.
And the argument turns against bimetallists in this
way, that by attaching such great importance to keeping
money abundant, they ally themselves with the most
vicious of currency theorists. It is not true that the
quantity of money, apart from the possibly mischievous
effects of any sudden change, socially and otherwise, can
affect materially the real wealth and welfare of an industrial
community. It is a mere truism to say that while it may
be useful to the world for other purposes to have gold and
silver more easily obtained than they are, yet, so far as
their use as money is concerned, they would be equally
serviceable if they were only half as abundant. The
bimetallist argument is accordingly tainted, and this
accounts very much, I believe, for the extreme disgust
and dislike of the theory which economists and statesmen
have shown. The prophets who prophesy that the world
is to be enriched by abundant money are the detestation
of men of sense.
Has not the scarcity and appreciation of gold, it may
be rejoined, something to do with the present depression
of trade ? To this I would reply that the depression is
mainly traceable to many other well-known causes of such
phenomena, so that the scarcity of gold can only have
been a contributory cause. In any case, moreover, the
temporary effects of a change in the supply or demand for
a particular kind of money, causing a general change in
the level of prices, are not to be confounded with the
permanent effects of scarce or abundant money. At the
new level of prices established, the scarcity and abundance
of money may become what they were before. However
a
S2
much, therefore, the scarcity of gold may have contributed
to the recent fall of prices, and through that to the
depression of trade, it does not follow that the effect will
be continued, or that trade will be permanently contracted.
A less number of gold and silver pieces at low prices will
serve for the same exchanges as a larger number at higher
prices. It may be added that it was never proposed by
the great English writers on currency — Locke, Harris,
Lord Liverpool — to prevent the fluctuations of one of the
precious metals in reference to itself at different periods.
If other fluctuations were got rid of, those in the metal
itself were not reckoned as of great importance, while
they were considered to be inevitable. It may be said,
perhaps, that abundant money is of more consequence now
than it was a century or two ago, because the effect of any
given quantity of money is now multiplied by our system
of credit. But I fail to see how the constitution of our
system of credit makes any diff'erence adverse to the
conclusion of Lord Liverpool and the old authorities.
Rather we have now a constant demonstration that moderate
changes in the quantity of money in use, unless they are
suddenly made, are not material. In consequence of
changes in credit alone, the serviceableness of the same
quantity of money varies indefinitely in comparatively
short periods ; the scale of prices is in constant oscillation ;
no conceivable changes in the quantity of money itself
could at all have the effects which are constantly being
produced by changes in credit alone.
To come to the other alleged superiority of bimetallism,
the facility of exchange, Ave find there is again a good deal
of exaggeration. The benefits of great facility of exchange
may themselves be readily exaggerated. We may look
only how trade has been carried on with inconvertible
paper countries, and with enormous fluctuations in exchange.
The fluctuations are no doubt an evil, and a serious one,
but in a question of the relative advantages of two systems
Mr. R, Giffen.
83
of money, we must see exactly how great the evil is.
Even serious evils may have to be endured, because
relatively they are unimportant compared with the great
objects proposed in a sound currency. Moreover, the
question of exchanges concerns only the foreign trade of
the countries affected, that trade being at most a fraction
of their whole trade. Whatever injury great fluctuations
of exchange may inflict, they can only do so by hindering
the development of a part of the whole trade of a
country — even in this country perhaps only a sixth or an
eighth part of its trade. Naturally, and in the long run
too, it results from the nature of gold and silver as money,
and the magnitude of the stocks in existence, that exchanges
between countries using gold and silver will be steady
without bimetallism. There may be rapid fluctuations at
particular periods, as there have been lately, and as there
were in 1850, when great changes in the supply of particular
metals and in the demand for them occur. But such great
changes, unless all nations lose their senses, are not likely
to be of frequent occurrence, and in ordinary times exchange
will be steady. The reason is that as neither gold nor
silver is likely to change greatly with reference to com-
modities in general, this being the cause of their selection
for use as money, they are not likely to change with
reference to each other. Accordingly we find that in past
times, without bimetallism, exchanges have been steady
for long periods together. I would refer especially to the
course of exchange between France and England from
about 1820 to 1850. During all that period France was
practically a silver-using country. Silver being cheaper
than the legal rate, and tending to become cheaper still,
had expelled gold from circulation, till, in 1848, the Bank
of France had hardly any gold left in its till. French
bimetallism, therefore, could not have prevented a further
fall in silver. " Ten years ago," says M. Leon Faucher,
writing in 1852, " every one was frightened at the prospect
g2
" of the depreciation of silver." But notwithstanding this
inoperativeness of bimetallism, the price of silver and rate
of exchange between France and England remained almost
as steady as they have done since, although bimetallism
afterwards came into operation through gold becoming
cheaper than the legal ratio fixed, and the bimetallic
countries having a great quantity of silver to be exchanged
for it. Thus fluctuations in exchange are neither so
formidable to trade as they are frequently represented,
nor are the exchanges so likely to be unsteady as a rule
without bimetallism, as its advocates have been in the
fashion of maintaining.
The fluctuations with bimetallism may also be con-
siderable. Bimetallism of some sort was the attempted
practice of the world for centuries, but this did not prevent
great fluctuations in exchanges or the price of silver.
Lord Liverpool, writing in 1805, says — .
" The price of silver iu dollars has varied iu twenty-two years,
'* that is, from the end of the year 1771 to the 31st of December,
" 1797, Uttt P®*" cent., and even in the course of one year, that
" is the year 1797, no less than 9^ per cent. The variation in the
" price of silver bullion appears to have been still greater, by another
" account, with which I have been favoured, by the late Mr. Garbett,
" an eminent merchant and manufacturer at Birmingham ; it there
" appears that the silver purchased by him, as a refiner, with bank
" notes, varied, according to his calculation, in the course of ten
" years, to 1793, more than 19|^ per cent., and in one year only
" more than 13J per cent."*
Apart from its bearing on the particular point in hand,
this quotation may, perhaps, be useful in convincing people
that great fluctuations in silver or in exchange with
silver-using countries, are not so novel as they have lately
been assumed to be.
What, then, is the increased steadiness of exchange
♦ Lord Liverpool on the Coins of the liealni, p. 150.
Mr. n. Giffrv.
85 ■
which bimetallism can give? And of what advantage
will it really be ? The answer to the first question appears
to be that, in certain circumstances, in some countries,
bimetallic regulations would help to steady the exchanges.
When a change in the relative value of the two metals is
occuring in the direction of making the less valuable the
more valuable, and when the bimetallic country possesses
the metal which is becoming appreciated, bimetallism may
help to steady the exchanges. The metal becoming cheajier
pours into the country to be exchanged for the metal
becoming dearer, and so the rise in the latter and fall in
the former are arrested. Of this the world had a con-
spicuous illustration after the Australian and Californian
gold discoveries. Silver, from being cheaper, became
dearer than what was fixed by the legal ratio between
silver and gold in France ; and as France had much silver
to be exchanged for gold, the rise in silver and fall in gold
relatively to each other were arrested. Gold was poured
into France and exchanged for silver, the process continuing
for many years. More lately an opposite process was
beginning, silver, as it lately fell, being sent back to France
in exchange for gold, when a stop was put to the proceeding
by France suspending the free mintage of silver. But it
is only in such transition periods that bimetallism can have
any effect. Suppose a change, not in the direction of
making the cheaper metal dearer than the other, but in
the direction of making it cheaper still (the chances of the
one event being exactly equal to the chances of the other),
bimetallism, it is plain, can have no influence of any sort.
It is powerless to arrest the fall, because the bimetallic
country has already got the cheaper metal, and has none of
the metal which is becoming dearer to exchange. As
already mentioned, this was precisely the case in France
for many years before 1850. If silver had become abun-
dant then as now, as there was at one time, it appears from
the above-quoted statement of M. Leon Faucher reason to
86
think it would be, there was no gold in France to be
exchanged for it to arrest the fall. It is not true, then,
that bimetallism has a general effect in steadying the
exchanges. A country which adopts it must expect that it
will only operate in that way in certain special circum-
stances, and those circumstances may never occur.
It may be said, perhaps, that if many countries were
bimetallic, the steadying effect would be greater. But this
is clearly not the case. If all bimetallic countries had the
same ratio, and the cheaper metal tended to become still
cheaper, they would simply be as one country. The fact
of their being many would give them no more power over
the exchanges than if they were one country, and their
power would be precisely that of monometallic countries.
Of course, if all countries were bimetallic, supposing that
to be a possible arrangement, exchanges Avould be steadier,
just as they would be if all were monometallic upon the
same basis. So much may be granted on this head to the
bimetallist argument.
But what would be the advantage of this increased
steadiness of exchange ? As we have seen, the exchanges
in any case are likely to be fairly steady; great fluctuations,
when they do occur, are not so harmful to trade as they are
often supposed to be, while foreign trade, after all, is only
a fraction of the business of great countries. In any case,
unless there is universal bimetallism, bimetallism will only
help to steady the exchanges in certain circumstances, and
will have no effect in other circumstances which are just as
likely to occur. Can the increase of steadiness which
bimetallism may give, therefore, be worth any great price,
so long as there is no universal bimetallism ? Is universal
bimetallism worth aiming at for the sake of mere steadiness
of the exchanges ? I cannot but think that, when really
looked at, the alleged superiority of bimetallism in this
respect, as in regard to its promise of more abundant
money, amounts to very little.
Mr. R. Gifeii.
87
But what of the great evils sustained by the Indian
Government through the fluctuations of silver and the
exchanges ? by Anglo-Indians who receive salaries in India
and have to remit in gold ? and by banks, insurance com-
panies, and others who have invested in Indian securities ?
Is it not desirable, to obviate these evils, that bimetallism
should be made to operate as far as possible — that is, in the
circumstances when it will steady the exchanges — and that
there should also be universal bimetallism? To this I
would re2)ly that, so far as the Indian Government is con-
cerned, and the Indian community generally, the evils of
the fluctuations which have occurred have been enormously
exaggerated. The difficulty of the Indian Government
and people, so far as it is a real one — that is, so far as the
changes betw^een silver and gold impose any additional real
burden on the Indian community, wdiich can only be if gold
has appreciated — will not be affected at all by India
becoming bimetallic. The Indian Government would re-
ceive silver just as they now receive it, and this would not
help them with the increased real burden of their gold
payments. England might help India by becoming bi-
metallic, and so arresting the rise in gold or fall in silver,
because England has much gold to exchange for silver;
but this would be gratuitously altering our monetary system
for the sake of a temporary advantage to India. If gold,
on the other hand, has not appreciated, and silver has really
depreciated, the difficulty even of the Indian Government
can only be transitory, pending the adjustment of all prices
and payments in India. As to Anglo-Indians who receive
salaries in silver and have to remit in gold, their case is no
doubt a hard one, though to some extent the hardship is
exaggerated. They are not worse off" than annuitants were
in this country after the gold discoveries, when all prices
rose and their salaries or annuities did not. Here, again,
to introduce bimetallism would be to make a permanent
alteration in a monetary system to meet a temporary evil.
88
Much the same may be said of the question of investments
by banks, insurance companies, and others in silver secu-
rities. They had suffered a temporary loss at a time of
great fluctuation, and at the present moment there is a
difference of about three-eighths in the rate per cent, which
the Indian Government has to pay on its rupee comjiared
with its sterling loans, showing the premium which investors
here charge for the additional risk of an investment in a
silver security compared with a gold security. But as the
exchanges become steadier even this premium will, no
doubt, diminish. It cannot be said that the flow of capital
from gold to silver countries is seriously checked by the
want of bimetallism.
Yet another advantage is alleged for bimetallism, viz.,
that the standard of value set up by it will probably be
more stable from period to period than a standard of one
metal only. And on the doctrine of chances it would seem
there is, perhaps, some foundation for this statement.
There is some probability that the chances of one metal
fluctuating in value in reference to itself from period to
period, will be partly compensated in a double standard
system by the chances of the two metals not fluctuating in
the same direction. But in this matter, it seems to me, the
doctrine of chances is not a sufficient guide for action.
The preponderant probability, on one side or the other, is
not very great — it appears something like two to one in
favour of bimetallism ; whereas, for a guide to action, the
probability should be so great as to amount almost to
certainty. The assumption on which the doctrine of
chances is appealed to is, moreover, not quite warranted.
In real life, it may be assumed, nations will not be constant
in their monetary arrangements. In the future, as in the
past, changes of price, political aspirations, the love of
imitation, and hundreds of other motives, will induce one
nation to change gold for silver or silver for gold, or to give
up bimetallism for one or the other metal. The result may
Mr. R. Giffen.
89
well be that, after a long lapse of years, the change of one
metal in value in reference to itself will be no greater than
the change in the combination of the two. In any case
the differences over long periods in the relative stability of
monometallic and bimetallic standards of value, hardly seem
an object worth any great concern to a State.
So much for the negative criticism of the alleged
superiorities of bimetallism to the opj)osite system. But
there is another side to the criticism. May there not be
positive defects in the bimetallic proposal, Avhich Avould
counterbalance even greater advantages than any that seem
to be promised ?
As far as what may be called particular bimetallism is
concerned, that is, the bimetallism of one or two countries
only, as distinguished from universal bimetallism, there can
be little dispute, I believe, of the existence of such great
defects. For particular States to be bimetallic is, in fact,
to condemn themselves to the misery and nuisance of con-
stant alterations of the money in use. M. Wolowski argues
that this is a minor matter, alleging that a country like
France suffers nothing by constantly changing its money in
use; but history is against him. Since he wrote, France
has shown its practical fear of the consequences of bi-
metallism by suspending its silver coinage, and this was
only in accordance with the previous experience of other
countries. Lord Liverpool dwells upon this misery at
certain periods in English history, as one of the reasons
which decided him against a Double Standard. Those who
have any curiosity in the matter may be referred to Lord
Liverpool's treatise (p. 61 et seq.), but the following sum-
mary may give some idea of his argument : —
" The evils resulting from the fluctuations in the relative
" prices of these metals do not appear to have shown themselves in
" any great extent, or at least to have been the subject of general
" complaint, till the reign of James I. At this last period these
" evils were felt in a most alarming degree In the first
90
*' years of the reign of this monarch, the complaints of the expor-
" tation of the gold coin, on acconnt of the low value at which gold
" was then estimated at the English Mint, compared with the value
** at which silver was then estimated, were great and incessant.
** To remedy this evil. King James raised the value of gold in his
" coins hy successive proclamations, hut he at last raised it heyond
** the due proportion ; so that during the remainder of his reign,
" and the whole of the reign of Charles I., the silver coins were in
" their turn exported, and a very small quantity of these last
"remained in circulation. The complaints of the want of silver
" coins were then as great as the complaints of the want of gold
** coins haA'e heen hefore. During a short period in the middle of
" the seventeenth century, the relative prices at which the precious
" metals were estimated at the Mint in our coins, appear to have
** been in a sort of equilibrium, or to have maintained a due pro-
" portion with the prices at which they respectively sold in the
" market. But in the fifteenth year of the reign of Charles II.,
*' that is, in the year 1663, when a new estimate was made of the
** relative value of gold to silver at the English Mint, that of gold
" was underrated A general coinage took place by the
*' advice of Parliament in the reign of King William III. After
*' this recoinage the gold coins passed in payment at a higher value
" than that at which they were still rated in the Mint indentures,
" or than the relative A^alue of gold to silver at the time would
"justify; not, however, by authority of Government, but by the
" general consent of the people. The consequence was that the
** new silver coins began immediately to l)e melted down and
" exported, notwithstanding the very great charge Avliich the public
" had incurred in recoining them. A very considerable part, in the
" course of not more than seventeen years, had disappeared, and
" there was found to be a want of them in circulation. The same
" deficiency in the number, as well as the weight of the silver coins,
" has remained to the present day, to the great inconvenience of
" your Majesty's people. From the beginning of the reign of
" James I. to the period of which I am now speaking, gold and
" silver coins were alternately exported, for the reasons just stated,
" to the great detriment of the public, as often as individuals could
" profit thereby." *
* Lord Liverpool on the Chins of the Realm, pp. IT
Mr. R. Giffcn.
118.
91
These Avere the practical reasons given ai. the beginning
of this century for adopting a single rather than a double
standard, and the mere statement, confirmed as it has l)een
by the subsequent experience of France, is enough. No
country will endure the misery and nuisance of the incessant
change, and M. Wolowski's allegation to the contrary is
singularly unfortunate. In England especially there is a
special reason against the alternation in its expense. There
is no seignorage on the standard coin at the English Mint,
a feature of importance in our monetary system. Whether
it is good or bad, it would have to be abandoned in a
bimetallic system. It could not be proposed that the
expense of an incessant recoinage should be thrown on the
country.
To some extent the misery inflicted by these alterna-
tions appears to arise from their depriving the people of
the peculiar sort of money they want, so that bimetallism
really thwarts the natural inclination of communities in
choosing their money. It is a procrustean rule under
which the State forces, or attempts to force, an overrated
metal into use, so that a country wishing to have gold may
be made to take silver, and vice versa. That nations have
their wdshes in such matters is not only proved incidentally
by the continual outcries in England in the seventeenth
century, but by numberless facts, such as the diflftculty
Germany now ex^ieriences in keeping the gold it has
acquired at so much expense and disturbance to the money
market, the refusal of California to take greenbacks in the
American Civil War, the liking of the Americans and of
almost all English-speaking communities for gold rather
than silver, the diflficulty of floating a note-circulation in
India, the preference in Scotland and Ireland for £ 1 notes
to sovereigns, and other phenomena of a similar kind. The
most significant event of the sort, however, was perhaps
that adoption of gold by England after 1696 in place of a
new silver coinage by the free choice of the people without
d2
1
its being legal tender^ described in the above quotatioi
from Lord Liverpool. Those who talk of legislation bein^
able to constitute a demand for money, and being all thai
is necessary to do so, may be referred to such facts
these. Bimetallism, proceeding on the same assumptioi
also stands condemned by the facts.
It may be urged that now it cannot matter to a nation
which metal it employs for a standard, because the rej
standard is now bullion only, and all the coins in use ai
substantially token coins, used only for small chang(
whether they are of gold or silver. Mr. Lowe's schema
as described in the Fortnightly Review of last month, ah
assumed that standard coins of gold could be dispens(
with. But it may be doubted if, even in England, we hai
yet got to the stage of wholly dispensing with coins in us
of the standard metal. For travelling, and for settlii
minor balances between countries, gold coins and not gol^
bullion are only still useful, as silver coins or silver bullion*
would not be. Apart from this, the greater convenience
of gold for storage and for the handling of banks anfll
other institutions which have to deal in it, would make it
naturally to be preferred by the richer countries; anc
whatever may be the case here, it is quite certain thi
many nations are still in a state to require coins of tl
standard metal in use, and particularly the silver-usinj
countries. So far as such preferences still exist, bimetallism
would tend to thwart them. It would at times create in mI
country which naturally likes silver a premium on th^
export of that metal ; and at other times, in countries
which preferred gold, a premium on its export. Thi
would be obviously a daily and hourly drawback t<
bimetallism, if any country thinks of adopting it, to
set against the possible advantages it may confer. It wi]
be answered that under universal bimetallism nations wil
be able to use whichever metal they want, and to whai
extent they want; but so far as they do so, and do noj
Mr. R. Giffen,
i It
I
n^'
93
use both equally, bimetallism will be inoperative. If they
are not to have both metals in use as standard money,
they might as well be monometallist at once.
Having mentioned these drawbacks, we need not dwell
on others. It is plain that bimetallism, if it does any good,
will have many counterbalancing disadvantages, whether
it is particular or universal. But the catalogue is far from
exhausted. For instance, the difficulty of making such
subsidiary arrangements as the exemption of standard
money from seignorage, now so conveniently made in a
monometallic system, would soon be felt. There would
also be an obvious difficulty, under particular bimetallism
at least, in finding a means of bullion remittance as
compared with the present system. In remitting now to
a country where gold is used, any one at need can draw
a cheque on his bankers and get the gold he wants.
Under bimetallism he might be offered silver, and con-
sequently have to purchase gold in the market. Under
universal bimetallism the difficulty would be the same.
Gold and silver ex hypothesi would be equally available
in paying debts, but money is not wanted exclusively to
pay debts with ; a particular sort of money is wanted for
special purposes, and all choice of this sort would be at
an end. In effect, also, the use of either silver and gold
in prescribed quantities in paying debts, though it avoids
in appearance the fixing of a legal ratio, does fix a ratio
in reality. It alters the demand for gold and silver from
what it would be if communities merely selected the money
they wanted according to their convenience, and j)ro tanto
diverts and hinders the natural development of the industry
of working the precious metals. It is not to be assumed
certainly that this interference w^th natural taste will be
more successful with gold and silver than it has been with
other commodities. But passing over all this catalogue of
objections, let me only urge that, as a practical measure,
proposed to a country like England, bimetallism will be
^1
objectionable, because it is an alteration of a system roote
in our habits, to which we have become accustomed as th
air we breathe, and which we have acquired with mud
cost and eftbrt after long experience of many bad systems
Even if the other advantages of bimetallism very muc
outweighed those of the opposite system — and the exa
contrary is the case — would not the mere trouble
alteration be an overwhelming disadvantage ? The ol(3_|
authorities on English currency might be invoked t^|
bring even stronger arguments. The emphatic protests of
Locke and others against «?zy alteration of a standa
once chosen, as necessarily involving injustice and
violation of contracts, are not to be forgotten, thoug
it is not necessary to our argument here to dwell upoi
them.
Finally it remains to be urged that bimetallis
admitting the balance of advantages to be in its favour"
and that all other objections are got over, is not practicabl
in any proper sense of the word. Of course theoreticall;
any particular government adopting bimetallism, and willing
to force its subjects to endure the nuisance and misery o
incessant changes in their money, which always occ
when bimetallism is really operative, may introduce
bimetallic law. But to have such a law is not to hav
the two metals actually in use, which is the object aimed
at, or to obtain for a country most of the other allegeMl
advantages of bimetallism. The advantages it procures
will be for others, and sooner or later, therefore, any single
country trying bimetallism will abandon it, as France bdHl
so lately done. Nations are not philanthropic to the
extent of sacrificing themselves for the good of othe
A group of nations trying bimetallism Avill experience t
same results and follow the same course. The only chan
for bimetallists then is the possibility of their scheme
imiversal bimetallism being tried. But can any one dream
of such a consummation? Who is to draw the treaty
Mr, R. Giffcn.
Ii
1
95
What power of persuasion will brino- all countries and
governments to accept this gospel? The initiative must
clearly come from the great governments, those of England,
France, Germany, Austria, Eussia, and the United States.
But only a dreamer could imagine such governments
agreeing on the principle, on the ratio to be fixed, and on
all the subsidiary arrangements necessary ; and then uniting
to persuade their smaller neighbours, the dissent of almost
any of whom would be fatal. So strong has this objection
seemed that, for no other reason, Mr. Bagehot and other
monometallists have steadily declined to discuss bimetallism.
Their reluctance is surely not to be w^ondered at. Even
if there w^ere no other difficulty in the Avay of universal
agreement, there is one which would probably be fatal —
the risk of particular countries over-issuing paper. The
Latin convention has been a practical failure as regards
Italy for this reason, so that universal bimetallism to be
really effective must regulate paper as well as coin issues.
If it does not, the world will be no more bimetallic than
it is now.
What may be urged more strongly, however, on the
score of the impracticability of universal bimetallism, is
the probability that great mercantile communities may
have a mind of their own in the matter, and may not
accept bimetallic money. It is amazing to see how the
discussion is carried on, as if a government had only
to issue its fiat, and bimetallism would come into use.
Enough facts have been stated in this paper to show that
mercantile communities themselves exercise choice in this
matter, as England did after 1696 ; and that bimetallic legis-
lation would not necessarily be followed by corresponding
practice. Have bimetallists then any reason to believe
that England, which freely chose gold in place of silver
in 1696, would now reverse its choice, now when it is so
much richer and so much more a centre of international
payments than it was two centuries ago ? Have they
96
reason to believe that the Californians who rejected green-
backs would submit to take any money the legislature
chose to give them; or that the New York Banks would
reconsider their late decision not to accept any of the
silver coins which Government had just issued as full legal
tender ? These and other questions must be answered in
the affirmative, and with conclusive facts in support of
them, before bimetallism can be talked of as a practicable
scheme. And no one who knows the business world of
London will fancy that, as regards this country, the
question would be answered in the affirmative. Leading
exchange brokers and bullion dealers have bimetallist
leanings ; they would like if it could be introduced in any
country. There is a half-notion at this moment among
some merchants, especially in the Eastern trade, that as
bimetallism has so much said for it, it might be tried,
though it may be doubted how far this notion would stand
the test of actual experiment; but so far as I can judge of
City feeling in general, the attempt to force bimetallism
on the mercantile and banking world of this country would
produce an instant revolt. The slightest approach to
" actuality " which bimetallic theories may attain, would
soon bring out the real strength of the feeling or prejudice
in favour of the present system which exists throughout
the City.
The case against bimetallism thus appears to my mind
overwhelmingly strong, and the dislike manifested towards
it seems accounted for. Its boasted superiority over the
single standard consists in the promise of abundant money,
which it does not and cannot fulfil, and which its advocates
give in a way that taints their entire argument with un-
soundness ; in the promise of greater steadiness in the
exchanges which it will only keep in certain circumstances,
while it does not really matter whether the promise is kept
or not, as the exchanges in any event will usually be fairly
steady ; and in the promise of greater stability in the
Mr. IL Giffcn,
97
standard of value from period to period, which it may fulfil
in certain circumstances, but where, again, the alleged
advantage seems really immaterial. On the other hand,
whether particular or universal, the system will be attended
with no small inconveniences, such as incessant change of
the money in use, and interference with the natural taste
of commimities in the choice of their money, which have
formerly caused great outcries ; and in England it would
have the undoubted evil of altering a long-established and
excellent system, which is based on experience and has
answered in every particular the ends of its designers.
Bimetallism, moreover, is really impracticable. If one or
two or even more nations try it, they do not succeed in
getting the two metals in use, and it is not even conceiv-
able that all should agree to try it. Moreover, whatever
governments may say, it does not follow that great mer-
cantile communities wdll be obedient, and the chance of
their preferring monometallism is an element of difficulty
to be reckoned with. Such a scheme does not seem entitled
to any favour. As founded on the assertion of vague
and indefinite evils, which cannot exist in a community
possessing a sound metallic currency, as promising vague
and indefinite advantages, and as utterly and hopelessly
impracticable, even if it should be tried, it seems
really liable to all the dislike which sober business men
entertain towards flighty currency projects. Matters in
its favour are not needed by the talk which I have not
thouofht it worth while to discuss, about the ratio of
15 J to 1 being the result of providential arrangement.
If bimetallists are sometimes reviled as lunatics, and
economists like Mr. Bagehot can hardly be brought to
overcome their disgust at the argument for bimetallism,
so as to turn aside even to discuss it, they are surely
not without excuse. Mathematicians do not stop to argue
w ith squarers of the circle, or with reasoners that the earth
is flat.
H
08
One more remark, by way of supplement. A former
controversy on this subject arose out of the suggestions for
an international money, which were so common ten or
fifteen years ago. Those who attach great importance to
the world having such a money, will regret that the case
against bimetallism is so strong, as it is only in such a
scheme they can at present see a way to their end. To
attempt to reach it by means of the opposite system implies
an extensive demonetisation of one metal or the other,
which is not to be thought of at present. But the idea of
an international money, in the present stage of the world's
economic progress, is really premature. Nations generally
are not yet so closely inter-connected as to make it worth
while that all should have the same money, to which there
are many other obstacles — such as over-issues of incon-
vertible paper — as well as the differences between gold
and silver. We may well leave future generations, there-
fore, to deal with this question, content to do the best we
can with the monetary arrangements in our power. As
the need for international money increases, the means for
introducing it may also be prepared, as they would be
prepared, for instance by the gradual introduction in all
countries of the use of gold for large payments, the general
use of silver in token coinage only, the increasing wealth
of the world causing a great increase of the demand for
token coinage, and the extension of economising expedients,
so as to lighten the strain upon the dearer and standard
metal. An international money upon a monometallic basis
is thus a possibility of the future, and there is no need for
precipitating matters by impracticable schemes.
ROBERT GIFFEN.
BIMETALLISM/
From the Contemjmrary Review, May, 1S81.
It may be safely said that the question of bimetallism is
one which does not admit of any precise and simple answer.
It is essentially an indeterminate problem. It involves
several variable quantities and many constant quantities,
the latter being either inaccurately known or in many cases
altogether unknown. The present annual supply of gold
and of silver are ascertained with fair approach to certainty,
but the future supplies are matter of doubt. The demand
for the metals again involves wholly unknown quantities,
depending partly upon the course of trade, but partly also
upon the action of foreign peoples and governments, about
which we can only form surmises.
The question is much complicated, again, by presenting
a double problem — that regarding the next decade of years,
and that regarding the more remote future. Possibly, a
step which might be convenient during the course of the
next ^\Q, ten, or fifteen years, would prove subsequently
to be the mere postponement of a real and inevitable
difficulty. When we pursue an inquiry of this complex
and indeterminate kind, it resolves itself into endless
hypotheses as to what will or will not happen if something
else happens or does not happen. Nevertheless, it does
not follow that, because statistical science fails us, we can
* Reprinted, with other Essays on the same subject, in a volume of
papers by the late Professor Jevons, on Currency and Finance, and
published by Messrs. Macmillan k Co.
h2
100
^sBiCT^o practical conclusion ; on the contrary, from the
very vagueness and uncertainty of the suhjcct may emerge
a conviction that it is best to do nothing at all. A party
of travellers lost in a fog will probably indulge in a great
many speculations and arguments as to the possible paths
and turnings they might take ; but the wisest course may,
nevertheless, be to stay where they are until the air
becomes clear.
Looking at the question, in the first place, as a chronic
one, that is, as regarding the constitution of monetary
systems during centuries, it is indispensable to remember
the fact, too much overlooked by disputants, that the
values of gold and silver are ultimately governed, like
those of all other commodities, by the cost of production.
Unless clear reasons, then, can be shown why silver should
be more constant in its circumstances of production than
gold, there is no ground for thinking that a bimetallic gold
and silver money will afford a more steady standard of
value than gold alone. The common argument that there
will not be enough gold to carry on the trade of the world
with, does not stand a moment's examination in this aspect.
In the first place, if the value of gold rises, more gold will
be produced, and the great number of gold-mining enter-
prises now being put forth may have some connection with
this principle. In the second place, so long as sudden
changes of supply and demand can be avoided, it is almost
a matter of indifference, within certain limits, whether
there is much gold or little. Prices having once settled
themselves, it is only a question of carrying a little more
metal or a little less in your pocket. As Cantillon,
and subsequently, but independently, Hume, remarked, if
the money in the world were suddenly doubled or halved
trade would go on as before, all prices being approximately
doubled or halved. But, of course, the interests of creditors
and debtors would be affected wdiile the change was in
progress.
Professor Jevons, M
101
Now, as regards the chronic question, it is probable,
though not certain, that the establishment of the bimetallic
ratio of 15 J to 1 would give a worse rather than a better
standard of value, because the momentary standard is always
the over-estimated metal. The double-standard system gives
an option to the debtor, so that if either gold or silver wei*e
in future years discovered in large quantities, the debtor
would have the benefit. In the monometallic system there
is no option, and all parties stake their interests on the single
metal. To these considerations must be added the historical
f\ict that silver has during the last thousand years fallen in
value more than gold. The ratio of values in the iSIiddle
Ages was about 10 to 1, fluctuating at times to 12 to 1.
Later on silver became comparatively cheaper, and in the
latter part of last century, 15 J to 1 correctly represented
the natural ratio. For some fifty years it was held pretty
steadily at this point by the action of the French Currency
Law. The unprecedented discoveries of gold in California,
Australia, New Zealand, and elsewhere, reversed the course
of prices for a time, but more lately the tendency to a
preponderating fall of silver has reasserted itself. No doubt
the events here so briefly recapitulated admit of endless
discussion, and it would be impossible even to mention the
volumes which have been written since the time of Locke
upon the comparative steadiness of value of gold and silver.
There emerges a certain degree of probability that silver
is more subject to depreciation than gold, although both
have, in the course of a thousand years, been very greatly
depreciated in comparison with corn and the chief kinds of
raw materials.
If this may be assumed to be the case, it follows that an
attempt to re-establish the ratio 15^ to 1 would tend to
discourage the production of the dearer metal, gold, and to
encourage the production of the more depreciated silver.
We should be filling our pockets and our strong boxes with
a metal 15^ times as heavy and 28^ times as bulky as gold.
102
proportionally to value, in order to get a worse medium of
exchange, and a probably worse standard of value. Nor
should we be approximating towards a better state of things.
If gold is destined ultimately to be the general standard of
value of all civilized nations, we must let it take its own
natural value, and must allow the appreciation, if any, to tell
upon the profits of mining. But the arbitrary reduction in
the vahie of gold, involved in the present bimetallic project,
would tend constantly to replace gold by silver; and unless
it were desired actually to take silver as the medium of
exchange, the last state of things would be worse than the
first. It thus becomes plain that a bimetallic regime is not
the means of approximating to a gold regime. On the
contrary, it must either be a permanent regime, or it will,
sooner or later, leave us with a vast stock of silver, liable
to sudden depreciation, and a diminished stock of gold. In
short, the project of M. Cernuschi is not a real panacea for
our present troubles ; it is only a mode of postponement
leading to eventual aggravation.
When we turn to the temporary view of the subject, by
which I mean the circumstances and interests of the next
ten or fifteen years, the difficulties increase, chiefly because
the data become wholly uncertain and contingent. The
great principle of the cost of production fails us, because in
the case of sucli durable commodities as gold and silver, the
accumulated stock in hand is immensely greater than the
annual production or consumption. It stands to reason, of
course, that if several great nations suddenly decide that
they will at all cost have gold currencies to be coined in the
next few years, the annual production cannot meet the
demand, which must be mainly supplied, if at all, out of
stock. The result would, doubtless, be a tendency to a fall
of prices. M. de Laveleye, in one of the able articles which
he is contributing to the Independance Beige, as an advocate
of Cernuschi-ism, points to a fall of 30 per cent., which he
thinks has already been occasioned by the demand for gold
Professor Jevons. 1
103
currency. He excites our imagination as to what may be
expected to happen shpuld Italy and other countries need
gold for coining. But he omits to observe that the fall of
30 per cent, is probably due for the most part to the collapse
of credit and speculation, a periodic event of which we have
had many prior instances. The period of 1833 to 1844,
especially was one when no great wars and monetary
operations were in progress ; it w^as a period of active
industrial and commercial progress. Yet the tables of
prices given by Tooke, in his History of Prices, and
reduced in my paper on the Variation of Prices, communi-
cated to the Statistical Society in May, 1865 (vol. xxviii.
pp. 294-320), show that the average prices rose by 22^ per
cent, between 1833 and 1839, and fell 25 per cent, between
this last year and 1844. So far as I have been able to
discover, this great oscillation was entirely due to the general
expansion of trade and credit, and to its subsequent collapse.
Like causes have certainly been in operation in the last ten
or twelve years; and if, as seems probable, we are now
getting round by the lapse of time to the period w^hen trade
naturally revives, experience would prevent us from imagin-
ing that the late fall of values will be continued or repeated
without an intervening rise. I am far from denying that
if the Italian Government decide to carry into effect
M. Luzzatti's threat of buying gold at all hazards, and if the
like course be taken by the United States and France, not
to speak of Germany, then there might be a considerable
disturbance of values for a time. But is it likely that such
proceedings will be taken by rational statesmen and rational
parliaments ? It is really too absurd to suppose that any
country wdU insist upon immediately having a gold currency
at any cost, regardless of the fact that it will thereby injure
its own trade and commerce in the getting. The position
is simply this. We have had for fifty years or more an
abundant currency of gold. Italy and some other countries
have a paper currency. Suddenly becoming disgusted with
paper, they say that unless we consent immediately to
abandon our gold to a great extent, and take silver instead,
they will insist upon buying our gold from us at "whatever
price we like to ask for it. We have so good a currency
that, unless we consent to give it up willingly, they will
insist on borrowing it from us. But surely in this case,
possession is nine points of the law. The largest stock of
gold in the world is to be found in England, and many of
the great gold-producing districts are to be found in the
English colonies or dependencies. If these foreign nations
insist upon having gold currencies, they must pay our price
for gold, and they must in raising the price benefit us and
our colonies, comparatively speaking.
When we consider what are the difficulties put forward
as the ground of this bimetallic crotchet, we find that they
arise either out of the sudden issue and withdrawal of
paper money, or else out of the eflforts of certain govern-
ments to get rid of silver. If the Italians suddenly want
fifteen or twenty millions of specie, it is because they
allowed their specie to be replaced by paper in former
years, and they now discover the evils of a variable paper
currency. Germany wants gold, because Prince Bismarck
and his economists recognised the soundness of the prin-
ciples on which Lord Liverpool fashioned our metallic
currency. But because Germany has met with a temporary
check in striving after a gold standard, is there any
reason that we, who have had a gold standard with little
interruption since the time of Sir Isaac Newton, should
throw it up at the demand of M. Cernuschi? The
difficulties of France simply consist in the fact that, having
had the law of the double standard previously in operation,
she suspended the action of the law as soon as it began
to occasion a return of silver. If all civilized countries
were to adopt the double standard, they would just be
inviting the growth of a silver currency, which France,
with full experience of the use of silver, has practically
decided to avoid.
Much that has recently been published on this subject,
l*rofessor J c vans.
105
including the official text of the draft resolution to be
submitted to the Conference in Paris, implies that the
French law establishing the double standard was intended
to act as a regulator of the values of the metals according
to the ratio of 15^ to 1. The fact, however, is that no
such idea seems to have prompted the law. Gaudin, who
in the ninth year of the Kevolution proposed the ratio of
lo^ to 1, did so upon the ground that this ratio was
sufficiently near to that of the market values to allow coins
of gold and silver to circulate side by side indifferently.
In case the market ratio should alter after a time, he
thought that the gold pieces could be melted and reissued.
Sir Isaac Newton, again, when in 1717 he fixed the guinea
at 21 5., did so upon the ground that this was the closest
convenient approximation to market rates. Only four
months ago I quoted in the Contemporary Review
(January, 1881, vol. xxxix. p. 73) the remarks of Cantillon
upon this decision of Newton. Cantillon says : —
" It is the market price which decides the proportion of
" the value of gold to that of silver. On this is based the
" proportion which we give to pieces of gold and silver money.
" If the market price varies considerably, it is necessary to
" alter the proportion of the coins. If we neglect to do this
" the circulation is thrown into confusion and disorder," &c.
There is, in fact, no precedent for the views now pressed
upon us. It is not even proposed to accept the prevailing
ratio of the markets, but by an arbitrary convention to raise
up silver to the place it held in the markets before, which
involves bringing down gold so as to meet it about half-way.
I do not undertake to deny that if a convention were agreed
upon, and carried into formal effect, it might possibly raise
silver to its former price of o9rZ. per ounce. The measure
is one of so novel a character that it is almost impossible to
say what would or Avould not happen. The attempt to force
silver dollars into use in the United States has entirely
failed, and it might fail even under a convention. It is
106
quite conceivable tliat in the United Kingdom and the
colonies the scheme would be defeated by the tacit refusal
of the people to accept silver legal tender. A bank or a
tradesman might try to stand upon his legal rights, but the
result would be a kind of commercial '^ Boycotting." Some
formula would probably be discovered for contracting aifairs
out of the Double Legal Tender Law. At present there
is no law to prevent people from making contracts in
terms of gold or silver bullion, or tin or copper or corn, or
Avhatever else they like, which is capable of precise defini-
tion. Even if the law were not thus circumvented, it
might still be possible to make payments in gold a point
of honour.
Then, again, the perpetual maintenance of this supposed
convention is the only safeguard against the most serious
inconvenience to some of the parties to it. The convention
would resemble a chain, the breaking of each link of which
would throw an increased strain upon the other links.
There exist, indeed, a good many international conventions
relating to postal intercourse, extradition of criminals,
copyright, and so forth ; but in none of these cases would
the breaking or suspension of the convention result in any
ruinous consequences. There would be suspension of
benefits rather than occasion of evil. But should war break
out among some of the countries involved in the monetary
convention, the probable effect would be to throw the mass
of silver coin upon neutral nations. This might be done
without any express breach of the convention, simply by
the issue of paper money, a measure which we cannot
pretend to consider unlikely, seeing that the chief difficulties
of the present monetary situation arise out of efforts for the
withdrawal of recent paper-money issues. It is true that
the 8th Article of the proposed Convention enacts that
" the fact of issuing or allowing to be issued paper money,
" convertible or otherwise, shall not relieve the State issuing
" it, or allowing it to be issued, from the above stipulated
Professor Jevons,
107
" obligation of keeping* its mints always open for the free
" mintage of the two metals at the ratio of 1 to 15 J." But,
as far as I can understand this *' keeping of the mints open,"
it seems probable that this article would be quite nugatory
in time of war. If silver were depreciated oor 10 per cent.,
paper legal tender might easily be depreciated 20 or 30 per
cent., and nobody would think of coining silver to pay their
debts, when they could pay them so much more cheaply
with paper. The issue of paper legal tender forms then, to
the best of my belief, an indirect mode of abrogating the
convention without a distinct breach of faith. No govern-
ment has ever yet resisted the temptation of resorting to
paper under serious stress of war, and therefore, until a
wiser and better state of things is brought about in the long
course of time, it Avould seem impossible to fulfil the first
condition of the bimetallic project — the making of an inde-
feasible convention.
When a measure is so clearly undesirable, it is hardly
needful to point out the many difficulties which would arise
in its operation. But there is one which presents itself to
my mind as almost insuperable — namely, the confusion
which would be produced in the masses of national and
other debts contracted in terms of gold money. Silver is
now about 13 per cent, below its old customary value,
compared with gold. If, then, debts contracted formerly in
gold could be paid in silver, by the option of the bimetallic
system, the claims of all creditors would be endangered to
this extent, and in all probability would be depreciated to
half that extent. Nor would the matter be much improved
by enacting that old debts should be paid in gold as
contracted, because gold, being forced into a fixed par with
silver, would be depreciated, say, six per cent. The adoption
of the bimetallic regime would be a coup cCetat affecting the
value of all past monetary contracts in a degree incapable
of estimation ; and although such a coup, or almost any
other coup, might be advisable under certain circumstances.
108
according to the maxim, salus populi suprema lex, yet it
would be clearly impossible to unsettle the whole monetary
contracts of the British nation and the British race, to the
extent of some six per cent, or more, for the sake of the
exceedingly problematic, if not visionary, advantages to be
derived from this proposed convention.
Though it thus appears to be altogether out of the
question that the English Government should contemplate
the abandonment of the gold standard, there are two or
three minor measures of a temporary nature which might
perhaps be adopted to relieve the disturbed relations of the
precious metals. There would probably be little or no
inconvenience in raising the limit of legal currency of silver
coin in the United Kingdom to five pounds instead of tAvo
pounds as at present. This change would probably prove
to be merely a nominal one, unless bankers and others could
be induced to pay out silver coin more largely than at
present. The Mint gains so handsome a profit upon the
coinage of silver money at present that the opportunity
might well be taken to throw as much silver into 'circulation
as possible ; but unless the habits of the people be changed
it would not stop in circulation. There is, in fact, at present
a very clear disinclination on the part of the public to take
any larger amount of silver money than is necessary. It is
an almost imknown thing in England for any tradesman to
give as much as two pounds in silver change. No customer
is expected to take more than ten, or at the most twenty
shillings in silver, and any surplus of silver receipts is paid
into the banking account, and the general balance of the
district is eventually returned to the Bank of England. It
is very doubtful whether Mr. Seyd's scheme of a four-shilling
piece or any other scheme would overcome this fixed habit,
which is moreover a reasonable habit.
A good deal has been said about the expediency of
bringing into operation the Third Clause of the Bank
Charter Act, which is supposed to authorize the issue of
Professor Jevons.
109
notes upon a reserve of silver bullion to a certain extent.
That Clause reads as follows : —
" And whereas it is ncccssjiry to limit the amount of silver
'* buUiou on which it shall be lawful for the same department of
" the Bank of England to issue Bank of England notes ; be it
" therefore enacted, that it shall not be lawful for the Bank of
'^ England to retain in the Issue Department of the said Bank at
" any one time an amount of silver bullion exceeding one-fourth
" part of the gold coin and bullion at such time held by the Bank
" of England in the Issue Department."
It is obvious that this clause is solely a restrictive one ;
that which authorizes the holding of silver bullion is the
preceding clause, far too long for quotation. It states,
however, that it shall not be lawful to issue notes in excess
of the securities allowed to be transferred to the Issue
Department, " save in exchange for other Bank of England
" notes, or for gold coin, or for gold or silver bullion received
" or purchased for the said Issue Department under the
" provisions of this Act," &c. It is curious that, although the
second clause thus seems to speak of silver bullion being
'' received or purchased under the provisions of this Act,"
there are no provisions in the rest of the Act relating to the
purchase of silver. The fourth clause defines the price at
which all persons may demand notes for gold bullion, but
there is no like definition as regards silver. The result
seems to be that the Bank of England buys and sells silver
bullion as an ordinary dealer or speculator. If, then, the
Bank Directors think that it will conduce to the interests
of their shareholders that they should lay in a stock of three,
four, or five millions of pounds' worth of silver, as the case
may be, let them do so. They will gain or lose according
as the value of that stock rises or falls ; but who can say
how that will be ? In any case, the effect of such an
operation upon the silver markets of the world must be
inappreciable.
There is one further measure which might well be
■^^^^^^^ 110 ^mniH
adopted at the present conjuncture, namely, tlie alteration
of the Bank Act so as to allow of the issue from the Bank
of one-pound notes. Now that Parliament has authorized
the circulation in England under very questionable conditions
of a fractionable paper currency, the last shadow of reason
has disappeared why one-pound notes, so long current in
Scotland and Ireland, should be unknown in England. If
we could suppose that thirty millions of such notes were
put into circulation eventually, about twenty millions might
be issued on Securities, giving a profit to the Government
of nearly half a million a year. The margin of ten millions
more or less of gold added to the specie reserve of the Issue
Department would be ample to meet any conceivable
demand for payment of such notes, the circulation of which
would probably be more constant than that of the larger
notes. Thus a supply of tAventy millions of sovereigns
would be opportunely thrown upon the markets of the world,
which might be scrambled for by the various nations now
wanting gold currencies.
It will easily be seen that in this article I do not pretend
to enter into the complexities of the subject, nor to answer
the numerous arguments adduced in favour of the bimetallic
project. The literature and statistics of the subject are of
an almost interminable extent. If any reader wants to
learn what he has to read before he can be considered to
have mastered this subject, let him refer to A Partial List
of Modern Publications on the Subject of Money, prejiared
by Mr. Ilorton, and printed among the Apj)endices to the
Official American Report on the International Monetary
Conference, held in Paris, in August, 1878. This volume
is replete with information on the subject. But my con-
tention is that to wade through the interminable discussions
on bimetallism is about as useful as to wander through a
forest in a mist, the happiest result of which is usually to
find yourself back again at the point you started from.
W. STANLEY JEVONS,
I
WHAT IS A POUND?
From the Nineteenth Century^ June, 1881.
This old question, which Sir EoLert Peel so much rejoiced
iu, has once more cropped up, and in the remarks I wish to
make upon it I desire to say a few words upon what loas a
230und and what may he a pound.
In his speech on the Bank Act of 1844 he says of the
principle of the metallic standard : " It must at the same
" time be admitted that it would be quite consistent with
" that principle to adopt some other measure of value than
" that Avhich we have adopted. It would be consistent with
" that principle to select silver instead of gold as the
" standard, or to have a mixed standard of gold and silver,
" the relative value of the tioo metals being determined, or to
" dispense with gold coin altogether, and regulate the
" amount and value of the paper currency by making it
" convertible only, according to the proposal of Mr. Ricardo,
" into gold bullion of a given minimum amount."
The authority of this great financier may therefore be
cited as showing that bimetallism as now proposed is not
otherwise than in accordance with the principle of the
metallic standard.
The Earl of Liverpool made his proposal for a gold
standard on the ground that Great Britain is " so dis-
" tinguished for its affluence and for the extent of its
" commercial connections, that gold coins are best adapted
" to be the principal measure of property."
112
The monometallists in the present controversy maintain
this doctrine, and assert that the superior wealth of England
enables her to keep her gold standard, while less wealthy
nations, such as Germany, Italy, &c., could not do so. On
the other hand, the bimetallists declare that this supremacy
would continue and even increase if England submitted
herself to a general law agreed on in concert with other
nations. The Americans believe that their Avealth, intel-
ligence, commercial activity, and undeveloped resources
will enable them, if they are forced into a gold standard, to
outstrip England in the race for wealth, and to draw from
England's store of gold a sufficient amount to place them in
the foremost rank.
The present controversy dates from the first monetary
conference in Paris, which sat in June, 1867, and which
was called for the purpose of '' appreciating more earnestly
" the advantages which would be derived from the unifi-
" cation of coinages."
At the very first meeting the question of standards
arose, and on its arising the existence of the double standard
seemed so little understood that the delegate from ilussia,
having been placed among those representing the double-
standard countries, declared that there was only one
standard in Kussia, that of silver; but he was corrected
by Monsieur de Parieu, the French delegate, who informed
him that both metals were legal tender in both countries.
On the 20th of June, at the third sitting, the propo-
sition " that the desired result, namely, monetary unification,
" is attainable on the basis and condition of adopting the
" exclusive gold standard," was carried with one dissentient
voice.
In 1871 the German demonetisation of money com-
menced, and in 1873 an Act of Congress was passed by
which silver was legally demonetised in the United States,
which act was, however, corrected by what is called the
Bland Bill, enforcing the coinage of a certain amount of
Mr, H. R. Grenfcll.
113
silver monthly. In 1878 another international monetary
conference assembled at Paris, at which the German Empire
was not represented, but, notwithstanding the absence of
that important element, the European States, through their
delegates, agreed "that it is necessary to maintain in the
" world the functions of silver as well as those of gold,"
thereby coming to a conclusion at variance with that at
which the previous conference had arrived.
A third conference is now sitting. Since the de-
monetisation of silver in Germany, a change which was
the legitimate consequence of the verdict of 1868, a con-
tinued fall of prices has taken place, and one of the subjects
of dispute between those engaged in the battle of the
standards is, whether that depreciation of prices and the
existing depression of trade are due to the usual ebb and
flow of commercial life caused by bad harvests and the
cupidity and folly of man, or w^hether they are due in a
great measure to the currency revolution of 1873.
The English system of metallic currency is founded on
Lord Liverpool's letter to the King on coins, on the report
of the Bullion Committee of 1810, and on the various Acts
relating to the resumption of what were called cash pay-
ments, or the right to receive standard coin in exchange for
bank-notes.
Most people are aware that previous to 1819 our circu-
lation was a paper one, but few are aware that, previous to
the suspension of cash payments, it was bimetallic, and not
measured by a gold standard. Of this fact it must be
supposed that Sir Robert Peel was not conscious when he
made his famous speech on the resumption of cash payments
in 1819, the peroration of which contains the following
sentence : " Every consideration of sound policy and every
" obligation of strict justice should induce us to restore the
" ancient and permanent standard of value."
Now, this is precisely what he did not do, but what the
bimetaUists are now advising. What they wish for is a
I
114
return to the "ancient standard of the realm" in common
with the rest of the nations of the earth.
The fall of prices which took place after the institution
of the modern, not ancient, gold standard of 1816, and that
which has taken place since the demonetisation of silver in
Germany, have both been the subject of a most voluminous
literature.
The evils connected with the fall in prices are disputed
by some economists, so in alluding to them I prefer to
quote the remarks of those whose orthodoxy is undoubted.
Mr. Giffen said in 1879 :—
'' I have come to the conclusion that not only is there a
" decline of prices at the present time from the high level estab-
** lished a few years ago, but that this decline is more serious
" than the downward fluctuations of prices usually exhibited in
" dull times, and that it may be partly of a permanent character,
" unless some great change should occur in the condition of
" business at an early date
" The reason is that a sudden pressure on the precious metals
" at a given period tends to disturb the money markets of the
*' countries using them
" Altogether, during the last six years, Germany has coined
" 84,000,000 ; the accumulation of gold in the United States
" amounts to 30,000,000 sterling."
A falling oflf in the supply of gold, as well as the
increased demand, is then described.
Now, if these things are admitted by the monometallists,
the question arises to what extent is the fall in prices an
evil ? and what is evil, and what is good, to a writer on
political economy ?
In my humble opinion, violent, sudden, and frequent
oscillations in the price of commodities are an evil. A long
continuance of the inability to obtain the due return for
their labours, be they what they may, is an evil to ordinary
men. It is an evil for those who have made fair and honest
Mr, H, R. Grejifell.
115
calculations, founded on a belief in a continuance of steady-
returns of any kind, to find them permanently falsified to
their loss and detriment. It is bootless to tell us that we
must consider this as a chronic question, irrespective of the
immediate effect of such sudden changes. If an enormous
depreciation in prices of all things produced in England be
not an evil, then I admit the bimetallist would be very
wrong to press his views on the public notice.
The inflation of prices in 1872 was felt to be a most
undoubted evil to consumers ; to those who produced nothing
it was an unmixed evil. To these same persons the state of
commercial depression is rather a good than an evil. They
receive as much now as they did before, and they pay less
for what they consume. But to those who are neither
enthusiasts nor doctrinaires the sudden inflation of prices
which went by the name of the coal famine was a great
evil, though perhaps not so great as the present depression,
which, though less sudden, appears more lasting, and there-
fore may be more mischievous in its results.
Consumers may be the better for this state of things,
but it must be allowed that if the interests of consumers
who have produced nothing are to be weighed against those
of consumers who have produced something — that is to say,
the drones against the working bees — these w^orking bees
always have been, and always must be, the objects of first
consideration.
Philosophers tell us to postpone all thoughts of the
interests of producers, in the hope that fifty years hence all
things may be set straight again and trade go on as before,
even though " all prices be approximately doubled or halved,
" the interest of creditors and debtors being affected to that
" extent while the change was in progress." Keither credi-
tors nor debtors would bear the doubling their property
with modesty, or the halving it with equanimity, even
though the operation might vindicate the perfection of the
doctrines of Locke and of Lord Liverpool.
I 2
116
Having stated the extent to which I believe certain
evils exist, I proceed to say what bimetallism is and what it
is not.
The bimetallism proposed is the free mintage of the two
precious metals at a given fixed ratio of 15^ to 1 in all
countries agreeing to a convention for the establishment of
the principle. It naturally would entail the legal tender of
either metal at the option of the debtor for the payment of
all debts.
Bimetallism is not an attempt to make silver or gold, or
both together, the currency of any country, the probability
being that under such an arrangement no alteration would
take place as to the coin in which the ordinary transactions
of life are carried on. Bankers would; as they do now, hold
in their tills just such notes, coin, or change as their
customers require, and would not, any more than they do
now, force their creditors or depositors to take away sacks
of five-franc pieces or crowns when they want cash with
which to pay their wages or bills. Legally, of course, this
could be done ; but as the habit now is to keep precisely
that form of currency which depositors require, so would it
be under a bimetallic system. The example of this is to be
found in England in the last century. The law was
bimetallic, but the practice was a gold currency. In India,
if a bimetallic law were promulgated to-morrow, in practice
silver would continue to be used.
Bimetallism existed in this country from 1717 to 1778,
during which period an Englishman could pay his debts
either in gold or in silver to the amount of £25 in tale
and any amoimt in weight. Bimetallism existed in France
from the beginning of this century to 1873, during which
period it is not denied that both gold and silver have
been the prevailing currency of that country, though not
both at the same time ; nor is it denied that during that
period the relative prices of gold and silver were kept
almost exactly at the legal rate of 15 J to 1, not only
Mr, H, R. GrenfelL
I
A
117
in France, the bimetallic country, but in the markets
of the world, or that England, having been bimetallic
previously, returned to cash payments in 1819 in gold
alone, thereby causing an important loss to debtors and
gain to creditors.
The following may be shortly stated as the fundamental
propositions of bimetallists, which they assert have not
been answered : —
1. That the precious metals used for circulation are so
large a proportion of the existing mass that the amount in
use for any other purpose is too small to have any influence
on their value.
2. That the amount used by the larger States so far
exceeds that of the rest of the world that any agreement
made by them for the regulation of the relative value must
of necessity fix it to the world at large.
3. That there is nothing impossible or impracticable in
an international agreement for the fixing of the rate.
4. That the ratio of 15^ to 1 having been maintained
for nearly the whole of the present century by the French
bimetallic arrangement, it would be the best ratio at which
to fix it.
At the present moment it is of paramount importance
that these propositions should either be answered or proved
to be beside the question. Those wlio are occupied in
discussing it are apt to treat it as if it were only a chronic
question, and not one requiring immediate attention. If it
had not been the subject of attention in 1868, it is quite
true that no one would have dreamed of stirring it in 1881.
Both parties to the controversy are agreed that it would
have been far better if Germany had never followed up
the conclusions of 1868.
To those who argue that this is a chronic question and
118
not necessary to be immediately considered, the following
facts are not unworthy of attention.
It has been shown that by the admission of the advocates
of monometallism the evils of trade depression are to be
traced to the diminution of the supplies of gold, and to the
increased demand for it, and it is now proposed to show
that the latter cause is likely to be increased if Germany
throws her silver on the market, if Italy resumes cash
payments in gold, and if America completes her gigantic
task of resumption and recall of her bonds by resorting, as
many of her financiers wish to do, to a monometallic gold
cm-rency.
Mr. Jevons admits this when he says : —
" It stands to reason, of course, that if several great nations
" suddenly decide that they will at all cost have gold currencies
" to be coined in the next few years the annual production cannot
** meet the demand, which must be mainly supplied, if at all, out
" of stock. The result would be a tendency to a fall in prices."
The question, then, is not whether a change in currency
is a good thing or a bad thing, because w^e are all agreed
that it is a bad thing, but whether the change of England to
bimetallism or that of the Latin Union and the United States
to a monometallic gold standard Avould be the greater evil.
Some of the adherents of the single standard assure us
that it is an error to suppose that it is possible to make
such a change as this at all, and, granting that possibility,
that we insure greater steadiness in prices than at present.
Again I prefer to quote Mr. Jevons rather than to express
my own opinion.
In his work on Money and the Mechanism of Exchange
he says : —
" I have no doubt whatever that M. Wolowski is theoretically
" quite correct in what he says about the compensatory action of
** the double-standard system. English writers seem to have com-
" pletely misunderstood the questiou, asserting that the system
Mr, H, R. Grcnfell.
119
'* exposes us to the extreme fluctuations of both metals. . . . Nor
" is this the whole error of English writers. A little reflection
" must show that MM. Wolowski and Conrcelle Leneuil are
" quite correct in urging that a compensatory, or, as I should
" prefer to call it, equilibratory action goes on under the French
'* currency law, and tends to maintain gold and silver more steady
" in value than they would otherwise be.
*' Imagine two reservoirs of water, each subject to variations
" of supply and demand. In the absence of any connecting pipe
" the level of the water in each reservoir will be subject to its
*' own fluctuations merely, but if we open a connection, the water
" in both will assume a certain mean level, and the effect of any
" excessive supply or demand will be distributed over the whole
" area of both reservoirs."
From this it will be seen that the more serious of the
monometallists admit the superior steadiness of the bimetallic
system.
One of the objections to bimetallism is that it would
vitiate contracts and alter prices. I have shown that in
these respects w^e cannot shut ourselves up in our insular
security. There is no " silver streak " in commerce ; prices
have been disordered by German demonetisation, and the
perfection of the English system no longer carries with
it the success which was supposed to attend it. Prince
Bismarck, who administers the affairs of Germany, and who
adopts the traditional policy of Frederick the Great, to
attain the glory by following every road w^hich leads to it,
desired to confer upon his country something of the com-
mercial supremacy of England. He believed, or rather his
economical advisers believed, that the metropolitan position
of England in commerce was due to her single gold
standard, and not to her vast capital, her ships and colonies,
and her industrial resources. He acted on this opinion, and
widespread ruin has been the consequence.
Giving full credit to Lord Liverpool for the perfection
of his treatise and for the completeness of his system, I am
120
led to examine, as he would have done, under what circum-
stances his so-called infallible dogma originated. His letter
was written when England was struggling for existence
with the rest of the civilised world, and in like manner, in
the reign of King William the Third, when Locke was
writing, England was engaged in a war for the defence of
the liberties and independence of mankind, and neither of
these writers had any idea of cosmopolitan agreement upon
such matters.
What Lord Liverpool said was, that in a given country
it was better to have a single metal made into coins, which
should be the standard of value and national legal tender,
but he cites as an example of that necessity the practice
of the commercial states and countries on the Continent
making foreign bills of exchange, and sometimes other bills
exceeding a certain amount, payable in what is usually
called bank money.
Now this important example is to me the most telling
argument which can be used in favour of bimetallism by
agreement. That bank money which is described by
Lord Liverpool as being a necessity in Venice, Genoa,
Amsterdam, and Hamburg in past days, seems to me to be
more required in London than in any place in the civilised
globe. London is now to the world what all those places
put together were in other days, and if we strip the
bimetallic discussion of all extraneous matter, I should be
content to see it argued upon the question of whether bank
money could not be made of two metals, either of which
would pay a bill of exchange.
If silver were money nowhere, either in the Latin
Union, India, Russia, China, or America, it would certainly
be better that all things should be reckoned by the London
gold standard; but as it is a fact that several of these
countries are wholly silver, that the United States is
trembling in the balance, and that Italy is desirous of
resuming cash payments in the best possible metal, we
Mr, //, 7?. Grenfell
121
have to face, as usual in this nether world, the facts as
they stand, and not as we wish them to be. And this is
precisely what Lord Liverpool did. He examined care-
fully and exhaustively every fact of past history, and
surveyed every circumstance which suiTOunded him, and
his decisions are based upon those facts and upon his
personal experience. Viewed in this light, his term of
bank money as an expression for convention currency is of
paramount importance to the discussion. He described
this bank money as being used to pay bills of exchange in
certain limited places, and the necessity for it arose from
the debased state of the coins in those places, as well as
from the variety of them current for ordinary transactions
in such centres of commerce, where anything but the
payment in a perfect currency would produce great
embarrassment in all commercial dealings, and would render
the exchange very much against such state or country.
If then the bank money, that is, gold or silver or
receipts for them at a fixed relative value, is the same in
New York, Frankfort, Vienna, Rome, Paris, and London,
and is of a greater certainty and more steady in its value
as regards the mass of commodities than either gold or
silver separately, then such bank money would approach
more nearly the ideal standard of Lord Liverpool than
gold bank money alone.
But Mr. Jevons himself has demonstrated that although
the variations of the two precious metals measured in
commodities would be perhaps more frequent, they would
be less violent, and seeing that w^e have the example of
France before us, where a single bimetallic country not
only obeyed the above law, but actually kept the relative
prices between the precious metals themselves without any
important change, how can it be doubted that if the
transactions of all Europe, the United States, and India
were added to those of France, the functions of bank
money could safely be entrusted to both gold and silver ?
12Q
Measuring the value of Lord Liverpool's doctrine and
his matchless treatise, we must not forget who and what
Lord Liverpool was. He was an official mainly occupied
with the phenomena which he watched from an official
standpoint, and, though practically conversant with almost
every branch of official life, he had no real knowledge of
the cosmopolitan commercial machinery which it is our
business now to discuss.
Monometallists seem to think that the subject has
received its last touch from Lord Liverpool's mind.
Against his authority I cannot help quoting that of
Alexander Baring, first Lord Ashburton, who lived a
generation later than Lord Liverpool. He had perhaps
the largest and most complete experience of affiiirs of every
kind, except military affairs, of any man of his day.
Before he was forty he was the confidential intermediary
between Napoleon and the English Government, and
shortly afterwards he Avas the rival of the first Rothschild
in financial operations. Subsequently he was the Cabinet
friend of Peel and Wellington, and he finished his career
by a treaty with America, which still goes by his name.
I find that he gave evidence in 1828 as to the con-
sequences which had followed a blind adherence to Lord
Liverpool's doctrines, in which he said —
" he had always thought that it was possible and desirable to
" manitain in this country a silver currency as a legal tender
** founded on the proportion of silver to gold established in the
** currency of France, or something very near it."
And he gives as a reason for that opinion —
" that a sudden change from peace to war, a bad harvest or a
" panic year arising from over-trading and other causes, imposes
'* upon the Bank of England, which is the heart of all our
" circulation, the necessity, for the purpose of protecting itself,
*' to stop the egress of specie, sometimes even to bring in large
" quantities into the country.
Mr. H, R. Grcnfell,
I
123
" Now it is evident that the Bank wishing to reinforce its
** snpply of specie can do so with infinitely increased facility
" with the power of either drawing in gold or silver than if it
** were confined to only one of the metals."
These opinions of Lord Ashburton were given -without
any wish to stir in the matter, but merely as a contribution
to the mass of knowledge in the possession of the Govern-
ment on the subject.
It may now be well to notice some of the objections
that have been made by those who have frankly admitted
the superior steadiness of the proposed system over that
now in existence. I will take those which seem to me to
be perhaps the most important.
One is that it is a direct attempt to force the stream
backwards ; that the tendency of all the wealthier and more
civilised nations of the world is towards a monometallic
gold standard, the superiority of w^hich is so clearly estab-
lished by the commercial supremacy of that country which
for a long time was the only one which had succeeded in
enforcing it ; that it is idle and impossible to attempt any
arrangement founded on another system ; that as the
experiment made to force silver dollars into use in the
United States has failed and might fail under a convention,
it is possible that payments in gold might be made a point
of commercial honour.
A great many things are possible, but as it has never
been found that in commerce or in any other profession
people pay more as a point of honour than they are bound
to do, and as all payments are made, -with the exception of
unimportant balances, by paper currency, book transfers, or
cheques, it must be clear to every one that that metal or
those metals which are the legal security for the ultimate
payment of papers in various countries would be the founda-
tion of all legal as well as honourable payment.
I confess, then, that I am not alarmed at this objection.
It is founded, without doubt, upon a review of what has
124
taken place in the United States in the eagerness which her
citizens have displayed to seize the foremost place both as
to national and commercial credit.
Another objection made by a very able writer is that,
whatever may be the evils connected with the depreciation of
prices and the depression of trade in England, the damage
done to India by the fall in the exchanges is wholly
imaginary. He states that it " is political economy of the
" most elementary description, that the low rate of exchange
" ruling between England and India has the effect of
" checking exports to India, and of stimulating imports
*^ thence, and that this is precisely what is wanted if India
" is to pay her obligations here in any shape, and that
" without such fall in the exchange her financial straits
" would be much worse than they are."
There is some truth in this assertion, but then it is
utterly incompatible with the arguments generally used by
the monometallists, that to raise the value of silver and to
depreciate that of gold to their old ratio would inflict a loss
upon gold-using countries and confer a great benefit upon
those using silver.
One writer has estimated the loss of England by such a
transaction as £8,000,000 on her stock of gold, and the
profit of France on her stock of silver as £ 16,000,000.
Nothing can show more clearly the divergence of
opinions held by monometallists as to the practical effect
of the carrying out of their doctrines to their legitimate
conclusion than these two surmises, made by equally
competent thinkers and writers.
The next objection which I am bound to notice is the
fear which exists in the minds of monometallists as to what
would happen in time of war. We are told that a war-
making nation would necessarily break the convention and
refuse free minting : that is to say, that if Kussia or Chili
go to war and issue a forced paper currency, this act would
be in breach of the bimetallic convention,
Mr. //. R. GrenfelU
125
Now, what really happens on such an event taking place
is that a belligerent nation does not increase the volume of
its own currency by using pieces of paper instead of metal,
but by exporting its own metal it increases the volume of
the currency in the world at large. Its pieces of paper
being discredited, it is obliged to use the precious metals
for the payment of everything to be bought abroad, and for
its belligerent operations, and it can and does enforce upon
its subjects the duty of receiving and paying in pieces of
paper at home.
The monometallist seems to imagine that at the same
moment when a belligerent is by a natural process exporting
its precious metals, some other country or body of merchants,
either from mere curiosity or from a desire to test the
convention, would send precious metals back into that
belligerent country and have them minted. This proposition
is so absurd that it need only be stated clearly to secure its
refutation.
The issue of paper by a belligerent would have, under a
bimetallic convention, precisely the same effect which it has
now. The explanation of the operation would, however,
lead me into a too lengthy paper. I content myself, then,
with stating my belief that the temporary effect of war and
of forced paper currencies would be somewhat the same as
a large discovery of the precious metals, and would be
spread over a larger surface and more evenly under an
international bimetallic convention than with the present
separate national standards.
Having answered some of the most recent objections
started to bimetallism, I approach the consideration of
certain remedies which have been suggested in substitution
of it. One proposal is to permit the raising of the limit of
legal currency of silver coin to five pounds, instead of two
pounds as at present. Considering that any one may, if he
like it, pay forty shillings in discharge of a debt, and that,
as far as my experience goes, it is never done, it is highly
12(3
improbable that anyone would dream of carrying about
sums of two, three, or four pounds in his pocket in silver
for the purpose of vindicating the rights of that beautiful
metal.
Another plan is to issue twenty or thirty millions of one-
pound notes, of which twenty might be on securities. Thus
we find men who are aghast at the notion of a currency
which, though it does not rest upon gold alone, is yet founded
upon a metallic basis quite ready to increase the circulation
by emitting a large amount of paper, having no tangible
metallic basis at all. If this proposition means anything,
it means that in England, as is now the case in Ireland and
Scotland, every one would use one-pound notes instead of
sovereigns. Those who are in favour of this proposition
would do well to read the chapter in Lord Liverpool on
paper currency, in which he says : —
" It is certain that the smaller notes of the Bank of Ensrland,
" and those issued by country bankers, have supphmted the gold
" coins, usurped their functions, and driven a great part of them
" out of circulation: in some parts of Great Britain, and especially
" in the southern parts of Ireland, small notes have been issued
" to supply the place of silver coins, of which there is certainly
" a great deficiency.
" I will first observe, that if this practice is suffered to con-
" tinue, as at present, without any limitation, there can be neither
" use nor advantage in converting bullion of either of the precious
** metals into coins, except so far as it may serve for the conveni-
" ence of your Majesty's subjects in their most private concerns ;
" that is, no greater quantity than many of the writers who have
" of late speculated on this subject will allow to continue in
" currency : the bullion of which these coins are made had better
" be exported in its natural state, like any other unmanufactured
*' commodity, for the use of which the trade of the country has
" no occasion. The coins of your Majesty when earned into
" foreign countries, will only be valued as bullion ; and the pre-
" cious metals, whether exported in coins or in bullion, will
Mr. H, R. Grenfell,
127
" equally servo the purpose of a commercial capital ; and it is
" useless and absurd to impose upon the public the expense of
*' making coins, merely for the purpose of sending them out of
" the kingdom."
I have now endeavoured to show that international
bimetallism would be in accordance with the opinions and
principles of some of those who are looked up to by
economical writers with profound and deserved veneration ;
that Sir Robert Peel admitted bimetallism to be in accord-
ance with the principle of the metallic standard ; that
Lord Ashburton had good reason for thinking that it would
have the effect of facilitating the return to commercial
calm after ordinary stormy weather ; and that the views
of Lord Liverpool as to the value of bank money would
be more nearly acted upon by creating an international
measure of value than by adhering to a separate national
standard.
The most singular part of the whole controversy is that
both this country and the United States seem to have
abolished the silver element in their standard accidentally.
It has already been shown that in 1819 the question of
silver hardly found, a place in the resumption discussion
in England, and with regard to the United States, Mr.
Groesbeck, the delegate of that country at the conference
of 1878, stated that the demonetisation of silver in 1873 was
passed " through inadvertence," and on being asked what
he meant by it he said that it had occurred when the Govern-
ment was in a state of suspension, and when public attention
was not sufficiently directed to the subject, and further that
a number of members of Congress had confessed to him
that they had not known what they were doing.
The Conference of Paris has now been adjourned till
the 30th of June, in order that the delegates may receive
fresh instructions. The opinions of most of the govern-
ments were already so well known that, beyond bringing
128
tKe questions at issue into a still more definite and con-
densed shape than they were before, there is little fresh to
remark upon except the important propositions made on
behalf of the Indian Government by Sir Louis Mallet, and
by Baron de Thielmann on behalf of Germany.
The former is simply a promise not to demonetise silver.
The German proposition is founded on the admission that
£87,000,000 of gold had been coined, that £54,000,000 of
silver had been demonetised, and that the expenses of this
operation had amounted to £2,200,000, while ^25,000,000
of silver still remains in Germany.
To enable those countries where silver had not been
demonetised to carry out the reforms which the Conference
had met to consider, the German Empire is willing to
abstain from all sales of silver for a fixed period, and to
confine itself afterwards to such a limited amount as would
not encumber the general market.
Thalers might be forbidden to be sent to the mints of
the bimetallic union, or those mints might refuse to take
them, so as to make the operation of selling them too
costly.
Germany would also be willing to recall the gold pieces
of five marks, and the treasury notes of the same value, and
to re-issue five and two mark pieces to the amount of about
£8,000,000, taking as a base a ratio between the two metals
as near as possible to 15^ instead of that which, according
to the present law, equals a ratio of about 1 to 14.
Having heard the above propositions from Germany,
the energies of the Conference were devoted on the
one hand to the persuasion of the English delegates to
make some concessions, and on the other to induce
France and the United States to proceed to a practical
solution in case England should be unwilling to accede to
their wishes.
It would be obviously improper for me to offer any
opinions of the projects submitted or to be submitted to
Mr, II. R. Grenfell.
I
129
our Government in furtherance of the common object
which all parties have in view — namely, the steadying of
the prices of the precious metals in relation to commodities.
In this discussion my wish has been to keep clear from
anything like zeal and enthusiasm. I am absolutely without
any prejudice in the matter, and I have confined myself, in
the evidence I have quoted, with the exception of that of
Lord Ashburton, to the facts honestly brought out by those
from whom I differ, so that I may say that the small bias
Avhich exists in my mind upon the subject is almost entirely
due to the study of my opponents' opinions.
If, then, I am forced to- answer the question " What
" is a pound ? " I incline to answer it in the words of
Sir Robert Peel — namely, that we ought to return to " the
*^ ancient standard of the realm," or, as the Americans call
it, "the dollar of our fathers," rather than to adhere to
the measure carried by that statesman, and founded upon
Lord Liverpool's letter.
H. R. GEENFELL.
IS THE VALUE OF GOLD AND
SILVER MONEY ARTIFICIAL ?
To the Editor of nie Th)ws*—Msij 7, 1881,
Sir, — Gold and silver have real and artificial values —
real and natural, as for gilding, for use in surgical appli-
ance, forks, spoons, and other things; artificial, for money,
for circulating mediums. Owing to their real and natural
value and the easy way in which that value can be stamped
on them, and other considerations, every civilized nation
takes gold and silver as representatives of value, and uses
one or both metals as its money or circulating medium.
This artificial value is much greater than the real. If
some substitute for gold and silver were found which could
be used more advantageously as money and displace them,
their exchangeable values would be vastly less than at
present. That is, if an ounce of gold exchanges for two
quarters of w^heat now anywhere, it would, if it ceased to
be used as money, exchange for much less — how much, is
beyond speculation. New uses would be found for the two
metals as they became cheaper, and they might retain a
considerable proportion of their exchangeable value.
But does it not follow from the value of these metals
being mainly of this artificial character and used mainly
* Tliese Letters, by tlie Right Hon. Lord Bramwell, IMr. T. H. FaiTer,
Mr. H. H. Gibbs, Mr. H. D, Macleod. and M. Cemuschi, are reprinted
from The Times.
k2
132
by few consumers, that their value relative to each other
can be kept practically at a definite ratio ?
If all the Governments of the world determine that they
will give " A " ounces of gold for " B " ounces of silver
and " B " ounces of silver for " A " ounces of gold, and no
more nor less, will not '' A " ounces of gold always be worth
"B" of silver?
For suppose, it having been so determined, very pro-
ductive gold mines, as they are called, are discovered, what
will happen?
This : the less productive gold mines will cease to be
worked, and the less productive silver. There will be more
gold and less silver. For suppose the same labour and
capital before the discovery of the new mines produced
*' A " ounces in gold and " B " ounces in silver, no rent
being paid, better mines of each metal paying rents where
more of either was produced, and suppose, owing to the
discovery, the capital and labour which produced "A"
ounces in gold produces five-fourths " A" ounces in gold,
paying no rent, all gold mines producing less will cease to
be worked, and all silver mines producing less than five-
fourths " B " ounces of silver. Of coiu-se, not at once nor
immediately, but in time, in the long run.
The same thing would be true if the discovery were
of new mines of silver. The same also would be true if
either metal became more difficult of production from
exhaustion of the mine. So that if gold mines became
productive we should have more gold money, if silver
mines more silver money. It will be asked what would
happen, if, for example, gold became so abundant that
no silver mine could be worked at the same ratio —
e. g,, if twice " A " ounces of gold could be got for the
labour and capital formerly required to get " A " ounces
and no silver mine would for that capital and labour
produce twice " B " ounces ?
One answer to the case supposed is, that it is impossible.
Lord Bramwcll.
133
Another is, that if it were possible, we should in time have
all gold money. A third is, that after a time the gold
mines would be exhausted and silver would come in again.
The same reasoning is true if silver increased in productive-
ness. The world would have a period of heavy, clumsy
money. But the thing is impossible.
I have suggested this would be true if all civilized
nations would agree to the ratio of "A" to " B," or any
other. But would it not also be true if the greater part of
them would — the great consumers of the two articles, the
great minters: all Europe and America, perhaps, without
England ?
It may be asked. Could they make gold and silver of
equal value, or gold 50 times the value of silver? I am not
sure ; I doubt it. I should think they must adopt a ratio
as near that of the cost of production as can be arrived at.
But this may be shown. The relation of value of the two
metals, both being money, must be between the relations of
value they would have to one another if each were exclu-
sively money. For suppose gold, and gold only, is used for
money, and that silver is produced to supply the demand
for the use for purposes other than money. Suppose that
being so, that one ounce of gold equals " A " ounces of
silver ; next suppose silver the only metal used for money,
and that then one ounce of gold equals " B " ounces of
silver, " B " will obviously be less — less in number — than
«^ A" — that is to say, gold will exchange for less silver when
silver alone is money than when gold alone is. Now,
suppose an attempt is made to use both metals as money,
and it is determined that for this purpose one ounce of gold
shall equal " C " ounces of silver, " C " in amount in number
must be between "A" and " B."
For the use of gold for ordinary purposes would cause it
to be absorbed at the rate of one ounce equal "B"; and if
" C " is less than " B " no gold will be taken to the Mint;
on the contrary, gold in circulation would be withdrawn
134
and melted down. So if ^^ C " is more than "A" no silver
would even be minted.
It may be asked, could iron or copper be dealt with in
this way — i, e,, a fixed ratio established between them ? I
say no ; nor beef and mutton. Their values are not at all
artificial, but wholly natural ; and the consumers could not
be got to agree on a ratio.
Is not bimetallism then a possibility? It would be
attended with this consequence — if either metal or both
became more abundant, the exchangeable value of both,
not inter se, but in relation to other commodities, would be
lowered. If either or both became less abundant, the ex-
changeable value of both, not hiter se, but in relation to
other commodities, would be raised. The world, therefore,
would have its circulating medium liable to more frequent
fluctuations in value than if it was monometallic. On the
other hand, as both gold and silver would be raised or lowered
at the same time, those fluctuations would be less in extent.
The cause of change would be spread over a larger area.
If bimetallism is adopted, the ratio of gold and silver
apparently should be 1 to 15^, for the reasons given by
M. Cernuschi in his last pamphlet — viz., it is practically
the ratio of the world; the ratio or nearly of four five-
franc pieces to the napoleon, of thalers to marks in gold,
of rupee to sovereign, and so on. If a higher ratio were
adopted — say, one of gold to 20 of silver — some silver
mines would be abandoned ; if lower — say, one to ten —
some gold mines Avould be. It might, however, be worth
while to see what could be said to some other ratio. If
this ratio, 15 J to 1, was adopted, gold would fall in value
and silver would rise. For the circulating medium would
be made up of both metals instead of one, as it is now
throughout Europe. For Europe is either monometallic
in gold or bimetallic with silver when coined, appreciated
by a limitation of the coinage. But it is obvious that if
two metals are used for the circulating medium instead of
Lord BramwelL
135
one, and the added metal is appreciated, the other will be
depreciated.
Supposing bimetallism established, what good would it
do to the world ? I have shown it would make fluctuations
less in extent, but more frequent. Would this be a benefit
on balance ? Some people suppose that because there would
be more money the world would be better off. An utter
mistake. It might as well be said that the world would be
richer if bank-notes were printed on larger pieces of paper.
It is a paradox, but the world has enough money and so
has every country.
Suppose by some magic all the gold coins and all the
silver, and all the bullion were doubled in size, what would
be the effect ? The world would be richer, because it would
have more of an article of real value and could afford to
turn more of its coin or bullion into spoons, &c. ; but,
allowing for that, the quarter of wheat which sold for £ 2
would still sell for £2, only each sovereign would be twice
as big as before. Similarly, if by some magic all coin and
bullion was made half as big only as it was, some gold
and silver would be turned into coin; but, allowing for
that, prices would be the same.
The truth is, the world uses gold and silver as circulat-
ing medium, only taking from it so much for other purposes
as it is worth while to take. It does not make its saucepans
of silver, because people would rather have what can be
got by the material turned into money than have silver
saucepans. So of each country. It parts with its precious
metals to foreigners for something it values more, where by
so doing it has raised their value it retains them. Scarcity
of money rarely means scarcity of coin or bullion. No
doubt the discovery of new and productive mines is a good
thing for the country where they are and a great stimulus
to trade and movement, but a very doubtful good to the
world at large, perhaps even a harm. For it takes its
capital and industry from the production of what the world
136
wants to the production of what it does not want. If it
were discovered that hammering gold for 24 hours doubled
its size and weight, there would be a great deal of hammer-
ing and a great deal more gold; but the world, instead of
being richer, would be very much poorer.
But then it is said that the burden of national debts
and other obligations would be less than with a mono-
metallic circulation of gold. Certainly. So it would be
if the sovereign was alloyed with half silver. So it would
be by any other contrivance that wronged the creditor.
It is strange that they who advocate bimetallism on this
ground do not see they are advocating wronging the
creditor.
True it is that gold is appreciated at this time, at least
I believe so ; but the creditor runs the risk of its being
depreciated. Why is he not to have the benefit of his
bargain to be paid in gold, because that is appreciated ?
But then it is said, " See how the demonetization of silver
" by Germany has lowered its value, and what will happen if
" Germany goes on with the process and demonetizes its
" thalers, and if France does the same with its silver ? "
Silver will fall to half its present value or less. Perhaps,
and this furnishes an excellent reason why nations with a
stock of silver should be bimetallic, or monometallic with
silver ; but, at the same time, it furnishes an equally strong
one for a nation with a stock of gold like England not to
be so. If bimetallism is adopted at the ratio of 1 to 15J,
silver will rise in value as compared with gold, say, in
round figures, from 52 to 60, or about 16 per cent. I say
as compared with gold, not generally, because gold, as I
have shown, will fall in exchangeable value with other
things.
Let us halve the percentage and say that the real fall
in the value of gold is 8 per cent., the rise in silver 8 ]ier
cent. Suppose we have a stock of gold of £100,000,000.
We lose £8,000,000. The French, it is supposed, I
137
believe, have £ 200,000,000 of silver ; they gain £ 1 6,000,000.
The Bank of France would be straightway £4,000,000
richer.
But it is said " consider India. That country has a vast
" stock of silver which would be appreciated." I doubt
it. I doubt if the depreciation has reached there. The
thing is most mysterious. Great mistakes are made about
India. People talk of a loss by the Indian exchange.
That is wrong. A loss by exchange is always of small
amount and temporary character, and is a loss on gold
against gold, or silver against silver. It is no more a loss
by exchange than it would be if India paid its tribute to
us in silk, and silk would not fetch as much in the European
market as formerly. A loss by exchange ought never to be
greater than freight, insurance, and other expenses.
This is not a question of words, but of substance. India
has to pay us so much in gold. It may buy that gold here,
or at home, or anywhere else. The thing it has to buy
gold with is silver. The same silver would not buy as
much as it would formerly. India, therefore, has to find
more silver. If silver has not fallen in price and India
exacts more from its taxpayers, it adds to the tax on them ;
otherwise if silver has so fallen, for then the taxpayer would
get more silver for the same produce of indigo, rice, or
wheat. They would have risen in price. But it is said
they have not. If so, the depreciation of silver has not
reached India. Still, it cannot be denied that in time it
must. In time the stock of silver in India will be of less
value, and India, to have enough money, must deprive
itself of things which it has, and so be a loser. It must
export more, as Mr. Bagehot showed. Is it worth England's
while, then, to forward bimetallism ? It is said it will be
done without us. Perhaps, but should we help ?
In considering the question, the effect of the change on
debtors and creditors should be borne in mind. It is,
perhaps, incorrect to say that the creditor would be wronged.
188
He has bargained for payment in gold, and will be paid in
gold or what will purchase that gold, and there has been no
bargain with him not to improve the currency by making
it bimetallic. But would it be just to make it bimetallic,
not to improve the currency, but to diminish the burden of
debt?
B.
(BEAMWELL.)
April 2^, 1881.
To the Editor of The Times.— Kaj 21, 1881.
Sir, — May I be allowed to appeal to history on a sub-
ject which is generally treated as a matter of scientific
deduction, and to state one or two matters of fact which
appear to me to have an important bearing on this question?
The arguments put forward in favour of bimetallism con-
stantly assume that the value of gold and silver coin is
artificial. Value, it is justly said, depends on supply and
demand ; if either of these is within the absolute control of
law, law can, it is said, regulate values. The supply of the
precious metals is admitted not to be within the control of
law. But it is alleged or assumed that the demand for
gold and silver coinage is a matter which depends upon and
is regulated by law. It is the use of coin as money which
creates the demand for it ; and it is the Government wliich
says what shall constitute money. The action of Govern-
ment, therefore, gives money its value ; and if all Govern-
ments agree, they can, at least, go so far in determining
the value of money as to fix the ratio of value between
gold and silver money.
Such, as I understand it, is the contention, and the
question I wish to ask is whether the history of our own
Mr. T. II, Farrcr,
139
coinage bears out this view; and for this purpose I will
refer shortly to the facts of that history as given in the
first Lord Liverpool's well-known letter on the coins of
the realm.
It is imnecessary to go back fiirther than the reigns of
Charles II. and James II. At that time silver had for
centnries been the money of account and the standard of
value. Gold coins had from time to time been introduced,
and eiforts had been made by different kings to determine
the relative values of the gold and silver coin. But these
efforts were unsuccessful; the attempt to determine these
values had been abandoned, and at the time of the Revolu-
tion of 1688 silver alone was the money of account and
legal tender. Gold guineas were issued and were in use,
but there was no law fixing the price or value of the gold
coin; and the guinea, which was originally supposed to be
equal to- 20^. in silver, circulated at the value in silver
which the people chose to give for it, and rose in value as
the value of gold rose.
In the early years of William III.'s reign the silver
coins had become clipped and defective to the extent of
nearly half their weight ; prices at home and exchanges
abroad were thrown into confusion ; the evil became in-
sufferable ; and at last, under the guidance of Montagu and
by the advice of Locke, the old silver coinage was called
in and good silver coins were issued, at a loss to the nation
of about £3,000,000. It was expected, on the faith of
theories which, taken by themselves, were perfectly sound,
that things would return to their previous condition ; that
silver, being the money of account of the country, or, as
we should term it, legal tender, would resume its place ;
and that the gold coin, to which no definite value was
attached by law, and which was not legal tender for the
payment of debts, would circulate, if at all, at a price in
silver corresponding to the value of gold in the market.
But none of these things happened. The newly-coined
140
silver was exported; little or no fresh silver was brought
to the Mint to be coined; the gold guineas took the place
of the silver coinage, and continued to circulate at a price,
in silver, higher than the intrinsic or market value of the
gold contained in them. They did this without any law
fixing their value, and in spite of the law which made silver
the legal tender and money of account. In spite of law,
in spite of deficiency of intrinsic market value, people
preferred the gold coins, and kept to them. The guinea
had become a token coin, not by law, but by habit and
inclination. Lord Liverpool says (p. 92): —
*' The high rate of the gold coins to which the people then
" voluntarily submitted can only be ascribed to the preference
" which at that time began to be given to the use of gold coins in
" all payments, at least of considerable amount. It is evident
" that during the late re-coinage the common people had become
" accustomed to the use of the gold coins, and the reason which
" induced them still to prefer them was, perhaps, the convenience
" of making large payments in coins of that metal. This change
" from what had been the case in the reign of Charles II. was
" probably owing to the great increase in the commerce of the
*' country, and to an augmentation in the price of every commodity,
" so that payments in general required coins made of the most
" valuable metals. The fact certainly is that from this period the
" gold coins began to take the ascendency, and to become the more
** usual instrument of commerce and measure of property, in pre-
" ference to the silver coins. In the reign of King William, when
" the silver coins were so very deficient, Mr. Locke had said : — ' It is
*' ' no wonder if the prices and value of things be confounded and
" 'uncertain when the measure itself is lost.' To restore this
" measure the public had expended £2,700,000. But, notwith-
** standing so great an expense, this measure of property in the
" lapse of a very few years was a second time lost, and had again
" no existence unless it had passed into the gold coin."
In this state of things the Government of George I., on
the advice of Sir Isaac Newton, determined to fix by law
^/r. T. II, Farrer,
141
the value of the gold guinea, wishing apparently to prevent
the exportation of the silver coin. They did not, however,
reduce it from 21^. 6d., the then current value, to 20^. 6d.,
the actual value, but only to 2ls., leaving it still above the
market value of the coin in silver. The effect was to con-
firm the tendency of the people to pay in gold coins, and
gold has ever since, by law as well as habit, been the current
money of the country. Silver coins ceased to be used in
large transactions; various statutes, commencing in 1774,
deprived it of its character of legal tender, except for pay-
ments of small amount, and it was ultimately reduced to its
present condition of a token coinage.
The interesting point in this history is to see that we
have obtained our present gold coinage, not by law, but to
a great extent in spite of law; that law was powerless to
force upon the country a currency which it did not want,
but all-powerful when it followed and stereotyped the prac-
tice of a people ; that this practice was suggested by
motives of convenience and inclination differing from and
counteracting the motives which arose from a mere con-
sideration of market values ; and that, even in such a matter
as currency, speculations founded on the effect of law, or
even on mere considerations of value, have been and are
likely to be at fault unless corrected by a careful con-
sideration of special wants and circumstances.
Political economists ought to be well satisfied with these
results. They illustrate and confirm the position that the
value of coined money is, like that of other things, a ques-
tion of supply and demand; and it depends on human wants
and habits ; and that if law is to be effectual, it must follow
and consult these wants and habits; in other words, that
the value of gold and silver money is at bottom '' natural,"
just as other values are natural.
These words will not have been useless if they call
attention to Lord Liverpool's celebrated letter, republished
last year by the Governors of the Bank. The way in
142
which he collects and states actual facts before generalizing
from them, and in which he corrects logical deductions by
reference to experience, may well afford a valuable lesson
to many modem economists, and especially to those advo-
cates of currency reform who appear to think that they
have solved a practical question when they have stated it
in the clear and definite form of an algebraical problem,
and who prophesy the results of their schemes with as much
confidence as if they were getting out the values of a: andy.
What the effects of bimetallism would really be I will not
venture to say, but I will venture to say that they are much
more doubtful than its advocates suppose.
F.
(T. H. FARRER.)
I
To the Editor of The Times.— Kay 26, 1881.
Sir, — Your correspondent " F.," in The Times of
yesterday, says that the value of gold and silver money is
at bottom natural, as other values are natural, and that it
depends, not on law, but on wants and habits.
Permit me to observe that the facts quoted by him in
proof of his statement really turn against him. " F."
says : —
" The Government of George I., on the advice of Sir Isaac
" Newton, determined to fix by law the value of the gold guinea,
" wishing to prevent the exportation of silver coin. They did not,
** however, reduce it from 2\s. 6d., the then current vahic, to
" 205. 6d., the actual value, but only to 2ls., leaving it still above
" the market value of the coin in silver."
Now, this so-called market value was nothing else than
the legal ratio between gold and silver on the Continent,
143
Had the reduction to 20s. Gd, been made, the exportation
of silver would have been prevented and international
bimetallism established. Sir Isaac Newton thoroughly ex-
plained this matter (see Cobbett's Parliamentary History,
vol. vii., 525). The habit of the people as regards coins is
nothing else than the inevitable result of a monometallic
legislation, or of a difference of ratio between the national
bimetallic legislation and a foreign one.
I am. Sir, yours obediently,
HENKI CEENUSCHL
7, Avenue Velasquez, Pare Monceau,
Paris, May 22.
To the Editor of The Times.— May 26, 1881.
Sir, — A writer in The Times of Saturday, who appends
the signature " F." to his very able letter, attacks what he
apparently conceives to be a position of the bimetallists —
that, whereas it is the use of certain metals as money which
gives them their value, and whereas it is the Government
which says what shall constitute money, it is the action of
Government which gives money its value. But where is
the bimetallist who has said that the value of certain metals
springs entirely from their use as money ?
It is true that the use of a metal as money, like any
other use which may be discovered for it, gives additional
value to that metal, but, speaking as a bimetallist, I deny
that the money-metals have no value but w^hat the action
of Government gives. But it is true that the greater part
of the value of vofxiajia (money) is given it by vofiog (law),
to which it, as Aristotle says, both etymologically and
actually owes its origin.
144
It is, as Aristotle again says, consent wMcn establishes
its use as money, and law springing from consent. And
this is, in fact, the gist of " F.'s " historical argument.
Consent, he says, in King William's reign made gold the
money of common use in England, and law, beginning in
King George's reign, ratified that consent.
In "F.'s" statement, again, that "the value of gold and
" silver money is natural, just as other values are natural,"
I fully agree. What, then, is the value of silver, for
instance, as measured in gold ? That which the market
price demonstrates ? Yes, the value at any given moment,
but not the value in the abstract.
What really defines the value of the commodity silver
as expressed in the money gold is the cost of production
(expressed, for convenience, in terms of that money). But
has the cost of production — the real cost, the labour at the
mines, altered since 1872, so that the cost of the mass of
silver is absolutely less than it was when the market price
of the metal was 60c?. an ounce ? Not, I think, in any
appreciable degree.
It may be said, and truly, that by the demonetization
of silver a vast mass of the metal has been "produced" —
as really produced as if, silver not having been demonetized,
a vast increase of mine-yield — such an increase as was
vainly predicted of the Comstock Mine — had taken place.
So, by this means, the cost of production of the mass is
appreciably less.
That is very true ; but the increased mine-yield would
be pei*manent and substantial ; the increase caused by
throwing some of the stock of silver out of work is of a
very dift'erent character. Demonetization has produced it;
remonetization of the metal would in one moment undo
what had been done — would un-produce the additional
stock ; and then the true measure of the decrease (if any)
in the money value of the commodity silver would be the
addition to the mass made by the late discoveries in
Mr. H. H. Gibbs.
145
America, an addition of no moment when compared Avith
the quantity of the pre-existing mass.
I quite admit " F.'s " suggestion that no agreement
between Governments and no law promulgated by any
Government for the adoption of a double standard of value
can so far affect the matter as to prevent people from
making separate bargains to be paid in this or that pre-
ferred metal. But, as he shows, it is not the market value
(however clearly proved) existing before such an agreement
or such a law which would determine its acceptance by the
people, and my contention is that, even if there had been
some insignificant difference in market value between the
two metals, people would soon be tired of making stipula-
tions which would prove of no real advantage to them, and
that convenience would soon produce that consent which is
necessary for permanence.
It suits, indeed, the argument of the writer of the
Money Article in The Times of the 7th inst. in his com-
ments on an able letter signed " B." to assume that those
who advocate the double standard contend that it is the
arbitrary will of princes which gives value to money, and
" F.," in his present letter, seems, as I have said, moved to
combat some such imagination. But "B.'s" letter said no
such thing, nor does any one else so far as I know.
What I have asserted above is, that the use of silver
as money gives additional value to the stock of that metal
in existence, just as the use of wool for clothing gives
additional value to the stock of wool in existence. If
man were suddenly endowed by nature with a coat of fur,
the demand for woollen clothing would diminish and the
market value of wool would fall. So if another substance
— gold — is found more suitable to serve as money than
silver is, the demand for silver diminishes and the value of
silver falls, and the more so if its value is measured in that
metal — gold — of which, by the hypothesis, the value has
risen in proportion as the demand has increased.
L
146
'hat demand is the immediate creation of consent anc
law (though springing from intrinsic qualities existing, or
supposed to exist, in the metals), and it cannot, therefore,
be denied that consent and law — sometimes, as "F." shows,
consent withotit and even in spite of law — give value to
the commodity ; but that differs widely from the belief
which the above-mentioned Money Article in The Times
attributes to " B." — "that the value of the metals used as
" money is wholly artificial and dependent on the will of
" Governments."
In Tlie Times of to-day, again, the writer of the Money
Article uses the same kind of method in combating a belief
which he attributes to bimetallists, that the adoption of
their system will make prices steady. I am not aware
that any bimetallist has expressed such a belief. The use
of silver and gold as money cannot influence the cost of
production of the commodities which they have to measure,
and cannot, therefore, make their prices steady or other-
wise. What bimetallists assert is that, so far, and only so
far, as prices of commodities depend on the greater or less
quantity of the mass of money in the world they will be
steadier (as Mr. Jevons, himself no bimetallist, clearly
shows in his Money and Mechanism of Exchange, p. 138)
when two metals form the measure of value than when one
forms it.
Yours faithfully,
CHRYSARGYROS. '
(HENRY H. GIBBS.)
May 23.
147
To the Editor of The Times— M&y 27, 1881.
Sir, — M. Cernuschi draws strange conclusions from my
facts. I sliowed that when the Governrftent attached no
vahie to gold, and did all that a Government could do, by
law and by good coinage, to attach value to silver, the
people of this coimtry rejected the silver and kept the gold,
though they had to pay a fancy price for it ; and, further,
that the law was then made to follow this practice of the
people, by attaching to gold a greater proportionate value
than to silver, and that it was then, and not till then,
obeyed.
M. Cernuschi draws the conclusion that if the Govern-
ment, instead of following the practice of the people, had
attached a higher value to silver, the law would have been
obeyed, English people would have kept their silver, and
England would now be a bimetallist country.
My conclusion, if I were to draw one, would be that if
the Government had done as M. Cernuschi suggests they
might have done, the English people would have disre-
garded the law, would have rejected the silver, and would
have kept the gold, even if they had had to pay an agio
for it.
But I am not strong in " would have beens." The
object of my letter was to draw attention from the " would
" he's " and " must be " of which, it seems to me, many
bimetallists are too fond, and to direct attention to what
" has been " and what " is."
F.
(FAEREE.)
Mai/ 26.
L 2
148
To the Editor of Tho Times— M&j 28, 1881.
Sir, — In the. very able letters of " F." in your Satur
day's issue and of " Chrysargyros " in your issue of to-day
there is some misapprehension of the way in which gold
became the sole legal tender in this country, which I
request you to allow me to correct.
Both writers seem to think that gold became sole legal
tender by law in the reign of George I. This, however,
is an error.
The real facts are these. Both gold and silver were
unlimited le^al tender in the beo:innino: of the last centurv.
Guineas were current at 21 5. 6d. But the ratio of the
English Mint being different from the ratio of foreign
countries great disturbance ensued. On the question being
referred to Sir Isaac Newton, he showed that the true
value of the guinea was 20^. 8^. But in December, 1717,
the guinea was fixed at 2l5. ; and then, in the language of
the Mint, the price of gold was fixed at £3 17.<f. lO^d,
per ounce.
Gold and silver continued equally unlimited legal
tender ; but gold, being thus overrated by 4(1. on tlie
guinea, was gradually adopted by mercantile custom (not
law) as the understood medium of payment in the course
of the last century. Silver being underrated by law, in
accordance with what is now recognized as Gresham's law,
all the good silver was exported, and none but worn,
clipped, and degraded coin remained in circulation. This
became so intolerable that in 1774 an Act was passed
limiting legal tender of silver to £25, And so the law
remained till the great re-coinage in 1816, when silver,
which was then coined as a token, was further reduced to
405. as le^al tender.
149
I regret to sec that " Chrysargyros " still sticks to the
exploded cost of production theory of value. Nothing can
be more erroneous. To show its fallacy, it is only neces-
sary to state the well-known fact that even inconvertible
paper may be maintained at the value of gold, if only it
is rigorously limited in quantity. In 1874 the inconvertible
notes of the Bank of France circulated at par with coin.
How could this be if their value depended on cost of
production ? Value depends purely on intensity of demand
and limitation of supply.
Your obedient Servant,
H. D. MACLEOD.
Oxford and Cambridge Club,
May "IQ.
To the Editor of The Times.— Zmx^q 1, 1881.
Sir, — In his second letter " F." contends that in re-
ducing the legal silver valuation of the gold guinea to 21 5.
the Government in 1717 did all that a Government could
do. I cannot agree to this. Why could not the same
Government reduce the silver value of the guinea to the
point suggested by Sir Isaac Newton, the point which
would have established in England the same legal ratio
between silver and gold as on the Continent, and thus
prevented all temptation, as Newton had said, of importing
or exporting one metal rather than the other ?
"F." thinks that English people would reject silver
and prefer to keep gold even if they had to pay an agio for
it. I answer, England possesses 30 millions of gold sove-
reigns lying permanently in the banks of England, Scot-
land, and Ireland, and 30 millions in the hands of the
public, together with 20 millions of debased silver coin.
People's habits are the same in England as in France,
150
In both countries the small payments arc made witli
silver, gold, and notes, the large with notes, cheques, and
clearances, without handling any metal. When inter-
national bimetallism is adopted by England there will be
in the Bank of England, side by side, gold bars and silver
bars, the latter to be the first employed for paying all
foreign countries except Scandinavia and Portugal. But
no change will be imposed on people's habits. The bime-
tallic reform will not even be visible to the naked eye.
Paid in specie or by cheque, money is not received to
be kept, but to be spent immediately, or to be credited in
the banker's books. Nobody consents to pay, nobody
dreams of asking, an agio above the level par either on
gold or silver, if not induced to do so by a foreign mone-
tary legislation difl'erent from his own.
Yours obediently,
HENEI CERNUSCHI.
7, Aveuue Velasquez, Pare Moneeau,
Paris, 3Iay 29.
To the Editor of The rimes.— June 2, 1881.
Sir, — Mr. Macleod, in The Times of last Saturday7
attributes to me the opinion that gold became sole legal
tender by law in the reign of George I. This is, however,
not what I said.
What I said Avas that gold was not legal tender at all
in the reigns of James II. and William III., because there
was at that time no law fixing the value of gold coins in
silver, which w'as the money of account ; that gold coins
circulated, to use Lord Liverpool's words, as a commodity ;
151
that, notwithstanding this, the gold coins were given and
taken by tlie people at a fancy price, and silver Avas ex-
pelled ; and that the law became effectual only when it
followed the habits of the people, and fixed the value of
the gold coin in silver at a rate corresponding to those
habits. I am quite aware that silver, which had always
been unlimited legal tender, remained so until 1774. It
was expelled from circulation, first by the practice of the
people, and afterwards by the change in the law made on
the advice of Sir Isaac Newton in the reign of George I.,
which followed and confirmed that practice. The law of
1774 and the subsequent laws which have limited the func-
tions of silver as legal tender have still further followed
and confirmed that practice, and are consequently effective.
All these facts confirm my original position that the value
of money is not artificially created by law, but it is natural
in the sense in which other values are natural.
M. Cernuschi's letter in your paper of to-day (June 1)
calls for no reply from me. I have been dealing with what
" has been," not with what " would be."
F.
(FAREER.)
June 1.
THE DOUBLE STANDARD/
From the Right Hon. EARL GREY, K.G.,
TO Mr. H. R. GRENFELL.
HOWICK,
May 31, 1881.
Dear Mr. Grenfell, —
I have just been reading the pamphlet by Mr. Gibbs
on The Double Standard, with an introduction by yourself,
and I should feel much obliged to you if you would
consider the following remarks which it has suggested
to me.
Mr. Gibbs has, I think, succeeded in showing that the
existing arrangements restricting the use of silver as an
instrument of exchange are even now a source of great
inconvenience to the whole commercial world, and threaten
to produce still more serious evils uuless some change should
be made in them. But while I concur to this extent with
Mr. Gibbs and yourself, I must confess that I cannot believe
that the inconvenience he describes could be cured by the
means he recommends of establishing a Double Standard of
value by the consent of the principal commercial nations of
the world. Mr. Gibbs admits the force of the objections to
the adoption of a Double Standard of value by a single
nation, which since the days of Locke have been generally
* Correspondence between the Right Hon. Earl Grey, K.G., and
H. R. Grenfell, Esq., Governor of the Bank of England,
154
recognized as insurmountable, but he urges that these
objections to the system would not apply if it were adopted
as generally as he desires. His argument in support of this
view of the subject is exceedingly ingenious, but without
attempting to answer it in detail I must say that it does not
appear to me to be satisfactory. I cannot believe that an^
agreement among nations, however general it might be, or]
any laws they could make to give effect to it, could prevent]
the relative value of gold and silver from being determined!
by the supply and demand, and ultimately by the cost oi
producing the tw^o metals. If both w^ere made equally]
available by law for the discharge of debts, that which wasj
at the moment obtainable at the least cost would be chosei
by debtors to meet their obligations. This would not
happen the less because the mode in which the cheapest
metal would be made to supersede the other would be some-BI
what complicated, and the result would in the end be the
same in the whole body of nations united by tlie proposed
agreement, as in the case of a single nation, though they
would not, perhaps, be arrived at so quickly. If there-
should be an increase in the quantity of either gold or silver:
produced annually, together with a diminution in the costj
of producing it, I can see nothing in the plan proposed by
Mr. Gibbs which could prevent the metal which had thus
become the cheapest from being brought in increasing
quantities to the mints of the various nations included in fll
his proposed union, and thus gradually bringing down the
value of the circulation in them all to the level determined
by the greater cheapness of one of the metals.
Inconvenience would thus arise from having a Double
Standard, even if, in the first instance, the relative values
assigned by law to gold and silver coins were accurately
adjusted to the natural prices of the two metals in the
markets of the world. But fjir more serious difficulties
must be anticipated if the various nations that are to be
parties to the proposed agreement are freely to open their
Earl Grey.
I
■
I
155
mints, as Mr. Gibbs desires, for coiiiing both gold and silver
into coins wliich are to be a legal tender in payment of all
debts, wliile the valne assigned to silver coins is to be far
higher than that borne in the market by the bullion they
contain. Should this arrangement be sanctioned by Parlia-
ment, every person would be entitled to carry as much
silver as he pleased to the English mint, and to receive it
back in coins of which 15 pounds and a half in weight would
be a legal tender in payment of the sum represented by one
pound weight of our present gold coinage. But we are told
by Mr. Gibbs that at the present price of silver the intrinsic
value of these coins would be 15 per cent, less than the sum
for which they would be a legal tender ; that is to say, all
debtors would have the right of paying their creditors in a
currency which, if the price of silver remained unaltered,
would be worth 15 per cent, less than that in which their
debts had been contracted.
Of course it is not intended by Mr. Gibbs that such a
gross injustice should be committed, and if I rightly under-
stand him, he trusts that it would be averted by the effect
the arrangement he proposes would have in making the
comparative values of gold and silver correspond in fact
with those assigned to them by law, so that it would
become immaterial to those to whom money is now due
whether they receive it in gold or in silver. I am not
prepared to admit that ieven if the expectations of Mr.
Gibbs on this point should be realized, the change he
recommends could be introduced without injustice unless
some further provision were made for the protection of
existing interests. I acknowledge that so long as the
existing standard of value is maintained unaltered, any
regulations having for their object to economize the use of
gold and thus limit its value, might be introduced without
giving any claim for compensation to those to whom
money is due, but it would be a very different matter to
make silver a measure of value concurrently with gold.
Mr. Gibbs holds that if this were done in the mannS^S
recommends, gold and silver coins Avould be enabled to
circulate together at the relative values he would assign to
them, partly by a rise in the value of silver, partly by a
fall in that of gold, which he anticipates as a consequence^
of the measure, so that the general value of the metallic
circulation of the world would be established at a rate
intermediate between the higher or the lower one it would^
bear, if gold on the one hand, or silver on the other, were to]
become the accepted medium of exchange at their present
prices. Should this anticipation prove correct, would not
an injustice be inflicted on creditors by requiring them to
accept payment of what is owed to them in a currency thus |
depreciated, even though they might still be able to obtain
the same weight of gold coins they could have claimed
before? Without, however, dwelling upon this point, I
have to remark that it would be unsafe to rely on the
expected rise in the price of silver in consequence of its,
having the character of money available for paying all
debts conferred upon it by most of the commercial nations
of the world. Probably the first effect of that change ;
would be to raise the value of silver, but Avhether to
the extent expected by Mr. Gibbs is uncertain, and it is
still more uncertain whether such a stimulus might not be
given to the production of silver that the supply would
speedily become equal to the increased demand, and bring fl
back its price to the present level. Mr. Gibbs, in a very
ingenious and elaborate argument, endeavours to show that
there is no reason for entertaining any apprehension on ■
this score, and says that " the words ' price ' and ' value '
" are misapplied in describing the mutual relation of the
'^ metals forming together one metallic standard of value,
" that is to say, forming inseparable parts of one monetary
" system." I will not attempt to follow Mr. Gibbs through
this argument, but I would ask him wliether he doubts that
the command which money, whether it be of silver or of
Earl Grci/.
I
I
157
gold, has over commodities is in the end determined by the
gre.ater or less abmidance of the metal and the cost of its
production? He clearly agrees in the received opinion
that the value of silver or of gold in the market of the
world determines the value of the currency of every nation
which adopts tlie one or the other as its standard, and that
this value depends in the first instance upon the proportion
between the demand for the metal and its supply. But
unless I misunderstand his argument he does not equally
admit that ultimately the supply, and therefore the value of
the metal, will be regulated by the cost of producing it.
Yet surely it must be so, since according to the return they
yield, a greater or a less amount of labour and of capital
will be applied to the production of the precious metals.
We continually hear of enterprises in gold and silver
mining being abandoned because they do not pay ; no
doubt a rise in the value of the metal produced would
enable some of them to go on and thus maintain the rate of
production. Variations in the price of silver are known
greatly to affect the extent to Avhich it is worked, and with
regard to gold, though its price cannot alter in this country
since it is itself the measure of value, variations in its value
may and do take place with a like result. If gold becomes
scarcer and more valuable, the prices in gold of other
things (including labour) must fall and diminish the cost of
producing it. On the other hand, an increased abundance
of gold diminishes its value, — in other words, raises the
price of everything else. In the last 30 years these
eifects of variations in the supply of gold have been well
exemplified in Australia. When the gold diggings first
grew into prosperity, wages and all articles of consumption
rose there to extravagant rates, which necessarily increased
the cost of producing gold, and tended to limit the quantity
produced. Afterwards, Avhen the exhaustion of some of
the richest diggings, and the flow of gold to other places,
had corrected its local excess, its value on the spot was
<^^ OP THR
'UNI7BRSIT7]
158
reduced, that is, wages and prices in general became lower
reducing the cost of production, and checking the decreas(
of this branch of industry. Il
For these reasons I must adhere to the opinion so long
and generally maintained by the highest authorities, though
now as it seems rejected by Mr. Gibbs, that the value both
of silver and of gold, whether in the form of coin oisAI
bullion, ultimately depends on the cost of producing them.
It is true that variations in that cost do not cause rapid
fluctuations in the value of these metals because they arefll
so durable, and the total mass of them available in the
world at any one time is so large as compared Avith the
produce of a single year, that it is a good while before afll
reduction in the cost of producing either metal, and an
increase in the amount produced, can cause any sensible
variation in its value as compared to the other, or to
commodities in general. Still it is proved by experienc
that variations in the supply and in the cost of producin
the precious metals do sooner or later tell upon their value
Such being the case it is at least not impossible that if,
Mr. Gibbs recommends, all the great commercial nations
were to concur in passing laws assigning to silver as money
a higher value than the metal now commands in the market,jB
this measure instead of producing the effect he anticipates
of enabling gold and silver to circulate together at the rates
proposed, might give such a stimulus to the production o"
silver as to increase the supply as much or more than the
demand, and leave its value as compared to gold, the same
as it now is. This I contend is at least a possible result of
the change of system recommended by ]\Ir. Gibbs, and it
would therefore be unjust to pass a law compelling those to
whom money is due to accept payment in silver coins at the
rate of 15^ pounds of these coins for every pound weight of
sovereigns they arc now entitled to. Mr. Gibbs seems to
feel this, for he says (p. 50) that he "presumes the law
" would provide that debts or other payments falling due
Earl Grey.
to
Lcefll
:ie.fll
159
" under contracts dated before the law came into operation
" might be demanded in gold." Such a provision would
undoubtedly be necessary, but has Mr. Gibbs considered
that it must include all payments of interest on the national
debt, and on the enormous sums lent on mortgage or on
other securities, and what confusion must arise from issuing
silver coins which would be a legal tender in settling recent
transactions, but would not possess that character with
regard to the vast mass of older ones? It seems to me
impossible that Parliament should be persuaded to create
such confusion for the sake of abolishing a monetary system
which has worked well for many years, in order to substitute
for it one which is untried and apparently dangerous.
I therefore regard the arrangement recommended by
Mr. Gibbs as impracticable, but I concur with him (as I
have already said) as to the importance of the object it
was intended to accomplish, nor do I see any reason for
assuming that some better means of effecting it might not
be discovered. Mr. Gibbs believes that unless something
is done to check the prevailing tendency towards an
increased use of gold, this metal will more and more
supersede silver, and become the chief instrument of
exchange for nations, both in their internal trade and in
their commerce with each other. He also believes that the
supply of gold will be insufficient to meet the demand thus
created for it, that its price will consequently rise, or in
other words the price of all commodities in gold will fall,
and that great commercial difficulties must ensue. So far
as I am aware no successful attempt has been made to
answer the arguments advanced by Mr. Gibbs in support
of these conclusions, and if they are accepted as correct, it
follows that he must also be right in contending that it is
desirable that silver should be used to a greater extent than
it seems likely to be as an aid to gold in carrying on the
transactions of commerce. The question then arises
whether it would not be possible to secure this advantage
100
by some arrangement that Avould be free from tb^bjectionS
to which the scheme of Mr. Gibbs is open ? My object iiij
writing this letter is to ask you to consider whether, so far!
as our own country is concerned, this might not be accom-J
plished by a very simple change in our monetary systemJ
involving no departure whatever from its principles. |
By the existing law a part of the bullion which the]
Bank is required to hold as against its issues of notes mayj
be silver. But as this silver cannot be used in payment of]
its notes it is of little real use. I would ask what valid!
objection there would be to providing that when notes are]
presented to the Bank for payment in sums exceeding!
£ 500 the Bank should be at liberty to make the paymenia
one-half in sovereigns, the other half in silver, coined or]
uncoined, at the market price of the day; while it should!
also be authorized to keep in silver instead of in gold]
one-half of the bullion against which it is entitled to issue]
notes? There would be no difficulty in finding some]
trustworthy authority to ascertain and declare the market]
price of silver which should be regularly published in the!
Gazette, as the price of corn used to be to determine the]
duty payable upon it, while the sliding scale was in force.]
The Gazette price of silver published twice a week in the]
Gazette woidd in like manner determine the rate at which
silver would be received or given by the Bank in exchange
for its notes.
You will perceive that the alteration in the law I havej
suggested would be merely the adoption, with modifications,!
to make it suit the circumstances of the present day, of the !
plan long ago proposed by llicardo for a " Secure and
Economic Currency." I would remind you (though it is
hardly necessary to do so) that in his admirable pamphlet
on this subject, he has shown the value of paper money'
issued by the authority of the State to depend upon its
amount as compared to the wants of the State in which it
circulates. No one, I believe, now doubts this to be true,
Earl Grey.
101
and experience has proved that inconvertible paper-money
will circulate not only without depreciation, but even at a
premium, if the issues are sufficiently limited, llicardo
also explained that the real use of insisting upon the con-
vertibility of paper-money, is to secure that its amount like
that of a metallic currency should be self-regulated by
the action of the exchanges, and that this object would be
equally attained whether the paper-money were convertible
into bullion or into coin. On the same principle, I hold
that silver taken at the market price of the day might be
used in conjunction with gold as the basis of our paper
circulation without in the slightest degree disturbing its
value. Large amounts in notes are usually presented to
the Bank for payment less with the view of using the
sovereigns received for them at home than for exportation,
because the state of the exchanges makes a remittance of
gold abroad profitable ; and the practical effect of demands
of this sort upon the Bank is to contract its paper circula-
tion and thus maintain its value. Precisely the same
results would follow if notes presented for payment in large
sums were paid as I have suggested, partly in gold and
partly in silver at the market price. The dealers in money
would receive in exchange for the notes they carried to the'
Bank gold and silver (the last having been received at the
market price Avould, if necessary, be converted into gold,
though this could seldom be required) for remittance abroad,
and the circulation of the Bank Avould be contracted exactly
as it now is. The money in ordinary use would still consist of
small silver, of sovereigns, and of Bank notes, the value of
the latter being maintained in the same way as at present.
I have suggested that the rule of making the notes of
the Bank payable half in silver and half in gold should
only apply when considerable sums were presented for
payment. AVhen the demand came from money dealers,
in consequence of the state of the exchanges, small sums
would not be asked for, and it would be inconvenient that
M
162
bankers and other traders, who require sovereigns fol
carrying on tlieir business, should be compelled to accept
silver bullion for part of the notes they might present at
the Bank for payment. Probably it might be conveniei^BI
to name a larger sum than I have mentioned above as
that which should give the Bank the right of paying
partly in silver. The point, however, is not one of much
consequence, for the Bank, if asked to give sovereigns for
the whole amount of notes brought to it for paymeni
would seldom refuse the request, if there were good reasoi
for making it.
The arrangement I have now suggested would be fr(
from all risk of producing the inconveniences I believe
be inseparable from any attempt to maintain a doubl
standard of value; yet it could hardly fail, even
adopted by England only, to be of considerable servii
in averting the difficulties which are now feared wit
respect to the employment of silver as a medium o1
exchange. The advantage would of course be muc^
greater if this system should be adopted by other natioi^l
as well as ourselves, as it probably would be if we set the
example. The Monetary Conference, now being held i%,
Paris, proves how strongly the nations that invited it tfj
assemble feel the inconvenience of the present state of
things. If they should fail, as they most likely will, in
gaining the general assent required for trying the experi-
ment of a Double Standard, it may therefore reasonably \jM\
expected that they would agree to a measure of which th?
general adoption would be at least a step in the direction
they desire to move in, and which would afford no small
part of the facilities they think are wanting for the use
of silver in making payments among nations. Some
coimtries would find additional motives for introducing
the proposed change in circumstances peculiar to them-
selves. Thus, in France, it is well known that the Bank
is encumbered by having a large stock of five-franc pieces
£a?'l Greij,
4
163
Avlilcli it is at a loss wliat to do with, since it cannot use
them at their nominal value to pay its notes without
depreciating the currency. Making them available for
this purpose, at the market price of the silver they contain,
would render the large capital locked up in these coins
again available to the Bank. If it were at the same time
provided by law that silver should be a legal tender only
for sirnis not exceeding 50 francs, the circulation of France
would be placed on the same footing as our own. The
United States and Italy might derive perhaps even greater
advantage from acting on the same principle, since it would
enable them to dispense with the adoption of measures for
substituting gold coins for the paper circulation they are
now actually using. The "greenbacks" of the United
States are now equal in value to gold, and seem to be
accepted in that country as convenient in the transaction
of business. If a law were passed requiring the Govern-
ment to give these notes to all who applied for them in
exchange for gold, or for silver at the market price of the
day, and also to take them back in return for gold coin
and silver bullion in equal proportions, when presented for
payment, the country would continue to enjoy the con-
venience which has arisen from the use of the greenbacks,
while the value of the currency would be self-regulated
by the exchanges, precisely as if there were a purely
metallic circulation.
To Italy the gain would be still greater. That kingdom
is about to raise a large loan to meet the cost of substituting
gold coins for its present paper-money. Why should this
burthen be incurred when the paper-money now in circula-
tion might be made, by the means I have pointed out, to
perform all the functions of a metallic currency, with the
same security against mischievous fluctuations in its value,
and without expense ? Though the financial situation of
Italy has been wonderfully improved, and the nation
deserves high praise for the sacrifices it has submitted to
M 2
164
for the purpose of effecting this improvement, all musi
agree that the burthens pressing upon the people are s(M|
heavy that it is most desirable to relieve them from every^l
unnecessary charge. But if gold coins are to be substi-^l
tuted for paper all over Italy, a large capital will have
to be provided by the State to supply these coins, and the
interest upon this capital, which will yield no return, wilMl
be a charge on the national revenue. If, as I believe, the
paper-money now in circulation could be given the same
steadiness of value which belongs to a gold currency, ii
would surely be far better for a nation, which has sucl
urgent demands for all the capital it can command foi
many important improvements that would increase its
resources, to avoid the unproductive employment of capital
in using for its ordinary business so costly a medium oi
exchange as gold, instead of the cheap one of a well-
regulated paper currency. At the same time, if th(
statesmen of Italy think it expedient to adhere to theii
intention of providing a gold circulation for the country,
the adoption of the arrangement I have suggested woul(
not impede but would, on the contrary, facilitate thei]
doing so.
Pray excuse me for troubling you with these sugges-
tions, but, from so long ago as the time of the discussions
which followed the panic of 1825, I have taken much
interest in the subject of our currency, and I confess that
I now observe with regret that what I regard as the veryfll
unsound doctrines on which the scheme of Mr. Gibbs is
founded, are apparently beginning to be received Avith more_
favour than formerly, and that the scheme itself has obtai
the powerful support of your approval.
Believe me,
Yours very faithfully,
GREY
H. R. Grenfell, Esq.
165
Fko:m Mr. II. R. GRENFELL to the Right Hon.
EARL GREY, K.G.
Bank of England,
9th June, 1881.
Dear Lord Grey, —
The objections which Locke felt to be insur-
mountable in a Double Standard, arose from the certainty
that a country with such a standard would inevitably be
left with the cheaper metal.
Cernuschi, the apostle of the new creed, declares that
France, notwithstanding that objection, gained by the
system. Mr. Gibbs, in his pamphlet, neither admits nor
denies the inconvenience to a single nation of being
bimetallic. He admits that certain effects were produced,
and that those effects are stated by one set of men to be
evil, by others to be good. He then states that he does not
accept Cernuschi's conclusion, or deny that there may be
some considerable disadvantage, but doubts it to be so great
as is commonly supposed. (Page 17.)
As you say, there would be nothing in the proposed
plan to prevent " the cheapest metal from being brought in
" increasing quantities to the mints of the various nations "
— gradually bringing down the value of the circulation
in them all. Neither is there now. When silver is the
cheapest it goes to silver mints, and gold to gold mints,
briiiffins: down the value of the circulation in each. Under
the proposed plan, the change of value would be over the
world at large.
The proposed relative value at which the two metals
are to be coined is, approximately, the one which was kept
in force for the whole of the present century up to the
demonetization of Germany. (See table, on page 27, from
1827, in Mr. Gibbs' pamphlet.)
166
With regard to the injustice, it is hard to see where i1
would be. All debtors are mulcted, to the same extent as
it is now proposed to mulct creditors, simply by the change
in Germany but eight years ago. Mr. Gibbs does not say
that gold and silver would in any currency circulate
together. He says that in gold-using countries gold would
still be used, and silver in silver.
Then as to the relative price being brought back again
to its present state by the extra demand for silver, Mr.
Gibbs' contention is that there could not be any other
relative price than the legal one, because to suppose other-
wise would be to state that a full-weight sovereign could
have any other value than a sovereign.
He does not doubt that command of money over com-
modities is determined by the greater or less abundance ;
but he says that the variations of production would engender
less important oscillation owing to the larger area which
those variations would affect. There would be the effect
produced by the alteration in the cost of production of
gold and that produced by the alteration in that of silver,
making the oscillation, perhaps, more frequent, but less
violent. This is now admitted by the monometallists.
If gold cannot alter its price now in England, neither
could silver or gold when bimetallic agreement was carried
out. Neither did they Avhen France enjoyed solitary
bimetallism. What France did was to have its prevailing
currency in the cheapest metal, but its price written in
francs in France was the same as that of the dearer. The
variation was in francs translated into rupees or pounds
sterling.
At page 158, you say Mr. Gibbs admits that present
contracts ought to be exempt ; from what I have already
said I think you will see that in this point I hardly concur
myself with Mr. Gibbs. If such were really necessary
I agree with you the arrangement would be impracticable.
I now come to your remedies : Sir Robert Peel, in
Mr. II. R. Grenfcll.
107
bringing in liis Bank Act, permitted Jth of the whole
bullion to be silver, leaving §ths to be gold. He assigned
as a reason " that a stock is convenient to our trade, and
" that merchants often require that metal as a remittance."
It is, however, a fact that since silver, on the discoveries of
gold, became at the French mint price the rarer metal of
the two, the Bank have never held any except on one
occasion for a very short while. To have the power of
paying one-half of the Bank's notes in silver, and to hold
one-half of its bullion in that metal, would, I submit, be
practically an admission of bimetallism ; since, of course,
this would only be done on condition of France and the
United States agreeing to bimetallism. If France, being
bimetallic, kept the prices so near to 15|, a forfioj^i would
it if agreed with the United States; and then, although
France and the United States might suffer either of the
inconveniences already discussed, it is quite clear England
would enjoy the advantage of both systems — her own
monometallic gold system, and the fixity of the French
bimetallic silver price. The question is, will France and
the United States consent to pull the chestnuts out of the
fire for us ?
Ricardo's proposal is particularly discussed in Lord
Liverpool's letter, in which he points out that coining would
be unnecessary if all the one pound circulation in the
country w\as in notes. It would be a useless expense since
for all foreign remittances of bullion, bars would do just as
w^ell. Paper is just as convertible when a large stock can
be exchanged by large bullion merchants for bars for
export, as if one five pound note can be exchanged for
small milled discs with the Queen's superscription on them.
This I think would, however, raise a separate question.
It appears to me then that your proposition would be
nothing more nor less than bimetallism. You qualify it by
saying "at the price of the day;" but the price of the
day w^ould be the mint price of France and the United
168
States. It is tnie that you speak of it as adopted]
by England only, but if other countries are suiFeringj
from the contraction of the favoured metal, and are]
expecting to suffer still more, then there cannot be
a doubt that the very first effect of such a proposal]
would be the immediate adoption of the 15 J to 1]
bimetallism by the two States who have convened the]
present congress.
The further contraction expected is from Italian resump-
tion and American repeal of the Silver Coining Bill, which]
goes by the name of " The Bland Bill." ]
The finances of America, her wealth and prosperity,!
would enable her to repeal that Bill whenever she likes,]
A few owners of silver mines might suffer, but the]
remainder of the citizens not engaged in silver mining]
would be indifferent to the loss, while their vanity and
ambition would be flattered by the notion of being impor-l
tant enough to have a gold currency. Their power to draw]
as much gold as they like from Europe is disputed byj
no one. 1
With regard to Italy the circumstances are somewhat
different. But Italy is also actuated by a rage for being of,
importance in the world at large ; and just as Bismarck}
altered the currency of Germany with a coeiir leger, so anj
Italian statesman would be capable of it. Moreover they]
could raise a loan in England at a high price only if it were]
a gold loan. Therefore if bimetallism were not carried]
anywhere, they might have, out of self-defence, to make a!
gold standard as well as a gold loan.
The "well-regulated paper currency" you speak of,]
must have a metallic basis, and if so, Italy would have to
get metal somewhere. The Latin Union arrangement lasts i
four years longer. By that she cannot coin more than a)
given amount of silver yearly; but with bimetallism she
would at once use in her resumption of metallic payments]
a large portion of the Italian currency now lying in the
169
Bank of France wliicli could not be better employed than
in taking in her small note circulation.
I have endeavoured very hastily to answer your letter,
but my views on this vexed question are expressed more
clearly and at length in an article I have just contributed
to the Nineteenth Century,
I remain,
Yours very faithfully,
H. R. GRENFELL.
The Earl Gkey, K.G.
Fkom the Right Hon. EARL GREY, E.G.,
TO Mr. H. R. GRENFELL.
HOWICK,
June 13, 1881.
Dear Mr. Grenfell, —
I am much obliged to you for your answer to my
letter. I have read it with great interest, and also your
article in the Nineteenth Century, which I was not aAvare
that you had published when I wrote to you. I am now
anxious to offer a very few rather desultory observations on
one or two of the points you have touched upon in your
letter and in your article.
In the first place, I do not think that either you or
Mr. Gibbs sufficiently recognize what I believe to be the
fact, that the relative values of gold and silver currencies
wdll ultimately be determined by the comparative cost of
producing the two metals, in spite of any laws which may
be enacted (either by a single nation, or by several nations
acting in concert) for the purpose of declaring what is to be
170
considered the equivalent in one metal for a given weigfff
of the other, and that either shall be a legal tender at the
rates assigned to them. Changes in the comparative cost
of producing the two metals will not immediately alter
their relative values, for the reasons I mentioned in my
former letter, but by degrees that which is most cheaply
produced will become the cheapest in the market of the
world, and drive the dearest out of circulation in a number
of nations, just as it is admitted to do in a single nation.
You tell me that, supposing his plan to be adopted,
" Mr, Gibbs does not say that gold and silver would in any
" currency circulate together. He says that in gold-using
" countries gold would still be used, and silver in silver."
I cannot understand how this could be. In the present state
of the world, and with the existing facilities for communica-
tion among nations, it appears to me that if the proposed
arrangement were made, the metal which could be obtained
at the smallest cost of labour and capital would be the only
one sent to the mints of all the nations which had agreed to
open their mints freely to both metals at a fixed rate; none
of the other metal would be coined, and after a time the
circulation would practically consist everywhere of the
cheapest metal. Under the system of legal bimetallism
has it ever happened that the two metals have really been
both available as currency at the rates assigned to them by
the law ? I remember, as I think you must also, that
formerly in France nobody ever received gold without
paying for it. If one changed a circular note or a draft
on London in Paris, one's banker always gave one for it
either bank notes (of which in those days there were none
for less than 500 francs) or a sack of 5-franc pieces.
If one asked for gold one had to pay for it, generally,
1 think about 10 francs for 50 napoleons. In England,
at one time, the case was reversed — the legal value of silver
coins was lower than the market value of the silver they
ought to have contained. The consequence was that they
J'Jarl GrcJ/.
171
were clipped or melted down, and there were no silver coins
of full weight in circulation ; the currency practically con-
sisted of g-uineas, with light silver for small change, gold
being the real standard of value. Among the united nations,
in the same manner, the cheapest metal, if both gold and
silver were made legal tenders at a fixed rate, would drive
out the other. If, therefore, the increased demand for silver
(which Avould, of course, he at first created by the adoption
of the plan of Mr. Gibbs) were so to stimulate the pro-
duction of that metal that its relative abundance as com-
pared to gold Avere restored, its value, as I observed in my
first letter, must likewise fall back to what it now is in
comparison with gold. The inevitable consequence would
be that silver only would be taken to the mints of the
united nations, sovereigns and 20-franc pieces would be
melted doAvn, and silver would become the general currency.
Of course when silver became a legal tender in this country,
the Bank of England must have the same right of using
the new silver coins in paying its notes, as other persons
would have as to the money they owed. This right Avould
not be refused to the Bank, and would necessarily be used,
for otherwise there Avould be a constant drain from the
Bank of sovereigns, which it would be unable to replace,
except by buying gold at its price in the market in order
to issue it again at its legal rate. An end would thus be
put to the circulation of sovereigns, and our circulation
would be depreciated accordingly. Mr. Gibbs denies that
this could happen, and contends that between gold and
silver " there could not be any other relative price than
'•' the legal one, because to suppose otherwise would be to
" state that a full weight sovereign could have any other
" value than a sovereign." I do not quite understand this
argument, but I would ask why should a sovereign not
bear a higher value in the market than its legal one?
The napoleon in France 50 years ago was worth more than
20 francs ; a hundred years ago a new jBriti^ih shilling was
172
worth more tlian a shilling, and in both cases the resuiwl
was that these coins were not received by creditors iuM
payment of money due to them, and that a less valuableHI
description of coins became the real standard of valiie,BI
I can see no reason why in the same manner, under the"'
proposed arrangement, gold coins should not disappear
by degrees from tbe circulation of the united nations, if theM
comparative cost of producing the two metals should
conthiue to be such that a given weight of silver could be
produced by a smaller expenditure of capital and labour
than the quality of gold for which it would be a legal
equivalent. And we can have no assurance that this may
not happen, or even that the comparative cost of silve
might not fall still lower.
Mr. Gibbs will, I am sure, admit that it is not the law
but the intrinsic value of the metal they contain tha"
determines the value of coins, as has been very clearl
proved by the result of a diminution of the weight or purit
of the metal contained in their coins to which nations hav
so often had recourse for relief from financial difficulties,
Nor will it, I think, be disputed that the intrinsic value o
gold arises from the great demand there is for it for other
purposes besides coinage, and from the cost of producing it.fl
This value has been, and I believe would be again under
the proposed arrangement, sufficiently high to prevent gold
coins from circulating. H
You say that the measure I have suggested would l)e
practically an admission of bimetallism. Ko doubt it would
be so in this sense, that it would make silver as well as gold
available as an instrument of exchange among nations.
But it would be directly opposed to bimetallism, as the
word is commonly understood, inasmuch as it would not
attempt to establish two independent measures of value, but
would on the contrary leave our existing standard of value
altogether undisturbed. This last is a consideration of
supreme importance ; any tampering whatever with our
Earl Ore//.
I
1
173
standard of value would work so much injustice, and would
so entirely derange all private contracts, that it ought to be
firmly resisted.
You assume that the measure I have suggested could
only be adopted " on condition of France and the United
" States agreeing to bimetallism." I cannot admit this to
be the case : on the contrary, I hold that our action on this
question ought to be entirely independent of what they may
do. Neither this nor any other country can, without
imprudence, make the regulation of its currency a matter
of negotiation with other nations. Each nation should,
without being trammelled by any agreement with another,
keep itself free to deal with the subject as it may think fit.
We ought therefore neither to bind ourselves by stipulations
respecting our currency with other states, nor seek to obtain
any from them. But whatever may be the policy of other
nations, I believe that very great advantage would result
from this country's making greater use of silver by ac-
cepting it at the market price of the day as the basis, in
conjunction with gold, of our paper circulation. At the
same time I am far from denying that as we have an
interest in everything that tends to give increased facilities
to the trade of the world, it would be for our advantage,
as well as for their own, if other commercial nations were to
follow the example I desire that we should set in this matter.
And if we led the way I think it probable that they would
follow, because it would be for their interest to do so.
Suppose we were to take the course I have suggested, how
would it affect France, and how would France be likely to
act? As far as it went, our making more use of silver
would clearly be of advantage to France, since it would
tend to diminish the quantity of silver now pressing uj^on
the market by creating a new demand for it. And what
would France do ? There seem to me only two courses
she could reasonably take. She might determine to maintain
her existing law (thus allowing both gold and silver to
174
continue to be legal tenders at tlieir present rate), wliile at
tlie same time she made this law effective by removing (as
soon as she is free to do so) the existing restrictions upon
the coining of silver. This would of course drive out
gold from her circulation, and would be equivalent to a
depreciation of her currency unless the price of silver
should rise. But she has a strict legal right so to act, and
I am not prepared to say that her creditors would have any
ground to complain of injustice if she were thus practically
to reduce the amount of her obligations and pay the interest
of her debt in a currency of a lower value. Whether this
would be for her real advantage is another question which
I need not discuss. Or if she decided against adopting
this course, she might so far demonetize silver as to make
it no longer a legal tender at its present rate for large
payments, declaring that gold should for the future be the
standard of value. If she did this she would obviously
incur a heavy loss by the depreciation of the silver coins
now held by the Bank and by the nation. Now this loss
and the inconvenience she would incur by making gold the
basis of her circulation, would be greatly diminished by her
adopting the same rule I have suggested for this country,
of allowing bank notes to be paid in equal proportions in
gold and in silver by weight at the current price of the day.
I cannot see any course Avhich France could follow with
any expectation of placing her currency upon a secure fl|
and permanent basis except one of these two. She might
indeed go on for a time nominally maintaining the system
of bimetallism, while it is really in abeyance, by declining H
to alter her law, but continuing to suspend the coinage of
silver; but the inconvenience of this would be so great
that before long she would practically be driven to choose
between the two courses I have mentioned, and it would be
entirely for herself to detennine which she would adopt.
To us it would be of comparatively little importance Avhat
her decision might be.
I
175
Similar reasoning would apply to the cases of the
United States, of Germany, and of Italy. All these
nations would find that our taking the course I have
suggested would not only leave them perfectly free to
choose the policy they might think best for themselves, but
would tend to diminish the difficulties they may have to
encounter whatever that policy may be. Our example
might probably have a good deal of influence on their
decision, but we have no business to interfere with it.
The question as to the use of £ 1 notes in this country
is, as you say, quite a distinct one from that which I have
been considering, and it is quite needless now to discuss it.
I must, however, confess that I have never seen any reason
for altering the opinion I formed at the time that the
abolition of small notes after the panic of 1825 was a
mistake. Notwithstanding the high authority of Huskisson
on such a question, I thought then and I think still that no
sufficient answer was given to the arguments against the
conclusion he had come to which w^ere urged in very able
reviews that were published of the proceedings of the
sessions of 1825 and 1826. But be this as it may, the
country has so long been accustomed, and attaches so much
importance to the use of sovereigns, while the expense of
our gold currency is one that w^e can so well afford, that^
although I believe it to be needless, I should not recom-
mend any attempt to get rid of it. Nations in which small
notes now form a principal part of the circulation, and
where coin could only be substituted for these notes at a
very heavy expense, stand in a very different position. In
their circumstances it seems to me that the wisest course
would be not to abolish small notes but to give them
steadiness of value by making them convertible into bullion.
Yours very faithfully,
GKEY.
H. R. Grenfell, Esq.
176
From Mr. H. U. GRENFELL to the Right Hox.
EARL GREY, K.G.
Bank of England,
17 th June, 1881.
Dear Lord Grey, —
Mr. Gibbs and I fully recognize that tlie value
of the precious metals in relation to commodities will be
determined by the cost of producing them, subject to the
following qualification of that proposition : —
That in the case of consumable commodities, the yearly
production being often greater than the existing stock at
any moment, the effect of an alteration in cost of production
is, comparatively speaking, immediate ; w^hile in the case of]
the precious metals, the annual production being so small
a proportion of the existing stock, a falling oif is scarcely
felt.
With regard to the relative value, the same rule would
hold good unless Governments step in and, by ojiening
markets — that is mints — at a given fixed ratio, create a
steadiness not otherwise attainable.
It is quite true that a napoleon in France 50 years ago
l)ore a premium. But nobody paid the premium in order
at once to pay away the napoleon for a debt. People paid
their debts in that which would at once procure a release
from them. A napoleon Avas an article of luxury as much
as a comfortable carriage or a fast horse.
You are quite right in saying that there would be no
reason why gold should not disappear from the circulation
of the united bimetallic nations as it did from single ones,
but where would it go ?
Monometallists have suggested that if the United States,
India, and Europe entered into the suggested monetary
league, some outside nation, such as China, Japan, or Brazil,
Mr. II. R. GrcnfelL
177
mlglit take it into its head to erect a gold standard for the
same reason which induced Germany to try it. But it
would very soon prove, as it did in Germany, a most costly
and ruinous operation.
Lord Liverpool says that a gold coinage is fitting for
England on account of her commercial activity, not that
her commercial activity and pre-eminence spring from her
gold coinage or standard.
I now notice your objection that nations should not
negociate with each other on such a subject.
It seems to me that if there is one subject more than
another on which a good understanding ought to exist, it is
in the value and measure of those commodities which by
the ao^reement of all a^i^es and nations are made the means of
balancing international accounts. We have arrangements
for lights at sea, for signals, for many other tools of com-
mercial life, and why not for money ? Such international
reo:ulations would not interfere with the rio^ht to make laws
for interior currency.
I now return to your scheme for enabling the Bank to
pay half its notes in silver above £ 500.
The objection Avhich presents practical difficulties to my
mind is that the person sending, say £10,000 of notes into
the Bank, and receiving £5,000 in silver, would either want
that silver or he would not. If he wanted the silver, the
operation would be much the same as it is now. If he did
not want it, he would send the silver back to the Bank for
notes the next day, and he would be in the same position
as the man who had got £5,000 gold for his notes under
the present regulations.
You then ask what the effect of the alteration would be
on France and Italy? Any alteration which did not entice
the Latin Union and the United States to keep open their
mints for silver Avould, in my opinion, be inoperative to
" rehabilitate " that metal. I see then no other course
possible but for all those nations to go to a gold standard
178
and regard silver merely as a commodity useful for sub-
sidiary coins, which the Monetary Conference of 1878
declared would be fraught with incalculable disasters to the
commerce of the world.
With regard to the one-pound notes, the policy of
returning to them depends on whether it would be econo-
mical to use paper instead of gold for those small amounts.
Calculations have been made, and are now before me,
showing that it costs more than 205. to keep a £ 1 note in
circulation with the regulations we now enforce as to regis-
tration, non-reissue, and forgery prosecutions. I confess
I don't believe in the accuracy of these calculations.
My reason for preferring sovereigns is that a large
amount of gold exists in the country in the pockets of the
lieges, which, in case of war, such as in 1797, is a prac-
tical reserve which could be got at by suspension of cash
payments.
I hope you will excuse this rather hurried answer to
your most interesting letter.
I am.
Yours faithfully,
H. K. GRENFELL.
The Right lion. Earl Grey, K.G.
179
From the Right Hon. EARL GREY, K.G.,
TO Mr. H. R. GRENFELL.
HOWICK,
June 2Wi, 1881.
Dear Mr. Grenfell, —
I will not trouble you with any further arguments
in reply to your last letter, but having had a good deal of
conversation with Lord Halifax while I was at Hickleton
on the subject of our correspondence, I write a few lines
to tell you that I think he quite agrees with me in coming
to the following conclusions : —
1st. That the objections to bimetallism are insurmount-
able ; bimetalhsm being understood to mean a system under
which the character of money is given to both silver and
gold coins, and either at a fixed rate is made a legal tender
in the payment of debts.
2nd. That the present standard of value in this country
ought to be strictly maintained, and that no departure from
it or from the principles of our existing monetary system
ought to be made.
3rd. That if, in consequence of our determination to
adhere to our present monetary system, France, the United
States, Germany, and Italy, were to resolve that they also
would maintain gold currencies, and should make such
changes in their existing laws as to the use of silver as
would be necessary to keep the gold coins they might issue
in circulation, the demand for gold must be so increased as,
for a time at least, materially to raise its value, and thus
occasion much commercial embarrassment and very serious
pressure on all branches of productive industry in most
nations.
n2
180
4th. Tliat authorizing the Bank of England to use silver
at the market price together with gold as the basis of its
issues might avert this evil, by leading other nations to
adopt similar arrangements, and would, at any rate, miti-
gate the evils that would arise from a great extension of
the use of gold in the circulation of those countries, by
diminishing the amount of gold required by England, and
affording facilities for the employment of silver as an instru-
ment of exchange between nations.
5th. That this measure would not involve the slightest
departure from our present standard of value, or from the
principles of our monetary system.
I do not gather from your letters that you would
seriously dissent from any of these conclusions, except
the first. And with respect to this (if I am not mis-
taken), in holding that bimetallism would be of advantage
if the system could be adopted with the general assent of all
the great commercial nations, you are aware that the assent
of this country could not be obtained, and that without its
concurrence the measure would be impracticable.
Such being the case, the suggestion I have offered with
the view of averting, or, at all events, mitigating the evils
to be apprehended from the course other nations may adopt
in consequence of the determination of this country to abide
by its present system of currency, seems to me to deserve
to be at least fully considered.
I have been writing In such haste, to save the post, that
I fear my letter will hardly be legible.
Yours very truly.
GREY.
181
From Mr. II. R. GRENFELL to the Right Hon.
EARL GREY, K.G.
Bank of England,
2Sth June, 1881.
Dear Lord Grey, —
Without saying anything more on the subject of
your three first conclusions, I merely desire to point out
with reference to the fourth, that while your proposition
gave the right to the Bank to pay its notes one half in
silver at the price of the day, I could only assent, during
the continued existence of the present standard of value,
that it should hold a portion of its bullion in silver without
infringing the right of all holders of notes to receive gold
for them at all times.
I remain,
Very faithfully yours,
H. K. GRENFELL.
The Earl Grey, K.G.
WHAT IS MONEY?
From the Nineteenth Century, April, 1882.
The wisest course which can be taken with popular
delusions is very often found to be to treat them like raging
waves of the sea, and let them foam out their own shame.
More especially is this the case when the delusion in
question touches the verge of abstruse and difficult subjects,
with which the mass of mankind are content not to meddle
at all. Such has been to a great extent the treatment
which has been experienced by the promoters of the doctrine
and discipline of bimetalism. The answer appears to most
minds so complete and so crushing, that it has been thought
unnecessary to give it at any length. It was supposed by
those who examined the subject that, like the mother of
Sisera, it would make answer to itself. Too much confidence
has perhaps been reposed in the doctrines inculcated by the
standard writers on political economy and the success that
has hitherto attended obedience to their advice, and too
little allowance has been made for the power of fear and
of interest to warp and obscure the clearest intelligence.
Now, however, when we find the Governor of the Bank of
England coming forward as a bimetalist, and recommending
a general committee in order to promote the adoption of
the double standard, and when we find the meeting at which
this remarkable proposal was made presided over by a
184
gentleman of the ability and authority of Mr. Cazalet, it is
time to point out what certainly appear to be the gross and
obvious objections to the admission of bimetalism in any
shape and under any conditions. In accordance, I presume,
with the suggestion of the Governor of the Bank of England,
the Bullionist newspaper has been enlisted as the organ
of bimetalism, and those who adhere to the doctrines of
Smith, Eicardo, and Mill are put upon the defensive. It
is not wdse to trust entirely to great names and works that
have been for a long time before the public; and even
if little can be added to them that little should on no
account be omitted, lest arguments which have hitherto
appeared to be unanswerable should be supposed to have
lost anything of their force.
Being anxious to inform myself as to the very latest
phase of the doctrine and discipline of bimetalism, I have
carefully perused the proceedings of the meeting in
November last of persons interested in the silver question,
most appropriately held at the India Office, where silver
reigns supreme, in hopes to extract from their consultation
a clear statement of what they desire, a complete explanation
of what is meant by the highly ambiguous term of bimetalism,
and a distinct description of the manner in which the union
of the two metals, should it be effected, is expected and
intended to work. I supposed that an assembly of so many
able and experienced men, gathered together to take counsel
on a subject with which they were all thoroughly conversant,
could hardly separate without leaving behind them a per-
fectly clear and distinct outline of their proposals, and an
equally clear and decisive answer to the difficulties and
objections wdiich might present themselves. Never was an
expectation more delusive.
" The feeling (says the chairman) that appears generally to
" prevail among the public in connection Avith this qnestion of
** bimetalism is, that bimetalists are prognosticating dangers and
l^ord SherhrQohc,
185
" difficulties without any good and sufficient grounds for their doing
" so. The question -vve have to deal with is not so complicated as
** some people suppose. It is simply this : Can silver be eliminated
" from use as currency in Europe and America without enormously
" increasing the value of gold and depreciating the value of silver ?
" It is not a speculative theory which we enunciate, when we say
" that the withdrawal of any portion of the active currency of a
" country must enhance the value of what remains in proportion
" to the amount withdrawn."
This is really all the argument which the chairman pro-
duced in order to show that we ought to adopt bimetalism.
He did not even condescend to tell us what meaning
he attaches to the word bimetalism, or give us the least
intimation what is the measure which will avert the evils
which he apprehends. His speech resolves itself into a
mere lamentation over the scarcity of gold, and leaves us
absolutely in the dark as to a remedy, except that it is to
be found in bimetalism — a word which neither he nor any
of those that followed him have taken the trouble to explain.
This gave the tone to the whole discussion; speaker after
speaker rose and lamented in piteous terms the dangers and
difficulties that would arise from the continuance in England
of a monometallic standard, but no one from first to last
ventured to say what he meant by bimetalism, or in what
sense that highly ambiguous word was to be applied. The
discussion amongst so many eminent persons, from whom we
had a right to expect at least a clear and distinct definition
of the remedies which ought to be applied, resolved itself
into a mere lamentation over existing and apprehended
evils, which w^ere to be remedied by a nostrum which every-
body carefully avoided defining or explaining. I may so
far anticipate as to point out that the word that everybody
agreed to employ, and everybody Avas anxious not to define,
the word bimetalism, is a highly ambiguous term, and may
mean either a forced currency, in which, for instance, a
186
seller is bouna to accept either one ounce of gold or litteei
and a half ounces of silver at the option of the buyer, or ii
is left to the option of the buyer to pay in silver or gold sA
his pleasure, without any attempt to establish a fixed relatioi
between the two metals. It is a singular instance of thf
degree in which the minds of those who originate thi
movement have been occupied, to the exclusion of all othei
considerations, by the terror inspired by the apprehendec
scarcity of gold, that though they have taken unto them-
selves a name under which to unite, they have carefully
shrunk from defining what that name means, and sheltei
themselves behind a mist of unmeaning words. It is als<
curious that they write and speak as if a drain of golc
however caused, were a permanent and durable calamity^
whereas, while nothing is more likely to occur, nothing is
more certain to be redressed.
If the whole monetary system of the country is to b<
overthrown, we have at any rate a right to require that ii
should perish in the face of day, and that our future fat<
should not be concealed from us under dark and drear]
ambiguities. We do not want to be told — what of course
is obvious enough — that the substitution of gold for silvei
in Germany, for instance, must raise the value of thai
metal all over the world, and therefore in England. W(
want to know what is the precise remedy that is proposed]
and whether it is possible, and, if possible, whether desirabh
that that remedy should be applied. Utterly failing in out
effort to obtain from the meeting of bimetalists in Novembei
last any information as to what is really meant, or any-
thing, indeed, except a lamentation over the dearness oi
gold, we turn to the pages of the BulUomst, which, ii
pursuance of the resolution of November last, has become
the chosen organ of bimetalism, whatever that may meai
But here we are encountered by precisely the same difficulty^
The Bullionist carefully avoids any authoritative statemeni
as to the real meaning of the term bimetalism. The most
Lord Sherbrooke,
187
which it ventures to do is to quote with approval a passage
from the Journal of the Institute of DankerSi in which it
is stated that
" the object of the association is to be the promotion of the stability
" of vahies, by establishing the free coinage of silver and its use
" as money under the same conditions as gold, by advocating and
'' furthering an international agreement, whereby a fixed relative
" value between gold and silver may be established, and the two
^' metals may jointly form the currency of civilised nations, thus
" facilitating the adjustment of international balances and lessen-
" ing the excessive and needless risks which have now become
'' attendant on home and foreign trade."
It is added very appropriately that
" it is well that those who hold the views advocated by the asso-
" ciation should more distinctly declare themselves, and whether
" they fail or succeed in obtaining assent to those views, nothing
" but good can result from their being more clearly enunciated."
In this sentiment at least I can most fully concur. Let us
have done with vague generalities, and call to mind the
memorable aphorism of Mr. Lowell, that it jerks one terribly
to kick at nothing.
One would suppose that we were about to undergo some
unheard-of plunder, some cruel and unjust humiliation ;
one would suppose that we were about to be stripped of
our property by the violence and wickedness of some
unjust and overbearing rival ; certainly one would suppose
that the possession of a certain quantity of gold had been
secured to us by some solemn contract which lawless violence
was about to cancel and overthrow, and that the Germans
were guilty of an unpardonable crime in seeking to despoil
us of our ancient and undoubted possessions. But what
is the tenure by which we hold our possession of gold ?
Instead of being, as these gentlemen seem to suppose, our
undoubted right, the possession of gold is of all thingstne
most liable to change masters. By what tenure do we hold
it? Simply by the conviction of its possessors that it is
more profitable for them to employ and use it in England
than elsewhere. This is a question which is decided not
by any regulation or any compact, but by the feelings and
wishes of mankind. If a certain quantity of gold remains
in England, it is because its possessors believe that it can
be more profitably employed in England than elsewhere.
Show them a place where gold will command more of the
necessaries and luxuries of life than here, and gold, which
is perfectly cosmopolitan in its ideas, will fly at once t
that favoured region. It is, if we may use the metaph
a coy beauty, and will fly all the faster from any attemp
to retain her by force. If a certain quantity of gold
found to command more of the necessaries, and convenienc
and pleasures of life in England, it will remain there, and
as soon as it ceases to do so it will find for itself a mo
congenial home elsewhere. Bimetalists seem to think th
they possess some power of checking or destroying t
tendency of gold to wander, but the only real security
to be found in such a state of prices as will enable gold to
command more here than elsewhere. So far from retaining
gold by these artificial and bungling contrivances, they
would only make the flight of the metal more certain, am
its return more difficult.
The speaker at the meeting to which I have alluded
seemed to treat the probability of the transfer of a certain
quantity of gold from England to Germany as an irreparable
loss, but nothing can be further from the truth. Gold is
always to be had by those who will pay the price necessary
for its possession, and tliat price is cheapness. The more
of the necessaries and luxuries of life gold can obtain
the more firmly is it held. One would suppose from the
language that has been used in the alarmist meetings to
which we have referred, that if gold was attracted elsewhere
Lord Sherbrooke.
I
k
d
180
there was no hope of its return ; but nothing can be further
from the fact. Once proved to its possessor that it is more
fruitful in one phicc than another, old grudges are at once
forgotten, and it returns to its former home without shame
or hesitation. Everybody knows how gold can be got —
that is, by paying the best price for it — and it really passes
the bounds of patience when we hear its possible diminution
spoken of as an irretrievable calamity.
I have hitherto treated of what appeared to me to be
on general principles the exaggerated apprehensions inspired
by a temporary failure of gold ; it remains to consider the
nature of the remedies which are most likely to be proposed
for an evil which the desponding votaries of bimetalism
seem to believe to be inevitable. I have already pointed
out the real remedy, which is, if I may so speak, offering
gold better terms — that is, giving in exchange for it a
better value ; in other words, a reduction of prices. It is
a disagreeable remedy, but perfectly efficient, and of course
much easier to be practised by a wealthy than by a poor
nation. In these matters every day brings its changes,
and a wonderful self-acting machinery cures defects and
compensates errors.
It remains for us to put aside all these considerations,
to assume our case to be absolutely hopeless, and to
examine the remedies which may be applied by way of
palliatives. In this undertaking we may naturally expect
to receive every possible assistance from the fervid votaries
who harangue our men of business, and hire our newspapers
in the cause of bimetalism. But here we are confronted
by a serious difficulty, and one which we know not how to
overcome. Bimetalists are ardent and eloquent in their
cause, but they scarcely admit of an answer, for a simple
reason, that they have hitherto abstained from telling us
what bimetalism is. We are summoned in the name of
our bleeding country to do something to save her from an
impending calamity ; but when we ask how this is to be
190
eiFected, we are paid by a barbarous word, which no oot
apparently has the heart to define. Like Joseph, we havJ
first to discover the riddle and then the interpretatioM
thereof. Perhaps this little difficulty may be removed hm
some revelation from the higher powers before this essaj
sees the light, but it is somewhat strange, when a new anfl
most important step is recommended, to find ourselveJ
obliged to guess at that to which we are called upon iM
agree. I am even exacting enough to think that we oughl
not only to be told what is the plan, but also the reason!
which have led to the adoption of whatever form it may
assume. Not being among the initiated, however, I must
even be content to draw such inferences as I may from
the single word bimetalism, and to state objections which
possibly a further explanation, if ever it shall arrive, w
show to be unfounded.
Having delivered myself of this protest, I will proceed
to answer as well as I can what I suppose will turn out
be the proposals of bimetalism. I presume it is intende(
that, instead of basing our currency upon gold of full
value and upon silver which is made much less valuable by
means of the alloy than the metal it personates, we are
for the future to have two standards; and this, as it appeanM
to me, can only be done in one of two ways. We can
arbitrarily select a certain value of silver — say, for instance,^
fifteen and a half times the weight of a single ounce ofll
gold — and declare the two metals bearing such relation to
each other as above stated to be to all intents and purposes;^
of precisely the same value ; or I can suppose that we ma^^
make two currencies, one of silver, the other of gold, to
divide the patronage of the country between them, both
being made legal tender, and no attempt being made to
establish any fixed relation between them, an attempt which
if made must necessarily fail. There may be some other
method of satisfying the conditions of the bimetalists'
problem, but I at least am perfectly unable to conceive
Lord Sherbrooke,
191
what it may be, and must content myself with deploring
the nnhap]>y fate of the other metals, which, without any
fault of their own, are excluded from their right to take
a part in the metallic congress of which they also are
members. In the total absence of any information on
the subject, I should have thought that if safety is
to be found in numbers, and if two metals are better
than one, three must be better than two and four better
than three.
Being left, however, totally without any information on
this subject, I will venture to ask one or two questions
which seem never to engage the attention of bimetalists;
and first I should like to propound the question. With
what object was money, which is a pure and absolute
creation of man, invented ? It was not certainly for the
purpose of creating value, for value exists independently of
any fiat or ordinance of man. As soon as a man appro-
priates any object of desire to himself, the notion of value
is firmly established in his mind. The animal that he has
tamed, the field that he has cultivated, the game that he
has caught, all give him a notion of property, which he
is ready to defend for himself and to respect in others.
All these things are far anterior to the idea of money.
Bimetalists argue as if money and wealth were identical,
whereas nothing is more certain than that the existence of
these two phenomena is separated by an indefinable period.
What, then, is the want which money was invented to
supply, and which has become so ingrained in our minds
that our bimetalists seem quite unable to see any distinction
between money and wealth ? I will answer this question
in the language of an author who seems to have had
a far clearer idea of the real function and duty of money
than the bimetalists, who apparently see no distinction
between money and other kinds of Avealth. The writer
I allude to is Aristotle. It is curious to observe how
much more clearly the ancient philosopher appreciated
192
the real function and duty of money than the moc
bimetalist.
" Intercourse" (he says) "takes place between people havin|
*' different objects of desire. In order that they may be exchanged
" with each other it is necessary that they should be compared, for
" which purpose money came forward, and is as it were a medium,
** for it measures everything, both the excess and defect ; as, for
" instance, how many pairs of shoes will be equal to a house or to
" food, for if this is not done there will be no exchange or inter-
" course. All things, therefore, must be measured ; but it is, in
** truth, want which holds all things together : for if persons
" wanted nothing from each other, or not equally, there would
** no exchange. Money, then, has been made by agreement asj
" were a substitute for demand, and is so called because it exisfs"
" not by nature, but by law, and it is in our power to change it anc
" make it useless for the purpose. If it were not possible to e^
" change there would be no commerce. If a man requires nothing
" at the present time, money is as it were a surety to him for a future
" exchange that it shall be made when he wants it. But monHI
*' itself is not always of the same value, but yet it has more tendency
" to remain fixed; wherefore everything ought to be appraised, for
" so there will be exchange. Money, like a measure, makes things
"equal ; for if there were no exchange there would be no inter-
" course, nor any exchange if there were no equality, nor an
" equality if there was no common measure. In truth, it is
"possible that things differing so much should be commensura
" but for practical use it is sufficiently possible. Money makes all
" things commensurable, for all things are measured by money .B
srs
nd
any
atff
It is extremely interesting to see how clearly Aristotle
apprehended the great trutli that the original and principal
use of money is not the hoarding of treasure, but the
providing a means of exchange, and that the fact that
money possesses generally a certain value of its own is not
part of its nature. The original use of money was to
determine prices ; that it possesses itself value of its own
is a mere incident. All that is required in order to enable
Lord Sherbrooke.
193
lis to determine the value of an article is a common measure
with which we may compare it ; that measure must of
course be limited in some way or other, and it is only as a
means of effecting that limitation that value is introduced
into the question.
The value of a commodity limits its quantity. Anything
which can be obtained in a limited quantity, with a certain
ascertainable amount of labour, and which is divisible, will
serve the purposes of money. Furs have been employed in
some countries as money, cattle in others — as in the Iliad,
in the estimation of the respective values of the shields of
Diomedes and Glaucus, the one being worth nine oxen, the
other a hundred oxen — bricks of tea in Tartary, cowries
in Africa, rock salt in Abyssinia. Other African tribes
calculate in macules^ a money of the mind w^hich has no
substance corresponding to it, but the value contained in
which has been sufficiently ingrained in their minds to
answer the purposes of a measm'e of value. Bullion is
chosen because it complies with these two conditions,
difficulty of acquisition and divisibility, better than any
known substance. Is it not strange that we should turn
this servant into our master, and elevate that which is a
mere medium for avoiding the inconveniences of barter into
an indispensable necessary of life, hardly secondary to food
and clothing ? If by some convulsion of nature the precious
metals gold and silver were utterly destroyed, the world
would be impoverished by the loss of a commodity on the
discovery and manufacture of which much labour and time
had been expended, but the only result would be that
we should have recourse to some other contrivance. The
main business of life would go on as before, and the only
difference would probably be that we should be obliged
to have recourse to a paper currency, based on whatever
might be found, after careful consideration, to be the most
convenient or least inconvenient standard of value. The
question would be, as it is now, a question of remedying
o
194
the inconveniences of barter by providing some means of
fixing prices. That Avould be all.
We are now in a position to examine with some con- ■I
fidence the claim of bimetalism to be regarded as a great M
and lasting improvement in our financial arrangements, HI
The first question which it occurs to me to ask is, why we M
should limit ourselves to bimetalism. The advantages of ■!
monometalism can easily be stated, and are undeniable. ■!
Those advantages are, that by this means alone can weW
effect that which we have conclusively shown to be theHI
object for which the contrivance of money was devised, ■!
the obviating the inconveniences of barter by creating a HI
common measure of value, and thus regulating prices. HI
Now it is perfectly obvious that this advantage, to obtain HI
which in the first instance money was invented, so far from HI
being promoted, will be destroyed by the introduction offll
bimetalism. Whenever you introduce two standards of HI
different values, and make them both legal tender, you atHI
once destroy the very object for which money was intro-HI
duced. Whether you have two independent currencies, HI
one of gold, the other of silver, and make each of them a ■!
legal tender, or declare that a certain portion of one shall
always be equal to a certain portion of the other, the HI
failure, as far as regards the establishment of a common™^
measure, to obtain which money was originally invented,
will be the same. You will have two prices. After the HI
bargain has been concluded will come a second bargain,
the nature of which may be expressed in the words. How
will you have it ? The value of money depends entirely HI
on the cost of producing it. If, then, a second metal of
equal value be introduced, nothing is gained, and the
process is simply futile — confusion for confusion's sake. HI
The only advantage which can be got out of the second
metal is by a cheat — that is, by mixing an inferior with a
superior article and palming them off* on the customer as
of equal worth, a practice well known to dishonest pedlars,
Lo7'd Sherhrookc,
195
but, I venture to submit, scarcely fit to be adopted into
the finance of an honest nation. The essence of bimetalism
is not plurality, but inequality. Plurality is only the
means to the end. Its whole end and object is to induce
people to treat as equal that which has been purposely
made unequal, and thus to deprive mankind of that power
of measuring values which money was invented to bestow.
It must never be forgotten that however the currency
of a country may be appreciated, it will always be able to
perform what has been shown above to be its leading
function, the regulation of prices. However much the
volume of the currency may be diminished, the quality for
which money was first invented, and which is its peculiar
function, will remain unaltered. Ratios remain the same,
whether they are counted in tens or in thousands. The
proper definition of bimetalism would be a fraudulent
contrivance by which the purpose for which money was
invented is entirely set aside in order to enable a State to
palm off an inferior metal as of equal value w^ith a superior
one. To such a device we are not, and I am happy to think,
when it is once understood, are not likely to be, reduced.
It is thus perfectly clear that a double standard is not
merely an inconvenience, but absolutely destroys the purpose
for which money was invented, and, instead of performing
the astounding feat of giving us two standards, leaves us
instead nothing but a quarrel, which there are no legitimate
means of deciding, and which may very probably end in
adopting a third standard, by splitting the difi'erence be-
tween the two. What makes the matter more absiu'd is
that this bungling and unscientific contrivance is adopted
to obtain an end which can be, and every day is, obtained
by the simplest means. The advocates of bimetalism seem
to treat the establishment of a gold currency in Germany
as a great and irreparable calamity, as a sort of robbery of
the treasure of England. But let them take comfort. The
only condition on which Germany or any other country can
o 2
196
hold any portion of gold is that that portion -^'ill comnian(
in that country as great a share of commodities as in any
other. Instead of being an irretrievable loss, the absence
of gold is of all things the most certain to correct itself.
Every pound that is taken away increases the purchasing
power of the gold that is left. The currency is a self-acting
machine, which, like a balance, is always tending to an
equilibrium. No doubt we must expect to see many and
serious changes in the distribution of the precious metals.
Old States are continually becoming more populous, and
new States are continually springing into existence. These
in the nature of things must demand a share of the universal
medium of exchange, and the appreciation of gold can only
be met by increased fertility in the mines. Should the
mines not answer to the call, the result must be a gradual
appreciation of the precious metals, such as existed in the
Middle Ages. This it may not be in our power to prevent,
but we may be quite certain that this distribution will take
place in exact accordance with the rule Avhich makes gold
flow to those countries where it commands the highest price.
The absolute value of gold may, and probably will, be
appreciated, but its relative value will obey a single, an
inevitable law. The history of gold has been a history of
fluctuation, and will doubtless continue to be so. The
fluctuations must be attended with loss to some and gain to
others; and it is the business of the financier to see and
provide against these inevitable vicissitudes. The bimetalist
seems to conceive that we should be at present in a stable
condition wfire it not for the wickedness of Germany.
There can be no greater mistake ; of all commodities money
is the most easily attracted and repelled. We live in a
boundless realm of unending change ; and the gold which
the bimetalist fancies he can enchain by his clumsy con-
trivance slips away from him in the very moment of his
acquisition. He will fill the vessel of the Danaids only to
see it empty by a power which he does not appreciate and
cannot control.
SHEEBROOKE.
WHAT IS A STANDARD?
From the Nineteenth Century^ May, 1882.
One half of my economical friends take it as a personal
grievance that I should advocate bimetallism, and the other
half absolutely refuse to discuss the matter seriously at all.
This arises partly from the extreme dislike which all
Englishmen have for system of any kind, and partly from
the almost mad enthusiasm with which they regard the
very few systematic institutions they possess.
At this time of almost universal scepticism, when every
one of our most cherished beliefs is being scattered to the
winds, there is one thing, and one thing only, which most
Englishmen concur in adoring, and that one thing is the
English pound sterling. An English pound sterling unites
in itself qualities to be found in scarcely any other coin.
It has maintained its position unaltered for sixty-four
years ; it is the standard of value and measure of property
throughout the length and breadth of Great Britain, and
even in our unfortunate annexe of Ireland. It is the unit
of accounts; it is the coin passing from hand to hand, at all
events in England; and it is legal tender. It is, in fact,
the golden image which Nebuchadnezzar the king has set
up, and which, according to the serious portion of my
economic friends, all Englishmen are bound to fall down
and worship.
The present position of the question as it apparently
presents itself to the Government may be shortly stated.
198
1st. The question does not concern England at all.
2nd. If it does concern England, it is not within the
scope of present practical politics, but is only in the
academic stage of discussion.
3rd. England, not having changed her standard since
1816, cannot be called upon to mix herself up with the
discussions upon it until those countries which have been
chopping and changing ever since 1868 have made up their
mind what it is they want, and to what extent England can
assist them in getting it.
4th. Supposing the object of these bimetallic discussions
be to rehabilitate silver, England, by keeping open her
Indian mints, has done more towards keeping up the price
of that metal than all the other countries put together.
5th. England having accepted and put in practice that
which is believed to be in accordance with economic law —
namely, free-trade — and having in vain endeavoured to
procure the adoption of it by other nations, including her
own colonies, it is rather too much to ask her without a
moment's hesitation to adopt another economic truth, sup-
posing the possibility of bimetallism by agreement to be as
capable of an academic demonstration as free-trade.
6th. But whether it be true or false, whether it be
wise or foolish, the number of pressing questions and the
party feelings in the House of Commons would render
any attempt to solve the question in this present year
absolutely hopeless.
I have endeavoured thus to state the present position of
things and the views entertained by those who take it as a
personal grievance that I should advocate bimetallism, and
I now pass on to those who resolutely decline to treat the
question seriously at all. The most conspicuous among
Mr. H. R, Grcnfell.
199
these is Lord Sherbrooke, but I shall endeavour to deal with
him later on. Besides his lordship, there are others who
write week by week upon the subject, and find it a simple
matter to crush bimetallism. To do so it is only necessary
to take Lord Liverpool's book and Sir Robert Peel's
speeches, to talk of Harris, Petty, and Locke, to bring
out the most well-known passages in their writings, to
ignore everything that has happened since 1868, and to
speak of the impossibility of thwarting the eternal laws of
production. Then, by mixing up in hopeless confusion
standard, currency, legal tender, and unit of account, it is
possible to produce a most able paper which must be quite
satisfactory to the orthodox worshippers of the golden
image which Nebuchadnezzar the king has set up.
In answer to an assertion of mine that the double
standard existed in England up to and indeed after the
suspension of cash payments, the Economist writes : —
"It is difficult to understand how they — that is, Lord
''Liverpool and Sir Robert Peel — could have represented to
" themselves the mercantile money of the kingdom as anything
" but gold. If they found the legal standard consisted of two
" metals, but that in practice one only was used, what stronger
" proof can be given of the impossibility experienced by us, as
" by other nations, of keeping both metals in circulation at one
" time ? "
This extract is given to show the determination not to
discuss the question in a serious manner ; for how can we
suppose that a writer in the Economist can be ignorant of
the difference between currency and standard? nor do we
know where he finds that the bimetallists desire that both
metals should be kept in circulation at the same time.
The Economist is so far right in that it follows Lord
Liverpool in using the expression '-that the standard is the
" principal measure of property — that is to say, the chief
200
" coin in use" — and it woiild appear that this diction was
followed by the Bullion Committee, which took "standard"
and " chief coin in use " to be synonymous, and thereby
held that gold was the English standard, anything in law
to the contrary notwithstanding.
Now, what appears to me to be a correct meaning of
the word "standard," as it is used at the recent monetary
conferences, is that it shall be " the principal measure of
property," but not necessarily " the chief coin in use."
A bank-note at this moment is legal tender in England,
but not in Scotland. It is also current in England and not
in Scotland. A Scotch bank-note is current in Scotland,
but it is neither legal tender nor standard until it has been
exchanged for gold.
In America it is very hard to say, with the perpetual
changes taking place, what is standard and what is legal
tender. In France, French bank-notes, pieces of five francs,
and napoleons are legal tender at the ratio of 15^ to 1, but
the coinage of silver having been suspended, the gold has
not quitted the country, notwithstanding the fall of silver.
It is, however, only kept therein by that and other some-
what forcible measures. Most of the economists declare
that France has got what they call a gold basis, and
this is true to a certain extent — namely, that while, if
you take gold ingots to the Mint at Paris, you may get
gold coin in exchange, of standard weight and fineness,
if you take silver ingots you cannot get them coined.
The double standard, therefore, exists still in France to
the extent of coined silver, but no further. The double
standard, according to law, is in that country less com-
plete than it was in England previous to the suspension
of cash payments, because during that time, notwith-
standing that the free coinage of silver had been stopped,
any one could pay his debts to the amount of £25 in
garbled silver currency, and to an unlimited extent in silver
by weight.
Mr. 11. R. Grcnfell. fl
201
Before continuing the subject of the standard, I will
say a few words upon what I mean by money.
A friend of mine, of unequalled knowledge of commercial
affairs, and of twenty years' experience in parliamentary life,
was inclined last year to take an interest in bimetallism.
He applied to Lord Sherbrooke for his opinion, and received
for answer that only fools were to be found in favour of the
double standard, and I have therefore naturally taken up
his lordship's paper upon the nature of money Avith fear
and trembling ; the more so as I find that he considers
bimetallism to be one of those " delusions," only worthy of
being treated like the raging waves of the sea by letting
them " foam out their own shame."
Having declared myself to be a bimetallist, I am
astonished to find that I have been "deluded" into a
question which " touches on the verge of the abstruse,
" which the mass of mankind are content not to meddle
" with." " The answer," according to Lord Sherbrooke,
" appears to most minds " — that is, I presume, to most
minds other than those of the mass of mankind — " so com-
" plete and so crushing that it has been thought unnecessary
" to give it at any length."
I do not pretend to understand all that has been written
on the subject, for I do not know what Lord Sherbrooke
means by the " discipline of bimetallism," but I have done
that Avhich he has not done, in reading most of the treatises
which have been written on the question. His method of
studying it has been, as Mr. Kinglake said of Lord Raglan
at the battle of the Alma, to avoid clouding his brain Avith
useless information or plans. The masses of pamphlets
which lay upon his table,
" Thick as autumnal leaves that strow the brooks
" In Vallombrosa,"
have been put aside, and he has sought for information as
to what he calls "the latest phase of the doctrine and
202
" discipline of bimetallism" by looking exactly wRer^^waS?
sure not to find it. He goes to the printed report of a
meeting summoned to agree upon the best mode of organising
a society for the spread of the doctrine, and expects to find
the whole theory explained in a speech made by the
chairman to men almost all of whom had written or spoken
upon it. He might as well have expected to find the Pons
Asinorum or the first rules of syntax in it. In fact, to;
carry on his own quotation, in this he is like a " wandering
" star to whom is reserved the blackness of darkness for
" ever." '
He tells us he is a disciple of Smith, Ricardo, and Mill,]
and I presume that the form in which that assertion
presents itself to his mind is the following: — " I am a]
" disciple of Smith, Ricardo, and Mill ; I disapprove oi
" bimetallism, therefore every one who approves of it is in!
** contradiction with Smith, Ricardo, and Mill."
My desire is to show that all that Mill says of the
double standard is thoroughly understood by bimetallists ;
that what Adam Smith says of the standard refers to purity
of coin more than anything else ; and that the plan of'
Ricardo, for the paper circulation, is one which would bring
out in a stronger light than any other the advantage, if not
the absolute necessity, of bimetallism.
But here I am in the same unpleasant predicament of]
which Lord Sherbrooke complains: I am "jerked with
*' kicking at nothing." If he had read the papers before
him, he would have known that the bimetallists have never
relied, for their statement of the effect of the German
demonetisation, on their own resources. They have derived
their whole statistical information from the writings of
Messrs. Gifi'en and Jevons. If these are exaggerated or
erroneous, their mistakes can be corrected.
The effect of bimetallism to secure a diminution of the
fluctuations in the prices of the precious metals is vouched
for by Mr. Jevons in his work on money.
Mr. H. R. Grenfell,
203
The general principles of bimetallism are contained in a
memorandum on an international bimetallic standard of
value, dated Simla, June 2, 1880, which memorandum is to
be found in the Blue Book containing the proceedings at
the Paris Conference of 1881. Mr. Chapman, the author
of it, was himself present at the meeting in November, and
its contents are more or less adopted by all those who take
an interest in this question.
Mr. Gibbs' pamphlet on the Double Standard, which
contains the table of the relative prices of the precious
metals during the whole period of the existence of the
French mint prices, showing that their divergence dated
from the exact moment when the double standard was
destroyed, might have afforded a candid inquirer some food
for reflection. But, as Lord Sherbrooke had omitted to
read anything on the subject on which he lays down the
law, so it was necessary for him to create a giant of some
sort to destroy, and the one he has selected is a supposed
assertion on our parts that we were " undergoing some
" unheard-of plunder, some cruel and unjust humiliation,"
by the German demonetisation. I shall shortly show that
our language upon that subject has been much less violent
than his own.
What we have said is that Germany committed an error,
now publicly acknowledged by her to have been so, in that
she "reposed too much confidence in the doctrines inculcated
" by the standard writers on political economy, and in the
" success that had hitherto attended obedience to their
" advice;" that she followed the counsels of doctrinaires who
had no practical knowledge of the phenomena they under-
took to explain, and that she thus altered her monetary
system, confiding in "dark and dreary ambiguities," rather
than in that which would bear the light of day from being
based on practical experience and theoretic truth.
A subject "verging on the abstruse" is not exhausted
by one quotation from Aristotle, and by paraphrases of Mill
204
I
and Adam Smith's chapters concerning the natnr^nSoney,
nor is it sufficient for an ex-Chancellor of the Exchequer to
assert that, like the mother of Sisera, a question upon the
subject would make answer to itself. The bimetallist theory,
which Lord Sherbrooke has not examined, is believed by us
to rest upon the definition to be found in his own quotation
from the Ethics — namely, that the value of money, and the
relative value of the precious metals, depend less on pro
duction than on the monopoly with which it is endowed b
being money.
Aristotle tells us that money has the name '^ vofxicr/xa
" because it is not so by nature but by law, and because it
^* is in our own power to render it useless;" thus, and thfll
only, was it in the power of the German Government to
change its silver money and render it useless, and the
consequences arising from that act are what we have to
analyse and explain.
Lord Sherbrooke says that "the value of mon
"depends entirely on the cost of producing it."
M'^CuUoch says the same thing, if possible, mo:
explicitly; he says: —
** A pound weight of gokl is at present worth abont lifte
" pounds of silver. The cause of the difference in the price of
"the two metals consists entirely in the circumstance of its
" costing about fifteen times as much to produce a pound of go!
** as to produce a pound of silver."
In a correspondence between Lord Grey and myself
last summer, he, while eagerly claiming for the precious
metals the subservience to the general law of the cost of
production, frankly admitted that qualification of the
doctrine which all men, I believe, except M'^Culloch, in an
unguarded moment, and Lord Sherbrooke, assent to. m
Lord Grey says: — ^
"It is true that variations in that cost do not cause rapid
" fluctuations in the value of these metals, because they are so
Mr. 11. R. Grcnfell
I
4
205
" durable, and the total mass of them available in the world at
" any one time is so large as compared with the prodnce of a
" single year, that it is a good while before a reduction in the
" cost of producing either metal, and an increase in the amount
" produced, can cause any sensible variation in its value as
" compared to the other, or to commodities at large."
This modification, if correct, shows that the truth of the
vahie being governed by cost of production is a question of
degree and not of principle. If the interval mentioned by
Lord Grey between the change in the cost of production
and the efiect upon the market value be a very long one,
say a century, it naturally becomes less important than the
instantaneous effect upon the market by the arbitrary action
of certain states. The discovery of the Californian and
Australian gold fields, and that of the silver deposits in the
centre of North America, had less effect on the values of
the precious metals than the acts perpetrated by the
German and Scandinavian Governments in their total or
partial cessation of silver coinage. A comparison of these
phenomena seems to me to be more pertinent to the
question than allusions to Diomedes and Glaucus, bricks of
tea, cowries, and rocksalt, or macules, otherwise money of
the mind, of which Lord Sherbrooke possesses so surprising
a monopoly.
Mill's remarks on the double standard have not been
neglected by the bimetallists ; they are as follows : —
" It appears therefore that the value of money is liable to
*' more frequent fluctuations when both metals are a legal tender
" at a fixed valuation, than when the exclusive standard of the
" currency is either gold or silver. Instead of being only affected
*' by variations in the cost of production of one metal, it is subject
*' to derangement from those of two."
Lower down in the same page he says: —
" Some of the advocates of a double standard are influenced
" by an exaggerated estimate of an advantage which to a certain
206
" extent is real, that of being able to have recourse tor repienismng
" the circulation to the united stock of gold and silver in the
*' commercial world, instead of being confined to one of the
^' which, from accidental absorption, may not be attainable wi
" sufficient rapidity."
he
1
These two assertions would be admitted by the bimeta
lists to have been fair enough at the time they were
written ; but the experience gained since the demonetisatiojl
of silver in Germany has proved that if the oscillations i?
the prices of the precious metals in respect to commodities
would be somewhat more frequent, they would be al
much less violent, with the double standard.
I now pass on to Adam Smith. In his days eith
of the two metals was legal tender at a fixed rati
Lord Sherbrooke apparently fancies that some wea
kneed individuals were assembled at the India Office la
November to hear the doctrine propounded for the fi
time. The following is what I find in Adam Smith on tl
subject : —
" In the English Mint the pound weight of gold is coined into
" 44^ guineas, which at 2\s. the guinea is equal to £46 \is.6i
" An ounce of such gold coin therefore is worth £3 17*. \0^d.
'' silver."
Further on he says : —
" In the English Mint a pound weight of standard silv<
** bullion is coined into G'2
shillings,
containiuff in the same
" manner a pound weight of standard silver ; 6s. 2d. an ounce
" therefore is said to be the mint price of silver in England,
**the quantity of silver coin which the mint gives in return f<
*' standard silver bullion."
There is not a word in the famous chapter of Adam Smit"
indicating his belief in the necessity of a single standard ;
in fact, in his day the question of the standard was so
Mr. JL R. Grenfell.
d
207
mixed up with the necessity of standard weight and fineness
in the coins forming the currency of tlie country, tliat no
one that I am aware of was known to discuss the possibility
of a standard of value, other than that depending on the
standard weight and fineness of the coins of the realm,
to which principally Lord Liverpool's famous treatise is
devoted. Thus Adam Smith says : —
*' The money of any particular country is, at any particular
" time or place, more or less an accurate measure of value,
" according as the current coin is more or less exactly agreeable
" to its standard, or contains more or less exactly the precise
'* quantity of fine gold or pure silver which it ought to contain."
I now come to Ricardo, whom it is the fashion at this
day to decry. Lord Sherbrooke's devotion to him is
derived, I believe, from one of the causes whence springs
his contempt for the classics. That contempt is bred by
familiarity with them, which, in the case of Kicardo, has
produced admiration mixed with envy of that special know-
ledge to which his lordship can never attain.
Ricardo in his day, and Lord Overstone in ours, have
enjoyed the peculiar advantage of what Mr. Squeers called
" practical education : " that is, they can not only spell
horse, but they have rubbed him down. Ricardo's scheme
for a paper currency which has been publicly praised by
Lord Sherbrooke, but the precise scope of which I fancy he
scarcely understands, is exactly the example which a2)pears
to me to show the advantage of bimetallism.
Let us suppose, for the sake of argument, that Kicardo's
scheme for a paper currency should be carried out to its
fullest conclusion ; that one-pound notes should be issued
for England, as they are for Scotland and L-eland, and that
there should be no such thing as coined sovereigns at all ;
that the security for the payment of these notes, either by a
privileged bank or the State, should be the amount of
208
the
1
securities declared to be sufficient, and the balance .^
bullion. It is manifest that with such a state of things
there would be no necessity for a mint at all. The precious
metals, whether one or two, would be kept in ingots of the
standard weight and fineness in the vaults of the issue
department. The volume of the paper circulation would
fluctuate exactly to the same extent as if the whole circu-
lation Avere metallic, and the raising and reducing of the
rate of discount would be the regular expression of the
existing value of money in the country — that is, a demand
for circulation would cause the rate to rise, and a super-
abundance of it would cause it to fall. Bullion for the
issue vaults would be attracted by high rates, and repelh
by low rates.
Are the monometallists prepared to say that, with tl
circulation thus confined to paper, if the principal nations
of the civilised world had agreed to treat both silver and
gold as money at a fixed ratio, whether in coins or ingots,
it would be to the advantage of England to restrict its
operations to one metal only ? Mi
If they are not prepared to say this, they will nW
doubt answer that the fixed ratio is an idle dream and an
impossibility, and that the reason why they wish for ingolBI
of gold is that one metal alone can measure value. Ho™'
then, if that be so, is it to be accounted for, that, during
the whole period of the French mint prices being open
the world, the relative prices of gold and silver remaine(
constant, notwithstanding the changes in the cost of pro-
duction caused by the discoveries, first, of gold in Australia
and California, and afterwards of silver in America ?
Instead of accounting for these phenomena. Lord Sherbrook^
rejoices in such words as " confusion for confusion's sakej
" fraudulent device," and " palming off by a practice kno^
" to dishonest pedlars."
I have already shown that in the days of Adam Smitl
a standard meant the measure of weight and fineness
Mr. II. It GrenfeU.
A
209
of a coin or ingot, and I have also endeavoured to
show that with liicardo's scheme for a ])aper currency
which Lord Sherhrooke publicly api)roves, there would
he no need for coin at all, but bullion, and bullion
only of standard weight and fineness in ingots, would
be necessary to hold against bank-notes beyond the amount
permitted to exist in securities. The standard weight
and fineness being duly certified, the pounds sterling in
such ingot would constitute the measure of value in the
country, because each possessor of a sufficient number
of bank-notes could at any time change them for an ingot,
which might be sent anywhere. In such a case, the only
use of the ingots would be to send abroad. Supposing
the French mint prices to be restored anywhere, the
holder of the ingot could procvu*e currency with it in
such places, but the monometallists would prevent the
holding of silver against the notes, however " convenient
" it might be to the merchant," lest it should be supposed
that the bimetallic standard was that of the realm of
England.
In America at this moment silver is legal tender, but
nobody wheels about barrows full of silver dollars ; but they
have in their pocket-books silver certificates with which
they can pay their debts or taxes. These silver certificates
are, as near as possible, in accordance with Kicardo's
proposition.
The most singular part of Lord Sherbrooke's omissions
is his total oblivion of his own speeches. He thinks
it a most dreadful presumption to attempt to alter the
standard of the realm in England, forgetting that he
has proposed to alter the standards used by two far more
populous communities than ours. He first proposed to
alter the European standard of value, and, secondly, that
of our Indian Empire. In order that there may be no
mistake whatever about his propositions, in making both
of which I am bound to admit that his language about the
P
^10
double standard was fully as strong as it is now, I quote
his words : —
" A gold and silver standard is not a double, but an alternate
" standard. The two metals are always fluctuating in their
** relations to one another. It is in the nature of things for the
*' cheaper metal for the time being to drive out the dearer.
** Therefore, when the silver standard drives the gold out of
" circulation, it leaves us nothing to compare our international
" coin with except the silver standard to which it would have no
" exact relation ; and so I ventured to say in answer to the
** question, that it would be impossible to hold out hopes of
" assimilation [that is, of coinage with France] until France has
" made up her raiud to give up the silver standard and have
*' only a gold standard ; and I am happy to say that France is
" favourable to the abandonment of her silver standard. . . .
" But I wish here to point out that I believe it is possible for
" England and France, if they can make up their minds to give
" up a little of their prejudices for the sake of the great advantage
** of having an international coinage, to obtain that object. I will
"just show the House how that could be done. . . .
" It appears to me that the subject is not so difficult as might
" be supposed, and that by a single measure we may secure to
" ourselves the great benefit of saving all the expenses incurred
" on our own gold coinage, without imposing those expenses on
" any one else, and at the same time of striking a coin which
** would have the advantage of an international circulation."
These extracts show that to change the standard of
value all over Europe for the very small object of possessing
a coin which Avould have the advantage of an international
agreement, was in 1869 thought a very easy and simple
operation by the then Chancellor of the Exchequer.
The next quotation is from his contribution as an
Opposition leader to the Indian silver discussions. He was
as strong as he is now, and as he was in the coinage
Mr. H. li, Grcnfcll,
211
controversy, against the double standard, and he placed his
views before the House purely as sugc^estions, and without
any assumption of authority. But, when looked at in the
light afforded by the controversy about the standards, they
showed that he exaggerated far more than any bimetallists
do the evils to India arising from the demonetisation in
Germany.
" We know from the accouuts before uS that India by this
means alone (that is, the depreciation of silver) actually loses and
is deprived of £3,000,000 yearly. This is a state of things which,
if it is to be regarded as permanent, and one not likely to be
speedily or immediately relieved, is one utterly intolerable to be
contemplated, if there be within our reach any means or power
of amendment. I think the case is made out, as clearly as can
be, that we should, if possible, avoid so terrible a calamity as that
with which India is visited through no fault of her own, which
springs from institutions which she has, which does not arise
from the nature of things, but comes from institutions made by
the will of man, and can be altered by the Avill of man."
What, then, was the remedy for the intolerable state of
things brought about, as he correctly states, by the will of
man and alterable by the will of man? He proposes a
paper currency for India founded upon gold. After making
his usual attack upon the double standard, w^hich had been
recommended by the previous speaker, Mr. Sidebotham,
he adds : —
" The question is whether we cannot hit on some other
" means. What appears to me to be wanted is a standard
" identical with that of the country with which it is so intimately
" bound up. . . .
." It would be perfectly easy, I think, to introduce notes into
" India, and to make the regulations that Mr. Ricardo suggested,
" that a person should receive gold for any notes he might bring
" in. We know if there were any redundancy in the currency
p 2
212
" that the process would go on until the redundancy ceased ; bu
" it would go no further, and then we should be possessed of a
'* currency, not so showy, not so expensive, but for all practical
" purposes just as good, as the currency of England and the silve
" currency of India."
1
This crude proposition, at first believed to have beeu
hastily advanced in the heat of debate, was afterwards
enlarged upon in an article in the Fortnightly of July, 1879jB|
under the title of "A Simple Way out of the Indian
" Difficulty." It included a cessation of general coinage of,
silver in India, and the issue of notes convertible into gold
The objections to it were-
I
1, That to procure the gold to pay the redundant notes
would create so large a demand for that metal as woul
increase the divergence between the value of it and that o
silver.
2. That the enormous amount of silver rupees in India
would be crowded into the treasuries to exchange for the
new notes convertible into gold.
3. That, notwithstanding the limit implied by the cej
sation of fresh coinage, the profit to the holders of rupeej
would be so enormous that it would have paid to set u]
mints in all directions.
This "simple way" showed the extreme simplicity oi
the author of it, who perhaps never suspected that it woul(
be called "a fraudulent contrivance," tending to "confusion'
" for confusion's sake." However, this proposition very
naturally was heard of no more. fll
The conclusions arrived at by Lord Grey in the corre-
spondence to which I have already referred are as follows ;
** 1. That the objections to bimetalHsm are insurmountable;
" bimetallism being understood to mean a system under which
Mr. H. R. GrenfelL
«
4
213
" the character oS money is given to both silver and gold coins,
" and either at a fixed rate is made a legal tender in the payment
" of debts.
" 2. That the present standard of value in this country ought
" to be strictly maintained, and that no departure from it or from
" the principles of our existing monetary system ought to be
" made.
" 3. That if, in consequence of our determination to adhere
** to our present monetary system, France, the United States,
** Germany, and Italy, were to resolve that they also would
** maintain gold currencies, and should make such changes in
" their existing laws as to the use of silver as would be necessary
" to keep the gold coins they might issue in circulation, the
" demand for gold must be so increased as, for a time at least,
" materially to raise its value, and thus occasion much commercial
" embarrassment and very serious pressure on all branches of
" productive industry in most nations.
*' 4. That authorising the Bank of England to use silver at
" the market price together with gold as the basis of its issues
" might avert this evil, by leading other nations to adopt similar
" arrangements, and would, at any rate, mitigate the evils that
" would arise from a great extension of the use of gold in the
*' circulation of those countries, by diminishing the amount of
" gold required by England, and affording facilities for the
" employment of silver as an instrument of exchange between
" nations.
" 5. That this measure would not involve the slightest depar-
" ture from our present standard of value, or from the principles
" of our monetary system."
It will be seen that Lord Grey accepts the fact of the evils
which have followed the demonetisation of Germany.
Mr. Clarmont Daniell, an Indian writer, proposes that
there should be but one standard and one legal tender of
money for all the world — gold. To this he adds silver, to
be equally legal tender to an^ amount, but upon conditiqn
2U
that its value as existing in the bullion market shall be
ascertained from time to time, and proclaimed by competent
authority. Professor Bonamy Price supports this theory,
and backs it up by the singular argument " that steadiness
" of value is incomparably the highest quality which money
" can possess." He therefore wishes to take away that
quality from that which is the money of a very large
portion of the human race, simply because he is unwilling
to accept one fact which Professor Jevons has proved to be
mathematically correct, and another which the French mint
prices show to be historically true.
The objection which I feel both to Lord Grey's plan
and to Mr. Daniell's is that they would have all the evils of
a radical change without bringing us^back to that state of
the common measure of value which was lost when the
French mint prices were given up.
The use of a standard is that, if the unit of account be
a pound, a dollar, a mark, a rupee, or a franc, the persons
having any number of these written in books against their
names may know as exactly as possible what their debt is,
and what quantity of what substance will suffice to free
them from it. Now with a varying relative price between
gold and silver, notwithstanding that both would be used
as " instruments of exchange between nations," the above
advantage would be lost.
The functions of a standard, as has been said before, are
not necessarily limited to its connection with coins or other
instruments of circulation within a state, more especially
in a country where paper transfers of all sorts are so much
in use as they are here. A standard may be, if I may use
the term, the test of that " money of the mind " which is
founded on the certainty of ultimately receiving that which
will be as available in the international exchange as paper
is within the state. It appears then to me that to recognise
the standard of value in international exchange is more
important than to regard it in its relation to interior cur-
Mr. II. R, Grcnfcll,
215
rency, and that this consideration ought to induce the
governments of those countries which have brought about
the difficulty by their rash interference and ill-considered
changes in their monetary arrangements, to think twice
before they break up the present negotiations, even sup-
posing that their continuance should involve an agreement
with no other offer from England and the Indian Empire
than that made last year.
I give this advice imder the full conviction that the
enormous international transactions of England will make
her come into the agreement as soon as it shall be shown to
be feasible, and giving due weight to the old objection which
would of course arise on the part of other Powers, that they
do not wish to pull the chestnuts out of the fire for us.
A great deal has happened since last year. The Italian
Government has made a gold loan,*but has not ventured
upon a gold resumption. The American Government has
shown its powerlessness to repeal the Silver Coinage Bill,
notwithstanding the recommendation of the Treasurer and
Director of the Mint. The silver material dollar may not
have got into circulation ; but the silver certificates which
Lord Sherbrooke thinks better still are to be found in every
railway station and custom-house, while the evils which
were so intolerable in India have turned out to be only
losses to the public budget of the State and the private
budgets of the English officials.
Lord Sherbrooke has himself proposed an international
agreement for coin which at once deprives him of the right
to make the objection of its impossibility.
The French bimetallic standard was defended as far
back as 1819 by Sismondi without anticipating either inter-
national agreement or free mintage, the two new elements
brought in since that date. He says : —
" Si le gouvernement declare que toute dette d'uiie once d'or
" pourra etre legitimement payee avec qiiinze onces d'argenl,
216
ainsi que cei^s^pratique en France, la mesure commune du
commerce ne s'etablira pas sur la quantite annuelle produite
par les mines d'or ou par celles d'argent, mais sur une moyenne
proportionelle entre les variations que subiront ces deux
quantites, et I'etalon desire en acquerra plus de fixite."
Now the above is what we want answered ; it will not
answer itself. We are all agreed that the object in view is
to have the greatest fixity which can be obtained from our
common measure of value. We are all agreed that within
a country where gold is the only measure of value, the
fixity, though not absolute, is as great as can be had ; but
the question is how to obtain the greatest fixity in inter-
national transactions, and with reference to this point we
believe that the effect of the demonetisation of silver has
shown that " there are more things in heaven and earth "
than were dreamt of in the philosophy of Lord Liverpool
and M^Culloch.
Lord Sherbrooke has not refuted our arguments, but he
approves of Aristotle's definition. He therefore believes
that money is made by law and can be unmade by it ; but
he apparently disbelieves that the relative value between
the two metals can be fixed by it; that is, he thinks that
Aristotle's rule is good enough for either metal, but not for
both. lie is thus, in my opinion, landed in the dilemma
suggested in Sheridan's famous paradox.
Sheridan was in the habit of walking with his aunt
to the j^ump-room at Bath, but after a time that amuse-
ment palled upon him. One day he neglected to escort
her, and on his visiting her next day she remonstrated with
him.
" But," he answered, " it was raining all the morning."
" Quite true," she said, " but it was fine all the afternoon,
" and I heard of you on the public Avalks." To which he
rejoined, " My dear aunt, it was fine enough for one, but
*< not for two,"
217
This argument, though in some respects defective, was
meant to be, and no doubt was, good enough for an old
woman. Lord Sherbrooke's limitation of the maxims of
Aristotle appears to me to display a contempt for the
understandings of his opponents similar to that which
Sheridan felt for that of his aunt.
No doubt Lord Sherbrooke would have refuted all this
if he had chosen to do so, but he has not read his brief.
To use his own words in the paper mentioned above, " why
" should he waste his time in thinking, when he is already
" master of all that has been and all that can be said on
" the subject ? To try to impart to such a person a new
" idea is a sort of insult, for it implies that there is some-
" thing left for him to learn — which, as the mathematicians
" say, is absurd."
H. R. GEENFELL.
BIMETALLISM.
At a 7nccting of the International Monetary Standard Association,
held in the Egyptian Hall of the Mansion House, on the
8th March, 1882, under the presidency of the Lord Mayor,
Mr. H. R. Grenfell, Governor of the Bank of England,^
spoke as follows : —
My Lord Mayor and Gentlemen, — I must,
in the first place, apologise for venturing, in the position
which I occupy, to appear at a meeting of this kind at all.
As one of the custodians of the currency of the country, it
might be supposed that it would not be fitting for me to
take any part in a movement of this kind. But as long as
it is distinctly understood that I am only speaking as an
individual, and in no degree whatever giving the opinions
of my colleagues, I think there cannot be any reason
why I should not attend a meeting of the citizens of
London, after the somewhat lengthy study that I have
given to this question. I think it right to say that I am a
bullionist of the bullionists ; that I have been brought up
at the feet of a bullionist Gamaliel — if such an individual
could be found in history — and therefore it is utterly
impossible that I should swerve one single jot from that
principle in which I believe, viz., that it is necessary above
all things, that the currency and standard of this country
should be founded upon wise and honest principles.
Now, that being the case, I think it is not unfitting
220
mat I should move the resolution which I hold in m^
hands ; but at the same time, as the resolution seems toj
be almost a truism, you might wish also that I should]
make a very short introduction to the general questionj
as well as speak to the resolution. I
I presume it is known by all present that the standard!
of this country is a gold monometallic standard ; that]
it was instituted by the great statesman. Sir Kobert Peel ;|
and that it was approved by the w^ritings of another]
great statesman, viz., Lord Liverpool, who had given I
years to the study of the question. But it is not sol
generally known, and it is somewhat singular that itj
should have been so, that when Sir Eobert Peel brought]
forw^ard the measure for the resumption of cash payments]
and for the institution of a monometallic gold standardJ
he appealed to the House of Commons by every wishl
they had to act with good faith towards their creditors,]
that they should return to the ancient standard of the]
realm. I presume he meant that the ancient standard w^asj
a metallic standard ; but the fact is, it w^as not a mono-]
metallic gold standard at all. The ancient standard to]
which Sir E-obert Peel alluded Avas a bimetallic standard.)
Although there had been a monometallic standard in the!
country before, there had never been a gold one. There!
had been a silver standard up to the time of Sir Isaaoj
Newton, and subsequently to that a bimetallic standard up]
to the suspension of cash payments. I, therefore, who have]
had to go through the labour of examining most of thej
points which Lord Liverpool wrote about, and which Sirj
Robert Peel spoke of, have no hesitation in saying that I
believe if Sir Robert Peel and Lord Liverpool w^ere alive
at this moment, and were as keenly alive as they were I
in their own days to all the events passing around them, J
that they would have come to the conclusion that this
question must be reconsidered. Now, why do I come
to that conclusion? Just on this ground, that anion<
^r. //, i?. Qrenfell
OOI
the reasons which Lord Liverpool gave for thinking it
absohitely necessary to liave a single standard, and that a
gold one, was that a statesman or state could only make men
obey within the limits of his or its own dominion. From that
I deduce the idea that there never came into his head the
possibility of various states agreeing on a subject like this.
Therefore, as the Lord Mayor has said, it is an entirely
new matter to be considered. But that is not all, for in one
of the best chapters of Lord Liverpool Ave find that he gave
a description of what he calls "bank money," which existed
in some of the great free ports in the last century in which
receipts were given for the deposit of bullion, and which
receipts passed amongst the great merchants of all classes
of trade. This at once, though upon a smaller scale, shows
that he contemplated that a good means of exchange might
be found by an agreement among interested parties in the
same place, though belonging to various nations. So
much for Lord Liverpool; but my reason for believing
that Sir Robert Peel might have been induced to
reconsider this question is that, as a statesman, he knew,
as all statesmen must, that it is not given to public men
to sit down in their room, devise a strictly systematic
plan, and carry it out ; but he knew that statesmen are
compelled to choose between two or three evils, and there-
fore he had the experience that it is impossible to neglect
the consideration of events which are passing around them.
What are these events which have occurred since the death
of Sir Robert Peel, or since he quitted public afiairs ?
They are practically a new set of events altogether. The
beginning of them was apparently an accident ; the first
event was the calling together of a Conference at Paris
in 1868, for the purpose of attempting to get a coinage of
all nations; and scarcely had they met when they found
it absolutely necessary to discuss the question of the
standards. But that Conference came to the conclusion
that the best of all possible standards was a monometallic
222
gold standard, and, I believe, by a narrow majori^^assec
a resolution to that effect. Shortly afterwards there camf
the Franco-German War, and when a large quantity otft
the French gold had passed into Germany, it was not veryBI
unnatural that with the result of the Conference of 1868BI
before them the German Government resolved to use thefll
gold in order to inaugurate that which had been declaredw
solemnly to be the best of all possible standards. AlmostW
immediately the evils began to be shown arising from thisfll
great monetary revolution, and in 1878 another ConferenceHI
was called to again discuss the question, and in the absenceBI
of any German delegate at that Conference, they j)assed aBI
resolution unanimously that it would be a misfortune to theHI
world if the functions of silver in the coinage of the worldHI
should pass away. The next matter was the ConferenceBI
which is still, technically speaking, alive in Paris. TheHI
difference which existed between that and the previous oneHI
was that a German delegate appeared at that Conference,B|
took part in it, and made certain offers with respect to it,||
which although they might not be all that was expected,H|
were at the same time most important offers. There isW
one other great change since the days of Lord Liverpool* H
There are now numberless agreements between States uponHI
all possible questions. We have postal and telegraph
agreements, i:)olice agreements and agreements for lighting
and signals, and other subjects in which the commercialBI
world is deeply interested. Therefore, what would appear
to the mind of Lord Liverpool to be impossible, might
appear to us to be one of the easiest things in the world. j
These are the general arguments which I venture to
submit to your notice with regard to this great and
important question, and if you will permit me now I would
say a few words with respect to some of the particular]
objections which are raised to what is called bimetallism.
In the first place, it is said that do what you will it is
utterly impossible to make a relative price between gold
Mr. H. R. Grcnfell
I
223
and silver, and that, however much you may fix it, the laws
of Political Economy will be too much for you. They
say that the law of cost of production is so certain that it
is absolutely impossible to go against it. I will now give
an instance, and if I am wrong there will no doubt be
some here who know something about the question. The
metal called platinum costs a great deal more to produce
than gold, and yet you cannot get a pound of gold for a
pound of platinum, and why? Simply because gold, being
used for coinage, has a special monopoly and privilege
that renders this cost-of-production law inoperative. We
are told we are against science. I suppose everbody who
has watched within the last few years any of the various
discussions which have taken place knows exactly how
that word " science " is used. We know when A differs
from B and has proved his case, B says : " That is all
" very well, but it is not scientific." But what we must
look to when using such words as " science " is, what are
the facts? and the fact is that during the time when the
bimetallic law existed in France, the relative value of
the two metals was kept as close as possible to the French
legal price, notwithstanding the great fluctuations taking
place in both metals in the cost of production. It is like
the story of the old French Abbe who wrote an essay
on the Swedish Constitution to show that it was eternal,
and he had scarcely had the last proofs of it when
they came and told him there had been a revolution and
that the constitution was at an end. " They may destroy
" the constitution," said he, "but they cannot destroy my
" book;" and that is exactly the case with those gentlemen
who are always throwing the cost of production in the
face of those to whom I have alluded. But with rea-ard
to bimetallism being against nature, I think you will agree
that that is a general proposition ; for almost all things
in heaven and earth are against nature. Everything in
heaven is supernatural, and most things to be seen from
224
the top of St. Paul's are interferences with nature, all thal|
has been done by human beings since II
" Man walked with beast joint tenants of the shade, ^^Bl
" The same his table, and the same his bed," ^^11
may be said to be against nature. We need not tli«l
trouble too much about these general propositions. The
great thing for those interested in this subject is to examine
it as carefully as they can; and therefore having saifl|
these few Avords in introduction of the general subject for
discussion I will pass to the resolution, which is to the
following eifect: — "That the contraction of the metallic
" basis of the world's currency by the exclusion of silvejl
" from its natural functions as domestic and Internationa™'
" money is to be deprecated as likely to render disturbances
" in the buying power of gold more frequent and violentJBl
I ask you all, have you calculated what the cost of the
demonetisation in Germany waa and the dislocation in
the value of the precious metals ? The amount that t
German Government coined was £87,000,000 sterling
gold, and that is equal, according to the average productio:
of the whole world for the last twenty years, to 3*3 years of
that whole production. But that is not all, as affects the
relative value of gold and silver, because besides buying
that amount of gold, or, rather, annexing it, they sold
£ 28,000,000 sterling of silver, which is equal to more than
two years of the average production of the whole world of
silver. That being the case, I ask you what you would
think supposing the Latin nations, our Indian Empire, and
the United States were to resort to some such measures as
the Gei-man Empire did? That is the problem we have
before us, and it is to this problem I invite your most
serious and intelligent consideration.
in
I
Mr. 11. R. Grcnfell.
A
225
Af the same meeting of the International Monetary Standard
Association, Mr. Henry II. Gibbs, President of the
Association, said: —
My Loud Mayor and Gentlemen, — You have
been good enough to ask me to say a few words upon this
question, but there is no resolution before the meeting at
this moment. The resolutions, happily, have all been
carried, if not unanimously, yet very nearly unanimously.
However, to put myself in order, as they say in another
place, I will state that I intend to end with a motion. But
first I should like to say a few words in answer to the
gentleman who spoke in the body of the hall. It would be
a great pity that his questions should not be answered,
although I believe there is hardly anybody in this hall but
knows the answers. He asks us, in the first place, why we
are to assume 15J as the proper ratio between gold and
silver. I say we do not assume anything of the kind.
There is no special virtue in 15^, but 15 J was once the
fixed proportion in England as it is now in France, as it is
in Germany, and as it is almost all OA^er Europe. When
that was the recognised ratio it was an approximate ratio.
It was not one that was mathematically correct; no ratio
ever was ; because if those gentlemen Avho spoke of the
cost of production were right, it must have varied every
second. The ratio was 15^ in active practice all over
Europe until Gennany demonetised her silver. Instantly
it was thrown down ; but if Germany to-morrow were to
remonetise silver, with the same rapidity it would come up
again. (A voice — " Exactly.") Therefore if we in England
should ever get so far in settling our minds about the
double standard that the arrangement of the ratio came
to be a question for consideration, and if that gentleman
should be put upon a Eoyal Commission to settle what the
Q
226
ratio sliould be, lie would find to his great surprise tliafl
before the Commission had sat at all the market price oH
silver would be at 15 J again, without his having had a word|
to say about it. Another question he put to us was, hoTW
are we to arrange between the various Governments, all am
whom he seems to think have different standards ; and ha
instanced the standard of gold in England, amongst otheJ
things, and the standard of gold in France. Well, ihm
standard is different, no doubt; but we have not the leas^
difficulty in making our international payments when the}i
have to be made in gold, and we should not have the leasll
difficulty in making them even if they had to be made in
silver. But the remarks that our friend made upon thS
subject are really addressed not to an international standard!
but to an international coinage, which is a perfectlji
different thing. We should, indeed, in that case have ta
make up our minds whether we were to give up our soveJ
reign or whether France was to give up her napoleon. Bui
to accommodate the standard of our country to the standardj
of another is only a matter of arithmetic, of the rule ofl
three ; and the parity of value between the different coin-i
ages of the world is thus easily settled. I have no\ii
touched on some small details of the subject, referred to b^
the gentleman who put these questions. I will now say m
few words on the general subject. I have gathered fronJ
what has passed to-day and from what has been passing]
now for the last year or so, that we have all made up our
minds by this time as to what we do not want and as t<
what we do want. Now, when a monometallist wants U
say something disagreeable, wants to throw a stone at
bimetallist, and does not know where to look for it (I thin]
it is a very difficult thing for him to find it), he says
" I see what you are about. You want cheap money : yot
" want abundance of money." Well, I have no objectioi
to abundance of money, especially if it is in my own pocketi
and as regards abundance of money, generally, abundance
Mr. II. II. Gibbs.
221
of the circulating medium as compared with scarcity of
tlie circuhiting medium, I prefer al)undance. Abundance
brings mischief with it ; but it brings some good. Scarcity
brings mischief with it, and does not bring anything else.
Therefore you may desire abundance so far, but abundance
is not the point we are aiming at. What we do want is
stabiUty. What we do want is enough monetary circula-
tion to serve for the wants of commerce, and progressively
enough to serve for the progressive wants of commerce.
If we mean by abundance something more than we want, —
a little more than we can spend, — we do not desire anything
of that kind. But stability we do want, and I do not need
to convince you, nor to convince anybody else, I suppose,
who has studied the subject, that stability is a consequence
of having a double standard : that is to say, a greater
measure of stability. For a testimony of this I appeal, as
Sir George Campbell has already appealed, to one of the
chief prophets of the monometallists, whose argument
referred to by Sir George Campbell was a very ingenious
argument. His way of putting it is this : He suj^poses you
to have two vessels, one a yellow one and one a white one,
both half full of water, and then, if, as Sir George says,
there is a heavy drain upon one of them, say the yellow
vessel, it is soon empty, or if more water were wanted and
it were poured into the silver vessel, it would run over the
sides of the vessel. But if you had a pipe connecting the
two vessels at the bottom, so that the level of the water in
them is the same, though you take as much as you please
from one of them or add as much as you please to one of
them the level at the top is still the same. Well, then, I
have now said what we do not want and what we do want ;
I will now say a little about why we want it. I will not
say that we want it because the present state of things is
intolerable ; but I will say, that it is far from satisfactory
and threatens danger in the future, danger in the scramble
for gold, and danger in the depreciation of silver, and I
Q2
228
appea^gamto another monometallist chanipion. Accord- i
ing to liim, and lie is a very able man and statistician, ;
very trustworthy when he does not speak against bi-
metallism — the existing state of affairs is an exceedingly \
dangerous one. I daresay it is, and therefore we want
Avhat will guard against that danger. Our opponents say !
" That is all very well, but the thing you desire is impossi-
" ble. It is impossible to make any agreement with any-
" body." I do not think that is the case. We have heard a |
great deal of late of the international concert. I do not see
why we should not have an international concert in metals
as well as in politics. I think the metallic concert would
be the most harmonious and most lasting of the two. As
to the matter of impossibility, I would repeat the words of
a great man in regard to that : " If it is possible," he said, i
" it has been done already ; if it is impossible, it shall be
" done." I say that it is possible, and has been done already; i
and, when I say that I am only stating simple facts, because |
this impossible thing was done in France for seventy years,
and " nobody seemed one penny the worse," but on the
contrary appeared to be extremely well off. We have heard
a good deal about the scientific part of the story from
Mr. Grenfell. I want just to tell you one of the particular!
views of its scientific character. "It is all very well," a man
said to me, "you may argue as much as you please, but you
" will never turn me away from the great scientific principle ■
" of one metal for the currency between peo^^le who trade
" one with another." My answer to him was and is now —
" There are two great scientific principles. There is the
" principle of unity, and there is the principle of uniformity ;
^' but the world has given up unity. They cannot have it,
" and they won't have it. Uniformity we can have, and
" sooner or later it appears to me we shall have it — that is a
" uniform system of the two metals accepted by all as money."
My next answer was — "As to your scientific principle,
" which you won't be turned away from, you are turned away
Mr. II. II. Gibhs.
229
" from it every day. You give it up if there is the slightest
" strain upon it. You tell me it is necessary for a man in
" London dealing with a man in York to know exactly what
*' he is to receive. Well, then, I say it is necessary also
" for a man in London dealing with a man in New York.*
" Your scientific principle is unseaworthy ; no sooner does
" it get on board ship than it goes to the bottom. It cannot
" venture across from Dover to Calais, still less can it go to
" New York." I have no more to say at this time upon the
subject itself. But there is one thing I should like to say,
and that is, that I perceive a great alteration since I went
to the Conference in Paris in 1878 in the feeling of the
people generally about this matter. I had not a word to
say then in favour of bimetallism, because I had not
opened my eyes sufficiently, but at that time if anyone in
England did venture to suggest such a thing he w^as thought
to be a lunatic. As has been said before, whatever w^e in
this little island have been accustomed to do we think is
absolutely right, and that whatever is done by the rest of
the nations of the world is absolute lunacy. However,
for that or other reasons any persons who thought of such
a thins: at that time were called lunatics. But now the tone
which speakers adopt in reference to bimetallism is very
different, and the way in w^hich they look at the matter is
very different also. They see that there is danger in the
present state of things, and they think it right that the
plans wdiich are proposed to meet the danger should be
considered seriously and not be put on one side as if the
proposers Avere asserting the flatness of the world or making
endeavours to square the circle. We are now listened to
with patience ; and, to come to the motion upon which I
rose to speak, I think the Lord Mayor is an example of
that patience. He has been listening to us for two hours
with exemplary patience. I hope he has been in some
degree rewarded for that patience by the interest he has
taken in the conversation w^hich has been going on. I
830
think he not only showed his patience, but proved his ]
ness in giving us this hall to talk in. The motion I
to submit to you is — " That the best thanks of this meeting
" be given to the Lord Mayor for his kindness and
" hospitality in taking us in under his roof and giving us
« this room in which to hold our Conference."
THE SCIUMBLE FOR GOLD.
From the BuUUmist, March 18, 1882.
Some of our contemporaries are never tired of pointing to
the effect of the late action of the Bank of England in
raising the rate of discount to 6 per cent., and assuring
themselves and their readers that a complete and rapid
success of that action in increasing the bullion in the Issue
Department is a convincing proof that there can be no
necessity for any reform in our present monetary system.
Nowhere is this assurance more clearly and more
jubilantly expressed than in an otherwise well-written
and thoughtful article in the Saturday Review of the
25th of last month, on the " Eesults of the Six per Cent.
Kate."
We reproduce the last paragraph of the article in ques-
tion, and propose to make for the benefit of our readers
such remarks on it as may be necessary to expose the
fallacies with which it is somewhat thickly sown : —
" The experience we have now had of the efficiency of the
" 6 per cent. Bank rate, in spite of all that is said of the scarcity of
" gold and of the international struggle for gold, ought to convince
" bimetallists that this country at least is not likely to suffi3r
" seriously through gold becoming scarce. Rich countries can
^' always buy whatever they require of any commodity, and England
" being the richest of countries can have as much gold as it pleases,
232
and when it pleases. In spite of the panic in Paris, of the^
Italian preparations for resumption of specie payments, and all,
the demands from so many quarters for gold, three short weeks
have seen the Bank of England replenish its stock of bullion and
raise its reserve more than two millions. And although under
other circumstances a 6 per cent, rate might not be equally effec-
tive, we have full assurance that some rate will be effective and
that England need never fear a scarcity of gold. Gold, in fact,
will flow to the market where its use is most profitable, and that
market is found in London. No doubt the United States and
France are also rich enough to obtain as much gold as they may
require, and they therefore, like England, are justified in main-
taining a gold standard. But poor countries like Italy, Germany,
and some others arc not so justified. They suffer serious loss by
affecting to compete with countries so much more powerful in
resources than themselves. Italy at present is so little prepared
for a gold currency that, though she has a considerable amount
of gold for which she is paying a heavy interest, she does not
dare to put that gold in circulation, knowing that it would
instantly flow away to London."
The Reviewer appears to imagine that bimetallists are
beset by an unreasoning dread that this country Avill have
to stand helpless and with folded hands while it is either
being absolutely denuded of gold, or seeing gold become so
scarce that the circulation is dangerously and permanently
contracted ; and tells us triumphantly that England — and
the United States and France too for that matter — are
quite rich enough to buy as much gold as they please and
as often as they please.
Now here are two patent mistakes. The fears of the
bimetallists arc misapprehended, and the remedy so con-
fidently exhibited is itself one cause of the disease.
Gold leaves this country, and will always leave it from
time to time; but it is only to redress the balance of trade
that it does so — that is, to make up the difi'crence when the
imports have exceeded the exports — to pay cash, so to speak,
Mr. H. H, Gibbs.
23:J
when we have not goods wherewith to pay ; and inasmuch
as the balance of trade is necessarily variable, bullion will
and must go, and no one need dread its going. No wise
bimetallist will dread it, and no one who knows anything
about the matter ever doubted that a timely rise in the rate
of discoimt would bring bullion back again.
No doubt we can " buy " gold, not only as the Saturday
Review is pleased to put it, as much as we please and as
often as we please, but also as dear as we please.
It is that dearness that we dread, and not without reason,
if not only France and the United States, as the Keviewer
says, but Germany also and Italy (wisely or unwisely) are
bidding for it in the same auction-room.
We are the richest, say the dwellers in a fool's paradise,
and we can always buy it ! Certainly we can ; but at what
a cost ! But it is not only dearness that is to be dreaded.
Dearness, moderate and steady dearness, is tolerable, and
even advantageous ; but excessive dearness, especially if it
be fitful and oscillating, is highly prejudicial to trade. A
constant rate of discount of 6 or even 5 per cent, is no
pleasant subject for contemplation ; but a rate frequently
varying, but always high and sometimes at fever point,
would be far worse than a rate of moderate height but
reasonably constant.
So that that very power of buying (possessed by others as
well as ourselves) which the Reviewer vaunts as our rock
of safety, is the rock on which we split ; and the so-called
antidote which he holds to our lips is itself a poison.
The Reviewer hugs himself again in the fallacious
reflection that England and one or two other nations are
alone worthy to have a gold currency, and that inferior
communities, such as Germany, Italy, and Austria, must be
content Avith the inferior metal. In writing thus he seems
to us to have misapprehended the nature and cost of a
metallic currency.
Any metallic money, whether gold or silver, any medium
234
of exchange aS^neasure of value which is made oTacom^
modity possessing itself intrinsic value, is necessarily an
expensive luxury, and must be bought and paid for. Every i
sovereign of the £ 120,000,000 supposed to be in circulation
in England, whether in the coffers of the Bank or in the
pockets of the lieges, has been purchased by an equal value I
of English goods. Every silver dollar in circulation in
Italy has been paid for in silk or wine or oil, or other
Italian produce ; and so it must be in every nation in which j
gold or silver being in circulation as money are neither the I
produce of the land itself nor the spoils of war other than
compensation for war expenses. I
But if it be true that gold and silver purchase other
commodities by dint of their own intrinsic value (whatever
may be the co-efficients of that value), it must follow that j
it must cost a nation just as much to procure a silver
coinage as a gold one. For every commodity exchangeable ;
by means of money must be measured by a quantity of i
money exactly its equivalent in value; and just as "a!
" pound of lead is equal to a pound of feathers," so the i
cost of a quarter of wheat must be the same whether the
Italian measures it in gold or silver.
A silver coinage then is suitable to a poor nation, not
at all because its initial cost is cheaper than a gold one,
but because the commerce of such a nation being made up
of smaller transactions than that of her richer neighbours
that coined metal is most convenient which is capable of
the most minute subdivision of value.
Therefore, though Italy may possibly be unwise, even
under the present uncertainty of the future value of silver,
in choosing gold rather than silver for money, it is
not because as a poor nation she is not "justified" in!
adopting it. I
If, then, gold is naturally more suitable for great com-
mercial transactions, it would seem that it is by natural
and not by arbitrary selection that gold has hitherto formed
Mr, H, H. Gihhs. \
235
sometimes a part and sometimes the whole of the standard
money of countries whose commercial transactions are large,
and silver alone the standard money of those countries
whose commerce is less advanced.
But the cause of the present disturbance of the values
of gold and silver is that some of these latter nations (and
notably Germany) have thought proper to reject their
ancient money and arbitrarily to select that which Ave
suppose to be less well suited to their commerce.
Their action has been a resistance to natural tendencies,
and Ave doubt not that if a remedy be found for the existing
dislocation of the metals in the establishment of a conven-
tion between the principal commercial nations for the
adoption of gold and silver jointly and at a fixed ratio for
their standard money, the natural allocation to which we
have above referred Avould again prevail ; and though
silver and gold Avould still be legal tender in all countries
which w^ould be parties to the convention, yet it seems certain
that gold would prevail in England as heretofore, and
silver in Germany and Italy when Italy has once resumed
specie payments.
As to the late and present action of Italy in this respect,
the " RevicAver " has failed to apprehend the true history of
the matter.
He supposes that the Italian Government " does not
" dare to put the gold into circulation, knoAving that it
" Avould instantly floAV aAvay to London ; " but prefers to
lose interest in vain, by keeping it locked up.
Italy loses no more interest on her gold than she Avill
always lose so long as she has the luxury of a valuable
currency. She never proposed to put her gold into circu-
lation until she should have completed the full tale of
£16,000,000 sterling prescribed by the laAv.
Were she to do so then or noAv Avithout calling in an
equivalent sum of her paper currency, the gold Avould of
couL'se floAv out to London or elscAyh^re, because the circu-
•
286
laKon would be redundant, and the more valuable portioi
of it would be the first to depart.
But inasmuch as it is intended to call in an equal
quantity of paper currency, thus leaving the volume oi
her circulation (presumably not now too much inflated^
unaltered, we do not see what is to carry the gold!
away.
Two things only will do it, the shifting of the balance!
of trade, or the lowness of the rate of discount. If thej
balance of trade turn against the country, she will have to
redress it, as England has been doing lately, by payments
in specie ; but that operation will last only so long as the]
rate of interest is lower in Italy (in proportion to the credit!
of the country) than in other countries with which she]
trades. When the rate of interest rises sufficiently the]
outflow of gold will cease.
Italy is now accumulating her gold, not by the natural]
law which regulates the outflow and inflow of the precious
metals, but really by the way of purchase, intercepting thatj
which would naturally come to this market. When she]
has got her gold and put it into circulation by the legiti-j
mate means of cancelling her notes, she will fight to retain
it ; and the Aveapon with which she will fight is our own
weapon — the rate of discount.
That such a battle can be fought without serious]
and far-reaching commercial disturbance will hardly bei
contended.
Many will be the casualties recorded, and not to the
weaker nations only, in the course of the struggle for
gold.
HENRY H. GIBBS.
CONCERNING FAITH IN TREATIES.
From The BulUomst, April 15, 1882.
There is a well-known chapter in Ilorrebow's History of
Iceland, entitled "Concerning Snakes in Iceland," and the
chapter consists of but six words: "There are no snakes in
Iceland." Our article might be as short, and might be
confined to the words " There is no faith in Treaties,"
but that we wish to point out why there is no faith in
them, and to finish, like a sermon, with an application.
The history of the world is the history of the making
and the breaking of treaties. Treaties of peace are
succeeded by declarations of war — allies become enemies,
commercial treaties are succeeded by "Berlin decrees"^
and that which was made for the good of two nations is
overturned by the unwisdom of one to the detriment of
both, and not unfrequently in greater measure to the harm
of the nation at whose instance the treaty has been
annulled.
Inter anna silent leges, war tears all treaties ; but even
without open war selfishness and supposed self-interest are
too strong for the bands of any treaty, and whether the
terms are imposed by a conqueror or settled by amicable
agreement a change in the dispositions of the contracting
parties will certainly bring the treaty to the ground. The
conquered nation feels herself strong enough to tear the
treaty imposed by her enemy — whether in the Black Sea
or elsewhere — or if two nations have made a treaty — it
may be concerning the Isthmus of Panama, or otherwise
238
— for their mutual protection or for the general good of]
commerce, one of them may think an advantage is toj
be gained by abrogating it, and will say candidly and
cynically to the other, "Don't you see that it is in some]
parts disadvantageous to us? You can't expect us to be
bound by it!" I
Self-interest, real or imaginary, it is that in all cases
dictates the breaking of any national engagement, and it is
because the promptings of self-interest will never cease
that we say there is no faith in treaties. ■I
These very true but very trite sayings are amongst the
weapons wherewith our opponents attack the advocates of
the bimetallic standard. "Put not your trust in treaties," ■I
say they. " Who is to guarantee that if you make a treaty
" or convention with Austria, Belgium, Chile, Denmark, and
" the rest of the alphabet of foreign States down to Zanzibar,
" some one or more of them, moved thereto by self-interest,j
" wantonness, or war, will not secede from your convention,!
" trample on the treaty, and overturn the whole fabric of j
" your bimetallic league ? "
Doubtless it is impossible to guarantee that no one shall
secede, but we think we shall prove that it is in the highest
degree unlikely that there should be any such secession — -j
first, because it would be to no one's interest to secede,]
and second because it would be an operation of extreme i
difficulty. Moreover, we shall show that if such secessionj
were accomplished it would not break up the league, and;
would indeed be of very little moment.
How would a nation intending to secede from such a
league set about it.
The changing from one metallic standard to another
would be comparatively a very easy undertaking, though
extremely costly to the Government which undertakes it. fll
The discarded metal is called in, paid for in the adopted
metal, and sold in other countries at a loss, yet Germany,
even though aided by the enormous inpouring of gold from
Mr, If. H. Gihbs.
I
239
the French indemnity has lately found that however easy
it may be to undertake such an operation it is exceedingly
difficult to carry it through.
The changing from a paper currency to a metallic one
is extremely easy, hut very costly either to the Government
which makes the change, and through them to the people
who pay for it in taxes, or else directly to the debtor class.
The former is the case of Italy, w^ho is looking forward to
the very desirable but very expensive luxury of a metallic
circulation; the latter was the case of England at the
resumption of cash payments in 1816.
But the changing from a bimetallic to a monometallic
system is a very different matter, when the nation desiring
to change is one of a group of States having a double
standard of money, and we fail to see how such a nation
can set about divesting itself of one metal and retaining
only the other without passing through the stage of a paper
currency. It may seem a simple thing to suspend the free
mintage of one of the metals as France has done with
silvery but if her neighbours had been bimetallic also
France w^ould never have been frightened into doing so,
nor would any nation in that case have any temptation to
follow her example, seeing that if she did she would not
get rid of her silver, as that example shows. But some
one may say, " Could she not send it to England as
" Germany did ? the cost of sending would be nothing."
True, she would make no immediate loss in doing so, for
England would by the hypothesis be bound to receive it
and coin it into double florins; but w^hat then? How
would she obtain the gold in its place? It is the right of
the debtor to choose which metal he will pay in, and she
would have no remedy but to receive the English silver
coin which would be tendered to her, and would have her
labour for her pains. No, there is but one practicable way
in which a nation once entering a bimetallic league can
separate herself from her fellows without heavy and useless
240
loss, and that is by discarding altogether her metallicJ
money and resorting to a paper currency, after wliich if]
she chose she might do as England did in 1816, and adopt
a single standard. But that any nation would suspend
cash j)ayments unless it were to provide for the cost of a
war seems in the highest degree improbable. J
War certainly would, as our opponents say, abrogate
treaties between belligerents, but we fail to see that war
would necessarily have, or, indeed, would have at all any
eiFect upon this particular treaty, or could afford any
inducement to a belligerent to break it. Our contemporary,
the Economist, supposes indeed that it might probably be
broken as an act of war, and to do damage to an enemy,
but fails to show what hostile or hurtful effect it w^ould
have on the antagonist. We will presently show that it
would have none.
In order to this we will first point out what the
supposed convention would be, and secondly what iti
would not be. I
Omitting minor details, it would be this: — That the]
contracting parties would engage to open their mints to|
the free coinage of both gold and silver, either metal at
the option of the debtor being legal tender in the proportion
of 1 to 15^.
It would not be the prohibition of any State to continue
or to resort to the issue of paper money. England, for
instance, who prides herself on the simplicity of her mono-
metallic gold standard, would not be asked to give up her
fifteen millions of paper circulation, which though payable
in gold is not based, as the rest of the circulation is, upon
a direct deposit of bullion.
A nation, then, resorting to an issue of paper money,
whether complete or partial, would not ijiso facto infringe
the letter of the treaty ; nor would the measure of itself
have any hostile or damaging effect upon the adversary.
It is true that a nation
Mr. II. II. Gibbs.
I
so actinff would have denied itself
241
the expensive luxury of metallic money in order the better
to be able to levy war. She might conquer her enemy
with the armaments which her discarded bullion would
buy, but the fact of her discarding it, or of her secession
from the convention, would not and could not be an act of
hostility. Tlie paper-using nation would be thereafter
wholly outside the convention, and would exercise no
influence upon it. She would in monetary matters be a
neutral. She might even wholly discard metallic money
and yet fulfil every article of the treaty to the letter, for
she might safely adhere to her promise and coin every
ounce of silver or gold brought to her mint for the purpose,
inasmuch as it is abundantly obvious that not an ounce
would be so brought ; and this would be the case whether
the secession, formal or virtual, were the offspring of war
or of caprice. All the metallic circulation would have left
the country (in accordance with the " Gresham Law "),
and would have gone to augment the circulation of other
commercial nations — silver and gold indifferently to the
bimetallic nations, and if there were any outside the
convention, then silver to the silver-using nations and gold
to those whose money was gold.
Now what we desire to impress upon our readers is that
this last result is precisely what would follow from the
adoption of a paper currency by a nation under stress of
war or otherwise at this present time, and could not there-
fore in any sense be traced to the adoption of a bimetallic
standard. The immediate result of it would be exactly
the same now in the absence of a bimetallic convention
as it would be if such a convention existed ; but the
practical consequences to other nations would be somewhat
more decided in the former case than in the latter.
Let us take Italy for example.
If after completing her resumption of cash payments
and withdrawing £16,000,000 of paper currency she were
unhappily to go to war, she would most probably think
242
herself obliged to undo her work and re-issue paper. The
£16,000,000 of gold would flow over, not into all othei
nations, but exclusively into those having a gold standard^
and the eiFect, prejudicial or otherwise, would be so much'
the greater ; for if she had entered with others into a
bimetallic convention the £16,000,000 would, or mightjHI
be partly gold and partly silver, and the metal would pass
having
a bimetallic,
into the currency of all nations
standard.
But let us suppose for the sake of argument that
nation bound by a bimetallic convention had succeeded h
separating herself from her co-signatories, and adoj)tingj
let us say, a single gold standard. Beyond the confusioi
and mischief which the operation, whether successful oi
not, would have caused, no permanent alteration of prices
would ensue. Her silver would have passed to her neigh-
bours, and they would all have been laid under a contribution'
of an equal value in gold. They would but stand where
France stood for seventy years, not however as France did,
alone, but supporting one another, and not as France did,
with all the world drawing from her one metal or the
other, but with only one or one additional monometalHc
nation capable of doing any such thing. H
Even if all the nations parties to the convention were
to become monometallic but one, that one would stand
exactly in the same position and under the same condition^!!
as France did until 1873 ; and we take leave to think that
the "sufferings" of France under those circumstances,
existed only in the imaginations of our own countrymen^
Certainly the French failed to discover them.
We return to what we said at the beginning of this
article. There is no faith in treaties where self-interes
points to their destruction ; but the conclusion to which
the above considerations lead us is that that one incentive
which is necessary to the breaking of treaties would
altogether lacking in the case of a treaty for the main
243
tenance of a bimetallic standard in commercial nations.
Not only can no ground of self-interest be discovered for
destroying such a treaty, but self-interest would be strong
enough in any nation in which both metals were by treaty
with other nations in like case current as standard money,
to cause her to cling to a system the destruction of which
by herself alone could only be accomplished at the cost of
confusion to her commerce and heavy loss to her exchequer.
HENRY H. GIBBS.
r2
THE VALUE OF MONEY.
From The BuUionist, May 20, 1882.
Our contemporary, the Economist, sums up his leading
article on " Bimetallism and the Bank Eeserve," in the
issue of the 8th of April, by saying that " whatever results
" might follow from the adoption of a bimetallic standard
" we may be certain . . . that cheaper money would not
" follow from it, nor fewer fluctuations in the English
" money market."
If the writer of the article supposed that bimetallists
expected the adoption of a bimetallic standard to cause
the rate of interest on loans to be permanently low, to
bring about a new era of " cheap money," unvaried by any
fluctuations, it would have been easy for him to have found
arguments good enough to dispel such a hope. But no
such expectation has ever been entertained, so far as has
come to our knowledge, and we shall presently show that
his arguments do not touch the real effect which the
adoption of a bimetallic standard would produce.
Much of the error that seems inseparable from the sub-
ject of money arises, as most errors do, from a confusion of
terms; and we propose to show in this article where the
error lies, and what phrase it is that is so much abused in
common parlance. The Economist perceives and strives
to avoid the confusion, but it has not carried out what it
has perceived to its legitimate conclusion, nor, indeed,
would it have suited the course of its argument fully to
do so.
246
It is the phrase at the head of our article — Value of
Money — which is so frequently misused by being employed
now in one sense now in another.
There is one simple and plain meaning of the phrase —
the only philosophical one — which implies the comparison
between money — between the gold, silver, or whatever
substance is used as the common measure — and other
commodities. What is the value of a quarter of wheat?
So much of that common measure — so much money.
What is the value of money ? So much wheat, or other
commodities that may be measured by it.
The value of money at large wanes or waxes in com-
parison with the mass of other commodities in the exact
ratio to the quantity of money in the world and of
commodities exchangeable for money.
It is to the value of money in this sense that Professor
Jevons no doubt refers in his famous similitude of the two
reservoirs of water liable to be differently lowered or raised
in level by various accidents happening to one or the other,
but which when connected by a pipe passing between them
maintain the same level whatever happens.
When gold is money in one country and silver is money
in another, a great increase in the quantity of gold, such as
was caused by the discoveries in Australia and California,
lowers the value of gold money in relation to silver and all
other commodities, while the relation of silver money to all
commodities but gold remains unchauged ; a great increase
in the quantity of silver, such as took place after the Spanish
conquests in America, has exactly the converse effect.
The pipe of connection is, as Professor Jevons says,
the law of the bimetallic standard. When that is applied,
the increase of either metal is an increase, not of the gold
or silver money respectively, but of the total money of the
world, and, all other things being equal, a rise in the price
or value of the mass of other conmiodities, and a fall in
the value of money ; the decrease of either metal, on the
Mr. H, U, Gibbs.
247
other hand, is a decrease in the total money of the world,
a rise in its value, and a corresponding fall in the price or
value of the mass of commodities measured by it.
So then the writer of the article in the Economist is
manifestly in error where he says that " Professor Jevons'
'• observations on the point do not refer to the value of
" money at all," and his saying so appears to us to be a
striking instance of the confusion of thought and ambiguity
of utterance on which we have remarked ; for it is precisely
to the value of money in the proper sense of the phrase —
that is to say, to the value of metallic money as compared
with commodities — that he does refer.
But it is not to that only that his illustration applies;
and we propose to show that the equilibratory action of the
bimetallic standard must affect the "value of money," taking
that phrase in its most common and least accurate sense.
In the common acceptation of the term it is used — in
City articles and the like — not at all for the value or
purchasing power of metallic money, but for the rate of
interest to be paid for the loan of capital, as, for instance,
for the price to be paid for the immediate command of the
sum drawn by a bill of exchange before the time when it
would probably become due.
We may say in passing that in this sense the saying of
the Economist that "the value of money is reckoned in
" money itself " is indeed intelligible, but seems to us to
be a very slipshod mode of speech, and not less so than
the statement in the same paragraph that ^* money can
" buy money." Money can buy commodities of all kinds,
including gold and silver, when either of these are not
money; but money it cannot buy. If it can, we would
repeat the question which has been asked elsewhere in
reply to the same statement — " How much of it can one
" have for a sovereign? "
To return to Professor Jevons' equilibratory action,
and to the belief in universal and continuous "cheapness
248
" of money" which the Economist attributes to bimetallists.
It would indeed be absurd to allege that the establishment
of a bimetallic standard would do away with fluctuations
in the market rate of interest. Those fluctuations are
inevitable, and must take place from day to day according
as the demand for loans and the supply of capital to be lent
correspond or not with one another. But the Economist ,
in citing J. S. Mill as a witness, misleads its readers; for
by his words, where he says that "the rate of interest
" does not depend on the quantity of money in circulation,"
he certainly means " on the total quantity of money in
*' circulation in the world." It is hardly necessary to say
that it may depend on the quantity of metallic money in
circulation at any given moment in any particular country,
and does depend in England, and that to a very considerable
extent, on the amount of gold existing in the Bank.
The rate of interest depends then on the demand for
and supply of capital available for loans, which demand,
as the Economist truly says, includes in itself " every
" demand arising from trade or commerce or from any other
"source"; but the supply, under our laws, depends more
particularly on the balance of trade and the necessity of
paying the foreigner in cash that which at the moment we
cannot pay in kind. Gold in that case leaves the vaults of
the Bank of England for export, and by that means as by
any other, such as for the needs of the Scottish circulation
or for harvest purposes at home, the reserve of the Bank
is diminished and there is less capital to lend, the supply
falls short of the demand, and the cost of that supply, that
is to say the rate of interest on loans is enhanced.
All these eft'ects are inseparable from our commerce
under the salutary provisions of the Act of 1844, and are
wholly independent of the question whether two metals or
only one should be used as money. The difference arises
at a further stage, that is to say when the amount of
capital available for loans is again being augmented by means
I
249
of the rise of the rate of interest here and the consequent
attraction of foreign capital to take the benefit of it.
Under a gold standard the metal which is to replenish
our circulation comes practically, so far as it is attracted
by a high rate of interest, from France or the United
States or Australia only, and before enough can come it
may be necessary that the rate shall be raised higher and
higher and through a longer period of time. But if the
void could be supplied by silver as well as gold, every
country using a metallic standard would be a well from
whence we could draw, and as a consequence of the
multitude of sources of supply would come competition
for supplying us, and therefore a lower rate of interest in
this market would suffice to create an inducement to our
neighbours to provide the supply.
The converse of this would of course be the case when
the tide set the other way, so that when the demand was
for the export of specie from this country there would be
a greater number of markets drawing upon us for their
supply. So then the fluctuations of capital to and fro
would be more continual, and consequently the changes
in the rate of interest might be more frequent ; but both
the sums passing and the rates charged would be for the
reasons above stated less considerable in amount ; and this
is exactly what has been demonstrated by Professor Jevons.
We believe, then, that we have shown that while no
sane person hopes to do away with the national fluctuations
in the " value of money," that is to say in the rate of
interest on loans, there is reason to believe that under a
bimetallic law., to quote the words of the Economist, " the
" replenishing of the reserve of the Bank of England
^' would be done more readily than before, and that a lower
" rate of interest would be sufficient for this than has
" hitherto been the case," or rather than would be the case
under the continuance of a monometallic standard.
HENRY H. GIBBS.
THE EATIO or VALUE BETWEEN
GOLD AND SILYEE.
From the BuUiomst, May 20, 1882.
TO THE EDITOR.
Sir, — I beg leave to offer for the consideration of
readers of the Bullionist a view of the bimetallic question
which may perhaps not have been presented to them by
any other of your correspondents. I am one of those who
question the assertion that any bimetallic law does, or can,
alter or do, more than very slightly affect the natural and
intrinsic ratio of value existing between gold and silver.
The bimetallists distinctly assert that the force of law will
avail to make gold and silver coins in currency exchange
at the rate of 1 oz. of gold for 15 J ozs. of silver, irrespec-
tive of the fact that the same metals are exchanging in
the market in quite another ratio, and expect that if the
nations agree to employ gold and silver on those terms in
their currencies the metals when not used for cmTcncy
purposes will sell at a corresponding valuation, because no
holder of silver will sell at any other price. It is for them
to show that by law or otherwise the ratio of 1 to 15 J can
be established as a permanent condition in the exchange
of the precious metals. I have heard it asserted, but never
seen it proved to be possible.
It is probable that the sic volo sic jubeo of the American
and Continental Governments will give a value to silver
252
which it does not na
when the ratio of 1 to
turally possess ? Or is it likely that
15 J is declared to rule the legal
tender and exchange, the necessary result will be that no M
one will buy or sell gold and silver for other than currency "
purposes except at the mint rate? As regards the first
case, the bimetallists must show that the force of law has!
at any time availed to make gold and silver exchange at;
any other than their natural value. M. Cernuschi asserts j
it, I venture to say, in the face of all history.
Up to the time of King James I. the English sovereigns]
were constantly engaged in regulating by law the relation
of value between gold and silver. But between the com-
mencement of the reign of King James I. and that oi
King Charles II. gold rose in value against silver 32 per]
cent. The variations were frequent and excessive. King]
James had altogether failed to modify them, and Kin^
Charles left the matter alone, wisely deciding to let gold,
which was not then the legal standard of value, take its,
rate in the currency from silver at the market price of th(
day. In the course of time gold gained an acknowledged!
ascendency over silver, because the medium with which
international commercial balances were settled, and was
felt to be so convenient for domestic use that Lord Liver-«
pool in 1816 converted the silver coin of the realm into a
token currency, and made gold by law, as it had long been
by custom, the standard of value. HI
The French nation have tried, as the English did up to >
the beginning of the eighteenth century (1707), the effect
of law, and have found it fail. It is easy to assert that
because it was law in France that gold and silver coins
should exchange on the basis of 1 oz. of gold to 15 J ozs.
of silver, and because that result was actually attained,
therefore it was law that fixed the price of the precious
metals ; but, if this were the case, how does the bimetallist
account for the sudden collapse of the law and its failure
to maintain the ratio? He does not perceive that the
Mr. C. DanielL
erHI
d|
363
municipal law only exercised any regulating power as long
as it was in unison with the natural law of value prevailing
between the two metals ; when the former law ran counter
to the natural order ruling the exchange, it ceased to
operate.
As long as France and the rest of the Latin Union
principally employed silver for their currencies, and the
currency valuation of silver in exchange for gold continued
to correspond with the natural value, or nearly so, silver
exchanged with gold at the legal rate. Silver was in all
those years, if anything, the dearer metal. As soon as
silver became the cheaper metal, and very much the
cheaper metal, it fell in the currencies of the Latin Union,
and the bimetallic law could do nothing to arrest its fall.
The Latin Union has given up the attempt to maintain by
law a ratio of exchange between the two metals. But the
vast amount of silver lying idle in Em-ope and the United
States of America, by reason of its being excluded from
its proper function — its use as money — has led its owners
to agitate for an universal convention among nations to use
the metal as coin on its former footing.
Bimetallists, however, trust not so much to the force of
law to create an artificial rate of exchange as to the hope
that if all nations will refuse to sell or buy gold and silver
for currency purposes except at one valuation, all gold and
silver bought and sold for any other purpose will exchange
at the same rate.
But let us suppose that America and the Latin Union
agree to sell 1 oz. of gold for 15^ ozs. of silver, in ex-
changing their coins they will still have a formidable
difficulty to overcome.
It is this : Assuming the ratio of exchange for currency
piu'poses to be fixed by all the associated nations at 1 oz.
of gold for 15^ ozs. of silver, it is quite clear that unless
the currencies of those nations absorb nearly all the silver
which is available for coinage, there will be a considerable
254
balance of silver in the world entirely unaffected by the]
metallic law, and that balance will be continually increased!
by fresh excavations of silver from below the earth. Itj
may be argued that, following the example of their
Governments, the people of the associated nations will sell
no more than 15 J ozs. of silver for 1 oz. of gold. This]
argument is good quoad the currency; but the capacity oi
the currency to absorb the supply of silver is limited — j
very limited in comparison with the quantity of silvei
waiting for absorption. All the silver therefore offered for]
sale in excess of the quantity required for currency wouldj
clearly not sell at the high price of 15 J ozs. for 1 oz. oi
gold, but at any price at which it would pay the producer
to sell it — 16, 17, or 18 ozs. The result would be that
silver would flow into the associated countries and be j
exchanged for gold at something between 15 J ozs. andfll
1 8 ozs. for 1 oz. of gold, and the gold thus obtained would i
be taken away from the associated countries, z.e., from
the western continents, and disappear in Asia. ■!
In Asia there exists a continual and probably insatiable
demand for gold, and at the same time a vast silver treasure —.
which could be shipped to Europe, coined into the curren-^|
cies of the associated nations without violation of the letter
or spirit of the law of the bimetallic convention, and be
used to buy up the gold coins; these on their arrival in
the East would purchase in the silver current coins o^H
Asia about 20 per cent, more silver than had been spent in
the purchase of the gold coins themselves in Europe, and
this operation would be repeated until gold had disappeared ■
from the cun-encies of the associated nations. It must
be evident that immediately the trader from Asia began
to operate in this way, these nations must either withdraw
gold altogether from their currencies, or, by limiting the
quantity of silver employed in them, prevent the public
from coining silver at its own discretion for the purchase
of the gold coins in the same currencies. If either course
Mr, C, Daniell,
255
Avere taken, the "principle of bimetallism,*' the "bimetallic
"law," and all the rest of it would vanish into air.
If the members of an International Monetary Union
agreed to use gold and silver only on particular terms
among themselves, their doing so would not affect the value
in exchange of the two metals in countries outside the
Union, unless it obtained a monopoly, or a quasi-monopoly,
of the precious metals — an achievement which the following
consideration shows is practically impossible.
India is the largest employer of silver, using about
one-fifth of all the coined silver estimated to be circulating
in the world. She alone absorbs from eight to ten millions
sterling per annum in value of silver treasure ; and the
fact that no perceptible enhancement in the price of silver
results from the demand made by India and other silver-
using countries on the world's supply of sur^^lus silver,
proves that the stocks of metal are undergoing no sensible
diminution, but that, on the other hand, they are being
replenished by fresh excavations at a price which, although
low, is profitable. What reasonable grounds, then, exist
for the expectation that any possible stimulus to the use of
silver, as currency, will cause the absorption of so large a
portion of the metal already available for coin, as to fix
the price of the remainder at the currency ratio of 1 to
15 J ? Whatever the quantity may be which can thus be
absorbed, its place will be immediately taken by silver dug
from the mines, and sold at a cost so low as to be fatal to
the maintenance of the arbitrary ratio which the bimetallist
convention seeks to establish. All the nations of Europe
and America taken together cannot absorb all, or nearly all,
the available silver above and below ground, unless gold be
expelled from their currencies, when the raison d'etre of
their bimetallism would melt away; and until these nations
do succeed in absorbing nearly the whole of these stocks of
silver, they cannot maintain an artificial ratio of value in
the exchange of the precious metals.
256
That the silver of Asia would be used to buy up the
gold of Europe is a danger which the Conference that sat
in Paris last year clearly foresaw, is proved by the sug-
gestion of the German delegates, that the bimetallist
countries should act alone in fixing the ratio of exchange —
that other States should secure the States of the Monetary
Union from an inundation of their silver ; and that in any
case England should give guarantees that the " International
" Monetary Union should not by its gold flowing into India
" be flooded with Indian silver."
Asia, then, is the rock on which such a bimetallic law as
that which we are discussing will be wrecked ; and it is clear
that the natural ratio of value will always defeat any scheme
to &x by law or agreement an arbitrary rate of exchange for
the two metals.
People talk very glibly of the American and Continental
mints coining silver to any amount, but this will not avail
to raise its price unless there is a demand for it when it is
coined — in other words it will not be coined in greater
quantities than commerce requires ; and what is that
quantity ? It will prove to be very small, because it is a
well-established law of currency in its relation to commerce
that the bulk of the coin in use can only be increased in
correspondence with an increase in the value of the goods
brought into the market to be exchanged into money. The
coin now in circulation in the world is not less than is
required — too much of it may be gold, perhaps, and too
little of it silver — for general convenience, but the sum of
the two metals used as coin is not so insufficient as to
attract much more coin into the currencies of the world
than is now in use. The owners of silver, therefore, can
only gain their object — that is, get rid of their sm-plus silver
by ousting gold from circulation to a value corresponding
to that of the silver which they introduce into the currency.
But how are they to do this ? There is no such thing as
forcing silver into a currency already sufficient for business
Mr. C. Daniell.
*
I
I
1
I
267
purposes. Some small quantity may be taken In fractional
coinage, but no large quantity of silver can get a footing in
any existing currency except it expel a corresponding
value of gold. There is no possibility of extinguishing the
ordinary laws of supply and demand, and when the surplus
silver of the world is coined it will be just as much surplus
silver as it was before.
Do the bimetallists really believe that they will be able
to appropriate any large quantity of the coined gold of the
world, or drive it out of circulation, substituting silver for
it, and if not, how do they expect to float their silver
without doing so? Assuming, for the sake of argument,
tliat such a bimetallic law is thoroughly enforced, the first
result would be that India would obtain such large quantities
of gold in exchange for her silver that she would cry out
for a gold standard and a gold currency from sheer lack of
silver. She would be forced to coin her hoards of surplus
gold probably exceeding £150,000,000 sterling in value.
But this is not one of the objects of the bimetallists. They
insist on England promising that India shall not change
her standard. What would be India's condition then,
depleted of her silver and not allow^ed to coin her gold?
The interest of money would rise enormously, and the
necessaries of life fall in price in correspondence wdth the
diminution of the coin in currency.
The order of nature and the laws of supply and demand
equally forbid the hope that the currency value of the two
metals wdll be other than their intrinsic value as long as
Asia is found a field for the employment of silver as coin in
free commerce, unfettered by any artificial bimetallic law.
The nation which imder takes to use both gold and silver in
its currency, and at the same time 23laces no limit on the
quantity of either kind of coin in circulation, but such as
the needs of commerce and the volition of the people provide,
can only make each kind of coin exchange for the other
without loss to the holders of either, by fixing the rate of
s
258
exchange in strict correspondence with the rafioofintrinsic
value which from time to time prevails in the market
between the two metals. Every other plan for working a
bimetallic currency, v/ithout limitation in the supply of coin,
experience and reason show to be impracticable.
CLAEMONT DANIELL.
India, April, 1882.
"WHITHEE WOULD THE DEAEEli
METAL GO?"
From The BuUiamsf, June 24, 1882.
This important and vital question is asked by Mr. Gibbs
in the 53rd page of his pamphlet. The Double Standard,
Mr. Clarmont Daniell, in a letter published in the Bullionist
of the 20th May, has endeavoured to answer it.
His letter is apparently merely a contribution to the
discussion upon the ratio of value between gold and silver,
and as such a most excellent answer appeared from the pen
of Mr. B. Kisch in the columns of the same paper on
the 11th inst.
But no notice was taken of the bold handling by Mr.
Daniell of the crucial question, " Whither will the dearer
metal go ? "
Concurring in Mr. Kisch's answer to the remainder of
the letter, we desire to say a few words on the point which
to a certain sense Mr. Daniell has made his own.
He published in 1879 a pamphlet on Gold m the
East,
The remedy proposed therein for the evils existing from
loss by exchange was — To coin gold in India : to make the
coinage of that country a gold one : to recognise the fact
that gold is and must be the " universal measure of value."
For this proposition there is a great deal to be said,
and if the debtor world are ready to face the expense of it
s2
260
to them, or if tlie creditor world are ready to enter into
some compromise tending to diminish their interest in the
operation, it might be a good thing.
We should in such a case have to supplement the
question of Mr. Gibbs by an enquiry, " Whither would the
" cheaper metal go ? "
We mention this fact with regard to Mr. Daniell's past
writings in order to account for the bold answer to be found
in his letter now under consideration.
His statement is that there exists in India an unlimited
treasure of silver and an insatiable demand for gold, and
that no sooner was a bimetallic union declared between the
Great Powers of the world, than the Indian people would
at once dispose of all their silver at 15^ to 1, or even more,
in order to procure that gold.
In order that there may be no mistake about Mr.
Daniell's proposition, we quote the paragraphs to which we
allude in full : —
" All the silver therefore offered for sale in excess of the
" quantity required for currency would clearly not sell at the
" high price of 15^ ozs. for 1 oz. of gold, but at any price at
" which it would pay the producer to sell it — 16, 17, or 18 ozs.
" The result would be that silver would flow into the associated
" countries and be exchanged for gold at something between
" 15 J ozs. and 18 ozs. for 1 oz. of gold, and the gold thus obtained
** would be taken away from the associated countries, i.e., from
" the western continents, and disappear in Asia.
*' In Asia there exists a continual and probably insatiable
" demand for gold, and at the same time a vast silver treasure
" which could be shipped to Europe, coined into the currencies of
" the associated nations without violation of the letter or spirit
" of the law of the bimetallic convention, and be used to buy
" up the gold coins ; these on their arrival in the East would
" purchase in the silver current coins of Asia about 20 per cent.
" more silver than had been spent in the purchase of the gold
Mr. H. R. Grcnfell.
201
" coins themselves in Europe, and this operation would bo
" repeated until gold had disappeared from the currencies of the
" associated nations. It must be evident that immediately the
" trader from Asia began to operate in this way these nations
" must either withdraw gold altogether from their currencies, or, by
" limiting the quantity of silver employed in them, prevent the
" public from coining silver at its own discretion for the purchase
" of the gold coins in the same currencies. If either course were
" taken the principle of ' bimetallism,' the * bimetallic law,' and
" all the rest of it would vanish into air.
" If the members of an International Monetary Union agreed
" to use gold and silver only on particular terms among them-
" selves, their doing so would not affect the value in exchange of
" the two metals in countries outside the Union, unless it obtained
" a monopoly or a quasi-monopoly of the precious metals — an
" achievement which the following consideration shows is
" practically impossible : —
" India is the largest employer of silver, using about one-fifth
" of all the coined silver estimated to be circulating in the world.
" She alone absorbs from eight to ten millions sterling per annum
" in value of silver treasure ; and the fact that no. perceptible
*' enhancement in the price of silver results from the demand
" made by India and other silver-using countries on the world's
" supply of surplus silver, proves that the stocks of metal are
*' undergoing no sensible diminution, but that, on the other hand,
" they are being replenished by fresh excavations at a price
" which, although low, is profitable. What reasonable grounds,
" then, exist for the expectation that any possible stimulus to the
" use of silver as currency will cause the absorption of so large a
*' portion of the metal already available for coin as to fix the price
" of the remainder at the currency ratio of 1 to 151 ? Whatever
" the quantity may be which can thus be absorbed, its place will
" be immediately taken by silver dug from the mines, and sold at
" a cost so low as to be fatal to the maintenance of the arbitrary
" ratio which the bimetallist convention seeks to establish. All
" the nations of Europe and America taken together cannot
" absorb all, or nearly all, the available silver above and below
/
262
" ground, unless gold be expelled from their currencies, when the
" raison d'etre of their bimetallism would melt away; and until
" these nations do succeed in absorbing nearly the whole of these
*' stocks of silver, they cannot maintain an artificial ratio of value
" in the exchange of the precious metals."
The difficulty of understanding Mr. Daniell's proposi-
tion is that he does not state clearly what position he
attributes to India with regard to the supposed bimetallic
league.
We must therefore do for him what he has not done
for us.
I. We will suppose that the whole British Empire
including India should be part of the bimetallic league.
If such were the case, on what ground does he suppose
that a mere insatiable desire for gold, alleged by him to
exist, would enable India to use all her silver treasure and
all her silver coin to purchase and take away all the gold
from her sister bimetallic nations.
The statement, if it means anything, amounts to an
assertion that an Indian having silver coin in his possession
and owing rent, and having to pay wages and other debts
which the bimetallic law permits to be paid in silver, will at
once insist on paying the carriage of that coin to a seaport
in order to get gold back, which will only when it arrives
pay the debts he owes precisely as the silver would have
done.
But supposing the transactions within the country are,
as monometallists assure us, on so small a scale that no
gold coin would be small enough to carry them on, how is
this insatiable desire for gold to make up to the people for
the loss of their fractional currency ?
Let us now turn to the great merchants and cosmo-
politan traders of Bombay, Kurrachee, Calcutta, and
Madras.
Mr. II. n. Grcnfell.
2GS
Ave we to believe that they, having dealt in silver
rupees all their lives and having been accustomed to a
silver currency, will at once .with the stroke of the j)en,
at the moment when agreements have been made to' re-
habilitate silver, declare their preference for gold and insist
upon paying a premium for the metal the superiority of
which beyond the ratio has just been destroyed; and that
having exchanged all the silver which the country wants
for fractional currency against gold which cannot be used
for it, they will create a paper fractional currency, founded
on their stores of gold ?
But should they do so, the Indian public being accus-
tomed to a metallic currency, would most probably refuse
to take it since it is notorious that the present issues, even
though guaranteed by the statutes of the Bank of Calcutta,
Bombay^ and Madras, are not easily circulated.
The proposition then that India would, notwithstanding
her membership of the bimetallic convention, absorb all the
gold from the other countries from mere insatiable desire,
cannot be taken seriously.
II. Let us then take Mr. Darnell's next sujrjrestion as
found in another paragraph.
Ofc>'
" That the silver of Asia would be used to buy up the gold
" of Europe is a danger which the Conference that sat in Paris
" last year clearly foresaw, is proved by the suggestion of the
" German delegates, that the bimctallist countries should act
" alone in fixing the ratio of exchange — that other States should
" secure the States of the Monetary Union from an inundation of
" their silver; and that in any case England should give guaran-
" tees that the * International Monetary Union shoidd not by its
" ' gold flowing into India be flooded with Indian silver.' "
By this we presume that he contemplates India being
left out of the Bimetallic Union as proposed in last year's
Conference, at which, with a view of getting the other
264
countries to adopt bimetallism, the Indian Government pro-
posed a covenant not to alter the silver standard for ten
years. If such an arrangement had been brought about,
how is it possible to suppose that men in India from mere
love of gold, which they could not get coined or with which
they could not pay their debts, would part with all their
silver which would serve for both purposes?
Both or either of these propositions, if sifted, amount to
this : that Indians will give some sum varying between
15 J and 18, in order to procure a metal which in one case
has no more value than that shown by the fixed ratio, and
in the other has less.
Such suggestions as these are, however, most valuable
contributions to the controversy. They are in fact features
in it which have to be considered.
And in considering them before setting them aside we are
bound to enquire wherein the fallacy in them is to be found.
Mr. Daniell's proposition is evidently founded on the
idea that a nation will not absorb more currency than it
really has need for, and that when all the metals necessary
for coinage have been absorbed by the bimetallic nations
there will still remain a large balance, which he thinks
will be of silver, for which there is no demand. In this
he makes a statement which is in part accurate, but
founds on it a most unreasonable conclusion, because he
forgets that there exists between the money in circula-
tion and the raw precious metal a store of money for
future use.
If the silver in the world is redundant, and if by the
bimetallic law all possessors of silver have a right to have
it coined at 15 J to 1, instead of the owners of silver sellmg
it at 18 to 1, they will send it to the bimetallic mints to be
coined, and the silver so coined will be added to the stock
of money existing. The existence of such a stock will
cause the value of money to fall and that of commodities to
rise, precisely in the same way as when a large new
265
discovery of gold takes place or a large issue of paper
currency.
The principal delusion under which Mr. Daniell labours
is that Indians will ship silver to Europe solely to obtain
gold for it. It is quite true that if he is correct in saying
that the desire for the latter is insatiable, they might have
even Avith the bimetallic practice to pay more than 15^ to 1
for it, because the debtor would have the right to pay in
whichever metal he chose. But for any other purpose than
to satisfy the insatiable desire, silver would be at the fixed
ratio and no other. To buy cotton goods, copper, iron,
coals, steam-engines or any other ordinary articles the price
of which is written in pounds sterling, silver would be as
good as gold, and gold as silver at the statutory price.
In conclusion, we congratulate Mr. Daniell on an
earnest endeavour to answer Mr. Gibbs' question, and
on the serious and suggestive manner in which he has
handled it.
H. R. GRENFELL.
"BIMETALLIC ENGLAND."
From Tlw BuUmiist, June 24, 1882.
The heading of our article is the title of a remarkable
pamphlet by N. Ottomar Haupt, and we propose to give a
succinct account of the work, and to supplement it by some
remarks of our own.
M. Haupt is a German resident in Paris, and has been
for many years an enthusiastic advocate of bimetallism —
how good an advocate is shown by the arguments of the
pamphlet before us, and how courageous an advocate by
the language in which it is written. It is very seldom that
a man, however good a linguist, will venture to write a
treatise on a difficult subject in a language not his own,
and we must congratulate M. Haupt on the success of his
present effort. An occasional failure in idiomatic accuracy
causes us the more to appreciate his mastery of the
language; for such slips show us that he had no English
reviser, and that the credit therefore is all his own.
The object of the pamphlet is to prove that England
could and ought to join a general bimetallic league ; that
her doing so would be convenient and advantageous not
only to commerce in general, but to English commerce in
particular. The author begins by enumerating — in answer
to Lord Sherbrooke's arrogant denunciation of the folly of
* Published by Efl&ngha|n Wilsop, Royal Exchange.
268
bimetallists, and in confutation of the scornful innuendoes
by wliicli he strives to make his readers believe all eminent
students of political economy to be of his mind — the goodly
array of writers, French, English, and German, all foremost
in the ranks of political economy, who have either advocated
bimetallism or allowed its practical possibility.
He adds, as a counter-assertion to Lord Sherbrooke's,
that—
" Those who are not convinced of the fact that bimetallism
" can stand on its own legs, and that the action of a double
" standard adopted hy all the leading European nations and hy
" the United States of America is fully in harmony with the
" existing economical laws, and must lead to satisfactory result^j
'^ simply wish to shut their eyes on purpose."
M. Haupt then gives a table of the numbers of francs,
marks, florins per kilo, fine, and of dollars and shillings pel I
ounce fine, which would be coined under a bimetallic
league at the several mints of the Latin Union, Berlin,
Amsterdam, Vienna, New York, and London, and of the
several sums which would be delivered per kilo, or oimce a1
the several national banks after deductions for commission
interest, and brassage.
Further he presents a tabular view of what he calls th(
mint-pars of France, Germany, Holland, and America
with England, and the " gold point," or exact point in the
exchange at which gold can be profitably exported into oi
imported from those countries, showing that were silver^
accepted by them all as avcII as by England the same
figures would apply to silver. |l
He then contemplates a time when " the English four-
*' shilling piece shall have been created — a handsome brand-
" new coin, struck on the basis of 1 gold to 15 J silver, thatll
" is to say a piece weighing 378*7 grains of the usual British
" standard '925 fine, at par with the similar coics of the
Mr. H, II. Gibbs,
J
269
" Latin Union, of Germany, of the United States, etc., and
" convertible without any loss whatever any day into their
" monies, based as they are on the same metals at the same
*' ratio between gold and silver, and kept in circulation
" on the same footing. In other words," he says, " it is
" excellent money at home — international coin in the
" fullest acceptation of the term."
He complains of the present condition of silver, circu-
lating, where it is standard money, at a nominal value of
15 per cent., and where it is fractional currency, at a
nominal value of 22 to 24 per cent., above the value to
which arbitrary legislation has temporarily degraded it, and
foresees the instant cure of this disorder in the repeal of
this arbitrary legislation and the return to the ancient law
of England and France consolidated by agreement with
other countries.
In the remainder of the pamphlet M. Haupt points out
the dangers of allowing the question to sleep, gives a sketch
of what has been already done to awaken Germany, France
and I^elgium to the urgent necessities of the situation, and
referring to the good work of Arendt, de Laveleye and
others in this direction, he concludes with —
" And against this overwhelming majority of the best
" authorities of the day, against the countless manifestations of
" all classes of society, against this compact front of public
" opinion, it is thought that old-fashioned prejudice, ignorance,
" custom, and all the other futile pretexts which are employed
'* to hinder the development of bimetallism can hold their own
" in England ! Away with the idea ! It may be that years will
"elapse before the fall necessity of a change in the monetary
" policy is realised in the leading circles of the country ; the
** movement itself is there and cannot any more be arrested."
In presenting this book to our readers and urging their
perusal of it, we do not endorse every word of its argument,
270
m
altliougli we consider It a remarkable production and a
valuable contribution to the literature of the subject. Its
author has treated of bimetallism in England as he hopes
and as we believe that it would be ; but we must add a few
words by way of showing what it would not be ; for such
words are necessary as a corrective to the fruits of the
vivid imaginations of writers like Lord Sherbrooke and
Mr. Crump, which have been lately offered to and (not-
withstanding their being so much out of season) swallowed
by an unsuspecting public. For the public — too many of
them — do swallow, though they make no attempt to digest
these fruits of imagination. Of Mr. Crump it must be
said that he committed suicide, as far as the bimetallic
discussion is concerned, when in an evil hour he was
tempted to appear in his OAvn person, instead of as the ,
occult authority of Printing House Square, which still
exercises sway over a few minds, if only by its audacity in
saying on Monday the direct opposite of what it said onj
Saturday. But of Lord Sherbrooke people ask, was he not^^
Chancellor of the Exchequer, and must it not be supposed 1
that a Chancellor of the Exchequer knows all that can be
known about money matters? Now in that supposition
they are at direct variance with his Lordship, who says
frankly that he does not know anything at all about
bimetallism — cannot indeed make out what it is. But
that is not in the least a reason why he should not write
about it. He is not the first and will not be the last man
of transcendent ability who has talked, and talked well, of
what he does not understand. We have before expressed
our enjoyment of his article, which is very pretty reading,
written in the choicest English, and lacking nothing but a
knowledge of the subject. We should be the first to admit
that our monometallic friends have retained a most brilliant
advocate for the defence. We picture him in wig and
gown, with brief unread, catching at the whispers of his
junior behind him, and then pouring forth an impassioned
Mr, II. II. Gihbs,
i
271
diatribe, which may satisfy and convince a jury to wliom
Standard and Currency, the Gresham Law, and all the other
terms employed are so much heathen Greek, hut who think
" the learned counsel must be right, he speaks so well ! "
and who cannot fail to be convinced by his metaphor of
" the waves foaming out their own shame." '' Why, he
"has Scripture on his side, hasn't he?" In a previous
article we have noticed Lord Sherbrooke's remedy for the
lack of gold, namely a fall in prices, or in other words
heavy loss to the selling class — and now we come to
another instance of the superficial character of his Lordship's
thoughts, which presents itself in connection with our
present subject. He tells us that the necessary conse-
quences of having two independent currencies, of having a
bimetallic standard, in short, is that there will be to every
transaction two bargains, one as to the price to be paid, and
a second as to the metal in which it is to be paid ; and the
reason in his mind is, that the varying cost of production
will necessarily alter the relative value of the metals from
day to day, and that it Avill be more to the advantage of
the buyer to pay in one and more to the advantage of the
seller to be paid in the other.
But if any fact in political economy be established, it is
this, that the influence of the cost of production on the vast
stock of the precious metals produced that they may be
stored, is wholly different from that of the cost of produc-
tion on those commodities Avhich as money those metals
purchase, commodities ephemeral in their nature, perishable,
and produced in order that they may be consumed and
perish. There can be no temptation to the English seller
to stipulate for one metal rather than another, when he can
by law not only pay his own debts to his English creditor
in one as well as in the other, but his Italian, French,
German, and practically every other creditor also. We
deny, therefore, the possibility of two bargains, and have
yet to meet with any w^ell- considered statement which
272
should show now sucli bargains could find a place in the
market of " Bimetallic England."
We may be excused devoting much space to Mr. Crump's
waggon-load of silver which he dreads he may have to
drive home to pay his housekeeping bills. If a waggon
will be needed for silver in the future, surely a wheelbarrow
must be needed for gold now ; yet we do not find that
mode of transport required when every transfer of £ 100,000
Consols is paid for. Mr. Crump should know, and perhaps
really does know a great deal better than this, but he must
have forgotten for the moment that he was writing in
London, the city of banks and cheques and clearing
houses, where every conceivable banking expedient is in
daily use, and where the British sovereign is confined
either to its praiseworthy use of tipping school-boys, or at
most to its office of discharging debts under five pounds.
It is no doubt conceivable that this last operation might
be performed on very rare occasions with an equivalent
number of double florins as the instrument ; but there is
no manner of fear that the establishment of a bimetallic
standard would be the signal for the sudden flight of every
British sovereign from this country, nor for the coming of
a time when either, as in Spain, porters shall be seen
carrying bags of dollars on their shoulders to pay their
patron's tailor's bills, or as in the imagination of Mr. Crump,
waggoners shall be seen passing between all parts of
London with their jingling loads of silver.
The specie in the vaults of the Bank of England,
whether gold or silver, would serve as it now does to
discharge the international indebtedness of England, and
the hundred millions of sovereigns said to be in the pockets
of Englishmen throughout the country would circulate
among them as heretofore, imtil at least the time should
arrive when our opponents, zealous for the purity of the
standard and detesting above all things the depreciation of
the national money, should issue or cause to be issued a
Mr. H. H. Gihbs.
S73
flood of one-pound notes, at which time our sovercio-ns will
indeed make themselves wings and fly, and we shall be
reduced, so far as the issue of notes is fiduciary, to a
currency of pure and imalloyed paper.
We are not bigots in the cause of bimetallism ; we keep
our minds free and our ears open, and are most willing
to hear arguments which shall show that our present belief
is wrong ; but hitherto the advocates of the bimetallic
standard have rarely been met with any attempt at serious
argument ; the usual weapons of their adversaries have
been tirades like Lord Sherbrooke's, rich in vituperation,
but barren in argument. This last week a writer in the
Saturday 7?^yz>?r, discussing " Question-time" in the House
of Commons, speaks of *' the paradox of bimetallism "
much as the late Dr. Dionysius Lardner once spoke, in the
hearing of the present writer, of the "paradox" of proposing
to send steam-vessels across the Atlantic; or as if some
Lardner of the present day should maintain that though
France and England had sent steam-vessels thither for
forty years it would be a paradox to assert that other
nations could do it. It cannot be too often repeated that
that which the Saturday Review calls a paradox was the
law of England till 1816, and the law of France till 1873 ;
that it did not "break down" in the latter country, as
Mr. Clarmont Daniell supposes, but maintained intact the
equality of silver and gold in the proportions fixed by the
law till the very moment when an unwise timidity induced
the French Government to relax and then to suspend
the law.
There is indeed a paradox in the money doctrines of
the present day, and that is this, that while monometallists
assert that it is indispensable for safe and just commerce
between man and man that we should have one uniform
medium of exchange, and while they deem it impossible
that either gold or silver alone should be that medium, they
are satisfied that England should use gold as her standard
T
2?4
money, while India uses silver, and other nations either
gold or silver or gold and silver.
The folly of tins paradox must before long become
evident to all who think on the subject, and the only thing
now wanting to the establishment of a imiform though
compound medium of exchange throughout the commercial
world is the concurrence and co-operation of " Bimetallic
England."
HENRY H. GIBBS.
PAPER OR METALLIC INFLATIO?^.
From the BuUhmist, June 24, 1882.
The pleas of the moiiometalllsts are substantially tlie same
as the proverbial pleas of the man who was accused of
borrowing a kettle entire and of sending it back to its
owner with a hole in it. The pleas were that he borrowed
it with a hole in it ; that he sent it back entire ; that he
never borrowed it at all.
So with the monometallists.
They urge that the proper cure for the evil existing is
paper currency.
That bimetallism is an improper cure.
That there is no evil at all.
Evidence has been produced as to the borrowing of the
kettle or the existence of the evil.
The evil has been admitted by Lord Grey, Mr. Jevous,
and Mr. Giffen. Prices have fallen to an unwonted extent.
Their ftill cannot be attributed to ordinary trade oscillations
or to the usual alterations of undue caution and extravagant
confidence. The fact that all producers, both agricultural
and manufacturing, have been working to a loss cannot be
disputed. It can also not be seriously disputed that things
in time Avill accommodate themselves without any empirical
remedies. But it is equally manifest that the present state
of things cannot remain, and that unless some remedy
be applied the monetary revolution of Germany will be
T 2
276
repeated by other States, augmenting tlie evil according
to tlie monometallist calculation fourfold.
What then are the remedies proposed ?
One is to increase the fiduciary issue of paper; the
other to resort to the bimetallic agreement.
Great fault has been found with the Governor of the
Bank for venturing to assert that it is probable that Lord
Liverpool or Sir Robert Peel, with the new facts before
them presented by the German monetary revolution,
would, according to the principles on which their writings
and speeches were founded, have looked with favour on an
international agreement for bimetallism.
Lord Liverpool said that "Every branch of the circu-
" lating medium should be founded on solid, wise, and honest
" principles." He also told us what he meant by a currency
founded on feeble, unwise, and dishonest principles —
namely, an unlimited issue of paper money, lie thought
a paper currency to be good so far and no further as the
issue was limited to the amount of the "gold and silver"
of which it supplied the place. What he considered unwise
was to admit the contention of certain "speculative writers"
that paper currency " may be made to represent even
" immovable property." He says, " It seems to have been
" discovered of late years in this country that by a new sort
" of alchemy coins of gold and silver may be converted into
"' paper, and that the precious metals had better be exported
" to serve as capital to foreign countries where no such
"' discovery has yet been made."
llicardo proposed that the benefits of a paper cur-
rency and a metallic basis should be secured to its fullest
extent by keeping all the circulation in paper, but main-
taining a sufficient amount of bullion to meet every note
issued.
The Act of 1844 was a compromise between the extreme
views of the alchemists and llicardo, the intention of its
author being to entice the English country bank issues to
Mr. H. l). Grcnfcll.
277
die out gradually, and the Scotch to live ou as long as the
then existing banks had any life in them.
The proposal of those who admit the evils now resulting
from the dislocation in the prices of the precious metals by
the German demonetisation, is to supplement the diminished
volume of the circulation by a return to imrepresented
paper currency.
Mr. Fowler's proposition in the House of Commons was
an abstract resolution in the sense of " forthwith " devising
a scheme with that view, and to enlarge the basis of the
fiduciary issue in the direction of an emission of one-pound
notes otherwise than on the deposit of bullion.
Many most eminent writers have been in favour of some
such alteration, but the most distinguished of them have
been or are interested in deposit banking combined with
Avhat we call private coining.
We bullionists believe that coining is an attribute of the
State. The monopoly or privilege still left to the Bank of
England in its issue department we deem to be a part of its
Government business rather than of its private adventure.
Our opponents are apt to suggest that all bimetallists are
either interested in silver mines or in trade with silver-using
countries. It might be said on the other hand that all
monometallists are either issuing or would-be issuing
bankers.
Such accusations on either side are beside the question.
All men are apt to feel partially towards the laws which
engender profits to themselves, and all wise men admit the
fact and make just such allowance for it as marksmen do
for currents of air.
The opponents of bimetallism are continually accusing
us of wishing to increase the volume of the circulation, and
of thereby diminishing the purchasing power of the pound
sterling. They have asked us over and over again to define
our objects, and If they are not as they have stated them to
be, to say Avliat they are. They have also requested us to
278
adjudicate in the matter of contracts already entered into,
and to express ourselves clearly, if possible, as to what
would happen if silver were once more raised to what we
call its normal value, and what they call its artificial value.
With regard to contracts a reply has been given over
and over again. It is no more a hardship to carry measures
tending to alter the terms of a contract in one sense than in
another. In 1816 all contracts were altered by the erection
of the gold standard to the detriment of the debtor, and in
1872 by the demonetisation of Germany the same thing
took place. If then the effect of the enactment of the
double standard were to have a contrary effect, why should
creditors complain ?
With regard to the diminution of the purchasing power
of the pound sterling, or, in other words, the raising of
prices, we are not alone in our contention.
Many of our monometallic friends are in favour of
measures which would entail the same consequences.
What would be the effect of increasing the fiduciary
issue of ])aper ? Let us suppose that the Act of 1844 should
be repealed or modified, and that the Bank of England or
some other authorised body should issue more notes other
than against a deposit of the precious metals, would that
not be diminishing the purchasing power of the sovereign ?
If Lord Liverpool or Sir R. Peel were now alive they
would most probably deprecate the course of curing an
acknowledged evil by creating a greater one. They
would most assuredly object to leaving the safe basis of
a metallic currency for the unsafe one of paper founded
upon nothing.
Kicardo considered the test of the safety of a paper
currency to be the having every penny of it secured by
a deposit of the precious metals. Lord Liverpool and
Sir Kobert Peel said that the expansion and contraction
of It being the same as that which it would be if wholly
metallic, made it safe.
Mr. II. IL Grcnfell,
279
But their discii^les propose to fly away altogether from
the principles of those statesmen in the matter of paper, in
order to defend their doctrines in reference to tlie mono-
metallic standard.
The dangers attending the undue expansion of a paper
currency are ten times as great as they were in the early
part of the century. The temptation to over-trading,
commercial extravagance, and the consequent fluctuations
in commercial enterprise, are daily increasing. But the
evils of unlimited issue were those with which Lord
Liverpool and Sir E,. Peel had to deal. Those arising
from a change of standard as we now regard it were
unknown to them. Those connected Avith the competition
of issuing bankers are now so far from us that we have
almost forgotten them, and men are very apt not only to
forget the circumstances, but the reason why bank notes
issued recklessly form so peculiarly a dangerous form of
credit. AVlien a deposit bank stops payment it is a debtor
only to those who have voluntarily trusted it ; but when an
issuing bank stops payment in a district where the notes are
current, hundreds of people may lose their money who liave
never knowingly entered into any transactions with the
bank at all.
In 1793, 100 out of 400 issuing banks suspended pay-
ment. After Lord Liverpool's time the same thing recurred
again and again. In 1810, one-quarter of them stopped.
Many in 1812. In 1814-15-16, 360 went down; in 1825,
70 succumbed in six weeks. But these would-be new issuers
of paper think that the world has grown wiser since those
days.
When Sir E. Peel brought in his Act of 1844 he
laid on the table a return of the banks which had stopped
payment during the five years previous to that year, and in
that return we find that 82 banks had stopped, of which 42
paid no dividend at all. Since the passing of that Act we
have had three panics in which it had to be suspended for a
280
sliort time, and eacli of these were banking panics bringing
down great joint-stock banking establishments with large
and lucrative business.
Mr. Fowler and his friends doubtless contemplate some
other system than the old unlimited and uncontrolled issue ;
some plan for an issue founded on deposit of stock. But
this would require lengthened inquiry and all that labour
and attention which has been in vain invited for the dis-
cussion of bimetallism. The Chancellor of the Exchequer,
and the financial, official and ex-official authorities, must
have some occupation other than the degrading solution
of Irish problems if such questions as these are to be
brought forward. Till that happy day arrives we must be
content to remain in an academic stage. But our work will
if possible clear the way of some of the irrelevant matter
which obstructs the course of close discussion.
The difference between diminishing the purchasing
power of the sovereign by bimetallism and doing the same
thing by an emission of one-pound notes is, that in the one
case we damage j^ro tanto the convertibility of the note;
in the other we make a currency which is equally known in
China, India, Chili, and the United States, and which no
panic can depreciate, no commercial crisis render less
valid.
To those monometallists who are strict buUionists in
the sense that Sir K. Peel was one our remarks may not
apply; but with those who, on the one hand, cry out
against watering the currency with a precious metal and,
on the other, loudly demand a fresh issue of paper, we can
have no common ground, and to them we can give no
quarter.
H. R. GRENFELL.
i
THE RATIO BETWEEN GOLD
AND SILVER.
Oil 30fh September, 1882, (he "Economist " in commenting on
the address of Professor Bonamy Price at Nottincjham,
made the following observations : —
Two propositions are put forward which it will be needful
for those who advocate the concurrent coinage of gold and
silver as legal tender to meet before the subject can be
approached at all closely. The first is the difference in
present value between gold and silver at the ratio of 15 J
to 1, which it has been very generally agreed by bimetallists
to adopt. The second is the necessity of bringing not only
all civilised countries but the whole world into the inter-
national union which it is proposed to establish. Unless
this is done, silver will undoubtedly move from those centres
where it is worth less, to those w^here it is worth more.
Though there is a vast demand for silver in the East, there
is also a very large demand for gold there as well ; and if
silver would exchange for more gold in Europe than in
Asia, we may be quite certain it will find its way to the
best market. The essence of money is, as Professor
Bonamy Price stated, to give equal for equal; value for
value. To start with a ratio of loj to 1 when the real
market price is now 18 to 1, and may be something else to-
morrow, fails in the first condition which money, as a
measure of value, should fulfil.
28-
The foregoing gaA^e rise to tlie following coiTCspondencc : —
Sir, — In your paper of last Saturday, you say that
there are two propositions which the bimetallists must
meet before the subject can be approached at all closely.
I. The question why lo^ is to be the ratio between
gold and silver when 18 to 1 is the existing market price
of silver.
II. The necessity of bringing all nations, and not only
the commercial ones, into a bimetallic union.
i
To these two points I propose, with your leave, t(
address myself.
I. The first has been cleverly dealt with by Mr. Grenfell
in his letter to the Times, of the 27th September ; but I will^il
try to supplement his answer with some explanatory words^HI
I admit that 18 to 1 is the existing market value. We
do not propose to adopt it as the ratio, because if we did,
then so soon as silver was restored to its ancient function
in the monetary world, it would be gold which would be
the over- valued metal.
The essence of the question is not what is the market
value of one metal as measured in the other, for that may
have been, and has been, affected by temporary circimi-
stances, but Avhat is the true comparative value of the two
metals existing and likely to exist, supposing both to be in
full work at all the occupations for which mankind has
adopted them ?
Now, I fail to see the existence of any natural cause
which can have altered the relative value which attached
to the two precious metals 12 years ago. Tlie outpourings
of silver from the Nevada mines has been as nothing in
comparison to the discoveries of gold in Australia and
Mr. H. II. Gibhs.
2SS
California; yet it is iu evidence that these last produced
no effect worth speaking of on the price of one metal
measured in tlie other ; and I conclude, therefore, that
the artificial cause once removed by the restoration of
the demand for silver as money, the true ratio — neces-
sarily an approximate one — will be found to be just what
it was, and there cannot, therefore, be any reason whatever
for the adoption of 16, or any other compromise. Let me
add that I consider perfect exactness of ratio a matter of
very little moment. If you adopt 18 to 1 you over-value
gold ; but the only practical result, except at the instant
of change, is that you contract the circulation of the world.
If you adopt 15^ to 1, then, even on the supposition, which
I do not admit, that by this ratio you under-value gold,
the only practical result is that you re-expand the circula-
tion of the world to the point at which it stood in 1873.
There are two reasons which make me think 15^ the
ratio most likely and most proper to be adopted, irrespective
of its nearness to the truth.
1. Great mischief was done in 1873 by an arbitrary
act which disturbed the ratio, and however arbitrary the
act of restoring it, such a course would but be precisely the
undoing of the mischief then done.
2. 15 J is the ratio which actually exists in the Latin
Union and in Gennany, and Avhich would be accepted by the
United States. It is, therefore, the ratio which is practically
possible, as provoking the least amount of resistance.
In another article you speak of 18 as the true ratio,
and ask what is to hinder the real ratio from being, say, a
year hence, 2 1 or 22 to 1 ?
I reply. What is to cause it so to be? If the Latin
Union should demonetise silver, there is every probability
of the market value (a very different thing, as I have
explained above, from the ratio) being 21 or even 25 to 1.
284
Must you not admit, that the necessary effect of this will
be a further and sudden appreciation of gold? that whereas
a sovereign was to be had for so much wheat, suddenly,
and by the stroke of a pen, the buyer of a sovereign will
have been forced to give so much more wheat for it ? The
permanence and immovability of your standard, on which
you lay such stress, will have gone to the winds.
I propose with your leave to deal with the second point
in another letter.
Yours faithfully, .
HENEY H. GIBBS.
October 7, 1882.
Sir, — I return to your article of the 30th September,
in which you assert the necessity of bringing all nations,
and not only the commercial ones, into a bimetallic union,
otherwise "silver will undoubtedly move from those centres
" where it is worth less, to those where it is worth more."
I did not think it would have been necessary to argue
this point in the pages of the Economist, or anywhere
where merchants do most congregate. You say, " Silver
" would exchange for more gold in Europe than in Asia,
" and we may be quite certain it Avill find its way to the best
" market." I agree with you. But for how long would silver
exchange for more gold in Europe than in Asia? For how
long would Europe be the best market? Some years ago
the answer would have been, — during a course of post ; the
answer must now be, — for the time occupied in getting a
telegram !
Mr. H. H. Gibbs.
285
The operation which Professor Price imagines (follow-
ing, I think, Mr. Clarmont Daniell*) would be possible
only on the supposition that one single person had the
monopoly of commerce and communication between Europe
and the East, and that he had, under a bimetallic system,
the power to demand gold for his 15|- oz. of silver thus
cheaply bought in India. As it is, he would receive silver
for his silver, and have his labour for his pains.
Even were it otherwise, so long as commerce was free
and the telegraph working, what would tie the hands or
dull the brains of other merchants while this creature
of imagination was making his gain of 2^ oz. silver on
each ounce of gold? Is it not obvious that competi-
tion will instantly level the prices in the two countries,
except so far as the daily variations of exchange affect
them?
In my opinion, the apprehension of *' two prices" of either
metal under a bimetallic union of the chief commercial
nations is a mere dream, dreamed by Lord Sherbrooke
in his study, and by Professor Price, dormant for once
in his professor's chair.
I wait for some merchant or cambist — someone engaged
in active business — to explain hoAV such two prices can co-
exist. It is not enough that someone, however experienced,
should assert that they can. I want an instance. I ask
to see the operation.
Let us suppose Guatemala to be outside the union ;
and I beg that it may be demonstrated to me what will
induce the Guatemala miner (who knows that every lo^ oz.
of his silver is equal, in all civilised countries, to 1 oz. of
gold) to give 18 oz. for that quantity of gold. What are
the grounds upon which any reasonable man can assume
such a course of conduct possible ? A knowledge of the
* Mr. Daniell's proposal is to retain Gold as the Sole Monetary Standard,
but to supplement it witli Silver as unlimited legal tender, at a fixed Ratio
to be named from time to time by competent authorities.
286
price obtainable in Europe must necessarily equalise the
price in Guatemala, always saving the fraction involved in
exchange, and I can only regard a miner who could be
guilty of the ignorance and stupidity ascribed to him
as another creation of the imagination. If he really
existed, he would not long survive the competition of his
neighbours.
If the miner should raise an unusual abundance of silver,
so much the better for him. The Australian who got gold
for the picking up received his 77s. lO^d, an ounce for it
so soon as he and his buyer knew that it icas gold. Hq
was not so obliging as to give it to his neighbour for 405.
an ounce. Why should he ? Those Avho think the matter
out will avoid confounding, as people are apt to do, the
profit of the miner with the market value of the metal.
The only real residt of a cheap, that is, an abundant,
find of either of the precious metals under a bimetallic
system would be that the circulation of the world would be
pi'o tanto expanded, and that prices of commodities would
rise. And in the same way, if the production of either
metal fell off, prices would fall in proportion.
My denial of "two prices" does not, of course, go so
far as to deny a possible agio on either metal, though the
wider the union the less the probability of an agio. When
the debtor has the choice of metals in which to pay, I do
not deny the possibility of a creditor who may desire one
hundred sovereigns for the convenience of a foreign tour,
having in very exceptional circumstances to pay a trifle if
he insists on taking gold instead of silver; but sucli an
instance, and others similar which may be adduced, are
as sliglit bubbles on the stream of commerce, which in no
way affect its volume or its course.
HENRY II. GIBBS.
October 14, 1882.
287
To tliesc letters the Economist replied on 21st October: —
Mr. Gibbs, in writing to us on the subject of the ratio
between gold and silver, in his letter published in the
Economist of October 7th, says : — " The essence of the
" question is, what is the true comparative value of the
" two metals existing and likely to exist, supposing botli
" to be in full work at all the occupations for which man-
" kind has adopted them ? " This is entirely intelligible ;
but when Mr. Gibbs goes on to say, as he does, " Let me
" add, that I consider exactness of ratio a matter of very
" small moment," we lose at once any common ground on
which to discuss the matter Avith him. If " the essence of
" the question " is to discover " the true comparative
" value," we fail to see how "exactness of ratio" can
be " a matter of very small moment," as it seems to us
that on the ratio adopted, as Mr. Gibbs himself says a few
lines further on, the whole point, whether " the circulation
" of the world " is '' expanded " or " contracted," would
depend. AYe cannot see how a standard the purchasing
power of which is subject in this manner to artificial
fluctuations can be in any true sense a real arbiter of value.
Expansion seems to be the aim desired in the proposed
change. Mr. Gibbs says in his second letter : — " The only
" real results of a cheap, that is, an abundant, find of
" either of the precious metals under a bimetallic system
" would be that the circulation of the world would be
" pro tanto expanded, and that prices of commodities
" would rise. And in the same way, if the production
" of either metal fell off, prices would fall in proportion."
But the production of the metal which was obtainable with
the least labour would be continually stimulated by the
artificial enhancement of its price. Hence the continua-
tion of this production might be looked upon as certain.
The whole history of the com-se of exchange of the two
288 j
metals shows, that during the last three centuries it has
from time to time been needful, whenever the relative
value of the two metals has been tested in an open market,
to give more silver in proportion for the same weight of
gold. There seems no reason to doubt that the same
course will continue, with a corresponding effect on the
standard based on it. With respect to the value of either n
metal, Mr. Gibbs considers that " the price obtainable i^H
" Europe must necessarily equalise the price " elsewhere.^*!
If he looks back to the early history of the Australian
gold discoveries, he will find that it was some time before
the mint price in England regulated the market price in
Australia. Yet there was free and unlimited coinage of
gold all the while in England. Thus Mr. Newmarch
states that in 1851 gold bullion was sold in South Australia
at 45^. per oz. while the price Avas 60s. in Victoria. We
cannot doubt that what has taken place before would take
place again. The object of bimetallism is to make the
cheaper metal as valuable as the dearer one, which can only
be done, according to their argument, by lowering the value
of the dearer metal. The nearer this ultimate end is to
attainment, it follows that the greater the relative deprecia-
tion of the standard of value must be.
The discussion was concluded by the following letter : —
SiK, — I have read your remarks in last Saturday's
paper on my letters in your issues of the 7th and 14th, and
I should be glad to be allowed to correct some misappre-
hensions of my meaning into which you have fallen.
I gave you two reasons why I thought 15 J to 1 the ratio
most likely and " most proper to be adopted, irrespective of
*' its greater nearness to the truth."
Mr, II. II. Gibhs.
289
You attribute to me another reason, which I not only
never gave, hut which I wholly repudiate, viz., a desire for
expansion of the circulation.
I must protest that neither in my letter on which you
comment, nor in anything I have ever written or said, is
there the slightest ground for attributing to me such a
desire. I referred to the incontestable fact, that a ratio of
loj would cause a return to the volume of circulation as it
existed in 1873, while the adoption of 18 would prohibit
such return, and perpetuate the existing contraction, but I
said nothing to suggest a preference for either ratio on
these grounds. Neither expansion nor contraction of the
circulation is in itself advantageous to trade ; wdiat is
advantageous is steadiness, and an absence of the fluctua-
tions which you and I alike deprecate.
My contention is, that these fluctuations in the relation
of money to the commodities measured by it, are more
likely to happen among a monometallist than a bimetallist
nation, inasmuch as they can be caused by the adoption
or rejection, on the part of other countries, of the
single metal which the monometallist nation employs as
money.
One question in your issue of September 30th was,
"Why choose 15^ rather than 18?"
I repeat my answer in plainer terms, if possible. Market
price shows the present value of the precious metals as
measured in each other : but it fails altogether to show the
true comparative value of the whole mass of each, as it
would be, were the full demand for one of them restored.
That 18 to 1 would be widely distant from the true value
is proved by the continuous price which prevailed while
that full demand existed. My point is, that 15J to 1 is as
near as we can get, or, at any rate, is sufficiently near to
the true comparative value.
A fixed ratio has always been, and must necessarily be,
approximate and not exact, and therefore it is that I deem
u
perfect exactness not only unattainable, but also unim-
portant. Let that be as it may, it is impossible that the
ratio, when once fixed, can be changed by law, without
])roducing at each change a change also in the quantum of
the circulation, and a prejudicial, because sudden, change
in the relation of money to commodities.
To suppose that the fixing of 15 J or any other
ratio could produce future fluctuations shows, so I venture
to think, misconception of all the conditions of the
problem.
For in proportion as the fixed ratio departs from the
market j^i'ice, the circulation is doubtless expanded or
contracted at the moment of fixing it ; but once fixed the
relation of the aggregate of the two metals used as money
to the commodities measured by it (leaving out of the
account any circumstances affecting those commodities)
depends and must depend on the total excess or defect
of production of the precious metals over the consump-
tion of them by wear and tear, taking also into account
the increased or diminished use of metallic money in t
world.
Your reference to the relative value of the two metals
in the last three centuries* — you do well to omit the first
70 years of the present one — is surely not germane to the
question, for in those centuries no properly organised bi-
metallic system was in existence. Had it been in operation,
the effect of the changes to which you refer would have
been nil, if the falling off* in gold production had balanced
the increase of silver ; or there would have been an
h^yl
♦ It is suggested to mo that the Econovi'iKt means the last 300 years,
and not the ICth, 17th and 18th centuries : but if bo, his statement, whitli
I had thought correct, is inaccurate, for during the fir^t 70 years of tlic
present century there have been no variations of any consequence in tlic
relative prices of gold and silver, although there have been more sudden
and more important variations in the relative production of those metals
than in any of the preceding time.
II. H. G.
Mr. 11, II. Gihhs.
291
advance in tlie prices of commodities if both silver and p^old
increased in volnme, or one increased -while the other
remained stationary.
You close your remarks by saying "the object of bi-
" metallists is to make the cheaper metal equal to the dearer."
Pray accept the assurance that this is a total misconception
of their object. The result at which you suppose them to
aim (which I take to be not the equalising the metals —
Avhich no one in his senses could propose — but the restoring
them to their old relations of price) would be accomplished
approximately, without the aid of a bimetallic agreement,
on the remonetisation of silver in Germany and elsewhere,
and restored accurately, if France restored her bimetallic
standard. The object of bimetalllsts is to secure perfect
stability in the relations of the two money-metals, and
increased stability in their joint relation to the commodities
measured by them.
A few words as to your remarks on what I wrote as to
the Australian Discoveries.
I have a full and personal recollection of their early
history, and they exactly bear out my statement, some
important words in which you have overlooked. I repeat
that the Australian received standard price for his gold
" so soon as he and his buyer knew that it teas gold."
Mr. Newmarch was, I think, far too accurate a man to
have said what you think he said, or at least to have implied
what you suggest that he implied. I am sure he can
neither have said nor thought that gold bullion was know-
ingly sold at 45.9. and 505. per oz. standard. AVhat really
happened was this. No one knew for certain what was the
quality of the gold found, nor how much of it was gold at
all. It was said, and believed, that it contained inferior
metal — platinum, to wit. There was no assaying instru-
ments within reach of the finders, and no available means
of smelting, or even completely separating the metal
from the quartz. Every sale was a speculative one ; but
ffnwTw^
292
from the moment that account sales from England showed
the metal to be real gold, like any other, all difficulties were
swept away, and the prices w^ere levelled, saving the
difference of exchange.*
What possible analogy exists between this transitional
state of things and ordinary increase of production ?
If the miner mines cheaply, so much the better for the
miner and his men. If he doubts for a moment, or his
buyer cajoles him into believing that his gold is dross, it is
the buyer who makes a profit and not he ; but neither the
price he gives, nor the profit Avhich either of them makes,
has anything whatever to do with the relation of gokl to
the commodities it measures.
You Avill agree, I am sure, that it is above all things
desirable that the arguments on both sides of this question
should be made clear and intellicrible to those who studv
them. On this ground I trust you will find room for this
letter.
T am. Sill, yours truly,
HENllY IIUCKS GIBBS.
London. October 24.
* It is scarcely necessary to say that the difference of exchange consists
])rimarily in the freight, insurance, interest, and other charges of transit,
and that the land charges, when the quality was known and robberies
frcriuent, would make the value at the diggings — whether to the digger
or his buyer — much less than the value at the i)ort.
BIMETALLISM AGAIN.
Extracts from Professor Bon amy Price's Address at the Social
Science Congress at Nottingham, September 25, 1882.
[As reported iu The Times, September 26, 1882.]
" The amount of the money given is determined by the
" cost of producing the metal, precisely as the price of a
" coat or of a loaf of bread is determined by what they cost
'•' to produce."
" The cost of production of gold or silver is the amount
" of goods of all kinds which the miner must have to induce
" him to get the metal out of the mine."
" Steadiness of value is the highest virtue which money
" can possess. Its importance is supreme."
" But now there is a question which ought to be put
" categorically to every bimetallist, and which he is speci-
" fically bound to answer. He seeks to make England a
" bimetallic country, to make both metals legal tenders in
" her currency, to place silver on the same level with gold.
"In organizing this change at the present hour, why does
" he not take the two metals, at their true, their actual
" market values ? Why does he not make the start with a
"ratio of gold to silver of 1 to 18? Why does he not
"demand that in the coinage 18 ounces of silver shall be
" the value of one ounce of gold?"
294
The following letter appeared in The Times, Wednesday, Sept. 27, 1882.
TO THE EDITOK.
Sir, — I venture to send the following answer to the
direct question to be found in your report of Professor
Price's speech at the Social Science Congress — " Why
" does not the bimetallist take the two metals at their true,
" their actual market value at 1 8 to 1 ? "
To understand this question it is necessary for him to
define what he means by " truth," and when " actuality " is
to be asserted. The truth of a comparative value, according
to ordinary economical writers, depends either on the cost
of production of the commodities to be compared, or else
on the demand for them.
If you give an artificial demand in 1872 to one com-
modity and deprive the other of the same artificial demand,
that which was true and actual value in 1872 becomes un-
true and imactual in 1873. This is the contention of the
bimetallists.
The comparative value of kelp and pounds sterling was
changed by a stroke of the pen. The comparative value
of gold and silver was changed by the demonetization of
Germany in like manner.
If Professor Price's question is stated in the usual
terms, it means that the relative value of gold and silver
must eternally depend on the cost of production and on no
other cause. According to him, artificial value given to
either metal by the conferring of the privilege of money
has nothing to do with it. We bimetallists assert that it
has everything to do with it.
^PCulloch in one place states that the reason why
gold and silver are at the ratio of 15 J to 1 is, that
295
it costs exactly 15^ times the amount of labour to
produce an ounce of gold as it does to produce the
same weight of silver. In other parts of his treatise he
so qualifies and pares down the assertion as to leave
nothing of it.
Bimetallists assert that during a period of 70 years in
which the comparative cost of production of the two
metals varied several times the relative value scarcely
changed at all ; that this period of 70 years tallies ])recisely
with the period during which French bimetallism, or rather
free coinage of both metals, existed ; and that this con-
stancy in the price of silver told in gold, or vice versa,
ceased exactly at the time when the artificial value of silver
was taken from it in Germany. They also assert that if
this artificial value or privilege was as suddenly taken away
from gold and conferred on platinum the same effect would
be produced upon gold. They, therefore, deny that the
terms " true and actual market value " have any ascertain-
able meaning.
I remain, Sir, your obedient servant,
H. E. GEEXFELL.
Bank of England.
296
Extract from the City Article of Tlic Times of Wednesday,
September 27, 1882.
The admirable address of Professor Bonamy Price at
the Social Science Congress, Nottingham, yesterday on
Economy and Trade touches upon a point which deserves
attention. In treating of bimetallism, and once more ex-
posing some of the fallacies into Avliich the advocates of that
system of currency have fallen, Professor Price himself goes
astray and, singularly enough, upon the most vital point, the
non-perception of which has probably involved several able
men in the espousing of a cause which they never would have '
associated their names with had they clearly perceived the
fLillacy to which we refer at the outset. Professor Price
says, " The amount of the money given is determined by the
" cost of producing the metal, precisely as the price of a
" coat or of a loaf of bread is determined by what they cost
" to produce." The leading advocates of the bimetallic
theory themselves admit, we believe, that the whole gist of
the question is involved in that of value in exchange. Their
fundamental error from the beginning has consisted in their
not having understood the technical meaning of that phrase
" value in exchange," and, with all his clearness otherwise,
Professor Price has fallen into the same mistake. That he
has done so is easily proved. The fallacy lies in the
assumption that the value in exchange of the metal is
detei-mined alone by the cost of production. Why has
silver fallen in exchangeable value with gold from 15 J to 1
to, say, 18 to 1 of gold? No one who really understands
the point admits that it was the diminished cost of produc-
tion that alone caused that depreciation. The main cause
of the fall was its diminished utility. This requires no
further demonstration than to say that the fall in the price
of silver in the market began with the demonetization of
297
the metal by Germany. It is allowed on all hands that the
value of a thing is what it will fetch. In other words, it is
determined by the demand in relation to the supply. If
the utility of a thing diminishes, as it has in the case of
silver, the demand obviously becomes less, whether the cost
of production increases or diminishes. A thing which
people do not want is said to be dear at any price. At a
large meeting of bimetallists some months ago, in London,
this very point of cost of production was raised with
reference to platinum. It was sought then to be proved
that the axiom was a fallacy which set forth that the cost
of production determined the value of a thing, the cost of
production of platinum, as compared with that of gold,
being cited in support of the argument. No such axiom
exists, or is acknowledged by sound political economists,
unaccompanied Avith the condition that utility is an essential
element in value. It was said, and rightly, at the meeting
referred to, that platinum cost much more to produce than
gold, and yet it was relatively cheaper ; the essential
element of utility being lost sight of, in the absence of
which it was, of course, useless to attempt to account for
the apparent anomaly.
From The Times, Friday, September 29, 1882.
The subjoined letter replies to the remarks on Professor
Bonamy Price's address to the Social Science Congress at
Nottingham, in Wednesday's article, and we are glad to be
able to state that in referring to the important point to
which we drew attention. Professor Price was guilty of
nothing worse than a lapsus calami: —
September 28.
Sir, — I beg leave to thank you for your kind notice in
The Times of Wednesday of my address to the Social
Science Congress at Nottingham. But you will allow me.
298
I trust, to show that I have not fallen into the " mistake "
imputed to me of not having imdcrstood the meaning of the
phrase "value in exchange," with reference to the cxcliange
of commodities for money. I do not, and never have
imbibed "the fallacy that the value in exchange of the
" metal is determined by the cost of production alone." On
the contrary, I have distinctly held that "if silver has fallen
"from loj to 1 to, say, 18 to 1, the diminished cost of
" production did not alone cause that depreciation."
Here is my proof. In an article in the Contemporary
Revieio of last February, on " How Money does its Work,"
I said, page 252, —
" Thus we are brought to the conclusion that, while cost of
" production is always ultimately the essence of the value of
" money — of metallic money — as of all commodities save those
" whoso prices are governed by feeling and fancy, the fluctuations
" which fall upon that vahie through the universal law of supply
" and demand are more frequent and last longer than those which
" befall most commodities."
Again, page 258, —
" It cannot be doubted that M. de Laveleye is correct in
" attributing the fall in no slight degree to Germany selling her
" silver, combined with the prohibitions against its free coinage in
" most civilized countries. What is this but the action of supply
" and demand ? A large quantity remained in stock; a fall of value
" became inevitable, whatever was the cost of production."
These passages show, I submit, that instead of holding
" the fallacy," I entirely agree in the view taken by the
City Article of The Times,
I come now to the letter of the Governor of the Bank
of England, Mr. H. R. Grenfell. I pressed all bimetallists
to answer distinctly the question, *' Why does not the
" bimetallist take the two metals at their true, their actual
299
" market value, at 18 to I ?" He replies by calling on me
to define Avhat I mean by true, by actual value. I answer,
the value of the two metals in the metal market, without
any reference whatever to coinage : what a man who buys
them to make ornaments must give for them. To this
meaning Mr. Grenfell opposes what he calls an artificial
value, as I understand him — the privilege of being legal
tender, which increases the value of the metal when coined.
Take away the privilege, as Germany did when it demone-
tized silver, and the value of silver falls to 18 instead of
15^, being now w^orth an ounce of gold. This being so, to
make a metal legal tender is to give it an additional, an
artificial value. I need say no more. I call that an untrue,
a false value. Artificial money is the last thing to be
called good money.
I am, &c.,
BONAMY PRICE.
From Tlie Times, October 3, 1882.
The following letter refers to Professor B. Price's com-
ments in last Saturday's article on the letter of Mr. H. R.
Grenfell, which appeared on the previous Wednesday: —
Bank of England,
October 2.
Sir, — In your Money Article of Saturday Professor
Bonamy Price has answered my enquiry as to what he
means by "truth" and "actuality" in the relative value of
the precious metals, by saying that he means " The value
" of the two metals in the metal market, without any
" reference whatever to coinage: what a man who buys
" them to make ornaments must "ive for them.''
300
Again I ask him by what criterion he tests the value of
gold if stripped of that which we are agreed in saying is an
artificial value conferred upon it by the ^^I'ivilege of the
Mint. Does he mean to say that the relative value of gold
and silver, if gold were demonetized, would be 18 to 1 ?
And, if so, on what ground does he make the assertion?
I remain, your obedient servant,
H. R. GRENFELL.
FiiOM riioiESSOK B. PRICE to Mr. H. R. GRENFELL.
Welton, Brougii, Yorkshire,
October 0, 1882.
My dear Grenfell, —
I am no bimetallist. I have never held nor admitted
that the mere fact that '^ an artificial value is conferred
" upon gold by the privilege of the Mint," in the sense —
that the fact that gold is made legal tender — gives it
increased power of exchange for other commodities. An
artificial ratio of value between two metals in the coinage
is perfectly possible, and may easily be, and is, involved
in the present bimetallist proposal; but the power of pur-
chasing commodities lies quite in another region, namely,
in the worth of the coined metals as commodities.
I have no fear : the actual })roposition of bimetallism is
irrational.
Yours,
B. PRICE.
P.S. — I do not use the expression labour as the basis of
value, but cost of production. That, with the incidents of
the universal law of supply and demand, is the essence of
the value of true money.
801
FuoM Mr. II. R. GRENFELL to Professor B. PRICE.
Bank of England,
October 6, 1882.
My dear Price, —
I neither assert in this letter, nor do I deny, tliat
the privilege of the Mint gives an artificial value to gold
and silver.
All I say is, that if it gives it to one, it gives it to the
other, and that when you try to pin me to the value in
exchange of the one, I have a right to pin you to tlie value
in exchange of the other as tested by your own standard :
viz., what it wouhl fetch for ornaments irrespective of its
artificial Mint value.
What I say is, that your figure of 18 to 1 is no more
tlie real proportionate value than 40 to 1, or 3 to 1, or any
other imaginary figure.
If the " Bland Bill" and the legal tender of silver dollars
were repealed, and if a gold standard were enacted in India,
it might be 40 to 1.
But the main question you have never answered, nor
has any monometallist : How the constancy of the relative
value all over the world during the existence of French
bimetallism is to be accounted for ?
The usual slip-slop leading article way is to state that
bimetalHsm was tried and failed in Germany and in France,
and therefore the former resorted to the gold standard, and
the Latin Union to the cessation of minting silver.
But of this failure not a jot of proof is adduced.
So much for what I say. Now for what you say. " An
" artificial ratio of value between two metals in the coinage
'^ is perfectly possible, and may easily be, and is, involved
" in the present bimetallist proposal ; but the power of
" purchasing commodities lies quite in another region : viz.
" in the worth of the coined metals as commodities."
802
Now, here we are all agreed. This is an accurate
definition of that for which we are contendincr. And takino-
your definition to be correct, we bimetallists assert that the
advantage of a standard at all is to get the greatest possible
amount of fixity of value of the standard metals told in
commodities.
We do not assert that they w^ill not vary, or that it is
possible to fix it completely. But what we say is, that the
fixity of value is greater when the mass of the standard
consists of two metals than if it consists of one.
A caviller may rejoin : Why not three ? To this we
reply: Because the mass of coins actually now in use
throughout the world consists of the two metals of which
we are speaking, and that wdiat may happen if others are
added is outside the question at issue.
When brought alongside we are much nearer each other
than you are aware of.
Yours,
H. K. GEENFELL.
From Professor B. PRICE to Mr. H. R. GRENFELL.
Welton, Brougit,
October 7, 1882.
My dear Grenfell, —
Your letter, received this morning, divides itself
into two parts. I will first speak of the second part.
It gives me great pleasure. You say very truly that
we are nearer to each other than was supposed. I have no
objection of principle whatever to bring against it. We
agree that "the power of purchasing commodities lies in
" the worth of the coined metals as commodities." This is
303
the essence of the manner in wliich good money performs
its work. It gives me most lively satisfaction to hear you
say, " Here we are all agreed."
Further, we are unanimous that to "get the greatest
" possible amount of fixity of value of the standard metals
" told in commodities " is '' the great advantage of a
" standard."
Further, you have a perfect right to say that " the
" fixity of value is greater when the mass of the standard
" consists of two metals than if it consists of one.'' This is
a proposition perfectly fair to assert. There is nothing
whatever in it against the principle of the best money.
Whether it is true, as a fact, is another question ; it may
be asserted or disputed ; but in both cases no breach against
the right conception of money can be alleged.
I am inclined to hold that two metals will yield less
fixity of value than one only; but I freely admit that I
may be mistaken here. It is a very hard question to come
to a confident decision on.
On the first part of your letter I fear that our agree-
ment is not so well assured. I agree — " When I try to pin
'• you to the value in exchange of the one metal, you
"'(H.R. G.) have a right to pin me to the value of the other
" by my own standard — namely, what it would fetch for
" ornaments." But I cannot add "irrespectively of its
" artificial Mint value," for I deny that there is any such
artificial Mint value.
However, you come to the pinch of the matter. You
say *' that my figure of 18 to 1 is no more the real pro-
" portional value than 40 to 1, or 3 to 1, or any other
" imaginary figure." I answer, first, that 18 to 1 is the
actual proportion in the bullion market to-day : it is the
existing fact, and, so far, is real. That is a quality of
immense importance in dealing with it.
Certainly, with alterations in the currency of many
countries, gold might be so wanted as to bring out the
304
ratio of 40 to 1. That is conceivable — probable, I cannot
believe it to be.
I freely concede that the actual values of gold and
silver as commodities are difficult to explain at any time.
As I said in the Contemporary of February, it is a question
dependent on the cost of production of the metal won from
the dearest mines, coupled with the incidents arising from
the action of the law of demand and supply which falls on
all commodities. This is a very difficult matter to trace
out. Thus it is not easy to say, why the relative value was
constant all over the world during the existence of French
bimetallism. But is it not an admitted fact that the French
ceased to coin silver because the ratio had become false,
and gold was leaving the country ?
Then again as to Germany: is it or is it not the fact,
that she demonetized silver because the supply of cheaper
silver from the mines had broken out in America ?
One remark I would make to Avhich I beg to call your
attention. On bimetallism, I admit that if one metal went
up or down, the other might do the same and keep up the
ratio : or they might do the reverse, one going up as the
other goes down, making the ratio more false than ever.
For my part, I cannot bring myself to believe that gold
and silver would keep company in their costs of production
and variations of value.
Why don't you take into consideration Clarmont
Daniell's scheme of occasional adjustments of the ratio in
coinage to the ratio of the bullion market, especially
as it was done in England for more than 400 years by
proclamation from the Crown ?
Yours,
B. PRICE.
305
Fkom Mr. II. R. GRENFELL to Professor B. PRICE.
Bank of England,
October 9, 1882.
Mr DEAR Price, —
We are getting mucli closer to each other than you
fancy.
1. My authority for saying " that the fixity of value is
" greater when the mass of the standard consists of two
" metals than if it consists of one," is to be found in Jevons'
work upon Money, page 137. I have never heard of any
one who had read up to that point in the controversy
having disputed his decision.
2. Your expression, or rather your use of the expression,
^^ cost of production," is, I submit, not the correct one.
Cost of production means the labour required to produce
a commodity.
When the economists laid down the law that cost of
production ultimately ruled the value of a commodity, they
meant that after all stocks were exhausted, and the various
incidents terminated, the new start would be governed by
the cost of labour to produce a commodity.
The " incidents arising from the laws of demand " may
govern or influence for a certain time, but, ultimately, the
labour to produce governs the value.
3. The relative value all over the world during French
bimetallism is strictly in accordance Avith the laws of supply
and demand. If in France, at all times, whatever the cost
of production, men could dispose of either gold told in silver
or silver told in gold at the ratio of 15 J to 1, there could be
no other price anywhere, because whichever, according to the
X
306
laws of the cost of production, was the cheapest could find in
France an artificial demand at that rate. This is our ex-
planation. Yours is, " that it is not so easy to say."
4. Referring to what you say about Germany and
France, I reply that the proof of th6 change in prices being
posterior and not anterior to the demonetization, and therefore
that the German change could not have been caused by the
fall in prices consequent on the silver discoveries in America,
is to be found in Gibbs' pamphlet, page 27, quoted from
Seyd. Germany demonetized silver in accordance with a
deliberate decision in favour of monometallism, arrived at
at the first International Conference. The tribute from
France enabled Germany to carry out the measure, which
has proved a most costly and ruinous operation to Germany.
The Latin Union was forced by this monetary revohi-
tion to follow suit. The evils arisino^ from these chano;es
cannot be disputed by you, because you have already
admitted them in your writings.
5. You ask me why we won't take into consideration
Clarmont Daniell's scheme. I have been in long corres-
pondence at times witli him, and was under the impression
that I had thoroughly shown the impracticability of it. But
my simple answer to you is, that I am not considering vacci-
nation, or the quadrature of the circle, or the procession of
The Holy Ghost.
His plan for the solution of the question of the
^^ standards" is to create something that is not a standard
at all, and it does not therefore necessarily come into a
discussion of whether a single or double standard is best.
Yours,
H. K. GRENFKLL.
B. Price, Esq.
807
From Professor B. PRICE to Mr. II. R. GRENFELL.
The Rectory, Kimbolton, St. Neot's,
October 13, 1882.
My dear Grenfell, —
I am very glad to get your letter.
1. As to Clarmont Daniell's proposition, you have
missed altogether the main point on which I ask on all
sides for a discussion. It is this. Daniell proposes that
the ratio of the silver coins to the gold ones in a currency,
as in England, avowedly monometallic, should be adjusted
by an official authority from time to time according to their
relative values in the bullion market. This was done by
proclamation for more than 400 years long in England up
to James I. There was nothing arbitrary in it : the metal
market was to govern the ratio.
I do not say that the plan is feasible, but I am perfectly
sure that it is quite sound in principle. The bimetallists
never deign to speak of it, — their reason why is quite plain
to me. They want to put up the value of silver : Daniell's
plan would leave it to the market value.
My " Jevons " is at Oxford, and I forget what he said ;
but I know of no answer to the argument that gold might
grow scarcer from the mine, silver much more abundant at
the same time, and then the divergence of the value and
bigness of the ratio might increase at a gallop.
2. My expression, "cost of production," comes from
Mill. Labour is not the word for it. Labour was a
favourite word with Adam Smith, but few economists use
it now in this connection. Cost of production means the
price which must be paid for an article, or else it will not
be produced at all. It is composed of several factors
besides labour.
X2
308
But, as I fully explained in the Contemporary of
February, cost of production falls under the incidents of
temporary supply and demand — all commodities do : but as
you say — (labour) — cost of production " ultimately governs
" the value."
3. Yes, if at all times, whatever the cost of production,
the ratio of 15^ prevailed in France, there could be no
other price anywhere. But, will it at all times ? Unbe-
lievable !
4. You do not give the reason why Germany demone-
tized silver.
But, as you say, Seyd's tables show that the demone-
tization was not the consequence of a fall in price through
silver discoveries in America.
Yours,
B. PRICE.
From Mr. H. R. GRENFELL to Professor B. PRICE.
Bank of England,
October 14, 1882.
My dear Price,—
1. When proclamations were made during the
400 years you speak of, they had solely reference to the
state of things within the realm, and the object was, not
to be done by your neighbours. The example is of no
moment whatever, when we are discussing the possibility
or practicability of coming to a general arrangement with
our neighbours. Again I repeat, Daniell's proposition is
one which is to call something a standard which is not a
standard at all.
These are my reasons for not considering it as part of
the question I am arguing. You have no inght to attribute
309
to mc a desire to raise tlie value of silver. It is a dangerous
method. Please read the other article I sent you, written
by me. Many of the monometallic writers in England are
interested in raising the value of "paper."
2. I think, if you get to close reasoning, you had better
at once admit that you made a mistake in your definition of
cost of production. Your present definition is correct down
to "labour." After that, you seem to fall into your error
again. Then you attribute to me the expression cost of
production "ultimately governs the value." This was not
my doctrine ; it was a statement of what I understood to be
the economist's definition of cost of production.
3. My assertion is, that whatever the cost of production
is with open mints at 15^ to 1, that will be the relative price
all over the world. My example is the 70 years of the
French open mints.
4. The reason why Germany demonetized has been
given so often by me, that I took it for granted you must
have read it. But I will give it you again. The first
Monetary Conference at Paris, in 1868, came to a decision
in favour of gold monometallism. It was summoned, not
for the purpose of discussing the standards, but, to discuss
an International Coinage. The necessity of discussing the
standard arose at once, and it was in accordance with the
most recent decision, and with the gold gained by the
conquest of France, that Germany demonetized. All this
is in my article, "What is a Pound?" Nineteenth Century,
1881.
The very next meeting of a Paris Conference reversed
the previous decision, and said it w^ould be an incalculable
disaster for silver to be demonetized.
Yours,
H. K. GRENFELL.
310
From Professor B. PRICE to Mr. II. K. GRENFELL.
KiMBOLTON Rectory,
October 17, 1882.
My DEAR Grenfell, —
The proclamations of the changes in the ratio
were facts : the immediate motives for them are utterly
unimportant. Nor is "the coming to a general arrange-
" ment with our neighbours" of any weight whatever in
regard to the action of those proclamations economically.
The question is, solely and simply, Are such alterations of
the ratio between gold and silver, founded entirely on the
ratios existing in the bullion market, sound economical acts
— the right thing to be done when two metals are used as
legal tenders ? I care not a straAv Avhat other nations may
or may not choose to do, in a discussion which deals with
principles. Negotiations with nations come later, — after
principles have been settled.
So Daniell's proposition remains vmexamined, though
warranted by the proclamation precedent.
I do not knoAV what you mean when you say that " the
" monometallist Avriters are interested in raising the value
" of paper." What paper ?
I am quite at a loss for anything like a ]n'oof that " if
" either gold or silver increased ever so much the standard
" would not alter, or the relative value, as long as the
" bimetallic nations, or one of them, opened their or its
" mint to both metals." It would be very funny indeed, if
silver increased so much as to be worth only 30rf. an oimce,
and its relative value to gold — (hypothctically unchanged)
— remained unchanged, because France, say, kej)t her mint
open to both metals. That passes my undcrt>tanding.
I made no mistake about the expression, cost of pro-
duction. Labour, as I said, was Adam Smith's word— it is
811
practically given up now. Mill's phrase — cost of j)roduction
— lias taken its place. Labour is appropriated to wages
generally. The cost of a commodity involves interest,
profit of capitalist and employer, freight and many other
factors of price, besides labour. You gain nothing by taking
your stand on labour.
AVliat I said was that you agreed — in terms — that " tke
'^ poioer of purchasing commodities is the worth of the coined
" metals as commodities^ You called this " an accurate
" definition," and then argued upon it as such. This is not
" a statement of what you understand to be the economist's
" definition of cost of production," but your oivn doctrine of
what the value of the metals in buying consisted of.
That being so, you cannot, without contradicting your-
self, assert that "whatever the cost of production, with open
" mints at 15^ to 1, that will be the price all over the world."
The worth here is NOT "that of the coined metals as
" commodities," but of an arbitrary ratio between the metals,
chosen without any reference to them as commodities.
Yours,
B. PRICE.
Fr03i Mr. II. R. GRENFELL to Pkobessor B. PRICE.
Bank of England,
October 19, 1882.
Dear Price, —
1. You ask the question, "Are such alterations
" of the ratio between gold and silver, founded entirely
" on the ratios existing in the bullion market, sound
" economical doctrine ? "
My answer is, as usual, another question. On what are
the ratios existing in the bullion market founded ? and you
312
answer, " I cannot say," — at least, you have answered so
when I asked you how you accounted for certain phenomena
in the past.
2. You say you don't know what I mean when I say
the monometallist writers are interested in raising the
value of paper. I answer that many of them are, or were,
connected with the paper-issuing banks. They all are,
or were, anxious to see the issue of paper extended rather
than bimetallism. It is a most worthless argument, I admit;
but it is quite good enough for those who are always
accusing bimetallists of being interested in silver and its
price.
3. I must ask you to read your "Jevons on Money"
if you want proof of the diminution of oscillation in the
bimetallic doctrine, and to read Gibbs in last week's
Economist as to the impossibility of silver being at 305. per
ounce if mints are opened to it at 15^.
4. In my oj^inion, you originally made a mistake about
cost of production. You now try to shift it on me by
distinguishing between labour (wages) and general cost of
production. Suffice it to say that I concur in your defini-
tion of cost of production, meaning the whole cost of bringing
a commodity to market.
5. My own doctrine, as you say, is that the power of
purchasing commodities is ultimately the worth of the
coined metals as commodities. And whether gold and
silver run up and down at different times, according to
their separate values as commodities, or whether a system
shall have been invented by which the value of each shall
tell upon the value of the mass of the two, is of no conse-
quence to the theory. Thus, if discoveries of silver are
quadrupled, the only effect would be to raise the general
price of commodities whether told in gold or silver. The
same with gold.
313
The only difference would be that in the former case
you would read in the money articles " Silver was shipped
yesterday to Egypt, Kiver Plate, New York," — or, in the
latter. Gold w^as.
Yours,
H. K. GRENFELL.
B. Price, Esq.
FitOM Pkofessor B. PEICE to Mr. H. H. GRENFELL.
2, NoRHAM Gardens, Oxford,
October 22, 1882.
MV PEAR GrENFELL, —
I am sorry that you quit the question, Is it
practicable, as in the past, to alter the ratio of silver coins
to gold according to the state of the bullion market?
I have never said that Daniell's scheme was practicable,
but I have said that it is founded on a right conception
of what money is. If bimetallism goes on, the question,
I am sure, will have to be faced.
I have not made a mistake about cost of production, nor
altered a single element of my view respecting it. The
question still remains unanswered, Why, in the new system,
give a value to silver of 15 J to 1, when it is worth as a
metal only 18 to 1. And yet you write now, "My own
" doctrine is, that the power of purchasing commodities is
" ultimately the worth of the coined metals as commodities."
Silver as a commodity is worth only 18 to 1, yet you claim
to make it worth 15^ to 1. How to put these two things
together !
Yours,
B. PEICE.
314
From Mk. H. R. GRENFELL to Professor B. PRICE.
Bank of England,
October 23, 1882.
My dear Price, —
Very well !
You mean the general proposition that the relative
price of gold and silver should be from time to time
rearranged by proclamation, as being the thing which ought
to be examined, not Clarmont Daniell.
Let us examine it;
We assert that there could be no other price with an
international agreement as to terms of open mint than that
laid down by such agreement.
Why?
Because, one nation having held its mints open for
seventy years the price did not vary, it stands to' reason
that if two did it, or four, or eight, no other price of bullion
could exist anyAvhere.
To suppose otherwise is to suppose that some fool is to
be found Avilling to sell for 62 that which at an open mint
he can get 60 for.
Let us then suppose such agreement made, and a
manifest disinclination to take silver was shown, owing to
its extra bulk, and, consequently, that an agio was paid for
gold, tlien Ave admit that there is no reason why a recon-
sideration of the relative price should not take place by
agreement.
But although Ave admit that, Ave believe the thing Avoiihl
be improbable, not to say impossible.
The question, hoAvever, Avhicli you say is still unansAvercd
is, Avhy give a value of 15 J to 1 to silver, Avhen it is Avorth
as metal 18 to 1. I tliought everybody acknoAvlcdged I
had fully ansAvered that question.
However, I Avill tiy again.
315
To begin with — the statement of the cj^uestion is 'vvrong in
every particular. Silver is not worth 18 to 1 in the bullion
market (according to your own criterion) for ornaments.
Silver is w^orth 18 to 1 for ornaments and coinage.
If gold were demonetized and reduced to its value for
ornaments, neither I nor you know what it would fetch in
reference to commodities. Therefore your figure of 18 to 1
is merely an accidental ratio consequent on certain changes
in the coinage laws of certain nations.
My next answer is that neither 18 to l,nor 15 to 1, nor
20 to l,nor any other ratio, affect in the smallest degree the
truth or fallacy of our abstract proposition, which is, that
whichever ratio the law lays down will regulate the price
of gold told in silver and silver told in gold.
If you will grant us that proposition, then we are ready
to show cause why on the whole we think it would be most
politic to go back to the French mint prices.
It is not, however, in any w-ay of the essence of the
question.
Yours,
H. K. GEENFELL.
B. Price, Esq.
From Professor B. PRICE to Mr. H. R. GRENFELL.
2, NoRiiAM Gardens, Oxford,
October 24, 1882.
My dear Grenfell, —
I am very glad to get your letter.
You state the proposition to be examined rightly ; but it
is the same as Daniell originated for India in ])rinciple. It
is that principle for w^liich I claimed investigation. In detail
there is a very serious difference between one country and
a combination of many nations,
316
I think your objection, derived from this source, is very
hard to answer. E-emember — I never ^ anywhere, asserted
that the plan was practicable : I asked only (as the principle,
in my opinion, was right) that it should be considered. As
you say, the positions of the several nations acting together
may be radically different, consequently some might refuse
a proposal to fix the ratio, and their opposition might be
insurmountable. So far, at present, I see no answer to this
your objection. But it raises another grave question. Is it
desirable to have a bimetallic alliance, if it subjects particular
nations to a false ratio, and, consequently, to a false money ?
That desirableness is not evident to me. ^|
I hold that you have not answered the question, — Why !
not adopt the bullion ratio of 18 to 1 ? It is no answer to
say, that 18 to 1 is one thing for ornaments, and another
for ornaments plus coinage. The naked fact is solely and
simply this : In a bullion shop next door to the Bank, will
the prices asked of me, a buyer of both silver and gold, be
in the proportion of 18 to 1, the dealer asking no question
Avhatever as to what use I am going to put the metals to ?
That is decisive, so far as the state of the market to-day.
But you may say : Let the nations adopt bimetallism,
and that ratio will at once be altered. I answer : That is to
meet a fact Avith a theory — a theory open to very great
imcertainties. The very day the new ratio is adopted, a
new chcaiier mine of either metal may be discovered, and
the 15 J to 1 Avill become false, whatever may have been the
fine conjectures that coinage will work the miracle of turning
an 18 into a 15. So the question always remains un-
answered, Why not adojjt the bullion prices of the day of
legislation ? Till it is answered, how can you be surprised if
Dr. Bamberger goes on with the notice he has affixed to the
room of the Conference — "This is the room where cheap
" silver is made dear."
Yours,
B. PRICE.
317
From Mr. H. R. GRENFELL to Professor B. PRICE.
Bank of England,
October 2o, 1882.
Dear Price, —
Your question is : Why not adopt the bullion prices
of the clay of legislation ?
I believe I have answered this over and over aofain.
But, as usual, with another question: What do you
mean by " day of legislation ? "
If you mean that, a bimetallic union being determined on
with a double standard, the ratio to remain fixed, then I
answ^er there is no reason at all. We have always admitted
that 18 to I, or 15, or 20, or 25, could equally be fixed. All
we say is that, on balancing the advantages and disad-
vantages, it appears to us that to return to 15 J to 1 offers
fewer disadvantages.
But we again remind you that it is not the bullion price
according to your criterion. To arrive at that you must
demonetize gold and then see what would happen.
But if you do not mean by legislation an International
Union with a fixed ratio, but mean something else, such as
C. Daniell means, a gold standard everywhere, with fluctu-
ating ratios according as the demand for silver tokens arose,
then I answer, as I have answered over and over again, it is
not a standard at all as far as silver is concerned, and it
would be much better to do what your allies want, — go to
PAPER tokens.
But the main point we were or are arguing about is,
whether the demand produced by coining affects the value.
How it can be otherwise you do not say, except by calling
it "false ratio and false money." It may be false. So, in
fact, is all demand for silver false, except the silver pokers
318
and jugs and basons at Dunham Massey. But they are
false in the sense that pottery-ware and iron would have
done as well.
Yours,
H. R. GRENFELL.
From Professor B. PRICE to Mr. II. R. GRENFELL.
2, NoRiiAM Gardens, Oxford,
November 2, 1882.
My dear Grenfell, —
The law of supply and demand, with its effects,
was not an alternative to cost of production, but an addition
to it. What I meant was that, in such cases as wlieat and
the precious metals, the variations for a time Avere often
very large, and, consequently, that the cost of production
and its repayment by price must be calculated on an
average of years. In all cases, cost of production, in the
long run, rightly calculated, governs the value of metallic
money. That is what I have said, in substance, all aloug.
All I can say, in reply to the reasons given on behalf of
15 J to 1, as you put them, is that they are theoretical.
They are unti-ue to the actual relation at starting in the
bullion market. They speculate as to what is likely to
happen. Such speculations seem to me very hazardous and
very unsafe. I cannot help feeling that the favour shown
to 15 J is derived from the fact that it was the ratio adopted
by France, &c., &c. ; and equally cannot help suspecting,
as many others do, that there is a wish in many minds to
give an undue value to silver. At the same time I am
I
319
quite willing to admit that it is possible that 18 to 1 would
not prove the true ratio in the bullion market after
bimetallism was set up.
On Daniell's plan the silver coins would not be "tokens" :
they would contain silver of the true A'alue in exchange for
gold. That is the very essence of what he seeks, — real
equal bullion values of the two sets of coins in their legal
relation to one another. Both coins would be standards if
their relative values were identical with those in the bullion-
dealer's shop.
Concerning my treatment of the law of supply and
demand in my Nottingham address, one of the very ablest
men in England, a distinguished economist, and one of the
most powerful writers in the press, writes to .me that: —
^' As to the objections made to what you said, they seem to
" me utterly puerile. That a man should be told that, because
" he has said the price of cotton depends in the long run on the
" cost of production, he is bluudering to forget that at a particular
" moment a good deal may depend on the quantity in the market
" and the demand for it, is like telling a man he bhniders who
" says that the velocity of a railway depends on the steam-power,
*' because he docs not add anything as to the friction or the
*' application of the brakes."
I do not deny, and have never denied, that "a demand
"produced by coining may affect value": all I have said
is, that the market ratio to-day is 18 to 1, and I simply
asked why it was thrust aside and 15^ to 1 chosen instead
at starting. The word "false" I used strictly as meaning a
ratio not in conformity with the ratio between the prices of
the metals in their own and true metal market.
Yours,
B. PRICE.
820
From Mr. H. R. GRENFELL to Professor B. PRICE.
Bank of England,
3rd November, 1882.
My dear Price, —
I have your letter of the 2nd. Your correspondent
may be right in his view of The Times' criticisms on your
original statements.
All I can say is, if you were right, then platinum must
be dearer than gold. But it is not — even in a bullion-
dealer's shop.
If The Times' criticism was puerile you ought not to]
have retracted your original statement ; but, having r
tracted it, you should not have re-asserted it.
You now, in your letter to me, continue to put wheat
and precious metals in the same category as regards tlie
effects of cost of production, whereas they are generally
reckoned as the two extremes.
With regard to Daniell : It is not sufficient for him to say
a thing is a standard ; he must show that his scheme will
bring about in the two metals that wliich otlier people call a
" standard." If the two metals are to vary in relative price
according to cost of production it is not possible that they
should both be standards; because "standard" means that
a given weight and fineness of one metal or either metal ||
should have the vis liheratrix.
This is what Sir Kobert Peel imderstood, when he said
that you might have a gold standard, or a silver standard,
or a double standard with a fixed ratio between the two
metals, without departing from the principle of a metallic
standard.
Yours,
H. R. GRENFELL.
321
From Professor B. PRICE to Mr. II. R. GRENFELL.
2, NoRHAM Gardens, Oxford,
November 4, 1882.
My dear Grenfell, —
I do not in the least understand your allusion
to platinum.
I do put wheat and metals in the same category; first,
as to cost of production ; secondly, as to the effect upon
them of supply and demand. The degree of the effect is
not the point ; that it exists is the important thing. I
fancy that you and I do not quite estimate, to the same
degree, the varying yields of the mines for precious
metals.
Of course, Daniell's plan does not give two standards,
but only one — gold : the ratio of silver, on the basis of the
metal market, being adjusted to gold from time to time.
Both metals will be legal tenders : but the assumption will
be that gold will be left unaltered, silver being altered in
value to it from time to time.
Mind, I have never said that DanielFs plan was
practicable : I have only asserted that it was founded on a
right principle and deserved examination. If it could be
made to work, it would give two metals to the coined legal
tender money of a country — but only one standard, the
untouched, unchanged gold. There would be no contra-
diction here of what Sir Robert Peel said : "the principle
" of a metallic standard would not be departed from."
Yours,
B. PRICE.
322
From Mr. H. R. GRENFELL to Professor B. PRICE.
Bank of England,
November 6, 1882.
My dear Price, —
In my opinion tlie question put to bimetallists in
your Nottingham address means that cost of production
alone settles the value of the precious metals, while your
letter to The Times, of the 28th September, would leave it
to be implied that you were ready to admit that which we
wished to have admitted, namely, that demand influences
it also.
And now I ask you to follow me into the discussion
as to the degree in which demand so affects the value of
the precious metals as to neutralize the absolute doctrine
of cost of production.
Our proof is not in our own writings, but in the list of
prices during the whole time the French mint was open,
ceasing at the exact moment when the mint was practically
closed. This argument you seem to be afraid to face.
You are not in business as a profit-seeker ; but you are
in business as a truth-seeker, and are a master of words.
If Ave are wrong you must have a far greater capacity
for showing us where than we can have.
My allusion to platinum is mentioned in The Times
article on your address, therefore I naturally supposed you
to be familiar with it.
If cost of production be the test of the value of the
precious metals, and of all commodities, how do you account
for the fact that an ounce of platinum costs more to produce
than an ounce of gold, but it is cheaper in the market? We
account for it by saying that there is an artificial demand
for gold, which gives it what you arc pleased to call, when
applied to silver, *' a false value"; and that if platinum
were monetized and gold demonetized, platinum would ])e
323
far dearer than gold. If we arc wrong in this, tell iis
WHERE.
I don't think much of your "eminent friend," and his
steam-power and brakes.
If you have a load to pull, and find your horse cannot do
it, you may put a donkey on to help you, and your load
may get up the hill. In like manner, if your first-class
engine will not pull your train, a second-class engine may
be put on ; and the aggregate of steam-power thus procured
may take the train smoothly along at a given speed, not,
as your friend would suppose, at jerky paces dependent on
the separate steam-power of each.
Yours,
H. K. GRENFELL.
From Professor B. PRICE to Mr. H. R. GRENFELL.
2, NoRHAM Gardens, Oxford,
November 12, 1882.
My dear Grenfell, —
I did say, and do say, that the value of money is
determined by the cost of production of the metal, like
the value of a loaf of l)read is determined by what it costs
to produce.*
And I say further, that, at particular times, the state of
supply and demand will alter the value of the metal in
exchanging, precisely as the character of the seasons may
largely affect the price of wheat in a particular year.
* By saying that, on an average of years, cost of production must be
met, and is met, by value in the market, the truth that cost of production
governs price is fully retained.
Y 2
324
By cost of production I meant the cost of production on an
average of years. A farmer may, under the influence of
the season, get more or get less than the cost of production
of his wheat; but, as a rule, and upon the average, he sells
his wheat for its cost of production, profit included, or else
he will cease producing wheat.
There is, in this, no affirming and denying at the same
moment that cost of production governs price. There is
merely a statement that the state of supply and demand
at particular moments will make value vary from cost of
production. All markets alike are subject to these
incidents.
You then ask me to enter upon a "discussion as to thej
" degree in which demand so affects the value of th(
" precious metals as to neutralize the absolute doctrine ol
^' cost of production." I am very sorry to have to say that]
I do not understand the question. I do not know what]
you mean by *'as to neutralize," &c. I dare say I am veryi
stupid: if so, pray forgive me.
Yours,
B. PRICE.
From Mr. II. R. GRENFELL to Professor B. PRICE.
Bank of England,
November 13, 1882.
My dear Price, —
You say you don't understand me when I ask
you to discuss the extent to which the demand has neutra-
lized the cost of production theory. I will once more try
to explain.
i
825
The point to which we have brought the discussion is,
that cost of production governs ultimately the value,
although the demand influences it. Your analogy with
wheat is the very worst you could have adduced, — but let
that ])ass.
AVhat we want you to take in is, that the artificial
(fictitious, false, if you will) demand created by law, by
erecting the precious metals into a standard of value for all
other commodities, gives them an exceptional position, and
that one of the incidents of that exceptional position is that
it has been decreed that the thing written as £ 1 sterling can
be paid at all times at the rate of 123*274 grains troy; that
the £ 1 sterling is that amount of gold utterly irrespective
of cost of production ; that the cost of production has
varied and is varying, and yet that amount of gold is the
£ 1 sterling. This, I presume, you will not deny.
From that point we get to silver, and we find that
whoever has got 180 grains troy of that metal can pay his
rent of one rupee in India.
The cost of production of silver has changed over and
over again. Still, 180 grains troy pays a rupee debt of
any kind.
Then we go a little further, and find that the French
mint fixed the ratio betw^een the two, and said that what-
ever the cost of production, they were willing to give for
99*56 1 grains troy gold twenty francs, capable of paying
any debt in France written in that coinage, and for 385*808
silver five francs.
We find that whatever the cost of production, and
whatever the " demand for ornaments," the relative
value of gold and silver by this artificial arrangement,
which we contend is not more artificial in principle in
respect to commodities than our gold standard, remained
substantially the same during the whole period in which
this law demand existed.
Can you alter these facts ?
326
Are they the truth?
Are they pertinent to the consideration of the new
events which have occurred since 1868?
Supposing that the cost of production of wheat in-
fluences the value and price in five years, and that the
cost of production influences the value and price of the
precious metals in the long run — say 200 years, — is it
worth while making preparations for that which may occur
200 years hence ?
But I have stuck absolutely to M'^Culloch in his dis-
tinction between the effect of the cost of production on
perishable articles and that on those not perishable.
Where is my fallacy ?
Yours,
H. R. GRENFELL.
I
From Professor B. PRICE to Mr. II. R. GRENFELL.
2, NoRHAM Gardp:ns, Oxford,
November 16, 1882.
My dear Grenfell, —
I have heard from " my eminent friend," — and he
is one of the very ablest men I know. lie laughs. " I have
*' known," says he, " a coat or a loaf of bread much more
" seriously altered from that of the cost of its production
" by the stringency of the demand and the smallness of the
" supply, than I have ever known the cost of gold altered
" from the same cause."
The case I will state once, for the last time. The
cost of production determines the value of a metal ; and
that cost — that price — must be procured, as a rule, in the
market, or that meti^l will not be produced. But, on a
327
given day, the buyers in the market may be few and poor,
by accidental causes ; or, the supply oifered for sale may
have fallen oiF, when buyers were eager; in either case, the
selling price Avill differ from the cost of production. These
are accidents which befall every commodity put up for sale.
The two forces — the cost, and the state of the market — are
perfectly different things, and they affect every commodity
under the sun.
It was the word " doctrine " which misled and puzzled
me. I do not see how demand — special demand, I
presume — could neutralize the doctrine : it might and does
neutralize, or at least weaken or strengthen, the fact of the
cost of production. There was no want of will to imder-
stand the question.
And now, a fresh sea to navigate ! The coining of a
metal, and making it legal tender, in no way determines
its value. Legal tender merely informs a creditor what
lueifjht of metal he will get paid for his goods if he gives
credit: that is all. Legal tender does not say a syllable
about the worth of the metals.
But to adopt a metal as the legal tender coin of the
country of course creates a demand for it, precisely as
using gold to make watches with.
Of course, the prescribed weight of gold is the £ sterling.
I always define a sovereign, or a £, as so many carats of
stamped gold; a shilling, as only the 2\)th of a sovereign.
In India, silver is the standard; and, of course, a rupee
is so many grains of silver. Really, you pour out truisms.
Of course, whatever the value of the silver, a debt specified
in rupees is so many times 180 grains of silver.
Of course, again, the French fixed the weight of their
gold and silver coins, and made them both legal tenders.
Who in the world disputes these facts, which any intelligent
boy can easily master ; but value — power in exchanging for
other commodities — does not enter into these statements
one bit.
328
Then you make a very remarkable assertion. You say,
that "whilst the law demand existed," this law ratio was
not more artificial in principle than our gold standard
remained during all that period. In principle, it was far
more artificial : for the proper ratio in paying debts
depended on two metals instead of one; each having its
own way of varying in value. What the monometallists
say is, that it is far better to take the chances of variation
of one metal than of two. It is possible, no doubt, that the
variations of the one may correct those of the other; but
they may also make them infinitely worse. The Latin
Union could not go on coining silver.
I prefer the variations of one metal only; and Gibbs
tells you and me that England has — for herself — a perfect
currency.
No doubt perishable articles may be terribly influenced
by the variations of supply and demand. An excessive
supply of fruit or eggs, that won't keep, may make them
almost worthless: that is right enough: and that is one
very good reason for not making them money, but good
hard metals.
You ask for your fallacy. First, in making an ounce of
gold, in coin, worth only 15 J of silver, instead of the true
value, 18 ; and, secondly, of exposing England (unless you
adopt a check, on Clarmont Daniell's principle, by the
process called the Gresham law) to lose all her gold, to be
filled with silver only, to the grave injury of every creditor
and the profit of every debtor.
Yours,
B. PRICE.
321)
FiioM Mr. II. R. GRENFELL to Professor B. PRICE.
Bank op England,
November 17, 1882.
Dear Price, —
I think less of your "eminent friend" than I did.
Or rather he must think less of me if he believes that it is
ad rem to say that he has " known a coat or a loaf of bread
" much more seriously altered from the cost of production
" by the stringency of demand and the smallness of supply
" than he has seen the cost of gold altered from the same
" cause."
I have neither time nor inclination to get at the reasons
why an old woman at market charges, or does not charge, an
extra profit on a handful of apples. Your friend, eminent
though he be, had better read J. S. Mill's Political
Economy, vol. 1, pp. 537, 538.
I now come to the serious part of your letter. I knew
you would say that though the law fixes the written figure
in the creditor's books, it does not " say a syllable about
" the worth of the metals." Very good ! I have nothing to
say against that dictum.
What does say anything about the " wortli of tlie
"metals"? — our old friends, cost of production and
demand.
I have nothing further to say against all your letter
up to the point where you very unwillingly, for the first
time, come to the crucial point, and say
" In principle, it (that is, bimetallism) was far more
" artificial ; for the -proper ratio in paying debts depended
" on two metals instead of one, each having its own way
" of varying in value."
" Now the monometallists say that it is far better to
" take the chance of variation of one metal than of two."
Do they?
330
The first of monometallists, Jevons, may say that it is
better as a matter of policy, but as a matter of securing
the greatest possible fixity of value "which, according
to Professor Price, is the one thing needful, he says
exactly the contrary, for he endorses the calculations of
the bimetallist writers as to the compensatory action of
the double standard.
Then you say " the variations of the one may correct
" those of the other ; but they may make them infinitely
'* worse. The Latin Union could not go on coining silver."
Why?
Because of the demonetization in Germany. Because
of the sudden and ill-considered change from bimetallism.
It is that phenomenon we are examining. If France had
gone on coining while Germany and America were taking
to gold, of course the whole of their coinage and circulation
would have become silver.
Why?
Because of the (according to Professor Price) fictitious,
false, artificial demand set up for gold in those countries.
You then say you prefer the variations of one metal,
notwithstanding that your own champion tells you the
oscillations are greater, and less likely to produce that
which you say is the greatest merit money can have, namely,
fixity of value.
I asked you to tell me where is my fallacy. You answer
me, in making 15 J the relative value when it is 18.
So we must begin all over again.
Why 18 ?
Because a false, fictitious, artificial demand has been
taken away from silver and given to gold.
But I accept 18, if you like it. I think \5l would have
been better last year. But next year, if the Bland Bill is
repealed, and Germany and Holland sell their silver, it
will be more likely 30, — to the profit of every creditor, and
the grave injury of (>vcry debtor.
831
Every creditor liiis already profited to tlic extent of
tlie fall from 15 to 18, and you Avisli them to be favoured
still more.
Yours,
H. R. GRENFELL.
From Professor B. PRICE to Mr. II. R. GRENFELL.
2, NoRHAM Gardens, Oxford,
November 2\, 1882.
My dear Grenfell, —
"You accept 18, if I like it." I do. This is an
immense fact : a foundation of great strength for, I hope, a
good superstructure.
We are almost agreed : certainly not far off now.
1. We have Gibbs' proclamation, that the currency of
England is perfect, and that, were it not for other nations,
he thinks it ought not to be changed.
2. I have all along held the opinion that it was desirable
to bring silver into the currency, if it can be introduced in
a manner that shall violate no sound principle of currency,
nor injure the one Avhich England possesses.
3. If silver is to be introduced, I have all along insisted
that it should be on the basis of its value in the metal-
market. 1 : 18 gives me what I ask for here.
I believe that we agree so far : there remains only one
problem more to solve — namely — In what way shall silver
be made legal tender in England by the side of gold, with
free coinage of all silver presented ?
Here I conceive that we have a precedent, which, most
probably, can solve the problem. For 400 years, we are
told, the ratio in which the silver coins should be related
332
to the gold ones was regulated by proclamation from the
Government. Why not examine this precedent closely, and
see whether it will not bear repetition ?
It is Daniell's proposal in substance ; and I have from
the first markedly claimed that it should be closely con-
sidered by the bimetallists. I have never said that a scheme
of practical working has yet been found for it : but I have
maintained that Daniell's w^ent on a right principle, and
that some sound method of working might probably be
discovered. ^J
If successful, the adaptation from time to time of the "I
ratio in the coins to the ratio of the values of the metals or
metal would give an excellent bimetallist currency — and
I have always declared myself as the advocate of such
money. If a right scheme can be devised, the two metals
would be related to each other in the national money on
their true metallic values ; and, I submit, you and I ought
to be agreed.
Yours,
B. PKICE.
From Mr. II. R. GRENFELL to Professor B. PRI
Bank of England,
November 21, 1882.
Dear Price, —
My acceptation of 18 to 1 is simply because
neither 18, nor 15, nor 20, is of the essence of our argument.
What we contend is, that any of them could be the fixed
ratio.
If you agree on this proposition, we do not fear that we
could show you that 15 J would be better than 18. Gibbs'
333
proclamation is merely admitting as a historical fact that
the cnrrency within England is perfect as far as being
understood and known by all the lieges.
But he has never said, nor do we admit, that as an
instrument or tool of exchange between nations it is
perfect.
You have, as you say, admitted all along and in several
writings the necessity of using silver, but you want to have
a varying standard instead of a sound one, notwithstanding
your assertion that fixity of value was the highest quality
of money.
1 in 18 may be the price to-day. 1 in 15 J was 12
years ago. 1 in 100 may be in a year or two, if the
monometallists have their way.
My final answer to the rest of your letter is to repeat
that your proposition, like that of Daniell, is not a standard
at all.
Yours,
H. R. GRENFELL.
COEEESPONDENCE.
From Mr. T. II. FARRER to Mr. H. H. GIBBS.
Abinger Hall, Dorking,
March 25, 1883.
My dear Gibbs, —
A friend, who takes interest in bimetallism, puts
to me the following problem :
" It is admitted by bimetalUsts that in a sound currency the
" value of the standard coin is determined by supply and demand,
" and not by any action of the Government : that this is effected
** by enabhng all persons to get any quantity of the standard
" metal turned into coin ; and that the relation of value between
" the standard coin and all other commodities is in consequence
** the result of the ordinary action of the market, and is not the
" creation of direct law.
" Assuming this to be the case, how is it that bimetallists
"justify the direct determination by law of the relative values
" of two particular commodities, viz. gold and silver ?
"And how is it that they satisfy themselves that direct
" Government prescription will operate with certainty and success
" in determining this particular relation of value, when they admit
" that it would do in respect of no other relation ? "
,330
I think I know what the answer would be : but as that
answer seems TO me open to a reply, I should be much
obliged if you could direct my friend to any writing where
the answer to this question is distinctly given in terms
which bimetallists would accept.
Sincerely yours,
T. H. FAEEEE.
H. II. GiBBS, Esq.
From Mr. II. H, GIBBS to Mr. T. H. FARRER.
St. Dunstans, Regent's Park
March 30, 1883.
My dear Farrer, —
I don't think your first sentence would be
" admitted by bimetallists."
I have written certain theses which show what I think
they do admit and assert; you will see that the 1st, to
which I believe you will assent, differs from yours.
1. In a sound currency the value of the standard coin
compared with the commodities which it measures is deter-
mined by supply and demand.
2. The Government, i.e. Law, affects supply : it provides
for its even flow by keeping an open Mint.
3. Law can fatally affect demand : for by demonetising
the standard coin in any country, it pro tanto diminishes the
demand for the metal of which the coin is composed.
4. If the Law restricts the Mint as to the amount
which it may coin, it raises the purchasing power, i.e. the
comparative value, of the coin of the country.
5. If the Law demonetises the metal, it lowers the
purchasing power, i.e. the comparative value, of the coin of
other countries whose money that metal is.
837
6. It is impossible, under good government, that Law
should prescribe the quantity of standard coin which shall
or shall not be given for a purchasable commodity.
7. But that in no way affects the power of Law to
determine what the standard coin shall be, nor, if com-
posed of two metals, what proportion they shall bear to one
another.
8. It is an abuse of terms to include either gold money
or silver money — both being money in the same country —
among purchasable commodities.
9. But, if gold and silver money are to be considered as
purchasable commodities, the measure of their value is the
mass of other commodities, and in that measure no Law
does or can determine their price.
I will see if I can refer you to any printed writings in
which the answer is distinctly given. The distinctness of an
answer must depend in some degree upon the question having
been distinctly before the writer. So you may, perhaps,
find none yet in print that clearly answers your letter.
I touched on the point in pp. 36-7 of the "Double
Standard"; and again, indirectly, in an article which I
suppose will appear in the National Review of May next.
Yours, &c.,
H. H. GIBBS.
From Lord BRAMWELL to Mr. H. II. GIBBS.
Four Elms, Eden Bridge, Kent,
September 1, 1883.
Dear Mr. Gibbs, —
At length I understand the good of bimetallism :
It is to relieve taxpayers and debtors generally. It is not
necessary for currency purposes. I agree with all you say,
except in the propriety of doing the good you propose ; as
z
338
to that I liavc a clonbt. Would it be honest ? Of course
you think so or you would not propose it. But is it right
to alter the currency for the purpose of benefiting debtors
at the expense of creditors ? Would it be right to alter it
to benefit creditors at the expense of debtors ? I speak as
a pensioner. Would it be right to lighten the sovereign,
or p«dd to its alloy and diminish its gold, for this purpose ?
But what is the diflference between that and what you
propose ? And this from a Bank Director and Member of j
the Political Economy Club ! Alas ! Political Economy is
sent to Jupiter and Saturn, and — but I will not proceed.
Very truly yours,
BEAMWELL.
FiioM Mr. II. H. GIBBS to Loud BBAMWELL.
Aldenham House, near Elstree, Herts,
September 30, 1883.
Dear Lord Bramwell, —
On my return from Scotland I found your note of
the 1st inst., and now write to thank you for it, and to say
a few words in reply.
If, as you suppose, bimetallists considered that the relief
of taxpayers generally, and of debtors at the expense of
creditors, was a " good " end, and one for which they should
strive, I should think their object was not honest, nnd it
would find no suj)port from me. I have no love for
" remedial legislation " when its aim is to gratify Paul
by giving him some of Peter's goods.
Neither would it be right to benefit creditors at the
expense of debtors, though such a course might be, from
our circumstances, more satisfactory to you and me, than
the other.
889
Yet both these thhigs liavc been clone, not without bitter
remonstrance on the part of those injured, but with the
approval of the majority of the nation, and of posterity.
When cash-payments were suspended in 1797, all creditors
were injured. When cash-payments were resumed in 1816,
all debtors were injured in their turn. Those of the creditors
and debtors who thought of the matter grumbled on their
several occasions at the injuries they suffered ; but none of
them, so far as I know, imagined that the Government had
adopted those two measures /b?' the purpose of giving a bonus
to debtors by the first, or to creditors by the second. They
knew well enough that the injury to the one, and the benefit
to the other, were only accidents of measures necessary or
just in the main, and they submitted to necessity.
In like manner, creditors have been benefited, not
indeed by the action of our own Government, but by the
action of Germany and France, and now the benefit which
debtors or taxpayers would in their turn receive from the
arresting of that appreciation of the measure of value which
I suppose to be taking place, and which must now be giving,
as it has hitherto given, a benefit to creditors, would be but
an unavoidable accident of a measure having no such thing
for its main object, but only the giving of greater steadiness
to the relations between the measure of value and the
commodities measured, and thus diminishing the amount
of injury that may be done now to debtors and now to
creditors by changes in those relations.
I don't think there is anything opposed to Political
Economy in the adoption of two metals in a certain relative
proportion as oiu- measure of value, nor that if it be true that
their adoption would produce a great and permanent benefit
to commerce, we wait till that science is banished to a
distant planet before adopting that good, even though it
should be accompanied by a small and temporary evil.
Yours, &c.
H. H. GIBBS.
z2
840
From Lord BRAMWELL to Mr. II. II. GIBBS.
Four Elms, Eden Bridge, Kent,
October 3, 1883.
Dear Mr. Gibbs, —
I write to you thus in answer to your letter
the 30th September.
I say that for currency purposes — on currency con-
siderations — in order to improve it, you may change the
currency though you raise or lower the exchangeable value
of any coin or circulating medium. I say that you ought
not in fairness to alter the currency only for the purpose of
benefiting creditors at the expense of debtors, or debtors
at the expense of creditors. This last is what I under-
stand you to propose. I say to you as a Bank Director,
proh pudor !
Now, what are your arguments ? You admit, I am glad
to find, that what I say is wrong, would be wrong. But
you say it has been done with the approval of the majority
of the nation, and you prophesy that of posterity. As an
instance, you cite the suspension of cash payments in 1797.
Prodigious I Do you really approve of that on any other
ground than that it coidd not be helped, or rather, that it
was supposed it could not be helped ? As to resiunption of
cash payments; do you not approve of it because it was
the right thing to do, and could not be done otherwise ?
And is it not true that all holders of depreciated currency
put a value on it because in time it would rise to par ; and
so of stocks and debts ? As to appreciation of gold owing
to the action of France and Germany, I say so much the
better for creditors. If they alter and revert to a silver
currency, or bimetallism, so much the worse for them ; or
would you alter the currency for their benefit? But I say
041
iiuless biinctallism is good for its own sake, it is not justi-
fiable to counteract tlie action of other countries — i,e, to
lower the exchangeable value of gold. And this, I repeat,
is what I understood you to say. Justify your bimetallism
on other grounds, and I agree you entirely justify it. I do
not think Political Economy is opposed to it. I still have
ftiith in that, and envy the inhabitants of Jupiter and
Saturn. I think bimetallism possible. Did you ever see a
letter in TJie Times on the subject, signed "B."? I abide
by that.
I am glad that we agree in our principles. If one-pound
notes would improve the currency, let us have them. So of
silver. Pray did you ever think of this : at present no one
pays £ 1 unless in gold. Would it be diiferent under
bimetallism ? If not, what good would that do ? If yes,
are we to carry about fifty or more crown pieces ?
Ever yours jointly and severally,
BEAMWELL.
From Mr. H. H. GIBBS to Lord BRAMWELL.
Aldenham House, near Elstree, Herts,
October 6, 1883.
Dear Lord Br am well, —
Mr. Grenfell has forwarded to me your answering
shot at him and me. I plead not guilty to the charge.
I never said (or, if my words seemed to bear that sense,
I never meant) that it could be good to do any act for the
purpose of benefiting the debtor at the expense of the
creditor. Moreover, I disclaimed, or meant to disclaim,
any such opinion, or any such desire, in my last shot
at you.
343
Consequently I entirely agree Avith you, as I do with
Grenfell, where you denounce it, and I should deserve your
'^ proh pudor'''' if I did not.
Nor did I at all mean to suggest that the Act of 1797
was passed with that object, nor the Act of 1816 with the
converse object. Those Acts were passed with no such
evil intent, but — the first because it was, or was supposed
to be, a necessity of the time ; the second, because it was just ;
and the fact that they both of them involved more or less
injustice to creditor or debtor did not deter the statesmen
of that day from doing what they believed, on grounds
totally distinct, to be necessary and just.
I agree with Grenfell that the wisdom, if not the justice,
would have been greater if they had returned to the ancient
standard of England — gold and silver.
It was the good (or supposed good) which was done by
those Acts, and not the involved injustice, which I suppose
posterity approved; but I am far from prophesying, as
you think I do, that posterity will approve bimetallism :
first, because "I don't know;" and, secondly, because our
grandfathers' posterity have done so many foolish things in
this generation that I have lost all confidence in posterity.
I fear our own may be no Aviscr, and don't, accordingly,
attach much value to their judgment.
I entirely agree with you that " unless bim.etallism is
" good for its own sake, it is not justifiable." Also, I envy
with )^ou the inhabitants of Saturn. They arc better
governed, apparently. Rcdeant Saturnia Regna,
II. II. GIBBS.
I read and remember "B.'s" article, and very good I
thought it.
848
FnoM Loud BRAMWELL to Mk. II. II. GIBBS.
Four Elms, Eden Bridge, Kent,
October 18, 1883.
Dear Mr. Gibbs, —
I hate a controversy. But that is no reason why
I should not write to you, for we do not differ. I wrote
my first note because somewhere you said, as I thought,
that among the reasons for bimetallism was this, that
it would relieve debtors and taxpayers. I think this
is not a reason for, but against it; for, unless for good
reason, it is wrong to alter the value of debts. I believe
you both think so, too ; therefore, there is no difference
between us. If, indeed, an alteration in the currency is a
good thing in itself, and it cannot be accomplished except
by altering the value of debts, &c., then it may be that that
must be borne.
I am not going to discuss bimetallism with you ; that
might involve a controversy. It might have been well if
"the ancient standard" had been reverted to by Peel.
I do not know. I agree that the variations in the value of
the £l would have been less, though more frequent. I said
so in m}^ letter signed " B.," and was delighted to find that
Jevons had said the same thing — which I did not know.
Whether it would be an improvement now^ I doubt. You
say nobody carries 50 sovereigns. No ; nobody wants as
many — cheques are used ; but people do carry 6s, x 50 =
£12 : 105. I ask again, would more silver be used? If not,
how would it rise in value ?
Ever yours,
BRAMWELL.
844
From Lord BEAM WELL to Mr. H. H. GIBBS.
Four Elms, Eden Bridge, Kent,
October 22, 1883.
Dear Mr. Gibbs, —
One word more, — not from a wish to have the last.
I believe more silver would be used in England. I think
our friends the Germans and Yankees would favour us
with some of theirs in exchange for our gold ; and that
when we had it, perforce we must use it somehow. But I
agree more might be used by the world, though we did not
use more. Then, 1st, Why can't they do without us ?
2nd, Why should we help them at a loss and inconvenience
to ourselves ? I prefer patriotism to cosmopolitanism
Ever yours truly.
BEAMWELL
A
THE GOLD QUESTION AND THE
FALL OF PRICES.
From the National Review, July, 1883.
I PROPOSE in the following paper to discuss the present
condition of wliat has been called the Silver question, but
which at this time and in this country, as directly affecting
the English medium of exchange, should rather be called
the Gold question.
I propose also to show that many evils have flowed and
are flowing from the demonetization of silver by Germany,
and that a remedy for them might be sought in the return
to our ancient system of gold and silver money, if the
prejudices of the present day did not so strongly militate
against it.
Yet, deeply-seated as that prejudice still is, it is certain
that there is a great difference between the present position
of the question and the position it occupied in 1878, the
date of the second Monetary Conference in Paris ; and
greater still, if we compare it with the ground taken by the
first Monetary Conference of 1867 and by the Royal
Commission of 1868. At that time, the conclusion at
which the members arrived was, that the universal adoption
of a Gold Standard was desirable. The Conference of
1878, on the contrary, having before them the fall in the
price of silver, and the consequent inconveniences which
had arisen, unanimously urged the necessity of silver taking
;346
its full part in the monetary service of the world. The fall
of prices which had begun in 1874 and had continued till
1881, the date of the third Monetary Conference, led its
members to consider more closely the effects both of the
fall in the purchasing power of silver, and of the correlative
rise in the purchasing power of gold ; and the result was a
further advance of opinion, and a wider spread feeling
amongst its members, of the wisdom of reverting to the use
of a Bimetallic Standard. France and the United States
and Holland were anxious to return to it ; and Germany,
unwilling to send representatives to the Conference of
1878, appeared now to be willing, on conditions, to join a
Bimetallic Union ; and England, though as much opj)Osed
as before to a return to a Bimetallic Standard of value,
was willing to admit that its adoption by other nations
Avould be a great advantage to herself, and to discuss the
possibility of making some changes, unimportant in them-
selves to her own interest, but likely to conduce to such
an end.
The same change, the same progress of opinion, has
been everywhere visible in the pages of that part of the
Public Press which pays any attention to the subject.
The bimctallists themselves have learnt much of the
working of their system, and of the mischief existing, and
likely to increase, from the contraction of our mono-
metallic currency. Their opponents, also, have begun to
perceive that there are more things in heaven and earth
than were dreamt of in their philosophy, and that, as
Prince Bismarck said, when ten men try to lie under a
blanket which has barely covered five, inconvenience must
result.
The Press in England was till lately wont to treat the
matter as a crotchet of a few theorists, having no real
bearing on the fortunes of commerce ; as an academic
question at best, not worthy of serious consideration by
economists and still less by statesmen, in whose eyes it
Mr. //. //. Gibbs. _^^
347
•was held to be "outside the range of practical politics."
The financial portion of the Press, and those masters in
Political Economy, who had learnt their own lesson once
for all and long ago, could not at once be induced to
believe that with changed premisses new conclusions might
be possible, and permitted themselves, therefore, to class
our contentions with pretended demonstrations of the
flatness of the earth, and of the squaring of the circle. It
was very natural. These our instructors (and very useful
instructors they are on subjects which they have thoroughly
studied) were too much inclined to think that they were
born to teach the world, and too little inclined to accept
instruction from men or matters.
Now all this — or nearly all — has been changed.
Statesmen, indeed, do not give the subject much con-
sideration; but statesmen, in England at least, are very
loath to examine any question for themselves. They wait
till Public Oj)inion is too strong for them, and then they
suddenly find that they, in common with all wise men,
have always believed in the urgent necessity of this or that
measure of reform. So will it be with the reform of the
Standard of Value. Public opinion, though not yet
converted, and not yet taking a real interest in the matter,
is on the right road towards conversion. The question
is now^ no longer contemptuously passed by in the Public
Press (except where a simulated contempt is sometimes
used as a cloak for ignorance), but is seriously discussed
from time to time both in the financial newspapers and
among students of Political Economy. The money columns
of the newspapers contain serious and elaborate articles
for and against the Bimetallic Standard : the opponents of
it professing to demonstrate our fallacies, but unfortunately
omitting the demonstration, and combating in most cases
not the assertions and arguments of the bimetallist, but
some other assertions and arguments which they are pleased
to father upon him.
348
Sometimes an ex-statesmau, rejoicing in his freedom
from parliamentary strife, rushes into our arena ; and using
for his weapons much wit and little logic, much prejudice
and little knowledge, tells us of the manifold disadvantages
which must flow from the two prices in one market, which,
as he thinks, will be the inevitable consequence of two
metals of differing value being employed to do service as
money; but he, in common with all those who use this
argument, wholly omits to show us how such two prices
will come about, or indeed, under a law of free mintage,
could be possible.
Sometimes a learned and able Professor takes up his
parable, and finds himself unwillingly and unwittingly
playing the part of Balaam the son of Beor : he comes
to curse, but blesses us altogether. He allows the necessity
of admitting silver to bear its part in the world as money ;
he virtually admits the soundness of our theory, but he,
also, trips over the imaginary stumbling-block of the two
prices, and proposes to make chronic that temporary
disorder in the relation between debtors and creditors
which the fixing of a ratio between two money-metals must
in some greater or less degree produce, and would make
such fixing and such disorder recur again and again at
indeterminate periods, at the discretion of some central
" authority."
On the other hand, Mr. Goschen's speech in Parliament
on the 19th of February last, not indeed touching on the
remedy advocated in this paper, but fully discussing the
causes and incidence of the evil which it is intended to cure,
shows that one statesman, at least, perceives the importance
of the subject, and that one a man better fitted than others,
by his early training, to gauge the necessities and diflii-
culties of trade.
The Spectator comments on this speech in its issue of
the 24th of February ; and recognizing the magnitude of
the evil, and the weight with which it presses on English
Mr. II. II. Gibbs. ^
849
industries, and especially on agricidture, asks if the time
has not arrived for the appointment of a Royal Commission
to inquire into the whole subject.
Again, a writer in the Statist of the 24th of the
same month, commenting upon Mr. Goschen's speech, takes
much the same line as Mr. GifFen did in his interesting
paper read before the Statistical Society, as long ago as
January, 1879, and fully acknowledges the effect on prices
which the scarcity of gold must produce. He does not
admit the efficacy of bimetallism as a remedy (and on his
arguments on this point I shall comment in the course of
this paper), but he, and all those who really think upon
the matter, are now fully aware what are the true objects
of the advocates of the Bimetallic Standard. We need no
longer take pains to explain those objects, nor to protest
that we do not consider the adoption of that system a
panacea for all the ills that Trade is heir to, but only a
remedy for one particular ill.
I may assume that it has been demonstrated —
1. That the fixing by law of the proportion in which
silver and gold, jointly adopted as money, as the measure
of value and medium of exchange, shall be received in
payment of debts, bears no analogy to a vicious fixing by
law of the price of a commodity as measured in money.
2. That that proportion once fixed, and the mints
opened for coinage of legal tender money in that proportion,
it is impossible that there can be a market price of silver
measured in gold, or of gold measured in silver, which shall
differ from the mint price or legal ratio ; and that, therefore,
under an international agreement, it is impossible that
there could be a dearer and a cheaper metal, of which the
former would " leave the country."
3. That such an international agreement would be easily
brought about if England would join it, or would cordially
850
promote its establishment in other nations, and that once
established on a broad basis sucli an agreement mnst prac-
tically be maintained.
4. That it is no part of the creed of bimetallists that
Commerce is, in the long run, benefited by inflation of the
currency; and that what they really desire, and what they
believe will result from the adoption of a Bimetallic Standard
of value, is a greater steadiness than can be attained under
a Monometallic System.
These matters have been treated pretty fully by many
writers of late years — in the United States by Dana Horton,
in Belgium by Laveleye, in Germany by Arendt, in France
by Wolowski ; and in this country by Mr. Grenfell, in two
papers in the Nineteenth Century, by myself, in a pamphlet
on the Double Standard in 1881, and by many others.
Besides this, the establishment of the International
Monetary Standard Association in this country, and the
foundation of sister Associations in Germany and Belgium,
insure that public attention will be continually called to
the importance of the subject, and, by their frequent
publications and unrefuted arguments, prepare men's minds
for a return to the sound and practical system, the benefits
of which were extended (until the suspension in 1873 of
the French law of free mintage) even to those countries
which nominally had but one metal — gold or silver — for
their measure of value.
Silver was not, indeed, while free mintage lasted in
France, true money in England, nor was gold true money
in Germany; but remittances of silver to England, and
of gold to Germany, were practically remittances of cash ;
because the fluctuations of value between the two metals,
notwithstanding the enormous fluctuations in the relative
amounts annually produced of each, were almost imper-
ceptible, and were measured only by the natural operation
of the Exchanges.
Mr, H. H, Gihhs.
351
This condition of things would evidently be restored
by the return of France to her former practice ; but it is
believed that France will not move in this direction, unless
Germany and the United States will join with her and the
rest of the Latin Union in adopting a bimetallic standard
with a fixed ratio, and free mintage of both metals.
It remains to be seen what steps England will take to
render this action more easy to Germany and the other
nations concerned.
In the year 1881, some steps were taken in this direc-
tion, and there would have been, I believe, no difficulty on
the part of England in guaranteeing, for a certain time,
the maintenance of free mintage of silver in India, in
authorising the Bank to carry out the provisions of the
Act of 1844 as regards that metal, and perhaps in extending
the amount of silver receivable as legal tender; but the
negotiations on the subject came, for that time, to no prac-
tical end ; a failure very much to be regretted, inasmuch as
the part to be performed by England was in no way onerous
to her, and, the condition of its performance being the
return of the Continental nations and the United States to
a Bimetallic Standard, it Avould have been of the greatest
advantage to her, both in the interests of commerce, and as
solving the monetary question as regards India.
But, while a better understanding of the subject is
increasing, the march of events is unfortunately in the
opposite direction.
Italy has announced that in this present month she will
put into circulation the sixteen millions of gold which she
has withdrawn from the circulation of the other fyold-usinof
states. The result will be, indeed, that that gold will be
obtainable by those states, if they choose to pay for it.
The gold will leave Italy if she is indebted to her neighbours,
Le., whenever the Exchanges are and remain against her ;
and she will have to contend with them for the retention of
the metal, and the weapon which both parties to the contest
must use will be the rate of discount, a weajDon which
wounds both the striker and the stricken.
In Holland, a Bill is before the Chambers authorising
the Government to sell their silver so as to substitute gold
in its place ; and if that Bill passes there will be yet another
combatant in the same contest.
In the United States there has been already a very large
absorption of gold. The return of the 12th of March shows
£34,000,000 in the Treasury, £ 11,000,000 in the Banks, and
£70,000,000 in circulation in the country— £ 1 1 5,000,000
in all ; and the tendency, even irrespective of the question
of repealing the Bland Bill, seems to be to increase the
amount.
The Session of Congress being over, there is no
imminent danger of the repeal of the Bill, and of the
consequent cessation of the coinage of silver, but though
it is difficult to believe that the United States, a silver-
producing country, can really desire to further the
demonetization of silver, or can be blind to the evils
likely to accrue to themselves as well as to Europe by the
contraction of the circulation, if they also should adopt
a single gold standard, still it would be unwise to leave
such a contingency out of the calculation. The causes of
the agitation for the repeal of the Bill appear to be two.
First, the desire of a large nvunber of politicians to adopt
the gold standard, as being, so they think, one source of
the prosperity of England ; and, second, the action of
others whose aims are directly opposite, and who would
deem the permanent adoption of a gold standard a great
misfortune for their country, but who hope, " by declaring
" war against silver," to make the position intolerable to
England, and induce her to retrace her steps.
Certainly tlic position would be intolerable, as will be
readily seen, if we look at the amount of silver in the
States which would be thrown on the market by such a
policy.
Mr. If. IT. Gihhs.
mk
The dollars coined under the provisions of the Bland Bill
up to the 1st of February last have been ^'135,405,080,
and of these about ;{( 38,000,000 were in circulation in specie
in possession of the people, and ;$ 72,745,470 more in circu-
lation also, but under the form of certificates, which pass
readily from hand to hand, and which, may be considered
as State notes or vouchers for dollars and bullion stored in
the vaults of the Treasury, of which sum ^4,306,650 were
held by the Treasury itself.
Now if all this silver is demonetized, and thrown on the
market together with what existed in the country before
the passing of the Bland Bill, and with the monthly produce
of the mines, what will be the loss suffered by the Indian
Government, and by all who receive fixed sums payable in
silver, or who trade with silver-using countries, and what
will be the effect on prices of the absorption by the United
States of the further quantity of gold which must take its
place !
I do not think such a catastrophe is likely ; but it is
impossible to foretell what the exigencies of party or the
needs of private interest, real or imaginary, may bring
about under a system of popular government.
As a further illustration of what I have said as to
the improved tone of the Public Press in their treatment
of this subject, I cannot but refer to an article on Trade
and Finance which appeared in the Daily News of the
20th of March. It is a perfectly fair and well-reasoned
statement of the case, as regards the influence of the
growing scarcity on prices, and the influence of decreasing
prices on the commerce of the country. The writer of that
article admits the disease, but, like the writer in the Statist,
rejects the remedy. He says, " Let the suffering cure
" itself; commerce, it is true, is on infirm ground and feels
" herself sinking ; let her not fear, she will come to firm
" ground at last ! " But how if the quagmire be deep, and
she be suffocated before she reach the bottom ?
2 A
854
A rcmo Jy is proposed, a reasonable remedy, uliicli shall
give all nations composing the world of commerce a uniform
standard of value. But we are content to wa-ap ourselves
up in our prejudices, and trust to an unseen future to cure
our admitted ills, and we reject the remedy that will cure
them. So also a remedy was proposed to cure the incon-
venience of a diversity of money in the states of which
Germany was composed. Every state had its own coinage,
to the manifest inconvenience of Germans and those that
had commerce with them. No doubt there was the same
cry, " Let well alone," even though well was ill ; but a
better wdsdom prevailed there, and will some day prevail
here. fl|
That England should make some such concessions as
those wdiicli were proj^osed in 1881, is, in my opinion, very
much to be desired, both for the sake of her commerce,
and for the sake of the general well-being of Englishmen,
for whom the prosperity of English commerce is a vital
question.
We have been told, year by year, that "next year"
was infallibly to bring with it improvement of trade ; and
that England's Commercial Prosperity, which had been so
long under a cloud, was to shine forth again with double
brightness so soon as commercial activity should revive in
the United States, and so soon as India should bo again
prosperous. But both these things have happened in
greater or less degree, and we have even had an improved
harvest year (after long Avaiting), Avliich was to be another
signal for the revival of trade ; but trade revives not.
Prices are and have been everyAvhere depressed — unless
where temporary and local circumstances have at any time
counteracted the general tendency.
What can be the cause of this declension ? There are,
no doubt, many causes ; but there is one among them Avhich
our instructors in the Press steadily io-norc, preferring
rather to attribute the mischief to the spots in the Sun, or
Mr. 11, II, Gihhs,
8o.:
oo
to any other recondite cause, than to one which lies at their
very doors.
Prices of commodities are influenced, first, by the supply
of and demand for those commodities, and by their cost of
production ; and, secondly, by the quantity of material
available for money, which is the measure of them, and
which provides, in ordinary parlance, the very conception
of price. If that material is rendered aA^ailablc in larger
quantities, either (1) by increased production, (2) by dimi-
nished population, (3) by a falling off in the demand for
use in the Arts, or (4) by the spread of banking expedients,
which supply the place of coin and set the metal free, the
prices of other commodities are, ccsteris paribus, necessarily
greater. Or, on the other hand, if (1) the production
at the mines falls off, (2) population increases, (3) more
money-metal is consumed in the Arts, or (4) metallic
money takes, in any nation, the place of paper, — these
causes, or any one of them, provided it be not counter-
balanced by the existence of either of the points in the first
category, must, so far as it goes, depress the prices of com-
modities.
The shrinking or increase of the worth of the sovereign,
the measure of value, is precisely analogous to the shrinking
or expansion of the inch, the measure of length. If the
standard inch were enlarged, so that the foot of 12 inches
were equal to 13 of our present inches, the buyer who
bought a foot-length would get more stuff; or, if it were
diminished, so that the foot of 12 inches were to be equal
to only 1 1 of our present inches, the buyer would get less.
The diminution of the quantity of sovereigns (that is to
say, of gold, used as money) is an increase in the value of
each particular sovereign; the buyer gets more stuff for it.
The multiplication of sovereigns is a shrinking of the value
of each particular sovereign ; the buyer gets less stuff
for it. The difference in actual fact is that the inch cannot
increase or diminish without its being everywhere known :
2 A 2
8.36
the increase or diminution of the quantity of the money-
metals is uncertain and insidious.
What is true of money-metals as a Avhole is, a fortiori,
true of either one of them ; either one being exposed to an
additional strain, if it is taken into use as money in lieu of
the other.
I have, then, to inquire — first — whether there is such
a general fall in prices as is supposed ; secondly —
■whether, if there is, it can be asserted with any degree
of certainty that no other universal and persistent cause
can be alleged for the fall ; and, thirdly — whether either
of those four things, to which I have above referred,
has happened, which could disturb the proportion which
existed some years back between gold and the commo-
dities which it measures in English commerce, and cause
such a fall.
Now, as to the second question, I must frankly say that
there can be no certainty in the answer. Each article in the
following table {pj), 358-9) may have had its own especial
increase of production or diminution of demand, or both
together, which may account for its steady fall in price ;
but if we find that the general result over all of them is
the same, though differing in degree, we must search for
some general cause which has overridden and either
counteracted or increased the effects of the especial circum-
stances of each case.
That there has been such a fall the succeeding table,
containing the prices of some of the principal articles of
trade, clearly shows. It is mainly taken from Mr. Giffen's
paper above referred to {p. 349), with additions and con-
tinuation to the present date (1883).
The results are admitted by the writer in the Statist,
Prices, he says, have declined, to the present prejudice of
trade and agriculture ; and " if gold had not been appre-
" ciating in value, prices all round would have been higher
" than they are now."
Mr. TL H. Gihhs,
357
But, in treating the decline of prices which springs from
this source as unimportant, he commits, I think, as grave
an error as I should commit were I to attribute the decline
to the appreciation of gold alone, and to no other cause ;
and I think I shall be able to show from his own words
that he has not fully apprehended the cause of the com-
plaint, nor the motives and reasoning of the complainers.
He Avrites : —
" The appreciation, after all, cannot have been the main
" factor, either in the agricultural distress or in tlie distress of
*' industry generally What causes distress
" and suffering in business, moreover, is not a gradual fall in
^' prices extending over many years, such as would be due to
" an appreciation of the standard, but a quick and violent fall,
*^ which comes heavily upon the holders of large stocks, or upon
" those who are carrying on considerable transactions with
" borrowed money. To such people, the ups and downs of prices
" in business from other causes are infinitely more important
" than the insensible changes which are due to an appreciation
" in the standard. The cases where the latter most cause
*' suffering are those of businesses which have large fixed
" payments, and large payments in wages, that are difficult to
"adjust to the new circumstances; but gradually, we may be
" siire, the adjustment, even in those cases, will be made. We
" are inclined to doubt, then, whether the appreciation of gold
" which has been going on during the last ten years will have
" more than temporary effects. When prices and wages and
"many of the fixed payments have got adjusted to the new
" conditions, business will go on as before."
Xo one can deny what he has here advanced, viz.: —
that sudden and heavy falls of price cause distress, and
greater distress than any which would result from the
gradual appreciation of the metal forming the standard
of value ; or that legislative interference would be
powerless to prevent, though it might lessen, this latter
phenomenon.
;358
X
Comparative List of Prices of sundry Articles of Froi
1874.
1875.
187(3. 1
1
/'/.
COCH INE AL, fair silver
per lb.
2s. Id.
Is. lid.
l.\
Cocoa, Guayaquil
per cwt.
50s. @ 525.
i2s. @ iis.
50.-. '
Coffee, Middling Plantation
Ceylon
}>
133^.
985.
Hi:
Cotton—
Middling Upland
per lb.
S^d.
7kd.
7d.
Fair Surat
J)
5^'^d.
bd.
Ud.
Hides—
Eiver Plate, heavy salted. . .
ji
ltd.
Wi.
^d.
light „ ...
))
7f/.
Australian heavy „ ...
M
(\d.
Wi.
5^,d.
light „ ...
»
'old.
'oil.
Indigo-
Middling shipping Bengal
>»
7s. 2d. @ 7.?. id.
7s. id. @ 7s. Gd.
6s. 10.
Jute, medium quality
per ton
15?. 10s.@lGI. l')S.
14/. 15.v.@ir./. 105.
15/. -
Rice, Rangoon
per cwt.
IU.@ I2s. M.
8.V. \)d. @ 1)5.
75. lOd. (a >.v.
»•'■ '
Saltpethe
)>
22s. @ 2is. 6d.
195. Cd. @ 2l5. dd.
J75. @ l[)s.\
U.<i
Sugar—
Brown Manilla
M
ISs. C>d.
Us.
lis. (d.
til
Good & fine West Indian...
}J
2os. @ 2Gs.
235.
20.V.
\iJ
Tea, sound common Congou
per lb.
Is. V^d.
11^/.
lOd.
^
Tobacco—
Virginia leaf
j>
M. (w Is.
7d. @ Is. 2d.
5hd. @ l5. S
m
strips
>>
T^d.rd) }]d.
d^d. @ l5. id.
i)d. (a) I..-. 2(
iA
Kentucky leaf
>>
id. @ lid.
C)d. @ ]s. \d
Hd. @ 1«
X»
strips
>>
7 Id. @ lOd.
i)d. @ Is. Id.
sd:@ U. U
i.&
AVooL—
English sheep's, ^ hog,
^ wether
;)
Is. Md.
Is. Shd.
U. C^d.
k
Australian : average Vic-
'
toria washed
)5
2s. (a) 2.V. Id.
2s. \d.
is. 1\4.
m
gi-casy
M
Is. 2d.
\s. 2d. @ l.y. 3d.
Lv. hi.
k
Mohair
>J
2s. Hd.
lis. r>d.
35. 7^^/.
k
Alpaca
Jl
2s. 4d.
2s. Sd.
25. bd.
k
At commencement of January
in respective years.
1873.
1874.
1875.
1876.
18;
Copper, Chili bar
per ton
mi.
84/.
83Z. 105.
82/.
;',
Ikon, Scotch pig
))
127.?.
107.<f. Gd.
80.*.
fi4.v. 3rt
k
Lead, English
«j
21/. 10.y.
24/. ns.
23/. 105.
22/. 125.
11.
Tin, foreign
142/.
12U/.
94/.
82/.
I
Wheat, English Imperial)
average throughout the /
United Kingdom ... )
per qr.
55.V. ]]d.
C,2s. Id.
445. Sd.
455. (V/
Jk
London, 31,v/ J(ninai
7/, 18S3
•
i
■
!
ao9
Pr, luarij of each of the undermentioned Tjears : —
876, 177.
1878.
1879.
1880.
1881.
1882.
■ 'i . dd.
C*3( @ (50.?.
2.?. Id.
lis. @ 7is.
2.i.
108,?. @ 1105.
35.
785. @ 805.
l5. 9r7.
595. @ 005.
l5. 6^7.
6l5. @ 63.?.
^k 20s.
102s.
975.
1035.
805.
745.
i ^d.
-I :%d.
GU.
iWl.
md.
Hd.
4frf.
G^d.
i^^d.
I Td.
i Id.
I id.
I y.
Sd.
7d.
5ld. ■
Hd-
Ud.
G\d.
hd.
i^d.
Gd.
hid.
5ii*
l\d.
Gld.
bU.
b\d.
« @ 7.?. Gd.
I: s'.Gd.@l6l
> f. dd.
i \d. @ 2ls.
Gs. 2d. @ Gs. id.
147. lo.?.@ 157.105.
9*'. l^d.
20s. @ 22s.
Gs. @ Gs. 2d.
117. @ 127.
8.?. 7^r7.
185. @ 19.?. 6^7.
7s. 9d. @ 85.
187. 5.?. @ 187. 155.
95. @ 95. 3d.
21s. @ 23s. 3d.
(),?.6^.@n5.10^7.
167. 5.?. @ 177.
85. 7^r7.@85. 9d.
245. 6^7. @ 255.
Gs. lOd. @ 7s.
1.57. 10.?. @ 167.
85. @ 7,?. 10^r7.
235. 3d.^
I 22s.
.?. Gd.
Shd.
Us. Gd.
21s.
9d.
15,?.
2l5.
8^.
18.?.
2.55. Gd.
Ud.@ Is.
14.?. 3d.
22s.
Gd. @ GU.
15.?.
23.?.
bd.
M. @ Is.
§1. (a) l.v.
If @ \oy.
I. @ u.
id. @ Ud.
5U,. @ K)d.
2\d. @ Hd.
bd. @ 9fr7.
3r7. @ lOd.
i^d. @ lOd.
2y.. @ Ud.
"id. @ Sd.
id. @ Is.
od. @ 101^7.
3d. @ \C)d.
ihd. @ Ohd.
id. @Ud.
5r7. @ lOyi.
3d. @ lC)d.
41^7. @ 9^7.
id.@ Is. 3d.
Gyi.@ Is. Id.
"id. @ lOd.
b^d. @ lOd.
]s. Gd.
Is. id.
Is. Id.
Is. 2^d.
l5. 1^7.
Is. 0\d.
d.(a)\s.Ud.
Is. ]d.
Ss. Id.
2s. Id.
Is. 10d.(a> 1.?. lid.
Is. Id.
3.?. O^d.
Is. 877.
Is. 9d.
Is.
Is. lOyi.
Is. 5d.
Is. Ud. (a) 2s.
Is. 2d.
2s. 2U.
Is. hd.
I5.9r7.@l.?.10f7.
1,?.
l5. 10^7.
l5. 3^7.
Is. lOd.
Is. Id.
Is. 9d.
Is. bd.
877.
1878.
1879.
1880.
1881.
1882.
1883.
d. 10.?.
7.?. Gd.
I. 10.?.
)Z. lOs.
GGl.
51s. Gd.
191. 2s. Gd.
GGl.
577.
ins.
147. 12.?. Gd.
Gil.
657. 105.
G75.
197. 75. Gd.
917. 10.?.
627. 10.?.
535. 4^7.
157. 55.
917. 10,?.
707. 55.
5l5. 9^7.
157.
1077. 105.
657. 5.?.
485. Hd.
137. 15,?.
927. 12.?. 6^7.
Is. Gd.
ols. 9d.
30s. Id.
4G.?. Ud.
41.?. Ud.
445. 9d.
405. 7^7.
8G0 '
But no sane man has ever hoped to prevent the " ups
"and downs in prices which result from otlier causes" by
legislative action, nor by any such action to forbid that
gradual appreciation of the metal forming the standard
which may spring from natural causes. Such an appre-
ciation will take place imder a bimetallic system of money,
from the same cause as under a monometallic system, if the
production of gold and silver both diminish at the same
time, but, in contending that probability and history are
both against such a thing happening and continuing to
happen, I onl}^ follow some of the most able and most
learned on the monometallic side of the question. What
I do advocate is, not a futile attempt to interfere with the
action of natural and slowly-acting causes, but the appli-
cation of a remedy which will surely counteract those evils
which hasty legislative action has caused and may cause
again ; and that remedy is a return by England to the
bimetallic standard, or, at least, some practical encouragement
on her part to induce other nations to return to the full
use of it. Either policy would bring us back to the state
of things as they existed before the violent action of
Germany brought about the present difficulties.
The remarks of the Statist are mainly directed to shoAv
how much less dangerous appreciation of the standard
metal is than depreciation ; and he assumes that the aim of
Mr. Goschen in his speech, and of all those who find
danger in an abnormal contraction of the currency, is " to
" substitute new conditions which would give the stimulus
" to industry formerly given by the continually increasing
" abundance of money."
But I may express my belief that Mr. Goschen desires
no such thing, and my own assurance tliat I have no such
wish.
I suppose that the ideal perfection of a monetary system
is, that there should be just so much of circulating medium
as will suffice for the commercial and domestic wants of the
iMr. If. ir. Gibbs,
8()1
community — not so much as unduly to foster speculation —
not so little as unduly to fetter legitimate trade ; and,
above all things, that there should he the greatest attainable
steadiness in the volume of the ciu-rency. Some regularity
in this respect is possible, but immobility is neither possible
nor desirable ; and the hope of the Statist that we shall in
no wise alter '' our determination to maintain an unchanging
" standard for money in this country*' is sufficiently proved
to be Utopian, by his own argument that by the operation
of natiu-al causes (and, I may add, by the operation of law)
its value is continually liable to change.
To return to the question of the decline of prices; there
is one notable exception. In wages there is no such fall.
On the contrary, it would seem that ' there has been a
marked improvement in the condition of the labourer, both
in increase of wages and in diminished cost of some of the
necessaries of life.
This is not the place for a disquisition on the causes
which place the price of that fundamental commodity,
labour, in a different category from the jirices of commodities
produced by labour; but, I may remark (1) that it seems
obvious that, in the long run, the price of labour must be
regulated by the ability of the labourer to live upon his
wages, and by the ability of the occupier of the soil to
pay him ; (2) that the general increase of his wages seems
consequent upon a conviction to which both he and his
employers awoke some time since that he had been
imderpaid, — a conviction which bore substantial fruit,
partly by reason of the flow of the wealth of the great
towns into the country districts, and partly by the increased
power of organization amongst the labourers themselves,
both causes being helped by the greater facilities of com-
munication and locomotion enjoyed in the present day; and
(3) that, whereas the increase of his weekly pay must have
tended to produce an increase in the prices of the com-
modities he consumes, the reverse seems to be the case.
862
But if the reverse is the case, and if those consumable
articles have persistently fallen in price, it is one proof the
more that there must be some general and abnormal cause
for their fall.
To say that the real cause is the badness of trade is
merely to argue in a circle, for we arc at once driven to ask,
" What, then, is the general and abnormal cause of the
" badness of trade ? "
Nor does it appear that over-production of commodities
is an adequate cause for this continuous decline in prices ;
such a decline should naturally have checked production,
and the facilities of telegraphic communication should
rather tend to adjust production to demand ; but the
establishment of railways in producing countries has opened
up new fields of production, and the increase of the means
of rapid transit between those countries and England, has
brought their produce nearer to its greatest market; and
the result has been that many articles have been produced
in abundance greater than the increase of population has
demanded, and that over-supply has brought down their
price. But the improvement of the means of transit, and
the increased production which it has helped to cause, have
been neither continuous nor universal, and a persistent
decline of price would seem to suppose a persistent and
universal cause.
One cause alone has been persistent ; and that is the
appreciation of gold. That commodity is produced less
and is used more, and, like all other commodities iu like
case, it is consequently dearer. In buying it Avith other
commodities we must give more of them than we should do
if those two circumstances did not exist.
So much, then, for the second question — whether the
alleged fall in prices is mainly or greatly due to the
appreciation of gold.
The first question (whether there is such a fall) is
abundantly answered by the foregoing table of price.^.
Mr. //. If. Gibhs.
303
The third question — whether the proportion between
the mass of gold money and the commodities it measures
has been disturbed — is to be answered as follows : —
1 . — The outjmt of gold from the mines appears to have
declined in the last 10 years, as will be seen by the following
table (;?. 364), the figures in which are taken from those
compiled by Sir Hector Hay, and printed in the Journal
of the Institute of Bankers of last month (March, 1883).
The production of gold in the year ending June 30,
1882, is, it will be seen, £2,070,000 less than that of
the year 1870, and £4,200,000 less than that of the year
of the greatest yield, 1878.
The estimates made in the United States give larger
figures, but with few exceptions they show the same
upward and downward tendency as Sir Hector Hay's.
They show a f\illing off of £4,374,000 between 1882 and
1870, in the total production of the world; and £2,832,000
in that of their own country.
It appears, therefore, that the chief difference is in
the estimated yield of other countries ; and it must be
admitted that there is great difficulty in arriving at a
correct account of their production.
M. Alexander Del Mar, formerly a Director of the
United States Bureau of Statistics, writes as follows in a
letter to the Mining World, dated 4th January last (1883),
as to the probable decline in production ; and if we may
take his opinions to be correct, we cannot consider the
figures in the second column of the following table as
likely to be maintained.
M. Del Mar says : —
^' During the past ten years I have personally inspected
" the principal goldfields and mines of Russia, Spain, Brazil,
" California, Nevada, Arizona, North Carolina, Mexico, &c.,
"and, witli the exception of Brazil and Spain, Avhore liltle or
804
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"
305
" no gold is being now prodnccd, I have derived a very firm
" conviction that at least for five or ten years to come none
" of these conntries will be enabled to increase their present
" ontpnt, bnt, on the contrary, that it will diminish. In all
" of these countries there are certain mines which will doubtless
" increase their product, and there are many new and probably
" very rich mines yet to be opened in them ; but speaking of the
" countries generally, I cannot believe that their output of gold
" will not diminish. The same must be said of Australia. There
" is a future for gold in Africa ; but this future, so far as any
** product of importance to the world is concerned, is a long
" way off. Mining depends on climate, Avater, the organisation
" of labour, and the general condition of the mechanical arts.
" Labourers who cannot handle a spade, a drill, a pick, a plane,
*' or a saw, will not make good miners ; and countries where
" these tools are not used or cannot be obtained, and whore there
" are no roads, foundries, mills, nor workshops, are poor places for
" successful mining. India has all these disadvantages, together
" with the further one of being, so far as gold is concerned, a
" very old and thoroughly searched country. On the whole,
'* therefore, I am compelled to believe the future production of
" gold must diminish."
2. — Population has largely increased, and with popu-
lation must have increased also the quantity of gold money
in the personal possession of the people ; so that if
£ 100,000,000 was a correct estimate of the amount of gold
in the United Kingdom, exclusive of the Reserve in the
Issue Department of the Bank of England, a quarter of a
century ago, we may now well add, at least, £20,000,000
to the sum.
3. — Luxury also has greatly increased, and that fact,
together with the increase of population, has doubtless
increased largely the use of gold for ornaments, and
otherwise in the Arts. M. Chevalier, writing in 1857,
estimated the annual consumption of the metal for articles
8G0
of luxury at 1,236,655 ounces, or about £5,000,000 sterling ;
and it may not be unreasonable to compute that, at tlie
present time, the amount may have increased to £ 7,000,000
sterling, a quantity about equal to the Avhole yearly
American output.
4. — Up to this time, paper — resting on no metallic
basis — has largely taken the place of metallic money.
Austria, Kussia, Portugal, Brazil, the Argentine Republic,
Turkey, Italy, Spain, Peru, Chili, and Japan, have all,
at various times, suspended specie payments. Spain,
I believe, has resumed them on a quasi-bimetallic basis ;
and Italy has made provision for resumption of specie
payments on the 12th of this month (April, 1883). Should
any or all of these follow her example, and in resuming
specie payments adopt gold as the metal for their coinage,
the effect cannot but be very great on the gold prices of
the world.
The action of Germany in its adoption of a gold
currency in place of silver, the action of the Scandinavian
nations in following her example, and the possible action
of the United States and of PloUand in the same direction,
cannot but make the strain more intense.
We see, then, that all the four things spoken of above
have hap])ened ; that the production of gold has declined,
is declining, and in the .opinion of those well qualified to
judge will continue to decline, and that the demand for it,
both in the Arts and for money purposes, has increased, is
increasing, and with the increase of population will continue
to increase ; and it seems to me that when this becomes
evident to the gold-using nations, they will be inclined
to ado2:)t, or further the adojition of, the only measure
which can lighten the strain upon them, and that is the
associating silver with gold in the monetary work of the
world.
Mr. H. II. Gibbs.
8G7
Should it be asked what harm can come of a dlnunislied
price, if it be caused by the increased value of that which
the merchant receives for his goods, — if, that is to say, the
diminution in quantity be compensated by an improvement
in quality of the money received, — the answer is that, if and
when the decline in price from this cause is a settled and
concluded matter, and the price is once adjusted to the
altered measure of value, then, as the Statist rightly says,
in the passage above quoted, trade can go on without
interruption, and without future injury from this source to
any one. But while the four causes above-mentioned are
in action, when one of them, the demand for gold for money
purposes is likely to increase, and when, consequently, it is
not only the case that prices have declined, but that they
are declining, the condition is a very different one. A
season of declining prices is almost necessarily a season
of unprofitable trade. A merchant who has advanced his
money on the market value of a commodity suffers loss
when the goods arrive and he finds that the market value
has diminished beyond his calculation ; and not he only
suffers, but the consumer suffers also in the long run ; for
though he is for the moment benefited by the cheapness
of the commodities he uses, yet the decline in their price
tries to the utmost the endurance of the producer; and
no one will care to continue importing goods which may
most probably fall in price by the time they arrive.
So, then, the tendency of the continued decline must
be to injure both producer and consumer, and to paralyse
trade.
If it be asked, " Is it not a positive good to England
"that gold should be appreciated?" "England," it may
be said, " is a creditor nation, and her debts are due to her
" in gold. The scarcity of gold has made that metal more
" valuable, and she must needs be the gainer by this, and
'• must continue to be still more the gainer if gold becomes
" scarcer still. Is it to be expected that she should throw
8G8
" away this advantage^ and by admitting silver to a
" partnership with gold, exalt the value of the first, and
" lower the value of the second ?"
I must reply by another question : What is a creditor
country ? Are we all creditors, and creditors only ? The
meaning of the phrase is, no doubt, that, on balance, the
nation has more to receive than to pay, and the inference
is that the balance must come in the appreciated and
appreciating metal. But who are they who are to receive
it? Not so much the producers, the makers of the wealth
of the land (though they, also, to the extent of their profits
are recipients), as the holders of fixed incomes, the fruges
consumere nati. But if we look to the advantage of
England at large, we must admit that it is not these for
whom we should be most solicitous ; especially as every
increase in the value of the three sovereigns which they
duly and punctually receive on each hundred pounds of
their Consols, is an addition to the burden of the National
Debt, payable alike by the working bees as by the drones ;
alike by the debtor who loses by the appreciation of gold,
as by the creditor who gains. My conclusion is, that the
bringing back of gold to its old relation to commodities
would be no real injury to England.
I have said above that it has been demonstrated that
there is no analogy between fixing by law the ratio that
gold money shall bear to silver money and fixing the money-
prices of commodities; but if I am met with the answer
that gold and silver are commodities like all others, and
that their price must be governed, accordingly, by the cost
of their production, I must reply that those two metals are
no doubt commodities, but that neither gold nor silver,
both being full money in the same country, can possibly be
priced each in terms of the other ; and though undoubtedly
like all others in their essence as commodities, yet they
differ from all others in their accidents. Every one,
bimetallist or monometallist, must admit that both or either
Mr. II. II. Gihbs,
^69
of them are differently conditioned from all other commo-
dities ; namely, in these four ways following : —
First. — They are the measures of all commodities, and
are measured by them. Of no other commodities can this
be affirmed.
Second. — It is of little importance to the world (though
of great importance to the producer) whether the production
of these measuring metals is greater or less. It is of the
greatest importance to the world, as well as to the producer,
whether other commodities (or almost all of them) are
produced or not.
If no more wheat is produced, it is a world-wide
calamity, immediate in its effect.
If no more gold and silver is produced the world is
not visibly or immediately the Avorse. Circulation will be
gradually contracted as wear and tear of the existing stock
goes on, and prices will gradually and imperceptibly fall ;
but the hindrance to trade, though certain, is necessarily
slow.
Third. — Ninety per cent, of the demand for the precious
metals being for one purpose only, that of serving as money,
the demand for either of them in any country, and conse-
quently in all countries, is subject to be almost entirely
and quite suddenly extinguished by the action of law.
This can be said of no other commodity ; nor, if it could,
would the extinction of the demand for it affect all other
commodities, as the extinction of the demand for gold or
silver as money must do.
Fourth. — All other commodities— speaking generally —
are consumable and produced to be consumed ; their reason
of existence is that they may be worked up and used, and
perish in the using. Roughly speaking, there is no stock
2 B
of any of them beyond a very few years' production : —
where is the wheat of 1880? — but the stock of gold and
silver is the production of a thousand years !
The production of gold and silver from 1493 to 1875
was estimated by Seyd to be £1,230,000,000 of gold and
£ 1,469,000,000 of silver, £2,699,000,000 in all; and adding
£101,000,000 for the production of 1876-8, we have a total
of £2,800,000,000. He computes, further, that taking into
account the production before 1493, there existed now, in
the shape of coined money or bullion serving as money,
a sum of £ 1,580,000,000.*
How small is the proportion which an annual increment
of £25,000,000 or £30,000,000 in coin or bullion bears to
this vast stock; and how little influence can the cost of
production of that small addition have on the relative value
of the stock of money-metals and the stocks of other com-
modities ! But in the case of consumable commodities, the
annual production of which bears a very large proportion
to the existing stocks, the cost of that production must
necessarily and immediately influence the price of the
commodity.
The precious metals, we are told, experience, as all
other commodities do, great changes of value from the
action of Supply and Demand. That they will do so
from the arbitrary cessation of Demand is incontestable ;
but Supply depends mainly on existing stocks, which may
almost be considered a constant quantity, while if by
Supply is meant annual supply, we have seen that it is
relatively insignificant; but of the mass of commodities
* Allowing 1/20^'' for waste by abrasion, and a suflBcient sum for
loss and forgotten hoards, the £2,800,000,000 may perhaps be reduced
by about £400,000,000 during the years from 141)3-1 87S ; and deducting
the £ 1,580,000,000 supposed to exist in current coin and bullion, it would
follow that no less than £800,000,000 must be stored in the form of
articles of luxury, or hidden away in hoards.
3fr. U. 11. Gihhs.
871
it nicay be said, that their existence depends on their annual
supply.
So then, in arguing for the possibility of fixing and
maintaining a definite ratio between gold and silver,
serving as money, tliere is no need to show that they have
any especial quality^ as compared with the commodities
they measure. It is enough that they are so differently
conditioned from all others, and so like-conditioned wdth
one another, that it is both possible and easy to yoke them
together as one combined medium of exchange and measure
of value.
The ground of controversy is narroAving. We are all
practically agreed on the main features of the position.
Gold has grown and is growing scarcer, prices have
declined and are declining, trade has suffered and is
suffering. Mr. Goschen, the late Mr. Stanley Jevons,
Mr. Giffen, the writer in the Statist^ and the WTiter in
the Daily News, and a host of other wa-iters, testify to
these facts. But the monometallist writers, while they
admit the evil, all tell us that time will cure it. No, not
all. Mr. Jevons proposed as a remedy the issue of one-
pound notes, and many writers and speakers are now
putting forth this plan — some as a remedy, some as being
itself a good. So, then, those of our opponents wdio look
wdth horror on the association of silver as money with gold
because forsooth it is an inferior metal, and because notes
issued on silver would not have a solid basis of value,
are not at all afraid to advocate the issue of millions of
fiduciary notes having no basis at all, — promises to pay
issued on the security of — promises to pay.
The more I consider the matter, the closer I look into
it, the more sure I am that the system which I advocate,
though it seem to contradict in words the dicta of Lord
Liverpool, is yet the only real carrying out of his system.
He urged unity and uniformity of metallic money of full
weight and fineness as a necessity for the nation. Unity
2 B 2
S72
of money Is impossible for that great nationwrncn aJ
commercial peoples form. No one desires it, or dreams
of it. But a uniform metallic money is possible, and for
the very reasons which Lord Liverpool gives, desirable,
and that is what I advocate.
Some objectors are satisfied to accept, without inquiry,
their own or other men's statement, that what I advocate
is impossible. My answer is that it is not only not impos-
sible, but has been practically done for 70 years in this
century, and will be done again.
HENKY H. GIBBS.
London, April, 1883.
P.S. — Since the foregoing paper was written, Mr.
Goschen has delivered a very interesting address to the
Institute of Bankers, strongly supporting my view that the
scarcity of gold has lowered prices and injured trade. He
expresses, indeed, the belief that the period of change in
values, during which time alone is any hurt done to trade,
will ])r()bably be short, and that all will soon subside into
a normal condition ; but Mr. Giffen, speaking on the same
occasion, thought that there was greater probability that
the production of gold would go on diminishing, and the
demand for it go on increasing for an indefinite time, so
that it was impossible to foresee the day when the desired
steadiness in the relation of gold to commodities should be
reached.
Mr. Henry Sldgwlck, Professor of Moral Philoso])}iy
in the University of Cambridge, also, has made of late a
very important contribution to iha study of this subject in
his book on the Princijdcs of Political Kconomy^ where he
maintains the view advocated in these pages.
373
Referring to what I liave written on p. 351 as to further
demands for gold, I would observe that the resumption of
specie payments by Italy there spoken of as imminent, has
since taken place, and the predictions of those who believed
that slie Avoidd be unable to retain the gold have not as yet
been verified. Gold will leave her shores, of course, just
as it will leave ours, when its export is needed ; and to
retain it, or to recall it, she will have to do as we do in
like case — raise her rate of discount.
Holland, also, has lost her silver to the amount of one
million sterling, and has supplied its place with gold drawn
from this country.
I must correct what I Avrote on p. 361 as to wages.
Agricultural wages have risen, and so have the wages
of many handicrafts ; but this has not been the case
everywhere, nor in all trades. In some there has been a
notable fall.
London, Junc^ 1883.
rp
rilE PEICE or SILVEE.
To the Editor of the Economist, September 19, 1885,
Sir, — I propose in this letter to make answer to three
questions which were put to me in the Money Article of
The Times of the 24th and 29th ultimo.
I am asked whether I should consider a violent rise in
the price of silver to be bad for trade, and it is intimated
that I say nothing on this point, " for reasons which those
" who are familiar with the bimetallic controversy will not
" fail to comprehend."
In everything that I have written or said on the subject
I have advocated the bimetallic standard as productive of
steadiness in the price of silver, and I have deprecated all
violent fluctuations, whether in one direction or the other,
as harmful to sound trade. The reasons which it has been
thought might induce me to hold a contrary opinion are,
I presume, a desire for high prices and "cheap money";
but as I have never expressed, and do not entertain that
desire, I need say no more about them. Those slight
oscillations in the price of silver which occurred before
1872, and which were for the most part due to the
variations of exchange between London and Paris, cannot
be considered as any injury to trade. I believe them to
be inevitable and practically harmless.
2. I am asked whether I have abandoned the views
expressed by me three years ago, and am prepared to
advocate a bimetallic union on the basis of 18| to 1.
376
I have abandoned nothing. The essence of bimetallism
is free coinage of both metals to an unlimited extent, and
at a fixed ratio. The question whether this or that shall
be the ratio has nothing to do with the principle. I say-
now, as I have always said, that the ratio of 151- to 1 is
the most suitable ; first, because I believe it would be found
to be the proportion nearest to the truth, supposing the
demand for silver for coinage purposes were again at the
point at which it stood before the "demonetisation" of
that metal by Germany; and secondly, because that is the
actual legal ratio between gold and silver in France and
Germany, and the change to 18 J, or any other higher rate
than the present, would be attended with very grave diffi-
culties. I say now, as I have always said, that what I
seek is a near approach to stability of price, and that if I
cannot get it by the adoption of a more suitable ratio,
I am content to take it by the adoption of 18 J to 1, or
whatever be apparently indicated by the market price.
3. I am asked if I am not beginning to be afraid of
so "dangerous" an arrangement as "an international
" agreement for keeping up the price of silver."
I have never advocated any arrangement having that
for its ultimate object, but I do not think the worse of
the 15 J to 1 ratio, that it would deliver the Indian
Government and officials from some embarrassment, and
restore the value of silver remittances made to this country,
I sec no danger at all in an international agreement for
fixing that or some other ratio between silver and gold,
and for mints being freely open to the coinage of both
metals. On the extreme improbability of the infraction of
such a treaty, I wrote fully in an article in the Bullionist
of the 15th April, 1882, entitled, " Concerning Faith in
" Treaties." Self-interest wouhl prevent any such infrac-
tion — even as self-interest now threatens the existence of
the Latin Union, a combination which has very little in
Mr. IT, IL Gibbs.
377
common with such a convention as I advocate, and which
contains in itself those seeds of disruption w^hich would be
wholly absent from a Bimetallic Union constituted on the
basis of the French Law. The Latin Union, on the con-
trary, in its present restricted form, involves the suspension
of the French Law, and the Union wdll fall, if it does fall,
not because it is a Union, but because it lacks the essential
condition necessary to success. It maintains a fixed ratio
between the tw^o money metals, but fails to preserve the
rule of a mint open to both to an unlimited extent, with
perfect freedom of action to the Gresham Law.
I have long sought in vain from the hands of any writer
on the subject a fair consideration of the one thing which
is the base of my contention, viz., the statement that
during the whole period of the unrestricted action of the
French Law, when the mint was freely open for coinage
at a ratio of 15 J to Ij there neither w^as nor could be any
other price in the London market than that which was as
near 60d, as the slight oscillations caused by the variations
of the exchange, by sudden demand, or by political crises,
would permit.
At last this assertion of mine is fairly met and boldly
traversed by the counter opinion that the French bimetallic
law was not, and could not be, the cause of the comparative
steadiness of the price of silver; and that it is a delusion
and an error into which I, in company with eminent
economists, monometallist as well as bimetallist, have fallen,
to suppose that it was ; and the assertion has even been
made that our advocacy of a fixed ratio between the metals
is one of the causes why the price of silver is not steady.
No attempt, indeed, has been made to prove the impossi-
bility of the effect supposed by me to have been produced
by the bimetallic la^v, nor to show how it could come to
pass that, when the seller of silver could get the equivalent
of 60d., or thereabout, in Paris, he would be content to
take a less price in London ; but another cause for the
378
steadiness of price has been suggested, viz., that in the first
seventy years of the century, " the relation between the
'' masses of the two metals in existence was approxi-
"mately unchanged," and this notwithstanding that the
discoveries of gold, which had their first effect in 1852
(the production in that year increasing from 16 to 36
millions), poured in no less between the years 1852 and 1859,
both inclusive, than £226,220,000, against £74,020,000
of silver, of which the production was then, and for two
years more remained stationary at about £ 9,000,000 a year.
That influx had, it is said, as much influence as could
be expected, inasmuch as it forced up the price of silver to
over 62^?., and had the further effect that, notwithstanding
the glut of gold in France, the Bank of France had to
borrow from the Bank of England (in 1860) £2,000,000 of
that metal to prevent having to pay out all its silver.
I will add a few w^ords on the above three points.
1. The transactions between the Banks of France and
England; 2. The price of 62d. per ounce to which silver
was forced ; and 3. The supposed parity of relations
between the precious metals until 1 849.
1. You, Sir, will be at no loss for the reason why there
was any such persistent export of precious metals from
France in 1860, for the Economist of the day, in a very
able article, thoroughly explained it. The debtor no doubt
had the choice which metal he would pay his creditor
with ; gold was then the cheapest and silver the dearest,
relatively, of the two metals, and, given the necessity
of export, silver would obey the Gresham Law, and be
the one to leave the country. But why was there that
necessity ? Why was the Bank of France in any difficulty
at all? Not because of the bimetallic law, but because the
French Government would not permit it to adopt the only
true remedy in such a case, the only one by which bullion
Mr. II. II. Gihhs,
879
can be retained at home or attracted from abroad — a rise
in the rate of discount.
2. Why was silver the dearer metal ? Not because of
the bimetallic law, but for the very simple reason that
large quantities of the metal were needed for export from
England to India for railway purposes, and that there was
no supply in England. It, therefore, became necessary to
purchase it where it could be had in the shape of bars, and
even of 5-franc pieces, the latter especially, by reason of
loss of weight by wear, involving greater cost.
But to what did the agio amount ? Silver rose to 62cL
an ounce in 1853, and varied between 60c?. and 62c?. and a
fraction during the succeeding 13 years ; and this rise of
about 3 per cent, can scarcely be as much as could have
been expected, seeing that the total production of gold
from 1849 to 1866 inclusive had been £430,000,000 (to add
to a stock in the world at the end of 1848 estimated at
£600,000,000, an increase of about 70 per cent.), and
though the excess of gold production over silver production
in the same period was no less than £253,000,000. It
would seem, then, that if the price was governed solely by
the relative production of the two metals, a much greater
rise than 3 per cent, might have been expected, and a
greater still when a further excess of gold of upwards of
£56,000,000 was produced from 1867 to 1872 inclusive.
But, on the contrary, the price of silver, in the face of that
excess of gold, gradually declined to the normal 60c/.
3. I have seen no attempt to prove the approximate
parity of relation between the metals which is imagined
as having existed from 1803 to 1872; but I think the
foregoing figures conclusively disprove it. For had that
parity existed up to 1849, and had it been, as is alleged,
the cause of the maintenance of the price of 60c?., then
it is clear that when the parity disappeared, and gold
380
streamed in in such abundance, silver must have been
forced not to 62d. only, but to a price commensurate with
the disparity. It is impossible, therefore, to avoid the con-]
elusion that there was some other cause of the steady price.
Now the total production of silver from 1849 to 1872
inclusive was £249,000,000, and of gold £559,000,000; the
annual production of silver from 1849 to 1860 inclusive
was only about £9,000,000, increasing gradually to
£14,000,000 in 1872; but the average annual production
of gold from 1852 (when the increase began) to 1872 was
£24,500,000, or an excess of gold over silver of about
£15,000,000 a year; in the face of which excess silver had
fallen again by 1872 to about 60d,
The supposed parity serves to elucidate another point
above referred to. If that parity existed at the ratio of j
15 J to 1, or if, in other words, that ratio exhibited anything,
like the real proportion of the masses of the two precious
metals at the beginning of 1849, it follows that the yield
of gold having been since then enormously in excess of]
that of silver, the true relation cannot now^ be as high as
15J to 1, still less can it be 18J to 1; and I repeat my
contention that the former ratio w^ould be found to be
nearer the true relation than that which is indicated by
the present price of silver.
My conclusion is, — 1, that it cannot be the supposed
parity of relation which maintained a certain steadiness of
price from 1803 to 1872 ; 2, that, however great the
disparity of production and stock between the two metals
may have been, the bimetallic law did suffice to maintain
the steadiness of price.
I am,
Yours faithfully,
HENRY II. GIBBS.
Ahlcnliam House, ucar Elstrcc, Ilcrte,
Sept. 17, 1885.
Passages from the concluding images of Mr. H. R. Grenfell's
Speech at the Memorial Hall at Manchester, February 6thj
1886:—
You are all aware that for some years past Mr. Gibbs
and I have been the President and Vice-President of an
association in London for the spread of the doctrine which
I have endeavoured to lay before you, and which association
Mr. Barclay and others are now desirous of enlarging upon
a more popular basis. A great deal of the correspondence
in which we have been engaged, I may say with leading
economists in various parts of the world, has been to a
limited extent confidential — that is to say, persons have
been good enough to impart to us the state of political
forces in these countries, so far as they were impediments
in the way of action on this question. Legislative confusion
is not limited to the English House of Commons. It exists
everywhere; but this correspondence in which we have
been engaged, enables me to set before you very briefly the
actual condition of affairs in other countries.
The United States followed the example which we set
in 1816, by enacting a gold standard at the close of their
great war. They seemed to think it would be a feather in
their cap. They paid off their debt with a rapidity which
has astonished the world ; but when they discovered the
evils arising from the contraction of their currency, they
passed the Bland Bill, which was a sort of compromise
between the gold party in New York and the silver party
of the West. And here I must be permitted to say, that
the silver party does not mean those interested in silver
mines alone, but the whole body of producers of agricultural
88^2
I
wealth in the Western States. This limited coinage of
silver makes what is called a "lame standard." Silver is
legal tender to any amount for debts and taxes, but only
when coined. On the whole, I am of opinion that the
Government at Washington, though anxious to suspend
the compulsory coinage of silver, are in favour of
international bimetallism. Our latest information from
Washington justifies the opinion we have long held, that
the Bland Bill will not be suspended during the present
Session of Congress. ■
France, and the Latin Union also, have had a lame
standard since 1873 ; all debts can be paid in coined silver,
as well as gold, but the coinage of silver is limited by HI
treaty between the States of the Union. Last autumn,
fears were entertained that the renewal of the treaty would
not be carried out; but it was signed and ratified not
long ago, and the French Government has very recently
Instituted a permanent commission to study the question.
Tlie state of affairs in Germany is extremely difficult
to portray accurately. Notwithstanding that we are
in daily communication with the bimetallists of that
country, we have failed to procure reliable statements as
to the definite opinions of the Great Chancellor. Nobody
understands the question better, for to him is attributed
the most epigrammatic summing-up of the whole gold
position, when he said, " The counterpane is too small for
" three to sleep in the bed." One thing is quite certain,
the matter has not been pooh-poolied in Germany, but is
now the subject of the most warm and eager debate.
With regard to our Indian Administration, the present
phase of the question seems to be one of helplessness.
Two proposals have been made, to each of which there
are insuperable objections. One is to limit the coinage of
silver till the coined dollar be artificially enhanced in
value. The other is to change the standard to a gold one.
This latter course would intensify the evil we are met to
Mr. If. R. GrenfelL
388
consider. The Indian Administration will either find itself
witli an ever-increasing deficit, or else it must augment its
taxation. I have reason to believe that it is now putting
a very strong pressure on the Imperial Government in
the direction of negotiating for a double standard with the
nations.
I have now, gentlemen, shown you why we appealed to
a Platform agitation. Next, I entered into, I am afraid
very inadequately, the salient features of the question, and
I hope I was able to prove the truth of the doctrines we
are preaching ; and, finally, I have explained to you the
existing state of the question in America, Germany, the
Latin Union, and Indian Empire.
Now, what do we want you to do? It is to give us
your support in endeavouring to press on the Government
the advisability of doing that which all other Governments
have done, namely, of studying it as the Germans have, of
coming to a conclusion on it as the Americans have, or of
appointing a permanent special commission to watch it as
the French have, and to negotiate with these Governments,
if they are willing, through our diplomatic agents.
We believe that the other nations are perfectly willing
to enter into treaties, not only if ayc will bind ourselves,
but even if we are ready to take minor measures short of
an immediate and absolute adhesion.
INDEX
A
PAGE
Africa, Future production of gold in 365
Agriculture, Effect of fall in prices on . , , . | ^3^
America. See United States.
Arendt (Dr.) on bimetallism 269, 350
Argentine Republic. Suspension of specie payments , 366
fl44,
) 191 192
Aristotle on the function and duty of money , , . < 203' 204'
(2161 217'
Arts, Use of gold and silver in the 355
Increased use of gold for ornaments .... 365-6
Ashburton (Lord). Opinion regarding a legal-tender silver
currency 122-3, 127
Australia. Gold. Cost of production 33
Decrease in the supply of . . . 4, 7, 367
Discoveries, and the relative price of the j gng 046
precious metals . . . . .1 2g2* '
Effect of the discoveries on prices and
wages 157
Mint price in England and market price
in Australia 288, 291
Austria, Attitude of, as to bimetallism 42, 95
Suspension of specie payments 366
B
Bagehot (Walter). Examination before the Silver Com-
mittee 74
His objection to discuss bimetallism .... 95, 97
on the influence of the price of silver on Indian
exports 137
2 c
386
PAGE
Bambeegee (Dr.) 316
Bank Charter Act, 1844, aimed at the extinction of the
country and Scotch bank issues .... 276
Efifect of a repeal of the Act 278
Power given to the Bank to hold gold and silver . 51
Professor Jevons on the expediency of carrying out
the third clause 108-9
Sir Robert Peel on the principle of the metallic
standard . . . Ill
Steps taken in 1881 towards authorising the Bank to
caiTy out the provisions of the Act as to silver . 167, 351
Bank Failures 279
( 120 121
Bank Money as described by Lord Liverpool . . . . j ^^j 22I
Bank Notes. See JVbtcs.
Bank of England. Disposal of a shipment of silver under
a bimetallic law 50-52
f 180 181
If authorised to use silver at the market price of the day ] o 1 s'
Its action in raising the discount rate to six per cent. 231
Monopoly of note issue a pai-t of the Government
business 277
See Notes, — Bank of England. BanTi Charter Act.
Bank of France. Borrower of gold from Bank of England
in 1860 378
Depletion of the gold reserve in 1 848 . . . .83
Effect of the adoption of bimetallism on . . . 136-7
Italian currency lying in the 168
Large stock of five-franc pieces in hand . . .162
See Notes, — Bank of France.
Barter among the ancients 193
The use of silver with us approaches to . . . 22-3
"Bimetallic England." H. H. Gibbs. Reprinted from the
BuUiotiist 267-74
(113 n fi
Bimetallic circulation in England before 1819 . . . j 220' '
( 25 26 2
Effect of a bimetallic law \ 264 '
T . T. ( 16, 223,
law m France { 37j '
existing in a single country . . . .29
affecting the intrinsic ratio of value between gold
and silver 251
( 88 100
standard. Stability of the ■ 3"--^ '
in France defended by Sismondi . . .215
as affecting the value of money . . . 245-8
treaties. Fear of breach in time of war . . .124, 240
"Bimetallism." Professor Jevons. Reprinted from the
Contcmiwrarij Iteviciv 99-110
" Bimetallism Again." Professor Bonamy Price . . . 293-333
( 17 207
Bimetallism, Advantages of • 267-9 '
„ .. . , (107,159,
as affecting contracts 166 278
I
I
387
Bimetallism — continued. page
Disadvantages of j j^^ ^^g
Effect of, on trade j 22(J
^, . - ., I 20, 136,
on the price of silver < jgj. '
X , -Tx i. • (10, 146,
on stability of prices < 202 380
Fundamental propositions 117
Object of 291
nv- .• + (34-6, 124,
Objections to (165,212
Bland Act, Dollars coined under provisions of . . . 353
Bombay, Traders of 202
Beamwell (Lord). Letter to the I'imes. " Is the Value of
Gold and Silver Money artificial?" .... 131-8
( 337-8,
Letters to Mr. H. H. Gibbs ^40-41,
( 343, 344
Answer to Col. Smith QQ
Bkazil. Suspension of specie payments 366
Bullion Committee (Report of). The foundation of the
English system of metallic currency . . .113
Use of the expressions " standard," and "chief coin
in use" . 200
Bullion Prices. Adoption of the prices of the day of legisla-
tion 316, 317
BuLLiONiST (The) adopted as the organ of bimetallism, 184, 186
Reprinted from : — >
"Bimetallic England.". . . . (H. H. Gibbs) 207-74
" Concerning Faith in Treaties." . . (H. H. Gibbs) 237-43
"Paper, or Metallic Inflation." . (H. R. Grenfell) 275-80
"The Ratio of Value between Gold and Silver."
(Clarmont Daniell) 251-8
"The Scramble for Gold." . . (H. H. Gibbs) 231-6
"The Value of Money." . . (H. H. Gibbs) 245-9
"Whither would the Dearer Metal Go?"
(H. R. GrenfeU) 259-65
BuLLlONlSTS believe that coining is an attribute of the State 277
Calcutta, Uncei-tain value of silver a disadvantage to the
trade of 21
Bank of , note circulation 203
California, Cost of gold discovered in 33
Effect of gold discoveries on value of the precious j 205, 208,
metals _. . • . .• 1 246, 283
Refusal to receive greenbacks at the time of the civil
vrar 91,96
2 C 2
388
PAGE
Campbell (Sir George) on tlie stability of a double standard. 227
Cantillon. Influence of fluctuations in tlie precious metals
on the price of commodities 100
The market price decides the proportionate value of
gold and silver 105
Capital. Distinction between the " value of money " and the
interest paid on a loan of capital . . . .247-9
Cazalet (E.) 184
Cernuschi (H.) Contention that France gained by paying
away her gold 16-17,16!
Letters to the Times 149-50
on the ratio of gold to silver to be adopted . . .1 34, 252
Professor Jevons on M. Cernuschi's project. . . 102, 104
( 147
Sir T. H. Farrer's replies to { j5o'5j
Chapman (Mr.) Memo, on an international bimetallic stan-
dard of value 203
j 14,60,121
Cheques, Economy of coin due to use of i 150, 272,
(343
Under a bimetallic law payments would continue
to be made in 49
Chevalier (M.) Estimate of the value of gold used in the
Arts 365
Chili. Suspension of specie payments 366
China, Effect of a gold or silver standard in . . . .41
the demonetization of silver in . . . 42, 120
Cobbett's Parliamentary History. Sir Isaac Newton on
the value of the guinea 143
Cochineal. Comparative prices, 1874-1882. (Table) . . 358-9
Cocoa. „ „ „ „ . . 358-9
Coffee. „ „ „ ,, . . 358-9
Commons (House of), Party feeling in the . . . .198
CoMSTOCK Mine 144
*' Concerning Faith in Treaties." Article reprinted from
the Bull ion hf. (Mr. H. H. Gibbs) 237-43
Contemporary Review, Reprinted from :—
"Bimetallism" .... (Prof essor Jevons) 99-110
References to " How Money does its work." ( 298, 304
(Professor B. Price) \ 308
Cotton. Comparative prices, 1874-1882. (Table) . . . 358-9
Copper. 1873-1883. • „ . . . 358-9
Crump (Arthur). Views on bimetallism examined . . 270, 272
D
Daily News. Ai-ticle on Trade and Finance .... 353, 371
Daniell (Clarmont) :—
*' Gold in the East," Correspondence reprinted from f 65-9,
the Economist on I 70-74
389
Daniell (Clarmont) — continued. page
on gold monometallism for the world . . .213-14
*' On the Rates of Value between Gold and Silver."
Reprinted from the BuUionlst 251-8
As to where the dearer metal would go . . . 259-65
( 304-10,
\ 31 3, 315,
J 3 1 7 319
Scheme of occasional adjustments of the ratio . . < '^^q '321'
)328|i332|
(333
Daru (Count). Argument for the French law of 1803 . . 77
Del Mar (Alex.) on the probable decline in the production of
gold 363
Depressiox ov Trade accounted for by the appreciation of
gold 78, 81
As to trade being permanently contracted . . .82
Effect of a revival of trade in India and the United
States 354
'Ml'. Goschen's paper read before the Institute of Bankers 3 72
Over-production of commodities 302
Double Standard (The) (H. H. Gibbs) | 225^9
Correspondence between Earl Grey and Mr. H. R.
GrenfeU 153-81
Drummoxd (Henry). Elementary propositions on the currency 03
E
Economist, Letters to the : —
On " Gold in the East" . . (H. R, GrenfeU) 05-8, 70-72
. . . (Clarmont DanieU) 68-9,72-4
( 282-4,
On the ratio between gold and silver. (H. H. Gibbs) < 284-0,
( 288-92
Editorial, in reply to Mr. H. H. Gibbs . . . 287-8
Effect on money and prices of the adoption of bi-
metallism 245, 249
On the existence of the double standard in England up
to the suspension of cash payments . . . .199
On the breach of a bimetallic treaty .... 240
England. Centre of international payments . . . • ' no 9(1
Debts payable in gold or silver, 1717-1778, up to £25 . 116
Gold stock 149
has the largest stock of gold 104
Hindrance to monetary concord 40, 42
Inconvenience of a single standard . . . .24
Silver standard abolished inadvertently . . .127
Stocks of debased silver coin 149
Europe. Limitation of silver coinage 7
Lord Sherbrooke's proposal to alter the standard of
value 209-10
390
F
PAGE
( 138-42,
Faeeee (Sii- T. H.) Letters to tlie Times . . . . <^ 147,
( 150-51
Mr. H. H. Gibbs , . . 335-6
Faucher (Leon). Depreciation of silver in 1842 . . . 83-5
Fawcett (Right Hon. Henry) :—
Qu estion to Mr. Bagehot before the Silver Commission 74
FOETNIGHTLY REVIEW, Reprinted from : —
" The Case against Bimetallism." . (R. Giffen) 75-98
Fowler (Wm.) on the issue of one-pound notes . . . 277, 280
FeaNCE, a clearing house between England and India . . 24, 29
Cessation of the coinage of silver . . . . 1, 174
Cernuschi's opinion that the loss of gold has been a
gain to 16, 17
Dearer metal disappearing from common use in .16
Double standard in i 24, 44, 45,
I 104, 200
Exports of the precious metals 378
Franco-German war 222
Free mintage in 25,350,351
Glutof gold in 1860 378
Interest to become bimetallic if England led the way 173-4
Intermediary between gold and silver-using countries 78
Legal tender in 200
Power to obtain as much gold as she requires . . 232
Premium on gold 170
Profit to, by return to old ratio with gold . . .124
Silver, if made legal tender up to 50 francs . .163
Single standard in 25, 91, 174
^ee Notes, — Bank of France. Mint, — Paris.
Free Trade. Want of reciprocity an ai-gument against bi-
metallism 198
G
Gabbett. Variation in the price of silver bullion . . .84
Gaudin (M. M. C.) on the ratio of 15^ to 1 . . . . 105
Gazette (The), Market price of silver to be published in .160
Germany. Gold. Consequences of absorption of . . . 19, 62
Coinage of | ^^^' ^^S,
Demand for 2, 67
Ratio between gold and silver . . . 283, 376
Silver. Effect of remonetisation .... 225, 291
Loss by sale of . . . . . .18
391
PAGJS
GiBBS (Henry Hucks), Papers by : —
" Bimetallic England." ReT^rinted from the Bullionist 267-74
" Concerning Faith in Treaties." Do. . . 237-43
" The Double Standard " 1-63
" The Gold Question and the Fall of Prices."
Reprinted from the National liexnnm 345-73
" The Price of Silver." Reprinted from the Economii<t 375-80
'' The Value of Money." „ „ Bullionist 245-9
" The Scramble for Gold." ,, „ „ 231-6
Speech at meeting of International Monetary Standard
Association, March, 1882 225-30
Letters to Lord Bramwell I • - .
341-2
282-4,
the Economist { 284-6,
288-92
Sir T. H. Farrer 336-7
the 'Times 143-6
Criticisms on "the Double Standard" in correspon-
dence between Earl Grey and Mr. H. R. Grenfell . 153-76
I 114 275
GiFFEN (Robei-t). Decline of prices . . . . ' \ 3^^' '
Decrease in the production of gold . . . .372
Paper read before the Statistical Society . . . 349, 356
Single standard in France 25
Statistical information of bimetallists derived from . 202
" The Case against Bimetallism."
Reprinted from the Fortnigldly Review 75-98
Gold, Absorption of 352, 353
Between reigns of James I. and Charles II. rose in
value against silver 32 per cent 252
• AX. n \ 114, 128
coined by Germany { 224.
Consumption of, for articles of luxury. . . . 365
Convenience of 92
Cost of transmission 49
■n 1 * i 2, 7, 212,
Demand for { 213
as influencing value 322, 369
effect on the markets of the world . . 67
in the East 281
Estimate of amount in the United Kingdom . . 365
International struggle for . . . . . 19, 231
• 1 4. 1, 1, ^ ^ • * J 188, 232,
IS always to be had at a price . . . . • ^ 233 351
legal tender in England 148, 150
Mint price in England regulated market price in
Australia 288
Not legal tender tiU 1816 139,252
Preference for 91, 92
Price of, before 1717 148
Mint 206
Production, Average annual 380
in the United States, 1877-1880 . . 4
of the world 370
IMr. Giffen on the probability of diminished 372
Mr. A. Del Mar's contention that, must
diminish ......... 363-5
392
Gold — continued.
Scarcity of, an advantage to England ....
affecting trade
diminishing cost of production .
Efficiency of a high Bank rate to counteract
Stocks of the world
unused in India .
Source of prosperity to England
"Gold in the East." Correspondence between Mr.
H. R. Grenfell and Mr. C. Daniell.
Reprinted from the Economist
" Gold in the East." (H. R. GrenfeU.)
Reprinted from the Built onist
" The Gold Question and the Fall of Prices." (H. H.
Gibbs.) Reprinted from the National Itcvicw
GOSCHEN (Right Hon. G. J.) Appreciation of Gold
Business in countries where fluctuations in exchange
are great
Paper read before the Institute of Bankers
GovEENMENT, Action of, on value of metals as money .
Geeat Beitaix. Gold the only standard . . . .
Geenfell (H. R.), Papers by :—
" Paper or Metallic Inflation."
Reprinted from the Bullionist
"What is a Pound?"
Reprinted from the Nineteenth Century
" What is a Standard ? " Do.
" Whither would the Dearer Metal go ? "
Reprinted from the Bullianist
Speech at meeting of International Monetary Stan
dard Association, March, 1882 ....
Correspondence with Earl Grey on the double standard
Professor Bonamy Price .
Letters to the Evonumist
Times
Geeenbacks (United States) equal in value to gold
Refusal of California to receive ....
Geesham'8 Law, Operation of
Geey (Earl, KG.) Letters to Mr. H. R. GrenfeU .
The general law of the cost of production in relation
to the precious metals
Conclusions arrived at as to bimetallism
Gboesbeck (W. S.) Statement as to the demonetisation of
silver in the United States in 1873 .
Guinea. Preference f0r the coin, deteraiined the Government
of Georg^ I. to fix the value by law
Value fix^fti 1717
at iihfe time of the Revolution .
Weight at,
pAai:
157
81,82
157
231-2
370
66, 68, 73
352
65-74
259-65
345-73
348, 349,
360, 371
23
372
138, 139
140-41
1, 50, 148
275-80
111-29
197-217
259-65
219-24
153-81
294-333
65-8, 70-72
294-5,
299-300
163
91, 96
148,241,
271,328,
377, 378
153-64,
169-75,
179-80
204-5
212-14,275
127
] 40-42
105,
148, 149
139
206
\
393
H
PAGE
Halifax (Lord). Objections to bimetallism . . . .179
Harris (Mr.) on gold monometallism 57, 82, 199
Haupt (Ottomar). Criticism on his pamphlet, "Bimetallic
England" 267-9
Hay (Sir Hector). Estimate of the world's production of
precious metals 303
Hides. Comparative prices, 1874-1882. (Table) . . . 358-9
Holland, Bimetallism in 346
Demonetisation of silver 2
Gold standard 366
Sale of silver 352, 373
Hoeton (Dana). Partial list of modem publications on the
subject of money 110,350
" How Money does its Work," Extract from.
(Professor Bonamy Price) 298
Hume. Influence of fluctuations in the precious metals on
the price of commodities 100
Huskisson on the abolition of small notes after the panic of
1825 175
I
Independance Belge, M. de Laveleye's article in . . 102
India. " A simple way out of the Indian difficulty" . .212
Council Bills 2, 3
Damage to, by fall in exchange, imaginary . . 87, 124, 137
by German demonetisation, exaggerated 211
Effect of the depreciation of silver on the finances of \ q-q '
Exchanges, state of the 71,137
Bimetallism would steady . . . .87
How rate checks exports . . . . 1 24
Gold coinage, Scheme of 259
Increased imports of 7, 8
legal tender 71, 73
production small and uncertain . . . .4, 365
Secret stock of (66 69,73,
( ^•''
Improvement of trade 354
Mr. Clarmont Daniell's proposals. Correspondence on . 65-72
( 211 212
Paper currency founded on gold j .^j..^' '
Proposals of Indian Government at Conference, 1881 . 128
Protection from a general fall in prices . . . 72, 74
Result of a bimetallic law in 87
Rupee coinage, Col. Smith's proposal to restore . . 65, 71, 75
Silver absorption 8
^ ^. - . » (67, 69, 71,
Cessation of coinage of I 212
394
India — continued. page
Silver, Free mintage of 351
Imports of 7, 379
Largest employer of 255
shipments to Europe under a bimetallic law . 265
Stock of 137, 260
Indigo. Comparative prices, 1874-1882. (Table) . . . 358-9
Inteeest on National Debt, Effect of a bimetallic law on
payments of 159
Rate of, tbe weapon with, which the battle of bullion
will be fought 19
depends on the demand for and supply of
capital 248-9
if a gold currency were adopted in India . 257
Institute of Bankers. Mr. Goschen's paper . . . 372
Journal of the, Extracts from 187, 363
International Monetary Standard Association : —
Object 187
Report of meeting 219-30
" Is the Value op Gold and Silver Money Artificial ? "
Letters to the Times « 131-51
Italy, Failure of the Latin Convention as regards . . .95
Change from a paper to a metallic currency easy but
costly 239
Demand for gold 233
Loan to meet the cost of redeeming the forced currency 6,163, 215
J i. ij \ 232, 235,
not prepared for a gold currency ) 241
c^ , » ,, (234,285,
Stock of gold \ 35^' '
Suspension of specie payments 366
Resumption of „ 18,168,241
Ireland, Preference for one-pound notes in .... 91,110,207
Issue of small notes to supply the place of silver coin . 126
Iron. Comparative prices, 1873-1883. (Table) . . . 358-9
Japan. Suspension of specie payments 366
Jevons (Professor Stanley) : —
Article on " Bimetallism." Reprinted from the
Contenqxyi'ary Itevicw 99-110
(11, 118,
" Money and the Mechanism of Exchange " . . < 249' 305'
(312'
on the fall of prices 275
Steadiness in value of money 214, 330
Variations in the precious metals measured in com-
modities 121,246
Jute. Comparative prices, 1874-1882. (Table) . . . 358-9
395
KisCH (B.) on the ratio of value between gold and silver . 259
KuEEACHEE, Influence of the silver question on the traders of 2G2
Lardner (Dr. Dionysius). The " paradox " of proposing to
send steam- vessels across the Atlantic . . .273
( 1, 17, 95,
Latin Union. Bimetallism < 253, 351,
( 376, 377
Demonetisation of silver j 224^283^^'
Gold standard 118*
j 2, 7, 177,
Eatio of gold to silver } 3^|!' ^gg'
( 330'
Laveleye (E. de) on the fall of prices occasioned by the de- ( 102-3.
mand for gold ] 298, 350
Reference to, in M. Ottomar Haupt's Pamphlet . . 269
Lead. Comparative prices, 1873-1883. (Table) . . . 358-9
Legal Tender. Bank notes in England and Scotland . . 200
Contention that gold was not, for payment of debts ( 139, 148,
in the reign of William III (150
Difference between legal tender coin and bullion . 70
Duty of Government in regard to . . . . 75, 76
Earl Grey on the effect of making silver unlimited j 155,
legal tender ( 170-71
Effect of making gold legal tender in India . . 71, 73
in France 163, 174
Lord Liverpool on 120
of silver dollars in the United States . . . • 5, 9, 301
Possible refusal to accept silver as unlimited legal
tender 95, 106
Preference for non-legal tender gold in England in (91-2,
1696 ] 140-4]
The privilege of legal tender increases the value of
the metals 299, 327
1190, 194,
205, 206,
235, 240,
252, 293,
310
under Mr. Clarmont Daniell's scheme . , . .321
Leneuil (Couecelle) on the French cun-ency law . .119
396
PAGE
LiVEEPOOL (Lord). Application of his argument to other
nations . 14
( 111 177
Basis of Ms proposal for a gold currency . . • ] ooi' 27C
Changed aspect of the monetaiy system since the ) ?oi^o'oa '
i^y«»' ]222;2-:<"'
Conversion of silver coins into a token currency in
181() 252
Discussion on Ricardo's proposal of a paper currency
convertible into bullion 107
His system and bimetallism 871, 872
-rr. . * . ( 189-41,
History of our coinage ) 150 '1
On paper currency 12G-7
On the depreciated currency of the 17th Century . 80
Reasons which decided him against a double standard 8S)-90
Recognition of his principles by Germany . . .104
Treatise on the coins of the realm . . . .56
the foundation of our present system of
money 50, 113
Variations in the price of silver bullion . . .84
Want of commercial education 122
Locke. On fluctuations in the precious metals . . .82
On the double standard \ j^l*^ ' ^ '
Recall of old silver coins under William III. . . 139, 140
Sense in which he used the word " money" . .13
State of England when he was writing . . .120
Violation of contracts by an alteration of the
standard 94, 115
LuzzATTi (M.) Purchase of gold by the Italian Govemment 103
M
MACLEOD (Henry D.) Letter to the 7'i77t6'* . . . .148-9
Madras, Bank of. Note issue 2<)3
Influence of silver question on Traders of . . . 2()2
Mallet (Sir Louis). Propositions made at the Paris Con-
ference 128
Mabks. (German.) Recall of five-mark pieces . . .128
Ratio of thalers to marks 134
McCuLLOCH. Cost of production determining the value of
money 204, 294
Effect of the cost of production on perishable or non-
perishable articles 320
Mexico, Gold as merchandise in 41
Mill (John Stuart) on a double standard . . . .10, 205
The rate of interest and the quantity of money in
circulation 248
The expressions "labour" and "cost of production" . 307,311
397
PAGE
Mint, Royal. No seignorage on standard coin . . .91
Coinage of guineas 148,200
Priceof gold fixed in 1717 . . . .148
Profit on coinage of silver 108
Paris. Coinage of gold, but not of silver . . . 200
( 69 71
India. Coinage of silver . . . . • 1 q-'i '
^ 3r,l
Money, Abundance of, not so mucli required as stability . 22(5-7
Coined, existing at the present time .... 370
Consent and law, establishing the use of gold and
silver as 12, 144
International, the idea jiremature . . . .98
Is not a commodity, but a measure of commodities . 13
Paper. See Notes.
The action of Government gives it value . . . 138, 143
" What is Money 1 " (Lord Sherbrooke.)
Reprinted from the Nineteentli Century 183-9G
]\T0NT AGU. Defective silver coinage in the reign of William III. 139
Mortgages. Effect of a bimetallic law on payments of
interest 159
N
National Debt. Effect of a bimetallic law on payments of j 136, 159,
interest .........( 308
National Review (The), Reprinted from : —
"The Gold Question and the Fall of Prices." . . 345-72
Xewmaech (William). Price of gold bullion in Australia
in 1851 238-91
Newton (Sir Isaac). Adoption of 2U. as the value of the] , ,ij' ,,o'
. guinea in 1717 ( HS^ 149
Limitation of the functions of silver as legal tender 151, 220
New York Banks. Decision not to accept silver coined
under Bland Act 90
Nineteenth Century (The), Reprinted from : —
"What is a Pound?" . . . (H. R. Grenfell) 111-29
"What is Money?" . . . (Lord Sherbrooke) 183-90
"Wliat is a Standard?" . . (H. R. Grenfell) 197-217
Notes, Bank of England. Effect of increasing the fiduciary
issue 278
Limit of silver bullion against which notes may
be issued 109, 100
Temporarily legal tender during the suspension
of cash payments 00
Bank of France, inconvertible, circulated at par with
coin in 1874 149
riOO, 101,
Proposed issue against silver . . . m i'-?' iro
ISl'
398
lOTES — continued
One-pound, Proposal of an issue of
Economy of issuing paper in lieu of gold .
Lord Liverpool's letter ....
Preference for, in Scotland and Ireland .
Scotch 200
PAGE
( 110, 175,
J 207, 273,
\ 277, 280,
(341,371
178
167
, 91, 126
One-Pound Notes. See Notes, One-Pound.
OVERSTONE (Lord)
Ornaments, Demand for gold for. See Arts.
207
"Paper or Metallic Inflation." (H. R. Grenfell.)
Reprinted from the Bulliunist 275-80
Tokens 317
Parieu (M. De) on the standard in Russia . . . .112
Paris Conferences. Year 1867 121, 221
1S78 n 10, 113,
^"'° I 222, 229
1881 127-8
Peel (Sir Robei-t), Changed aspect of currency since the*
time of 221, 276-9
I 111 127
on the principle of the metallic standard . . • ) 321' '
( 113 129
on the resumption of cash payments in 1819 . . < 220' 343'
Reason assigned for permitting one-fifth of the bullion
to be silver 167
Petty (Sir William) 57
Peru, Suspension of specie payments in 366
I 223 295
Platinum, Cost of, relative to gold j 297' 320-22
Early sales of Australian gold speculative, as the metal
was believed to contain platinum . . . .291
Population. Influence of increased or decreased population
on prices ......... 355, 362
increases the quantity of gold in the personal posses-
sion of the people 365
increases the demand for gold 366
Portugal. Suspension of specie payments . , , .366
309
PAGE
Price OF Silver (The). Letter to the Ecoywmisf. (H.H.Gibbs) 375-80
Prices, Comparative statement of, 1873-1883. (Table) . . 358-9
Fall of, pai-tly due to collapse of credit speculation . 103
Mr. Giffen on 114
cannot be attributed to ordinary trade oscil-
lations 275
produced by demands for gold for coinage . 118
of commodities affected by the scarcity of gold . .81
of silver, 1827-1880. (Table) 27
Regulation of, by currency however appreciated . 195
Steadiness of, under a double standard . . .10
Two, of either metal, under a bimetallic union . . 285-6
" The Gold Question and the Fall of Prices."
Reprinted from the National Bevicw 345-73
Price (Professor Bonamy). Letter to the Times , . . 297-9
Correspondence with Mr. H. R. Grenfell . . . 300-32
R
Rate of Interest. See Interest, Hate of.
Ratio, Alterations in the 47
as affected by cost of production | J^?' 2^^'
^ 225
between gold and silver in the time of Adam Smith . 206
between other metals or commodities . . . .134
Exactness of, a matter of less importance than the { 287, 289,
principle ] 332, 376
Occasional adjustments of the. (Mr. C. DanielFs ( 304, 307,
scheme) ( 321, 332
Whatever ratio the law lays down will regulate the
prices of gold and silver 315
of 15^ to 1, Continuity of {309'^^^'
Expanding or contracting circulation . 287, 289
Fallacy of 330
has existed for a longer period than any ( 43, 101,
other ] 105, 117
M'CuUoch on the 294-5
Objection to, on the ground that it would
stimulate production of silver, examined 54
practically the ratio of the world . . 34, 134
No special virtue in, except that it has
been in actual practice .... 225
Steadiness in price of silver during period
of French bimetallism .... 377
the best ratio, as having been maintained
for nearly the whole of the present
century 117
of 18 to 1 would prohibit a return to the volume of
circulation as existing in 1873 . . 289
Professor Price on the adoption of the
bullion ratio of 316, 319
400
Ratio — continued. page
of 1 8^ to 1 , Chang-e to, would be attended with difficulty 376
" The Ratio of Value between Gold and Silver." Letter
to the Bullioyiist, by Mr. Clarmont Daniell . . 251-8
" The Ratio of Value between Gold and Silver." Letters
to the Economist, by ]\Ir. H. H. Gibbs . . . 281-92
Recoinage, Expense of ,91
Revolution of 1688, Position of silver at the time of the . 139
RiCARDO. Proposal of a paper currency convertible only in f 111,
gold bullion . .1160-61,209
Adoption of the scheme for India . . . ,211
Advantage of his practical education . . . 207
Benefit of a paper currency and test of its security , 276, 278
His proposal discussed in Lord Liverpool's letter . 167
Rupee. Col. Smith's proposal to restore the rupee coinage of
India 65,66,75
Loss to the Indian Government on the , . .88
Russia, Bimetallism in , 95
The standard in 112
Suspension of specie payments 366
Salaries, Effect of depreciation on Indian . . . .87
Saltpetre. Comparative prices, 1874-1882. (Table) . , 358-9
Saratoga, Bankers' Convention at 6
Saturday Review (The) on the results of the six per cent.
rate 231-3
on bimetallism 273
Seignorage. Exemption of standard coin from seignorage
at English mint 91
under a bimetallic law 93
Seyd (Ernest). Prices of silver, 1827-1853. (Table) . . 27
Estimate of the production of silver, 1493-1875 . .370
The demonetisation of silver in Germany and the
silver discoveries in America 306, 308
Scheme of a four-shilling piece 108
Sherbrooke (Lord). "WTiat is Money?"
Reprinted from the Nineteentli Century 183-96
M. Ottomar Haupt on Lord Sherbrooke's denunciation
of bimetallism 267-70
on the scarcity of gold 67, 92
Shillings. Distinction between silver standard money and
token coinage 54-5
Four-shilling pieces 108, 268
Value of the British shilling a century ago . . 171-2
Weight and definition 206, 327
Sidebotham (Mr.) 211
Sedgwick (Professor). " Principles of Political Economy " . 372
SiSMONDi on the bimetallic standard in France , , . 215-16
401
Silver, Appreciation of, involving a depreciation of gold
as a commodity
Bank of England notes, Partial payment in
Cost of transmission of, relatively to gold .
Demonetisation of, as affecting trade .
Depreciation of. Chief causes .
^ in 1812
Discoveries of, Effect of new
in America, influencing German de
monetisation
Effect on trade of fluctuations in price of .
Exports to India for railway purposes .
Fall in pric3 due to German demonetisation
France, Legal tender in ... .
Stock of
Tokon coinage. Relation of five-franc
to. (Table)
Germany, Demonetisation of
Sales of .
Holland. Demonetisation of .
India, Absorption of
Mint, coinage of, has kept up price ,
Loss to, by depreciation of
Legal tender in England in 1090 .
Legislation commencing in 177
priving silver of its character as
limited to <£ 25 in 1774 .
Proposal to permit increase of the
to £5
Market value of
More subject to depreciation than gold
Payments of, in bulk under a bimetallic law
Preference for, by half the world
Price of, years 1774-1797 ....
LS27-1880. (Table) .
at the time of Adam Smith
Production of, from 1493 to 1875.
Remonetisation. Effect on prices
Scandinavian States, Demonetisation of .
Stock of coin in England . . .
Token coinage. Necessity of recoinage
United States. Demonetisation of
Failure to force dollars into use
Production of . . .
Value of, determined by cost of production
" Is the Value of Gold and Silver Money Artificial ?
Letters to the Times
"The Ratio between Gold and Silver."
Letters to the Economist, by Mr, H. H. Gibbs
2 D
piece
4 de
limit
44
22, 178
( 1<)0, 107,
\ 178, 177,
( 180, 213
49
78
2
83-4
31,312
( 304, 300,
I 308
21-2
379
( 29(5, 304,
( 300
103
137
( 2. 114,
\ 128, 309
30, 224
2,352
255
198
f 23. 87,
I 211
91
141, 151
148, 200
108, 125
282
101
j 110, 209,
( 272
48
84
27
200
370
144
2
149
35, 54
I 4, 112,
■( 353
123
7-8
( 144, 293.
(325
131-51
281-92
402
Silver — cont inued.
"The Price of Silver."
Letter to the Economist, by Mr. H. H. Gibbs
Smith (Adam). The question of a single or double standard .
His use of tbe word " labour " as equivalent to " cost
of production "
Smith (Col.) Proposal to restore the rupee coinage of India
to a level in value with gold
Spain. Suspension of specie payments
Resumption of „ „
Spectator (The). Comments on Mr. Goschen's speech on
the appreciation of gold
Statist (The). Comments on Mr. Goschen's speech on the
appreciation of gold
Statistical Society. Professor Jevons' paper, 1865 .
Mr. Giffen's paper, 1879
Sugar. Comparative prices, 1874-1882. (Table) .
PAGE
375-80
206, 207,
208
307, 310
G5, 71, 75
366
368
348
349, 353,
356, 360,
371
103
349
358-9
Tea. Comparative prices, 1874-1882. (Table)
Thielman (Baron de). Propositions on behalf of Geimany
Times (The), Letters to, by : —
Lord Bramwell
M. Henri Cemuschi
Sir T. H. Farrer .
Mr. H. H. Gibbs .
Mr. H. R. Grenfell
Mr. H. D. Macleod
Professor Bonamy Price
Tin. Comparative prices, 1874-1882. (Table)
Tobacco „ „ „
Tooke's History of Prices .
Trade, Balance of, in favour of this country notwithstanding
debased currency during the 1 7th century .
Gold only leaves this country to redi-ess the
Expansion of, between 1833 and 1839 .
Foreign, only a fraction of the business of great
countries
General revival of trade would stimulate demand for
gold
Hindrance to trade by scarcity of gold
Predicted revival of
Stimulated by discovery of new mines ....
See Urpi'csjiion of Trade.
Treaties (Bimetallic), Risk of breach of
Turkey. Suspension of specie payments
358-9
128
131-8, 341
f 142-3,
i 149-50
138-142,
147,150-51
143-6
294-5,
299-300
148-9
297-9, 322
358-9
358-9
103
80
232, 236,
248
103
86
8
369
354
135
I 46, 238,
\ 240, 243
366
403
U
PAGE
Unification OF Coinage. Advantages to be derived from , 112
United States. Bland Act, Purport of the . . . .112
Causes of ag-itation for repeal of 352
Dollars coined under provision of 353
Repeal would fui-ther contract | 168, 301,
gold supply . . . . ( 330
Coinage law and its results 4-8
Desire for foremost place in national and commercial
credit 112,124
Dollars, Weight of, under the law of 1878 . . . 4-5
coined under provision of Bland Act . . 353
Failure of attempt to force into use . . 105, 123
Double standard. Not likely alone to introduce . . 9, 352, 3G6
Gold, Absorption of. has been large and continuous . 7, 352
Demand for, since 1872 2
Production of . 3, 4
• Decrease in 363
standard, Large party in favour of . . .19
Greenbacks, Refusal of California to receive . . 91, 96
now equal in value to gold . . .163
Ratio between gold and silver ] 283 *
Silver. Certificates in circulation . . . .353
• Coinage of 352
• Disinclination to use 17,123
Production of 3-8
Standard abolished accidentally . . .127
Stock of 352
Trade revival predicted, not fulfilled .... 354
( 299-301
Value, Artificial or actual, defined • < .j^o 095
Artificial greater than real 131
Change in. period during which trade suffers . .372
Comparative, of gold and silver changed by German
demonetisation 294
( 39, 100,
Determined by cost of production . . . .< 144,16'.),
( 176, 322
( 138 149
supply and demand . . . . < 005' o-rn
(216 227
Fixity of, the advantage of a standard . . . < oqo' '
In exchange. Gist of the question involved in . . 296, 298
Market, of silver 282
404
^ALVH—continveff. page
Measure of, Gold as a 11
Adam Smith on money as a . . . 207
Essentials of a 33
of a commodity limits its quantity . . . .193
of coined money HI
of gold, Variations in, affecting tlie gold price of
commodities 157
being governed by cost of production is a
question of degree . . . . . 20.")
influenced by demand 322
Intrinsic, affected by the demand for it for
ornaments 172
of metals increased by privilege of being legal tender j 299, 301.
when coined (322,325
of precious metals as measured in each other shown
by market price 289
under a bimetallic law 204
*' The Value of Money." (H. H. Gibbs.)
Reprinted from the Bulliontat 245-9
*' Is the Value of Gold and Silver Money Artificial? "
Letters to the Times 131-51
w
Wages.
Economic meaning of the word 311
Effect of the appreciation of gold on large employers
of labour 357
Increase or decrease in rate of .
Influence of, on the cost of production
Position of the Indian producer in regard to
Wealth, Distinction between money and
*' What is Money 1 " (Lord Sherbrooke.)
Reprinted from the Xlnctccnth Ccntnnj
" What is a Pound ? " (H. R. Grenfell.) Do.
" What is a Standard ? " (H. R. Grenfell.) Do.
Wheat. Comparative prices, 1873-1883. (Table) .
Value determined by cost of production .
'•Whitheb WOULD the Dearer Metal go ? " (H. R. Grenfell.)
Reprinted from the BuUionist
Wool. Comparative prices, 1874-1882. (Table) .
WoLOWSKi's "Lor et I'Argent'VV^
3fil, 373
157-8
(57-8, 2G2
191
183-96
111-29
197-217
358-9
G7
259-65
358-9
77, 78,
89, 91,
118,350
?p^ OF OTB*^
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